Court Opinion

ID: 6344084
Source: CourtListenerOpinion
Date Created: 2022-05-26 14:01:58.56486+00
Date Added: 2024-06-11T15:49:19.169911
License: Public Domain

United States Tax Court
                                 Washington, DC 20217

DANNY KARL DOBERSTEIN &
MARGERI KERR DOBERSTEIN,

                Petitioners
                                               Docket No. 10557-21S.
                v.

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 Chief Special Trial Judge Carluzzo at Los Angeles, California, on April 27,
2022, containing his oral findings of fact and opinion rendered at the conclusion of
the trial.

        In order properly to take into account any payments petitioners might have
made in connection with the deficiency that will be redetermined in accordance with
the oral findings of fact and opinion now being served, and notwithstanding the
representation made in the closing comments made by the Court in the oral findings
of fact and opinion, decision will be entered under Rule 155.

                                      (Signed) Lewis R. Carluzzo
                                       Chief Special Trial Judge

                                  Served 05/26/22
                                                                 3
1    Bench Opinion by Judge Lewis R. Carluzzo

2    April 27, 2022

3    Danny Karl Doberstein & Margeri Kerr Doberstein v.

4    Commissioner

5    Docket No. 10557-21S

6                 THE COURT:   The Court has decided to render oral

7    findings of fact and opinion in this case and the

8    following represents the Court's oral findings of fact and

9    opinion (bench opinion).     Section references made in this

10   bench opinion are to the Internal Revenue Code of 1986, as

11   amended, in effect for the relevant period, and Rule

12   references are to the Tax Court Rules of Practice and

13   Procedure.     This bench opinion is made pursuant to the

14   authority granted by section 7459(b) and Rule 152.

15                This proceeding for the redetermination of a

16   deficiency is a small tax case subject to the provisions

17   of section 7463 and Rules 170 through 174.      Except as

18   provided in Rule 152(c), this bench opinion shall not be

19   cited as authority, and pursuant to section 7463(b) the

20   decision entered in this case shall not be treated as

21   precedent for any other case.

22                Danny Karl Doberstein appeared without counsel.

23   References to petitioner are to him.      There was no

24   appearance by or on behalf of Margeri Kerr Doberstein.

25   The case will be dismissed for lack of prosecution as to
                                                              4
1    her, but the decision entered against her will reflect the

2    resolution of the issue here in dispute.    Trent D. Tanzi

3    appeared on behalf of respondent.

4              In a notice of deficiency dated February 16,

5    2021 (notice) respondent determined a deficiency in

6    petitioner's 2017 Federal income tax.    As a technical

7    matter, the issue for decision is whether petitioners are

8    entitled to a deduction for a $5,500 contribution to an

9    individual retirement account (the contribution).   From

10   petitioner's presentation at trial, it would seem that in

11   reality, petitioners commenced this case not because of

12   the potential increase in their 2017 Federal income tax

13   liability resulting from the disallowance of the deduction

14   for the contribution, but because of their annoyance and

15   frustration in dealings with respondent before the notice

16   was issued and because of their concern that they might be

17   subject to an additional Federal income tax liability

18   beyond the deficiency here in dispute.   More on these

19   points later.

20             The underlying facts in this case are easily

21   summarized, even without the convenience of a written

22   stipulation of facts.

23             Petitioner is an engineer by profession and

24   trade who operated a sole proprietorship for many years

25   (petitioner's business).   In years before 2017, as a self-
                                                              5
1    employed individual, he wasn't bring in enough, "dough" as

2    he puts it, so he needed other sources of income.     In

3    2017, although he continued to operate his business, he

4    was also employed as an engineer by the U.S. Department of

5    Defense.

6               No income was earned from the business, and no

7    income from the business is reported on petitioners' 2017

8    joint Federal income tax return (return).

9               During 2017 and for many years before,

10   petitioner maintained a traditional individual retirement

11   account (IRA) and a simplified employee plan-individual

12   retirement (SEP-IRA) account with Charles Schwab & Co.,

13   Inc. (Charles Schwab).   Apparently, the SEP-IRA account

14   was opened while petitioner was self-employed, and for

15   many years he claimed deductions not challenged by

16   respondent for contributions made to his SEP-IRA account.

17              Petitioners claimed a deduction for the

18   contribution on the return.     According to petitioner, the

19   contribution was made, or at least intended to be made to

20   his IRA.   According to a 2017 Form 5498, IRA Contribution

21   Information, prepared and issued by Charles Schwab, (the

22   form) the contribution was made to petitioner's SEP-IRA.

23   Petitioner claims that the form results from a coding

24   error made by Charles Schwab.     Petitioner attempted to get

25   Charles Schwab to correct what he believes to be a
                                                                  6
1    mistake, but the company refused to do so.

2                There is no need to burden this bench opinion

3    with a discussion of the ins and outs of allowable

4    deductions for contributions made to individual retirement

5    accounts.   Petitioner agrees that if the contribution is

6    treated as a contribution to his SEP-IRA, then petitioners

7    are not entitled to a deduction for the contribution.       On

8    the other hand, taking into account the income that was

9    reported on the return, we are satisfied from what has

10   been presented that petitioner's would be entitled to a

11   deduction for the contribution if it were treated as a

12   contribution to petitioner's IRA.

13               As a general rule, the Commissioner's

14   determination of a taxpayer's liability in a notice of

15   deficiency is presumed correct, and the taxpayer bears the

16   burden of proving that the determination is incorrect.

17   Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).

18   Deductions are a matter of legislative grace, and the

19   taxpayer generally bears the burden of proving entitlement

20   to any deduction or credit claimed.   Rule 142(a); INDOPCO,

21   Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial

22   Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).

23               Applying that principle to this case requires

24   that petitioners demonstrate that they are entitled to the

25   deduction for the contribution, which in turns requires
                                                                  7
1    that they demonstrate that the contribution was made to

2    petitioner's IRA rather than his SEP-IRA.     Although

3    neither side apparently sought account information records

4    from Charles Schwab, petitioner made contact with that

5    company and the company refused to acknowledge that the

6    information shown on the form is incorrect.    As it turns

7    out, after considering the evidence presented, it is not

8    clear whether the contribution was made to petitioner's

9    IRA or his SEP-IRA.   Given that petitioners' bear the

10   burden of proof, the uncertainty on the point requires

11   that we resolve the dispute against petitioners.     It

12   follows that respondent's disallowance of that deduction

13   is sustained.

14             In closing we think it appropriate to comment on

15   petitioner's annoyance and frustration over events that

16   occurred before the notice was issued.   Petitioner was

17   particularly annoyed with receiving a letter from

18   respondent inviting a response from petitioners by a

19   certain date.   The annoyance resulted not so much from the

20   invitation to respond, or the nature of the response

21   requested, which was in essence an invitation for

22   petitioners to concede the deduction for the contribution,

23   but the annoyance rather related to the fact that the

24   letter was mailed after the due date for the response.       We

25   can understand how a taxpayer might be annoyed at such a
                                                                  8
1    situation, but the event plays no role in the resolution

2    of the technical issue before us.    As to petitioner's

3    concern that a proposed adjustment conceded by respondent

4    before the notice was issued might somehow resurface, we

5    note that the decision to be entered by the Court in this

6    case will for all intent and purposes establish

7    petitioner's 2017 Federal income tax liability with

8    finality.

9                To reflect the foregoing, an appropriate order

10   dismissing the case with respect to Margeri Kerr

11   Doberstein will be issued, and decision will be entered

12   for respondent.    This concludes the Court's bench opinion

13   in this case.

14               (Whereupon, at 3:07 p.m., the above-entitled

15               matter was concluded.)

16

17

18

19

20

21

22

23

24

25