TAX COURT OPINION

Case: David Allen Thomas
Docket Number: 20017-11
Judge: Kroupa
Opinion Type: bench
Filed: 11/13/2012
Pages: 6

UNITED STATES TAX COURT WASHINGTON, D.C. 20217 DAVID ALLEN THOMAS, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respoiident. ) ) ) ) ) ) ORDER Docket No. 20017-11 Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit to petitioner and to respondent a copy of the pages of the transcript of proceedings of this case before Judge Diane L. Kroupa in Reno, Nevada on October 3, 2012, containing her oral findings of fact and opinion rendered at the trial session at which this case was calendared. In accordance with the oral findings of fact and opinion, an appropriate decision will be entered for respondent. (Signed) Diane L. Kroupa Judge Date: Washington, DC November 13, 2012 SERVED NOV 1 4 2012 Capital Reporting Company David Allen Thomas 10-03-2012 1 THE COURT: The Court has decided to render 2 oral findings of Fact and Opinion in this case and 3 4 the following represents the Court's oral findings of Fact and Opinion. These oral findings of fact and 5 opinion shall not be relied upon as precedent in any 3 6 other case. 7 This bench opinion is made pursuant to the 8 authority granted by section 7459 (b) and Rule 152. 9 All section references are to the Internal Revenue 10 Code for 2008, and all Rule references are to the Tax 11 Court Rules of Practice and Procedure. 12 13 14 Petitioner appeared pro se, and Mark Howard appeared on behalf of respondent. FINDINGS OF FACT 15 Certain facts have been stipulated. The stipulation 16 of facts the parties filed, with accompanying 17 exhibits, is incorporated by this reference, and the 18 19 facts are so found. Petitioner resided in Placerville, 20 California when he filed the petition. 21 22 Petitioner filed a timely income tax return. Petitioner worked as a self-employed welder. 23 He reported on a Schedule C that he received $74,000 24 of gross receipts and $73,915 of business expenses 25 resulting in only $85 of taxable business income. (866) 448 - DEPO www.CapitalReportingCompany.com 2012 Capital Reporting Company David Allen Thomas 10-03-2012 1 2 3 4 5 6 7 8 Respondent examined petitioner's return in large part due to the large amount of business expenses and wondering how petitioner could live on so little taxable income. Petitioner first asserted that he failed to report all the income he received in 2008. The examiner then reviewed petitioner's bank accounts. Respondent determined after completing a bank deposit analysis that petitioner 9 deposited only $41,263 into the bank accounts in 10 11 12 2008. Petitioner now asserts that he only had the $41,000 amount of gross receipts. Respondent issued petitioner a deficiency 13 notice determining a $3,596 deficiency in 14 petitioner's Federal income tax for 2008. 15 Petitioner timely filed a petition for 16 redetermination. 17 OPINION 18 We are asked to decide if petitioner overreported 19 gross receipts on the return he filed. We begin with 20 the fundamental principle of tax litigation that the 21 Commissioner's determinations in the deficiency 22 notice are presumed correct and taxpayers bear the 23 burden to establish those determinations are 24 incorrect. See Rule 142(a); Welch v. Helvering, 290 25 U.S. 111, 115 (1933). This includes the burden of (866) 448 - DEPO www.CapitalReportingCompany.com 2012 Capital Reporting Company David Allen Thomas 10-03-2012 5 1 substantiation. Hradesky v. Commissioner, 65 T.C. 2 3 4 5 87, 90 (1975), affd. per curiam 540 F.2d 821(5th Cir. 1976). Substantiation means that a taxpayer shall keep such permanent records or books of account as are sufficient to establish the amount of income and 6 deductions claimed on the return. Sec. 6001; sec. 7 1.6001-1(a), (e), Income Tax Regs. The Court need not 8 9 accept a taxpayer's self-serving testimony when the taxpayer fails to present other probative evidence. 10 Beam v. Commissioner, T.C. Memo. 1990-304 (citing 11 Tokarski v. Commissioner, 87 T.C. 74, 77 (1986)). 12 Petitioner claims and testified that he did 13 not receive the amount of gross receipts that he 14 reported on the return. First he asserted that he 15 underreported the gross receipts shown on the return. 16 At trial, however, he claimed that he received only 17 18 the $41,000 amount of gross receipts. The law provides that the gross receipts on 19 a return are admissions that must be overcome by 20 cogent evidence. Estate of Hall v. Commissioner, 92 311 21 T.C. 3f3, 337-338 (1989); Tolbert v. Commissioner, plM. 22 T.C. Memo. 1997-123. If a portion of the gross 23 receipts were reported in error for 2008, discovery 24 of the error should have occurred in 2009, when the 25 return was filed, not in the year that the return was (866) 448 - DEPO www.CapitalReportingCompany.com 2012 Capital Reporting Company David Allen Thomas 10-03-2012 6 1 2 3 4 5 6 7 8 9 examined. First and foremost we find the record and testimony of petitioner to be incredible. Petitioner claimed (71 $85 of taxable business income on the return, which allowed him very little, if any, remaining income on which to live. It gets worse if we accepted the lower amount of gross receipts. If we were to find that petitioner reported all income and that the expenses claimed are accurate, we would 10 have to find that every penny petitioner spent was 11 deductible. This we refuse to do. 12 13 Moreover, petitioner is essentially saying he does not know how much income he received in 2008. 14 We find this lacks credibility too. Taxpayers know 15 roughly how much they make each year and saying that 16 he received only half of his income is simply not 17 18 credible. Moreover, the Court need not accept a taxpayer's self-serving testimony when the taxpayer 19 fails to present other probative evidence. Beam v. 20 Commissioner, T.C. Memo. 1990-304 (citing Tokarski v. 21 Commis sioner, 87 T . C. 74, 77 (1986) ) . Petitioner 22 failed to keep accurate records. We find that 23 petitioner received the amount of gross receipts he 24 reported on the return. 25 To give effect to the foregoing, decision (866) 448 - DEPO www.CapitalReportingCompany.com 2012 Capital Reporting Company David Allen Thomas 10-03-2012 1 will be entered for respondent. 7 THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE. (Whereupon, at 1:23 p.m., the bench opinion in the entitled matter was adjourned.) 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 2 4 25 (866) 448 - DEPO www.CapitalReportingCompany.com 2012