Court Opinion

ID: 6339583
Source: CourtListenerOpinion
Date Created: 2022-05-11 17:02:02.51156+00
Date Added: 2024-06-11T15:49:11.584190
License: Public Domain

United States Tax Court
                                 Washington, DC 20217

ANDREW ETHAN MACTAGGART,

                Petitioner

                v.                             Docket No. 6465-21.

COMMISSIONER OF INTERNAL
REVENUE,

                Respondent

                                      ORDER

      Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is

      ORDERED that the Clerk of the Court shall transmit herewith to petitioner
and to respondent a copy of the pages of the transcript of the trial in the above case
before Judge Joseph Robert Goeke containing his oral findings of fact and opinion
rendered at the Houston, Texas trial session at which this case was heard.

      In accordance with the oral findings of fact and opinion, a decision will be
entered for respondent as to the deficiency in income tax and for petitioner as to the
penalty pursuant to I.R.C. section 6662(a).

                                     (Signed) Joseph Robert Goeke
                                                 Judge

                                  Served 05/11/22
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1    Bench Opinion by Judge Joseph Robert Goeke

2    April 27, 2022

3    Andrew Ethan MacTaggart v. Commissioner of
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4    Docket No. 6465-21

5                 THE COURT:   The Court has decided to render the

6    following as it's oral findings of fact and opinion in

7    this case.    This bench opinion is made pursuant to the

8    authority granted by section 7459(b) of the Internal

9    Revenue Code and Tax Court Rule 152.      And it shall not be

10   relied upon as precedent in any other case.

11                Rule references in this opinion are to the Tax

12   Court Rules of Practice and Procedure, and section

13   references are to the Internal Revenue Code, as amended,

14   and in effect at all relevant times.

15                The IRS issued a notice of deficiency asserting

16   an increase in petitioner's income tax and the section
         (a)
17   6662(d) penalty. Respondent has conceded the penalty, but
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18   the deficiency of $23,624 for 2017 remains in dispute.

19   This Court has jurisdiction under section 6213(a) because

20   petitioner timely petitioned this Court after the notice

21   of deficiency was issued.     On the evidence before us, and

22   using the burden of proof principles explained below, the

23   Court finds facts as follows:

24                Petitioner resided in Texas at the time he filed

25   the petition in this case.     The record of trial consists
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1    of three exhibits and petitioner's testimony.    Petitioner

2    provided services for Valspar Inc. for which he was paid

3    $119,838 in 2017.   The amended return petitioner filed for

4    2017 is in the record and it confirms his testimony that

5    he received $119,838 for Valspar.     In the amended return

6    petitioner asserts the $119,838 was not taxable income.

7    The amended return also seeks a refund of all the income

8    tax withheld by Valspar from petitioner's wages in 2017.

9              Petitioner's amended return notes he changed the

10   W-2 he originally received from Valspar to reflect his

11   position regarding the non-taxability of the amounts he

12   was paid by Valspar.     Turning to the legal analysis and

13   opinion in this case, we first note that petitioner's

14   position is a discredited argument which is inconsistent

15   with section 61(a)(1).    The introduction of section

16   61(a)reads as follows.     "Except as otherwise provided in

17   this subtitle gross income means all income from whatever

18   source derived, including (but not limited to) the

19   following items:" Subsection (1) of section 61(a) provides
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20   as follows.   "Compensation for services including fees,

21   commissions, fringe benefits and similar items."

22             Respondent's determination is generally presumed

23   correct in deficiency cases and the taxpayer has the

24   burden of proof.    Tax Court Rule 142(a), and Welch v.

25   Helvering, 290 U.S. 111 (1933).    The burden of proof may
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1    shift to respondent as to certain factual issues which a

2    taxpayer presents credible evidence in support of it.

3    Section 7491(a).   In the present case petitioner has not

4    presented any such evidence, and the burden of proof is

5    not shifted under section 7491(a).

6                In cases asserting the failure to report income

7    the Court of Appeals for the Fifth Circuit, where an

8    appeal in this case would ordinarily lie, has held that

9    the IRS must establish a factual foundation to support

10   that the taxpayer engaged in the income producing

11   activity.   The Court of Appeals has held that such

12   evidence is necessary before the burden of proof would

13   shift to the taxpayer to establish that the income is not

14   taxable.    Here petitioner's testimony and the amended

15   return, which is an exhibit in the record, meet the

16   requirements of the factual foundation.    Parker v.

17   Commissioner, 117 F.3d 785, 787 (5th Cir. 1997).      In

18   Bindel v. Commissioner, T.C. Memo. 2022-39, the tax court

19   recently dismissed arguments very similar to the arguments

20   petitioner is making in the present case regarding the

21   non-taxability of income.    Bindel contains a quote from

22   Crain v. Commissioner, 737 F.2d 1417 (5th Cir. 1984).

23   This quote fits the present case very well, "We perceive

24   no need to refute these arguments with somber reasoning

25   and copious citation of precedent; to do so might suggest
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1    that these arguments have some colorable merit."

2    Petitioner's arguments clearly merit that analysis and we

3    will make no further discussion of those.

4                 We appreciate the fact that ultimately

5    petitioner was willing to admit that he actually received

6    $119,838 for services in 2017.        We advised the petitioner

7    that should he continue to pursue frivolous arguments

8    about the taxability of such income, he might face

9    sanctions.    Based upon the record of trial and our
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10   analysis of the law the clearly applies to petitioner's

11   situation, a decision will be entered on the deficiency in

12   income tax for respondent.    And because of respondent's

13   concession, a decision will be entered for the petitioner

14   relative to the addition to tax under section 6662(a).

15                This concludes the Court's oral findings of fact

16   and opinion in this case.

17                (Whereupon, at 9:55 a.m., the above-entitled

18                matter was concluded.)

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