Opinion
8483-20
12-22-2023
DENNIS R. TURNER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
James S. Halpern Judge
By Notice of Deficiency in Tax (Notice), dated February 10, 2020, respondent determined deficiencies in petitioner's income tax and penalties as follows.
All section references are to the Internal Revenue Code of 1986, as amended. Rule references are to the Tax Court Rules of Practice and Procedure.
Additions to Tax
Year
Deficiency in Tax
2013
$5,595
$1,259
$1,399
2014
10,280
1.972
2,191
2015
324,234
72.550
*69,326
$170
2016
88,977
20.020
*13,791
2,127
* Amounts calculated in Substitute for Return (SFR) discussed infra.
Trial in this case was conducted during a remote Special Trial Session on May 16, 2023. Seattle, Washington is listed as the place of trial for this remote Special Session. The parties executed a First Stipulation of Facts (First Stipulation) consisting of 18 exhibits and comprising 728 pages. The parties filed a First Supplemental Stipulation adding another 5 exhibits and an additional 49 pages. Attached to the First Stipulation as Exhibits 2-J, 4-J, 6-J, and 8-J are SFRs prepared by respondent on April 29, 2019, pursuant to section 6020(b) for petitioner's tax years 2013 through 2016, respectively. The SFRs for each year are supported by a common Form 4549-A, Report of Income Tax Examination Changes. For each year, lines 11 through 14 of the form show "Total corrected tax liability" (line 11), "Total tax shown on return" (line 12), "Adjustments" (line 13) and, subtracting the line 12 amount from the line 11 amount, the difference, after any adjustments, which is the "Deficiency-increase in tax" for the year (line 14). For each of the years in issue, line 12 (Total tax shown on return) is $0, no line 13 adjustments are made, and the line 11 amounts (Total corrected tax liability) agree with the line 12 amounts (Deficiency ... in tax). Moreover, the deficiencies in tax on the Form 4549-A agree with the deficiencies in the Notice.
Attached to the First Stipulation as Exhibits 3-J, 5-J, 7-J, and 9-J, are petitioner's signed Forms 1040, Individual Income Tax Returns for tax years 2013 through 2016, respectively, all submitted to respondent on December 27, 2021. The first two, Exhibits 3-J and 5-J, for 2013 and 2014, respectively, show positive amounts of total tax due for those years: $966 and $1,480, respectively. The last two, Exhibits 5-J and 7-J show $1 tax due.
At the trial, it emerged that the principal issues in dispute were two items of gross income not acknowledged by petitioner and his failure to adequately substantiate his business deductions. The income items were Schedule C-l gross receipts adjustments of $2,458 and $10,380 for 2014 and 2015, respectively. Petitioner insisted that the stipulated exhibits supported his claimed deductions. Respondent's counsel acknowledged that he was able to corroborate $42,250.02 of payments petitioner had made for all the years at issue. See transcript, pp. 71-72. At the conclusion of the trial, the Court set a briefing schedule: petitioner to file an opening brief by July 31, 2023, respondent to file an answering brief by September 14, 2023, and petitioner to reply, if he desired, by September 25, 2023. We instructed petitioner that he bore the burden of proof. See Rule 142(a). We directed petitioner to Rule 151, concerning briefs, and instructed him as to the importance of making proposed findings of fact. See Rule 151(e)(3). We advised him to make a spreadsheet linking the stipulated exhibits to his claims of deductible and substantiated expenditures.
Petitioner failed timely to file an opening brief, and, following a telephone call with the parties, the Court extended petitioner's time to file an opening brief until September 19, 2023, and extended the other briefing times accordingly. Petitioner filed no opening brief, and, by order served October 13, 2023, the Court precluded petitioner from filing his seriatim opening brief and relieved respondent of his obligation to file an answering brief.
Except for petitioner's testimony, this case was stipulated, and petitioner had available to him 23 exhibits and 777 pages of supporting documents. Petitioner had an obligation to assist the Court by organizing that material, which was extensive, and giving the Court his views of the controlling legal authorities. See Bond v. Commissioner, T.C. Memo. 2012-313, at *9. A taxpayer's failure to file a brief "fully justifies the dismissal of all issues as to which [he has] the burden of proof." Stringer v. Commissioner, 84 T.C. 693, 708 (1985), aff'd without published opinion, 789 F.2d 917 (4th Cir. 1986). The failure of a party "to comply with the dictates of Rule 151 and the specific directions of the Court . . . can be said to constitute a default under Rule 123(a)." Id. at 706. We forebear to do so in this case, but we do decide the two gross receipt adjustments and his entitlement to business deductions against petitioner because of his failure to satisfy his burden of proof. See Hough v. Commissioner, T.C. Memo. 1986-229, 1986 Tax Ct. Memo LEXIS 381, at *12, aff'd, 882 F.2d 1271 (7th Cir. 1989). Nevertheless, because respondent acknowledged corroborating $42,250.02 of payments, we assume that petitioner's remaining deficiencies in tax must be adjusted accordingly. We leave it to the parties to determine how to allocate that sum.
Section 6651(a)(1) provides for an addition to the tax for failing to timely file a return. Section 6651(a)(2) imposes an addition to tax for failure to pay, when due, taxes (other than estimated taxes) which are owed on the return, or, in this case, the substitutes for return. Section 6654(a) imposes an addition to tax for failure by an individual to pay estimated income tax. Respondent has carried his burden of production with respect to the additions to tax. See sec. 7591(c). With respect to the additions under section 6651(a)(1) and (2), petitioner has failed to show reasonable cause and lack of willful neglect. The maximum period for accrual on additions under section 6651(a)(2) has run. We sustain the additions.
We are prepared to enter decision for respondent except for the $49,250.02 adjustment described and one other issue. Section 6201(a)(1) requires the Secretary to assess all taxes shown on a return. As relevant, section 6211(a) defines a deficiency as the amount by which the tax imposed exceeds the excess of the tax shown on the return over any rebates. The returns filed by petitioner were filed after the Notice was issued, and that may explain why the deficiencies determined in the Notice did not take into account the tax shown by petitioner on his returns. The amounts are inconsequential for 2015 and 2016 but not for 2013 and 2014. In fight of this issue, we wish the parties to address what the correct amount of the deficiencies to be included in our decision assuming that, but for the two issues described, we would sustain the deficiencies and additions to tax determined in the Notice. It is, therefore, ORDERED that, no later than January 8, 2024, each party shall file with the Court a memorandum discussing the proper amount of deficiencies and additions to tax to be included in our decision.