Court Opinion

ID: 4336870
Source: CourtListenerOpinion
Date Created: 2018-11-14 03:03:11.325645+00
Date Added: 2024-06-11T07:50:38.137339
License: Public Domain

T.C. Summary Opinion 2007-203

                      UNITED STATES TAX COURT

                RENARD HALLIBURTON, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent

     Docket No. 13967-06S.            Filed December 5, 2007.

     Renard Halliburton, pro se.

     Lisa R. Woods, for respondent.

     HAINES, Judge:   This case was heard pursuant to the

provisions of section 7463 of the Internal Revenue Code in effect

when the petition was filed.1   Pursuant to section 7463(b), the

decision to be entered is not reviewable by any other court, and

     1
       Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended. Amounts are rounded to
the nearest dollar.
                               - 2 -

this opinion shall not be treated as precedent for any other case.

     Respondent determined a deficiency in petitioner’s 2002

Federal income tax of $6,480, as well as additions to tax under

section 6651(a)(1) and (2) of $1,082 and $842, respectively, and

section 6654(a) of $193.

     After concessions,2 the issues for decision are:    (1)

Whether petitioner failed to report a taxable distribution and

other income of $1,830, and $12,000, respectively, in 2002; and

(2) whether petitioner is liable for additions to tax under

sections 6651(a)(1) and 6654(a).

                            Background

     The parties’ stipulation of facts and the attached exhibits

are incorporated herein by this reference.     Petitioner resided in

Saint Paul, Minnesota, when he filed this petition.

     On August 8, 2002, petitioner received $12,000 from Amex

Financial Corp. (Amex) in settlement of a class action racial

discrimination suit against Amex.3     Amex mailed petitioner a Form

1099-MISC, Miscellaneous Income, stating it paid petitioner the

$12,000 in 2003.   During 2002, petitioner also received a taxable

distribution of $1,830 from the National Finance Center Thrift

Savings Plan (National).

     2
       Respondent concedes that petitioner is not liable for the
sec. 6651(a)(2) addition to tax.
     3
       Petitioner did not contend that the $12,000 was not
included in gross income under sec. 104(a)(2).
                                - 3 -

     On March 23, 2005, respondent filed a substitute for return

for petitioner and on April 11, 2005, assessed the tax shown

thereon.    On May 8, 2006, petitioner filed his Form 1040, U.S.

Individual Income Tax Return, for 2002 (2002 return), in which he

failed to report receiving the $12,000 from Amex and the $1,830

from National.    Respondent treated the 2002 return as an amended

return.

     On May 9, 2006, respondent mailed petitioner a notice of

deficiency for 2002.    The notice of deficiency was mailed before

respondent could take into consideration petitioner’s 2002

return.    Using third-party payor information, respondent

determined petitioner owed $6,480 in Federal income tax on the

basis of:    (1) Wage income of $21,816 from the Xerox Corporation,

$409 from Labor Ready Midwest, Inc., and $759 from the Doherty

Employment Group; (2) a taxable distribution of $1,830 from

National; and (3) other income of $12,000 from Amex.    In the

notice of deficiency, respondent calculated tax using married

filing separately rates and allowed a standard deduction, one

personal exemption, a self-employment tax deduction of $848, and

an adjustment to prepayment credit of $1,669.

     Petitioner filed an amended petition with the Court on

September 11, 2006.4

     4
       Petitioner’s original petition was timely filed with the
Court on July 19, 2006.
                               - 4 -

     On January 16, 2007, respondent mailed petitioner a letter

asking whether he received $12,000 from Amex and $1,830 from

National in 2002.   Petitioner responded on March 30, 2007, in a

letter stating he received $12,000 from Amex in 2002 and reported

the income on his Form 1040X, Amended U.S. Individual Income Tax

Return, for 2003 (2003 amended return) because Amex’s Form 1099-

MISC reported it paid him the $12,000 in 2003.   The letter also

stated that petitioner received the $1,830 distribution in 2002.

                            Discussion

     Petitioner admits he received $12,000 from Amex and $1,830

from National in 2002 and failed to report the income in 2002.

Petitioner contends, however, that because he reported the

$12,000 on his 2003 amended return, he was not required to report

it in 2002.

     Section 451(a) provides that the amount of any item of gross

income shall be included in the gross income for the taxable year

in which received by the taxpayer, unless, under the method of

accounting used in computing taxable income, such amount is to be

properly accounted for as of a different period.   Fed. Home Loan

Mortgage Corp. v. Commissioner, 125 T.C. 248 (2005).

     Although petitioner reported the $12,000 in 2003 because the

Form 1099-MISC was mistakenly dated 2003, he received the amount

in 2002.   Petitioner produced no evidence to show he used a
                                - 5 -

method of accounting requiring him to report the $12,000 in a

period other than the period ending December 31, 2002.

     Accordingly, the Court holds that petitioner was required to

report the $12,000 in 2002.

     Respondent determined that petitioner is liable for

additions to tax under sections 6651(a)(1) and 6654(a).

Respondent bears the burden of production with respect to

petitioner’s liability for the additions to tax.   Sec. 7491(c);

Higbee v. Commissioner, 116 T.C. 438, 446-447 (2001).     To meet

his burden of production, respondent must come forward with

sufficient evidence indicating it is appropriate to impose the

additions to tax.    Higbee v. Commissioner, supra at 446-447.

     Section 6651(a)(1) imposes an addition to tax for failure to

file a return on the date prescribed (determined with regard to

any extension of time for filing), unless the taxpayer can

establish that such failure was due to reasonable cause and not

willful neglect.    The parties stipulated that petitioner did not

timely file the 2002 return.   Respondent has met his burden of

production.   Petitioner did not show reasonable cause for failing

to timely file a return for 2002.   Sec. 6651(a)(1).    Therefore,

the Court holds that petitioner is liable for the section

6651(a)(1) addition to tax for 2002.

     Section 6654(a) imposes an addition to tax on an individual

taxpayer who underpays his estimated tax.   The addition to tax
                                  - 6 -

is calculated with respect to four required installment payments

of the taxpayer’s estimated tax liability.    Sec. 6654(b) and (c).

Each installment is equal to 25 percent of the “required annual

payment”.   Sec. 6654(d)(1)(A).    The “required annual payment” is

generally equal to the lesser of (1) 90 percent of the tax shown

on the individual’s return for that year (or, if no return is

filed, 90 percent of his or her tax for such year), or (2) if the

individual filed a return for the immediately preceding taxable

year, 100 percent of the tax shown on that return.    Sec.

6654(d)(1)(B); Wheeler v. Commissioner, 127 T.C. 200, 210-211

(2006); Heers v. Commissioner, T.C. Memo. 2007-10.

     Respondent introduced evidence to show petitioner was

required to file a Federal income tax return for 2002, failed to

report income for 2002, and failed to make estimated tax payments

for 2002 (with the exception of the withheld tax).    In order to

permit the Court to make the analysis required by section

6654(d)(1)(B)(ii), respondent must introduce evidence showing

whether petitioner filed a return for the preceding taxable year

and, if so, the amount of tax shown on that return.    See Wheeler

v. Commissioner, supra at 212.     Respondent did not do so.

Without that evidence, this Court cannot identify the number

equal to 100 percent of the tax shown on petitioner’s 2001

return, complete the comparison required by section

6654(d)(1)(B), and conclude petitioner had a required annual
                                 - 7 -

payment for 2002 that was payable in installments under section

6654.   Therefore, the Court finds respondent failed to meet his

burden of production.   Accordingly, respondent’s determination

regarding the section 6654 addition to tax is not sustained.

     In reaching these holdings, the Court has considered all

arguments made and, to the extent not mentioned, concludes that

they are moot, irrelevant, or without merit.

     To reflect the foregoing,

                                              Decision will be entered

                                      for respondent as to the

                                         deficiency and the addition to

                                         tax under section 6651(a)(1),

                                         and for petitioner as to the

                                         additions to tax under

                                         sections 6651(a)(2) and 6654.