office_of_chief_counsel internal_revenue_service memorandum number release date cc pa apjp b02 gthomas postn-153427-05 uilc date date to deborah c stanley associate area_counsel richmond small_business self-employed from charles a hall senior technician reviewer administrative provisions judicial practice branch procedure administration subject suspension of interest for payroll_taxes of bmf taxpayers in a combat_zone this chief_counsel_advice responds to your email request for assistance dated date this advice may not be used or cited as precedent legend taxpayer ------------------------ individual -------------------------- tax quarter -------------------------------------------------- tax quarter --------------------------------------------------------- issue sec_1 whether interest on delinquent payroll_taxes of a partnership whose principal_partner is an individual serving in a combat_zone is suspended under sec_7508 for the period the partner serves in a combat_zone and for the next days thereafter whether sec_7508 as amended by the katrina emergency tax relief act of ketra applies retroactively to entitle a partnership whose partner served in a combat_zone a suspension of interest on delinquent payroll_taxes postn-153427-05 conclusions interest on delinquent payroll_taxes of a partnership whose principal_partner served in a combat_zone is not suspended for the period the partner serves in a combat_zone and for the next days thereafter because pre-ketra sec_7508 did not provide a postponement for or suspend interest on payroll_taxes and a partnership is not an individual serving in or serving in support of a combat_zone who is entitled to relief under sec_7508 even if sec_7508 as amended by ketra applied retroactively the statute does not suspend payment of and interest on delinquent payroll_taxes of a partnership because a partnership is not an individual the amendments made to sec_7508 by ketra do not apply retroactively facts taxpayer is a partnership whose principal_partner is individual individual requested abatement of interest on taxpayer’s payroll tax_liabilities imposed under subtitle c for tax quarter and tax quarter that were not timely paid because individual was serving in a combat_zone at the time the liabilities were due the time period for filing and paying taxpayer’s payroll tax_liabilities occurred before date the effective date of the ketra amendments to sec_7508 law and analysis relief under pre-ketra sec_7508 prior to the enactment of ketra sec_7508 provided that in the case of an individual serving in the armed_forces_of_the_united_states or serving in support of such armed_forces in an area designated as a combat_zone or when deployed outside the united_states while participating in an operation designated as a contingency operation or hospitalized as a result of injury received while serving in such an area or operation during such time the period_of_service in such area or operation plus the period of continuous qualified_hospitalization attributable to such injury and the next days thereafter shall be disregarded in determining under the internal revenue laws in respect of any_tax liability including any interest penalty additional_amount or addition to the tax of such individual - whether any of the following acts was performed within the time prescribed therefor a filing any return of income estate or gift_tax except income_tax withheld at source and income_tax imposed by subtitle c or any law superseded thereby b payment of any income estate or gift_tax except income_tax withheld at source and income_tax imposed by subtitle c or postn-153427-05 any law superseded thereby or any installment thereof or of any other liability to the united_states in respect thereof payroll tax_liabilities under subtitle c generally include old-age survivor’s and disability insurance medicare unemployment tax and income_tax_withholding pre- amendment sec_7508 specifically excluded payment of withholding taxes under subtitle c from postponement while an individual is serving in or serving in support of a combat_zone it follows that the other employment_taxes under subtitle c were also excluded from sec_7508 see eg notice_2003_21 2003_17_cb_817 a-30 the deadline extensions do not apply to other tax and information returns such as those for corporate income taxes employment_taxes or excise_taxes thus as the time to pay payroll tax_liabilities was not postponed under pre-ketra sec_7508 interest on those liabilities is not suspended as explained below even if the amendment under ketra applies retroactively to permit the suspension of interest on payroll tax_liabilities there could be no suspension of interest on taxpayer’s payroll tax_liabilities because taxpayer is a partnership and partnerships are not individuals who may serve in or serve in support of a combat_zone the katrina emergency tax relief of amends subparagraphs a and b of sec_7508 to permit the service to suspend the performance of specific acts by an individual serving in or serving in support of the armed_forces in an area designated as a combat_zone or contingency operation including relief under sec_7508 as amended by ketra a filing any return of income estate gift employment or excise_tax b payment of any income estate gift employment or excise_tax or any installment thereof or of any other liability to the united_states in respect thereof p l title iv sec_403 119_stat_2027 this amendment applies to any period for performing an act which has not expired before date p l title iv sec_403 the periods for filing a return and paying the taxpayer’s payroll tax_liabilities expired before this date thus the time for performing these acts is not postponed and interest is not suspended on taxpayer’s payroll tax_liabilities for the periods at issue under amended sec_7508 even if sec_7508 as amended applied the postponements and interest suspensions would not apply to the taxpayer’s payroll tax_liabilities for the periods at issue because it is not an individual serving in or serving in support of a combat_zone if a word is not defined in the internal_revenue_code it should be interpreted using its common and ordinary meaning 506_us_168 postn-153427-05 331_us_1 the dictionary definition of individual within the context of sec_7508 is a single human being as contrasted with a social group or institution merriam webster online http www merriamwebster com last visited date when used in title_26 individual is usually interpreted to mean a human being rather than an entity see eg 353_f3d_1181 10th cir individual does not include deceased taxpayer for purposes of sec_6015 sec_1 c discussing married and unmarried individuals and i r s l g m gl-65 date individual is used in sec_6334 rather than taxpayer because the levy exemption does not apply to a corporate taxpayer taxpayer is a partnership individual is one of taxpayer’s partners a partnership is a voluntary association of two or more persons who jointly own and carry on a business for profit black's law dictionary 8th ed a partnership is a business_entity not an individual who may serve in or serve in support of a combat_zone a partner’s service even the principal partner’s service in a combat_zone does not result in combat relief for the partnership thus under sec_7508 as amended interest is suspended on an individual’s payroll tax_liabilities but not a partnership’s payroll tax_liabilities for purposes of sec_7508 no acts of taxpayer are suspended by reason of individual serving in a combat_zone case development hazards and other considerations in requesting assistance you referred to interim guidance issued by compliance policy on date the subject of this memorandum was bmf accounts of taxpayers deployed to a qualified combat_zone you believed that this guidance instructed the service to suspend the accrual of interest and penalties on payroll tax_liabilities of certain bmf taxpayers after consulting with lawrence randall policy analyst in collection policy we have determined that such guidance was intended only to instruct the service to suspend collection and enforcement actions with respect to certain bmf accounts of taxpayers that were deployed in a combat_zone or contingency operation this writing may contain privileged information any unauthorized disclosure of this writing may undermine our ability to protect the privileged information if disclosure is determined to be necessary please contact this office for our views please call if you have any further questions


internal_revenue_service number release date index number ---------------------------- ------------------------ ---------------------- ------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------- id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-147433-09 date date legend x country date ------------------------------ ------ ---------------- ---------------------- ---------------------- dear ----------------- this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting that the service grant x an extension of time under sec_301_9100-3 of the procedure and administration regulations to elect to be treated as a disregarded_entity the information submitted states that x was formed as a company under the laws of country x was eligible to elect to be treated as a disregarded_entity effective date however x inadvertently failed to timely file form_8832 entity classification election sec_301_7701-3 of the income_tax regulations provides that an eligible_entity with at least two members may elect to be classified as either an association and thus a corporation under sec_301_7701-2 or as a partnership and an eligible_entity with a single owner can elect to be classified as an association or to be disregarded as an entity separate from its owner sec_301_7701-3 further provides that so long as a business_entity is not classified as a corporation under sec_301_7701-2 or an eligible_entity it may elect its classification for federal tax purposes plr-147433-09 sec_301_7701-3 provides that except as provided in sec_301_7701-3 unless the entity elects otherwise a foreign eligible_entity is a a partnership if it has two or more members and at least one member does not have limited_liability b an association if all members have limited_liability or c disregarded as an entity separate from its owner if it has a single owner that does not have limited_liability sec_301_7701-3 provides that for purposes of sec_301_7701-3 a member of a foreign eligible_entity has limited_liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member sec_301_7701-3 provides that an entity classification election must be filed on form_8832 and can be effective up to seventy-five days prior to the date the form is filed or up to twelve months after the date on which the form is filed sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time 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_9100-1 defines the term regulatory election as an election whose due_date is prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make the election sec_301_9100-2 provides the rules governing automatic extensions of time for making certain elections sec_301_9100-3 provides the standards the commissioner will use to determine whether to grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 under sec_301_9100-3 a request for relief will be granted when the taxpayer provides evidence to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and granting relief will not prejudice the interests of the government based solely on the information submitted and the representations made we conclude that the requirements of sec_301_9100-3 have been satisfied as a result x is granted an extension of time of sixty days following the date of this letter to file form_8832 and to elect to be treated as a disregarded_entity for federal tax purposes effective date a copy of this letter should be attached to the form_8832 a copy is enclosed for that purpose except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code plr-147433-09 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely curt g wilson associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


tcmemo_2008_84 united_states tax_court industrial electrical and instrumentation inc petitioner v commissioner of internal revenue respondent docket no filed date robert a shupack for petitioner w robert abramitis and justin l campolieta for respondent memorandum findings_of_fact and opinion vasquez judge respondent determined the following deficiencies in and penalties on petitioner’s federal_income_tax penalty year deficiency sec_6663 dollar_figure dollar_figure big_number dollar_figure unless otherwise indicated all section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure the issues for decision are whether petitioner failed to report dollar_figure in gross_receipts for and dollar_figure in gross_receipts for whether petitioner is liable for the civil_fraud penalty for and and whether the periods of limitations for and have expired findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts the supplemental stipulation of facts the second supplemental stipulation of facts the third supplemental stipulation of facts and the attached exhibits are incorporated herein by this reference at the time petitioner timely filed its petition petitioner had a mailing address in boca raton florida petitioner industrial electrical instrumentation inc iei was an active florida corporation during the years at issue alfred white mr white during the years at issue and as of the date of trial was a florida state-certified electrical contractor mr white was also the president secretary and treasurer of iei during the years at issue in mr white qualified petitioner to engage in electrical contracting services during the years at issue and as of the date of trial petitioner remained qualified to perform electrical contracting services iei is the only entity for which mr white has submitted an application with the state of florida to qualify it to perform electrical contracting services on date mr white signed an agreement to qualify with stewart g penny stewart lance penny lance and sean penny sean collectively the pennys the agreement purported to qualify stewart to obtain permits to perform electrical contracting services through omni building contractors inc omni during the taxable years at issue mr white knew that neither omni nor the pennys in their own capacities were state- certified electrical contractors in florida omni wa sec_1 in order to qualify iei mr white filed an application with the florida department of business professional regulation electrical contractors’ licensing board the board mr white then received notification from the board that iei was authorized to engage in electrical contracting to maintain the qualification mr white has to show that he has completed continuing education every years according to the board’s frequently asked questions section of its web site http www myflorida com dbpr pro elboard documents elecfaqs pdf to qualify a business a contractor must agree to accept full responsibility for the business including monitoring financial transactions signing permits and supervising all jobs the business participates in a primary qualifying agent must be an officer or a supervising employee of the business pursuant to fed r evid we take judicial_notice of the board’s definition of what it means to qualify a business lance and sean penny are the sons of stewart penny stewart penny is deceased administratively dissolved by the state of florida on date pursuant to fla stat ann sec west a corporation administratively dissolved continues its corporate existence but may not carry on any business except that necessary to wind up and liquidate its business on date stewart was enjoined by the circuit_court of dade county from engaging in electrical contracting in florida furthermore pursuant to the agreement to qualify mr white agreed to transfer percent of iei’s shares to the pennys as follows percent to lance percent to sean and percent to stewart mr white retained the remaining percent of the shares of iei additionally a miami branch of iei was to be established on date the pennys became officers and shareholders of iei the board_of directors of iei unanimously adopted resolutions naming the pennys vice presidents of iei the resolutions were signed by mr white as secretary of iei the resolution naming stewart vice president also named him general manager of the miami office of iei the three resolutions were titled authorize appointment of director or officer the pennys with the approval of mr white engaged in electrical contracting services during the years at issue under iei issued stewart shares of stock lance and sean each were issued shares of stock in iei petitioner’s name petitioner maintained a checking account with first union national bank corporate account and mr white had sole signature_authority the pennys were given a deposit book in order to make deposits into petitioner’s account but they could not withdraw money from the account during taxable_year iei customer checks totaling dollar_figure were made payable to petitioner of that amount dollar_figure was deposited by the pennys into petitioner’s corporate account and reported on petitioner’s form_1120 u s_corporation income_tax return checks totaling dollar_figure were cashed by the pennys or donna penny donna at check cashing stores and not reported on petitioner’s tax_return and checks totaling dollar_figure were endorsed by the pennys to classic title inc classic deposited into an escrow account and not reported on petitioner’s tax_return petitioner’s gross_receipts for were dollar_figure with a taxable_income of dollar_figure petitioner’s gross_receipts were paid to petitioner for electrical services rendered during taxable_year iei customer checks totaling dollar_figure were made payable to petitioner of that amount petitioner used the calendar_year as its fiscal_year the gross_receipts amount for includes negative dollar_figure in cash deposits which are allowed as redeposits of moneys received through the cashing of checks dollar_figure was deposited by the pennys into petitioner’s corporate account and reported on petitioner’s tax_return checks totaling dollar_figure were cashed by the pennys or donna at check cashing stores and not reported on petitioner’s tax_return and dollar_figure was deposited by the pennys into bruce m harlan’s trust account harlan trust and not reported on petitioner’s tax_return the checks cashed at check cashing stores were endorsed with petitioner’s name and by stewart lance or sean followed by the initials v p or by donna the checks deposited into the harlan trust were endorsed with petitioner’s name sean’s name followed by the initials v p and bruce harlan’s name and trust account number the checks deposited into the harlan trust were used to purchase real_estate in trust for the penny family petitioner’s gross_receipts for were dollar_figure with taxable_income of dollar_figure the pennys as stockholders and officers of petitioner negotiated and entered into contracts to perform electrical contracting services under the name of petitioner the pennys had business cards with the name and logo of petitioner the business cards also showed mr white’s state-certified electrical the gross_receipts amount for includes negative dollar_figure in cash deposits which are allowed as redeposits of moneys received through the cashing of checks the business cards indicated that stewart was vice president and general manager and that lance and sean were vice presidents contractor license number which he obtained and used to qualify petitioner additionally the pennys with mr white’s awareness used trucks and t-shirts with petitioner’s name and logo in and stewart placed advertisements for petitioner’s services in the telephone book under petitioner’s name the pennys issued customers invoices bearing petitioner’s name and using mr white’s license number iei’s customers paid the invoices with checks made out to petitioner the pennys deposited money into the corporate account when they needed to pay iei’s vendors and suppliers vendors and suppliers sent petitioner bills for electrical contracting supplies that the pennys purchased on credit mr white was aware and approved of the pennys’ performing electrical contracting work during the years at issue using petitioner’s name and its credit because stewart did not have good credit one of the reasons that mr white entered into the agreement to qualify was to allow stewart to use petitioner’s credit rating when petitioner received bills from a vendor or supplier mr white faxed the bill to the pennys at the miami branch office of petitioner mr white wrote checks from petitioner’s corporate account to pay petitioner’s supply bills with money that alma gordon contacted and hired petitioner after seeing its advertisement in the telephone book petitioner obtained through the performance of electrical contracting services by the pennys petitioner included the amounts paid to vendors and suppliers in the costs of goods sold it reported on its tax returns for and after the expenses were paid mr white wrote checks to omni for money that was left over in petitioner’s corporate account before mr white made any payments to omni stewart submitted a form_w-9 request for taxpayer_identification_number and certification on behalf of omni mr white wrote the checks to omni because he did not want to have to withhold taxes petitioner included the checks drawn on the corporate account and made payable to omni as subcontracting expenses in the cost_of_goods_sold that petitioner reported on its tax returns for and during the years at issue the pennys obtained permits to perform electrical contracting work with mr white as the qualifier and using petitioner’s name none of the pennys put his name on the electrical contracting permits nor did omni the permits were pulled with the knowledge and approval of mr white the electrical contracting permits listed petitioner as the contractor on date stewart acting on behalf of petitioner signed a contract with the presidential condominium association inc presidential to perform electrical contracting services two days later mr white signed a document authorizing petitioner to perform electrical contracting services at presidential petitioner and mr white personally helped finance the electrical contracting services performed by the pennys at presidentialdollar_figure in petitioner sued presidential in order to recover payment for services either performed or being performed stewart hired andre zamorano mr zamorano an attorney to represent petitioner lance acting on behalf of petitioner filed a claim of lien against presidential the claim of lien listed petitioner as the lienor mr zamorano filed a notice of lis pendens on behalf of petitioner and listed petitioner as plaintiff mr zamorano never heard of or had reason to believe that he was representing omni mr white was aware that the pennys initiated the lawsuit on behalf of petitioner against presidential and eventually settled presidential paid petitioner in with checks for the settlement of the lawsuit brought by petitioner the pennys or donna cashed these checks at a check cashing store and the proceeds were not reported on petitioner’s tax_return the pennys negotiated contracts for petitioner to perform electrical contracting work for the archdiocese of miami mr white used an undisclosed amount of his own money to finance the project archdiocese at lasalle high school lasalle dollar_figure the archdiocese hired petitioner to complete electrical and wiring work on a lift station located at lasalle after work began on the lift station many other problems arose at lasalle a project that was projected to take approximately days to complete ended up taking approximately a year and a half ending in date the archdiocese and iei drafted contracts for the lasalle job the pennys acted on behalf of iei on behalf of petitioner stewart hired workers for the lasalle job at the lasalle jobsite they wore t-shirts with petitioner’s name and logo and occasionally drove a truck emblazoned with petitioner’s name and logo and mr white’s license number petitioner paid them in cash additionally the pennys acting on petitioner’s behalf hired kring’s shoring inc and ringemann plumbing inc as subcontractors to work on the lasalle job at the direction of stewart donna prepared invoices for the archdiocese for services rendered by petitioner at lasalle petitioner’s name was at the top of each of the invoices furthermore using petitioner’s letterhead stewart issued requests for payment to the archdiocese to pay for petitioner’s electrical contracting services the archdiocese wrote several lasalle is owned by the archdiocese checks payable to petitioner not to the pennys or omnidollar_figure the pennys changed some of the checks from the archdiocese by adding the harlan trust to the payee portion of the check mr white hired robert cole mr cole a certified_public_accountant to prepare petitioner’s corporate tax returns for and mr white signed petitioner’s and tax returns mr white gave mr cole monthly portions of a transaction detail report that mr white prepareddollar_figure mr cole used the monthly reports to prepare petitioner’s tax returns for and the transaction detail reports did not include all presidential’s payments to petitioner furthermore the transaction detail reports for and did not include proceeds of checks to petitioner that the pennys did not deposit into petitioner’s bank account but instead cashed at check cashing stores endorsed to classic or deposited into the harlan trust petitioner made payments to omni that are reflected in the transaction detail reports prepared by mr white for and as payment for outside services one of the checks from the archdiocese was endorsed by mr white payable to petitioner in the amount of dollar_figure the transaction detail report mr white prepared does not reflect all of iei’s activity but is only a partial transaction log the transaction detail report shows accounts_receivable accounts_payable and other expenses_incurred by iei during the years at issue petitioner was a cash_method taxpayer at no point during or did mr white ask the pennys how much money they had received on the jobs they performed on behalf of iei opinion i unreported income the commissioner’s determinations generally are presumed correct and the taxpayer bears the burden of proving that those determinations are erroneous rule a 290_us_111 70_f3d_548 9th cir once there is evidence of actual receipt of funds by the taxpayer the taxpayer has the burden of proving that all or part of those funds are not taxable 87_tc_74 there is ample evidence linking petitioner to an income- producing activity iei and respondent has demonstrated that petitioner received unreported income ii fraud the fraud_penalty is a civil sanction provided primarily as a safeguard for the protection of the revenue and to reimburse the government for the heavy expense of investigation and the loss resulting from a taxpayer’s fraud see 303_us_391 fraud is intentional wrongdoing on the part of the taxpayer with the specific purpose to evade a tax believed to be owing see 61_tc_249 affd 519_f2d_1121 5th cir the commissioner has the burden of proving fraud by clear_and_convincing evidence see sec_7454 rule b to satisfy the burden_of_proof the commissioner must show an underpayment exists and the taxpayer intended to evade taxes known to be owing by conduct intended to conceal mislead or otherwise prevent the collection_of_taxes see 94_tc_654 the commissioner must meet this burden through affirmative evidence because fraud is never presumed see 55_tc_85 a underpayment an underpayment is the amount by which the tax imposed exceeds the excess of the sum of the amount shown as the tax by the taxpayer on his return plus amounts not so shown that were previously assessed or collected without assessment over the amount of rebates made see sec_6664 petitioner argues that there is no underpayment because the money the pennys earned performing electrical contracting services was income either to the pennys or to omni further petitioner claims that it was not actively engaged in the performance of electrical contracting services during the years at issue but merely allowed the pennys to use its name its credit and mr white’s electrical contracting license we disagree the pennys wanted to engage in the electrical contracting business but did not have a license to do so in fact the state of florida enjoined stewart from being in the electrical contracting business as a result the pennys made a deal with mr white whereby they would become officers and shareholders of iei and thus have access to a license and be able to engage in the electrical contracting business petitioner relies on the language in the agreement to qualify that the work performed by the pennys was performed by omni not iei omni could not have performed electrical contracting work as it was not licensed to do so and a license holder had not qualified omni to perform electrical contracting services pursuant to florida law a licensed electrical contractor can qualify a business organization to engage in electrical contracting fla stat ann sec west additionally at least one officer or supervising employee of the business organization must be qualified to engage in contracting in the category of the business conducted id sec mr white was not affiliated with omni in any way thus he could not qualify omni to perform electrical contracting services neither could the pennys mr white could and did qualify petitioner to perform electrical contracting services and the pennys were shareholders and officers of petitioner mr white testified that one of the reasons he entered the agreement with the pennys was to enable them to pull permits the permits were pulled with petitioner’s name not omni’s with mr white’s knowledge and approval the pennys used petitioner’s goodwill and credit to obtain clients and supplies the pennys used business cards trucks and t-shirts emblazoned with petitioner’s name and logo customers who hired petitioner14 never heard of omni workers hired by the pennys to perform electrical contracting services never heard of omni only petitioner mr zamorano an attorney hired by stewart to file a lawsuit on behalf of petitioner never heard of omni the electrical contracting work performed by the pennys was on behalf of petitioner not omni or the pennys as individuals because it could not have been performed by omni or the pennys as they were not licensed income is be taxed to the individual or entity which earns it 281_us_111 petitioner cannot customers entered into agreements with iei to perform electrical contracting services customers did not enter into agreements with omni or the pennys as individuals contract away its liability for federal income taxes nor can it anesthetize us to the fact that it tried to do so gibson v commissioner tcmemo_1982_374 further taxation of income cannot be escaped by anticipatory arrangements assigning it to someone else id the agreement to qualify was an anticipatory agreement that attempted to assign all of petitioner’s income to the pennys and or omni despite the fact that the work was performed by or on behalf of petitioner the business that held itself out to the general_public and its patrons was iei not omni petitioner had advertisements in the telephone book issued invoices with its name on them had its workers wear t-shirts with its name and logo on it and had trucks with its name logo and mr white’s license number on it additionally all customer checks were made out to petitioner not omni or the pennys other than mr white the witnesses who testified had never heard of omnidollar_figure respondent has shown by clear_and_convincing evidence that during the taxable years at issue petitioner engaged in the electrical contracting business and did not report all of it sec_15 this case is similar to omnitec corp v commissioner tcmemo_2006_202 in omnitec the court held that the income was earned by omnitec missouri as opposed to omnitec nevada because the record indicated that everyone doing business with omnitec believed it was omnitec missouri and had no knowledge of there being an omnitec nevada omnitec unlike this case did not involve a civil_fraud penalty the similarity in name to omni in this case is strictly coincidental gross_receipts on its tax returns proceeds of checks that were not deposited into petitioner’s checking account were not reported on petitioner’s tax_return instead of depositing the checks into petitioner’s bank account the pennys officers and shareholders of petitioner either cashed the checks at check cashing stores or endorsed them over to classic or to the harlan trust in petitioner had unreported gross_receipts of dollar_figure from its electrical contracting business petitioner reported gross_receipts of only dollar_figure and a net_loss of dollar_figure respondent determined that petitioner’s correct taxable_income for was dollar_figure we agree with respondent in petitioner had unreported gross_receipts of dollar_figure from its electrical contracting business petitioner reported gross_receipts of only dollar_figure and a net_loss of the corrected taxable_income of dollar_figure for is computed as follows gross_receipts costs of sales net_operating_loss salaries and wages cash payments salaries and wages reclassified contract labor total adjustments previously reported taxable_income dollar_figure big_number big_number big_number big_number big_number big_number dollar_figure respondent determined that petitioner’s correct taxable_income for was dollar_figure we agree with respondent accordingly we conclude that petitioner understated its income in both and b fraudulent intent the commissioner must prove that a portion of the underpayment for each taxable_year at issue was due to fraud sec_7454 see also 79_tc_888 the existence of fraud is a question of fact to be resolved from the entire record see 67_tc_181 affd without published opinion 578_f2d_1383 8th cir because direct proof of a taxpayer’s intent is rarely available fraud may be proven by circumstantial evidence and reasonable inferences may be drawn from the relevant facts see 317_us_492 79_tc_995 the corrected taxable_income of dollar_figure for is computed as follows gross_receipts costs of sales salaries and wages cash payments salaries and wages reclassified contract labor total adjustments previously reported taxable_income dollar_figure big_number big_number big_number big_number big_number affd 748_f2d_331 6th cir a taxpayer’s entire course of conduct can be indicative of fraud see 56_tc_213 53_tc_96 the following badges_of_fraud have been used to prove fraud understating income maintaining inadequate records implausible or inconsistent explanations of behavior concealment of income or assets failing to cooperate with tax authorities engaging in illegal activities an intent to mislead which may be inferred from a pattern of conduct lack of credibility of the taxpayer’s testimony filing false documents failing to file tax returns and dealing in cash no single factor is necessarily sufficient to establish fraud a combination of a number of factors constitutes persuasive evidence below we discuss the factors that we find to be present in the case of a corporation such as petitioner the fraudulent activities of a corporate agent or officer may be imputed to the corporation if the wrongdoer so dominates the corporation that it is in reality a creature of his will his alter ego or the agent was acting in behalf of and not against the interests of the corporation m j laputka sons inc v commissioner tcmemo_1981_730 understating income petitioner as we found above understated its gross_receipts in both and and as a result also understated its taxable_income in both years only funds deposited into petitioner’s bank account were reported on its return however petitioner earned significantly more than was deposited into the account petitioner argues that the money from electrical contracting services belonged to omni or the pennys individually we disagree see supra maintaining inadequate records petitioner kept a transaction detail report that was little more than a reflection of the activity of petitioner’s corporate account petitioner’s transaction detail report did not reflect the checks that were cashed at check cashing stores or endorsed to classic or the harlan trust the report did not reflect all of petitioner’s business implausible or inconsistent explanations of behavior in his testimony mr white acknowledged that he was aware that petitioner was working on the archdiocese job and that it was a significant job mr white claimed that the income from this work was the pennys’ he did not know how much the job was worth and it was not his business to know despite these claims mr white endorsed a check from the archdiocese payable to petitioner in the amount of dollar_figure concealment of income or assets the stockholders and officers of petitioner concealed petitioner’s income through various methods in officers and shareholders of petitioner endorsed over to classic checks totaling dollar_figure payable to petitionerdollar_figure in officers and shareholders of petitioner cashed at check cashing stores checks totaling dollar_figure made out to petitionerdollar_figure in officers and shareholders of petitioner cashed at check cashing stores checks totaling dollar_figure made out to petitionerdollar_figure also in officers and shareholders of petitioner endorsed over to the harlan trust checks totaling dollar_figure made out to petitionerdollar_figure by not depositing the money in the corporate account and distributing the money from the corporation petitioner avoided double_taxation on millions of dollars officers and shareholders of petitioner exhibited a pattern of concealment of iei’s income during the years at issue the four checks were endorsed to classic in forty-seven checks were cashed at check cashing stores in twenty-seven checks were cashed at check cashing stores in six checks were endorsed to the harlan trust in incidents were not isolated but were continuous throughout the 2-year period an intent to mislead the behavior described in relation to the concealment of income also indicates an intent to mislead once again the behavior was continuous on the part of petitioner’s officers and shareholders filing false documents petitioner’s and tax returns indicate that mr white was the sole shareholder the two tax returns failed to disclose that the pennys were shareholders and officers who collectively owned percent of petitionerdollar_figure as we have found the returns understated petitioner’s income by large amounts for both and dealing in cash during and petitioner dealt in cash the cashing of checks at check cashing stores has been detailed supra in addition petitioner paid its workers in cash michael delucia and jamie massey testified that petitioner paid them in cash for their services performed for petitioner although mr white claimed that he was the only officer of petitioner he never disputed that the pennys were shareholders petitioner’s arguments petitioner relies heavily on the argument that the pennys were not officers of petitioner and that mr white was the only officer petitioner argues that mr white’s actions were not fraudulent and therefore neither were petitioner’s we disagree mr white endorsed a check payable to iei in the amount of dollar_figure that he knew was never reported on petitioner’s tax_return mr white was more involved with petitioner than he claimed mr white knew that petitioner had a major project at lasalle and work at other locations yet the documents he turned over to mr cole did not include much of the income those jobs generated for petitioner pursuant to fla stat ann sec west a director must discharge his or her duties in good_faith with ordinary care and in a manner he or she believes to be in the best interests of the corporation even if we assume arguendo that mr white’s conduct on behalf of petitioner was not fraudulent the pennys were officers and shareholders of petitioner and their actions in their capacity as officers and shareholders of petitioner also establish that petitioner is liable for the civil_fraud penalty the pennys who were 49-percent shareholders were together with mr white the dominant figures of petitioner see m j laputka sons inc v commissioner supra petitioner’s counsel admitted at trial that stewart was a thief a liar and a crook stewart however was the general manager of iei’s miami branch a vice president and together with lance sean and donna ran that branch of petitioner on a day-to-day basis all of the electrical contracting work that petitioner undertook in and was the result of the pennys’ efforts pursuant to florida law when in the usual course of business of a corporation an officer or other agent is held out by the corporation or has been permitted to act for it or manage its affairs in such a way as to justify third persons who deal with him in inferring or assuming that he is doing an act within the scope of his authority the corporation is bound thereby edward j gerrits inc v mckinney so 2d fla dist ct app we conclude that respondent has proven by clear_and_convincing evidence that petitioner fraudulently underpaid its taxes for and once the commissioner establishes that any portion of the underpayment is attributable to fraud the entire underpayment is treated as attributable to fraud and subject_to a 75-percent penalty except with respect to any portion of the underpayment that the taxpayer establishes is not attributable to fraud sec_6663 and b petitioner has not proven that any part of either underpayment is not attributable to fraud therefore the underpayments for and are subject_to the 75-percent penalty iii period of limitations petitioner argues that respondent cannot assess the tax_liabilities petitioner reported on its tax returns because the statutory periods of limitations have expired in the case of a false_or_fraudulent_return with the intent to evade tax the tax may be assessed at any time see sec_6501 a fraudulent return deprives the taxpayer the bar of the statutory period of limitations for that year see 464_us_386 288_f2d_517 2d cir affg tcmemo_1960_32 see also 102_tc_380 we found that petitioner filed fraudulent income_tax returns for and therefore the periods of limitations on assessment for both of these years remain open in reaching all of our holdings herein we have considered all arguments made by the parties and to the extent not mentioned above we find them to be irrelevant or without merit to reflect the foregoing decision will be entered for respondent


t c memo united_states tax_court darlene r esposito a k a amnesty national petitioner v commissioner of internal revenue respondent docket no filed date darlene r esposito a k a amnesty national pro_se nancy c carver for respondent memorandum findings_of_fact and opinion chiechi judge respondent determined a deficiency of dollar_figure in petitioner’s federal_income_tax tax for prior to trial respondent conceded that deficiency the only issue remaining for decision is whether petitioner made an overpayment_of_tax overpayment for her taxable_year we hold that she did not findings_of_fact some of the facts have been stipulated and are so found at the time petitioner filed the petition she resided in rahway new jersey petitioner timely filed form_1040 u s individual_income_tax_return for her taxable_year return in peti- tioner’s return petitioner reported taxable_income of dollar_figure total_tax of dollar_figure tax withheld of dollar_figure and other tax_payments other tax_payments of dollar_figure and claimed an overpayment and refund of dollar_figure in support of the other tax_payments of dollar_figure reported in her return petitioner attached two forms notice to shareholder of undistributed long-term_capital_gains form that she prepared form_2439 is a form that the internal_revenue_service service requires a regulated_investment_company ric or a real_estate_investment_trust reit to file with the service and to send to its shareholders with respect to its undistributed long-term_capital_gains the respective forms that petitioner prepared and that she attached to her return showed inter alia the following information name of regulated_investment_company or real_estate name of long-term total undistributed tax paid_by the ric or reit on total undistributed long-term investment_trust shareholder capital_gains capital_gains new jersey department of labor darlene esposito dollar_figure dollar_figure division of environmental protection name of regulated_investment_company or real_estate name of long-term total undistributed tax paid_by the ric or reit on total undistributed long-term investment_trust shareholder capital_gains capital_gains new jersey amnesty department of labor international dollar_figure dollar_figure petitioner did not pay to the service from any of her personal accounts including her checking account the other tax_payments of dollar_figure that she reported in her return with respect to which she is claiming an overpayment on or about date respondent notified petitioner that it had changed petitioner’s return and had determined that petitioner was entitled to a refund of dollar_figure and not dollar_figure as claimed in that return for her taxable_year on a date not disclosed by the record after date respondent sent petitioner a dollar_figure refund check around date petitioner filed form 1040x amended u s individual_income_tax_return form 1040x form_1045 application_for tentative refund form and form_843 claim_for_refund and request for abatement form with respect to petitioner’s taxable_year in form 1040x petitioner claimed an overpayment and refund of dollar_figure in form_1045 petitioner claimed an overpayment and refund of dollar_figure in form_843 petitioner claimed a refund of dollar_figure respondent issued to petitioner a notice_of_deficiency notice for her taxable_year as noted above respondent conceded the deficiency determined in the notice opinion petitioner bears the burden of proving that she made an overpayment for her taxable_year see rule a 290_us_111 in support of her position that she made an overpayment for her taxable_year petitioner relies on her own self-serving testimony and certain documentary_evidence with respect to petitioner’s testimony we found her testimony to be vague uncorroborated and incomprehensible in many respects we shall not rely on petitioner’s testimony to establish her position in this case that she made an overpayment for with respect to the documentary_evidence on which petitioner relies petitioner introduced into the record inter alia her 1form 1040x form_1045 and form_843 also indicated that such forms related to a fiscal_year ended date 2all rule references are to the tax_court rules_of_practice and procedure return to which she attached forms and various letters various letters from certain banks and certain federal and new jersey state agencies petitioner conceded at trial and we have found that she prepared forms that showed other tax pay- ments of dollar_figure that were allegedly made for her taxable_year we find forms attached to petitioner’s return on which she relies to be unreliable we further find that the various letters on which petitioner relies do not establish any facts that support petitioner’s claimed overpayment for we shall not rely on forms or the various letters to establish petitioner’s position in this case on the record before us we find that petitioner has failed to carry her burden of establishing that she has made an overpay- ment for her taxable_year we have considered all the contentions and arguments of petitioner that are not discussed herein and we find them to be incomprehensible irrelevant and or without merit to reflect the foregoing and the concession of respondent decision will be entered reflecting no deficiency in and no overpayment_of_tax


internal_revenue_service department of the treasury index no washington dc contact person i a teleohone number in reference to sc dom p si plr-112588-98 date oct legend x trust trust trust i o o a l o i i b i r a w n n i i o w t t i plr-112588-98 this responds to a letter dated date and subsequent correspondence written on x’s behalf requesting inadvertent termination relief under sec_1362 of the internal_revenue_code facts according to the information submitted x was formed under a plan of merger effective on dl and elected to be treated as an sdollar_figure corporation effective for its taxable_year beginning d2 on d3 a established trust trust and trust collectively the trusts for the benefit of b on d4 a the sole shareholder of x transferred m shares of x's stock to each of the trusts c and d respectively it is represented that trust trust and trust each possess the elements of a qualified_subchapter_s_trust a qsst under sec_1361 b beneficiary of trust however each failed to timely file qsst elections required by sec_1361 needed to make trust trust shareholders of x the beneficiary of trust and d the the beneficiary of trust and d were unaware that qsst elections were and trust eligible c b in ds x's accountant learned qsst elections had not been subsequently on d6 qsst elections for and trust were filed with the appropriate filed for the trusts trust trust service_center and trust have filed tax returns as x represents that throughout the period from d4 to present if valid and its shareholders agree trust trust qsst elections had been in effect to make any adjustments consistent with the treatment of x as an s_corporation that may be required to file the qsst elections was not part of a plan to terminate x's s_corporation_election or motivated by tax_avoidance merely inadvertent x represents that failing it was xx law_and analysis sec_1361 defines an s_corporation as business corporation for which an election under sec_1362 effect a small is in sec_1361 b provides that one of the requirements for a taxpayer to be a small_business_corporation is that the taxpayer cannot have as a shareholder a person other than an estate and other than a_trust described in not an individual sec_1361 who is plr-112588-98 sec_1361 provides that in the case of a qsst with d -- a such trust shall be treated as a_trust for purposes of respect to which a beneficiary makes an election under sec_1361 described in sec_1361 sec_678 the beneficiary of such trust shall be treated as the owner of that portion of the trust which consists of stock in an s_corporation with respect to which the election under sec_1361 a i and b is made sec_1361 a provides that the beneficiary of a under the temporary qsst may elect to have sec_1361 apply regulations in effect at the time the election should have been filed a qsst election had to be filed within the 61-day period beginning on the date the stock of a corporation was transferred to a_trust regulations section a of the temporary income_tax sec_1362 provides that an election to be an corporation will be terminated whenever the corporation ceases to be a small_business_corporation a if an sec_1362 provides in relevant part that b no later that a reasonable period of time election under sec_1362 by any corporation was terminated under sec_1362 the secretary determines that the termination was inadvertent c after discovery of the circumstances resulting in such termination steps were taken so that the corporation is a small_business_corporation and d the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to sec_1362 agrees to make any adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to the period then notwithstanding the terminating event the corporation shall be treated as an corporation during the period specified by the secretary the committee reports accompanying the subchapter_s_revision_act_of_1982 act explain sec_1362 f as follows if the internal_revenue_service determines that a corporation’s subchapter_s_election is inadvertently terminated the service can waive the effect of the terminating event for any period if the corporation timely corrects the event and if the corporation and the shareholders agree to be treated as had been in effect for such period if the election the committee intends that the internal_revenue_service be reasonable in granting waivers so that corporations whose subchapter_s eligibility requirements have been plr-112588-98 inadvertently violated do not suffer the tax consequences of a termination if no tax_avoidance would result from the continued subchapter_s treatment granting a waiver it government will work out agreements that protect the revenues without undue_hardship to taxpayers it is expected that the waiver may be made retroactive for all years or retroactive for the period in which the corporation again became eligible for subchapter ss treatment depending on the facts in is hoped that taxpayers and the s rep no h_r rep no 1982_2_cb_730 97th cong 2d sess 97th cong 2d sess c b conclusions after applying the relevant law to the facts submitted and representations made we conclude that the termination of x‘s subchapter_s_election on d4 was inadvertent within the meaning of sec_1362 f under sec_1362 x will be treated as continuing to be an s_corporation during the period from d4 to d6 and thereafter assuming x’s s_corporation_election was valid and not otherwise terminated under sec_1362 during the period from d4 to d6 thereafter the trusts will be treated as trusts described in sec_1361 and b sec_678 as the owners of that portion of their respective trust that consists of x stock and d will each be treated for purposes of c and except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code specifically no opinion is expressed concerning whether x is an s_corporation or whether the trusts are qssts under sec_1361 this ruling is directed only to the taxpayer who requested of the code provides that it may not be sec_6110 it used or cited as precedent plr-112588-98 under the power of attorneys on file in this office a copy of this letter will be sent to x a b c and d sincerely yours lu cvichow- jeff erickson assistant to the branch chief branch office of the assistant chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


internal_revenue_service number release date index number ------------------------------- -------------------------- ------------------------------------------------ ------------------------------------ in re ----------------------- -------------------------- -------------------------- ---------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ------------- telephone number --------------------- refer reply to cc psi b01 plr-137048-04 date date legend x -------------------------------------------------------------------------------------- ---------------------------- y -------------------------------------------- ---------------------------- state --------- d1 ---------------- d2 ---------------- dear ------------------- this responds to your letter dated date submitted on behalf of x requesting an extension of time under ' c of the procedure and administration regulations to elect to treat y as a qualified_subchapter_s_subsidiary qsub for federal tax purposes facts according to the information submitted x and y were incorporated on d1 and d2 respectively under the law of state x made an election to be treated as an s_corporation effective d1 on d1 y became a wholly-owned subsidiary of x x intended to treat y as a qsub effective d1 however x inadvertently failed to timely file the proper election law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation plr-137048-04 sec_1361 provides that a qsub shall not be treated as a separate corporation and all assets liabilities and items of income deduction and credit of a qsub shall be treated as assets liabilities and such items as the case may be of the s_corporation sec_1361 defines a qsub as a domestic_corporation that is not an ineligible_corporation if percent of the stock of the corporation is owned by an s_corporation and the s_corporation elects to treat the corporation as a qsub a taxpayer makes a qsub election with respect to a subsidiary by filing a form_8869 qualified_subchapter_s_subsidiary election with the appropriate service_center sec_1_1361-3 of the income_tax regulations provides that a qsub election will be effective on the date specified on the election form or on the date the election is filed if no date is specified the effective date specified on the election form cannot be more than two months and days prior to the date of filing and cannot be more than months after the date of filing sec_301_9100-1 provides that the commissioner has discretion to grant a reasonable extension of time under the rules set forth in ' to make a regulatory election sec_301_9100-1 defines a regulatory election as an election with a due_date prescribed by a regulation published in the federal_register or a revenue_ruling revenue_procedure notice or announcement published in the internal_revenue_bulletin requests for relief under '301 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 conclusion based solely on the facts submitted and the representations made we conclude that x has satisfied the requirements of and as a result x is granted an extension of time of days from the date of this letter to file a form_8869 to elect to treat y as a qsub effective d1 a copy of this letter should be attached to the election and is included for that purpose except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically no opinion is expressed concerning whether x is a valid s_corporation or whether y is a valid qsub plr-137048-04 this ruling is directed only to the taxpayer requesting it sec_6110 provides that it may not be used or cited as precedent sincerely s heather c maloy heather c maloy associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c date date uil number release date memorandum for charles washington dl-120947-98 director atlanta service_center from chief branch office of assistant chief_counsel disclosure litigation subject union request for weekly adjustment reports this memorandum is intended as a follow-up to the verbal response given by a member of my staff to your request for direction under the privacy_act issue whether the privacy_act permits the local union vice-president to receive a copy of a weekly adjustment report which identifies the adjustments made to employee measurements in order to effectuate the total evaluation performance system teps agreement between the service and the nteu conclusion the privacy_act would permit the union representative to receive a sanitized copy of the report only if the representative can demonstrate that receipt of the report is necessary and relevant to the coordination of the teps agreement background information on date this office received a question from you as to whether the privacy_act prohibited the service from providing a weekly adjustment report to the union representative who is a member of the local committee assigned the task of coordinating the total evaluation performance system teps agreement it is our understanding that the teps agreement is part of the contract between the service and the bargaining unit members of the service centers around the country teps is the employee performance evaluation system used to evaluate all measured service_center employees gs-08 and below a measured employee is an employee who may or may not receive a measured appraisal ie an appraisal derived in part from systematically computed quality and quantity ratings on a quarterly basis teps calculates the performance summaries for measured quality cc el d and quantity under the contract nc v these summaries are provided to the employees in january april july and october and cover the employees’ performance for the preceding four full quarters these performance summaries are not performance appraisals but are evaluative recordations under article section of the contract e mployees will receive measured ratings in quality based on their performance against numerical standards established by the employer as described in subsection 14c it is the duty_of the local teps committee to assure that the section is implemented in accordance with the intent of the national parties article section 19a of nc v provides that the weekly individual performance report will be provided to affected employees section 19c provides that the union will receive at a minimum the following reports monthly branch performance report 2-month cumulative branch performance report 3-month cumulative branch performance report and unit and branch distribution of ratings - quality quantity calculated base point fixed standards and branch base points the contract further provides that n othing in this section serves as a waiver of the union’s statutory right to additional information that is reasonable and necessary for it to perform its representational duties article subsection 19c emphasis added the report which is the subject of this memorandum is an individual performance history adjustment report it is not a report used to coordinate the teps agreement but rather is a report which contains the names social_security numbers ssns hours codes of work volume of documents and adjustments for each employee in the service_center both bargaining unit and non-bargaining unit our first recommendation to you was to require the union representative to request the report in writing by submitting his privacy_act request to the disclosure_office explaining a particularized need for the report at the time we gave this recommendation we had been assured that the names of non-bargaining unit employees and the ssns of all employees could be sanitized we have since been advised that it is impossible to separate the bargaining unit from non-bargaining unit employees moreover we have been advised that the union representative requesting the report did not articulate a reason for needing the report beyond stating that the report was necessary and relevant for the coordination of the teps agreement law and analysis the privacy_act prohibits the disclosure of an individual’s records by an agency unless the individual consents or the disclosure falls into one of the statutorily cc el d enumerated categories of nonconsensual disclosures after reviewing the various exceptions to the prohibition on nonconsensual disclosures we concluded that the only applicable exception was subsection b routine use u s c sec_552a b provides in relevant part no agency shall disclose any record which is contained in a system of records by any means of communication to any person or to another agency except pursuant to a written request by or with the prior consent of the individual to whom the record pertains unless disclosure of the record would be- for a routine use as defined in subsection a of this section and described under subsection e d of this section we determined that the system of records sor which included the report to which the union representative sought access was sor treasury ir sec_36 general personnel and payroll records we determined from reviewing the notice that the potentially applicable routine use was paragraph which states provide information to officials of labor organizations recognized under u s c chapter when relevant and necessary to their duties of exclusive representation based on the statute and the routine use published in the system notice we concluded that the union representative would be entitled to the information pertaining only to bargaining unit employees if the representative could demonstrate that the report was necessary and relevant to his duties under the teps agreement neither the routine use nor the contract provide the union representative access to the information pertaining to non-bargaining unit employees we likewise conclude that the ssns of all employees should be sanitized because we cannot perceive how that data could meet the necessary and relevant threshold the crucial issue is whether the union representative can demonstrate that even a sanitized report is necessary and relevant to the coordination of the teps agreement given that the individual bargaining unit employees have a right to privacy with respect to the weekly adjustment report the union representative ha sec_1 routine use is defined as the use of such record for a purpose which is compatible with the purpose for which it was collected u s c sec_552a a 2indeed the privacy_act would prohibit the disclosure of records of non- bargaining unit employees because they would not fall within the routine use exception to the prohibition of nonconsensual disclosures cc el d the burden of proving that his receipt of the report is necessary to coordinate the teps agreement a mere statement that the union representative believes it is necessary is not sufficient to meet the standards of the act he has to demonstrate that he needs to know the identities of the employees and he must elucidate the purpose for which he is planning on using the report when making the determination of whether the union representative has established that the disclosure of the report to him meets the necessary and relevant requirement bear in mind that if the union representative is representing an individual employee who believes that adjustments were erroneously made the representative can obtain a copy of the individual’s weekly individual performance report from the individual employee if the representative has questions with respect to that individual’s weekly report he can request additional information from labor relations pursuant to u s c it is unnecessary for the union representative to have the entire weekly adjustment report for all employees in order to evaluate the adjustments made to one individual we have coordinated this opinion with the office of the assistant chief_counsel general legal services if you have any questions regarding this matter call 3we contacted the teps coordinators for the andover service_center memphis service_center and the austin service_center these coordinators all agreed that they do not release the type of weekly report to which the union representative here seeks access to their union representatives nor have their union representatives requested such reports


t c memo united_states tax_court bruce p cadwell petitioner v commissioner of internal revenue respondent docket no filed date steven b jacobs for petitioner kevin g croke for respondent memorandum findings_of_fact and opinion parr judge this case is presently before the court on respondent's motion for summary_judgment pursuant to rule of the tax_court rules_of_practice and procedure the motion was filed date all rule references are to the tax_court rules_of_practice and procedure and all section references are to the internal_revenue_code in effect for the taxable years in issue unless otherwise indicated by separate notices of deficiency respondent determined additions to petitioner's federal_income_tax for fraud under sec_6653 as follows additions to tax sec sec sec sec year deficiency b b b a b b dollar_figure-0- big_number -- big_number -0- -- big_number -0- -- -- -0- -- big_number -0- -- big_number -- -0- -- -- -- dollar_figure -- -- -- percent of the interest due on the portion of the underpayment attributable to fraud petitioner timely filed his petition and respondent thereafter filed her answer to the petition in her answer respondent alleged the facts on which she relied to support her determinations of additions to tax for fraud petitioner did not file a reply to respondent's answer on date respondent filed a motion under rule c for an order that the undenied allegations in the answer be deemed to be admitted a copy of that motion and the court's notice of filing of motion for order under rule were served on petitioner's counsel by the court on date the notice gave petitioner until date to file a reply in which case respondent's motion would be denied petitioner did not file a reply and on prior to the issuance of the notices of deficiency petitioner agreed that he failed to report income for the tax years but he disagreed with respondent's imposition of the additions to tax for fraud under sec_6653 date the court granted respondent's motion and deemed admitted for purposes of this case the undenied affirmative allegations of fact contained in paragraphs and of respondent's answer rule c on promulgation of our order the pleadings herein were closed see rule sec_34 sec_36 sec_37 sec_38 sec_121 the following findings_of_fact are based upon the allegations in the answer which are deemed to be admitted findings_of_fact petitioner filed federal_income_tax returns in and jointly with his wife pamela marie tinsley-cadwell although aware of his filing obligation petitioner failed to file timely tax returns for tax years through resulting in the omission of dollar_figure of income during the years at issue petitioner received dollar_figure in the form of wage income or self-employment_income as follows year payer income holaday-parks inc dollar_figure holaday-parks inc peter kiewit sons co natkin sheet metal co sun-air sheet metal inc toklat sheet metal inc total dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure toklat sheet metal inc dollar_figure toklat sheet metal inc dollar_figure toklat sheet metal inc sandstrom plumbing heating total dollar_figure dollar_figure dollar_figure sandstrom plumbing heating dollar_figure wayne r sandstrom et al ptr dollar_figure dollar_figure total petitioner filed form_w-4 with exempt status during the years and claiming he owed no tax in each of the prior years and expected to owe no income_tax for the current_year petitioner requested his union to withhold information from the internal_revenue_service irs the majority of petitioner's paychecks were signed over to a third party in an attempt to conceal transactions from the irs petitioner was the defendant in the criminal case of united_states v cadwell docket no a91-0022cr d alaska respondent herein is a party in privity with the united_states the prosecuting party in the aforesaid case in that case petitioner was indicted on four counts of income_tax evasion in violation of sec_7201 on date petitioner entered a plea of guilty to counts iii and iv of the indictment for the charged offense of attempted evasion of income_tax relating to his personal income_tax returns for tax years and the district_court accepted petitioner's guilty plea to counts iii and iv of the indictment upon being satisfied that there was adequate factual basis that petitioner did willfully attempt to evade and defeat part of his income_tax for the taxable years and and was therefore guilty as charged petitioner was convicted on his guilty plea and the judgment is final one of the issues in the instant case is whether the additions to tax under sec_6653 should be imposed against petitioner for the taxable years and this same issue was presented and determined against petitioner in the criminal case to the extent that a conviction on counts iii and iv in the indictment is dependent upon a finding that petitioner did willfully attempt to evade or defeat part of his income_tax the prior criminal conviction of petitioner under sec_7201 for the taxable years and is conclusive and binding upon him by reason thereof petitioner is estopped in the instant case under the doctrine_of collateral_estoppel from denying herein that he did willfully attempt to evade or defeat his federal_income_tax liability for the taxable years and and that he knew and believed that the items described in counts iii and iv of the indictment and which are the basis of allegations of fraud in respondent's answer were reportable as taxable_income in and respectively opinion summary_judgment is intended to expedite litigation and avoid unnecessary and expensive trials 90_tc_678 summary_judgment may be granted with respect to all or any part of the legal issues in controversy if the pleadings answers to interrogatories depositions admissions and any other acceptable materials together with the affidavits if any show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law rule b 98_tc_518 affd 17_f3d_965 7th cir 90_tc_753 85_tc_527 the moving party bears the burden of proving that there is no genuine issue of material fact and factual inferences will be read in a manner most favorable to the party opposing summary_judgment 85_tc_812 79_tc_340 sec_6653 provides for the imposition of an addition_to_tax if any part of any underpayment_of_tax required to be shown on the return is due to fraud the burden_of_proof with respect to fraud is upon the commissioner to prove by clear_and_convincing evidence that some part of the underpayment_of_tax was due to fraud with an intent to evade tax sec_7454 rule b 22_tc_1002 that burden can be satisfied by the commissioner by undenied facts deemed admitted under rule c 77_tc_334 70_tc_562 affd without published opinion 621_f2d_439 5th cir 62_tc_260 furthermore if the fraud allegations are deemed admitted by motion under rule c the commissioner may move for judgment on the fraud issue on the basis of the facts deemed admitted pursuant to rule judgment on the pleadings rule summary_judgment or rule submission without trial 73_tc_736 petitioner conceded an understatement_of_tax for each of the years at issue accordingly we must determine whether any part of the underpayment was due to fraud with intent to evade income_tax by petitioner in the case at bar material allegations in the answer with respect to fraud have been deemed to be admitted by our granting of respondent's rule c motion in our view those findings_of_fact clearly and convincingly establish fraud with intent to evade tax for the tax years and fraud is conclusively established by petitioner's prior conviction under sec_7201 for those years 43_tc_68 as to the remaining years--1983 and 1988--there are numerous badges_of_fraud petitioner misrepresented his status as exempt on form_w-4 ie he claimed he owed no taxes for the years at issue but he had unreported income in the amount of dollar_figure in an attempt to conceal his income and evade taxes petitioner withheld information from the irs moreover he signed his paychecks over to third parties in an attempt to conceal transactions from the irs and evade taxes furthermore petitioner knew of his tax_return filing obligation yet he willfully failed to file tax returns for the years at issue the facts admitted establish a pattern of fraudulent conduct including failure to report income and elaborate efforts to conceal that income and to prevent the collection_of_taxes on that income the admitted facts thus constitute clear_and_convincing evidence of fraud for all of the years in issue and respondent's burden_of_proof has been satisfied because the matters admitted are sufficient to satisfy respondent's burden of proving fraud and there exists no genuine issue of any material fact respondent's motion for summary_judgment will be granted rule b an appropriate order and decision will be entered for respondent