Court Opinion

ID: 6215758
Source: CourtListenerOpinion
Date Created: 2022-02-07 20:02:02.615142+00
Date Added: 2024-06-11T08:57:05.685215
License: Public Domain

United States Tax Court

                                T.C. Memo. 2022-7

                              LARRY T. WILLIAMS,
                                  Petitioner

                                           v.

               COMMISSIONER OF INTERNAL REVENUE,
                           Respondent

                                     —————

Docket No. 939-20.                                         Filed February 7, 2022.

                                     —————

Larry T. Williams, pro se.

Michael K. Foster II and Daniel C. Munce, for respondent.

            MEMORANDUM FINDINGS OF FACT AND OPINION

      URDA, Judge: Petitioner, Larry T. Williams, challenges a notice
of deficiency issued by the Internal Revenue Service (IRS) that
determined a deficiency of $49,100 in his federal income tax for his 2016
tax year as well as an addition to tax under section 6651(a)(1) 1 of
$12,273 and an accuracy-related penalty under section 6662(a) of
$9,820. 2 The notice of deficiency disallowed certain deductions claimed
by Mr. Williams in connection with his business. Rather than
attempting to demonstrate errors by the IRS in its determination, Mr.
Williams has chosen to focus his challenge on frivolous and groundless

        1 Unless otherwise indicated, all statutory references are to the Internal
Revenue Code, Title 26 U.S.C., in effect at all relevant times, all regulation references
are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant
times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
We round all monetary amounts to the nearest dollar.
       2 The Commissioner has conceded a portion ($2,453) of the addition to tax

under section 6651(a)(1) as well as the full $9,820 penalty under section 6662(a).

                                 Served 02/07/22
                                            2

[*2] arguments. We will uphold the Commissioner’s determination,
subject to certain concessions.

                               FINDINGS OF FACT

       This case was tried at our Atlanta, Georgia, remote trial session
(via Zoomgov). We base our factual findings on the deemed admissions
of facts, as well as the testimony of Mr. Williams, the sole trial witness.
See Rule 90(c); Silver v. Commissioner, T.C. Memo. 2021-98, at *2–3.
Mr. Williams lived in Florida when he timely filed his petition.

       During 2016 Mr. Williams worked as a consultant for a business
called Lows Consultant, LLC, working on behalf of National Group
Protection, Inc. Mr. Williams filed his 2016 Federal income tax return
3-1/2 months late. On that return he reported gross business income of
$174,956 and business expenses of $174,829, which produced a taxable
income of $127. Mr. Williams’ business expenses included, inter alia,
$73,651 of travel expenses, $43,117 of car and truck expenses, $28,689
of “other” expenses, $7,255 of supplies, and $6,322 of meal and
entertainment expenses.

       The IRS thereafter determined that Mr. Williams had failed to
substantiate his 2016 expenses and issued him a notice of deficiency that
disallowed most of his claimed deductions. 3 The IRS further determined
an addition to tax for failure to file timely under section 6651(a)(1) of
$12,273 and an accuracy-related penalty under section 6662(a) of
$9,820. 4

                                      OPINION

I.      Burden of Proof

      The Commissioner’s determinations in a notice of deficiency are
generally presumed correct, and the taxpayer bears the burden of
proving error in the determinations. See Rule 142(a); Welch v.
Helvering, 290 U.S. 111, 115 (1933). The taxpayer bears the burden of

        In his pretrial memorandum respondent conceded $22,380 of travel expenses
        3

and $151 of other expenses for parking.
        4 In his pretrial memorandum respondent conceded the full section 6662(a)

accuracy-related penalty of $9,820. Respondent further conceded a portion ($2,453) of
the addition to tax under section 6651(a)(1) for failure to file timely on the ground that
Mr. Williams filed his return about 3-1/2 months late, rather than five months as
asserted in the notice of deficiency.
                                    3

[*3] proving his entitlement to any deduction or credit claimed on his
return. INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).

       Mr. Williams does not contend, and the evidence does not
establish, that the burden of proof should shift to the Commissioner
under section 7491(a). He thus bears the burden of proof with regard to
the deficiency. To the extent Mr. Williams challenges the addition to
tax under section 6651(a)(1), the Commissioner bears the burden of
production with respect to that addition to tax. See § 7491(c).

II.   Legal Background

       Gross income includes all income from whatever source derived.
See § 61(a); see also Commissioner v. Glenshaw Glass Co., 348 U.S. 426,
429 (1955); Helvering v. Clifford, 309 U.S. 331, 334 (1940). Section
162(a) generally allows a deduction for ordinary and necessary expenses
paid or incurred during the taxable year in carrying on a trade or
business. The taxpayer bears the burden of proving that his reported
business expenses were actually incurred and were “ordinary and
necessary.” See § 162(a); Rule 142(a).

       The taxpayer bears the burden of substantiating expenses
underlying his claimed deductions by keeping and producing records
sufficient to enable the Commissioner to determine the correct tax. See
Treas. Reg. § 1.6001-1(a), (e). Failure to keep and present such records
counts heavily against a taxpayer’s attempted proof. See Rogers v.
Commissioner, T.C. Memo. 2014-141, at *17.

       In certain circumstances the Court may approximate the amount
of an expense if the taxpayer proves it was incurred but cannot
substantiate the exact amount (Cohan rule).              See Cohan v.
Commissioner, 39 F.2d 540, 543–44 (2d Cir. 1930). But the taxpayer
must provide some basis for such an estimate. See Vanicek v.
Commissioner, 85 T.C. 731, 742–43 (1985). A court may not apply the
Cohan rule to approximate expenses subject to the stricter
substantiation requirements under section 274(d), including expenses
for travel (including meals and lodging while away from home) and with
respect to the business use of any listed property (such as a passenger
automobile). See Sanford v. Commissioner, 50 T.C. 823, 827–28 (1968),
aff’d per curiam, 412 F.2d 201 (2d Cir. 1969); see also §§ 274(d)(1), (4),
280F(d)(4)(A).
                                     4

[*4] The Commissioner disallowed Mr. Williams’ deductions for lack
of substantiation. Mr. Williams does not challenge either the facts on
which the Commissioner’s determination is based or his calculation of
tax. Mr. Williams instead raises assorted frivolous or groundless
arguments that have been oft rejected by this Court, including among
other things, that the U.S. Government went bankrupt and no longer
exists, that the Internal Revenue Code does not constitute “law,” and
that he is not a U.S. citizen. See, e.g., Ulloa v. Commissioner, T.C.
Memo. 2010-68, 2010 WL 1330387; I.R.S. Notice 2010-33, 2010-17
I.R.B. 609. We will not painstakingly address his assertions “with
somber reasoning and copious citation of precedent; to do so might
suggest that these arguments have some colorable merit.” Crain v.
Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984); see also Wnuck v.
Commissioner, 136 T.C. 498, 512 (2011).

      We accordingly uphold the Commissioner’s deficiency
determination, subject to the concessions he has made during the
pendency of the proceedings in this Court.

III.   Addition to Tax

       A.    Section 6651(a)(1) Addition to Tax

       Section 6651(a)(1) imposes an addition to tax for the failure to file
a required return timely unless the taxpayer can establish that such
failure was due to “reasonable cause and not due to willful neglect”.
United States v. Boyle, 469 U.S. 241, 243 (1985). The Commissioner
bears the initial burden of production to introduce evidence that the
return was filed late. See § 7491(c). The taxpayer then bears the burden
of proving that the late filing was due to reasonable cause and not willful
neglect. Boyle, 469 U.S. at 245; Higbee v. Commissioner, 116 T.C. 438,
447 (2001).

        The facts before us establish that Mr. Williams was required to
file a return for 2016. The Commissioner met his initial burden in this
case by introducing Form 4340, Certificate of Assessments, Payments,
and Other Specified Matters, for Mr. Williams’ 2016 tax year, which
showed that Mr. Williams filed his 2016 tax return on May 17, 2018,
around 3-1/2 months after the extended deadline to do so. See Murray
v. Commissioner, T.C. Memo. 2017-67, at *11. The burden thus shifts to
Mr. Williams to prove that the untimely filing was due to reasonable
cause and not willful neglect. See Rule 142(a); Higbee, 116 T.C.
at 446–47. Mr. Williams has offered no explanation or evidence that
                                   5

[*5] would support such a conclusion. As Mr. Williams has not met his
burden, we hold that he is liable for the addition to tax under
section 6651(a)(1) (as reduced by the Commissioner’s concession).

      B.     Penalty Under Section 6673(a)(1)(B)

       The Commissioner further seeks a penalty against Mr. Williams
pursuant to section 6673(a)(1)(B). Section 6673(a)(1)(B) provides this
Court with the discretion to require a taxpayer to pay to the Government
a penalty of up to $25,000 when a taxpayer takes a frivolous or
groundless position in this Court.         Although Mr. Williams has
repeatedly advanced frivolous or groundless positions in this case, the
Court declines to impose a section 6673 penalty at this time. We warn
Mr. Williams that we are unlikely to be lenient going forward should he
choose again to press frivolous or groundless arguments like the ones he
relied upon in this case.

IV.   Conclusion

       In sum, we sustain the IRS’ determinations in the notice of
deficiency, other than the expenses, penalty, and portion of the addition
to tax conceded by the Commissioner.

      To reflect the foregoing,

      Decision will be entered under Rule 155.