Opinion
6020-21S
04-05-2023
RUBY TANG, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
For the Petitioner: RUBY TANG, PRO SE For the Respondent: SCOTT A. HOVEY, ESQ. IRS OFFICE OF CHIEF COUNSEL
ORDER
Alina I. Marshall Judge
Pursuant to Rule152(b), Tax Court Rules of Practice and Procedure, it is
ORDERED that the Clerk of the Court shall transmit herewith to petitioner and respondent a copy of the pages of the transcript of the remote trial in this case before Judge Alina A. Marshall, where the place of trial was designated as Washington, D.C., containing her oral findings of fact and opinion rendered at that trial session at which the case was heard.
In accordance with the oral findings of fact and opinion, an appropriate decision will be entered.
In the Matter of: RUBY TANG, Petitioner, v.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
Docket No. 6020-21S
Date: November 4, 2022
The above-entitled matter came on for bench opinion, pursuant to notice at 12:33 p.m.
For the Petitioner: RUBY TANG, PRO SE
For the Respondent: SCOTT A. HOVEY, ESQ. IRS OFFICE OF CHIEF COUNSEL
BEFORE: HONORABLE ALINA I. MARSHALL Judge
PROCEEDINGS (12:33 p.m.)
THE CLERK: Please bring your attention. The court is now in session. Judge Marshall is presiding.
THE COURT: Thank you, Mr. Mieth.
Welcome back to this session of the Tax Court.
Mr. Mieth, if you would, please call the case.
THE CLERK: Calling docket 6020-21S, Ruby Tang.
THE COURT: Thank you. Good afternoon, Ms. Tang.
MS. TANG: Good afternoon, Your Honor. Good afternoon, Mr. Mieth. (Whereupon, a bench opinion was rendered.)
Bench Opinion
Alina I. Marshall, Judge
THE COURT: So the Court has decided to render oral findings of fact and opinion in this case, and the following represents the Court's oral findings of fact and opinion. The oral findings of fact and opinion shall not be relied upon as precedent in any other case. The oral findings of fact and opinion are made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986 as amended, and Rule 152 of the Tax Court Rules of Practice and Procedure. Subsequent section references are to the code as amended and in effect at all relevant times, and all rule references are to the Tax Court rules of practice and procedure.
Petitioner appeared at trial pro se. Scott Hovey appeared on behalf of Respondent.
The issues remaining for decision are whether the statutory notice of deficiency issued to Petitioner for taxable year 2017 is valid. Whether Petitioner is entitled to deductions for charitable contributions and medical expenses, and whether Petitioner is liable for an accuracy related penalty under section 6662(a).
On the evidence before the Court and using the burden of proof principles explained below, the Court finds the following facts:
FINDINGS OF FACT
The parties filed with the Court a stipulation of facts with accompanying exhibits that are incorporated herein by this reference. Petitioner resided in Maryland when she filed her petition.
Petitioner filed a federal income tax return for taxable year 2017, claiming deductions in the amounts of $96,617 for medical and dental expenses, as well as $20,025 for cash charitable contributions. Respondent commenced an examination of Petitioner's 2017 return in 2019, and the examiner received written supervisory approval for imposing a substantial understatement accuracy related penalty or in the alternative, a negligence accuracy related penalty on October 16th-, 2019.-*
Respondent issued to Petitioner a notice of deficiency on February 4th, 2021. In that notice of deficiency, Respondent disallowed the deductions for medical and dental expenses and for charitable contributions, determined a $25,564 deficiency in Petitioner's federal income tax, and determined a section 6662(a) substantial understatement penalty of $5,112.80.
Petitioner timely filed a petition for redetermination with the Court, challenging the validity of the notice of deficiency and the disallowed deductions. At trial, Petitioner presented evidence regarding events in the administrative record that took place prior to the issuance of the notice of deficiency, asserting that the lack of audit on a particular date invalidated the notice. Petitioner did not present evidence or testimony regarding her medical and dental expenses or her charitable contributions.
DISCUSSION
I. Validity of the Notice of Deficiency
When determining the validity of a notice of deficiency, all. All we have generally required is that the notice provide a formal notification that a deficiency in taxes has been determined. Pietz v. Commissioner, 59 T.C. 207 213-14 (1972) While while there is no required format for notice of deficiency, it must fairly advise the taxpayer that the Commissioner has determined a deficiency and specified a year end amount.
Dees v. Commissioner, 148 T.C. 1, page 4 (2017), the The deficiency issued to Petitioner satisfies these requirements. Although Petitioner seeks to identify missing signatures and irregularities in Respondent's documents, we generally do not look behind a notice of deficiency to review what occurred during the course of an examination. See Greenberg's Express, Inc. v. Commissioner, 62 T.C. 324 327 (1974).
Section 7605(B), however, opens a narrow exception to that rule. Section 7605(B) provides that "[n]o no taxpayer shall be subjected to unnecessary examination or investigations, and only one inspection of a taxpayer's books of account shall be made for each taxable year unless the taxpayer requests otherwise, or unless the secretary after investigation notifies the taxpayer inviting that additional inspection is necessary.
Petitioner argues that the Internal Revenue Service account transcript for her 2017 tax year shows two audits, but it does not. Petitioner identifies the November 30, 2020, date on the Form 4549-A report of income tax examination changes, sent with her notice of deficiency and notes that this date differs from the one on the civil penalty approval form that was also sent with Petitioner's notice of deficiency. These different dates do not indicate that a second audit occurred.
Furthermore, Petitioner also offers a conflicting view when she argues that the notice of deficiency is invalid because an audit never occurred on the specific date of November 30th-, 2020.
We have held that the Commissioner does not conduct a second examination and he does not obtain any new information. Estate of Sower v. Commissioner, 149 T.C. 279 289 (2017). We have also held that there was no second examination when a taxpayer failed to meet his burden, to show that there was a second examination of his books of account when the Commissioner issued a notice from the returns already in his possession. Id.;
See also Hough v. Commissioner, 882 F.2d 1271 (7th Cir. 1989), aff'g T.C. Memo 1986-229. Here, petitioner has failed to meet her burden to show that there was a second examination. Estate of Sower, supra, 149 T.C. at 289. Rice v. Commissioner, T.C. Memo 1994-204. Upon review of the record, we conclude that there was no second examination, and that section 7605(b) does not preclude Respondent from making the determinations in the notice of deficiency.
In questioning the validity of the notice of deficiency, Petitioner also asserted that the notice was mailed after the expiration of the three-year period of limitations. Petitioner's tax return for taxable year 2017 was filed prior to the due date, so it is considered as filed on the last day, i.e. April 17th, 2018. Section 6501(b)(1). The notice of deficiency was issued to Petitioner on February 4th, 2021, which is within three years of April 17th, 2018. We conclude that the period of limitations had not expired at the time the notice of deficiency for this case was issued and that the notice of deficiency is valid.
II. Deductions
In general, the Commissioner's determinations in a determination and notice of deficiency are presumed correct, and Petitioner bears the burden of proving them erroneous by preponderance of the evidence. Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111115 (1933). The taxpayer bears the burden of proving entitlement to any deduction claimed. Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79 84 (1992).
With respect to deductions for medical and dental expenses and charitable contributions, Petitioner has offered no evidence. She has offered no supporting documents and did not testify about her expense about her deductions. Petitioner has failed to carry her burden of proving entitlement to the deductions claimed so they are disallowed.
III. Penalties
Section 6662(b)(2) imposes a twenty percent penalty on any underpayment attributable to any "substantial understatement of income tax." An understatement is "substantial" if it exceeds the greater of $5,000 or ten percent of the tax required to be shown on the return. Section 6662(d)(1)(A). Under section 7491(c), the Commissioner bears the burden of production with respect to the liability of an individual for any penalty. To satisfy this burden he must present sufficient evidence to show that it is appropriate to impose the penalty in the absence of available defenses. See Higbee v. Commissioner, 116 T.C. 438, 446 (2001). Respondent's burden of production under section 7491(c) also includes establishing compliance with section 6751(b)(1), which timely requires which requires timely supervisory approval of penalties. See Graev v. Commissioner, 149 T.C. 485 493 (2017), supplementing and overruling in part 147 T.C. 460 (2016).
Section 6751(b)(1) requires that the initial determination of a penalty be approved in writing by the immediate supervisor of the individual making that initial determination. Respondent presented a signed civil penalty approval form dated October 16th-, 2019, seeking approval for section 6662(a) substantial understatement penalty, and testimony from a revenue agent authenticating the document. Respondent has thus shown that penalty approval was received well before the notice of deficiency was issued, and Petitioner has not shown that the penalty approval was untimely received. See Frost v. Commissioner, 154 T.C. 23 34-3-5 (2020). Accordingly, we hold that Respondent has established compliance with section 6751(b) as to the penalty asserted in this case.
Respondent has also shown that Petitioner's understatement exceeds the greater of $5,000 or ten percent of the tax required to be shown on the return. Petitioner has not raised any defense for the underpayment. We therefore hold that the penalty applies.
Consistent with the preceding discussion, decision will be entered for Respondent.
This concludes the Court's oral findings of fact and opinion in this case.
Ms. Tang, thank you for your work on this case. And thank you to Mr. Hovey, who is not here. I hope you have a wonderful weekend. (Whereupon, at 12:47 p.m., the above-entitled matter was concluded.)
CERTIFICATE OF TRANSCRIBER AND PROOFREADER
CASE NAME: Ruby Tang v. Commissioner
DOCKET NO.: 6020-21S
We, the undersigned, do hereby certify that the foregoing pages, numbers 1 through 11 inclusive, are the true, accurate and complete transcript prepared from the verbal recording made by electronic recording by Elaine Larosee on November 4, 2022 before the United States Tax Court at its session in Washington, DC, in accordance with the applicable provisions of the current verbatim reporting contract of the Court and have verified the accuracy of the transcript by comparing the typewritten transcript against the verbal recording.
Samantha Stewart, CDLT-253 11/25/22
Transcriber Date
Shoshana Chana Axtell, CDLT-106 11/25/22.