Court Opinion

ID: 4336391
Source: CourtListenerOpinion
Date Created: 2018-11-14 02:48:37.834257+00
Date Added: 2024-06-11T07:52:40.614910
License: Public Domain

T.C. Memo. 2007-76

                      UNITED STATES TAX COURT

                STACY N. DAVENPORT, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent

     Docket No. 23917-05.               Filed April 2, 2007.

     Stacy N. Davenport, pro se.

     Carrie L. Kleinjan, for respondent.

             MEMORANDUM FINDINGS OF FACT AND OPINION

     FOLEY, Judge:   By notice of deficiency dated September 19,

2005, respondent determined a deficiency in and additions to

petitioner’s 2002 Federal income tax.    The issues for decision
                               - 2 -

are whether petitioner is liable for unreported income and the

section 6654(a)1 and section 6651(a)(1) and (2) additions to tax.

                          FINDINGS OF FACT

     During 2002, petitioner performed services for S. McClain,

Inc. (McClain).   Between March 29 and September 6, 2002, McClain

issued, and sent to petitioner’s home, 24 checks payable to DDR

Truck Associates (DDR).   Those checks totaled $63,850.

Petitioner deposited those checks into, and paid his salary from,

a bank account in the name of DDR over which he had signature

authority.

     McClain issued petitioner a Form 1099-MISC, Miscellaneous

Income, which stated that in 2002 McClain paid petitioner

$63,850.   McClain subsequently issued a corrected Form 1099-MISC

to petitioner (i.e., stating that it paid petitioner zero in

2002) and a Form 1099-MISC to DDR (i.e., stating that it paid DDR

$63,850 in 2002).   Petitioner did not file a return, pay tax, or

make estimated tax payments relating to 2002.

     On August 17, 2005, respondent, pursuant to section 6020(b),

prepared a substitute for return (SFR) relating to 2002.    On

September 19, 2005, respondent sent petitioner a notice of

     1
        Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
                                - 3 -

deficiency relating to 2002.   Respondent determined that

petitioner was liable for a deficiency and additions to tax for

failure to file a tax return, pursuant to section 6651(a)(1);

timely pay tax, pursuant to section 6651(a)(2); and pay estimated

income tax, pursuant to section 6654(a).

     On December 19, 2005, petitioner, while residing in Hamburg,

Pennsylvania, filed his petition with the Court.

                               OPINION

     Generally, a notice of deficiency is presumed correct, and

the taxpayer bears the burden of proving that the determination

is erroneous.   Welch v. Helvering, 290 U.S. 111, 115 (1933).

Respondent provided sufficient predicate evidence connecting

petitioner to the unreported income.     Berkery v. Commissioner, 91
T.C. 179, 195 (1988).   Thus, the notice of deficiency is presumed

correct, and petitioner has the burden of proof.2

     Petitioner contends that the $63,850 from McClain is

attributable to DDR and that DDR is a separate legal entity from

which he received a salary.    Conversely, respondent contends that

DDR does not exist, and that the $63,850 is attributable to

petitioner.   There is insufficient evidence to establish the

     2
        Sec. 7491(a) is inapplicable because petitioner failed to
introduce credible evidence within the meaning of sec.
7491(a)(1).
                                - 4 -

existence of DDR.    Moreover, when petitioner was questioned at

trial about how much of the $63,850 he was paid from DDR, he was

evasive and responded:    “I don’t have that information.”

Petitioner’s testimony was not credible.    We conclude that he

received $63,850 for the services he rendered to McClain, and we

sustain the deficiencies as determined by respondent.

       Respondent also determined additions to tax for failure to

file tax returns, pursuant to section 6651(a)(1); timely pay tax,

pursuant to section 6651(a)(2); and pay estimated income tax,

pursuant to section 6654(a).   Respondent, pursuant to section

7491(c), has the burden of production relating to the additions

to tax.

       Respondent established that petitioner failed to file a

return relating to 2002.    In addition, respondent, at trial,

proffered an SFR that met the requirements of section 6020(b) and

established that petitioner failed to timely pay tax relating to

2002.    See Wheeler v. Commissioner, 127 T.C. 200, 208-209 (2006).

Petitioner did not establish reasonable cause for the failure to

file or timely pay tax relating to 2002.    Sec. 6651(a)(1) and

(2).    Accordingly, we sustain the section 6651(a)(1) and (2)

additions to tax as determined by respondent.

       In order to satisfy his burden of production relating to the

section 6654 addition to tax, respondent, at a minimum, must
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establish that petitioner had a required annual payment pursuant

to section 6654(d)(1)(B).     Wheeler v. Commissioner, supra at 211.

 The required annual payment is generally equal to the lesser of

90 percent of the tax shown for the subject taxable year (or, if

no return was filed, 90 percent of the tax for such year), or 100

percent of the tax shown on the taxpayer’s return for the

preceding year.    Sec. 6654(d)(1)(B)(i) and (ii); Wheeler v.

Commissioner, supra at 211.

     Respondent established that petitioner had a tax liability

relating to 2002 (i.e., the subject taxable year).       Respondent

has not produced credible evidence relating to 2001 (i.e., the

preceding year).   Respondent contends that his transcript (i.e.,

a “summary of Mr. Davenport’s tax account of all the years opened

[sic], returns filed, or not filed”) demonstrates that petitioner

did not file a return relating to 2001.       The transcript is

reproduced in pertinent part below.

        Tax Period                 Posted Return

          1986                           POSTED
          1987                           NONE
          1988                           NONE
          1990                           POSTED
          1992                           POSTED
          1993                           POSTED
          1994                           POSTED
          1995                           POSTED
          1996                           NONE
          1997                           POSTED
          1998                           NONE
          1999                           NONE
          2002                           SUBST4
                               - 6 -

     At trial, respondent’s only witness, Ms. Gallagher,

testified that the transcript, as it relates to 2002, “shows that

no return was filed by Mr. Davenport, but it shows a substitute

for return was prepared by the IRS.”    Indeed, the transcript

shows “SUBST4" relating to 2002.   When Ms. Gallagher was asked

whether petitioner filed a return relating to 2001, she stated

that 2001 “is not even on this transcript [thus] no return [was]

filed”.   We do not arrive at the same conclusion.   The transcript

makes reference to 13 of petitioner’s tax years yet there is no

reference to 2001.   Moreover, the transcript indicates that

returns were filed for certain years (i.e., “POSTED”) and not

filed for other years (i.e., “NONE”).    Because there is no entry

relating to 2001, we conclude that the transcript is insufficient

to prove that petitioner failed to file a return for that year.

     Without credible evidence relating to 2001, we cannot

identify the number equal to 100 percent of the tax shown on

petitioner’s 2001 return (i.e., the preceding year), complete the

comparison required by section 6654(d)(1)(B), or conclude that

petitioner had a required annual payment relating to 2002.

Wheeler v. Commissioner, supra at 211-212.    Accordingly,

respondent has not met his burden of production relating to, and

petitioner is not liable for, the section 6654 addition to tax.

     Contentions we have not addressed are irrelevant, moot, or

meritless.
                            - 7 -

To reflect the foregoing,

                                         Decision will be entered

                                    under Rule 155.