t c summary opinion united_states tax_court paul l tucker jr and anita h tucker petitioners v commissioner of internal revenue respondent docket no 5854-06s filed date paul l tucker jr and anita h tucker pro sese marshall r jones for respondent carluzzo special_trial_judge this case was heard pursuant to the provisions of sec_7463 pursuant to sec_7463 the decision to be entered is not reviewable by any unless otherwise indicated section references are to the internal_revenue_code_of_1986 as amended in effect for the relevant period rule references are to the tax_court rules_of_practice and procedure other court and this opinion shall not be cited as precedent for any other case in a notice_of_deficiency dated date respondent determined a dollar_figure deficiency in and imposed a dollar_figure sec_6662 accuracy-related_penalty with respect to petitioners’ federal_income_tax the issues for decision are whether petitioners are entitled to an employee_business_expense deduction in excess of the amount allowed by respondent whether petitioners are entitled to a charitable_contribution_deduction in excess of the amount allowed by respondent and whether petitioners are liable for an accuracy-related_penalty background some of the facts have been stipulated and are so found petitioners are and were at all times relevant married to each other at the time the petition was filed they resided in birmingham alabama references to petitioner are to paul l tucker jr during petitioner was employed as a pilot for southwest airlines southwest as a southwest pilot he functioned in two capacities--as a line captain and as a check airman for purposes of this case his duties in each capacity can be briefly summarized as a line captain petitioner was responsible for piloting an aircraft between departure and arrival on any given flight assignment and for the safe transportation of passengers crew and cargo as a check airman petitioner in accordance with federal aviation administration requirements and as supervised from dallas texas was responsible to train or to review the performance of other southwest employees petitioner’s rate of compensation was the same regardless of the function he performed on any flight assignment during petitioner estimates that more of his earnings from southwest were attributable to flights during which he functioned as a check airman than to those during which he functioned as a line captain petitioners resided in birmingham alabama during but most of petitioner’s flight assignments as a line captain check airman or both during that year originated and concluded at midway airport in chicago illinois midway in connection with his flight assignments petitioner routinely drove from his residence in birmingham to a nearby airport and then flew to midway so as to arrive in sufficient time for his flight assignment sometimes that required him to leave birmingham the night before his flight assignment and spend the night in chicago typically at the conclusion of a flight assignment he flew from midway back to birmingham and returned to his residence again depending upon the timing of the flights petitioner might spend the night in chicago and return to birmingham the next morning pursuant to southwest’s travel reimbursement policy petitioner was reimbursed for travel_expenses on an hourly basis for a period that began hour before the scheduled departure time of any given flight assignment and ended one-half hour after the flight assignment terminated on those occasions when petitioner spent the night in chicago he did so in an apartment that he rented there during petitioners were members of the dawson memorial baptist church in birmingham church forty checks totaling dollar_figure show donations in that amount to church during petitioners’ joint federal_income_tax return which was prepared by a paid income_tax_return_preparer was timely filed as relevant here petitioners claimed a dollar_figure employee_business_expense deduction and a dollar_figure charitable_contribution_deduction on a schedule a itemized_deductions included with that return in the notice_of_deficiency respondent disallowed all but dollar_figure of the employee_business_expense deduction disallowed all but dollar_figure of the charitable_contribution_deduction and imposed a sec_6662 accuracy-related_penalty upon the ground that the underpayment_of_tax required to be shown on petitioners’ return is due to negligence or to some extent the details of the employee_business_expense deduction are shown on a form_2106 employee business_expenses also included with petitioners’ return the amount shown above for that deduction does not take into account sec_67 intentional disregard of rules or regulations the disallowed portion of the employee_business_expense deduction relates almost entirely to expenses petitioner incurred traveling between birmingham and chicago the cost of renting and maintaining an apartment in chicago and a claim for meals expenses on those occasions when petitioner was required to remain in chicago because of the timing of his midway flight assignments and available flights from and to birmingham employee_business_expense deduction discussion ordinarily expenses_incurred by an individual for meals_and_lodging are considered personal living_expenses and may not be deducted sec_262 on the other hand expenses for meals_and_lodging other than amounts that are lavish_or_extravagant under the circumstances incurred by an employee can qualify as deductible trade_or_business_expenses if the expenses were incurred while the employee was traveling away from home in connection with the employee’s employment sec_162 54_tc_374 to qualify for deduction under sec_162 among other things the expenses for meals and or lodging must be incurred while the taxpayer is away from home and the expenses must be directly connected with carrying on the taxpayer’s business 326_us_465 the reference to home in sec_162 means the taxpayer’s tax_home 74_tc_578 67_tc_1 49_tc_557 the disallowed portion of the employee_business_expense deduction consists of expenses petitioner incurred to travel between his residence and midway as well as expenses for meals_and_lodging while petitioner remained in chicago according to petitioners those expenses are properly deductible as travel_expenses petitioner incurred while traveling away from home as an employee of southwest according to respondent those expenses represent nondeductible personal living or family_expenses the dispute between the parties reduces to their disagreement regarding the location of petitioner’s tax_home during the year in issue according to petitioners petitioner’s tax_home was dallas and traveling expenses_incurred in connection with traveling to or remaining in chicago are deductible under sec_162 according to respondent petitioner’s tax_home was chicago during and the expenses_incurred to travel there or for meals_and_lodging while present in chicago are not deductible because the expenses are personal in nature for the following reasons we agree with respondent generally a taxpayer’s tax_home is determined by the location of the taxpayer’s regular or principal if more than one regular place of business mitchell v commissioner supra kroll v commissioner supra cf sec_1_911-2 income_tax regs petitioners point out that much of petitioner’s income from southwest during was generated from flights on which he functioned as a check airman they further note that he was supervised from dallas on those flights upon the basis of those facts they argue that dallas should be considered his tax_home we have difficulty following their reasoning on the point and they have offered no support or authority for such a proposition we can envision many scenarios where an employee regularly works in one location but is supervised from a distant one as previously noted and well established it is the taxpayer’s regular place of business that determines the taxpayer’s tax_home for purposes of sec_162 the location of the employee’s supervision or supervisor might be instructive but it is hardly determinative during most of petitioner’s flight assignments originated and terminated at midway as best can be determined from southwest’s records he was physically present in dallas on relatively few occasions for business purposes during that year it follows that midway was petitioner’s regular or at least principal_place_of_business during and chicago is petitioner’s tax_home during that year respondent’s adjustments that reflect those findings are sustained petitioners are not entitled to an employee_business_expense deduction in excess of the amount allowed by respondent charitable_contribution_deduction petitioners claimed a dollar_figure charitable_contribution_deduction on their return in general a taxpayer is allowed to deduct any donations contributions or gifts made to a qualifying_organization see sec_170 c the only donee specifically identified in the record is church and nothing in the record suggests that church was not a qualifying_organization described in sec_170 checks made to church show that petitioners contributed dollar_figure to that organization during according to petitioner his religious principles constrained him to make cash donations to church anonymously according to petitioner those cash donations totaled almost dollar_figure we appreciate petitioner’s religious beliefs and practices but a deduction for a charitable_contribution whether made in cash or otherwise must be substantiated by at least one of the following a canceled check a receipt from the donee charitable_organization showing the name of the donee the date of the contribution and the amount of the contribution or in the absence of a canceled check or receipt from the donee charitable_organization other reliable written records showing the name of the donee the date of the contribution and the amount of the contribution sec_1_170a-13 income_tax regs the reliability of the records is determined on the basis of all of the relevant facts and circumstances see sec_1 170a- a income_tax regs other than his testimony regarding his religious beliefs and donation practices the only evidence in the record relating to the amount of cash contributions made to church during is a handwritten log prepared by petitioner the entries made in the log were copied from notations made in another ledger also maintained by petitioner but not produced at trial set against petitioners’ practice of making substantial donations to church by check we do not find petitioner’s handwritten log to be persuasive or otherwise to satisfy the provisions of the regulation cited above petitioners are entitled to a charitable_contribution_deduction in excess of the amount allowed by respondent in the notice_of_deficiency but only to the extent that the contributions are evidenced by canceled checks to church that amount exceeds the amount allowed in the notice_of_deficiency by dollar_figure sec_6662 accuracy-related_penalty according to respondent the underpayment_of_tax required to be shown on petitioners’ return is due to negligence or intentional disregard of rules or regulations see sec_6662 b c according to respondent the imposition of the sec_6662 accuracy-related_penalty upon the ground of negligence is appropriate because petitioners improperly failed to treat chicago as petitioner’s tax_home during and they claimed a charitable_contribution_deduction without having maintained sufficient records to support that deduction the burden of production rests with respondent to come forward with sufficient evidence to show that petitioners are liable for the penalty here in dispute see sec_7491 after carefully considering the evidence in this case we find that respondent’s burden has not been met petitioners are not liable for a sec_6662 accuracy-related_penalty for to reflect the foregoing and to take into account payments made after the notice_of_deficiency was issued decision will be entered under rule


- - tcmemo_1998_338 united_states tax_court estate of robert l wagner deceased ruth r wagner personal representative and ruth r wagner et al petitioners v commissioner of internal revenue respondent docket nos filed date rta an s_corporation within the meaning of sec_1361 i r c reported a loss to its shareholders on account of a failed investment in certain technology the shareholders deducted their pro_rata shares of that loss on their returns respondent disallowed those deductions on the ground that the loss was not evidenced by a closed and completed transaction in the year the loss was claimed on account of the reasonable prospect of a recovery under a lawsuit against the supplier of the technology held respondent’s determination is sustained because petitioners have failed to prove that rta’s chances for success on the lawsuit were remote or cases of the following petitioners are consolidated herewith walter w manley ii docket no richard t wagner and margie s wagner docket no charles e lecroy ii and karen a lecroy docket no nebulous or if not remote or nebulous the financial condition of the defendant made unrealistic the possibility of an actual recovery stephen g salley and anthony j scaletta for petitioners william r mccants for respondent memorandum findings_of_fact and opinion halpern judge these cases have been consolidated for trial briefing and opinion by separate notices of deficiency respondent determined deficiencies in federal income taxes as follows docket no -- year dollar_figure big_number big_number dollar_figure dollar_figure -- -- -- -- -- -- dollar_figure -- -- -- respondent made adjustments for which decreased petitioners’ net_operating_loss for and consequently petitioners’ loss_carrybacks to and which created deficiencies in tax for those earlier years except as otherwise noted all section references are to the internal_revenue_code in effect for the years in issue all rule references are to the tax_court rules_of_practice and procedure the common denominator in these consolidated cases is resource technology associates inc rta a small_business_corporation within the meaning of sec_1361 petitioners ruth r wagner richard t wagner walter w manley ii and charles lecroy were shareholders in rta during the shareholders rta reported a loss to the shareholders for and on account thereof each claimed a loss deduction in determining his or her federal_income_tax liability respondent disallowed those loss deductions and the sole issue remaining for decision is whether rta sustained the loss that gave rise to the shareholders’ claimed deductions introduction findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts with accompanying exhibits is incorporated herein by this reference at the time of the filing of the petitions in these cases all petitioners resided in florida resource technology associates inc rta rta a florida corporation was organized on date rta was organized for the purpose of investing in a new and speculative technology for the safe and efficient disposal of used truck and automobile tires shortly after it was organized rta elected pursuant to sec_1362 to be an s_corporation within the meaning of sec_1361 rta’s taxable_year is the calender year environmental disposal systems inc and the tire transformation system prior to organizing rta the shareholders had researched and investigated an opportunity for investing in a product that would dispose_of old tires that product the tire transformation system tts was being marketed and promoted by environmental disposal systems inc eds a georgia corporation the tts was designed both to transform used truck and automobile tires into marketable byproducts such as oil steel ash and carbon black and to comply with the environmental requirements of the federal clean air act eds which held patent rights to the design of the tts had successfully obtained the necessary state regulatory permits and had instituted an experimental prototype of the tts in georgia in master asset acquisition agreement on date rta and eds entered into an agreement the master asset acquisition agreement the agreement the agreement provides for the acquisition of the tts by rta from eds the agreement was amended in date to grant rta nationwide developmental and marketing rights in the technology underlying the tts the marketing rights the agreement provides that eds will deliver the tts to rta on a completely installed ‘turn key’ basis for the sum of dollar_figure the purchase_price the agreement further provides that the purchase_price is to be paid in installments upon completion of specified construction benchmarks because eds possessed neither the experience nor the equipment necessary to manufacture the tts the agreement identifies a third-party fabricating company miles fabricating machine co inc miles fabricating which the parties agreed would manufacture the tts the agreement also requires eds to provide rta with all assistance and advice necessary for obtaining the regulatory permits required for operation of the tts eds's principal shareholders guaranteed the performance of eds's obligations under the agreement construction and permitting of the tts subsequent to entering into the agreement rta began searching in polk county florida for a site on which to locate the tts manufacture of the tts began in the fall of on date rta applied for a permit from the florida department of environmental regulation fder obtaining the fder permit was key to rta's success because without it rta could not legally operate the tts in florida on date the fder sent rta's president robert l wagner deceased husband of petitioner ruth r wagner a letter detailing certain deficiencies in rta's permit application and identifying substantial additional information that rta was required to submit before the fder could fully consider the permit application the lawsuit in date miles fabricating stopped manufacturing the tts because rta had terminated its periodic_payments to eds and eds lacked the financial resources necessary to pay miles fabricating eds considered rta's cessation of payments a breach of the agreement and in date sent rta a notice of default asserting that the agreement was canceled rta reciprocated by sending eds its own notice of default asserting that eds had failed to provide the technical reports and information concerning the tts that were necessary to obtain the fder permit and rta intended to hold eds and its officers responsible for this and other alleged breaches of the agreement at that time rta had paid in excess of dollar_figure million towards the development of the tts the tts was approximately percent complete and the underlying tts technology remained unproven initial attempts at salvaging the business relationship between rta and eds failed and in date rta filed a complaint the complaint in a lawsuit the lawsuit against eds and its principal shareholders in the circuit_court of the ninth judicial circuit in and for orange county florida the circuit_court the complaint contains three counts the first count relates to the tts and alleges breach of contract among the remedies sought are specific performance of the agreement by eds delivery of the tts damages and injunctive relief against eds selling or using the tts alternatively the complaint asks for a return of moneys paid to eds and damages the second count relates to the marketing rights it alleges breach of contact and asks for injunctive relief the third count relates to certain medical technology alleges breach of contract and asks for injunctive relief eds answered the complaint mostly denying the allegations and counterclaimed the counterclaim alleges that rta breached the agreement and asks for damages the injunction in date in pursuit of the lawsuit rta petitioned the circuit_court for an injunction preventing eds from selling the tts equipment to other investors rta successfully persuaded the circuit_court of the merits of its claim for an injunction but it did not post the required bond and the circuit_court did not issue the injunction permit denial on date the fder issued rta a notice of permit denial formally denying approval of rta’s application to operate the tts in polk county florida the fder denied the permit because among other things rta had failed to provide much of the technical information requested by the fder rta did not pursue its rights under florida law to appeal the denial the fder invitation although it had denied rta's permit application on date the fder invited rta to participate in oral discussions with the fder and five other firms concerning innovative technologies for the disposal of waste tires participants selected by the fder would receive state contracts for the disposal of waste tires rta prepared an information package on the tts and made an oral presentation to the fder despite its efforts the fder did not award rta a waste tire disposal contract cessation of rta’s business operations following rta’s failure to obtain a fder waste tire disposal contract the shareholders collectively determined that rta would cease all further business activities in date rta discharged its employees and ceased operations rta did not further pursue obtaining a fder permit attracting additional investors or marketing or promoting the tts technology eds’s agreement with tire recyclers inc at the time rta discontinued payments to eds in mid-1990 eds began marketing the tts and underlying technology to new investors on date eds entered into an agreement to sell the equipment to an unrelated company asset holding co which assigned its rights to tire recyclers inc the tri agreement and tri respectively pursuant to the tri agreement tri agreed to purchase the tts ie the partially constructed tts that eds originally had been constructing for rta for a purchase_price of dollar_figure million plus costs incurred in transporting the tts to tri's business location in virginia one-fourth of the purchase_price dollar_figure was payable to eds prior to shipment of the tts and the balance was due to eds once the tts had been successfully constructed and among other things had satisfied all governmental requirements for continued operation rta had been aware of eds’s efforts to sell the tts as early as date when rta sent a memorandum to charles white a principal_shareholder of tri warning of its interest in the tts conclusion of the lawsuit the lawsuit continued until the fall of when negotiations between rta and eds produced a settlement agreement the settlement agreement which the parties executed on date the settlement agreement terminated the lawsuit and provided that eds would pay rta dollar_figure million the settlement amount payment of approximately one-half of the settlement amount was dependant upon successful completion of the tri agreement the remainder of the settlement payment was dependent on eds' making future sales of products equipment or intangible rights the parties executed an addendum to the settlement agreement in date which granted rta an option to purchase all products or services of eds at the lowest prices offered by eds to other purchasers as well as a territory in which rta would have marketing rights for future sales of the tire transformation system technology continued development of the tts eds and tri continued to develop the tts over the next several years nevertheless as of the date of trial of this case the tts had not been placed into service and consequently rta had received no reimbursement as a result of the settlement agreement tax returns on rta’s federal_income_tax return for rta claimed a loss of dollar_figure with respect to its investment in the tts the tts loss rta characterized the tts loss as resulting from the disposition of sec_1231 property and reported to each shareholder his or her her pro_rata share of the tts loss each shareholder is a calender-year taxpayer each reported her pro_rata share of the tts loss on her federal_income_tax return respondent denied the shareholders’ deductions for the tts loss explaining that there was insufficient evidence of a loss i introduction opinion resources technology associates inc rta is an s_corporation within the meaning of sec_1361 as such it is not generally subject_to federal_income_tax see sec_1363 instead rta’s items of income loss deduction and credit are passed through to its shareholders and taxed directly to them see sec_1366 rta determined that it suffered a loss in on its investment in certain technology and reported that loss to its shareholders the shareholders each of whom claimed his or her her pro_rata share on her federal_income_tax return respondent does not question rta’s investment in the technology respondent questions only whether rta sustained any loss in because rta had pending at the end of a lawsuit that respondent believes afforded rta a reasonable prospect for recovering its investment the sole issue we must decide is whether rta failed to sustain a loss in because the lawsuit afforded rta a reasonable_prospect_of_recovery that presents a question of fact and petitioners bear the burden_of_proof rule a petitioners have failed to carry that burden ii summary of facts in rta and environmental disposal systems inc eds entered into an agreement the agreement for the acquisition by rta from eds of the tire transformation system tts difficulties ensued and in date rta sued eds for breach of contract the lawsuit its principal requests being specific performance delivery of the tts and injunctive relief in date rta discharged its employees and ceased business operations it claimed a loss on its federal_income_tax return on account of abandonment of the tts the tts loss and reported the tts loss to the shareholders the lawsuit was concluded in when eds agreed to pay rta dollar_figure million none of which however has been paid iii law applicable to deductions of losses a allowance for losses sustained during the taxable_year with limitations not here pertinent sec_165 allows as a deduction any loss sustained during the taxable_year and not_compensated_for_by_insurance_or_otherwise sec_165 sec_1_165-1 income_tax regs provides to be allowable as a deduction under sec_165 a loss must be evidenced by closed and completed transactions fixed by identifiable events and actually sustained during the taxable_year an essential inquiry under the closed transaction concept is whether in the year the deduction is sought there exists a substantial possibility that the alleged losses could be recouped by actions against responsible third parties or otherwise e g 61_tc_795 affd 521_f2d_786 4th cir when such a claim exists no portion of the loss with respect to which reimbursement might be received is sustained until it becomes reasonably certain that reimbursement will not be received sec_1_165-1 income_tax regs b reasonable_prospect_of_recovery the existence of a reasonable prospect of recovering from litigation is determined by the facts and circumstances of each case 326_us_287 the determination is based primarily on objective evidence ramsay scarlett co v commissioner supra pincite but the taxpayer's subjective belief as of the close of the taxable_year also is a relevant factor boehm v commissioner supra pincite the loss deduction need not be postponed if the potential for success of a claim is remote or nebulous ramsay scarlett co v commissioner supra pincite also where the financial condition of the person against whom a claim is filed is such that actual recovery cannot realistically be expected the loss deduction need not be postponed 28_bta_418 alternatively if the taxpayer’s claim is not speculative or wholly without merit and if the taxpayer believes that the chance of recovering the loss is sufficiently probable to warrant bringing a lawsuit and prosecuting it with reasonable diligence to a conclusion the taxpayer may have to wait until the conclusion of the lawsuit to claim the loss deduction 266_f2d_154 6th cir regarding a theft_loss affg in part and revg in part 25_tc_774 iv analysis a introduction rta which was formed to exploit the tts discharged its employees and ceased business in at that time all it had to show for its investment in the tts were its unfulfilled contract rights under the agreement the possibility of success under the lawsuit which was much the same thing and a potential liability under the counterclaim the principal relief rta sought in the lawsuit was not money damages but completion of the agreement delivery of the tts and the protection of rta’s nationwide developmental rights we must determine not only whether rta’s claim had some minimal chance of success but also whether such success would ring hollow because of eds’s lack of resources b the lawsuit we have examined the agreement and the complaint and on their faces the agreement is valid and the complaint properly drawn j p carolan iii is an attorney who represented rta in the lawsuit at trial he opined that eds would not be successful in terminating the agreement in its entirety and that rta had a claim he described rta’s initial efforts to prosecute the lawsuit including rta’s success on the merits in date in asking for an injunction to prevent eds from selling the tts equipment to other investors he stated that even after rta failed to post the bond necessary to have the injunction issued rta’s activity on the lawsuit primarily discovery continued for a few months until the lawsuit became dormant for economic reasons in early walter w manley ii one of the shareholders a director of rta an attorney and a professor of business administration at florida state university college of business testified credibly that there was merit to the breach of contract claim that gave rise to the lawsuit messrs carolan's and manley’s testimony convinces us that the breach of contract claim in the lawsuit had merit the second count of the lawsuit related to the marketing rights obtained by rta from eds we presume that in some part the injunctive relief that rta successfully argued for related to that count and that success convinces us that the marketing rights claim of the lawsuit had merit petitioners have presented no evidence that eds would have been successful in its defenses to the lawsuit or with respect to the counterclaim we are thus satisfied that the lawsuit had merit--that rta’s chance of success in the lawsuit was not remote or nebulous--and we so find c realistic possibility of enforcing a judgment having found that the lawsuit had merit we now inquire whether there was a realistic possibility that rta could actually have enforced a judgment against eds the principal remedies sought by rta were specific performance delivery of the tts and injunctive relief alternatively rta asked for the return of moneys paid_by rta and unspecified damages petitioners' principal argument is that eds had no financial ability to provide either performance under the agreement or any money to rta petitioners point to eds's dire financial condition as objective evidence that performance or payment was not reasonably foreseeable at the end of rta's tax_year petitioners overlook two things however first eds's principal shareholders were named in the complaint and had guaranteed the performance of eds's obligations under the agreement petitioners have failed to prove the inability of those principal shareholders to satisfy any judgment against them second eds had patent and other rights with respect to the tts technology along with certain tts equipment rta has failed to prove those rights and equipment were valueless indeed during the shareholders were aware that eds was seeking new investors for the tts in the counterclaim eds alleges that on or about date rta interfered with an advantageous business relationship between eds and one charles white a memorandum attached to the counterclaim from bob wagner resources technology associates inc to mr charles white mentions the lawsuit and claims an interest in among other things the tts equipment on date eds entered into a contract to sell the tts equipment for dollar_figure million dollar_figure before delivery to a company of which mr white was the controlling shareholder asset holding co which assigned its rights to tire recyclers inc petitioners have failed to prove that as of the end of there was no realistic possibility of an actual recovery from eds or its guarantors d subjective belief we have taken into account the testimony of the two shareholders who testified walter w manley ii and richard t wagner it is clear that at some point both of those shareholders lost confidence in the tts investment mr manley testified about his refusal in late or early to post the necessary dollar_figure bond following the successful effort to persuade a court to issue an injunction because at that particular time i was the person providing the money and i had determined considerably before then that it was a worthless project and i wasn’t about to put good money after bad money apparently mr manley had become disenchanted with the project even before it began when the fabricator of the tts equipment miles fabricating machine co inc would not become a participant in the agreement between rta and eds mr manley testified that he proceeded with his investment because he had given his word that he would do so to his close friends richard t wagner and robert l wagner husband of shareholder ruth r wagner richard t wagner testified that the decision not to post the dollar_figure bond was not recommended by all those with an interest in the matter he testified that although he did not agree his father robert l wagner was hopeful that the tts technology could be proven or that eds could be successful at some point mr manley testified robert l wagner had a different risk profile then i did apparently the shareholders had different beliefs on the probable success of rta’s investment in the tts however mr manley the man with the money was in control he decided not to put good money after bad money that was a business judgment which was different not only from the business judgment of robert l wagner but also from the business judgment of charles white who in agreed to pay dollar_figure million for a tts dollar_figure to be paid before delivery we have considered the testimony of messrs manley and richard t wagner and we conclude that it does not establish that there was no reasonable prospect for recovery on the lawsuit at the end of but only that they did not wish to bear the risk associated with any further investment e conclusion petitioners have failed to prove that rta’s claim against eds and its shareholders was speculative or wholly without merit rta instigated a lawsuit which at least initially it prosecuted diligently and in any event eventually settled on favorable terms we believe that the evidence does not establish a closed and completed transaction with respect to the tts investment in because there was a reasonable_prospect_of_recovery on the lawsuit at the end of accordingly no loss deduction is allowable to rta for v conclusion we have concluded that rta did not suffer a deductible loss with respect to the tts during therefore no deductible loss may be passed through to the shareholders in that year respondent’s determinations of deficiencies in the shareholders’ federal_income_tax liabilities are sustained decisions will be entered for respondent


t cc no united_states tax_court diane fernandez petitioner v commissioner of internal revenue respondent docket no filed date p submitted a request to r for innocent spouse relief pursuant to sec_6015 c and f i r c r mailed to p a determination which denied the requested relief p filed a timely petition with the court pursuant to sec_6015 i r c p seeks review of r’s denial of relief under sec_6015 c and f i r c r moved to dismiss for lack of jurisdiction and to strike as to sec_6015 i r c r further moved to strike certain allegations of fact raised by p in the petition held we have jurisdiction to review a request for innocent spouse relief under sec_6015 i r c when p makes a reguisite election under sec_6015 and or c i r c and files a timely petition with the tax_court pursuant to sec_6015 i r c see butler v commissioner t c __ accordingly r’s motion to dismiss for lack of jurisdiction and to strike is denied held further allegations of fact raised in the petition are relevant to p’s request for - - innocent spouse relief r’s motion to strike p’s allegations of fact is denied francine k cardella for petitioner rose fe gole for respondent opinion cohen chief_judge this case was assigned to chief special_trial_judge peter j panuthos pursuant to the provisions of sec_7443a unless otherwise indicated section references are to the internal_revenue_code as amended and all rule references are to the tax_court rules_of_practice and procedure the court agrees with and adopts the opinion of the special_trial_judge which is set forth below opinion of the special_trial_judge panuthos chief special_trial_judge this matter is before the court on respondent’s motion to dismiss for lack of jurisdiction and to strike the issues for decision are whether this court has jurisdiction to review the denial of a request for innocent spouse relief pursuant to sec_6015 and whether certain allegations of fact asserted in the petition are relevant to petitioner’s request for innocent spouse relief background in date petitioner submitted to respondent a request for relief from joint_and_several_liability for taxable_year under sec_6015 c and f in a letter dated date respondent denied the requested relief ’ the determination_letter advised that petitioner was not entitled to relief and included the following explanation because the taxpayer diane fernandez had actual and constructive knowledge of the capital_gains and the tax underpayment in addition the petitioning spouse received a significant financial benefit when she received sales proceeds of dollar_figure in tax_year on date petitioner filed a timely petition with this court pursuant to sec_6015 to review respondent’s denial of relief petitioner asserts entitlement to relief under sec_6015 c and f the petition sets forth several bases of error by respondent and alleges facts in support of such bases two of such allegations of fact are petitioner asserts in the petition that the determination_letter was mailed to petitioner and her agent on date respondent in his answer to the petition denies for lack of sufficient information whether a copy of the determination was mailed on date respondent did not provide any evidence of the mailing date of the date letter while the record is not clear as to the mailing date of respondent’s determination_letter we note that the petition which was postmarked date and received by the court on date would be timely even assuming the determination_letter was mailed on date see sec_6015 - - the facts upon which the petitioner relies as the basis of the petitioner’s case are as follows b the petitioner was not in control of the marital finances which were one of the governing factors in the preparation of the jointly filed income_tax return c the sale of the house in question was owned exclusively by the petitioner’s former spouse the petitioner had neither a proprietary nor a financial interest in the house which was sold which caused the underpayment of the income_tax assessed respondent filed an answer to the petition and subsequently filed a motion to dismiss for lack of jurisdiction and to strike as to relief sought under sec_6015 respondent further moved to strike the allegations of fact contained in paragraph sec_5 b and c of the petition at the time of filing the petition petitioner resided in elmhurst new york discussion general congress enacted sec_6015 in the internal_revenue_service restructuring and reform act of publaw_105_206 112_stat_685 as a means of expanding relief to innocent spouses see h conf rept pincite s rept pincite h rept part i pincite- sec_6015 provides that if an individual has made a joint_return he or she may elect to seek relief from joint_and_several_liability under subsection b in addition - - such individual may elect to limit his or her liability under subsection c if eligible sec_6015 enumerates requirements for seeking innocent spouse relief specifically sec_6015 provides sec_6015 procedures for relief from liability applicable to all joint filers --- in general --under procedures prescribed by the secretary if-- a a joint_return has been made for a taxable_year b on such return there is an understatement_of_tax attributable to erroneous items of individual filing the joint_return c the other individual filing the joint_return establishes that in signing the return he or she did not know and had no reason to know that there was such understatement d taking into account all the facts and circumstances it is inequitable to hold the other individual liable for the deficiency in tax for such taxable_year attributable to such understatement and be the other individual elects in such form as the secretary may prescribe the benefits of this subsection not later than the date which i sec_2 years after the date the secretary has begun collection activities with respect to the individual making the election then the other individual shall be relieved of liability for tax including interest penalties and other_amounts for such taxable_year to the extent such liability is attributable to such understatement subsection c of sec_6015 provides an opportunity to limit liability as follows sec_6015 procedures to limit liability for taxpayers no longer married or taxpayers legally_separated or not living together --- in general --except as provided in this subsection if an individual who has made a joint_return for any taxable_year elects the application of this subsection the individual's liability for any deficiency which is assessed with respect to the return shall not exceed the portion of such deficiency properly allocable to the individual under subsection d hlection --- a individuals eligible to make election --- in general --an individual shall only be eligible to elect the application of this subsection if- i at the time such election is filed such individual is no longer married to or is legally_separated from the individual with whom such individual filed the joint_return to which the election relates or ii such individual was not a member of the same household as the individual with whom such joint_return was filed at any time during the 12-month_period ending on the date such election is filed certain taxpayers ineligible to elect --if the secretary demonstrates that assets were transferred between individuals filing a joint_return as part of a fraudulent scheme by such individuals an election under this subsection by either individual shall be invalid and sec_6013 shall apply to the joint_return - j- sec_6015 provides an additional opportunity for relief as follows sec_6015 equitable relief --under procedures prescribed by the secretary if-- taking into account all the facts and circumstances it is inequitable to hold the individual liable for any unpaid tax or any deficiency or any portion of either and relief is not available to such individual under subsection b or c the secretary may relieve such individual of such liability jurisdiction the first issue to be decided is whether this court has jurisdiction to review a denial of a request for innocent spouse relief pursuant to sec_6015 the tax_court is a court of limited jurisdiction and we may exercise our jurisdiction only to the extent authorized by congress see 113_tc_132 112_tc_123 bourekis v commissioner t cc the question of the court’s jurisdiction is fundamental and must be addressed when raised by a party or on the court’s own motion see 85_tc_527 a sec_6015 the petition herein has been filed pursuant to sec_6015 sec_6015 as pertinent here provides sec_6015 petition for review by tax_court --- in general --in the case of an individual who elects to have subsection b or c apply-- a in general --the individual may petition the tax_court and the tax_court shall have jurisdiction to determine the appropriate relief available to the individual under this section if such petition is filed during the 90-day period beginning on the date on which the secretary mails by certified or registered mail a notice to such individual of the secretary's determination of relief available to the individual notwithstanding the preceding sentence an individual may file such petition at any time after the date which is months after the date such election is filed with the secretary and before the close of such 90-day period applicable rules --- a allowance of credit or refund ---except as provided in subparagraph b notwithstanding any other law or rule_of law credit or refund shall be allowed or made to the extent attributable to the application of subsection b or f b res_judicata --in the case of any election under subsection b or c if a decision of the tax_court in any prior proceeding for the same taxable_year has become final such decision shall be conclusive except with respect to the qualification of the individual for relief which was not an issue in such proceeding the exception contained in the preceding sentence shall not apply if the tax_court determines that the individual participated meaningfully in such prior proceeding notice to other spouse --- the tax_court shall establish rules which provide the individual filing a joint_return but not making the election under subsection b or c with adequate notice and an opportunity to become a party to a proceeding under either such subsection we have been asked in this stand alone petition filed pursuant to sec_6015 a to decide whether we have authority to review a denial of relief under sec_6015 since our jurisdiction in this case is dependent upon sec_6015 a we look to the language of sec_6015 to determine whether we have authority to review a denial of relief under sec_6015 in butler v commissioner t c respondent argued that sec_6015 precluded judicial review of claims made pursuant to sec_6015 we opined in butler that we find nothing in sec_6015 that precludes our review of respondent’s denial of equitable relief to petitioner in this case respondent asserts that since sec_6015 provides in the case of an individual who elects to have subsection b or c apply the language of the statute limits our jurisdiction to the review of an election made under subsection b or c therefore respondent contends we do not have jurisdiction to review relief under subsection f we do not agree as explained more fully below when we interpret sec_6015 to determine the scope of our jurisdiction our purpose is to give effect to congress’ intent to accomplish this we must begin with the statutory language which is the most persuasive evidence of the statutory -- - purpose see 310_us_534 usually the plain meaning of the statutory language is conclusive see 489_us_235 woodral v commissioner t cc if a statute is silent or ambiguous we may look to the statute’s legislative_history in an attempt to determine congressional intent see 481_us_454 59_f3d_1571 lith cir when a statute appears to be clear on its face there must be unequivocal evidence of legislative purpose before interpreting the statute so as to override the plain meaning of the words used therein see 83_tc_742 see also 90_tc_498 and the cases cited therein we first look to the prefatory language contained in sec_6015 which states in the case of an individual who elects to have subsection b or c apply we conclude that this language does not contain words of limitation that confine our jurisdiction to review of an election under subsections b and or c as respondent contends rather we understand this language to encompass the procedural requirement applicable to all joint filers seeking innocent spouse relief and therefore states the prerequisite to seeking our review of such relief sec_6015 provides that if an individual has made a joint_return he or she may elect to seek innocent spouse relief pursuant to the procedures set forth in subsection b if the individual is eligible he or she may also elect to limit their liability pursuant to subsection c see sec_6015 subsections b and c read together encompass all joint filers who have the opportunity to seek innocent spouse relief sec_6015 provides an additional opportunity for relief to those taxpayers who do not otherwise meet the requirements of subsection b or c specifically sec_6015 provides that if taking into account all the facts and circumstances it is inequitable to hold the individual liable for any unpaid tax or any deficiency or any portion of either and relief is not available to such individual under subsection b or c the secretary may relieve such individual of such liability sec_6015 does not require an affirmative election for relief as do subsections b and c we interpret this to mean that sec_6015 provides an additional opportunity for relief to those individuals who elect relief under subsection b or c but do not meet one or more of the respective requirements of those subsections in fact a prereguisite for relief under sec_6015 is that relief is not available under sec_6015 or c see sec_6015 therefore we conclude before an individual may petition this court for review of innocent spouse relief including relief under subsection f such individual must make an election under subsections b and or c as we pointed out in butler v commissioner supra the statutory language which grants jurisdiction to the tax_court over subsection f 1s found in the statutory text the individual may petition the tax_court and the tax_court shall have jurisdiction to determine the appropriate relief available to the individual under this section sec_6015 a emphasis added it is our view that congress intended the term under this section to include all subsections of sec_6015 in their entirety our interpretation of the term under this section is consistent with our recent interpretation of identical language used in sec_6404 which provides in part that the tax_court shall have jurisdiction to determine whether the secretary’s failure to abate interest under this section was an abuse_of_discretion emphasis added we held in woodral v commissioner supra pincite that sec_6404 clearly grants the court jurisdiction to review the commissioner’s failure to abate interest under all subsections of sec_6404 and does not limit the court’s jurisdiction to review cases sec_6404 was redesignated sec_6404 by the internal revenue restructuring and reform act of publaw_105_206 sec_3309 112_stat_743 - - arising only under sec_6404 emphasis added we also note that congress recently amended sec_6015 a in recognition of the distinction between the terms section and subsection congress amended sec_6015 a by striking of this section and inserting of subsection b or f omnibus consolidated and emergency supplemental appropriations act of publaw_105_277 sec_112 stat b legislative_history in butler v commissioner supra we opined that the legislative_history of sec_6015 supported an interpretation that sec_6015 does not limit our authority to review sec_6015 for the same reasons as fully discussed in butler we hold that the legislative_history of sec_6015 makes clear that congress did not intend to limit our review of sec_6015 c sec_6015 sec_6015 provides that the commissioner may relieve an individual of liability if taking into account all the facts and circumstances it is inequitable to hold the individual liable for any unpaid tax or deficiency or portion thereof and relief is not available to such individual under subsection b or c respondent asserts that we do not have jurisdiction to review a denial of a claim for innocent spouse relief under sec_6015 because the granting of such relief is discretionary this argument is identical to that made in butler v commissioner supra we concluded in butler v commissioner supra that the commissioner’s authority is not committed solely to agency discretion and is therefore susceptible to judicial review we further concluded that we are well equipped to decide whether it was an abuse_of_discretion for respondent to deny relief to a taxpayer under sec_6015 for the same reasons as more fully discussed in butler v commissioner supra we conclude that we have authority to review respondent’s denial of petitioner’s claim for equitable relief allegations of fact in her petition to this court petitioner asserted error by respondent for failing to consider certain facts in his denial of innocent spouse relief petitioner recited the alleged facts in her petition see supra p as bases for such error respondent moved to strike the paragraphs from the petition as not relevant to the determination of whether petitioner is entitled to innocent spouse relief petitioner is required to set forth clear and concise statements of the facts on which petitioner bases the assignments of error see rule b 78_tc_646 73_tc_736 risner v commissioner tcmemo_1996_82 such facts are relevant to the issue of -- - innocent spouse relief accordingly respondent’s motion to strike is denied to reflect the foregoing an order will be issued denying respondent’s motion to dismiss for lack of jurisdiction and to strike with respect to sec_6015 and to strike with respect to allegations of fact asserted in the petition


significant index no department of the treasury internal_revenue_service ro washington d c uv uj q tax exempt and government entities - division aug 5e tep pata in re dear this letter constitutes notice that with respect to the above-named defined benefit pension_plan we have granted a waiver of the minimum_funding_standard for the plan_year ended december this waiver for the plan_year ended december accordance with sec_412 of the internal_revenue_code and sec_303 of the employee_retirement_income_security_act_of_1974 erisa the waived amount is the contribution which would otherwise be required to reduce the balance in the funding_standard_account to zero as of the end of the plan_year for which this waiver has been granted has been granted in the company has a calendar_year fiscal_year the company has recently closed some of its facilities this combined with the loss of a key_employee resulted in accounts_receivable to age and rise above normal levels the company has reduced the number of top management positions and reduced marketing costs the company has also increased its efforts at reducing the accounts_receivable as of january plan's current_liability the value of the assets of the plan was equal to of the 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 other retirement plans maintained by the company or to the company’s profit sharing plan 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 9yv 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 ended december the date of this letter should be entered on schedule b actuarial information a copy of this letter is being sent to the manager employee_plans classification in if you have any questions on this ruling letter please contact sincerely norman greenberg manager actuarial group


t c memo united_states tax_court james k roberts petitioner v commissioner of internal revenue respondent docket no filed date the issues for decision are whether petitioner failed to report certain items of gross_income whether he is entitled to certain disallowed schedule c and schedule a deductions and whether he is liable for certain additions to tax held except for one item p has failed to prove that the income items in dispute were not gross_income to him held further p is not entitled to any of the disputed deductions disallowed by r held further r’s determination of the disputed addition_to_tax under sec_6651 i r c is sustained held further r’s determination of additions to tax under sec_6653 i r c is sustained held further r’s determination of additions to tax under sec_6661 i r c is sustained samuel g weiss for petitioner jody tancer and mark a ericson for respondent memorandum opinion halpern judge by notice_of_deficiency dated date the notice_of_deficiency respondent determined deficiencies in income_tax and additions to tax as follows year deficiency sec_6651 sec_6653 or a a a b sec additions to tax dollar_figure dollar_figure dollar_figure big_number big_number big_number big_number --- of interest due on dollar_figure of interest due on dollar_figure --- sec_6661 dollar_figure big_number big_number unless otherwise indicated all section references are to the internal_revenue_code in effect for the years at issue and all rule references are to the tax_court rules_of_practice and procedure each of the parties has conceded certain issues and the parties have agreed to the resolution of certain other issues the issues remaining for decision are whether petitioner failed to report certain items of gross_income whether he is entitled to certain disallowed schedule c and schedule a deductions and whether he is liable for certain remaining additions to tax the parties have stipulated numerous facts which we so find the stipulations of fact filed by the parties and attached exhibits are incorporated herein by this reference although the issues remaining for decision are principally factual we need find few facts in addition to those stipulated by the parties accordingly we have not divided our report into two sections one comprising our findings_of_fact and the other setting forth our opinion the additional findings we must make are contained in the discussion that follows after setting forth certain background information we shall address the adjustments made by respondent that remain in dispute and the additions to tax that remain in dispute petitioner bears the burden_of_proof on all questions of fact rule a i background petitioner resided in huntington new york at the time the petition in this case was filed during petitioner was employed as an automobile salesman by two different automobile dealerships sports imports inc sports imports and rallye motors inc rallye motors petitioner was unemployed from approximately date when his employment by sports imports ended until date when his employment by rallye motors began during and petitioner was employed as an automobile salesman by rallye motors during and petitioner owned a horse racing and breeding business petitioner is a frequent gambler for all of the years in issue petitioner made his return of federal_income_tax on the basis of a calendar_year petitioner filed his federal_income_tax return on date ii disputed adjustments a unreported income in her notice_of_deficiency respondent made adjustments increasing petitioner's gross_income for and on account of certain unexplained bank_deposits and cash transactions petitioner does not dispute that the bank_deposits in question were made to accounts owned by him or that he received the cash items in question he claims however that virtually all of those items were either loan repayments or redeposits of cash carried around by petitioner on his person and thus not items of gross_income we shall address the items in question year by year during petitioner owned a bank account at north fork bank and trust co southampton new york north fork account no the north fork account on the dates and in the amounts indicated petitioner made the following deposits to the north fork account date amount dollar_figure big_number big_number total dollar_figure on date petitioner also deposited a check in the amount of dollar_figure to the north fork account that check is dated date and was received from john ballis racing account a bank deposit is prima facie evidence of income and respondent need not prove a likely source of that income 87_tc_74 petitioner seeks to rebut the presumption of income that arises from the evidence of bank_deposits by arguing that the deposits in question for were loan repayments or petitioner's own cash the dollar_figure in deposits to north fork bank represents loan repayments or redeposits of petitioner's own cash the dollar_figure check from the john baylis sic racing account is not unreported income but rather is a repayment of a loan by mr baylis sic petitioner has failed to persuade us that any of the deposits in question represent either loan repayments or redeposits the only evidence that those deposits represent loan repayments or redeposits is petitioner's testimony to that effect we did not however find petitioner to be a reliable witness for example with respect to the dollar_figure deposited to the north fork account on date petitioner testified that he could not specifically remember that deposit but that he assumed that it was a partial repayment of dollar_figure that he had lent to one robert libutti libutti because it was deposited into my checking account with respect to a deposit of dollar_figure made on date to the north fork account petitioner testified that he could not remember whether it was a partial repayment of the dollar_figure that he testified he lent to libutti or a redeposit of a portion of the dollar_figure that he had deposited on date and then withdrew the fact that it's deposited as such is indicative that it is from mr libutty sic petitioner did not corroborate his testimony as to loan repayments with written evidence of any loans moreover he provided no supporting testimony he neither called libutti or john ballis to testify nor showed that they were unavailable to testify if petitioner had made loans to them and received repayments from them in they could have testified to that effect we infer from their failure to testify that their testimony would have been negative to petitioner 886_f2d_1237 9th cir affg 89_tc_1063 6_tc_1158 affd 162_f2d_513 10th cir we accord no weight to petitioner's testimony that the deposits were either loan repayments or redeposits of petitioner's own cash petitioner has failed to rebut the presumption that the deposits represented items of gross_income therefore we sustain respondent's determination_of_a_deficiency as it relates to such items during petitioner continued to own the north fork account on the dates and in the amounts indicated petitioner made the following deposits to the north fork account date amount dollar_figure big_number big_number total big_number during petitioner owned a bank account at astoria federal savings glen cove new york account no the astoria account on the dates and in the amounts indicated petitioner made the following deposits to the astoria account date amount total dollar_figure big_number big_number on date north fork received dollar_figure in cash from petitioner in partial consideration for the issuance of a cashier’s check to petitioner on both june and date trump plaza hotel and casino atlantic city new jersey trump received chips in the amount of dollar_figure in partial repayment of a loan of dollar_figure made to petitioner on date with respect to the deposit of dollar_figure to the north fork account on date as related above petitioner could not remember whether that deposit was a partial repayment of the dollar_figure that he testified that he lent to libutti or a redeposit of a previous withdrawal with respect to the deposit of dollar_figure to the north fork account on date petitioner testified that he had no specific recollection of that deposit although it could be another partial repayment from libutti with respect to the deposit of dollar_figure to the north fork account on date petitioner testified that he had no recollection as to its nature by his testimony petitioner did not convince us that the north fork deposits were either loan repayments or redeposits petitioner has not directed us to any testimony or other evidence with respect to the source of the deposit of dollar_figure to the astoria account on date or the payment of dollar_figure to north fork on date petitioner has failed to convince us that either item is either a loan repayment or a redeposit of a previously withdrawn sum petitioner has convinced us however that the deposit of dollar_figure to the astoria account on date is the redeposit of dollar_figure withdrawn from the north fork account and we so find with respect to all of the deposits to the north fork account the date deposit to the astoria account and the date payment to north fork petitioner has failed to rebut the presumption that such items represented items of gross_income see tokarski v commissioner supra pincite therefore we sustain respondent’s determination_of_a_deficiency as it relates to such items we sustain no deficiency with respect to the deposit of dollar_figure to the astoria account on date petitioner’s position with respect to the june and date chip payments to trump is unclear in her notice_of_deficiency respondent included those items as unreported income and described them as unexplained advances - libutti petitioner testified that the chip payments which repaid a loan made to petitioner by trump were made by libutti on brief petitioner argues that the transactions do not evidence unreported income because there is no allegation of unreported gambling winnings petitioner’s argument is somewhat beside the point these are not items that result from a reconstruction of petitioner’s income where there is no evidence that petitioner actually received anything during the period at issue if this were such a situation then petitioner might argue that until respondent links petitioner to an income-producing activity petitioner does not have the burden of proving he had no income see 649_f2d_152 2d cir affg in part revg in part and remanding in part 74_tc_260 we would follow llorente because it is likely that any appeal in this case will be to the second circuit_court of appeals see 54_tc_742 affd 445_f2d_985 10th cir 73_tc_394 this however is not a situation where there is no evidence of any receipts petitioner as much as concedes that libutti paid a debt on his behalf moreover there is no question that a taxpayer can realize income when another pays his debt see eg 279_us_716 the discharge by a third person of an obligation to him is equivalent to receipt by the person taxed respondent bears no burden here to show a taxable source for the payments made on petitioner’s behalf by libutti tokarski v commissioner t c pincite petitioner bears the burden of proving facts from which we could draw the conclusion that the payments in question did not constitute gross_income to petitioner that petitioner has failed to do petitioner having failed to carry his burden_of_proof we sustain respondent’s determination to the extent attributable to the dollar_figure in payments made to trump by libutti on petitioner’s behalf during petitioner owned a bank account at chase manhattan bank roslyn new york account no the chase account on date petitioner deposited to the chase account a check in the amount of dollar_figure received from cutlass reality syndication cutlass the check is annotated for phone petitioner testified that the check was to reimburse him for having a cellular phone installed in an automobile purchased by cutlass a customer of rallye motors petitioner testified that in it was hard to find the specific type of phone that cutlass wanted he knew where to get one cutlass gave him a check for the approximate amount of the phone and he got cutlass the phone petitioner’s testimony was uncorroborated petitioner provided no receipt for his purchase of a phone nor did he provide any evidence of the work to install the phone moreover petitioner neither called anyone from cutlass to testify nor explained his failure to do so we infer from those failures that any testimony from cutlass would have been negative to petitioner mckay v commissioner f 2d pincite wichita terminal elevator co v commissioner t c pincite petitioner has failed to prove that the dollar_figure deposit to the chase account was a reimbursement for an amount expended on account of rallye and we so find the deposit remains unexplained and thus is an item_of_gross_income to petitioner tokarski v commissioner t c pincite accordingly we sustain respondent's determination_of_a_deficiency as it relates to that item b schedule a deduction sec_1 a interest in her notice_of_deficiency respondent included an adjustment disallowing an interest_deduction in the amount of dollar_figure although petitioner has assigned error with respect to that adjustment petitioner has failed to address that adjustment on brief therefore we conclude that petitioner has abandoned the interest issue and we sustain so much of respondent’s determination as relates thereto see 22_tc_1146 holding against the taxpayer with respect to an issue because among other things the taxpayer did not press the issue on brief affd 230_f2d_603 2d cir 22_tc_593 petitioners in their brief do not argue anything about the issue and although they do not expressly abandon the issue we presume they no longer press it b contribution in her notice_of_deficiency respondent included an adjustment disallowing a charitable_contribution_deduction in the amount of dollar_figure that amount is reflected as a cash contribution on schedule a itemized_deductions attached to petitioner’s form_1040 u s individual_income_tax_return petitioner testified that he had no specific recollection of cash contributions except for change he put into a collection cup when he purchased his morning coffee petitioner has failed to convince us that he made a charitable_contribution in cash of dollar_figure or indeed that he made any charitable_contributions of cash during petitioner has failed to carry his burden_of_proof on this issue and we sustain so much of respondent’s determination as relates thereto a contribution in her notice_of_deficiency respondent included an adjustment disallowing a charitable_contribution_deduction in the amount of dollar_figure that amount is reflected as a cash contribution on schedule a itemized_deductions attached to petitioner’s form_1040 u s individual_income_tax_return petitioner’s testimony with respect to cash contributions was the same for as it was for petitioner has failed to convince us that he made a charitable_contribution in cash of dollar_figure or indeed that he made any charitable_contributions of cash during beyond what already has been allowed by respondent petitioner has failed to carry his burden_of_proof on this issue and we sustain so much of respondent’s determination as relates thereto b miscellaneous deductions in her notice_of_deficiency respondent included an adjustment disallowing a miscellaneous deduction in the amount of dollar_figure petitioner testified that during his employment at rallye motors he incurred expenses incident to that employment for which he did not feel it was proper to claim reimbursement petitioner has provided no detail of any expenses he may have incurred petitioner has failed to convince us that during he incurred any unreimbursed business-related expenses petitioner has failed to carry his burden_of_proof on this issue and we sustain so much of respondent’s determination as relates thereto schedule c deductions in her notice_of_deficiency respondent included adjustments disallowing schedule c expenses for and in the amounts of dollar_figure and dollar_figure respectively after taking into account concessions by the parties only the following expenses remain in dispute dollar_figure dollar_figure car truck due sec_122 office rent utilities big_number big_number supplie sec_263 those expenses were claimed by petitioner on schedules c profit or loss from business attached to petitioner’s form sec_1040 for and respectively those schedules c identify the trade_or_business in question as horse racing and breeding respondent has allowed substantial amounts as deductions in connection with petitioner’s horse racing and breeding business petitioner has not convinced us that he incurred deductible expenses beyond what respondent already has allowed for instance in support of the disputed car and truck expense for petitioner introduced into evidence a dollar_figure invoice for the installation of a car phone in a new mercedes automobile petitioner has failed to convince us that that expense did not have substantial if not exclusive personal attributes he has failed to convince us that his car and truck expense related to a vehicle used in his business also he has failed to provide any detail or supporting documents concerning the category office rent utilities he testified that the category dues included magazine subscriptions petitioner has not proven that any of the disallowed expenses were incurred in connection with his business of horse racing and breeding accordingly we sustain so much of respondent’s determination as relates thereto iii disputed additions to tax a failure to file--1987 by her notice_of_deficiency respondent determined an addition_to_tax against petitioner under sec_6651 for sec_6651 provides that in the case of a failure_to_file an income_tax return by the due_date there shall be imposed an addition_to_tax for such failure of percent of the amount of tax reduced by timely payments and credits under sec_6651 for each month or portion thereof during which the failure continues not exceeding percent in the aggregate unless such failure is due to reasonable_cause and not due to willful neglect although petitioner assigned error to that determination petitioner has failed to propose any findings_of_fact with respect thereto or advance any arguments in support of that assignment petitioner is a calender-year taxpayer petitioner’s return was filed on date which is prima facie untimely see sec_6072 petitioner has failed to prove that his untimely return was due to reasonable_cause and not due to willful neglect respondent’s determination of an addition_to_tax under sec_6651 for is sustained b negligence by her notice_of_deficiency respondent determined additions to tax against petitioner for negligence for all of the years in issue sec_6653 imposes one or more additions to tax where an underpayment_of_tax is due to negligence or intentional disregard of rules or regulations hereafter without distinction negligence sec_6653 for returns due in and sec_6653 for returns due in and impose an addition_to_tax equal to percent of the entire underpayment if any portion of such underpayment is due to negligence sec_6653 for returns due in and imposes an addition_to_tax equal to percent of the interest payable under sec_6601 with respect to the portion of the underpayment due to negligence negligence is lack of due care or failure to do what a reasonable and ordinarily prudent person would do under the circumstances 85_tc_934 quoting marcello v commissioner 380_f2d_499 5th cir affg in part and remanding in part 43_tc_168 although petitioner assigned error to respondent’s determinations of additions to tax for negligence petitioner has failed to propose any findings_of_fact with respect thereto or advance any persuasive arguments in support of that assignment on brief petitioner simply states the statutory addition will apply only if petitioner is shown to be negligent or in intentional disregard and clearly that is not the case with petitioner petitioner has the burden of proving that he was not negligent rule a he has failed to carry that burden respondent’s determinations of additions to tax under sec_6653 are sustained except to the extent necessary to reflect concessions or agreements of the parties c substantial_understatement by her notice_of_deficiency respondent has determined additions to tax under sec_6661 for all of the years in issue for returns due before date sec_6661 provides for an addition_to_tax equal to percent of the amount of any underpayment attributable to a substantial_understatement an understatement is substantial when the understatement for the taxable_year exceeds the greater of percent of the tax required to be shown or dollar_figure the understatement is reduced to the extent that the taxpayer has adequately disclosed his or her position or has substantial_authority for the tax treatment of an item sec_6661 sec_1 a income_tax regs petitioner has averred no facts in support of his assignment that respondent erred in determining an addition_to_tax under sec_6661 moreover on brief petitioner makes no argument disputing respondent's sec_6661 determinations except petitioner believes that the understatement penalty will not apply when the understatement amount is recalculated because of concessions and settled issues we cannot determine whether petitioner’s understatements are substantial we sustain respondent’s determinations of additions to tax under sec_6661 to the extent that petitioner’s understatements are substantial for no year has petitioner proven that he adequately disclosed his position or has substantial_authority for the tax treatment of an item decision will be entered under rule


number release date id office uilc cca_2011072510033853 ---------------------------- from -------------------- sent monday date am to ---------------------- cc subject representation question hi ------------ attached is the prior advice i mentioned on the phone note when a foreign attorney or accountant located in a foreign_country contacts a revenue_officer located in the united_states the representation is not occurring outside the united_states please feel free to contact me if you have any additional questions thank you --------- attachment cca-628390-10 no ------------------------- -----------------------


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division oct uniform issue list legend taxpayer a irab financial_institution c company d limited_partnership e company f unitg amount amount dear this is in response to your request dated april14 as supplemented by correspondence dated may july and september and in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a represents that she received a distribution of her ownership_interest interest in limited_partnership e from ira b taxpayer a asserts that her failure to accomplish a rollover of this same investment within the 60-day period prescribed by sec_408 of the code was due to the improper management of her financial affairs by company d taxpayer a maintained ira b under sec_408 of the code with financial_institution c on date taxpayer a entered into a subscription agreement to purchase unit g of limited_partnership e through ira b at a purchase_price of amount taxpayer a's investment was in the form of a limited_partner limited_partnership e is a limited_partnership equity fund owned by company f between august and october taxpayer a made five separate investments of ira b assets totaling amount in limited_partnership e in financial_institution c determined that certain illiquid assets including limited_partnership e would no longer be eligible to be held in an ira maintained with financial_institution c including ira b as was the policy at that time between financial_institution c and financial advisors of its clients on both april and date financial_institution c sent letters to taxpayer a's financial advisor company d stating that her investment in limited_partnership e would be removed from ira b for unexplained reasons company d failed to notify taxpayer a that ira b was no longer eligible to hold her investment in limited_partnership e and that such investment would be subject_to income inclusion if not rolled over within days after it was removed from ira b when financial_institution c removed the investment from ira bon date it did not sell the investment nor did it send funds to taxpayer a taxpayer a's interest in limited_partnership e was deposited into a non-ira account with financial_institution c and has not been used for any purpose taxpayer a was not aware of the taxable_distribution until she received form_1 099-r in consequently taxpayer a missed her rollover deadline the ruling_request is accompanied by a letter from company d in which it admits that it failed to alert taxpayer a that her interest in limited_partnership e would be distributed from ira band had to be deposited into another ira within days or be subject_to income inclusion based on the above facts and representations you request that the service waive the 60-day rollover requirement contained in sec_408 of the code with respect to taxpayer a's interest in limited_partnership e which was distributed from ira bon date sec_408 of the code provides that except as otherwise provided in sec_408 of the code any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if - i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the 60th day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60th day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 of the code sec_408 of the code provides that sec_408 of the code does not apply to any amount described in sec_408 of the code received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 of the code from an ira which was not includible in gross_income because of the application of sec_408 of the code sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 of the code the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and the documentation submitted by taxpayer a is consistent with her assertion that her failure to accomplish a timely rollover of her interest in limited_partnership e which was distributed from ira b was due to the failure of company d to notify her in accordance with the existing financial_institution c policy that her interest in limited_partnership e could no longer be held in ira b and would be distributed therefrom therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of taxpayer a's interest in limited_partnership e from ira b taxpayer a is granted a period i of days from the issuance of this letter_ruling to transfer her interest in limited_partnership e into a rollover ira provided all other requirements of sec_408 of the code except the 60-day requirement are met with respect to such contribution the contribution of taxpayer a's interest in limited_partnership e will be considered a rollover_contribution within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_408 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_611 o k of the code provides that it may not be used or cited as precedent if you wish to inquire about this ruling please contact at sincerely yours manager employee_plans technical group