Opinion
8483-20
07-01-2024
DENNIS R. TURNER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
James S. Halpern Judge
By a notice of deficiency dated February 10, 2020, respondent advised petitioner of his determination of deficiencies in petitioner's income tax for the taxable years ended December 31, 2013, 2014, 2015, and 2016, additions to tax under section 6651(a)(1) and (2) for each of those years, and, for 2015 and 2016, additions to tax under section 6654. Respondent based his deficiencies on substitutes for returns prepared under section 6020.
Unless otherwise indicated, statutory references are to the Internal Revenue Code, 26 U.S.C., in effect for the years in issue, regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect for those years, and Rule references are to the Tax Court Rules of Practice and Procedure in effect at the relevant times.
On May 1, 2020, petitioner mailed a petition for redetermination of the deficiencies respondent determined. More than a year and a half later, on December 27, 2021, petitioner submitted to respondent a signed Form 1040, Individual Income Tax Return, for each of the years in issue. For the most part, petitioner's returns report the income on which respondent based his deficiencies, but they also report deductions that respondent did not take into account. Therefore, while petitioner's returns reported amounts of tax for three of the four years, those amounts were less than the deficiencies respondent determined. In particular, line 61 of petitioner's 2013 return shows a "total tax" of $966. Line 64a of that return shows an earned income credit of $231. And line 76 shows an amount owed of $735 ($966 - $231). By contrast, respondent determined a deficiency of $5,595 for petitioner's 2013 taxable year.
Petitioner's 2016 return shows no income or tax.
Line 63 of petitioner's 2014 return shows a total tax of $1,480. By contrast, respondent determined a deficiency of $10,280 for petitioner's 2014 taxable year.
Line 63 of petitioner's 2015 return shows a total tax of $1. Respondent determined a deficiency for petitioner's 2015 taxable year of $324,234.
At trial, we suggested that respondent's counsel or a revenue agent seek to reach an agreement with petitioner as to allowable expenses. Respondent's counsel replied that she had already done so, and had been "able to corroborate [only] $42,250.02" of the expenses petitioner claimed.
At the conclusion of the trial, we set a schedule for seriatim briefs. Even after we extended the deadline for petitioner's opening brief he failed to file one. Almost a month after the expiration of the extended deadline, we issued an Order precluding petitioner from filing an opening brief and relieved respondent of the responsibility for filing an answering brief.
In a subsequent Order, dated December 22, 2023 (December Order), we resolved that, because of petitioner's failure to file an opening brief, as required by Rule 151, we would decide against him all issues on which he bore the burden of proof. On the premise that respondent bore the burden of production under section 7491(c) in regard to the additions to tax, we concluded that he had met that burden. At that point, as explained in the December Order, we were left with two issues. First, respondent had not then identified the year or years to which the $42,250.02 of deductions he would allow related. The second issue was the impact, if any, on petitioner's deficiencies of the amounts of tax shown on the returns for 2013, 2014, and 2015 that petitioner submitted on December 27, 2021. In light of those issues, we directed "each party [to] file . . . a memorandum discussing the proper amount of deficiencies and additions to tax to be included in our decision."
Petitioner's failure to assign error to the additions to tax in his Petition and his subsequent failure to file a brief in the case may have relieved respondent of the burden of production under section 7491(c). See Funk v. Commissioner, 123 T.C. 213, 218 (2004); Henaire v. Commissioner, T.C. Memo. 2023-131, at *23-26.
Petitioner failed to respond to the December Order. Respondent submitted an initial Memorandum and then a Supplement. In his initial Memorandum, respondent advised us that the $42,250.02 of expenses he conceded were for 2016. Respondent's Memorandum also stated deficiencies and additions to tax for the years in issue. The deficiencies and additions to tax for 2013 and 2014 are the same as those stated in the notice of deficiency. The deficiency, section 6651(a)(1) addition to tax, and section 6654 addition to tax stated in respondent's Memorandum for 2015 are also the same as those stated in the notice of deficiency. Respondent's Memorandum also provides an amount for the section 6651(a)(2) addition to tax for 2015, which the notice of deficiency had stated would be computed at a later date, presumably because the notice was issued less than 50 months after April 15, 2016. The deficiency, section 6651(a)(1) addition to tax and section 6654 addition to tax stated in respondent's Memorandum for 2016 are less than the corresponding amounts stated in the notice of deficiency, presumably as a result of respondent's concession that petitioner was entitled to some of the deductions he claimed for that year. The Memorandum also provides an amount for petitioner's section 6651(a)(2) addition to tax which, again, the notice stated would be computed at a later date.
In computing the deficiencies stated in his Memorandum for each of the years in issue, respondent determined that the amount shown on petitioner's return was zero. Respondent's Memorandum offered no explanation, however, of why the amounts of tax shown for 2013, 2014, and 2015 on the signed returns petitioner submitted on December 27, 2021, did not reduce his deficiencies for those years. We therefore directed respondent to "file with the Court a supplement to his memorandum addressing why, in computing the remaining deficiencies, respondent did not reduce the original deficiencies by the amounts of tax reported on petitioner's subsequent returns." In the Supplement to his Memorandum, for reasons explained below, respondent asked us to uphold the computations set forth in his Memorandum, in which petitioner's deficiencies for 2013, 2014, and 2015 were not reduced by the amounts shown as tax on the returns petitioner submitted for those years on December 27, 2021.
Applicable Law
In simplified form, section 6211(a) defines the term "deficiency" to mean the excess of the tax imposed over "the amount shown as the tax by the taxpayer upon his return, if a return was made by the taxpayer and an amount was shown as the tax by the taxpayer thereon." Consequently, the Commissioner need not follow deficiency procedures to assess tax shown on a taxpayer's return. Instead, he can summarily assess that tax under section 6201(a)(1), which requires the assessment of "all taxes determined by the taxpayer."
Treasury Regulation § 301.6211-1(a) provides:
Any amount shown as additional tax on an "amended return," so-called (other than amounts of additional tax which such return clearly indicates the taxpayer is protesting rather than admitting) filed after the due date of the return, shall be treated as an amount shown by the taxpayer "upon his return" for purposes of computing the amount of a deficiency.
We assume that the regulation refers to amended returns as "so-called" because, while they are common in practice, they are not expressly authorized by the Code and, consequently, the Internal Revenue Service can either accept or reject them in its discretion. E.g., Badaracco v. Commissioner, 464 U.S. 386, 393 (1984).
Section 6213(a) bars the Commissioner from assessing a deficiency without issuing a notice of deficiency. If the Commissioner issues a notice of deficiency, the taxpayer generally has 90 days to petition this Court for redetermination of the deficiency. If the taxpayer files a petition, the bar on assessment of the deficiency remains in effect until this Court's decision in the case becomes final.
Section 6213(d) allows a taxpayer to waive the bar on assessment imposed by section 6213(a), either before or after issuance of a notice of deficiency. A waiver under section 6213(d) need not take any particular form, but it must be signed by the taxpayer, and "filed with the district director or other authorized official under whose jurisdiction the audit or other consideration of the return in question is being conducted." Treas. Reg. § 301.6213-1(d). In addition, the notice of waiver, whatever form it takes, must "specifically state" that the taxpayer intends to waive the section 6213(a) restrictions on assessment. Hull v. Commissioner, T.C. Memo. 2014-36, at *12. A waiver under section 6213(d) can apply to all or part of a deficiency.
We addressed section 6213(a) and (d) in Powerstein v. Commissioner, 99 T.C. 466 (1992). The taxpayers in Powerstein filed amended returns for some of the years in issue before the Court that reported additional tax. They also filed amended returns for other years before the Court showing less tax than they had paid. If the amended returns had been accepted in toto, the taxpayers would have been entitled to a net refund. The Commissioner accepted the amended returns reporting additional tax but declined to process the amended returns showing refunds. He then assessed the additional tax shown on the amended returns he accepted. The taxpayers moved to enjoin that assessment, arguing that it was barred by section 6213(a).
In concluding that "the assessments in question were made in violation of section 6213(a)," we noted that the assessed amounts were within our jurisdiction to redetermine. Citing Naftel v. Commissioner, 85 T.C. 527, 533 (1985), we noted that, "[o]nce a petition is filed with this Court, our jurisdiction extends to the entire subject matter of the correct tax for the taxable year." Powerstein, 99 T.C. at 472.
Moreover, because the assessed amounts remained in dispute, we concluded that they were not "shown upon" petitioners' amended returns. The notice of deficiency in Powerstein covered five years: 1984 through 1988. In an amended answer, the Commissioner asserted that the original notice had overstated the taxpayers' income for 1984 and 1985 but understated their taxable income for the three later years. In their reply to the Commissioner's amended answer, the taxpayers alleged that their taxable income for 1986, 1987, and 1988 was less than the amounts asserted in the amended answer. "Thus, it [was] clear," we reasoned, "that [the taxpayers] continue[d] to dispute the increased deficiencies" the Commissioner had determined. Id. at 473.
The taxpayers' amended returns did not "amount to a waiver of the restrictions on assessment as contemplated under section 6213(d)." Id. at 474. "To the contrary," we wrote, "the several amended returns were all filed at once in a misguided attempt to generate a net refund for the years in issue." Id. Under those circumstances, we declined to find that the taxpayers had "consented to immediate assessment of the amounts in dispute or otherwise waived protection provided in section 6213(a)." Id.
Respondent's Argument
Respondent acknowledges that "the tax shown on a return generally may be summarily assessed pursuant to section 6201(a)." But he argues that the bar on assessment provided in section 6213(a) applies to the amounts of tax shown on petitioner's returns "because the amounts are in dispute and subject to this Court's jurisdiction." He adds:
[I]n light of Powerstein, and under the circumstances of the case at hand, Respondent does not believe that by Petitioner providing signed returns to Respondent's Counsel five weeks before trial, in preparation of litigation, and in an effort to narrow the issues before the Court during trial, Petitioner caused or intended to cause any portion of the amount reported on the amended delinquent returns to be excepted from, nor waive, section 6213.
We tried this case on May 16, 2023, almost a year and a half after petitioner submitted his returns. When petitioner submitted those returns, however, trial had been scheduled for January 31, 2022.
Respondent apparently views petitioner as continuing to dispute his liability even for the amounts of tax shown on his returns. Petitioner's intention to dispute those amounts, in respondent's view, was "clearly indicated by Petitioner continuing to trial, and only providing Respondent's Counsel with signed returns to aid[] in litigation, not to file the returns." According to respondent, the revenue agent and appeals officer assigned to petitioner's case "repeatedly requested that he file (signed) returns with them." If petitioner had "intended to admit the amount of tax," respondent surmises, "[he] would have provided the signed returns" to the revenue agent or appeals officer when requested. His "repeated refusals" to provide those returns "indicates his intention to protest, not admit, the amount of tax due."
Analysis
We are not convinced that, after submitting returns showing tax due, petitioner continued to dispute those amounts of tax. By respondent's own description, petitioner submitted the returns "in an effort to narrow the issues before the Court." Therefore, we could take petitioner's signed returns as admissions that he owed at least $735 of tax for 2013, $1,480 of tax for 2014, and $1 of tax for 2015. That petitioner "continu[ed] to trial" after providing those returns may show only that he believed his tax for each year was less than what respondent had determined.
On the other hand, petitioner's returns do not "specifically state" an intent to waive, in part, the section 6213(a) restriction on assessment. Cf. Hull, T.C. Memo. 2014-36, at *12. Nor do the circumstances in which petitioner submitted those returns indicate an intent to waive the restriction. Treating the amounts of tax shown on those returns as described in section 6211(a)(1)(A) would authorize what might be viewed as a "back door" waiver.
Under the circumstances of this case, we need not decide whether respondent could have summarily assessed under section 6201(a)(1) the amounts shown as tax on the 2013, 2014, and 2015 returns petitioners submitted. Whether or not respondent could have assessed those amounts, he did not. No purpose would be served at this juncture in authorizing respondent to assess part of what he accepts to be deficiencies before our decision in the case becomes final.
Accordingly, it is
ORDERED AND DECIDED: That there are deficiencies in income tax due from petitioner for the taxable years 2013, 2014, 2015, and 2016 in the amounts of $5,595, $10,280, $324,234, and $73,712, respectfully; and
That there are additions to tax under section 6651(a)(1) due from petitioner for the taxable years 2013, 2014, 2015, and 2016 in the amounts of $1,258.88, $1,971.90, $72,550.13, and $16,585.20, respectfully; and
That there are additions to tax under section 6651(a)(2) due from petitioner for the taxable years 2013, 2014, 2015, and 2016 in the amounts of $1,398.75, $2,191, $80,611.25, and $18,428, respectfully; and
That there are additions to tax under section 6654 due from petitioner for the taxable years 2015 and 2016 in the amounts of $169.91 and $1,762.04, respectfully.