department of the treasury i n t e r n a l r e v e n u e s e r v i c e w a s h i n g t o n d c o f f i c e o f t h e c h i e f c o u n s e l date number release date cc tege eb qp4 ---------------- conex-126614-17 uil 408a the honorable robert wittman member u s house of representative sec_6501 mechanicsville turnpike suite mechanicsville va attention ------------------------------ dear representative wittman i am responding to your email dated date on behalf of your constituent --------- ------------------------ who asked if he could transfer funds from his traditional_ira to a roth_ira without incurring a tax_liability your email included a copy of an article discussing irs notice_2014_54 which addressed direct rollovers of after-tax and pre-tax amounts from qualified_plans to iras -------------------also explained he may not have documentation to determine the after-tax and pre-tax portions in his traditional_ira a traditional_ira owner can transfer funds except for any part that is a required_minimum_distribution because the owner is 70½ or older from the traditional_ira to a roth_ira at any time this transaction is commonly known as a conversion and is discussed in publication 590-a contributions to individual_retirement_arrangements iras you can find this publication on our website at irs gov any pre-tax amounts in the traditional_ira such as earnings that are transferred to the roth_ira are taxable in the year transferred the rules in notice_2014_54 apply to distributions from qualified_plans and not to distributions including conversions from iras we consider funds in a traditional_ira as pre-tax amounts unless owners can show they’ve paid taxes on those funds taxpayers can use a variety of documents to verify they’ve paid taxes for example copies of income_tax returns conex-126614-17 copies of forms 1099-r distributions from pensions annuities retirement or profit-sharing_plans iras insurance contracts etc copies of forms nondeductible iras which are filed by taxpayers who receive a distribution from an ira that contains after-tax amounts i hope this information is helpful if you have additional questions please call me or ---------------------------at -------------------- sincerely joyce kahn acting branch chief qualified_plans branch employee_benefits tax exempt and government entities


department of the treasury_department of the treasury internal_revenue_service internal_revenue_service washington d c washington d c of f i c e of of f i c e of c h i e f c ou n s e l c h i e f c ou n s e l date number release date uilc cc ita b04 scaf-104744-02 internal_revenue_service national_office significant service_center advice memorandum for jillena warner from associate area_counsel cc sb lou heather c maloy associate chief_counsel income_tax accounting subject request for significant service_center advice form 1099-c guidance this significant service_center advice responds to your memorandum dated date in accordance with sec_6110 of the internal_revenue_code this significant service_center advice should not be cited as precedent issue how should a taxpayer seek relief when he she has reported income from the cancellation of a consumer debt and in a subsequent year makes a repayment on the debt conclusion a taxpayer who includes reports income_from_discharge_of_indebtedness but who later repays the debt may file a claim_for_refund for the year the income was reported facts in a typical situation a cash_basis individual taxpayer defaulted on a consumer credit obligation although the debt was not formally forgiven or compromised the creditor pursuant to sec_1_6050p-1 of the income_tax regulations issued form 1099-c to the taxpayer the taxpayer included the amount in income for that year the taxpayer paid the debt in a later year either voluntarily or because of enforced collection action by the creditor scaf-104744-02 law and analysis sec_61 provides that gross_income includes income_from_discharge_of_indebtedness sec_6050p requires certain financial entities to report discharges of indebtedness of dollar_figure or more during any calendar_year under sec_1_6050p-1 discharge_of_indebtedness must be reported if one of eight identifiable events occurs the regulations make it clear that if one of the identifiable events has occurred a discharge_of_indebtedness is deemed to have occurred s olely for purposes of the reporting requirements whether or not an actual discharge_of_indebtedness has occurred the eight identifiable events specified in the regulations include a decision to discontinue collection activity by the creditor and the expiration of the non-payment testing_period under sec_1_6050p-1 there is a rebuttable_presumption that an identifiable_event under the regulations has occurred during a calendar_year if a creditor has not received a payment on an indebtedness at any time during a testing_period ending at the close of the year the testing_period is a 36-month period increased by times during which the creditor is precluded from engaging in collection by a stay in bankruptcy or a similar bar under state or federal_law the timing requirements discussed above are for reporting purposes only and do not automatically mean that the debtor must take the amounts reported into income in the year in question while in most cases the amounts are required to be taken into income under sec_451 in the same year that they are required to be reported by the creditor they do not have to be generally income_from_discharge_of_indebtedness must be taken into income when there is an identifiable_event 88_tc_435 when a debt has been canceled or discharged depends on the substance of the transaction and is determined on the facts and circumstances of each case id miller trust v commissioner 76_tc_191 60_tc_535 randolph v commissioner tcmemo_2000_248 events that can trigger cancellation_of_indebtedness_income can include such events as a formal settlement agreement 345_fsupp_486 n d ala aff’d 492_f2d_1096 5th cir rivera v commissioner tcmemo_1993_609 the abandonment of security 88_tc_435 carlins v commissioner tcmemo_1988_79 a unilateral discharge by a creditor waterhouse v commissioner tcmemo_1994_467 and the entry of an scaf-104744-02 item on corporate books schneller v commissioner tcmemo_1996_62 aff’d without published opinion 129_f3d_1265 6th cir taxpayers who have not reported income reported on form 1099-c have been required to include those amounts see eg johnson v commissioner tcmemo_1999_162 stoddard v commissioner tcmemo_2002_31 rinehart v commissioner tcmemo_2002_71 under the facts presented the debt survived as a legally enforceable obligation under the case law this would not be enough to stop the triggering of income for the debtor because under cozzi the debt is viewed as having been discharged the moment it becomes clear that it will never have to be paid t c pincite however if the particular facts and circumstances presented demonstrate that it was not clear in the year for which the form 1099-c was issued that the amounts would never be repaid then the taxpayer did not realize cancellation_of_indebtedness_income in that year and is entitled to a refund those facts and circumstances could include but are not limited to the creditor issuing a form 1099-c despite the fact that the debtor made payments within the testing_period payment of the entire liability in a later year would support a conclusion that the original amount reported should not have been included in income the proper amount that should have been included if the taxpayer later partially paid the liability would depend on the particular facts in question accordingly the taxpayer may file an amended_return if the period of limitations for filing a claim_for_refund is open we considered whether sec_1341 could apply instead of requiring that a claim_for_refund be filed for the year of inclusion sec_1341 which was enacted in response to 340_us_590 pertains to the computation of tax for the year in which a taxpayer repays amounts received under a claim of right taxpayers who qualify under sec_1341 are permitted to pay the lesser_of the tax for the year of repayment computed with the allowable repayment deduction or the tax for the year of repayment computed without the repayment deduction minus the decrease in tax for the prior taxable_year that would result solely from the exclusion of the item from gross_income for the prior taxable_year the effect of the provision is to give the taxpayer the equivalent of a refund without interest for the year of inclusion if the taxpayer is advantaged thereby sec_1341 applies only if the amount of any allowable deduction exceeds dollar_figure we do not believe that sec_1341 applies to this situation because sec_1341 applies only to situations in which it appears that the taxpayer has an unrestricted right to the income we do not believe that it applies when a taxpayer fails to pay a debt and it becomes apparent that the debt will never be paid in such a situation the taxpayer does not have a right to the income and in fact still legally owes the debt to the creditor notwithstanding the issuance of form 1099-c second a condition to application of sec_1341 is that the taxpayer would otherwise be entitled to a deduction for the repayment deductions for repayments of amounts included in scaf-104744-02 income under a claim of right must be deductible under some other section of the code see revrul_69_115 1969_1_cb_50 repayment of excess salary revrul_65_254 1965_2_cb_50 repayment of embezzled amounts and revrul_82_74 1982_1_cb_110 deduction permitted on repayment of insurance proceeds because payments of personal loans are generally not deductible under any provision of the code a taxpayer who takes an amount into income because of a cancellation of indebtedness and who later paid that amount cannot deduct the payment case development hazards and other considerations we are concerned about your point that the remedy of allowing encouraging a claim_for_refund would not apply if a taxpayer paid the debt after the expiration of the period of limitations for claiming a refund for the original year of inclusion because we do not believe that sec_1341 applies we considered allowing a deduction in the year of debt payment but not allowing taxpayers to recompute their liabilities under sec_1341 there may be a reverse tax_benefit_rule in which a cash_basis taxpayer who properly took an amount into income based on a transaction rather than a payment would be entitled to a deduction upon reversal of the transaction ie payment of the prior amount included in income if that were the case the statute_of_limitations would not constitute a bar to the deduction in 460_us_370 the supreme court rejected the argument that the tax_benefit_rule only applied to recoveries on the contrary it is to approximate the results produced by a tax system based on transactional rather than annual accounting id pincite this rationale if extended could support a deduction in the year of payment allowing a deduction in the year of payment to the extent of the payment might be an attractive solution to this problem we note however that discharge_of_indebtedness income is one of the few if any items of income that are taxable to cash_basis taxpayers without actual receipt of either cash or property this writing may contain privileged information any unauthorized disclosure of this writing may have an adverse effect on privileges such as the attorney client privilege if disclosure becomes necessary please contact this office for our views please call if you have any further questions


t c memo united_states tax_court gary james copeland petitioner v commissioner of internal revenue respondent docket no 9305-02l filed date gary james copeland pro_se rollin g thorley for respondent memorandum opinion chiechi judge this case is before the court on respon- dent’s motion for summary_judgment and to impose a penalty under - sec_6673' respondent’s motion we shall grant respon- dent’s motion background the record establishes and or the parties do not dispute the following petitioner resided in henderson nevada at the time he filed the petition in this case on or about date petitioner filed a federal_income_tax tax_return for his taxable_year return in his return petitioner reported total income of dollar_figure total_tax of dollar_figure and claimed a refund of dollar_figure of tax withheld petitioner attached a two-page document to his return petitioner’s attachment to his return that document as completed by petitioner stated in pertinent part i gary j copeland am submitting this as part of my income_tax return even though i know that no section of the internal_revenue_code establishes an income_tax_liability as for example code sec_4401 sec_5005 and sec_5703 do with respect to wagering alcohol and tobacco taxes provides that income taxes have to be paid on the basis of a return -as for example code sec_4374 sec_4401 sec_5061 and sec_5703 do with respect to other taxes ‘al11 section references are to the internal_revenue_code in effect at all relevant times all rule references are to the tax_court rules_of_practice and procedure although the court ordered petitioner to file a response to respondent’s motion petitioner failed to do so i am filing anyway because i know that the government has prosecuted others for failing to file income_tax returns by erroneously invoking code sec_7201 and sec_7203 therefore this return is not being filed voluntarily but is being filed out of fear that if i did not file this return i could also be illegally prosecuted for failing to file an income_tax return for the year in addition to the above i am filing even though the privacy_act notice as contained in a booklet clearly informs me that i am not required to file it does so in at least two places a in one place it states that i need only file a return for any_tax i may be liable for since no code section makes me liable for income taxes this provision notifies me that i do not have to file an income_tax return b in another place it directs me to code sec_6001 this section provides in relevant part that whenever in the judgment of the secretary it is necessary he may require any person by notice served upon such person or by regulations to make such returns render such statements or keep such records as the secretary deems sufficient to show whether or not such person is liable for the tax under this ti- tle since the secretary_of_the_treasury did not serve me with any such notice and since no legisla- tive regulation exists requiring anyone to file an income_tax return i am again informed by the privacy_act notice that i am not required to file an income_tax return it should also be noted that i had zero income according to the supreme court’s definition of income since in merchant’s loan trust co v smietanka 225_us_509 at pages that court held that the word income must be given the same meaning in all of the income_tax acts of congress that was given to it in the corporation excise_tax act of therefore since i had no earnings in that would have been taxable as income under the corporation excise_tax act of i can only swear to having zero income in obviously since i know - - the legal definition of income if i were to swear to having received any other amount of income i would be committing perjury so not wishing to commit perjury i can only swear to having zero income for reproduced literally on or about date petitioner filed a tax_return for his taxable_year return in his return petitioner reported total income of dollar_figure and total_tax of dollar_figure petitioner attached a three-page document to his return petitioner’s attachment to his return which was very similar to petitioner’s attachment to his return on date respondent issued to petitioner a notice_of_deficiency notice with respect to his taxable years and which he received in that notice respondent determined a deficiency in and an accuracy-related_penalty under sec_6662 on petitioner’s tax for his taxable_year in the respec-- tive amounts of dollar_figure and dollar_figure and for his taxable_year in the respective amounts of dollar_figure and dollar_figure petitioner did not file a petition in the court with respect to the notice relating to his taxable years and instead on date in response to the notice peti- tioner sent a letter petitioner’s date letter to the internal_revenue_service that letter stated in pertinent part your deficiency_notice dated date according to your deficiency_notice of above date cover sheet page of notice with respect to --- - petitioner’s taxable years and attached there is an alleged deficiency with respect to my income taxes of dollar_figure dollar_figure respec-- tively and if i wanted to contest this deficiency before making payment i must file a petition with the united_states tax_court before i file pay or do anything with respect to your notice i must first establish whether or not it was sent pursuant to law whether or not it has the force and effect of law and whether you had any authority to send me the notice in the first place let me further point out that ir code sec_6001 and sec_6011 as identified in the privacy_act notify me that i need only comply with regulations nothing in the privacy_act notice or in the above statutes informs me that i have to comply with or pay attention to letters and or alleged determina-- tions sent to me by various and sundry employees of the irs please note that sec_6212 states that if the secretary determines that there is a deficiency in respect of any_tax he is authorized to send notice of such deficiency etc etc etc however the notice i received was not sent by the secretary but by james j walsh who is identified as being the district_director in phoenix az and i have no way of knowing whether he has been delegated by the secretary to send out such notices on the secretary’s behalf so before i do anything at all with respect to your no- tice i would have to see a delegation_order from the secretary_of_the_treasury delegating to james j walsh the authority to send out deficiency notices in addition i would also like you to send me or identify for me the legislative regulations that you claim implement code sec_6212 and sec_6213 i have also attached an excerpt from the irs procedures manual which points out that the irs is required to make available to all taxpayers comprehensive accu- rate and timely information on the requirements of tax law and regulations so pursuant to this provision from your procedures manual i am asking that you identify make available for me the legislative regulations that you claim implement both code sec_6212 and sec_6213 since i have not been able to locate them without your furnishing me with these documents and information i will be unable to ascertain whether the individual who sent me the deficiency_notice was authorized to do so and whether i am le- gally required to take any notice of it reproduced literally on date respondent assessed petitioner’s tax as well as any penalties and interest as provided by law for each of his taxable years and we shall refer to those assessed amounts as well as interest as provided by law accrued after date as petitioner’s unpaid liabilities for and on date respondent issued to petitioner a notice of balance due with respect to petitioner’s unpaid liabilities for and on date respondent issued to petitioner a final notice_of_intent_to_levy and notice of your right to a hearing notice_of_intent_to_levy with respect to his taxable years and on or about date in response to the notice_of_intent_to_levy petitioner filed form request for a collection_due_process_hearing form and requested a hearing with respondent’s appeals_office appeals_office petitioner attached a document to his form that document stated in pertinent part i am requesting a due process hearing as out-- lined in from i am challenging the appropri- - jj - ateness of the collection action as specified c a if any irs employee attempts to deny me the due process hearing guaranteed to me by law or recommends that seizure action be taken without producing the documentation required by sec_6320 and sec_6330 or without addressing the issues provided for in these code sections i will seek damages and seek that employees termination i am requesting to see copies of the following documents a copy of the statutory notice_and_demand a copy of the record of my assessments and since code sec_6201 and irs transaction code states all assessments have to be based on filed returns ti will have to see a copy of the returns from which any claimed assessments are based the name or names of the irs employees who imposed the frivolous penalty along with their federal id number the delegation of authority from the secretary authorizing such persons to impose a frivolous pen- alty the official job description s of those irs employ- ees who imposed the frivolous penalty code sec_6001 and sec_6011 which are specifically mentioned in the privacy_act notice in the book- let advise the public that they need only to comply with regulations i am requesting that you also have at the hearing the treasury regulation that allows irs employees to impose the frivolous penalty and the regulation that requires me to pay it lastly i will be challenging the existence of the underlying tax_liability which code sec_6330 6b specifically authorizes me to do in lieu of producing these specified documents listed above verification from the secretary_of_the_treasury that the requirements of any applicable law or administrative procedures have been met will be acceptable but the appeals officer better have either the documents as identified above or verification from the secretary if the appeals officer can not produce neither document than no due process hearing should be scheduled until he has those documents in hand reproduced literally --- - on date respondent’s appeals officer held an appeals_office hearing with petitioner with respect to the notice_of_intent_to_levy at the appeals_office hearing the appeals officer relied on form_4340 certificate of assessments pay- ments and other specified matters form with respect to each of petitioner’s taxable years and on date the appeals_office issued to petitioner a notice_of_determination concerning collection action s under sec_6320 and or notice_of_determination an attach- ment to the notice_of_determination stated in pertinent part the secretary has provided you with sufficient verifi- cation that the requirements of any applicable law or administrative procedures have been met you requested a collection_due_process_hearing under sec_6330 opposing levy action your request for a collection_due_process was timely filed and you are entitled to judicial review the case was assigned to tony aguiar appeals officer who had no prior involvement with respect to the dis- puted tax_liability the levy notice reflects a liability for income taxes owed for and zero type income_tax returns were filed for and statutory notices of deficiency were sent to you for both years on date you responded to the sent statutory_notice_of_deficiency with your interpretation of the tax laws you were given an opportunity to petition the united_states tax_court and choose not to the statutory_notice_of_deficiency defaulted and an assessment was made the assessment made is valid the assessment has been made and notice_and_demand letters were issued by regular mail to your last_known_address as required and demonstrated by forms 4340s in the administrative file you have not challenged the appropriateness of the levy action at your collection_due_process_hearing you spoke about whether the assessment made was done so by one delegated with the authority to do so you stated you do not believe you received a proper statutory_notice_of_deficiency for the secretary_of_the_treasury did not sign it i explained it sic the statutory_notice_of_deficiency does not have to be signed by the secretary_of_the_treasury to be valid you have been previously given an opportunity to contest the amount assessed as income_tax due to fact you have had a previous opportunity the underlying liability is not to be considered under the collection_due_process review of the information stated above and now present in the administrative file shows the requirements of all applicable laws and administrative procedures have been met assessments were properly made you were billed and did not pay the amounts due collection proceeded with enforced collection and they should be allowed to continue it is appeals determination that the proposed collec- tion action balances the need for efficient collection_of_taxes with the legitimate concern that collection action is no more intrusive than necessary discussion the court may grant summary_judgment where there is no genuine issue of material fact and a decision may be rendered as a matter of law rule b 98_tc_518 affd 17_f3d_965 7th cir we conclude that there is no genuine issue of material fact regarding the questions raised in respondent’s motion with respect to petitioner’s taxable years and petitioner received a notice_of_deficiency but he did not file a petition with respect to that notice in the petition peti- tioner admits that he received the notice_of_deficiency and -- - alleges that the deficiency_notice petitioner received was invalid because it was not sent out by the secretary as required by code sec_6212 on the instant record we find that petitioner may not challenge the existence or the amount of petitioner’s unpaid liabilities for and see sec_6330 b 114_tc_604 114_tc_176 where as is the case here the validity of the underlying tax_liabilities is not properly placed at issue the court will review the determination of the commissioner of internal revenue for abuse_of_discretion sego v commissioner supra pincite goza v commissioner supra pincite as was true of petitioner’s attachment to his return petitioner’s attachment to his return petitioner’s date letter and petitioner’s attachment to form the petition contains contentions arguments and requests that the court finds to be frivolous and or groundless to illustrate petitioner contends in the petition that respondent failed to issue petitioner the notice_and_demand for payment required by sec_6303 we reject that contention forms with respect to petitioner’s taxable years and show that sswe note that pursuant to rule c petitioner is deemed to have admitted that he may not challenge the existence or the amount of his unpaid liabilities for and because he received a notice_of_deficiency with respect to those years respondent sent petitioner a notice of balance due on date the same day on which respondent assessed petitioner’s tax as well as any penalties and interest as provided by law for each of those years a notice of balance due constitutes the notice_and_demand for payment under sec_6303 119_tc_252 as a further illustration of the frivolous and or groundless nature of petitioner’s position in this case petitioner contends in the petition that the appeals officer failed to obtain and to produce verification that the requirements of any applicable law or administrative procedure have been met as required by sec_6330 the record establishes that the appeals officer obtained verification from the secretary that the requirements of any applicable law or administrative procedure were met and we reject petitioner’s contention to the contrary at the appeals_office hearing the appeals officer relied on forms with respect to petitioner’s taxable years and sec_6330 does not require the appeals officer to rely ona particular document to satisfy the verification requirement imposed by that section craiq v commissioner supra pincite- nor does sec_6330 require the appeals officer to provide petitioner with a copy of the verification upon which the appeals officer relied id pincite form_4340 is a valid verification that the requirements of any applicable law or administrative procedure have been met id petitioner has not shown any irregularity in respondent’s assessment procedure that would raise a question about the validity of the assessments or the information contained in forms with respect to peti- tioner’s taxable years and we hold that the assess- ments with respect to petitioner’s taxable years and were valid and that the appeals officer satisfied the verifica- tion reguirement of sec_6330 see id ’ based upon our examination of the entire record before us we find that respondent did not abuse respondent’s discretion in determining to proceed with the collection action as determined we shall not specifically address any additional matters such as the following which petitioner asserts in his petition all of which as indicated above the court finds to be frivolous and or groundless x but in any case petitioner pointed out to the appeals officer if he would simply identify for petitioner the statute that established peti- tioner’s income_tax_liability peti- tioner would pay the taxes and penalties at issue without further adieu petitioner asked the appeals officer to identify for petitioner the statute that required petitioner to pay the income taxes at issue even though the exis-- tence of such a statute was a relevant issue relating to the unpaid tax as stated in c a despite the law specifically providing that this issue could be raised since it is obviously a relevant issue what could be more relevant the appeals officer refused to identify any such statute in the notice_of_determination with respect to petitioner’s taxable years and in respondent’s motion respondent requests that the court require petitioner to pay a penalty to the united_states pursuant to sec_6673 sec_6673 authorizes the court to require a taxpayer to pay to the united_states a penalty in an amount not to exceed dollar_figure whenever it appears to the court inter alia that a proceeding before it was instituted or main- tained primarily for delay sec_6673 a or that the taxpayer’s position in such a proceeding is frivolous or ground- less sec_6673 b in 115_tc_576 we issued an uneguivocal warning to taxpayers concerning the imposi- tion of a penalty under sec_6673 on those taxpayers who abuse the protections afforded by sec_6320 and sec_6330 by instituting or maintaining actions under those sections primarily for delay or by taking frivolous or groundless positions in such actions in the instant case petitioner advances we believe primar- ily for delay frivolous and or groundless contentions argu- ments and requests thereby causing the court to waste its limited resources we shall impose a penalty on petitioner pursuant to sec_6673 in the amount of dollar_figure we have considered all of petitioner’s contentions argu- ments and requests that are not discussed herein and we find them to be without merit and or irrelevant on the record before us we shall grant respondent’s motion to reflect the foregoing an appropriate order granting respondent’s motion and decision will be entered for respondent


t c memo united_states tax_court alex b rhodes jr petitioner v commissioner of internal revenue respondent docket no filed date alex b rhodes jr pro_se douglas r fortney for respondent memorandum findings_of_fact and opinion swift judge respondent determined deficiencies in petitioner’s federal_income_tax and additions to tax for and as follows additions to tax_year deficiency sec_6651 sec_6651 sec_6654 dollar_figure dollar_figure dollar_figure dollar_figure big_number big_number big_number big_number as determined by respondent through date as determined by respondent through date unless otherwise indicated all section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure after concessions the primary issues for decision are as follows whether wage and investment_income received by petitioner constitutes taxable_income whether petitioner is entitled to business_expense deductions for which petitioner would have been reimbursed by his employer had petitioner requested reimbursement and whether petitioner is liable for additions to tax under sec_6651 sec_6651 and sec_6654 for the failure_to_file federal_income_tax returns for the failure to pay federal_income_tax and for the failure to pay estimated federal_income_tax findings_of_fact some of the facts have been stipulated and are so found at the time the petition was filed petitioner resided in plano texas during and petitioner resided in texas and received wage income for employment with various companies as an information systems consultant a technical computer consultant and an internetwork engineer petitioner also earned investment_income for and respectively petitioner earned_income from both wages and investments in the total_amounts of dollar_figure and dollar_figure in and petitioner submitted to his employers forms w-4 employee’s withholding allowance certificate on which petitioner claimed to be exempt from federal_income_tax as a result for no federal_income_tax was withheld from petitioner’s wages and for only dollar_figure was withheld during and respectively petitioner incurred employee business_expenses in the amounts of dollar_figure and dollar_figure although available to him petitioner did not request reimbursement of these expenses from his employers for and petitioner did not file federal_income_tax returns other than the above dollar_figure withheld from petitioner’s wages for petitioner paid no federal_income_tax for and opinion petitioner claims that his income from wages and investments does not constitute taxable_income petitioner misreads case law statutory language and related treasury regulations petitioner’s arguments are frivolous see 119_tc_285 114_tc_136 as stated in williams v commissioner supra we shall not painstakingly address petitioner’s assertions ‘with somber reasoning and copious citation of precedent to do so might suggest that these arguments have some colorable merit ’ id pincite quoting 737_f2d_1417 5th cir affg per curiam an order of this court we conclude that the wage and investment_income that petitioner received during and is includable in petitioner’s taxable_income see sec_61 sec_162 generally provides taxpayers with deductions for ordinary and necessary business_expenses where taxpayers would have been reimbursed by their employers for business_expenses incurred but where they failed to receive reimbursement because they failed to request reimbursement the expenses will not be considered necessary and will not be deductible 788_f2d_1406 9th cir affg tcmemo_1984_533 56_tc_936 affd aftr 2d ustc par 2d cir due to petitioner’s failure to request available reimbursement for his employee business_expenses petitioner is not entitled to deduct them see orvis v commissioner supra pincite kennelly v commissioner supra pincite petitioner is liable for the deficiencies in income_tax determined by respondent for the years in issue petitioner’s argument that he failed to file federal_income_tax returns and to pay tax for the years in issue because of his purported belief that wage and investment_income does not constitute taxable_income is frivolous petitioner has offered no credible_evidence showing that his failure_to_file federal_income_tax returns and to pay estimated_tax was due to reasonable_cause we sustain respondent’s determination of the sec_6651 addition_to_tax and the sec_6654 addition_to_tax under sec_6651 an addition_to_tax may be imposed on a taxpayer for failure to pay any federal_income_tax reflected as due on a tax_return petitioner failed to file federal_income_tax returns for the years in issue and respondent has not asserted that respondent prepared substitute tax returns for those years see sec_6651 accordingly petitioner is not to be treated as having failed to pay a tax reflected on tax returns for the years in issue petitioner is not liable for an addition_to_tax under sec_6651 see cabirac v commissioner t c ___ and sec_7491 which places the burden of production on respondent with regard to additions to tax because of petitioner’s frivolous arguments herein we shall impose on petitioner under sec_6673 a penalty equal to dollar_figure to reflect the foregoing decision will be entered under rule


internal_revenue_service number release date index number ------------------- ---------------------------------------------- ---------------------------- ------------------------------ ------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------------- id no ---------------- telephone number -------------------- refer reply to cc corp b02 plr-113182-09 date may legend parent ---------------------------------------------------------------------------- ------------------------------------------------------------------- ------------------- sub ------------------------------------------------------------------- ---------------------------------- company official ---------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------- -------------------- a b c d date dear ------------ ------------------ ------------- ------------- --------------- -------------------------- this letter responds to a letter dated date requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election parent is requesting an extension of time to file an election the election under sec_1_1502-32 to waive loss_carryovers from separate_return limitation years of sub the information submitted is summarized below plr-113182-09 parent is the common parent of an affiliated_group the parent group that files a consolidated federal_income_tax return on a calendar_year basis parent acquired all of the common_stock and common_stock equivalents of sub for cash on date sub had net operating losses available for carryover to taxable years beginning after date totaling dollar_figurea parent has represented that because of a limitation imposed by sec_382 as a result of an earlier ownership_change the maximum amount of such loss_carryovers that the parent group would be permitted to use was dollar_figureb per year pursuant to sec_172 and sec_382 the maximum amount of the losses that the parent group would ever be permitted to use is dollar_figurec net operating losses of dollar_figured were guaranteed as of date to expire unutilized the parent group has in fact used dollar_figurec of such loss_carryovers and the remaining dollar_figured of loss_carryovers have expired sec_1_1502-32 provides that if a corporation has a loss carryover from a separate_return_limitation_year when it becomes a member of a consolidated_group the group may make an irrevocable election to treat all or any portion of the loss carryover as expiring for all federal_income_tax purposes immediately before the corporation becomes a member of the consolidated_group sec_1_1502-32 provides that such an election must be made in a separate statement filed with the consolidated group’s return for the year the corporation becomes a member the election was required to be filed with the parent group's consolidated_income_tax_return for its taxable_year that included date for various reasons however parent failed to make the election in a timely manner subsequently this request was submitted under sec_301_9100-3 for an extension of time to file the election under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 in this case the time for filing the election is fixed by regulations ie sec_1 b iv therefore the commissioner has discretionary authority under sec_301 to grant an extension of time for parent to file the election provided it shows that it acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government plr-113182-09 information affidavits and representations submitted by parent and company official explain the circumstances that resulted in the failure_to_file the election timely the information establishes that parent reasonably relied on a qualified_tax professional who failed to make or advise parent to make the election see sec_301_9100-3 based on the facts and information submitted including the representations made we conclude that parent has shown that it acted reasonably and in good_faith that the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and that granting relief will not prejudice the interests of the government accordingly an extension of time is granted under sec_301_9100-3 until days from the date on this letter for parent to amend the parent group’s consolidated federal_income_tax return for the taxable_year that included date to include the election as described above a copy of this letter must be attached to such return alternatively if the amended_return is filed electronically this requirement may be satisfied by attaching to that return a statement that provides the date and control number of the letter_ruling the above extension of time is conditioned on the parent group's tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers' tax_liability for the years involved a determination thereof will be made by the director’s office upon audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers' tax_liability is lower sec_301_9100-3 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any transaction or item discussed or referenced in this letter in particular we express no opinion with respect to the amount of any net operating losses of sub the amount of any sec_382 limitation or the amount of net operating losses that could be utilized prior to their expiration further we express no opinion as to the consequences of filing the election late under the provisions of any other section of the code and regulations or as to the tax treatment of any conditions existing at the time of or resulting from filing the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-3 we relied on certain statements and representations made by the taxpayer however the director should verify all essential facts in addition notwithstanding that an extension is granted under sec_301_9100-3 to file the election penalties and interest that would otherwise be applicable if any continue to apply this ruling is directed only to the taxpayer or taxpayers requesting it sec_6110 of the code provides that it may not be used or cited as precedent plr-113182-09 in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to parent's authorized representative sincerely _________________________________ ken cohen senior technician reviewer branch office of associate chief_counsel corporate


t c summary opinion united_states tax_court richard thomas williams petitioner v commissioner of internal revenue respondent docket no 11695-05s filed date richard thomas williams pro_se lynn m curry for respondent armen special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case unless otherwise indicated all subsequent section references are to the internal_revenue_code in effect for respondent determined a deficiency in petitioner’s federal_income_tax for of dollar_figure on the basis of the disallowance of an alimony deduction for payments made to petitioner’s ex-wife the sole question presented in this case is whether those payments met the definition of alimony under the internal_revenue_code we hold that the payments at issue were not alimony and consequently we hold for respondent background some of the facts have been stipulated and they are so found we incorporate by reference the parties’ stipulation of facts and accompanying exhibits at the time the petition was filed richard thomas williams petitioner resided in jacksonville florida petitioner and amy williams ms williams or ex-wife were married in date they separated in date immediately following their separation petitioner a retired u s coast guard coast guard officer directed the coast guard finance center that one-half of his monthly military pension be paid to ms williams the money was to cover both alimony and child_support for the couple’s minor child petitioner made these arrangements upon separating from ms williams as he thought he was required to do so under the term sec_2 petitioner retired from the military in and began receiving his pension at that time of the uniform code of military justice ucmj under this arrangement petitioner paid ms williams dollar_figure in petitioner and ms williams began divorce proceedings in and entered into an official marital settlement agreement msa in date the msa later incorporated into the final judgment of dissolution of marriage specified that petitioner was to pay dollar_figure per month plus annual cost of living increases to ms williams as alimony the payments under the msa began date petitioner’s divorce became final in date discussion4 sec_71 provides the general_rule that alimony payments are included in the gross_income of the payee spouse sec_215 provides the complementary general_rule that alimony payments are tax deductible by the payor spouse in an amount equal to the alimony or separate_maintenance payments paid during such individual’s taxable_year the term alimony means any alimony as defined in sec_71 the relevant provision of which explains the uniform code of military justice can be found pincite u s c subtit a part ii ch as the issue for decision under these facts is essentially legal in nature we decide the instant case without regard to the burden_of_proof sec_71 alimony or separate_maintenance payments defined --for purposes of this section-- in general --the term alimony_or_separate_maintenance_payment means any payment in cash if-- a such payment is received by or on behalf of a spouse under_a_divorce_or_separation_instrument b the divorce_or_separation_instrument does not designate such payment as a payment which is not includible in gross_income and not allowable as a deduction under sec_215 c in the case of an individual legally_separated from his spouse under a decree of divorce or of separate_maintenance the payee spouse and the payor spouse are not members of the same household at the time such payment is made and d there is no liability to make any such payment for any period after the death of the payee spouse and there is no liability to make any payment in cash or property as a substitute for such payments after the death of the payee spouse both parties agree that petitioner’s payments to his ex-wife satisfied the requirements set out in sec_71 c and d the parties do not agree however whether the respondent’s argument focuses on sec_71 so we merely note--it does not impact our holding--that it seems inconsistent to concede that the divorce or separation agreement in question does not designate a payment as being excluded from the sec_71 and sec_215 inclusion deduction scheme when respondent’s argument is that there is no divorce or separation agreement at continued payments made in satisfied the requirement that alimony payments be made under_a_divorce_or_separation_instrument see sec_71 according to sec_71 a divorce_or_separation_instrument means a a decree of divorce or separate_maintenance or a written instrument incident to such a decree b a written_separation_agreement or c a decree not described in subparagraph a requiring a spouse to make payments for the support or maintenance of the other spouse respondent’s position is that neither the msa nor the final judgment of dissolution of marriage was in effect for the year at issue therefore the payments were not made pursuant to a divorce_or_separation_instrument petitioner argues that the ucmj required him to make arrangements to support ms williams even in the absence of a court order or written_separation_agreement if that were the case the ucmj might serve to meet sec_71 and function as a decree not otherwise continued all for the year in issue as previously stated petitioner paid ms williams dollar_figure in to cover both alimony and child_support for the couple’s minor child payments to support children are not deductible sec_71 respondent does not however invoke that section but argues instead that the payments in issue do not satisfy the requirement of alimony as set forth in sec_71 described in subparagraph a but despite his honorable intentions petitioner cites no authority and we are aware of none subjecting a retired military officer receiving only a military pension to the ucmj at trial we found petitioner to be very straightforward and honest we are convinced that petitioner felt he was doing what was morally required of him unfortunately the internal_revenue_code is very specific in its requirements and petitioner’s payments to his ex-wife in did not meet the requirement outlined in sec_71 accordingly we must hold that in the instant case petitioner’s payments made to his ex-wife in did not satisfy the conditions set forth in sec_71 and are thus not properly deductible as alimony for the taxable_year in issue to reflect our disposition of the disputed issue decision will be entered for respondent similarly petitioner cited no authority and we are aware of none subjecting a retired coast guard officer to the provisions of the coast guard personnel manual available at http www uscg mil hq cgpc home persman pdf


significant index no department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division apr se teammate na ‘in re company this letter constitutes notice that a waiver of the minimum_funding_standard for the above-named plan for the plan_year ending has been granted subject_to the following conditions through atthe end of each of the plan years ending the company will make contributions to the plan in amounts sufficient to meet the minimum_funding requirements for the plan for the plan_year ending if applicable the company will make the required quarterly contribution to the plan that is due_date in a timely manner credit balances will be maintained in the funding_standard_account of the plan that are not less than the outstanding balances of the amortization base with respect to the waived amount that is established and maintained under sec_412 of the code your authorized representative agreed to these conditions in an e-mail dated date if these conditions are not satisfied the waiver is retroactively null and void this conditional waiver has been granted in accordance with sec_412 of the internal_revenue_code and sec_303 of the employee_retirement_income_security_act_of_1974 erisa the amount for which this conditional waiver has been granted is the contribution that would otherwise be required to reduce the balance in the funding_standard_account to zero as of date the company is one of the leading food retailers in the united_states inl company employed iii employees and operated ll supermarkets under various trade names the company’s supermarkets offer a broad selection of grocery meat poultry seafood dairy fresh produce delicatessen bakery and frozen food products the stores also offer non-food products and services such as health and beauty care products housewares general merchandise and in many cases pharmacies floral items and baking services in addition to its retail operation the company supplied approximately independently operated supermarkets from its distribution centers the iii the company and each of its direct and indirect subsidiaries filed a on voluntary petition for relief under chapter of the u s bankruptcy code the company and each of its subsidiaries have operated as debtors in possession under the bankruptcy code as part of its reorganization the company has closed some store locations as well as divested itself of a number store locations and warehouse facilities as of ie the company employs employees and operatesliil supermarkets additionally the company serves findependently owned franchise stores iii was the second bankruptcy filing in the company's bankruptcy filing a be the company and certain of its subsidiaries filed petitions under chapter of the bankruptcy code to implement a pre-negotiated financial restructuring of the company to address its over-leveraged capital structure although the company emerged from the mb bankruptcy filing with dramatically lower debt the downturn in the economy after i had an adverse impact on the company’s ability to build its revenue base in addition the entrance of another competitor into the supermarket industry in the areas served by the company exerted significant pressure on the company to lower prices and cut labor costs during the third and fourth quarters of the fiscal the company experienced declines in of the fiscal_year ending operating performance that would have resulted in defaults under its pre-petition secured credit facility as a result of the company’s failure to comply with certain financial covenants the company successfully negotiated waivers of such defaults and ultimately entered into an amendment of the pre-petition through early ee credit facility on however a dramatic decline in trade credit to the year ending eee and the first quarter company by i its vendors caused the company to experience severe liquidity_shortfall by leading to the bankruptcy filing cll since the petition date the company has taken several steps toward a successful resolution of the chapter reorganization the company has put a new management team into place obtained and maintained adequate liquidity to fund its operations going forward augmented the operational and restructuring capabilities of senior management identified and implemented significant cost cutting measures and substantially completed sales of unprofitable and non-core assets the company has also negotiated the distress termination of its cash balance pension_plan with the pbgc the financial information provided by the company clearly shows that the company has suffered a substantial business hardship this financial hardship forced the company to voluntarily file for reorganization under chapter of the u s bankruptcy code as described above the company has made tremendous strides in reorganizing itself through a restructuring of its business and management particularly through the installation of a new management team the divestiture of its poorly performing assets and the distress termination of its cash balance pension_plan the company has also negotiated exit financing that allowed it to emerge from chapter in - because the company’s financial position has improved to the point that it has emerged from chapter it is clear the business hardship was temporary furthermore the company oi - has been granted subject_to the conditions set forth above has accelerated contributions to the plan hence the waiver for the plan_year your attention is called to sec_412 of the code and sec_304 of erisa which describe the consequences that would result in the event the plan is amended to increase benefits change the rate in the accrual_of_benefits or to change the rate of vesting while any portion of the waived_funding_deficiency remains unamortized please note that any amendment to a profit sharing plan or any other retirement plans covering employees covered by this plan maintained by the company to increase the liabilities of those plans would be considered an amendment for purposes of sec_412 of the code and sec_304 of erisa similarly the establishment of a new profit sharing plan or any other retirement_plan by the company covering employees covered by this plan would be considered an amendment for purposes of sec_412 of the code and sec_304 of erisa this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent when filing form_5500 for the plan_year ending ii the date of this letter should be entered on schedule b actuarial information for this reason we suggest that you furnish a copy of this letter to the enrolled_actuary who is responsible for the completion of the schedule b we have sent a copy of this letter to the manager ep classification in to the manager ep compliance unit in - _and to your authorized representative pursuant to a power_of_attorney on file in this office if you require further assistance in this matter please contact sincerely yours carol d gold director employee_plans


t c summary opinion united_states tax_court jeffery allen suiter petitioner v commissioner of internal revenue respondent docket no 15409-07s filed date jeffery allen suiter pro_se terra-lynn zentara for respondent gale judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision 1unless otherwise indicated all section references are to the internal_revenue_code_of_1986 as in effect for the taxable_year in issue and all rule references are to the tax_court rules_of_practice and procedure all dollar amounts have been rounded to the nearest dollar to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case respondent determined a deficiency of dollar_figure with respect to petitioner’s federal_income_tax the issues for decision are whether petitioner is entitled to a dependency_exemption deduction under sec_151 and c and whether petitioner is entitled to a child_tax_credit under sec_24 background some of the facts have been stipulated we incorporate the stipulated facts and exhibits into our findings by this reference at the time the petition was filed petitioner resided in kentucky petitioner timely filed his federal_income_tax return for on his return petitioner claimed a dependency_exemption deduction and child_tax_credit for jks petitioner’s minor son from a prior marriage to amanda suiter amanda with whom he had two children jks is the younger of their two children petitioner and amanda divorced in on date the state court with jurisdiction held a hearing in connection with the divorce and by oral order granted petitioner and amanda joint custody of their children and directed that petitioner would be allowed to claim a tax 2the court refers to minor children by their initials see rule a jks was born in exemption for jks on his tax returns and that amanda would be allowed to claim a tax exemption for their older child on her tax returns in a written order dated date the state court designated amanda the primary residential caretaker of the children and awarded petitioner visitation rights on a regular basis subsequently amanda remarried and made plans to move to georgia with her new husband and the children petitioner filed a motion seeking primary residential custody of the children which by written order entered date the state court denied in the order the state court permitted amanda to move with her husband and children to georgia and awarded petitioner visitation rights generally every third week from friday pincite p m to sunday pincite p m as well as for consecutive weeks during the summer and during certain holidays in jks resided with petitioner approximately months as noted petitioner claimed a dependency_exemption deduction with respect to jks on his return and included thereon jks’s social_security_number no form_8332 release of claim to exemption for child of divorced or separated parents or any other waiver signed by amanda was attached to the return respondent issued a notice_of_deficiency with regard to petitioner’s taxable_year disallowing the dependency_exemption deduction and child_tax_credit that petitioner claimed for jks petitioner filed a timely petition for redetermination discussion the commissioner’s determinations in the notice_of_deficiency are presumed correct and the taxpayer bears the burden of proving error in the determinations see rule 290_us_111 petitioner has not claimed or shown eligibility for a shift in the burden_of_proof under sec_7491 he has not in any event introduced credible_evidence that standing alone would be a sufficient basis for a decision in his favor see 116_tc_438 consequently the burden_of_proof does not shift to respondent pursuant to sec_7491 dependency_exemption deduction sec_151 and c allows a taxpayer a deduction for each individual who is a dependent of the taxpayer as defined in sec_152 provided that the dependent’s identifying number is included on the return see sec_151 sec_7701 sec_6109 sec_152 defines the term dependent in pertinent part to include a son of the taxpayer over half of whose support for the calendar_year was received from the taxpayer or treated as received under sec_152 or e sec_152 provides a special rule for treating a taxpayer as providing over half of the support of his or her child where the parents are divorced the special rule states that if the child received over half of his support during the calendar_year from his divorced parents and the child is in the custody of one or both parents for more than one-half of the calendar_year then the child is treated as receiving over half of his support during the calendar_year from the parent having custody for the greater portion of the calendar_year referred to as the custodial_parent in the statute see id the regulations provide that if the parents have split custody then ‘custody’ will be deemed to be with the parent who as between both parents has the physical custody of the child for the greater portion of the calendar_year sec_1_152-4 income_tax regs emphasis added see also neal v commissioner tcmemo_1999_97 noah v commissioner tcmemo_1998_384 nieto v commissioner tcmemo_1992_296 an exception to the sec_152 rule for divorced parents is extended in sec_152 which provides that if the custodial_parent signs a written declaration that he or she will not claim the child as a dependent and the noncustodial 3as cited herein sec_1_152-4 income_tax regs is applicable for taxable years beginning after date fed reg date and before date fed reg date 4the exceptions in sec_152 and do not apply in this case there is no evidence of a multiple_support_agreement as defined in sec_152 covering petitioner’s children in and there was no pre-1985 instrument within the meaning of sec_152 applicable to them parent attaches the declaration to his or her return for the taxable_year then the noncustodial_parent is entitled to the dependency_exemption deduction petitioner and amanda had joint custody of jks during the parties have stipulated that petitioner had physical custody of jks for approximately months in that year given the state court’s date order permitting amanda to move to georgia and take the children with her we find--in the absence of any contrary evidence--that amanda had physical custody of jks for the remainder of therefore she is the custodial_parent as defined in sec_152 because petitioner the noncustodial_parent did not attach form_8332 or an equivalent waiver to his tax_return he is not entitled to the dependency_exemption deduction see sec_152 see also 114_tc_184 in miller we explained the blanket nature of the rule and its rationale sec_152 clearly requires that the custodial_parent release the dependency_exemption for a child by signing a written declaration to that effect in order for the noncustodial_parent to claim the child’s dependency_exemption the control_over a child’s dependency_exemption conferred on the custodial_parent by sec_152 was intended by congress to simplify the process of determining who is entitled to 5for purposes of sec_152 the term noncustodial_parent means the parent who is not the custodial_parent sec_152 6we assume without deciding that petitioner and amanda together provided more than half of jks’s support during claim dependency_exemptions for children of a marriage id petitioner argues that he is entitled to claim jks as a dependent for pursuant to the date order of the state court granting him that right while petitioner’s frustration may be understandable it is nonetheless the case that a state court grant to a taxpayer of the right to claim the dependency_exemption deduction is ineffective if the requirements of sec_152 are not met because a state court cannot determine issues of federal tax law miller v commissioner supra pincite on the basis of the foregoing we hold that petitioner is not entitled to a dependency_exemption deduction for jks for accordingly we sustain respondent’s determination 7in congress considered but promptly rejected a rule that would have treated a state court order as a sufficient basis for claiming the dependency_exemption see working families tax relief act of wftra publaw_108_311 sec 118_stat_1169 amending sec_152 effective for taxable years beginning after date to provide that a noncustodial_parent is entitled to the dependency_exemption deduction for a child supported by the divorced parents together if a decree of divorce or separate_maintenance or written_separation_agreement provides that the noncustodial_parent shall be entitled to any deduction allowable under sec_151 for such child however congress promptly reconsidered and retroactively repealed the change before the end of so that it had no effect see gulf_opportunity_zone act of publaw_109_135 119_stat_2632 retroactively amending sec_152 effective as if included in the wftra to eliminate the noncustodial parent’s entitlement to a dependency_exemption deduction pursuant to a state court decree disallowing the dependency_exemption deduction for jks claimed by petitioner for child_tax_credit subject_to income limitations not pertinent here a child_tax_credit is allowed with respect to each qualifying_child of the taxpayer sec_24 and b sec_24 defines a qualifying_child as an individual for whom the taxpayer is allowed a dependency_exemption deduction under sec_151 and who has not attained age since we have concluded that petitioner is not entitled to a dependency_exemption deduction for jks jks is not petitioner’s qualifying_child under sec_24 consequently petitioner is not entitled to claim a child_tax_credit and we sustain respondent’s determination to that effect to reflect the foregoing decision will be entered for respondent


t c memo united_states tax_court bohdan senyszyn and kelly l senyszyn petitioners v commissioner of internal revenue respondent docket no filed date in senyszyn v commissioner senyszyn ii t c __ date we declined to apply the doctrine_of collateral_estoppel to uphold whatever minimum deficiency would be consistent with ph's prior conviction for tax_evasion we found that the evidence presented at trial showed that ps were not liable for any deficiency and concluded that the purposes of collateral_estoppel did not support its application r filed a motion for reconsideration of senyszyn ii on the grounds that because the legal requirements for applying the doctrine were met its application was mandatory held the discretion we exercised in senyszyn ii not to apply collateral_estoppel to uphold a minimum deficiency was squarely within applicable precedent r's motion for reconsideration will be denied this opinion supplements our prior opinion senyszyn v commissioner senyszyn ii t c __ date bohdan senyszyn and kelly l senyszyn pro sese marco franco and lydia a branche for respondent supplemental memorandum opinion halpern judge this case is before us on respondent's motion under rule that we reconsider our opinion senyszyn v commissioner senyszyn ii t c __ date for the reasons explained below we will deny respondent's motion mr senyszyn's tax_evasion conviction background in date david hook a former business_associate of mr senyszyn filed a civil_fraud suit against petitioners alleging that they had embezzled funds from him between and mr hook's civil suit led to a federal criminal investigation of mr senyszyn as part of that investigation internal revenue_agent carmine degrazio was asked to determine the amount of income that mr senyszyn had received in but had failed to report on petitioners' form unless otherwise indicated all section references are to the internal_revenue_code for the year in issue and all rule references are to the tax_court rules_of_practice and procedure u s individual_income_tax_return agent degrazio examined records of accounts belonging to petitioners to mr hook or to related entities to determine the flow of funds between mr hook's accounts and mr senyszyn's accounts agent degrazio compared the transfers made from mr hook's accounts to mr senyszyn's accounts with the transfers in the opposite direction and concluded that mr senyszyn had received dollar_figure of net benefits from mr hook that petitioners did not report on their form_1040 in date the u s attorney for the district of new jersey filed a four-count information in a criminal case against mr senyszyn that included a charge of tax_evasion in violation of sec_7201 in support of the tax_evasion charge the information alleged that mr senyszyn embezzled approximately dollar_figure from mr hook during and failed to include that amount in the income reported on petitioners' form_1040 contemporaneous with the u s attorney's filing of charges against him mr senyszyn signed an agreement to plead guilty to all four counts with which he was charged mr senyszyn agreed to stipulate at sentencing that he had knowingly and willfully failed to report dollar_figure in taxable_income for after mr senyszyn entered a plea of guilty in accordance with his plea agreement the u s district_court for the district of new jersey entered judgment pursuant to mr senyszyn's plea upon the conclusion of further proceedings in the district_court and the u s court_of_appeals for the third circuit the district court's judgment became final the determined deficiency following mr senyszyn's criminal conviction respondent examined petitioners' federal_income_tax return for the purpose of determining any deficiency in tax after that examination respondent determined a deficiency in petitioners' federal_income_tax together with fraud and accuracy-related_penalties the deficiency in tax resulted primarily from respondent's adjustment increasing petitioners' gross_income on account of dollar_figure of income that petitioners allegedly failed to report senyszyn i before trial in this case respondent moved for partial summary adjudication that petitioners were collaterally estopped from denying that during mr senyszyn received unreported income of dollar_figure or that the fraud_penalty applied for and the period of limitations on assessment and collection of tax remained open under the doctrine_of collateral_estoppel or issue preclusion once an issue of fact or law is actually and necessarily determined by a court of competent jurisdiction that determination is conclusive in subsequent suits based on a different cause of action involving a party to the prior litigation 440_us_147 collateral_estoppel has the dual purpose of protecting litigants from the burden of relitigating an identical issue with the same party or his privy and of promoting judicial economy by preventing needless litigation 439_us_322 it also fosters reliance on judicial action by minimizing the possibility of inconsistent decisions montana u s pincite in our initial report in this case senyszyn v commissioner senyszyn i tcmemo_2013_274 we granted respondent's motion for summary_judgment in regard to the fraud_penalty and the statute_of_limitations but denied his motion for summary_judgment that petitioners were estopped from disputing that mr senyszyn received unreported income of dollar_figure in as we explained in that report although the existence of an underpayment in tax is a necessary element of tax_evasion under sec_7201 the determination of an exact liability evaded is not id at even where the taxpayer has stipulated a specific amount of underpayment in a guilty plea we continued such stipulation--though strong evidence of the deficiency amount--does not collaterally estop the taxpayer from challenging that amount in a subsequent civil_proceeding id at therefore we denied respondent's motion to the extent it sought determination of the amount of petitioners' unreported income for the issues of the amounts of the deficiency in tax and the penalties for we concluded remain ed for trial id at nonetheless the existence of some underpayment was a necessary element of the offense for which mr senyszyn was convicted see 380_us_343 listing the existence of a tax_deficiency among the elements of sec_7201 therefore we accepted that mr senyszyn's criminal conviction established the existence of an underpayment by petitioners for but not its exact amount senyszyn i at senyszyn ii on the basis of the evidence presented at trial we found that mr senyszyn repaid to mr hook during more than he took senyszyn ii t c at __ slip op pincite thus correction of the error reflected in agent degrazio's understatement of the amount that mr senyszyn repaid to mr hook during eliminated the deficiency respondent determined see 366_us_213 quoting with approval government's observation on brief that victim's recovery_of misappropriated funds reduces embezzler's income chumbrook v commissioner tcmemo_1977_108 tax ct memo lexis at where restitution of wrongfully converted property is made prior to the close of the year of the wrongful conversion the restitution offsets what would otherwise be income so that no income results from the wrongful conversion having determined in senyszyn ii t c at __ slip op that the evidence presented did not support the amount of the deficiency that respondent asserted--or indeed any deficiency at all we then considered whether to apply the doctrine_of collateral_estoppel to uphold a deficiency in whatever minimum amount would justify mr senyszyn's conviction under sec_7201 we recognized that prior cases had not established a minimum amount necessary to support a conviction for tax_evasion id at __ slip op pincite we read parklane hosiery co as having granted trial courts discretion to decline to apply collateral_estoppel when the purposes of the doctrine do not support its application id at __ slip op pincite thus we considered whether the purposes of collateral_estoppel support ed applying the doctrine to uphold a deficiency in petitioners' federal_income_tax and concluded that they would not id at __ slip op pincite we explained that conclusion as follows upholding a minimum deficiency would not promote judicial economy even after mr senyszyn's conviction under sec_7201 we were required to hear this case to determine the amount of petitioner's deficiency and any inconsistency between mr senyszyn's prior criminal conviction and a decision that petitioners are not liable for any deficiency would not undermine reliance on judicial action cf montana u s pincite because the inconsistency would result not from conflicting findings by different courts but instead from mr senyszyn's entry of a guilty plea to a charge that the evidence--at least as presented to us--would not support id at __ slip op pincite therefore we declined to apply the doctrine_of collateral_estoppel to uphold whatever minimum deficiency would be consistent with mr senyszyn's conviction under sec_7201 id at __ slip op pincite instead we concluded that petitioners were not liable for any deficiency in their federal_income_tax for id at __ slip op pincite respondent's motion for reconsideration on date respondent filed his motion asking us to reconsider senyszyn ii in that motion respondent alleges that in senyszyn ii we did not properly apply the standard for collateral_estoppel in particular respondent argues that our claim of broad discretion in the application of collateral_estoppel was a substantial error of law because it contradicts previous holdings of the court_of_appeals for the third circuit the court to which any appeal in this case although a motion for reconsideration of an opinion must be filed within days after service of the opinion respondent's motion that we reconsider the opinion we issued on date was timely because date fell on a saturday see rule a would lie finally respondent alleges that proper application of the standard for collateral_estoppel would result in a substantial tax_deficiency for petitioners according to respondent that court_of_appeals allows trial courts discretion in the application of collateral_estoppel only when the doctrine is asserted by a claimant who was not a party to the prior litigation ie cases of non-mutual collateral_estoppel by contrast in cases involving mutual collateral_estoppel in which the doctrine is asserted by a party to the prior litigation courts must apply the doctrine whenever the legal conditions to its application are met respondent rests his interpretation of third circuit law on a single case that court's opinion in 458_f3d_244 3d cir respondent focuses in particular on the court's discussion of the appropriate standard of appellate review of a trial court's decision whether to apply collateral_estoppel the court_of_appeals acknowledged in jean alexander that its prior decisions on that point had been inconsistent in some cases we have reviewed the application or nonapplication of issue preclusion for abuse_of_discretion while in others we have applied plenary review id pincite the court sought to reconcile its prior cases on the basis of the circumstances in which the doctrine had been invoked it had engaged in more limited abuse-of-discretion review only in cases in which a nonparty to a previous proceeding ha d asserted issue preclusion against a defendant that is in cases involving 'non-mutual offensive collateral_estoppel ' id pincite those cases the court suggested established a limited exception to the general_rule requiring plenary review over the application of issue preclusion id the court_of_appeals justified the differing standards of appellate review according to the significance of equitable considerations in the determination of whether to apply collateral_estoppel the more the question turned on legal rather than equitable considerations the court reasoned the greater the justification for plenary review thus plenary review of a lower court's decision in a case involving defensive or mutual collateral_estoppel makes sense the court decided because t he predominant question in those cases is whether the basic requirements for issue preclusion are satisfied id citing 288_f3d_519 3d cir relying on jean alexander respondent argues that our claim of broad discretion to apply collateral_estoppel or not contradicts the third circuit's standard of review respondent apparently reasons that because that court_of_appeals reviews a lower court's application of collateral_estoppel for abuse_of_discretion only in cases involving nonmutual collateral_estoppel those are the only cases in which it allows a trial_court any discretion in the application of the doctrine respondent also suggests we consider the breadth of our opinion he worries that the discretion we have claimed in the application of collateral_estoppel might encourage many more challenges to clear-cut cases that will waste judicial resources and the resources of the parties thereby frustrating the entire purpose of collateral_estoppel he also professes concern that our opinion might be used to challenge prior criminal convictions finally respondent suggests that applying collateral_estoppel would save the court from having to confront the question of a requirement to arbitrarily determine some 'substantial tax deficiency' in order to afford the district_court the comity to which it is due in a case where this court's factual analysis shows there really is no deficiency at all the better course respondent recommends is to accept via collateral_estoppel the liability to which mr senyszyn stipulated in his guilty plea as a minimum deficiency discussion in asking us to reconsider senyszyn ii respondent leaves largely unchallenged our determination that the purposes of collateral_estoppel do not support its application in the present case instead respondent relies on jean alexander for the proposition that collateral_estoppel when invoked by a party to the prior litigation must be applied whenever the basic requirements for its application are met regardless of whether doing so would further the doctrine's underlying purposes respondent offers no explanation for the surprising view that courts are hamstrung in the application of a doctrine they created largely for their own benefit jean alexander does not stand for the proposition for which respondent cites it respondent focuses on the court of appeals' observation that t he predominant question in preclusion cases involving defensive or mutual collateral_estoppel is whether the basic requirements for issue preclusion are satisfied jean alexander f 3d pincite citing nat'l r r passenger corp f 3d pincite the court_of_appeals offered that observation not in a discussion of the standards we see no merit in respondent's argument that the need to consider challenges to collateral_estoppel by future petitioners in cases similar to the present case will waste judicial resources and the resources of the parties thereby frustrating the entire purpose of collateral_estoppel as we explained in both of our prior opinions in this case because a defendant's conviction under sec_7201 establishes only the existence of a deficiency but not its amount the commissioner's efforts to collect any_tax owed will necessarily require subsequent civil litigation we are also not persuaded by respondent's professed concern that our decision might somehow give mr senyszyn or others similarly situated grounds to have a final criminal conviction overturned governing the application of the doctrine on the merits but instead in addressing the appropriate standard of appellate review the statement respondent seized on cannot be read to mean that courts are bound to apply collateral_estoppel when invoked by a prior party whenever the basic requirements for issue preclusion are satisfied cf id the question of whether those requirements are satisfied may be t he predominant question in preclusion cases involving defensive or mutual collateral_estoppel see id but predominant does not mean sole the court of appeals' opinion in nat'l r r passenger corp demonstrates that even if equitable considerations are less prevalent in cases involving nonmutual or defensive collateral_estoppel the application of the doctrine in those circumstances does not turn entirely on satisfaction of the legal requirements in4 any case that raises an issue of collateral_estoppel a court must consider equitable factors to assure that the doctrine is applied in a manner that will serve the twin goals of fairness and efficient use of private and public litigation resources nat'l thus respondent not only misinterpreted the court of appeals' observation in 458_f3d_244 3d cir regarding the relative importance of legal and equitable considerations in preclusion cases involving defensive or mutual collateral_estoppel he also failed to read or appreciate the import of the case the court cited in jean alexander in support of that observation see id citing 288_f3d_519 3d cir r r passenger corp f 3d pincite the equitable factors relevant in a particular case depend on whether estoppel is being asserted by a prior party ie whether mutuality exists and whether its use is offensive or defensive id but even in a case of mutual offensive collateral_estoppel like nat'l r r passenger corp application of the doctrine does not depend solely on the satisfaction of the applicable legal requirements even when the requirements of the general_rule of collateral_estoppel are satisfied the court must consider whether there are special circumstances present which make it inequitable or inappropriate to foreclose relitigation of a previously determined issue id pincite on the facts before it the nat'l r r passenger corp court found no special circumstances that would justify relitigation it did not however resolve to apply collateral_estoppel merely because the legal requirements had been satisfied thus jean alexander establishes only that were respondent to appeal our decision in the third circuit the court_of_appeals would conduct plenary or de novo review of our determination not to apply collateral_estoppel see 499_us_225 using interchangeably the terms plenary de novo and independent review jean alexander does not establish that because the basic requirements for issue preclusion are satisfied in the present case it necessarily follows that the doctrine must be applied even though doing so would not further the doctrine's underlying purposes respondent's argument thus conflates the substantive issue of when collateral_estoppel properly applies and the procedural issue of the scope of an appellate court's review of a lower court's decision to apply the doctrine or not an appellate court's choice to exercise plenary review of a lower court's decision rather than more limited abuse-of-discretion review does not mean that the lower court necessarily lacked any discretion to take into account relevant equitable considerations as well as applicable legal requirements in reaching its decision the appellate court's exercise of plenary review simply means that that court will make its own weighing of any relevant equitable considerations instead of deferring to the lower court's judgment e g salve regina coll u s pincite when de novo review is compelled no form of appellate deference is acceptable see generally james wm moore moore's federal practice sec pincite 3d ed a circuit_court employing de novo review may substitute its own judgment regarding a conclusion of law made by the trial_court even if we were to apply collateral_estoppel in this case the doctrine would not support upholding the deficiency respondent asserts for the reasons explained in senyszyn i collateral_estoppel even if applicable would not establish the amount of any income petitioners failed to report for were we to apply collateral_estoppel we would have to determine a deficiency in whatever minimum amount would justify mr senyszyn's conviction under sec_7201 because prior cases do not establish a minimum amount necessary to support a conviction the determination respondent requests of us would necessarily be not only arbitrary but also nominal we remain convinced that no purpose would be served by upholding a nominal deficiency--one that respondent apparently concedes would be contrary to the evidence --merely because the legal preconditions for the application of collateral_estoppel are satisfied we see nothing in the court of appeals' opinion in jean alexander or in its jurisprudence generally that requires us to make such a seemingly pointless determination instead that court's opinions confirm that in any case raising the possible application of collateral estoppel--whether offensive rule allows a party to request our reconsideration of either an opinion or findings_of_fact although respondent's motion asks only that we reconsider senyszyn ii on the grounds that it reflected a substantial error of law the memorandum he submitted in support of his motion refers to substantial errors of fact as well but the errors of fact to which respondent refers appear to derive from our alleged errors of law respondent argues that senyszyn ii contains clear errors of law that led the court to find facts inconsistent with a prior final_decision made by a court of competent jurisdiction in a case concerning the same parties nowhere in his memorandum does respondent challenge our evaluation of the evidence presented in senyszyn ii or defensive mutual or nonmutual--a court must consider relevant equitable factors to assure that the doctrine is applied in a manner consistent with its underlying objectives because the discretion we exercised in senyszyn ii is squarely within the scope of third circuit precedent we will deny respondent's motion an appropriate order will be issued