TAX COURT OPINION

Case: Vincent Victor Suzara
Docket Number: 22523-14S
Judge: Armen
Opinion Type: bench
Filed: 10/19/2015
Pages: 7

UNITED STATES TAX COURT WASHINGTON, DC 20217 MN VINCENT VICTOR SUZARA, Petitioner, v. ) ) ) ) Docket No. 22523-14S. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ) ) ) ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Special Trial Judge Robert N. Armen, Jr. at San Diego, California, containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, a Decision will be entered for petitioner. (Signed) Robert N. Armen, Jr. Special Trial Judge Dated: Washington, D.C. October 19, 2015 SERVED Oct 20 2015 Capital Reporting Company 3 1 2 Bench Opinion by Special Trial Judge Robert N. Armen, Jr. Friday, October 2, 2015 3 Vincent Victor Suzara 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Docket No. 22523-14S I. THE COURT: THE COURT HAS DECIDED TO RENDER ORAL FINDINGS OF FACT AND OPINION IN THIS CASE, AND THE FOLLOWING REPRESENTS THE COURT'S ORAL FINDINGS OF FACT AND OPINION. THE ORAL FINDINGS OF FACT AND OPINION SHALL NOT BE RELIED UPON AS PRECEDENT IN ANY OTHER CASE. See Rule 152(c), Tax Court Rules of Practice and Procedure. II. This proceeding was heard as a Small Tax Case pursuant to the provisions of section 7463 of the Internal Revenue Code of 1986, as amended, and Rules 170 through 175 of the Tax Court Rules of Practice and Procedure. III. This bench opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986, as amended, and Rule 152 of the Tax Court Rules of Practice and Procedure. Hereinafter in this bench opinion, and unless otherwise indicated, all section numbers refer to the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company Internal Revenue Code, as amended and in effect for 2012, the taxable year in issue, and all Rule numbers refer to the Tax Court Rules of Practice and 4 Procedure. IV. Petitioner appeared on his own behalf. Monica I. Cendejas appeared on behalf of Respondent. V. In a notice of deficiency issued to Petitioner on June 23, 2014, Respondent determined a deficiency in Petitioner's 2012 Federal income tax of $1,102. VI. The issue for decision by the Court is whether 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Petitioner received cancellation-of-indebtedness 15 16 17 18 19 20 21 22 23 24 (COI) income of $7,337 in 2012 as reported by Toyota Financial Services on a Form 1099-C for that year. VII. Some of the facts have been stipulated, and they are so found. Petitioner resided in the State of California at the time that the petition was filed with the Court. The taxable year at issue in this case is the calendar year 2012. In mid- to late-2003 Petitioner purchased a new, 25 model year 2004 Toyota 4-Runner SUV. Petitioner 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 traded in an existing vehicle and, after paying some cash, financed the balance of the purchase price. Petitioner satisfied the car loan in 2007. Inexplicably, five years later, Toyota Financial Services sent Respondent an electronic Form 1099-C for the taxable year 2012 reflecting cancellation of indebtedness of $7,337. Notably, the item on the Form 1099-C denominated "Personal Liability" does not have a corresponding entry indicating that such liability existed. Even more remarkably, the item on the Form 1099-C denominated "Identifiable Event Code" includes only the entry "Insignificant". Other than the aforementioned Form 1099-C, the record includes no other document, such has a loan agreement, note, demand for payment, or otherwise to show that Petitioner had COI income for 2012. VIII. A. Burden of Production Pursuant to section 6201(d), if an information return, such as a Form 1099-C, serves as the basis for the determination of a deficiency, the burden of production may shift to the Commissioner. Del Monico v. Commissioner, T.C. Memo. 2004-92. Section 6201(d) provides that in any court proceeding, if a taxpayer 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 asserts a reasonable dispute with respect to the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 9 10 11 income reported on an information return and the taxpayer has fully cooperated with the Commissioner, then the Commissioner has the burden of producing reasonable and probative information in addition to such information return. Id. Petitioner raised a reasonable dispute with respect to the accuracy of the information return. He contends that his car loan was actually satisfied in full well before 2012, and further contends that the issuance of the Form 1099-C was erroneous. In addition, the record demonstrates that 12 Petitioner fully cooperated with Respondent. Thus, 13 14 15 16 17 18 19 20 21 22 23 24 25 under section 6201(d), the burden is on Respondent to produce reasonable and probative information concerning the information return issued by Toyota Financial Services and hence the deficiency in this case. See Kleber v. Commissioner, T.C. Memo. 2011- 233. B. Cancellation of Indebtedness Income Gross income includes all income from whatever source derived, including but not limited to cancellation of indebtedness. Sec. 61(a) (12); sec. 1.61-12(a), Income Tax Regs. Generally, COI produces income in an amount equal to the difference between the amount due on the obligation and the amount paid 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 7 1 2 3 4 5 for the discharge. See Babin v. Commissioner, 23 F.3d 1032, 1034 (6th Cir. 1994), aff'g T.C. Memo. 1992-673. The rationale for this principle is that cancellation of indebtedness provides the debtor with an economic benefit that is equivalent to income. 6 United States v. Kirby Lumber Co., 284 U.S. at 3; 7 8 9 10 11 12 13 see Friedman v. Commissioner, 216 F.3d 537 (6th Cir. 2000), aff'g T.C. Memo. 1998-196; Cozzi v. Commissioner, 88 T.C. 435, 445 (1987); see also sec. 108. The issuance of a Form 1099-C is not dispositive of a discharged debt. Owens v. Commissioner, T.C. Memo. 2002-253, aff'd in part, rev'd in part and remanded, 67 Fed. Appx. 253 (5th 14 Cir. 2003). 15 16 17 18 19 20 21 22 23 24 25 Petitioner credibly testified that the car loan was satisfied in 2007. The Form 1099-C, the only document produced by Respondent supporting his determination that Petitioner had COI Income, raises questions regarding its accuracy and reliability, and hence its probative value. For example, the item on the Form 1099-C denominated "Personal Liability" does not have a corresponding entry indicating that such liability existed, and the item denominated "Identifiable Event Code" includes only the entry "Insignificant". Taken as a whole, the Court cannot 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 conclude that Petitioner had COI income for 2012. IX. In order to give effect to the foregoing, decision will be entered for Petitioner. X. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE. (Whereupon, at 9:15 a.m., the above- entitled matter was concluded.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com