Court Opinion

ID: 4334221
Source: CourtListenerOpinion
Date Created: 2018-11-14 01:34:37.836818+00
Date Added: 2024-06-11T14:47:51.215478
License: Public Domain

T.C. Summary Opinion 2003-11

                     UNITED STATES TAX COURT

                CALVIN L. EUBANKS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent

     Docket No. 9579-01S.              Filed February 13, 2003.

     Calvin L. Eubanks, pro se.

     Caroline R. Krivacka, for respondent.

     CARLUZZO, Special Trial Judge:   This case was heard pursuant

to the provisions of sections 6330(d) and 7463 of the Internal

Revenue Code in effect at the time the petition was filed.

Unless otherwise indicated, subsequent references to sections

other than sections 6320 and/or 6330 are to the Internal Revenue

Code of 1986, as amended and in effect for 1992.   Rule references

are to the Tax Court Rules of Practice and Procedure.    The
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decision to be entered is not reviewable by any other court, and

this opinion should not be cited as authority.

     On July 10, 2001, respondent issued to petitioner a Notice

of Determination Concerning Collection Action(s) Under Section

6320 and/or 6330 for unpaid 1992 Federal income tax and related

liabilities in the amount of $10,132.48.   The issue for decision

is whether petitioner is liable for the Federal income tax

liability reported on his untimely 1992 Federal income tax

return.   The resolution of this issue depends upon whether

certain income reported on petitioner’s 1992 return is includable

in petitioner’s income for that year.

Background

     Some of the facts have been stipulated and are so found.    At

the time the petition was filed, petitioner resided in Memphis,

Tennessee.

     Petitioner was one of three incorporators of W.H.Y.

Construction Company, Inc. (W.H.Y. or WHY), incorporated in

Tennessee on May 12, 1989.   W.H.Y. was administratively dissolved

by the Secretary of State of Tennessee on February 15, 1991,

because the corporation failed to file a report required by

Chapter 16 of the Tennessee Business Corporation Act.   While in

existence, W.H.Y. was involved in residential construction and

renovations.
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     Petitioner was associated with or employed by W.H.Y., and

performed what he describes as “quality control” services.

Petitioner’s relationship to W.H.Y. during 1992 is less than

certain because, as noted, the corporation had been dissolved the

previous year.

     During 1992, petitioner was involved with a renovation

project for a house that had been damaged by fire.       The cost of

some or all of the renovations was paid by State Farm Fire and

Casualty Company (State Farm).    In connection with the

renovations, State Farm issued a check for $18,587 payable to

petitioner “DBA WHY Construction”, which payment was reported on

a Form 1099-MISC, Miscellaneous Income.       Dunn Construction

Company (Dunn) also issued a Form 1099-MISC reflecting a payment

of $16,125 to petitioner for 1992.       No other background

information regarding this latter payment is included in the

record.   The above-referenced Forms 1099-MISC issued by State

Farm and Dunn are subsequently referred to as the Forms 1099.

     Apparently, respondent received the information reported on

the Forms 1099 but had no record of petitioner’s 1992 Federal

income tax return.   Sometime during 1998, a revenue officer

employed by respondent’s Collection Division contacted

petitioner.   After discussing the situation with petitioner and

confirming that petitioner had not previously filed a 1992

Federal income tax return, the revenue officer prepared
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petitioner’s 1992 return based in part upon the information

reported on the Forms 1099 and other information provided by

petitioner.

     Ultimately, petitioner’s 1992 Federal income tax return was

filed on August 12, 1998.   The return includes a Schedule C,

Profit or Loss From Business, on which the following items are

reported:

               Income                     $34,712

               Expenses:
               Car and truck                3,000
               Rent or lease                4,000
               Repairs, etc.                3,000
               Supplies                     1,000

               Net profit                  23,712

The income reported on the Schedule C represents the sum of the

amounts reported on the Forms 1099.    No other income is reported

on petitioner’s 1992 return.   The net profit reported on the

Schedule C is treated as net earnings from self-employment.     The

Federal income tax liability of $5,769 reported on the return

consists of a section 1 income tax liability of $2,419 and a

$3,350 section 1401 tax on self-employment income.   The section 1

income tax liability takes into account petitioner’s filing

status as single, a personal exemption deduction, the appropriate

standard deduction, and a deduction for one-half of the section

1401 tax.
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     Petitioner did not pay the tax liability reported on his

1992 return.   Based upon the liability reported on the return,

which does not include interest, additions to tax, or penalties,

petitioner and the revenue officer agreed to an installment

payment schedule at the time the return was prepared.   The terms

of the installment agreement are unclear, but it appears that

petitioner originally agreed to pay $100 per month toward his

outstanding 1992 Federal income tax liability.   We cannot tell

with any degree of certainty when the installment payments began

or ended, but as of the date of trial, petitioner had paid $2,514

towards his outstanding 1992 income tax liability.

     On September 8, 2000, respondent issued to petitioner a

Notice of Federal Tax Lien Filing and Your Right to a Hearing

Under IRC 6320 (the notice of lien).   According to the notice of

lien, petitioner’s then-outstanding liability for 1992 Federal

income tax and related items totaled $10,132.48.   Petitioner

timely submitted Form 12153, Request for Collection Due Process

Hearing.   Petitioner stated in this request that he disagreed

with the underlying liability because the liability in dispute

was computed taking into account income that he neither earned

nor received; namely, the income reported on the Form 1099 issued

by State Farm.   Petitioner’s administrative hearing was held on

February 13, 2001.   During the hearing, petitioner reiterated his

challenge to the underlying liability.   He did not raise any
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issues regarding alternative collection activity.

Discussion

     Issues that may be raised by a taxpayer at a section 6330(d)

administrative hearing are prescribed by statute, and include, as

relevant here, a challenge to the existence or amount of the

underlying tax liability if the taxpayer did not receive a

statutory notice of deficiency or did not otherwise have an

opportunity to dispute the underlying tax liability.    See sec.

6330(c)(2)(A) and (B); Kennedy v. Commissioner, 116 T.C. 255, 260

(2001).   If the validity of the underlying tax liability is at

issue, our review of respondent’s determination with respect to

that liability is de novo.   See Sego v. Commissioner, 114 T.C.

604, 609-610 (2000).

     In this case, we focus our attention on petitioner’s

challenge to the amount of his 1992 Federal income tax liability,

as reported on his 1992 Federal income tax return,1 as he has

raised no other issues either at the section 6330(d)

administrative hearing or before this Court.   See Rule 331(b)(4);

Pierson v. Commissioner, 115 T.C. 576, 580 (2000).     We further

limit our focus to the income reported on the Form 1099 issued by

     1
       Under the circumstances of this case, we decline to
consider whether the manner in which petitioner’s 1992 Federal
income tax return was prepared and filed provided him with an
opportunity to dispute the underlying tax liability reported on
that return. See Horn v. Commissioner, T.C. Memo. 2002-207;
Young v. Commissioner, T.C. Memo. 2003-6.
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State Farm, as petitioner has never challenged the income

reported on the Form 1099 issued by Dunn.2

     According to petitioner, he was surprised when he received

the notice of lien that indicated his 1992 liability exceeded

$10,000.   He now claims that he only agreed to the income and tax

reported on his 1992 return because he was under the impression

that the liability reported on the return constituted his entire

liability for that year.   As noted, the liability reported on his

1992 return does not include interest, additions to tax, or

penalties.   The liability reflected in the notice of lien does.

     Petitioner claims that he only agreed to report the income

shown on the Form 1099 issued by State Farm because he thought

that he could afford to pay the resultant Federal income tax

liability through the installment agreement.   He claims that

respondent, in effect, violated the terms of the installment

agreement by subsequently demanding a higher monthly payment than

originally agreed.

     Petitioner now takes the position that the income reported

on the Form 1099 issued by State Farm was actually paid to W.H.Y.

He admits that he received the check, but claims that he turned

it over to officials of W.H.Y.    He further claims that he did not

     2
       Petitioner argued at trial that he was not required to
file a 1992 Federal income tax return because of the amount of
income he earned during that year. Even were we to consider only
the uncontested income reported on the Form 1099 issued by Dunn,
this argument would fail. See sec. 6012(a).
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and could not have negotiated the check.   According to

petitioner, because respondent failed to rebut this contention by

producing the relevant canceled check from State Farm, the income

is not includable in his 1992 income.   We disagree.

     We consider it significant that the income now in dispute

was originally reported on petitioner’s 1992 return.   Although

the circumstances surrounding the preparation and filing of that

return are less than routine, we are not persuaded that the items

of income shown on petitioner’s return are incorrect and reported

out of convenience, rather than correct and reported as required.

“Statements made on a tax return signed by the taxpayer have long

been considered admissions, and such admissions are binding on

the taxpayer, absent cogent evidence indicating they are wrong.”

Pratt v. Commissioner, T.C. Memo. 2002-279 (citing Waring v.

Commissioner, 412 F.2d 800, 801 (3d Cir. 1969), affg. T.C.

Memo. 1968-126; Lare v. Commissioner, 62 T.C. 739, 750 (1974),

affd. without published opinion 521 F.2d 1399 (3d Cir. 1975);

Rankin v. Commissioner, T.C. Memo. 1996-350, affd. 138 F.3d

1286 (9th Cir. 1998)).   Disregarding petitioner’s self-serving

and uncorroborated testimony on the point, see Niedringhaus v.

Commissioner, 99 T.C. 202, 212 (1992), we find no cogent evidence

that petitioner erroneously included in his 1992 income the

income reported on the Form 1099 issued by State Farm.
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     Petitioner admits to having received the check from State

Farm, and the check is made payable to him.   Furthermore, he

admits that he performed services (albeit as he views the matter,

as an employee of W.H.Y.) that generated the issuance of the

payment.   Looking at the return itself, it is obvious that some

negotiation occurred between petitioner and the revenue officer

who prepared petitioner’s return.   For example, the expenses

deducted on the Schedule C appear to be estimates that could be

based only upon information provided to the revenue officer by

petitioner.   Petitioner no doubt had an incentive to sign and

file the return based upon the expense deductions allowed and his

expectation that the liability reported on the return could be

paid through a manageable installment agreement.   Nevertheless,

we think it unlikely that petitioner would have agreed to report

on his return any income that he did not consider to be his,3 and

we are not persuaded by his presentation at trial that he did.

     The record does not establish that the Federal income tax

liability reported on petitioner’s 1992 return is overstated.

It follows that respondent’s determination to proceed with

collection of that liability should be sustained and we so hold.

     3
        Although we do not consider the point, we cannot help but
wonder whether, under circumstances such as presented in this
case, sec. 6404(b), which precludes a taxpayer from filing a
claim for abatement for certain Federal taxes, has been rendered
inoperative by the provisions of sec. 6330.
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    Reviewed and adopted as the report of the Small Tax Case

Division.

    To reflect the foregoing,

                                       Decision will be

                                  entered for respondent.