t c summary opinion united_states tax_court mark pelot petitioner v commissioner of internal revenue respondent docket no 3791-13s filed date mark pelot pro_se lawrence d sledz for respondent summary opinion armen special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case respondent determined a deficiency in petitioner’s federal_income_tax for of dollar_figure the sole issue for decision is whether petitioner is entitled to deduct unreimbursed employee_expenses reported on schedule a itemized_deductions background some of the facts have been stipulated and they are so found we incorporate by reference the parties’ stipulation of facts and accompanying exhibits petitioner resided in the state of michigan at the time that the petition was filed throughout petitioner was employed as a fire investigator by certified investigations international inc certified investigations petitioner’s job included conducting investigations regarding the causes of fires interviewing fire department employees and people who lived or worked where the fires occurred or unless otherwise indicated all subsequent section references are to the internal_revenue_code in effect for the year in issue all rule references are to the tax_court rules_of_practice and procedure in the immediate area and preparing and reviewing reports the nature of petitioner’s work often required that he travel to locations away from certified investigations’ main office to examine the site of a fire or interview relevant parties petitioner used one personal vehicle exclusively for work-related transportation and a different personal vehicle for non-work-related transportation certified investigations did not reimburse employees for transportation vehicle or any other expenses claimed by petitioner petitioner maintained a log containing information about fires investigated by certified investigations during that included the address of each fire and the investigator assigned to it petitioner also maintained a contemporaneously prepared log of his daily activities that included in part the file number of each fire the street_name the activity performed and his start and end times on each activity petitioner recorded his odometer readings on occasion petitioner attended conferences related to the science of fire investigations one such conference was held in boston massachusetts by the national association of fire investigators another was sponsored by the ohio department of public safety private investigator security guard services petitioner timely filed hi sec_2010 federal_income_tax return on the schedule a petitioner claimed miscellaneous_itemized_deductions consisting of unreimbursed employee_expenses of dollar_figure and tax preparation fees of dollar_figure in support of his schedule a deductions for unreimbursed employee_expenses petitioner attached to his return form_2106 employee business_expenses petitioner elected to apply standard mileage rates for vehicle expenses for petitioner claimed deductions for unreimbursed employee_expenses as follows vehicle expenses parking fees tolls and transportation travel_expenses while away_from_home_overnight meals and entertainment_expenses other business_expenses less multiply meals and entertainment by total unreimbursed employee_expenses dollar_figure big_number big_number big_number in date respondent issued petitioner a notice_of_deficiency for determining a deficiency of dollar_figure the notice_of_deficiency disallowed all of the miscellaneous_itemized_deductions claimed by petitioner on hi sec_2010 schedule a the notice is clear that unreimbursed employee_expenses were disallowed for lack of substantiation whereas tax preparation fees were disallowed only because of the floor on miscellaneous_itemized_deductions prescribed by sec_67 petitioner filed a timely petition for redetermination with the court discussion i burden_of_proof the commissioner’s determination of a taxpayer’s liability in a notice_of_deficiency is normally presumed correct and the taxpayer bears the burden of proving that the determination is incorrect rule a 290_us_111 this burden includes substantiating the amounts of deductions claimed 65_tc_87 aff’d per curiam 540_f2d_821 5th cir generally a taxpayer must keep records sufficient to establish the amounts of the items reported on his or her federal_income_tax return sec_6001 sec_1_6001-1 e income_tax regs petitioner has not asserted that the burden_of_proof as to any relevant factual issue should shift to respondent under sec_7491 see sec_7491 and 116_tc_438 deductions are a matter of legislative grace and as just indicated the taxpayer bears the burden of proving entitlement to any deduction claimed rule a 503_us_79 308_us_488 292_us_435 see sec_7491 requiring compliance with statutorily imposed substantiation and recordkeeping requirements for the burden to shift a taxpayer must substantiate deductions by keeping and producing adequate_records that enable the commissioner to determine the taxpayer’s correct liability sec_6001 hradesky v commissioner t c pincite 43_tc_824 when a taxpayer establishes that he or she paid_or_incurred a deductible expense but fails to establish the amount of the deduction the court normally may estimate the amount allowable as a deduction 39_f2d_540 2d cir 85_tc_731 there must be sufficient evidence in the record however to permit the court to conclude that a deductible expense was paid_or_incurred in at least the amount allowed 245_f2d_559 5th cir in addition and as discussed infra deductions for certain expenses are subject_to strict substantiation requirements and an allowance therefore may not be estimated by the court ii unreimbursed employee_expenses a taxpayer who is an employee may deduct unreimbursed employee_expenses as an ordinary and necessary business_expense under sec_162 sec_162 79_tc_1 the term trade_or_business includes performing services as an employee sec_162 lucas v commissioner t c pincite in contrast personal expenses such as commuting expenses are not deductible sec_262 sec_1_162-2 income_tax regs see also sec_1_212-1 sec_1_262-1 income_tax regs whether an expenditure satisfies the requirements for deductibility under sec_162 is a question of fact see 320_us_467 sec_274 prescribes more stringent substantiation requirements to be met before a taxpayer may deduct certain categories of expenses including travel_expenses meals and entertainment expenditures and expenses related to the use of listed_property as defined in sec_280f see 50_tc_823 aff’d 412_f2d_201 2d cir as relevant here the term listed_property includes passenger automobiles sec_280f to satisfy the requirements of sec_274 a taxpayer generally must maintain adequate_records or produce sufficient evidence corroborating his own statement establishing the amount date and business_purpose of an expenditure or business use of property sec_1_274-5t c temporary income_tax regs fed reg date sec_1_274-5t temporary income_tax regs supra provides in relevant part that adequate_records generally consist of an account book a diary a log a statement of expense trip sheets or a similar record made at or near the time of the expenditure or use along with supporting documentary_evidence sec_1_274-5 income_tax regs provides that the strict substantiation requirements of sec_274 for vehicle expenses must be met even where the optional standard mileage rate is used moreover the court may not use the cohan doctrine to estimate expenses covered by sec_274 sanford v commissioner t c pincite sec_1_274-5t temporary income_tax regs fed reg date a vehicle expenses petitioner elected to apply standard mileage rates and claimed deductions for vehicle expenses of dollar_figure for the record includes a log containing petitioner’s daily work assignments and addresses to which he drove in connection with his employment with certified investigations petitioner’s testimony at trial describing his daily activities and responsibilities during the course of his employment with certified investigations was forthright and credible we are satisfied from his testimony and other evidence in the record that he traveled regularly from certified investigations’ office to various locations of fires and back within the scope of his employment we likewise are convinced that the logs that petitioner provided were prepared contemporaneously and are generally representative of the miles that he drove for business purposes under the circumstances recognizing that mileage for commuting is not deductible and giving appropriate weight to petitioner’s contemporaneously made logs of his daily assignments and time as well as his testimony we conclude that he has adequately substantiated that he drove a total of big_number business miles in connection with his work for certified investigations during see eg 335_f2d_496 5th cir aff’g and remanding tcmemo_1962_233 32_tc_947 aff’d per curiam 283_f2d_865 5th cir b parking fees tolls and transportation_expenses petitioner claimed a deduction of dollar_figure for unreimbursed employee parking fees tolls and transportation_expenses petitioner failed to provide any receipts canceled checks bank records or similar records to substantiate any of these expenditures and he did not testify or offer secondary evidence regarding the expenditures accordingly petitioner is not entitled to deductions for unreimbursed employee parking fees tolls and transportation_expenses c travel_expenses while away_from_home_overnight petitioner claimed a deduction of dollar_figure for travel_expenses while away_from_home_overnight including lodging airplane car rental and other expenses petitioner attended a conference in boston massachusetts related to the science of fire investigations however the record does not include documentation or other persuasive evidence regarding the cost of the flight or other travel_expenses because petitioner did not substantiate these expenses he is not entitled to any travel expense deductions relating to the boston trip petitioner did not offer any documentation or other persuasive evidence regarding any other travel expense accordingly petitioner is not entitled to deductions for travel_expenses while away_from_home_overnight d meals and entertainment_expenses petitioner claimed a deduction of dollar_figure for unreimbursed employee meals and entertainment_expenses as previously mentioned meals and entertainment_expenses are subject_to the strict substantiation requirements of sec_274 petitioner failed to provide any receipts canceled checks bank records or similar records to substantiate any expenditures_for meals and entertainment and he did not testify or offer secondary evidence regarding such expenditures accordingly petitioner is not entitled to any deduction for meals and entertainment_expenses e other business_expenses petitioner claimed a deduction of dollar_figure for other unreimbursed employee business_expenses not deducted elsewhere as discussed above petitioner attended a conference in boston massachusetts hosted by the national association of fire investigators accordingly petitioner is entitled to a deduction of dollar_figure for the cost of the conference see cohan v commissioner f 2d pincite petitioner also attended a seminar sponsored by the ohio department of public safety private investigator security guard services at trial petitioner introduced documentation of a seminar fee of dollar_figure a registration fee of dollar_figure and a fingerprint check for dollar_figure for a total of dollar_figure petitioner did not introduce any documentation or other persuasive evidence regarding any other business_expenses therefore of the dollar_figure claimed on his tax_return petitioner is entitled to a deduction of dollar_figure ie dollar_figure dollar_figure for other business_expenses conclusion in holding on the disputed issue we have considered all of the arguments advanced by the parties and to the extent not expressly addressed we conclude that those arguments do not support a result contrary to that reached herein in order to give effect to the foregoing decision will be entered under rule


tax-exempt and government entities division g0u7 department of the treasury internal_revenue_service washington d c jan uniform issue list tep rak legend taxpayer a ira x financial_institution m financial_institution n amount c amount d date dear this is in response to letters dated date and date submitted on your behalf by your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a age represents that she received a distribution from ira x totaling amount c taxpayer a asserts that her failure to accomplish a rollover of amount d amount c minus the required_minimum_distribution for year within the 60-day period prescribed by sec_408 was due to miscommunication and misunderstanding by a representative of financial page institution m resulting in amount d being deposited into a non-ira account taxpayer a represents that amount d has not been used for any other purpose taxpayer a met with a representative of financial_institution m a few days after receiving a date distribution from ira x which she had maintained with - financial_institution n in amount c taxpayer a had established a relationship with her broker at financial_institution m and maintained an ira account and a - taxable account at financial_institution m taxpayer a intended to move ira x to her ira at financial_institution m however a representative of financial_institution m mistakenly deposited taxpayer a’s check into the taxable account rather than the ira account taxpayer a was not aware that a deposit to non-ira account was established until she received a form after the expiration of the 60-day period based on the facts and representations you request a ruling that the internal_revenue_service waive the 60-day rollover requirement with respect to the distribution of amount c contained in sec_408 of the code the code’ - sec_408 of the code provides that except as otherwise provided in sec_408 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 defines and provides the rules applicable to ira_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 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 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 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 sec_408 of the code provides that sec_408 does not page apply to any amount described in sec_408 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 from an ira which was not includible in gross_income because of the application of sec_408 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 sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that are eligible for the waiver under section occurred after date d i of the code s o 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 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 documentation submitted by taxpayer a consistent with her assertion that a failure to accomplish a rollover within the day period prescribed by sec_408 was due to miscommunication and misunderstanding by a representative of financial_institution m resulting in amount d being deposited into a non-ira account taxpayer a represents that amount d has not been used for any other purpose is therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution to is taxpayer a of amount d from ira x pursuant to this ruling letter taxpayer a granted a period of days measured from the date of the issuance of this letter_ruling to make a rollover_contribution of an amount equal to amount d to an ira or iras described in code sec_408 provided all other requirements of code sec_408 except the 60-day requirement are met with respect to page auv7 u2 é such ira contribution the contribution will be considered a rollover_contribution within the meaning of code sec_408 please note that pursuant to code sec_408 this ruling letter does not authorize the rollover of the code sec_401 minimum required distributions for the calendar years and -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 pursuant to a power_of_attorney on file with this office a copy of this letter_ruling is being sent to your authorized representative this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent if you wish to inquire about this ruling please contact sincerely yours frances v sigan employee_plans technical group manager enclosures deleted copy of letter_ruling notice of intention to disclose


internal_revenue_service number info release date index no date conex-159541-02 cc ita b4 attention dear this letter is in response to your letter dated date on behalf of your asked us to make permanent constituent mr the provisions of notice_2001_69 2001_2_cb_491 which involve the tax treatment of amounts paid under employer leave-based donation programs mr notice_2001_69 provided interim guidance that the treasury_department and the irs believed was appropriate in the aftermath of the date terrorist attacks although contrary to well-established legal principles notice_2001_69 provided special relief for uniquely tragic circumstances the treasury_department and the irs have studied the issue and believe that employees who participate in leave-based donation programs may have taxable_income under longstanding assignment_of_income principles also the employees may be eligible for a charitable_contribution_deduction depending on each individual’s tax situation accordingly consistent with tax principles that are well-established in the law and administrative guidance the treasury_department and the irs have decided not to extend notice_2001_69 to payments made after date i hope this information is helpful please call if you have any further questions sincerely james l atkinson associate chief_counsel income_tax accounting


tcmemo_2013_108 united_states tax_court mohamed mawji and fatema mawji petitioners v commissioner of internal revenue respondent docket no filed date thomas a sadaka and thomas f hudgins for petitioners joel d mcmahan for respondent memorandum opinion chiechi judge respondent determined the following deficiencies in thomas a sadaka mr sadaka who has his office in orlando florida has represented petitioners since he filed the petition on their behalf thomas f hudgins mr hudgins who has his office in naples florida did not enter an appearance in this case until date shortly before the commencement of the date trial session in tampa florida at which this case was calendared for trial and accuracy-related_penalties under sec_6662 on petitioners’ federal_income_tax tax for their taxable years and year deficiency dollar_figure big_number accuracy-related_penalty dollar_figure dollar_figure we must decide whether to sustain the determinations in the notice_of_deficiency that respondent issued to petitioners for their taxable years and we hold that we will sustain those determinations background all of the facts have been deemed established for purposes of this case under rule f petitioners resided in florida at the time they filed the petition during each of the years and the taxable years at issue petitioners owned or controlled businesses that sold inter alia computer hardware products all section references are to the internal_revenue_code in effect for the years at issue all rule references are to the tax_court rules_of_practice and procedure during petitioners maintained in the united_states a capital one credit card a financial_account with bank of america bearing an account number ending in a financial_account with wachovia bearing an account number ending in a financial_account with suntrust bearing an account number ending in and a financial_account with wachovia in the name nexon we shall refer collectively to all of those listed accounts that petitioners maintained during in the united_states as u s financial accounts during petitioners deposited dollar_figure to their u s financial accounts during petitioners maintained in the united kingdom a financial_account with first trust bearing an account number ending in a financial_account with first trust bearing an account number ending in a financial_account with first trust bearing an account number ending in and a financial_account with first trust bearing an account number ending in we shall refer collectively to all of those listed accounts that petitioners maintained in the united kingdom during as u k financial accounts during petitioners deposited dollar_figure to their u k financial accounts during petitioners maintained in the united_states a financial_account with bank of america bearing an account number ending in a financial_account with suntrust bearing an account number ending in a financial_account with wachovia bearing an account number ending in and a financial_account with wachovia bearing an account number ending in we shall refer collectively to all of those listed accounts that petitioners maintained in the united_states during as u s financial accounts during petitioners deposited dollar_figure to their u s financial accounts during petitioners maintained in the united kingdom a financial_account with first direct bearing an account number ending in a financial_account with first direct bearing an account number ending in a financial_account with first direct bearing an account number ending in a financial_account with first direct bearing an account number ending in and a financial_account with first direct bearing an account number ending in we shall refer to all of those listed accounts that petitioners maintained in the united kingdom during as u k financial accounts during petitioners deposited dollar_figure to their u k financial accounts petitioners filed form_1040 u s individual_income_tax_return for each of their taxable years tax_return and tax_return in the tax_return they reported wages salaries tips etc of dollar_figure taxable interest of dollar_figure and total income of dollar_figure petitioners failed to report for their taxable_year gross_receipts of dollar_figure in schedule c profit or loss from business schedule c in their tax_return petitioners reported wages salaries tips etc of dollar_figure taxable interest of dollar_figure rental real_estate royalties partnerships s_corporations trusts etc from schedule e supplemental income and loss schedule e of -dollar_figure and total income of dollar_figure petitioners failed to report in their tax_return schedule c gross_receipts of dollar_figure respondent issued a notice_of_deficiency notice to petitioners for their taxable years and in that notice respondent determined inter alia it is determined that in the absence of adequate_records your taxable_income for the tax years and has been computed by reference to bank_deposits and cash payments plus personal and other nondeductible expenditures if any thus it is determined you had additional gross business income for both years accordingly taxable_income is increased dollar_figure for the taxable_year ended petitioners also failed to report in their tax_return schedule c-2 gross_receipts of dollar_figure and schedule e income of dollar_figure from aegis inc petitioners indicated in the pretrial memorandum that they filed late on date that they do not contest the determinations that respondent made in the notice_of_deficiency issued to them for their taxable years and discussed in the text requiring them to report those respective amounts in their tax_return date and dollar_figure for the taxable_year ended date it is determined that as a result of embezzlement of funds from eaegis incorporated to pay personal expenses that you have additional flow-through income of dollar_figure reportable on your individual return for the tax_year accordingly taxable_income is increased dollar_figure for the taxable_year ended date see 4605-a for eaegis incorporated it is determined that fatema mawji had additional income of dollar_figure as payment for bookkeeping services rendered during to eaegis llc accordingly taxable_income is increased dollar_figure for the taxable_year ended date respondent also determined in the notice that petitioners are liable for each of their taxable years and for the accuracy-related_penalty under sec_6662 on date we issued an order to show cause osc in which we granted respondent’s motion for order to show cause why proposed facts and evidence should not be accepted as established as provided in rule f respondent’s rule f motion in that osc we also ordered petitioners to file the name of the company from which petitioners reported in their tax_return schedule e income of dollar_figure is spelled inconsistently in different documents in the record for convenience we shall use the spelling aegis see supra note see supra note see supra note a response to the osc which complied with rule f and in which they were to show why the matters set forth in respondent’s proposed stipulation of facts and the exhibits referenced therein and attached thereto should not be deemed established for purposes of this case we further stated in the osc if by the date specified date no response is received with respect to any such matter or portion thereof in respondent’s proposed stipulation of facts and the exhibits referenced therein and attached thereto or if the response is evasive or not fairly directed to any such matter or portion thereof that matter or portion thereof will be deemed established for purposes of this case and an order will be entered pursuant to rule f on date petitioners filed a response to the osc petitioners did not show in that response as they were required to do by our osc and rule f why the matters set forth in respondent’s proposed stipulation of facts and the exhibits referenced therein and attached thereto should not be deemed established for purposes of this case consequently by order dated date we made the osc absolute and ordered that the facts and evidence set forth respondent’s proposed stipulation of facts and the exhibits referenced therein and attached thereto were attached as an exhibit to respondent’s rule f motion the osc explicitly required that we receive petitioners’ response to the osc on or before date in respondent’s proposed stipulation of facts and the exhibits referenced therein and attached thereto are deemed established for purposes of this case on date petitioners filed a motion for reconsideration of our order dated date petitioners’ motion for reconsideration petitioners did not show in that motion why the matters set forth in respondent’s proposed stipulation of facts and the exhibits referenced therein and attached thereto should not be deemed established for purposes of this case consequently by order dated date we denied petitioners’ motion for reconsideration on date respondent timely filed a pretrial memorandum in that pretrial memorandum respondent indicated that respondent expected to call as a witness at trial raza meghjee and that respondent reserved the right to call at trial impeachment witnesses and any witnesses listed in the pretrial memorandum that petitioners filed in respondent’s pretrial memorandum respondent estimated that the trial in this case would take two hours in that pretrial memorandum respondent stated inter alia that respondent intends to rely on the stipulations of fact deemed established by this court’s order dated date to support respondent’s income determinations on date petitioners filed late a pretrial memorandum in that pretrial memorandum petitioners indicated that petitioners may testify as witnesses at trial and that they reserved the right to call at trial impeachment witnesses and those witnesses listed in respondent’s pretrial memorandum in petitioners’ pretrial memorandum petitioners estimated that the trial in this case would take eight hours in that pretrial memorandum petitioners stated petitioner contends and can show that the deposits categorized by the respondent as unreported income of the petitioners was in reality the petitioners own money that was being transferred from one account of their accounts to another and that the money was all savings and income of the petitioner that had previously been taxed as appropriate in either the united_states or the united kingdom reproduced literally on date respondent filed a motion in limine in that motion respondent stated on date respondent received petitioners’ late- filed pretrial memorandum in which petitioners assert they will over the course of an eight hour trial present testimony to contradict the facts deemed established in this case petitioners suggest that the evidence they intend to offer will establish that the income determined by respondent’s bank_deposits analysis consists of non-taxable transfers however petitioners have refused to provide documents to respondent to support their contention instead petitioners have engaged in a pattern of behavior designed to prevent respondent from receiving information regarding petitioners’ income and financial accounts in fact during respondent’s examination of petitioners’ and income_tax years and throughout respondent’s preparation for trial of this case respondent has requested information including foreign and domestic financial_account records copies of income_tax returns allegedly filed in the united kingdom and other information that may support petitioners’ position but in each instance petitioners have refused to produce all of the requested information instead as detailed in respondent’s report filed with this court on date petitioners have employed an abusive tactic of refusing to produce information in response to respondent’s requests because of petitioners’ refusal to voluntarily exchange information informally or formally and their refusal to participate in the stipulation process respondent filed a tax_court rule f motion on date that motion was granted on date and after granting petitioners an opportunity to respond this court issued an order on date that deemed established for purposes of this case those facts and exhibits referred to in and attached to respondent’s proposed stipulation of facts now in their late-filed pretrial memorandum served on respondent petitioners assert that they will produce testimony or some other evidence during an eight hour trial to contradict the facts deemed established in this case notwithstanding that petitioners have never produced the information in response to respondent’s requests after failing to properly respond to respondent’s discovery requests and failing to participate in the stipulation process petitioners should not be permitted to introduce evidence that contradicts those facts deemed established by this court’s order dated date consequently respondent moves that this court exclude any evidence offered by petitioners that contradicts the facts deemed established in this case on date we granted respondent’s motion in limine on date this case was called from the calendar calendar call for our trial session in tampa florida counsel for petitioners mr sadaka and mr hudgins and counsel for respondent joel d mcmahan appeared mr mcmahan informed us that the case was for trial mr hudgins initially spoke at the calendar call on behalf of petitioners and stated that mr mcmahan had informed him on date that we had granted respondent’s motion in limine but according to mr hudgins it wasn’t posted on the docket mr hudgins stated as follows with respect to our having granted respondent’s motion in limine i believe that the motion may have been granted improvidently or without due course for the evidence which i believe actually has a material bearing on the case here we asked mr hudgins whether he was making an oral motion to vacate our order dated date granting respondent’s motion in limine he replied that he was we indicated that after the calendar call we would have a hearing on that oral motion we then asked whether the parties wanted to raise anything else at the calendar call mr hudgins stated provided that we’re able to actually call witnesses we would estimate that it would take date was the day after mr hudgins had filed an entry of appearance in this case approximately at that point we corrected mr hudgins’ misstatement of what our granting of respondent’s motion in limine meant we stated the motion in limine didn’t have anything to do with calling witnesses it had to do with what those witnesses could testify to and or what exhibits could be introduced through the witnesses mr hudgins then made an oral motion to vacate our order dated date making the osc absolute we denied that oral motion on date this case was recalled for hearing on petitioners’ oral motion to vacate our order dated date granting respondent’s motion in limine counsel for petitioners mr hudgins and counsel for respondent mr mcmahan appeared at the conclusion of that hearing we denied petitioners’ oral motion to vacate our order dated date granting respondent’s motion in limine on date this case was recalled for trial mr hudgins counsel for petitioners and mr mcmahan counsel for respondent appeared mr hudgins informed us that petitioners intended to call only one witness at trial petitioner mohamed mawji mr mawji mr mcmahan informed us that respondent did not intend to call any witnesses mr hudgins called mr mawji as a witness and asked him the following question mr mawji you are the taxpayer correct mr mawji responded correct at that point mr hudgins stated your honor given this court’s pretrial procedure at this point the petitioners would like to rest their case mr mcmahan then stated that respondent rests we asked respective counsel for the parties whether the parties wanted to file posttrial briefs they responded that they did not although petitioners called mr mawji as their witness he did not testify except to state that he was the taxpayer and respondent did not call any witnesses as a result we had this case submitted on the basis of the facts deemed established under rule f discussion petitioners bear the burden of proving error in the determinations in the notice that remain at issue see rule a 290_us_111 we have found the following facts during each of the years and the taxable years at issue petitioners owned or controlled businesses that sold inter alia computer hardware products during petitioners maintained in the united_states a capital one credit card a financial_account with bank of america bearing an account see supra note number ending in a financial_account with wachovia bearing an account number ending in a financial_account with suntrust bearing an account number ending in and a financial_account with wachovia in the name nexon during that year petitioners deposited dollar_figure to their u s financial accounts during petitioners maintained in the united kingdom a financial_account with first trust bearing an account number ending in a financial_account with first trust bearing an account number ending in a financial_account with first trust bearing an account number ending in and a financial_account with first trust bearing an account number ending in during that year petitioners deposited dollar_figure to their u k financial accounts during petitioners maintained in the united_states a financial_account with bank of america bearing an account number ending in a financial_account with suntrust bearing an account number ending in a financial_account with wachovia bearing an account number ending in and a financial_account with wachovia bearing an account number ending in during that year petitioners deposited dollar_figure to their u s financial accounts during petitioners maintained in the united kingdom a financial_account with first direct bearing an account number ending in a financial_account with first direct bearing an account number ending in a financial_account with first direct bearing an account number ending in a financial_account with first direct bearing an account number ending in and a financial_account with first direct bearing an account number ending in during that year petitioners deposited dollar_figure to their u k financial accounts petitioners filed their tax_return and their tax_return in their tax_return they reported wages salaries tips etc of dollar_figure taxable interest of dollar_figure and total income of dollar_figure petitioners failed to report in their tax_return schedule c gross_receipts of dollar_figure in their tax_return petitioners reported wages salaries tips etc of dollar_figure taxable interest of dollar_figure rental real_estate royalties partnerships s_corporations trusts etc from schedule e of -dollar_figure and total income of dollar_figure petitioners failed to report in their tax_return schedule c gross_receipts of dollar_figure petitioners also failed to report in their tax_return schedule c-2 gross_receipts of dollar_figure and schedule e income of dollar_figure from aegis inc petitioners continued on the record before us we sustain the deficiency determinations for petitioners’ taxable years and we turn now to respondent’s determinations that petitioners are liable for each of their taxable years and for the accuracy-related_penalty under sec_6662 respondent has the burden of production with respect to those determinations see sec_7491 116_tc_438 to satisfy respondent’s burden of production respondent must come forward with sufficient evidence indicating that it is appropriate to impose higbee v commissioner supra pincite the accuracy-related_penalties at issue although respondent bears the burden of production with respect to those penalties respondent need not introduce evidence regarding reasonable_cause or similar provisions the taxpayer bears the burden_of_proof with regard to those issues id on the record before us we find that respondent has satisfied respondent’s burden of production under sec_7491 with respect to the accuracy-related continued indicated in the pretrial memorandum that they filed late on date that they do not contest the determinations that respondent made in the notice issued to them for their taxable years and requiring them to report those respective amounts in their tax_return penalty that respondent determined to impose on petitioners for each of their taxable years and petitioners advanced no argument in their pretrial memorandum and adduced no evidence with respect to the accuracy-related_penalties at issue on the record before us we sustain the accuracy-related_penalty determinations for petitioners’ taxable years and to reflect the foregoing and the concessions of petitioners decision will be entered for respondent


internal_revenue_service department of the treasury number release date index numbers washington dc person to contact telephone number refer reply to cc psi b09-plr-149094-02 date date re legend taxpayer spouse date trust trust daughter son individual trustee corporate trustee x company attorney accountant accounting firm date year plr-149094-02 date dear this is in response to your letter dated date on behalf of taxpayer requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations and sec_2642 of the internal_revenue_code to make allocations of taxpayer’s generation-skipping_transfer gst_exemption the facts and representations submitted are summarized as follows on date taxpayer created trust and trust trust and trust are substantially_similar except that trust is for the primary benefit of daughter and her descendants and trust is for the primary benefit of son and his descendants the trustees of trust and trust are individual trustee and corporate trustee paragraph a of each trust provides that while the named beneficiary is under the age of fifty years the trustee may pay to them or use for their benefit so much of the net_income and principal of the trust as the trustee in the trustee’s sole and absolute discretion determines to be required or advisable for the beneficiary’s support in reasonable comfort health and education paragraph b of each trust provides that after the named beneficiary reaches the age of fifty years the trustee shall pay all the net_income of each trust to the named beneficiary in convenient installments at least quarter-annually and thereafter the trustee may pay principal to the named beneficiary as provided in paragraph a paragraph of each trust provides that upon the death of the named beneficiary the trust shall be distributed to the appointee or appointees other than the named beneficiary’s estate his or her creditors or the creditors of his or her estate upon such conditions and estates in trust or otherwise with such powers in such manner and at such time or times as the named beneficiary appoints or directs by will specifically referring to this power_of_appointment except that if the named beneficiary dies before reaching the age of years the trust may only be so appointed among one or more of taxpayer’s descendants upon the named beneficiary’s death to the extent he or she does not effectively exercise this power_of_appointment the trustee shall distribute the trust as then constituted to the named beneficiary’s then living descendants per stirpes or if there are none to taxpayer’s living descendants per stirpes except that any share distributable to taxpayer’s other child shall be held as a separate trust for his or her benefit in an identical trust as that for the deceased beneficiary plr-149094-02 paragraph of each trust provides that the trustee may in the trustee’s sole and absolute discretion add one or more of taxpayer’s descendants other than the named beneficiary as a beneficiary or beneficiaries under paragraph a in which case the trust shall thereafter be held and disposed of as provided in paragraph a on date taxpayer transferred x limited_partner units of company to each of trust and trust after trust and trust were created and the gifts were made to each trust attorney prepared a summary of the tax and administrative matters related to each trust each summary provided the trust is a generation-skipping_trust and taxpayer’s dollar_figure gst_exemption as indexed for inflation should be allocated to any gifts thereto using a formula allocation producing a zero inclusion_ratio the summaries were delivered by attorney to taxpayer and spouse individual trustee and accountant of accounting firm on or about date taxpayer and spouse each filed a form_709 united_states gift and generation-skipping_transfer_tax return reporting the year gifts and electing to treat all gifts made by taxpayer and spouse to third parties as made one- half by each of them the year gift_tax_return was prepared by accountant no gst allocation was made on either return in the process of reviewing estate_planning recommendations for taxpayer and spouse on date attorney requested copies of the year gift_tax_return upon review of the return attorney discovered that gst_exemption had not been allocated to the year gifts taxpayer has requested the following rulings an extension of time under sec_2642 of the internal_revenue_code and sec_301_9100-1 and sec_301_9100-3 to make allocations of taxpayer’s gst_exemption for the transfers to the trusts in year and the value of the transferred property for purposes of determining the inclusion_ratio of each gst_trust will be the gift_tax value of the transferred property sec_2601 imposes a tax on every generation-skipping_transfer gst a gst is defined under sec_2611 as a taxable_distribution a taxable_termination and a direct_skip sec_2631 provides that for purposes of determining the inclusion_ratio every individual shall be allowed a gst_exemption of dollar_figure adjusted for inflation under sec_2631 that may be allocated by such individual or his executor to any property with respect to which such individual is the transferor sec_2632 provides that any allocation by an individual of his or her gst_exemption under sec_2631 may be made at any time on or before the date prescribed plr-149094-02 for filing the estate_tax_return for such individual’s estate determined with regard to extensions regardless of whether such a return is required to be filed sec_2642 provides that except as provided in sec_2642 if the allocation of the gst_exemption to any transfers of property is made on a gift_tax_return filed on or before the date prescribed by sec_6075 for such transfer or is deemed to be made under sec_2632 or c the value of such property for purposes of sec_2642 shall be its value as finally determined for purposes of chapter within the meaning of sec_2001 or in the case of an allocation deemed to have been made at the close of an estate_tax_inclusion_period its value at the time of the close of the estate_tax_inclusion_period and such allocation shall be effective on and after the date of such transfer or in the case of an allocation deemed to have been made at the close of an estate_tax_inclusion_period on and after the close of such estate_tax_inclusion_period sec_2642 provides generally that the secretary shall by regulation prescribe such circumstances and procedures under which extensions of time will be granted to make an allocation of gst_exemption described in sec_2642 or and an election under sec_2632 or c such regulations shall include procedures for requesting comparable relief with respect to transfers made before the date of the enactment of sec_2642 which was enacted into law on date sec_2642 provides that in determining whether to grant relief under this paragraph the secretary shall take into account all relevant circumstances including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the secretary deems relevant for purposes of determining whether to grant relief under this paragraph the time for making the allocation or election shall be treated as if not expressly prescribed by statute notice_2001_50 2001_34_irb_189 provides that under sec_2642 the time for allocating the gst_exemption to lifetime transfers and transfers at death the time for electing out of the automatic allocation rules and the time for electing to treat any trust as a generation-skipping_trust are to be treated as if not expressly prescribed by statute the notice further provides that taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in sec_301_9100-2 and sec_301_9100-3 to make a regulatory election or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-3 provides the standards used to determine whether to grant an extension of time to make an election whose due_date is prescribed by a regulation plr-149094-02 and not expressly provided by statute under sec_301_9100-1 a regulatory election includes an election whose due_date is prescribed by a notice published in the internal_revenue_bulletin in accordance with sec_2642 and notice_2001_50 taxpayers may seek an extension of time to make an allocation described in sec_2642 or b or an election described in sec_2632 or c under the provisions of sec_301_9100-3 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides the evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 provides that a taxpayer is deemed to have acted reasonably and in good_faith if the taxpayer reasonably relied on a qualified_tax professional including a tax professional employed by the taxpayer and the tax professional failed to make or advise the taxpayer to make the election based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied therefore taxpayer is granted an extension of time of days from the date of this letter to make allocations of taxpayer’s available gst_exemption with respect to taxpayer’s transfers to the trusts in year the allocations will be effective as of the date of the transfers to the trusts and the value of the transferred property for purposes of determining the inclusion_ratio of each gst_trust will be the gift_tax value of the transferred property the allocations should be made on a supplemental form_709 united_states gift and generation-skipping_transfer_tax return and filed with the internal_revenue_service center cincinnati oh a copy of this letter should be attached to the supplemental form_709 a copy is enclosed for this purpose 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 an 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 herein we express or imply no opinion on the federal tax consequences of the transaction under the cited provisions or under any other provisions of the code in addition we express or imply no opinion regarding the value of the property transferred to the trusts in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to taxpayer plr-149094-02 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely heather c maloy heather c maloy associate chief_counsel passthroughs and special industries enclosures copy for sec_6110 purposes copy of this letter


t c summary opinion united_states tax_court shuang-di sun bennett petitioner v commissioner of internal revenue respondent docket no 6291-03s filed date shuang-di sun bennett pro_se elaine t fuller for respondent panuthos chief special_trial_judge this case was heard pursuant to the provisions of sec_6330 and sec_7463 of the internal_revenue_code in effect when 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 all subsequent section references are to the internal_revenue_code in effect at relevant times all rule references are to the tax_court rules_of_practice and procedure respondent issued to petitioner a notice_of_determination concerning collection action s under sec_6320 and or notice_of_determination in which respondent sustained a proposed levy to collect petitioner’s unpaid tax_liability following an administrative hearing the issues for decision are whether in the context of this collection action petitioner is liable for the underlying tax for the taxable_year and if so whether respondent may proceed with collection background some of the facts have been stipulated and they are so found the stipulation of facts the supplemental stipulation of facts and the attached exhibits are incorporated by this reference at the time of filing the petition petitioner resided in monterey park california petitioner is a native of shanghai china in date petitioner married alva d bennett mr bennett a u s citizen and she immigrated to the united_states in date as described by petitioner mr bennett went to shanghai to marry her and then picked her up from the airport a little less than a year later at some point in petitioner discovered that mr bennett was having an extramarital affair petitioner suspects that the extramarital affair began much earlier than petitioner continued to reside in the same house as mr bennett until date the date their divorce became final petitioner spoke little or no english when she immigrated to the united_states even at the time of trial petitioner had somewhat limited proficiency in english she placed her trust in and completely relied on mr bennett to manage their household and financial matters she often signed documents at the request of mr bennett without knowing or understanding what she was signing during the year at issue mr bennett was employed as general manager of and possibly had an ownership_interest in premium fresh juice food co premium fresh juice during the tax_year petitioner and mr bennett were married and living together in california a community_property_state petitioner and mr bennett filed separate federal_income_tax returns for each claiming a filing_status of married_filing_separately petitioner’s return provided mr bennett’s name and social_security_number the return reported gross_income of dollar_figure dollar_figure of taxable wages dollar_figure of taxable interest and dollar_figure from a taxable ira distribution a total_tax of dollar_figure total payments of dollar_figure and a tax due of dollar_figure attached to her return was a form_w-2 wage and tax statement from columbia cleaning co columbia cleaning the tax due reflected a dollar_figure estimated_tax penalty petitioner claimed dollar_figure in itemized_deductions for the year and a deduction of dollar_figure for an ira contribution reporting that petitioner was paid wages of dollar_figure in petitioner failed to pay the amount of tax reported on her return petitioner’s return was prepared by a professional tax preparer on date and petitioner purportedly signed and dated it on date however her return was not filed until date a date occurring after petitioner and mr bennett were divorced she had not previously filed an application_for an extension of time to file a return respondent accepted petitioner’s return as it was filed and assessed the income_tax_liability reported therein as well as an addition_to_tax for filing a delinquent_return an addition_to_tax for failing to pay a tax shown on a return and interest respondent did not issue petitioner a statutory_notice_of_deficiency for although petitioner was a married individual living in a community_property_state and filed a return as married_filing_separately respondent did not determine or assess a tax based upon her one-half share of community_income on his separate return also filed on date mr bennett reported gross_income of dollar_figure taxable_income of dollar_figure and a total_tax due of dollar_figure mr bennett’ sec_2 other third-party information reported that petitioner earned wages of dollar_figure in return was not introduced into the record transcripts of account reflect that mr bennett’s gross_income included dollar_figure of wages and dollar_figure of taxable interest and he claimed dollar_figure in itemized_deductions mr bennett also failed to pay the amount of tax reported on his separate_return and respondent assessed the tax_liability reported therein as with petitioner’s return respondent did not determine or assess a tax based on mr bennett’s share of community_income respondent has initiated a separate collection activity against mr bennett on date respondent issued to petitioner a written request for payment of her tax_liability petitioner contacted respondent to discuss her tax_liability in correspondence received by respondent on date petitioner wrote i also never worked for columbia cleaning company my ex-husband had partners who ownd sic this company and he told them to prepare this w-2 form my ex-husband prepared the ‘98 ‘99 tax forms for me to sign and i didn’t know what i was signing i went to columbia cleaning company on and asked them for an amended w-2 form but they refused to give me one the collection of mr bennett’s unpaid tax_liability as assessed is not at issue in this case the income reflected on mr bennett’s return is relevant only for purposes of determining petitioner’s underlying tax_liability under california’s community_property_laws on date petitioner submitted an amended return on which she reported no taxable_income no taxes withheld and a tax_liability of zero petitioner did not submit a corrected form_w-2 with the amended_return petitioner’s amended return was received on date but respondent did not process the amended_return on date respondent issued to petitioner a final notice--notice of intent to levy and notice of your right to a hearing petitioner timely filed a form request for a collection_due_process_hearing on which petitioner stated in pertinent part i came to u s a and i have never worked at all my ex-husband put me on his partner’s company payroll for insurance but i have never received any pay from any source he prepared the tax form for my signature and i signed it without looking at or understanding the form i had no income from any job in my request for an amended w-2 form was refused on date an administrative hearing was held between petitioner and a hearing officer from the irs office of appeals on date respondent issued to petitioner the notice_of_determination in the notice respondent determined that it was appropriate to proceed with collection the notice provided the following explanation in pertinent part the taxpayer appeared for the conference and reiterated the argument presented in the request for a collection_due_process_hearing the taxpayer was given an opportunity to provide evidence to support her argument that she did not earn wages from her former husband’s company the taxpayer failed to respond a follow-up letter was sent on date but was returned undeliverable the follow-up letter was sent a second time on date in case the post office made a mistake the follow-up letter was returned again undeliverable i am processing this case based on the facts in the file since the taxpayer has failed to provide any evidence no other issues were raised compliance followed the proper procedures petitioner timely filed with the court a petition for lien and levy action pursuant to sec_6330 at trial respondent introduced into the record paychecks made out to petitioner in the paychecks included checks from trojan management co trojan management totaling dollar_figure and checks from columbia cleaning totaling dollar_figure executive officers from trojan management and columbia cleaning testified that they issued paychecks to petitioner as payroll agents for premium fresh juice and that petitioner did not work we note that respondent filed a motion for summary_judgment on date on the basis that petitioner could not challenge a self-assessed tax_liability under sec_6330 following this court’s opinion in 122_tc_1 we denied respondent’s motion for summary_judgment by order dated date we remanded this case to the irs appeals_office for further consideration of the underlying tax_liability reported on petitioner’s original return in a status report filed date respondent advised that upon reconsideration he had concluded that petitioner was liable for the full tax and penalty as assessed the checks purported to represent net wages after withholding of taxes and other miscellaneous deductions for either trojan management or columbia cleaning in furthermore in their capacity as payroll agents they did not independently verify whether petitioner performed services for premium fresh juice but issued paychecks to her based solely on payroll information provided to them by mr bennett as explained by the president of trojan management mr bennett asked us to put ms bennett on our payroll and the juice company would reimburse us plus pay us our profit that we normally charge for such services the paychecks were deposited into joint bank accounts belonging to petitioner and mr bennett at bank of america and mercantile national bank petitioner had signatory authority on these joint accounts petitioner examined the paychecks and stated that the endorsement signatures were not hers respondent admitted that there was a substantial question about whether the endorsements were petitioner’s signature in addition to the joint bank accounts petitioner maintained a separate bank account at bank of america in petitioner kept a modest combined balance in standard checking and regular savings accounts ranging from a combined balance of approximately dollar_figure to dollar_figure petitioner also maintained the function of payroll agent was explained at trial by the president of trojan management trojan management provided payroll services where we prepared payroll checks payroll tax deposits for mr bennett’s company premium fresh juice certificate of deposit accounts at bank of america with a combined balance ranging from approximately dollar_figure to dollar_figure during the year most of the deposits into petitioner’s individual accounts came from checks written by mr bennett from their joint bank accounts i general rules--lien and levy discussion sec_6331 authorizes the commissioner to levy upon property and property rights where a taxpayer liable for taxes fails to pay them within days after notice_and_demand for payment before the commissioner can proceed with a levy sec_6331 requires the secretary to send to the taxpayer a written notice_of_intent_to_levy and sec_6330 entitles the taxpayer to an administrative hearing conducted by an impartial hearing officer from the office of appeals sec_6330 provides that the taxpayer may raise any relevant issue with regard to the commissioner’s collection activities including spousal defenses challenges to the appropriateness of the intended collection action and alternative means of collection additionally the taxpayer may challenge the existence or amount of the underlying tax_liability including a liability reported by the taxpayer on an petitioner earned dollar_figure of the taxable interest in from her accounts at bank of america original return if the taxpayer did not receive any statutory_notice_of_deficiency for such tax_liability or did not otherwise have an opportunity to dispute such tax_liability sec_6330 see also 122_tc_1 a taxpayer may appeal the commissioner’s administrative determination to this court and we have jurisdiction with respect to such an appeal so long as we generally have jurisdiction over the type of tax involved in the case sec_6330 122_tc_287 if the underlying tax_liability is properly at issue the court will review that issue de novo see 114_tc_604 114_tc_176 if the validity of the underlying tax_liability is not properly at issue the court will review the commissioner’s determination for abuse_of_discretion see sego v commissioner supra pincite goza v commissioner supra pincite we have jurisdiction over petitioner’s appeal because the underlying tax_liability relates to federal income taxes see sec_6330 montgomery v commissioner supra pincite 116_tc_60 at her administrative hearing petitioner challenged the existence of her underlying tax_liability since petitioner did not receive a statutory_notice_of_deficiency and did not otherwise have an opportunity to challenge her tax_liability before her administrative hearing we review petitioner’s underlying tax_liability de novo in a trial de novo our findings and conclusions concerning a taxpayer’s liability must be based on the merits of a case without deference to the determination reached at the administrative level see 122_tc_32 97_tc_7 although petitioner resided in a community_property_state and filed her return as married filing separate respondent did not determine or assess a tax based upon petitioner’s share of community_income and consequently there was no consideration of the issue in the notice_of_determination since our task in a trial de novo is to arrive at a conclusion of the correct amount of a taxpayer’s underlying tax_liability we apply federal_income_tax principles as they relate to the taxpayer’s share of community_income ii de novo review of petitioner’s underlying tax_liability a community property--general rules generally a spouse residing in a community_property_state has a vested interest in and is owner of one-half of both spouses’ community_property 403_us_190 california law defines community_property as all property real or personal wherever situated acquired by a married_person during the marriage while domiciled in california cal fam code sec west under california law there is a rebuttable_presumption that all property acquired during marriage is community_property 332_f3d_1240 9th cir haines v haines cal rptr 2d ct app it follows that there is a rebuttable_presumption that all income derived during the marriage while domiciled in california is community_property see eg dooley v commissioner tcmemo_1992_39 since federal_income_tax liability follows ownership with respect to income there is a rebuttable_presumption that any income derived in a marriage in california is taxable as community_income see united_states v mitchell supra pincite spouses who reside in a community_property_state may file either a joint federal_income_tax return or separate federal_income_tax returns if separate returns are filed then generally each spouse must report and pay tax on one-half of the community_income regardless of whether the spouse actually received that income id pincite 181_f3d_1002 9th cir affg tcmemo_1997_97 120_tc_102 b petitioner’s community_income the potential sources of community_income in this case are the items of income reported on petitioner’s return totaling dollar_figure and the items of income reported on mr bennett’s return totaling dollar_figure unless petitioner can rebut the presumption under california law that these items are community_property the bennetts’ total community_income for was dollar_figure and petitioner’s one-half share of community_income was dollar_figure as follows item of community_income total amount petitioner’s share petitioner’s wages petitioner’s interest petitioner’s ira total petitioner husband’s wages husband’s interest husband’s other income total husband petitioner’s share of community_income dollar_figure big_number big_number big_number big_number big_number big_number dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure there is no evidence in the record to rebut the presumption that any of the items of income listed above were community_property while petitioner contends that she did not work for premium fresh juice in and that she should not owe taxes on any portion of the dollar_figure in wages she does not dispute that paychecks were issued in her name and deposited into joint bank accounts over which she had signatory authority as a result legal_title to the purported wages passed to the bennetts in and they are properly included in the bennetts’ community_income for there is no evidence in the record that premium fresh continued iii statutory relief under sec_66 having concluded that petitioner’s share of community_income is dollar_figure we consider the application of sec_66 under certain circumstances sec_66 provides that a taxpayer may be relieved of liability on community_income sec_66 addresses the treatment of community_income in the case of spouses who live apart sec_66 allows the secretary to disallow the benefits of community_property_laws if the taxpayer acted as if he or she were solely entitled to the income and failed to notify his or her spouse of the nature and amount of the income before the due_date for filing the return sec_66 provides a taxpayer with relief if certain circumstances are satisfied under the circumstances of the present case petitioner is not eligible for the type of relief provided by sec_66 and b sec_66 does not apply because petitioner and mr bennett lived together in sec_66 allows the commissioner to disregard the benefits of community_property_laws and in the present case petitioner is seeking relief from continued juice considered any of the payments as improper or illegally issued community_income consequently we need to consider only relief under sec_66 to qualify for statutory relief under sec_66 petitioner must satisfy all four conditions provided in paragraphs - of sec_66 in particular sec_66 provides sec_66 spouse relieved of liability in certain other cases -- under regulations prescribed by the secretary if-- an individual does not file a joint_return for any taxable_year such individual does not include in gross_income for such taxable_year an item of community_income properly includible therein which in accordance with the rules contained in sec_879 would be treated as the income of the other spouse the individual establishes that he or she did not know of and had no reason to know of such item of community_income and taking into account all facts and circumstances it is inequitable to include such item of community_income in such individual’s gross_income then for purposes of this title such item of community_income shall be included in the gross_income of the other spouse and not in the gross_income of the individual 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 sec_66 is not a relief provision and can be used only by the commissioner to disallow the benefits of community_property_laws to a taxpayer it cannot be used by a taxpayer to claim relief from community_property portion of either attributable to any item for which relief is not available under the preceding sentence the secretary may relieve such individual of such liability a the items of community_income from petitioner’s return fail to satisfy sec_66 sec_66 provides that petitioner must not have included in gross_income an item of community_income properly includable therein which in accordance with the rules contained in sec_879 would be treated as the income of mr bennett as it relates to the items of community_income reflected on her return dollar_figure of wages dollar_figure of taxable interest and dollar_figure of ira_distributions petitioner fails to satisfy either of the conditions for relief under sec_66 the first condition that petitioner must not include in gross_income for such taxable_year an item of community_income properly includible therein is not satisfied because petitioner’s original return reported the items of community_income from which she seeks relief although petitioner subsequently submitted an amended zero return claiming no income this amended_return does not negate the filing of the original return even if her amended_return were sufficient to satisfy the first requirement of sec_66 petitioner would not satisfy the second requirement that the items of community_income would be treated as the income of the other spouse in accordance with the rules provided in sec_879 sec_879 provides that earned_income is attributable to the spouse who performed the services trade_or_business income is attributable in accordance with sec_1402 community_income not described in either or which is derived from the spouse’s separate_property is attributable to that spouse and all other items of community_income are attributable in accordance with the applicable community_property law we conclude that the correct classification of all the items of community_income reported on petitioner’s return is under the category of other such community_income under sec_879 although payroll agents acting on behalf of premium fresh juice reported that petitioner earned dollar_figure of wages in the payroll agents did not verify that petitioner performed services for premium fresh juice and acted solely on the basis of payroll information submitted to them by mr bennett petitioner’s testimony that she never worked for mr bennett’s company was credible and as a result we find that the dollar_figure is correctly classified as other such community_income rather than wages the taxable interest and the ira distribution also for purposes of sec_879 earned_income is defined by reference to sec_911 which provides that the term means wages salaries or professional fees or and other_amounts received as compensation_for_personal_services actually rendered do not fit one of the other categories of sec_879 and are also classified as other such community_income other such community_income is treated under the applicable community_property law therefore the half of the dollar_figure of community_income reported on petitioner’s return or dollar_figure cannot be treated as mr bennett’s income and she is not entitled to further relief under sec_66 b the items of community_income from mr bennett’s return fail to satisfy sec_66 sec_66 provides that petitioner must establish that she did not know and had no reason to know of the community_income with regard to the items of community_income reflected on mr bennett’s return dollar_figure of wages dollar_figure of taxable interest and dollar_figure of other income petitioner does not satisfy sec_66 a taxpayer’s knowledge of an item of community_income must be determined with reference to her knowledge of the particular income-producing activity see 979_f2d_66 5th cir affg tcmemo_1991_510 hardy v commissioner tcmemo_1997_97 affd 181_f3d_1002 9th cir petitioner was aware that mr bennett was employed by premium fresh juice and was aware that his wages were used to pay their household living_expenses while petitioner may not have known the precise amount of mr bennett’s salary she had knowledge of his employment accordingly we find that petitioner knew or had reason to know about mr bennett’s wages of dollar_figure similarly in regard to her share of the dollar_figure of taxable interest petitioner was aware that the couple had joint bank accounts as a result petitioner knew or had reason to know of the taxable interest_income with regard to her share of the remaining dollar_figure of unidentified community_income we do not have enough information to evaluate whether petitioner knew or had reason to know of this income therefore for purposes of sec_66 petitioner has not established that she did not know and had no reason to know of the unidentified income accordingly we hold that she is not entitled to relief from any of the items of community_income reported on mr bennett’s return under sec_66 iv equitable relief under the flush language of sec_66 the flush language of sec_66 provides 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 attributable to any item for which relief is not available under the preceding sentence the secretary may relieve such individual of such liability the flush language providing equitable relief was added to sec_66 as part of the internal_revenue_service restructuring and reform act of publaw_105_206 112_stat_734 the same section of the same legislation that continued generally a spouse has to submit a request for relief under the equitable relief provision of sec_66 on form_8857 request for innocent spouse relief see revproc_2003_61 2003_2_cb_296 revproc_2000_15 2000_1_cb_447 however since respondent did not seek until trial to collect a tax based upon community_property principles petitioner had no reason to submit a form_8857 or request equitable relief until trial since respondent did not consider equitable relief for petitioner under sec_66 we view sec_66 as an affirmative defense and may review respondent’s denial of that relief see rule sec_39 sec_41 114_tc_276 discussing jurisdiction under sec_6015 we review the commissioner’s denial of equitable relief under sec_66 under an abuse_of_discretion standard beck v commissioner tcmemo_2001_198 we previously stated that our determination of petitioner’s tax_liability takes place in a trial de novo see supra p where the commissioner has not previously considered equitable relief and our review of the commissioner’s determination is for an abuse_of_discretion in a trial de novo we have jurisdiction to determine whether continued created the similar equitable relief provision under sec_6015 accordingly cases interpreting our jurisdiction under sec_6015 provide guidance on interpreting our jurisdiction under the equitable relief provision of sec_66 see beck v commissioner tcmemo_2001_198 equitable relief is appropriate see ewing v commissioner t c pincite discussing jurisdiction under sec_6015 our determination is not limited to matter in the administrative record and we consider equitable relief within the guidelines that the commissioner has published id pincite- as directed by sec_66 the secretary has prescribed factors in revproc_2003_61 supra that the commissioner will consider in determining whether an individual qualifies for equitable relief under the flush language of sec_66 revproc_2003_61 sec_4 c b pincite provides a nonexclusive list of factors that the commissioner will consider in determining whether taking into account all the facts and circumstances it is inequitable to hold the spouse requesting relief liable for all or part of the unpaid tax_liability revproc_2003_61 sec_4 a provides that the following factors are relevant to whether the commissioner will grant equitable relief marital status economic hardship knowledge or reason to know the nonrequesting revproc_2003_61 2003_2_cb_296 supersedes revproc_2000_15 2000_1_cb_447 revproc_2003_61 supra is effective for requests for relief filed on or after date and for requests for relief pending on date for which no preliminary determination_letter has been issued as of date because respondent has not issued a determination_letter in this case regarding equitable relief under sec_66 revproc_2003_61 supra applies to this case spouse’s legal_obligation significant benefit compliance with income_tax laws abuse and mental or physical health further revproc_2003_61 supra provides that no single factor will be determinative but that all relevant factors regardless of whether the factor is listed in revproc_2003_61 sec_4 will be considered and weighed a marital status revproc_2003_61 supra provides that petitioner’s marital status is a factor in determining whether a spouse should be granted equitable relief petitioner and mr bennett divorced on date and her divorce weighs in favor of granting equitable relief under sec_66 b economic hardship whether a spouse will suffer economic hardship if equitable relief is not granted under sec_66 is a factor which may be considered pursuant to revproc_2003_61 supra economic hardship exists if a levy will cause a taxpayer to be unable to pay his or her reasonable basic living_expenses sec_301 b proced admin regs in this case we are unable to properly evaluate whether petitioner would suffer economic hardship if equitable relief were not granted while petitioner testified that she was economically dependent upon mr bennett during their marriage we are not aware of petitioner’s current employment situation or expenses given the paucity of information in the record we view this factor as neutral c knowledge or reason to know a spouse’s knowledge or reason to know of the income from which she seeks relief is a factor in determining whether the spouse should be granted equitable relief in evaluating whether a spouse had reason to know of an item of community_income revproc_2003_61 supra provides that we may consider the spouse’s level of education any deceit or evasiveness the spouse’s degree of involvement in the activity generating the tax_liability her involvement in business and household financial matters and her business or financial expertise petitioner was undeniably an unsophisticated spouse with respect to business and household financial matters petitioner did not speak english when she immigrated to the united_states in and had no prior experience with financial matters or with running a household further it is undeniable that mr bennett exercised complete control_over their financial matters mr bennett filed income_tax returns and was responsible for virtually all matters relating to their household finances petitioner often signed documents at the request of mr bennett without knowing or understanding what she was signing mr bennett forbade petitioner to open mail that arrived at their home to review bank statements from their joint bank accounts and to withdraw money or to write checks from their joint bank accountsdollar_figure knowledge or reason to know about the items of community_income reported on petitioner’s return petitioner did not argue that she did not know about the dollar_figure of interest_income or the dollar_figure in distributions from her ira that were reported on her return however with respect to the dollar_figure of wages petitioner purportedly earned from premium fresh juice petitioner testified that mr bennett placed her on his company’s payroll without her knowledgedollar_figure in evaluating whether petitioner knew or had we have granted relief from joint_and_several_liability on a joint_return in cases involving an unsophisticated spouse and a controlling spouse who misled controlled or hid financial matters from the unsophisticated spouse see eg 897_f2d_441 9th cir affg tcmemo_1987_522 887_f2d_959 9th cir laird v commissioner tcmemo_1994_564 these cases involved relief from joint_and_several_liability on a joint_return pursuant to former sec_6013 and sec_6015 rather than relief under sec_66 however we believe that interpretations of spousal relief from joint liability are instructive to our interpretation of equitable relief from community_income see eg beck v commissioner tcmemo_2001_198 although we previously concluded that petitioner had knowledge or reason to know of mr bennett’s wages from premium fresh juice for purposes of sec_66 because a taxpayer’s knowledge of a particular item of community_income is determined with reference to knowledge of a particular income-producing activity see supra pp that conclusion has no bearing on the wages purportedly earned by petitioner although both petitioner’s purported wages and mr bennett’s wages were from premium fresh juice they are distinctly different we have concluded that petitioner unlike mr bennett did not perform services for premium fresh juice and thus amounts paid to her continued reason to know about the purported wages from premium fresh juice we must determine whether the payroll checks issued in petitioner’s name and deposited into petitioner and mr bennett’s joint bank account gave petitioner knowledge or reason to know of the purported wages whether petitioner’s return which reported these wages from premium fresh juice gave petitioner knowledge or reason to know of the purported wages and whether the form_w-2 issued to petitioner from columbia cleaning as payroll agent for premium fresh juice gave petitioner knowledge or reason to know of the purported wages although the payroll checks were issued in petitioner’s name and deposited into joint accounts with her purported endorsement signature petitioner testified that she never saw and certainly did not endorse for deposit the payroll checks further petitioner testified that she did not have access to monthly bank statements and was forbidden by mr bennett to access the accounts we found petitioner’s testimony to be credible and trustworthy given mr bennett’s position as general manager of premium fresh juice and his control_over their household and continued from premium fresh juice are not wages in addition there is no indication that petitioner’s purported wages were actually the wages of mr bennett accordingly we do not impute to petitioner knowledge of the dollar_figure of purported wages reported on her return by virtue of the fact that mr bennett worked for the company financial matters we conclude that petitioner did not have knowledge about the purported wages reported in her name from premium fresh juice a taxpayer may be charged with constructive knowledge of the content of a return even when he or she signs an original return without reviewing or understanding its contents 992_f2d_1256 2d cir affg tcmemo_1992_228 levin v commissioner tcmemo_1987_67 the appropriate standard to be applied in determining whether a taxpayer has constructive knowledge is whether a reasonable person under the circumstances of the taxpayer at the time of signing the return could be expected to know 72_tc_1164 levin v commissioner supradollar_figure as we stated earlier petitioner was unsophisticated in regard to financial matters and she had a limited proficiency in english she frequently signed documents at the request of mr bennett without understanding what she was signing we do not believe that petitioner willingly turned a blind eye to the contents of her return but rather that she was not in a position to understand the return and trusted mr bennett to prepare accurate returns on her behalf finally we conclude that the form_w-2 issued to petitioner from columbia cleaning did not provide petitioner with knowledge see supra note and accompanying text or reason to know of her purported wages we previously found that mr bennett forbade her to open mail and thus we believe petitioner’s testimony that she never saw the form_w-2 in sum we conclude that petitioner did not have knowledge or reason to know of the dollar_figure of purported wages but that she knew or had reason to know of the dollar_figure of taxable interest and dollar_figure of income from an ira distribution this factor weighs in favor of equitable relief with respect to the wage income but against granting equitable relief from the taxable interest and ira_distributions reported on her original return knowledge or reason to know about the items of community_property reported on mr bennett’s return we have previously held during our discussion on sec_66 that petitioner had knowledge or reason to know about mr bennett’s wages and the interest_income reported on his return with respect to the dollar_figure of unidentified income reported on mr bennett’s return we were unable to determine whether petitioner knew of these items but held for purposes of sec_66 that petitioner could not establish that she did not know or have reason to know about the income thus in regard to mr bennett’s wages and taxable interest this factor weighs against equitable relief but is relatively neutral with respect to the dollar_figure of unidentified income reported on mr bennett’s return because we do not have enough information to evaluate her knowledge or reason to know d other spouse’s legal_obligation no evidence was introduced in the case regarding mr bennett’s legal_obligation pursuant to a divorce decree or agreement we regard this factor as neutral e significant benefit whether petitioner received a significant benefit beyond normal support from the items of community_income is a factor to consider in weighing petitioner’s eligibility for equitable relief the balances from petitioner’s individual bank accounts and joint bank accounts with mr bennett were modest and even though petitioner had certificates of deposit on account ranging in value from dollar_figure to dollar_figure during the year there is no evidence to suggest that petitioner lived a lavish lifestyle or had extravagant expenses rather mr bennett controlled all of the couple’s accounts regardless of in whose name the account was held therefore we conclude that petitioner did not receive a significant benefit beyond normal support from the items of community_income therefore this factor weighs in favor of relief from the items of community_income from both petitioner’s return and mr bennett’s return f compliance with income_tax laws there is no evidence regarding petitioner’s compliance with income_tax laws in subsequent years this factor is therefore neutral g abuse there is no evidence that petitioner was the victim of abuse in this case revproc_2003_61 2003_2_cb_296 however provides that the presence of abuse is only a factor which may weigh in favor of equitable relief the absence of abuse is not a negative factor weighing against equitable relief thus this factor is neutral in this case h mental or physical health at trial petitioner was extremely emotional and distraught petitioner testified that she was financially and emotionally dependent upon mr bennett and that she became depressed and physically ill when she discovered that mr bennett was engaged in an extramarital affair further during their marriage mr bennett exercised control_over all facets of petitioner’s life and according to petitioner would threaten to have her deported to china if she disobeyed him on the basis of the record as a whole we believe that she was suffering from poor mental health this factor weighs in favor of granting relief i conclusion in regard to petitioner’s share of items of community_income reported on her return dollar_figure share of wages dollar_figure of taxable interest and dollar_figure of ira distribution petitioner’s marital status lack of knowledge or reason to know of the wages from premium fresh juice a lack of significant benefit and poor mental health weigh in favor of granting equitable relief there was insufficient evidence for us to evaluate petitioner’s economic hardship mr bennett’s legal_obligation pursuant to a divorce decree or agreement and her compliance with income_tax laws in subsequent years none of the factors under revproc_2003_61 supra weighed against relief with respect to her community share of the wages reported on her return and the only factor weighing against relief with respect to her community share of the taxable interest and ira distribution is that she had knowledge or reason to know of them therefore we conclude that it is inequitable to hold petitioner liable for her share of the purported wages of dollar_figure reported on her return but that she remains liable for dollar_figure in taxable interest and dollar_figure in ira_distributions with respect to petitioner’s community share of the items of community_income reported on mr bennett’s return dollar_figure of wages dollar_figure of taxable interest and dollar_figure of other income the factors weigh as they do for the items on petitioner’s return except that we hold that she had knowledge or reason to know of mr bennett’s wages and taxable interest it would not be inequitable to hold her liable for the amounts of which she had knowledge or reason to know we cannot make a finding about petitioner’s knowledge or reason to know of the remaining community share of dollar_figure of income reported on mr bennett’s return because the source and nature of this other income is uncertain we cannot find that it is inequitable to hold her liable for this amount therefore we conclude that petitioner is not entitled to equitable relief with respect to her community share of mr bennett’s reported wages of dollar_figure her community share of taxable interest reported on his return of dollar_figure or her community share of the dollar_figure of unidentified income in sum petitioner is liable for tax on gross_income of dollar_figure and is relieved from liability on gross_income of dollar_figure under the flush language of sec_66 v addition_to_tax sec_6651 imposes an addition_to_tax for a taxpayer’s failure_to_file a required return on or before the specified filing due_date including extensions sec_6651 imposes an addition_to_tax for failing to pay an amount shown on a return an addition_to_tax under either sec_6651 or is inapplicable however if the taxpayer’s failure_to_file the return was due to reasonable_cause and not due to willful neglect sec_6651 and respondent has introduced evidence sufficient to establish the appropriateness of imposing additions to tax under sec_6651 and see 116_tc_438 petitioner’s return was filed date well after its statutory due_date of date and no application_for extension of the filing due_date was filed the return showed a balance due of dollar_figure but petitioner did not remit payment with the return and the outstanding balance remains unpaid thus petitioner is liable for additions to tax for filing a delinquent_return and failing to pay the tax due unless she can attribute her failures to reasonable_cause and not willful neglect there are several established principles that operate against petitioner first a taxpayer cannot rely upon his or her spouse to file a return or pay a tax due for purposes of excusing the taxpayer from sec_6651 liability see james v commissioner tcmemo_1980_99 second even though petitioner did not actually know about the income from premium fresh juice she is required to file a return and pay taxes based upon her share of community_income see united_states v mitchell u s pincite consequently petitioner cannot attribute her failure to timely file a return and pay tax to reasonable_cause and not willful neglect accordingly respondent is sustained on the imposition of additions to tax under sec_6651 and but the amounts of the additions to tax must be adjusted to account for our finding that petitioner is not liable for tax on a portion of the community_income at issue vi collection of underlying tax_liability respondent’s determinations aside from issues relating to petitioner’s underlying tax_liability are reviewed for abuse_of_discretion see sego v commissioner t c pincite goza v commissioner t c pincite an abuse_of_discretion occurs if the hearing officer takes action that is arbitrary capricious or without sound basis in fact or law see 112_tc_19 under sec_6330 the commissioner’s hearing officer is required to consider any relevant issue raised at a taxpayer’s administrative hearing including spousal defenses challenges to the appropriateness of the intended collection action and collection alternatives aside from challenging her underlying tax_liability petitioner did not directly raise any relevant issue relating to the unpaid tax or the proposed levy no collection alternatives were discussed a spousal defense under sec_66 has been fully considered during the court’s de novo review of petitioner’s underlying tax_liability and there is no reason to give further consideration to that issue respondent’s hearing officer obtained verification that any applicable law or administrative procedure was met before making his determination to proceed with collection on the basis of the foregoing we conclude that there was no abuse_of_discretion by respondent’s hearing officer all the requirements of sec_6330 have been satisfied and respondent may proceed with his proposed collection action as to petitioner’s underlying tax_liability as determined by the court reviewed and adopted as the report of the small_tax_case division to reflect the foregoing an appropriate order and decision will be entered