Opinion
9721-19S
01-10-2022
Fredric W. Schultz, V, Petitioner v. Commissioner of Internal Revenue, Respondent
ORDER OF DISMISSAL AND DECISION
Joseph H. Gale, Judge
This case was calendared for a remote trial at the Baltimore, Maryland trial session commencing November 2, 2020. On October 8, 2020, respondent filed a Status Report representing that the parties had reached a basis of settlement with respect to the deficiency determined for petitioner's taxable year 2016, and that respondent had sent petitioner a proposed decision document for signature. The Court accordingly continued the case and directed the parties to file, on or before December 28, 2020, a proposed stipulated decision or, in the alternative, a joint status report. Respondent subsequently advised the Court in a Status Report filed December 28, 2020, that he had not yet received a signed decision document from petitioner, even though petitioner had informed respondent in October of 2020 that he intended to sign and return it. Respondent also stated that he planned to file a motion to dismiss for lack of prosecution if his Status Report did not elicit any further response from petitioner.
On February 1, 2021, respondent filed a Motion to Dismiss for Failure to Properly Prosecute (Motion to Dismiss), wherein he requests that this case be dismissed for failure to properly prosecute and that a decision be entered sustaining a deficiency for petitioner's 2016 taxable year in the amount of $4,806, as determined in the notice of deficiency. The Court thereafter on February 17, 2021, issued an Order to Show Cause directing petitioner to file, on or before March 19, 2021, a response in writing showing cause why respondent's Motion to Dismiss should not be granted and this case should not be dismissed for failure to properly prosecute. The Order to Show Cause advised petitioner that he could avoid dismissal for failure to properly prosecute by signing and returning to respondent's counsel before March 19, 2021, the decision document respondent's counsel had previously provided to him. The Order to Show Cause was electronically served on petitioner on February 17, 2021. To date, petitioner has not responded to the Order to Show Cause.
Because petitioner consented to electronic service, all Court documents are served on petitioner electronically. To date, the Court has received no notification that any electronic service has not been delivered.
Respondent's Motion to Dismiss alleges, and petitioner has not disputed, that subsequent to the filing of the Petition, the parties reached a settlement in accordance with petitioner's desire to concede the case in full. Consequently, on September 25, 2020, respondent's counsel mailed a proposed decision document to petitioner reflecting a deficiency of $4,806, as determined in the notice of deficiency. Respondent thereafter attempted to contact petitioner by telephone on several occasions, but was unable to reach him until October 23, 2020. At that time, petitioner confirmed that he had received and would review the settlement package respondent had sent to him. After that conversation, respondent sent petitioner a follow-up email on October 26, 2020. Petitioner replied by email on October 28, 2020, advising that he would sign and return the decision document. The next day, petitioner called respondent's counsel to say that he would return the decision document by the close of business that day. However, respondent did not receive a signed copy of the decision document. Nor did respondent receive any response to several additional follow-up emails and a duplicate settlement package that he sent to petitioner over the ensuing weeks. To date, the parties have not filed a proposed stipulated decision.
Respondent's specific allegations concerning the proposed settlement and petitioner's failure to cooperate in reaching a final resolution of this case are detailed in the Motion to Dismiss, and petitioner had an opportunity to dispute those allegations by responding to the Order to Show Cause. Given petitioner's failure to dispute respondent's allegations, and the absence of any contrary evidence, we treat them as established for purposes of the Motion to Dismiss.
The Court may dismiss a case at any time and enter a decision against the taxpayer for failure properly to prosecute his case, failure to comply with the Rules of this Court or any order of the Court, or for any cause which the Court deems sufficient. Rule 123(b); Stearman v. Commissioner, 436 F.3d 533, 535-537 (5th Cir. 2006), aff'g T.C. Memo. 2005-39; Bauer v. Commissioner, 97 F.3d 45, 48-49 (4th Cir. 1996); Edelson v. Commissioner, 829 F.2d 828, 831 (9th Cir. 1987), aff'g T.C. Memo. 1986-223. Although we advised petitioner that he could avoid dismissal by signing the proposed decision document and returning it to respondent, he has not done so. Petitioner has also failed to comply with the Court's Order to Show Cause directing him to file a response to respondent's Motion to Dismiss. We therefore conclude that petitioner does not wish to continue prosecuting this case or to dispute the terms of the settlement reflected in the proposed decision document that respondent sent to him (and which he acknowledged receiving). We will accordingly dismiss petitioner's case for failure to properly prosecute.
All Rule references are to the Tax Court Rules of Practice and Procedure, and all section references are to the Internal Revenue Code in effect at all relevant times.
In the notice of deficiency, respondent determined a deficiency of $4,806 in petitioner's 2016 Federal income tax. The notice of deficiency indicates that petitioner failed to report the following amounts of income: (1) a taxable distribution from a retirement account of $8,554; (2) unemployment compensation of $8,600; and (3) a taxable health savings account distribution of $1,155. The notice of deficiency also indicates that the foregoing unreported income items were reported on information returns submitted to respondent by third parties.
The Commissioner's determinations in a notice of deficiency are generally entitled to a presumption of correctness. See Rule 142(a). In a case involving unreported income, as in the instant matter, the Court of Appeals for the Fourth Circuit, where an appeal in this case would ordinarily lie, has held that the presumption of correctness applies once the Commissioner makes a "minimal evidentiary showing" to support a link between the taxpayer and an income-producing activity. See Williams v. Commissioner, 999 F.2d 760, 766 (4th Cir. 1993), aff'g T.C. Memo. 1992-153. If the Commissioner produces evidence linking the taxpayer with an income-producing activity, the burden of proof shifts back to the taxpayer to prove by a preponderance of the evidence that the Commissioner's determinations are arbitrary or erroneous. Helvering v. Taylor, 293 U.S. 507, 515 (1935); Tokarski v. Commissioner, 87 T.C. 74, 76-77 (1986).
Pursuant to sec. 7463(b), the decision entered in this case is not reviewable in any other court. We nevertheless generally follow the precedent of the Court of Appeals to which an appeal would otherwise lie. See Golsen v. Commissioner, 54 T.C. 742, 757 (1970), aff'd, 445 F.2d 985 (10th Cir. 1971).
In this case, neither the Petition nor the Amended Petition assigns error to any of respondent's unreported income determinations. Petitioner's pleadings instead indicate that he believed tax had already been withheld on funds he withdrew from an inherited retirement account, and that he wished to resolve his tax liability for the year at issue through an installment agreement. We accordingly deem petitioner to have conceded that he received and failed to report income as determined in the notice of deficiency. See Rule 34(b)(4). Furthermore, even if petitioner's pleadings could be construed to assign error to respondent's unreported income determinations, the notice of deficiency itself would satisfy respondent's burden of production since it indicates that respondent determined the specific amounts of those unreported income items based on information returns filed by third-party payers. See Banister v. Commissioner, T.C. Memo. 2008-201, 2008 WL 3925877, at *2 (finding that a notice of deficiency indicating third parties paid the taxpayer the specific amounts in question satisfied the minimal evidentiary burden, even though direct evidence was not in the record, where the taxpayer implicitly acknowledged that he received at least some income during the year at issue), aff'd, 418 Fed.Appx. 637 (9th Cir. 2011). Respondent's deficiency determination is accordingly entitled to the presumption of correctness.
Although sec. 6201(d) may in certain circumstances shift the burden of production to the Commissioner when a disputed information return forms the basis for his deficiency determination, such circumstances are not present here. Petitioner has failed to cooperate with respondent's counsel in reaching a final resolution of this case, and sec. 6201(d) applies only where "the taxpayer has fully cooperated with the Secretary" in a court proceeding. Moreover, petitioner has not assigned error to respondent's unreported income determinations and has not disputed the allegation in the Motion to Dismiss that he indicated to respondent that he wished to concede this case in full. Petitioner therefore has not raised any "reasonable dispute with respect to any item of income reported on an information return" as required under sec. 6201(d).
All of the material allegations set forth in the Petition in support of the assignments of error have been denied in respondent's Answer. Petitioner has not claimed or shown entitlement to any shift in the burden of proof under section 7491(a). See sec. 7491(a)(2)(B). Accordingly, the burden of proof rests with petitioner concerning any error in the deficiency determination. As petitioner has adduced no evidence in support of the assignments of error in the Petition, he has failed to satisfy his burden of proof. We thus sustain the deficiency in full.
The foregoing considered, it is
ORDERED that the Court's Order to Show Cause served February 17, 2021, is hereby made absolute. It is further
ORDERED that respondent's Motion to Dismiss for Failure to Properly Prosecute, filed February 1, 2021, is granted, and this case is hereby dismissed for failure to properly prosecute. It is further
ORDERED and DECIDED that there is a deficiency in petitioner's 2016 Federal income tax due in the amount of $4,806.