t c memo united_states tax_court patricia louise hyde petitioner v commissioner of internal revenue respondent docket no filed date patricia louise hyde pro_se dessa j baker-inman for respondent memorandum findings_of_fact and opinion marvel judge respondent determined a federal_income_tax deficiency of dollar_figure and a section accuracy-related_penalty of dollar_figure with respect to petitioner’s taxable_year and 1all section references are to the internal_revenue_code in effect for the year at issue and all rule references are to the tax_court rules_of_practice and procedure reflected those determinations in a notice_of_deficiency dated date petitioner timely petitioned this court to contest respondent’s determinations the issues for decision2 are as follows whether petitioner received nonemployee compensation of dollar_figure that she did not report on her income_tax return and whether petitioner is liable for the sec_6662 penalty for in her petition petitioner alleged that she rescinded her return before respondent mailed the notice_of_deficiency to her she also raised a plethora of other issues that we will not address in this opinion because they are frivolous see 114_tc_136 quoting 737_f2d_1417 5th cir findings_of_fact a few of the relevant facts have been stipulated we incorporate the stipulation of facts into our findings by this reference when the petition was filed petitioner resided in arkansas 2the notice_of_deficiency adjusted schedule a itemized_deductions and the lifetime_learning_credit imposed self- employment_tax on the nonemployee compensation and allowed a deduction for one-half of the self-employment_tax these are either computational adjustments or matters that were not challenged by petitioner and thus need not be decided herein petitioner timely filed a form_1040 u s individual_income_tax_return for on that return she reported wages of dollar_figure taxable interest of dollar_figure ordinary dividends of dollar_figure a taxable refund of dollar_figure and a dollar_figure capital_loss petitioner did not report any self-employment_income by cp2000 notice dated date respondent notified petitioner that she did not include on her return dollar_figure of nonemployee compensation reported by a third-party payor ally apparel resources l l c ally apparel on a form 1099-misc miscellaneous income in the cp2000 notice respondent proposed changes to petitioner’s return that included increasing petitioner’s income by dollar_figure reducing her schedule a deductions and a lifetime_learning_credit to reflect the additional income imposing self-employment_tax on the additional income and allowing a deduction for one-half of the self- employment_tax the notice notified petitioner that the resulting tax increase was dollar_figure and proposed the imposition of a penalty under sec_6662 petitioner responded to the cp2000 notice dated date through a mailing that respondent received on date in that mailing petitioner stated that she did not agree with some of the changes and she included a schedule c profit or loss from business for and other documents explaining her disagreement on the schedule c petitioner reported gross_receipts of dollar_figure expenses of dollar_figure including dollar_figure for the business use of her home and a net profit of dollar_figure petitioner calculated that she owed additional tax for of dollar_figure which included self-employment_tax of dollar_figure and she enclosed a check for dollar_figure by cp2000 notice dated date respondent notified petitioner that he agreed with her position the date notice reflected a revised tax increase of dollar_figure a sec_6662 penalty of dollar_figure and interest of dollar_figure for a total proposed liability after application of the earlier dollar_figure payment of dollar_figure petitioner responded to the date notice in a mailing that respondent received on date in that mailing petitioner stated that she had not had time to properly review all records and documents and that she did not know whether she agreed or disagreed with the tax_liability reflected in the notice however she enclosed a check for dollar_figure to avoid additional penalties and interest she stated that once a review is completed we will file a proper amended_return in a letter dated date respondent responded to petitioner’s mailing respondent stated in the date letter in pertinent part as follows you do not need to file an amended_return if you will send us the correct information on schedule c and schedule se we will make all necessary changes for you and send a corrected notice to you we need your signature on the consent to tax increase at the end of this letter to complete our action on your tax account please sign the consent and send it to us if you don’t agree with our proposed changes please write to us and tell us why on date petitioner sent a response that asked respondent to provide the law that shows petitioner is liable for any_tax and an explanation of how the tax is to be lawfully calculated respondent sent another cp2000 notice to petitioner the notice was dated date and showed a balance due of zero in a mailing sent on date petitioner notified respondent that she was rescinding her return and was demanding a refund of dollar_figure additional correspondence between petitioner and respondent followed on date respondent mailed to petitioner a notice_of_deficiency for in which respondent determined that petitioner had failed to report nonemployee compensation of dollar_figure that petitioner was entitled to dollar_figure of business_expense deductions and that petitioner was liable for a deficiency of dollar_figure and a sec_6662 penalty of dollar_figure 3the dollar_figure tax_refund claimed presumably included the payments of dollar_figure and dollar_figure and the tax of dollar_figure reported on petitioner’s original return there is a dollar_figure difference that the record does not explain petitioner timely petitioned this court to contest respondent’s determination a trial was held we ordered posttrial briefing and both parties submitted briefs in accordance with our order thereafter by order dated date we directed the parties to submit supplemental briefs addressing whether this court has jurisdiction over this case because before the notice_of_deficiency was mailed petitioner had sent remittances sufficient to fully pay the dollar_figure deficiency determined therein in response to the order both parties filed supplemental briefs in his supplemental brief respondent acknowledged that petitioner remitted dollar_figure and dollar_figure before he mailed to petitioner the notice_of_deficiency dated date respondent contends however that while he posted the remittances to petitioner’s income_tax account he did not assess these amounts respondent requests the following finding the petitioner’s first remittance of dollar_figure did not fully pay the deficiency respondent proposed for taxable_year the petitioner’s second remittance of dollar_figure was a deposit under sec_6603 and not a payment of tax and therefore the court has jurisdiction in this case in petitioner’s supplemental brief she agrees that she made the remittances in before respondent mailed the notice_of_deficiency dated date she objects to the above-quoted requested finding of fact and citing 516_us_235 she contends that we have jurisdiction under sec_6512 to determine and refund the overpayment she contends she made petitioner does not dispute respondent’s requested findings_of_fact that respondent did not treat the remittances as payments of tax and that respondent did not assess the amounts of the remittances as deficiencies we so find i jurisdiction opinion the tax_court is a court of limited jurisdiction and it may exercise its jurisdiction only to the extent authorized by statute sec_7442 320_us_418 this court is authorized to redetermine the amount of a deficiency for a taxable_period as to which the commissioner issued a notice_of_deficiency and the taxpayer timely petitioned the court for review see sec_6212 sec_6213 and sec_6214 this court also has jurisdiction to determine the amount of any overpayment a taxpayer made for a year that is properly before the court on a petition to redetermine a deficiency sec_6512 if the court determines that there is an overpayment and further determines the amount of the overpayment that is refundable in accordance with sec_6512 the overpayment amount thus determined shall when the decision of the tax_court has become final be credited or refunded to the taxpayer sec_6512 sec_6211 defines an income_tax deficiency as the amount by which the tax imposed under the income_tax provisions of the code exceeds the excess of-- the sum of a the amount shown as the tax by the taxpayer upon her return plus b the amounts previously assessed or collected without assessment as a deficiency over-- the amount of rebates made in the notice_of_deficiency dated date respondent determined that petitioner was liable for a dollar_figure deficiency and a sec_6662 penalty of dollar_figure however petitioner mailed to respondent remittances of dollar_figure and dollar_figure in which respondent received and posted to petitioner’s account but did not treat as payments or assess as deficiencies before the notice_of_deficiency was mailed to petitioner our jurisdiction to redetermine a deficiency depends upon the issuance of a valid notice_of_deficiency and a timely filed petition 93_tc_22 ordinarily we will not look behind the notice_of_deficiency to examine the circumstances surrounding the determination see 92_tc_661 instead we conduct a proceeding de novo and redetermine a taxpayer’s tax_liability on the basis of the evidence presented during the deficiency proceeding not on whatever record was developed at the administrative level before the notice_of_deficiency was issued see 62_tc_324 it is not the existence of a deficiency but the commissioner’s determination_of_a_deficiency that provides a predicate for tax_court jurisdiction 52_tc_787 respondent treated petitioner’s remittances as deposits and not payments respondent did not assess additional tax equal to the amounts of the remittances as a deficiency before issuing the notice_of_deficiency petitioner does not dispute these facts respondent determined a deficiency of dollar_figure for and we have jurisdiction ii burden_of_proof and burden of production the commissioner’s determinations in a notice_of_deficiency are presumed correct and the taxpayer ordinarily bears the burden of proving that the commissioner’s determinations are in error see rule a 290_us_111 if however a taxpayer produces credible_evidence with respect to any factual issue relevant to ascertaining the taxpayer’s tax_liability the burden_of_proof on any such issue shifts to the commissioner but only if the taxpayer has complied with the requirements of sec_7491 sec_7491 and petitioner does not contend that sec_7491 applies nor has she established that the requirements of sec_7491 have been met consequently petitioner bears the burden_of_proof as to any disputed factual issue see rule a under sec_6201 if a taxpayer asserts a reasonable dispute with respect to an item_of_income reported on an information_return filed by a third party and the taxpayer meets certain other requirements the commissioner bears the burden of producing reasonable and probative information in addition to the information_return concerning the deficiency attributable to the income item at trial petitioner disputed that she received any income from ally apparel the entity that issued the form 1099-misc reporting the income at issue petitioner admitted however that she received dollar_figure the amount shown on the form 1099-misc during from an entity she identified at trial as texport in addition petitioner submitted a schedule c for to respondent in response to the cp2000 notice dated date in which she admitted receiving the funds although the record does not clarify why ally apparel issued the form misc nor disclose the relationship of ally apparel to texport the unclarified corporate relationship does not change the fact that petitioner has admitted receiving dollar_figure of nonemployee income which she was obligated to report on her return but did not we conclude that petitioner’s attempt to dispute the accuracy of the form 1099-misc under these circumstances is not reasonable and that the burden of production with respect to the income does not shift to respondent under sec_6201 iii unreported nonemployee compensation sec_61 defines gross_income as all income from whatever source derived and includes compensation paid for services whether furnished by the taxpayer as an employee or as a self- employed person or independent_contractor see sec_61 petitioner admitted that she provided services to texport during for which she was paid dollar_figure because this compensation must be included in petitioner’s income for under sec_61 we sustain respondent’s determination iv petitioner’s attempt to rescind return petitioner’s position that she is not liable for any federal_income_tax for and that she is entitled to a refund focused on her misguided attempt in to avoid liability for federal_income_tax by rescinding her return petitioner never fully explained her position but appears to believe that rescinding her return thereby imposes on respondent the obligation to prove that she is liable for tax neither the internal_revenue_code nor the regulations promulgated thereunder which are the sources of a taxpayer’s obligation to file an annual income_tax return contain any provision permitting a taxpayer to rescind a filed income_tax return moreover petitioner failed to prove that she overpaid her tax_liability and that she was entitled to a refund we reject petitioner’s argument as meritless v sec_6662 penalty sec_6662 and b authorizes the imposition of a percent penalty on the portion of an underpayment that is attributable among other things to a substantial_understatement_of_income_tax or to negligence or disregard of rules or regulations respondent alleges that petitioner is liable for the sec_6662 penalty because the underpayment was attributable to either a substantial_understatement_of_income_tax or to negligence a substantial_understatement_of_income_tax exists if the amount of the understatement exceeds the greater of percent of the tax required to be shown on the return or dollar_figure sec_6662 the term understatement means the excess of the amount required to be shown on the return for the taxable_year over the amount of tax imposed that is shown on the return reduced by any rebate sec_6662 the amount of the understatement is reduced by that portion of the understatement 4see eg secs sec_1_6012-1 income_tax regs sec_301_6012-1 proced admin regs that is attributable to the tax treatment of any item if there is or was substantial_authority for such treatment or any item if the relevant facts affecting the item’s tax treatment are adequately disclosed in the return or in a statement attached to the return and there is a reasonable basis for the taxpayer’s tax treatment of the item sec_6662 the term negligence as used in sec_6662 refers to any failure on the part of the taxpayer to make a reasonable attempt to comply with the provisions of the internal_revenue_code sec_6662 the term disregard includes any careless reckless or intentional disregard id a taxpayer may avoid liability for the sec_6662 penalty imposed because of the taxpayer’s negligence or substantial_understatement_of_income_tax if the taxpayer demonstrates that the taxpayer had reasonable_cause for the underpayment and that the taxpayer acted in good_faith with respect to the underpayment sec_6664 reasonable_cause and good_faith are determined on a case-by-case basis taking into account all pertinent facts and circumstances sec_1_6664-4 income_tax regs the most important factor in determining reasonable_cause and good_faith is the extent of the taxpayer’s effort to assess his or her proper tax_liability id a taxpayer may establish reasonable_cause and good_faith within the meaning of sec_6664 if the taxpayer demonstrates that he or she reasonably relied in good_faith on the informed advice of an independent professional adviser as to the proper tax treatment of an item id the taxpayer must show that the adviser was a competent and qualified professional who had sufficient expertise to justify the taxpayer’s reliance on him the taxpayer provided all necessary and accurate information to the adviser and the taxpayer actually relied in good_faith on the adviser’s judgment in deciding on the proper tax treatment of the item see 115_tc_43 affd 299_f3d_221 3d cir under sec_7491 the commissioner has the initial burden of production with respect to any penalty addition_to_tax or additional_amount and must introduce evidence that it is appropriate to impose the sec_6662 penalty on the taxpayer to satisfy that burden of production once the commissioner has satisfied his initial burden of production the taxpayer must then come forward with evidence sufficient to persuade us that the commissioner’s determination is incorrect 116_tc_438 the taxpayer bears the burden of proving that he or she is not liable for the sec_6662 penalty the commissioner need not produce evidence regarding whether a taxpayer is entitled to relief from the penalty under sec_6664 the taxpayer must raise that issue and carry the burden_of_proof with respect to it id pincite respondent satisfied his initial burden of production under sec_7491 by introducing evidence that petitioner received nonemployee compensation of dollar_figure but failed to report that income on her return petitioner then had the obligation to show that the sec_6662 penalty did not apply petitioner made no such showing petitioner testified that she performed services for which she was paid dollar_figure and she does not dispute that she failed to include that income on her return petitioner argued that she did not know ally apparel and seemed to contend that because she did not receive the money from ally apparel she could ignore the form 1099-misc ally apparel issued even though she knew that she had received the income petitioner also contended that she did not receive the form 1099-misc or at least that she did not receive a form 1099-misc that covered the unreported compensation and that therefore she did not have to report the nonemployee compensation she received we do not find credible any testimony that suggests petitioner did not receive the form 1099-misc the record supports a finding that petitioner received the form 1099-misc but chose to ignore it because the name of the issuer did not match the name of the company for which she worked and we so find regardless of whether petitioner received the form misc however petitioner deliberately failed to include income she knew she had received on her return that failure was negligent at best and justifies the imposition of the sec_6662 penalty we turn to the issue of reasonable_cause and good_faith under sec_6664 at one point during the trial petitioner testified that she relied on her return preparer for the position that the nonemployee compensation did not have to be reported on her return when pressed by the court however petitioner claimed that she could not recall whether she told the preparer she had actually received the income or whether she simply told him that she did not get a form 1099-misc with respect to the income petitioner’s testimony was insufficient to satisfy her burden of proving that she reasonably relied on professional advice with respect to the unreported nonemployee compensation income she received in petitioner offered no other testimony to prove that she had reasonable_cause for her failure to report the income and she certainly did not prove that she acted in good_faith consequently we sustain respondent’s determination that petitioner is liable for the sec_6662 penalty vi conclusion we have considered all of the arguments raised by either party and to the extent not discussed we find them to be irrelevant or without merit to reflect the foregoing decision will be entered for respondent


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi plr-110512-00 date date in re legend grantors - daughter - trust - trustee - foundation - - date date - - date - date - date dollar_figurex - dear this is in reference to your date correspondence and prior submissions requesting rulings regarding the effect of the proposed judicial modification of the trust instrument for federal generation-skipping_transfer_tax purposes the facts submitted are as follows on date grantors created and funded trust an irrevocable_trust governed by the law of state x primarily for the benefit of the issue of daughter their child trustee an independent corporation is the trustee of trust under the terms of trust trustee will distribute dollar_figurex from net_income and to the extent that income is not sufficient from principal to foundation annually for a term of years the annuity period for the payments commenced on date and will terminate on date in the event that there is excess income in any year the amount of any excess not to exceed the percentage of dollar_figurex by which the wholesale price index or other equivalent substitutes for that year exceeds the wholesale price index for date is to be paid to foundation trustee has the discretion to pay any income in excess of the amounts required to be paid to foundation to the issue of daughter or if plr-110512-00 there is no such issue to other issue of the grantors any income not so distributed will be retained in principal and may be distributed in subsequent years as excess income article first d of trust provides that the trust will terminate years after the death of the survivor of grantors daughter daughter’s spouse two other children of grantors and their spouses and named issue of grantors’ children article first d i provides that in the event that the trust terminates before date foundation will be paid an amount equivalent to the present_value at the date of termination of the remaining payments of dollar_figurex per year payable on the payment_date and any remaining principal will be distributed pursuant to article first d ii article first d ii provides that if trust terminates on or after date the remainder will be distributed to such of the grantors’ issue other than daughter her estate or the creditors of either and their spouses as daughter may appoint either by testamentary or inter_vivos appointment in the event that daughter does not exercise the power_of_appointment the principal will be distributed in equal shares to the issue of daughter per stirpes or if none in equal shares to the issue of grantors per stirpes in the event that there are no issue of grantors living at the termination_date the principal will be distributed to foundation daughter who is no longer living exercised her limited_power_of_appointment over the assets of trust on date in favor of her children who may be living on date and the issue of any child of hers who is deceased on date by right of representation currently daughter has three children all of whom are living the trustee represents that there is an ambiguity in trust with respect to the termination_date article first d provides that trust will terminate years after the death of grantors daughter daughter’s spouse and other named individuals article first d i indicates that trust could terminate at an earlier date this section states that i f such termination shall be prior to date in addition trust does not include any provisions addressing distribution of income and or principal after the expiration of the annuity period on date to resolve this ambiguity the children of daughter filed a petition in the appropriate local court for a proper construction of the termination provisions of trust the court issued an order construing the terms of trust the order concluded that trust should terminate at the expiration of the annuity period on date if not earlier and that the assets should be distributed pursuant to article first d ii the order is subject_to the internal_revenue_service issuing a private_letter_ruling that termination of trust at the expiration of the annuity period on date and distribution of the principal of trust pursuant to article first d ii of trust on that date will not subject trust to the generation-skipping_transfer_tax trustee has represented that no additions have been made to trust after date plr-110512-00 trustee requests a ruling that the court order construing the termination_date of trust will not affect the exempt status of trust for generation-skipping_transfer_tax purposes and will not result in a transfer of property that will subject trust or distributions thereunder to the generation-skipping_transfer_tax imposed under sec_2601 sec_2601 imposes a tax on every generation-skipping_transfer gst made after date a generation-skipping_transfer is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2612 provides that the term taxable_termination means a termination by death lapse of time release of a power or otherwise of an interest_in_property_held_in_trust where the property passes to a skip_person with respect to the transferor of the property sec_2612 provides that the term taxable_distribution means any distribution from a_trust to a skip_person other than a taxable_termination or a direct_skip under sec_2612 a direct_skip is a transfer subject_to federal estate or gift_tax made by a transferor to a skip_person under a of the tax reform act and sec_26_2601-1 of the generation-skipping_transfer_tax regulations the gst tax does not apply to any generation-skipping_transfer under a_trust that was irrevocable on date however this exemption does not apply to additions actual or constructive that are made to the trust after date sec_26_2601-1 states that if an addition is made after date to a_trust which was irrevocable on date a pro_rata portion of subsequent distributions from and terminations of interests in property held in the trust is subject_to the gst tax provisions if an addition is made the trust is thereafter deemed to consist of two portions a portion not subject_to the gst tax and a portion subject_to the gst tax sec_26_2601-1 provides that the release exercise or lapse of a power_of_appointment other than a general power is not treated as an addition to a_trust if the power was created in an irrevocable_trust that is not subject_to the gst tax because it was irrevocable on date and in the case of an exercise the power was not exercised in such a way that may postpone or suspend the vesting absolute ownership or power of alienation of an interest in property for a period beyond the rule_against_perpetuities measured from the creation of the trust a general_power_of_appointment is defined in sec_2514 as a power that is exercisable in favor of the individual possessing the power his estate his creditors or the creditors of his estate the inter_vivos and testamentary power held by daughter to appoint the remainder of trust after the expiration of the annuity period to such of the grantors’ issue and their spouses was not a general_power_of_appointment because daughter plr-110512-00 could not exercise the power in favor of herself her estate or the creditors of either the exercise by daughter on date of the limited_power_of_appointment in favor of her children who may be living on date and the issue of any child of hers who may have died before that date did not postpone or suspend the vesting or ownership of any interest in trust beyond the rule_against_perpetuities measured from the creation of trust on date thus pursuant to sec_26_2601-1 the exercise of the power by daughter was not treated as an addition constructive or otherwise to trust sec_26_2601-1 provides rules for determining when a modification judicial construction settlement agreement or trustee action with respect to a_trust that is exempt from the generation-skipping_transfer_tax will not cause the trust to lose its exempt status sec_26_2601-1 provides that a judicial construction of a governing instrument to resolve an ambiguity in the terms of the instrument or to correct scrivener’s error will not cause an exempt trust to lose its exempt status provided the judicial action involves a bona_fide issue and the construction is consistent with applicable state law that would be applied by the highest court of the state in the present case trust was irrevocable on date trustee has represented that no additions actual or constructive have been made to the trust after that date the law of minnesota provides at minn stat ann sec_501b west that a trustee of an express trust by will or other written instrument or a person interested in the trust may petition the district_court for an order to construe interpret or reform the terms of a_trust or authorize a deviation from the terms of a_trust including a proceeding involving charitable trusts if there are ambiguities in the construction of the terms of an instrument the court will adopt that construction that will result in sustaining the questioned provision to the end that the testator’s intention will be carried out matter of florance n w 2d minn ct app aff’d and rev’d in part on other grounds n w 2d the settlor’s intention as expressed in language used in the trust must prevail if it is not inconsistent with the rules of law in ascertaining the settlor’s intention the court will consider pertinent trust provisions as a whole in re butler’s trusts n w 2d minn in this case the court concluded that the terms of trust concerning the termination_date were ambiguous and concluded that the settlor intended that the trust would terminate at the expiration of the annuity period the court construed trust to require termination after expiration of the annuity period and pursuant to that plr-110512-00 construction amended trust to the effect that the assets of trust will be distributed upon termination on date pursuant to article first d ii we conclude that the terms of trust present a bona_fide issue regarding the termination of the trust further we conclude that the court’s construction of trust is consistent with applicable state law that would be applied by the highest court of the state accordingly based on the facts submitted and the representations made the court order construing trust will not affect the exempt status of trust for generation-skipping_transfer_tax purposes and will not result in a transfer of property that will subject trust or distributions thereunder to the generation-skipping_transfer_tax imposed under sec_2601 a copy of this letter should be attached to any gift estate or generation-skipping_transfer_tax returns that you may file relating to these matters the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by the appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination except as specifically ruled above no opinion is expressed as to the federal tax consequences of the facts described above under the cited provisions or any other provisions of the code or regulations this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours james hogan assistant to branch chief branch associate chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes


internal_revenue_service number release date index number 468a cc psi -- plr-106599-00 date re revised schedule of ruling amounts taxpayer parent state x director plant location commission a commission b customer commission c order a1 order a2 order a3 plr-106599-00 order a4 rider order b1 order b2 order c1 order c2 dear this letter responds to your request dated date and subsequent submissions submitted on behalf of the taxpayer the request is for a revised schedule of ruling amounts under sec_1_468a-3 of the income_tax regulations for the taxpayer’s nuclear decommissioning fund the fund under the jurisdiction of commission a commission b and commission c the taxpayer was previously granted a revised schedule of ruling amounts on the required information for the schedule of ruling amounts was submitted on behalf of the taxpayer pursuant to sec_1_468a-3 the taxpayer has represented the following facts and information the taxpayer a wholly-owned subsidiary of parent is incorporated in state x and is an operating utility providing electric service in state x the taxpayer is subject_to the audit jurisdiction of the director the taxpayer owns a percent undivided_interest in the plant which is situated at location the operating license issued by the nuclear regulatory commission expires at midnight on the jurisdictional percentage for each commission and customer for are as follows commission a percent commission b percent commission c percent and customer percent for a total of percent the percent figure allocable to commission b is derived by multiplying a wholesale allocation factor of percent approved in order a2 by percent the percentage of plr-106599-00 taxpayer’s wholesale decommissioning collections covered by the commission b formula rates as discussed below the method for decommissioning the plant is prompt removal dismantling on taxpayer filed an annual revision of rider with commission a this revised was approved in order a1 authorized amounts for decommissioning cost to be included in taxpayer’s cost of service for ratemaking purposes effective it also updated the projected after-tax rate of return the weighted average interest rate trustee fees and the inflation rates used for decommissioning the decommissioning costs for are based on the total estimated cost of decommissioning the plant being dollar_figure of which the commission a jurisdictional portion is dollar_figure this base cost escalated using a variable estimated inflation rate results in an estimated future decommissioning cost of dollar_figure of which the commission a jurisdictional portion is dollar_figure on taxpayer filed an annual revision of rider with commission a this revised was approved in order a2 authorized amounts for decommissioning cost to be included in taxpayer’s cost of service for ratemaking purposes effective it also updated the projected after-tax rates of return interest rates trustee fees and the inflation rates used for decommissioning cost estimates the decommissioning costs for used in order a2 were unchanged from order a1 but were escalated using a redetermined variable estimated inflation rate and resulted in an estimated future decommissioning cost of dollar_figure of which the commission a jurisdictional portion is dollar_figure the wholesale formula rates used by taxpayer since were accepted for filing in order b1 in taxpayer filed with commission b predetermined charges under taxpayer’s wholesale formula rates this update to wholesale rates used the decommissioning costs that commission a approved in their order a1 commission b authorized amounts for decommissioning costs to be included in taxpayer’s cost of service for ratemaking purposes effective the decommissioning costs for are based on the total estimated cost of decommissioning the plant being dollar_figure of which the commission b jurisdictional portion is dollar_figure this base cost escalated using a variable plr-106599-00 estimated inflation rate results in an estimated future decommissioning cost of dollar_figure of which the commission b jurisdictional portion is dollar_figure in taxpayer filed with commission b predetermined charges under taxpayer’s wholesale formula rates this update to wholesale rates used the decommissioning costs that commission a approved in their commission b authorized decommissioning costs to be included in taxpayer’s cost of service for ratemaking purposes effective the decommissioning costs for and thereafter are based on the total estimated cost of decommissioning the plant being dollar_figure of which the commission b jurisdictional portion is dollar_figure this base cost escalated using a redetermined variable estimated inflation rate results in an estimated future decommissioning cost of dollar_figure of which the commission b jurisdictional portion is dollar_figure rates for customer a wholesale customer of taxpayer are under the jurisdiction of commission b and are set pursuant to commission b’s formula rates order b2 developed for commission b in its included decommissioning costs for the plant equal to the costs approved by commission a in their order a3 customer began purchasing power under a negotiated rate rather than commission b formula rates consequently amounts collected from customer beginning on that date do not qualify as part of the cost of service amount applicable to the fund and taxpayer’s revised schedule of ruling amounts includes a jurisdictional amount for customer only for the first three months of the decommissioning costs for customer are based on the total estimated cost of decommissioning the plant being of which customer’s jurisdictional amount is this total estimated cost escalated annually at various rates of inflation results in a future total estimated cost of of which customer’s jurisdictional amount is in order c1 commission c authorized decommissioning costs to be included in taxpayer’s cost of service for ratemaking purposes effective order c1 was based on commission a’s order a1 and commission a’s assumptions in regard to interest rates assumed after tax_rates of return and rate of inflation plr-106599-00 the decommissioning costs for are based on the total estimated cost of decommissioning the plant being dollar_figure of which the commission c jurisdictional portion is dollar_figure this base cost escalated using a variable estimated inflation rate results in an estimated future decommissioning cost of dollar_figure of which the commission c jurisdictional portion is dollar_figure in order c2 commission c authorized decommissioning costs to be included in taxpayer’s cost of service for ratemaking purposes effective order c2 was based on commission a’s order a2 and commission a’s assumptions in regard to interest rates assumed after tax_rates of return and rate of inflation the decommissioning costs for are based on the total estimated cost of decommissioning the plant being dollar_figure of which the commission c jurisdictional portion is dollar_figure this base cost escalated using a redetermined variable estimated inflation rate results in an estimated future decommissioning cost of dollar_figure of which the commission c jurisdictional portion is dollar_figure the estimated period for which the fund is to be in effect is and the estimated_useful_life of the plant is thus the taxpayer has calculated the qualifying percentage to be percent on commission a issued order a4 order a4 cites the likelihood that taxpayer’s application_for extension of its operating license will be approved as a factor in its decision to reduce the amount of decommissioning costs to be collected during to zero since the amounts collected from customers under the jurisdiction of commission b and commission c are based upon the determinations of commission a the amount of decommissioning costs to be collected during from customers under the jurisdiction of commission b and commission c has also been reduced to zero consequently taxpayer has limited its request for a revised schedule of ruling amounts to the years at the present time there are no other proceedings pending before any of the commissions that would increase or decrease the amount of decommissioning costs to be included in taxpayer's cost of service for ratemaking purposes sec_468a of the internal_revenue_code provides that a taxpayer may elect to deduct the amount of payments made to a qualified decommissioning fund however sec_468a limits plr-106599-00 the amount_paid into such fund for any taxable_year to the lesser_of the amount of nuclear decommissioning costs allocable to this fund which is included in the taxpayer’s cost of service for ratemaking purposes for the tax_year or the ruling_amount applicable to this year sec_468a of the code provides that no deduction shall be allowed for any payment to the nuclear decommissioning fund unless the taxpayer requests and receives from the secretary a schedule of ruling amounts the ruling_amount for any_tax year is defined under sec_468a as the amount which the secretary determines to be necessary to fund that portion of nuclear decommissioning costs which bears the same ratio to the total nuclear power plant as the period for which the nuclear decommissioning fund is in effect bears to the estimated_useful_life of the plant this term is further defined to include the amount necessary to prevent excessive funding of nuclear decommissioning costs or funding of these costs at a rate more rapid than level_funding taking into account such discount rates as the secretary deems appropriate sec_468a of the code provides that a taxpayer shall be deemed to have made a payment to the nuclear decommissioning fund on the last day of the tax_year if the payment is made on account of this tax_year and is made within ½ months after the close of the tax_year additionally a taxpayer that files for a schedule of ruling amounts and receives such schedule of ruling amounts after the ½ month deadline for making a payment to a nuclear decommissioning fund must make such payment to the fund within days after the date that the taxpayer receives the schedule of ruling amounts for the tax_year sec_1_468a-1 of the regulations provides that an eligible_taxpayer may elect to deduct nuclear decommissioning costs under sec_468a of the code an eligible_taxpayer as defined under sec_1_468a-1 of the regulations is a taxpayer that has a qualifying interest in among other things a direct ownership_interest including an interest as a tenant in common or joint tenant sec_1_468a-2 of the regulations provides that the maximum amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year shall not exceed the lesser_of i the cost of service amount applicable to the nuclear decommissioning fund for such tax_year or ii the ruling_amount applicable to the nuclear decommissioning fund for such tax_year if the amount of cash payments made or deemed plr-106599-00 made to a nuclear decommissioning fund during any_tax year exceeds the limitation of paragraph b the excess is not deductible by the electing taxpayer in addition under sec_1_468a-5 there are rules which provide that the internal_revenue_service may disqualify a nuclear decommissioning fund if the amount of cash payments made or deemed made to a nuclear decommissioning fund during any_tax year exceeds the limitation of paragraph b sec_1_468a-3 of the regulations provides that in general a schedule of ruling amounts for a nuclear decommissioning fund is a ruling specifying annual payments that over the tax years remaining in the funding_period as of the date the schedule first applies will result in a projected balance of the nuclear decommissioning fund as of the last day of the funding_period equal to and in no event more than the amount of decommissioning costs allocable to the fund sec_1_468a-3 of the regulations provides that to the extent consistent with the principles and provisions of this section each schedule of ruling amounts shall be based on the reasonable assumptions and determinations used by the applicable public_utility commission in establishing or approving the amount of decommissioning costs to be included in the cost of service for ratemaking purposes under sec_1_468a-3 the internal_revenue_service shall provide a schedule of ruling amounts identical to the schedule proposed by the taxpayer but no such schedule shall be provided by the service unless the taxpayer’s proposed schedule is consistent with the principles and provisions of this section sec_1_468a-3 of the regulations provides that in general the total estimated cost of decommissioning a nuclear power plant is the reasonably estimated cost of decommissioning used by the applicable public_utility commission in establishing or approving the amount of these costs to be included in cost of service for ratemaking purposes sec_1_468a-3 of the regulations provides that a taxpayer’s share of the total estimated cost of decommissioning a nuclear power plant equals the total estimated cost of decommissioning such plant multiplied by the taxpayer’s qualifying interest in the plant under sec_1_468a-3 the qualifying percentage for any nuclear decommissioning fund is equal to a fraction the numerator of which is the number of tax years in the estimated period for which the nuclear decommissioning fund is to be in effect and the denominator of plr-106599-00 which is the number of tax years in the estimated_useful_life of the applicable plant sec_1_468a-3 of the regulations provides that the internal_revenue_service shall not provide a taxpayer with a schedule of ruling amounts for any nuclear decommissioning fund unless the public_utility commission that establishes or approves the rates for electric energy generated by the plant has determined the amount of decommissioning costs to be included in the taxpayer’s cost of service for ratemaking purposes and has disclosed the after-tax rate of return and any other assumptions and determinations used in establishing or approving the amount sec_1_468a-3 of the regulations provides that any taxpayer that has previously obtained a schedule of ruling amounts can request a revised schedule of ruling amounts such a request must be made in accordance with the rules of sec_1_468a-3 the internal_revenue_service shall not provide a revised schedule of ruling amounts applicable to a tax_year in response to a request for a schedule of ruling amounts that is filed after the deemed deadline date for such tax_year we have examined the representations and information submitted by the taxpayer in relation to the requirements set forth in the sec_468a of the code and the regulations thereunder based solely on these representations we reach the following conclusions the taxpayer has a qualifying interest in the plant and is therefore an eligible_taxpayer under sec_1_468a-1 of the regulations commission a commission b and commission c have determined the amount of decommissioning costs to be included in the taxpayer’s cost of service for ratemaking purposes as required by sec_1_468a-3 of the regulations the taxpayer has calculated the shares of the total decommissioning costs allocable to each of the commissions as required by sec_1_468a-3 of the regulations the taxpayer has proposed a schedule of ruling amounts which meets the requirements of sec_1_468a-3 and of the regulations the annual payments specified in the proposed schedule of ruling amounts plr-106599-00 are based on the reasonable assumptions and determinations used by commission a commission b and commission c and will result in a projected fund balance at the end of the funding_period equal to or less than the amount of decommissioning costs allocable to the fund for that jurisdiction the maximum amount of cash payments made or deemed made to the fund during any_tax year is restricted to the lesser amount of the decommissioning costs applicable to such fund or the ruling applicable to this fund as set forth under sec_1 468a- b of the regulations the qualifying percentage under sec_1_468a-3 of the regulations is calculated to be percent based on the above determinations we conclude that the taxpayer’s proposed schedule of ruling amounts satisfies the requirements of sec_468a of the code the following schedule of ruling amounts is specifically approved for the commissions approved revised schedule of ruling amounts year commission a wholesale sales customer commission c total commission b commission b approval of the schedule of ruling amounts is contingent on there being no change in the facts and circumstances known or assumed at the time the current ruling is issued if any of the events described in sec_1_468a-3 of the regulations occur in future years the taxpayer must request a review and revision of the schedule of ruling amounts generally the taxpayer is required to file such a request on or before the deemed payment deadline date for the first tax_year in which the rates reflecting such action became effective when no such event occurs the taxpayer must file a request for a revised schedule of ruling amounts on or before the deemed payment deadline of the 10th tax_year following the close of the tax_year in which the most recent schedule of ruling amounts was received plr-106599-00 the approved schedule of ruling amounts is relevant only to those payments made to the fund payments allocable to any funds other than the fund cannot qualify for purposes of the deduction under the provisions of sec_468a of the code payments made to such fund can qualify only to the extent they are made while taxpayer is the owner of the plant and only to the extent that they do not exceed the lesser_of the decommissioning costs applicable to such fund or the ruling amounts applicable to this fund in the tax_year this ruling is directed only to the taxpayer who requested it section 6ll0 k of the code provides it may not be used or cited as precedent pursuant to sec_1_468a-7 of the regulations a copy of this letter must be attached with the required election statement to the taxpayer’s federal_income_tax return for each tax_year in which the taxpayer claims a deduction for payments made to the fund sincerely yours peter c friedman peter c friedman office of associate chief_counsel passthroughs and special industries assistant to the branch chief branch enclosure copy


internal_revenue_service department of the treasury number release date index number washington dc person to contact lynne camillo telephone number refer reply to cc te_ge eoeg et2-plr-129604-00 date date legend board agency district state city this is in response to a request for a ruling concerning whether amounts received by nurses with respect to services performed for the board are subject_to taxes under the federal_insurance_contributions_act fica the agency is a non-profit private duty nursing agency providing nursing care and services to a variety of clients the agency currently has a contract with the board to provide several nurses to schools in the district these nurses work a set schedule each day at various schools in the district throughout the school year and provide health services to the students attending these schools the schools in the district are members of the state retirement_system under the contract between the agency and the board the agency is solely responsible for the payment of wages to the nurses the payment of all worker’s compensation_unemployment compensation medicare retirement or any other_benefits which may accrue to the nurses the board has the right to designate from time to time the particular subject matter or projects for the agency’s services as part of its services the agency monitors the work of the nurses and provides documentation relating to the nurses’ services as requested by the board supervisor the board assists in monitoring the performance of the nurses and provides and pays for all supplies used by the nurses in the provision of nursing services for the board plr-129604-00 the agency periodically submits invoices to the board for the nurses’ services and the board is required to pay such invoices within ten working days of receipt the work schedule and supervision for the nurses performing services is the shared responsibility of their direct supervisor at the agency and the board’s director of development student and community services fica_taxes are composed of the old-age survivors and disability insurance oasdi taxes imposed under internal_revenue_code code sec_3101 and sec_3111 also known as social_security_taxes and the hospital_insurance_tax imposed by sec_3101 and sec_3111 also known as medicare taxes in general all payments of remuneration by an employer for services performed by an employee are subject_to fica_taxes unless the payments are specifically excepted from the term wages or the services are specifically excepted from the term employment in order to determine whether the remuneration paid to the nurses is subject_to fica_taxes it is first necessary to determine which of the two entities the agency or the board is the common_law employer of the nurses under the employment_tax regulations a common_law employment relationship generally exists when the person for whom the services are performed has the right to control and direct the individual who performs the services not only as to the result to be accomplished by the worker but also as to the details and means by which that result is accomplished that is an employee is subject_to the will and control of the employer not only as to what shall be done but as to how it shall be done it is not necessary that the employer actually direct or control the manner in which the services are performed it is sufficient if he has the right to do so see employment_tax regs sec_31 d - c the analysis of whether an employment relationship exists typically arises in the context of determining whether an individual is an employee or an independent_contractor however the determination of which of two potential employers is treated as the employer for employment_tax purposes is made using the same standard 332_us_126 89_tc_225 aff’d 862_f2d_751 9th cir sec_4 of revproc_2001_3 2001_1_irb_111 states that the service will not make determinations as to which of two entities under common_law rules applicable in determining the employer-employee relationship is the employer when one entity is treating the worker as an employee thus we are unable to make a determination as to whether the agency or the board is the common_law employer with respect to the nurses however the agency and the board have both represented that the nurses are employees of the board under the common_law rules insofar as the board is the entity that has the right to control and direct the nurses not only as to the result to be accomplished by the work but also as to the details and means by which plr-129604-00 that result it accomplished accordingly our analysis and conclusions are based on the assumption that the board is the common_law employer of the nurses under code sec_3401 the term employer_generally means the person for whom an individual performs any service of whatever nature as the employee of such person under code sec_3401 however if the person for whom the individual performs the services does not have control of the payment of the wages for such services the term employer means the person having control of the payment of such wages see employment_tax reg sec_31_3401_d_-1 which provides that the term employer means the person having legal control of the payment of the wages thus a person other than the common_law employer will be treated as an employer for employment_tax purposes if the common_law employer does not have control of the payment of the wages and the third party has control of the payment of the wages under code sec_3401 the person having control of the payment of wages is responsible for income_tax_withholding generally even though that person is not the common_law employer for purposes of code sec_3401 which defines wages for purposes of income_tax_withholding code sec_3401 also provides various exceptions to the term wages that depend on the nature of the employer as a result the determination of whether remuneration is wages under code sec_3401 is made on the basis of the common_law employer even if another party is the employer under code sec_3401 the fica provisions contain no definition of employer similar to the definition contained in code sec_3401 however 419_us_43 holds that a person who is an employer under code sec_3401 is also an employer for purposes of fica withholding under code sec_3102 circuit courts have applied the otte holding to conclude that the person having control of the payment of the wages is also the employer for purposes of code sec_3111 which imposes fica excise_tax on employers see eg in re armadillo corp 561_f2d_1382 10th cir otte dealt with the trustee in bankruptcy of a bankrupt employer and the tax_liability attributable to wages paid_by the trustee for services performed for the bankrupt employer the trustee argued that the payments made by the trustee were not wages under code sec_3401 the supreme court rejected those arguments and noted that the payments were for services performed for the former employer it stated that the fact that the services were performed for the bankrupt rather than for the trustee and the fact that the payments were made after the employment relationship terminated did not convert the remuneration into something other than wages otte also held that the payments were fica wages even though the employment relationship between the bankrupt and the employee no longer existed at the time of payment and that the trustee was responsible for withholding the employee’s share of fica in extending statutory employer status to fica otte did not explicitly address whether plr-129604-00 fica wages are determined with respect to the common_law employer rather than the sec_3401 employer it thus inherently applied the sec_3401 definition of employer for fica purposes in a manner analogous to its application_for purposes of income_tax_withholding therefore because sec_3401 employer status does not apply in determining wages for purposes of income_tax_withholding it should not apply in determining wages for fica or futa purposes under code sec_3121 and sec_3306 respectively control of the payment of the wages means legal control of the funds used to pay the wages see 317_f2d_681 9th cir employment_tax regulations sec_31_3401_d_-1 in three-party arrangements like the one in the instant case if the sec_3401 employer is obligated to pay the common_law employer’s employees regardless of whether the common_law employer advances funds to the sec_3401 employer or whether the common_law employer subsequently reimburses it the sec_3401 employer is in control of the payment of the wages conversely if the sec_3401’s payment of the common_law employer’s employees is contingent on or proximately related to the common_law employer’s transfer of funds to the sec_3401 employer the common_law employer is in control of the payment of the wages although the board is the common_law employer of the nurses the contract between the board and the agency provides that the agency is responsible for the payment of the nurses’ wages you have represented that the agency is obligated to pay wages to the nurses assigned to schools within the district regardless of whether the board advances funds to the agency or whether the board subsequently reimburses it accordingly the agency has legal control of the payment of wages and is therefore responsible for withholding and paying employment_taxes with respect to the nurses pursuant to sec_3401 sec_3121 of the code generally excludes from employment services performed in the employ of any state or any political_subdivision thereof or any wholly- owned instrumentality of any one or more of the foregoing however under code sec_3121 the exception from employment does not apply to services included under an agreement entered into pursuant to sec_218 of the social_security act in the event that the services performed by the employees are not included under a sec_218 agreement code sec_3121 provides that the exception from employment shall not apply to services performed by an employee of a state political_subdivision or wholly owned instrumentality thereof by an individual who is not a member of the retirement_system of such state political_subdivision or wholly owned instrumentality see sec_31_3121_b_7_-2 of the employment_tax regulations if the employees are qualified participants in a retirement_system of the employer within plr-129604-00 the meaning of the regulations and therefore exempt under code sec_3121 from the taxes imposed under the fica they may nevertheless be subject_to the medicare portion of the fica_taxes under code sec_3121 of the code all state_or_local_government employee hired after date are subject_to the medicare portion of the fica_taxes regardless of membership in a retirement_system provided by the employer the following six factors are considered in determining whether an organization is a wholly-owned instrumentality of a state whether the organization is used for a governmental purpose and performs a governmental function whether performance of its function is on behalf of one or more states or political subdivisions whether there are any private interests involved or whether the states or political subdivisions involved have the powers and interests of an owner whether control and supervision of the organization are vested in public authority or authorities whether express or implied statutory or other authority is necessary for the creation and or use of such an instrumentality and whether such authority exists and the degree of financial autonomy and the source of its operating_expenses see revrul_57_128 1957_1_cb_311 the board consists of five members who are publicly elected city officials serving two year terms the board is responsible for establishing policy and monitoring activities of the district the district is a public school district in state functioning under charter of the state department of education the board and the district are governed by state statute and the policies of the state board_of education the state provides most of the funding for the district with the remaining funds consisting of revenue from local property taxes and a small percentage from federal sources solely on the basis of the information submitted we rule that the board is a wholly- owned instrumentality of city which is a political_subdivision of state therefore the services performed by the board’s employees who are qualified participants in a retirement_system within the meaning of sec_3121 are excluded from employment accordingly the board is not subject_to the oasdi taxes under sec_3111 with respect to wages paid to qualified participants in a retirement_system similarly such qualified participants are not subject_to oasdi taxes under sec_3101 finally the agency as the sec_3401 employer is under no obligation to withhold and pay oasdi taxes with respect to wages paid to nurses who perform services for the board no opinion is expressed as to the federal tax consequences of the transaction described above under any other provision of the code the above analysis is based on the assumption that the taxpayer is not covered by a sec_218 agreement no opinion is expressed on whether the continuing-employment exception to the medicare portion of the fica tax provided by code sec_3121 applies to any employee of the taxpayer no opinion is expressed on whether the taxpayer’s retirement_plan plr-129604-00 constitutes a retirement_system within the meaning of code sec_3121 this ruling is directed only to the taxpayer which requested it sec_6110 of the code provides that it may not be used or cited as precedent sincerely jerry e holmes chief employment_tax branch office of the assistant chief_counsel exempt_organizations employment_tax government entities


t c summary opinion united_states tax_court bruce l helmich petitioner v commissioner of internal revenue respondent docket no 12596-99s filed date bruce l helmich pro_se ross m greenberg for respondent pajak special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority unless otherwise indicated subseguent section references are to the internal_revenue_code in effect for the year in issue respondent determined a deficiency of dollar_figure in petitioner's federal_income_tax petitioner concedes that he received interest in the amount of dollar_figure which is includable in his income we must decide whether petitioner received dollar_figure which should be included in his income some of the facts in this case have been stipulated and are so found petitioner resided in madeira beach florida at the time he filed his petition petitioner worked part time as a legal clerk for byron vaughan vaughan esquire an attorney at law with an office in sarasota florida respondent received a form 1099-misc stating that petitioner received nonemployee compensation from vaughan in the amount of dollar_figure for the taxable_year petitioner did not report this amount on his return in reply to correspondence from respondent petitioner ina letter received by the internal_revenue_service on date stated that although i did receive the amounts claimed on pages two and four of your letter these pages misidentify the dollar_figure received from byron vaughan esquire ein this amount was a bonus paid to me by mr vaughan my employer and was not money received as non-employee compensation nor was it money received by a self-employed_individual as such i believe that mr vaughan had an obligation to withhold both social_security_taxes and withholding taxes on that amount on date petitioner wrote to the internal_revenue_service and stated that the that i received from mr vaughan was a bonus for that year as your records indicate i was an employee of mr vaughan for several years prior to this time i realize that the may have been completed with the notation as non-employee compensation but that would have been an error on the part of mr vaughan and not my error mr vaughan stated to me that the taxes were taken care of i do not feel that i should be held responsible for errors committed by mr vaughan i realize that mr vaughan 1s now deceased and i believe that the reason that the irs is attempting to get this from me since sic they cannot get it from him on date petitioner responded to proposed changes by the internal_revenue_service and stated that as i have explained the bonus was employee compensation regardless of how it was reported to your office as i have explained to your office on several occasions this income was a bonus from my employer and he informed me that he would be taking care of the taxes i do know that my records for will reflect that i received a bonus that year and that bonus reflected the pay was for employee compensation respondent determined that the dollar_figure should be included in petitioner's income the notice_of_deficiency contains the following statement a bonus is considered taxable_income and must be included on the tax_return it is not subject_to self- employment_taxes nor fica_taxes we have deleted the self- employment_tax and your share of the fica tax petitioner stated in his petition that he disagreed with the adjustments in the notice_of_deficiency because the dollar_figure was erroneously marked on as non-employee compensation when it should have been marked as employee compensation at trial petitioner changed his story and claimed that he never received the dollar_figure we summarize petitioner's testimony and the sequence of events which he alleges occurred as follows as noted petitioner worked part-time for vaughan as a legal clerk he received his w-2 and dated his federal_income_tax return on date after petitioner filed his return vaughan gave petitioner the form 1099-misc which reported the amount of dollar_figure as nonemployee compensation vaughan explained to petitioner that he needed to report this amount to reduce his taxes petitioner protested that he did not receive the money vaughan said not to worry because he would pay the tax when it came due petitioner was applying for admission to the florida bar at the time these events allegedly occurred petitioner had been convicted for the felony of extortion his bar application had been pending before the florida supreme court for months petitioner claims that vaughan knew this and when petitioner gquestioned vaughan about the form 1099-misc vaughan let him know in a very unsettled way that if petitioner had any problems with accepting the form 1099-misc then vaughan would probably have trouble with petitioner's employment and would have to notify the bar about it petitioner considered himself between a rock and a hard place petitioner never reported the alleged blackmail he claims he did not feel compelled to alert the authorities that he was being extorted because mr vaughan had told him don't worry about it i'll pay the tax when it comes due petitioner claimed he did not amend his return to reflect the income because he did not want to state under the penalty of perjury that he had received the money at trial petitioner claimed that the reason he initially told the internal_revenue_service that he received the money as a bonus was because he had spoken with someone in the internal_revenue_service who had led him to believe that the form misc was all the proof the irs needed and that petitioner had to explain why he did not pay the taxes on it petitioner testified that the only explanation he could come up with as to why he should not have to pay taxes on the money was that it was employee compensation not nonemployee compensation and that vaughan should have paid the taxes on it petitioner admitted that he sent respondent the three letters stating that he had received the dollar_figure as a bonus after he wrote the letters petitioner was told by an accountant that if petitioner had said from the beginning that he did not receive the money then the form 1099-misc would not be proof in and of itself that he received the money and the burden of persuasion as to the payment of the money would be on respondent after he heard this petitioner informed respondent that he had never really received the money and told respondent the same story he reiterated in court at trial petitioner claimed that he erred in writing the three letters to the internal_revenue_service in addition to his testimony petitioner provided months of bank records to support his position that he did not receive the dollar_figure petitioner's bank records show that dollar_figure was not deposited into his bank account in a 4-month period they do not establish that petitioner did not receive the money at trial petitioner contended that he never received the dollar_figure respondent contended that the letters written by petitioner are proof that he received the income and that the dollar_figure must be included in petitioner's gross_income under sec_61 a statutory_notice_of_deficiency ordinarily carries with it a presumption of correctness rule a 290_us_111 because of this presumption taxpayers generally at least initially have the burden_of_proof and the burden of going forward with the evidence 967_f2d_986 4th cir affg tcmemo_1990_618 see also sec_7491 under sec_6201 if the taxpayer in a court_proceeding asserts a reasonable dispute with respect to the income reported on an information_return and fully cooperates with the commissioner then the commissioner shall have the burden of producing reasonable and probative information in addition to the information_return mcquatters v commissioner tcmemo_1998_ dennis v commissioner tcmemo_1997_275 hardy v commissioner tcmemo_1997_97 affd 181_f3d_1002 9th cir the taxpayer must have fully cooperated with the commissioner before the burden of production would shift to the commissioner fully cooperating with the irs includes but is not limited to the following bringing the reasonable dispute over the item_of_income to the attention of the irs within a reasonable period of time and providing within a reasonable period of time access to and inspection of all witnesses information and documents within the control of the taxpayer as reasonably requested by the secretary h rept pincite 1996_3_cb_49 petitioner did not fully cooperate with the commissioner and is not entitled to the benefit of sec_6201 even assuming arguendo that he is entitled to the benefit of sec_6201 the commissioner has presented sufficient information to sustain the determination in the notice_of_deficiency petitioner has put himself between a rock and a hard place on the one hand if petitioner did not receive the money then he agreed to assist vaughan in defrauding the government he failed to report extortion he lied in three letters written to the internal_revenue_service and he lied in his petition filed with this court if on the other hand petitioner did receive the money then he failed to properly amend his tax_return he lied to the internal_revenue_service he accused an innocent man of committing a crime and he committed perjury when he testified before the court fortunately it is not necessary to decide which of these scenarios actually occurred respondent introduced into evidence three letters from petitioner stating that petitioner received dollar_figure as a bonus during his employment with mr vaughan petitioner admitted writing these letters in contradiction to these letters we are faced with petitioner’s testimony we are not reguired to accept a taxpayer’s self-serving and uncorroborated testimony 338_f2d_602 9th cir affg 41_tc_593 87_tc_74 in this case we find that petitioner's testimony carries no weight due to his lack of credibility petitioner did not meet his burden_of_proof the letters which are admissions against interest are convincing under sec_61 gross_income includes all income from whatever source derived including compensation_for services we note that this includes employee compensation as well as nonemployee compensation we find that petitioner received dollar_figure as employee compensation_for his services in accordingly we sustain respondent's determination reviewed and adopted as the report of the small_tax_case division decision will be entered for respondent