Opinion
6675-19S
03-02-2023
FROILAN NIGEL VILLAHERMOSA, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Diana L. Leyden Special Trial Judge
Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is
ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the remote trial in the above case before Special Trial Judge Diana L. Leyden at San Diego, California, on February 1, 2023, containing her oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, a decision will be entered for respondent.
In the Matter of:
FROILAN NIGEL VILLAHERMOSA, Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
No. 6675-19S
Date: February 1, 2023
The above-entitled matter came on for bench opinion, pursuant to notice at 8:57 a.m.
BEFORE: HONORABLE DIANA L. LEYDEN Special Trial Judge
APPEARANCES:
For the Petitioner: No Appearance
For the Respondent: No Appearance
PROCEEDINGS
THE CLERK: Calling docket number 6675-19S, Froilan Nigel Villahermosa.
(Whereupon, a bench opinion was rendered.)
Bench Opinion by Judge Diana L. Leyden
February 1, 2023
Froilan Nigel Villahermosa v. Commissioner of Internal
Revenue
Docket No. 6675-19S
THE COURT: The Court has decided to render a bench opinion in this case, Froilan Nigel Villahermosa, Petitioner, v. Commissioner of Internal Revenue, Respondent, docket number 6675-19S.Can you shut the feed for just a second? (Whereupon, a recess was held from 8:57 a.m. until 8:58 a.m.)
THE COURT: My apologies. I am going to start again. DLL The Court has decided to render a bench opinion in Froilan Nigel Villahermosa, Petitioner, v. Commissioner of Internal Revenue Service, Respondent, docket number 6675-19S.
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 and Tax Court Rule 152. The rule references in this opinion are to the Tax Court Rules of Practice and Procedure, and section references are to the Internal Revenue Code in effect at all relevant times.
The proceeding was heard as a Small Tax Case pursuant to the provisions of section 7463 and Rules 170 through 174. The Court uses the term "Internal Revenue Service" or "IRS" to refer to administrative actions taken outside these proceedings. The Court uses the term "Respondent" to refer to Commissioner of Internal Revenue, who is the head of the IRS and is the Respondent in this case and to refer to actions taken in connection with this case.
The trial of this case was conducted on January 31st, 2023, at the remote San Diego trial session of the Court. Petitioner appeared on his behalf. Andre J. Kim appeared on behalf of the Respondent. In a Notice of Deficiency issued March 4th, 2019, the IRS determined a deficiency of $1,345 for 2016. The issues for determination are whether Petitioner is entitled to claim education credits totaling $1,015 and entitled to claim an individual retirement account (IRA) contribution deduction of $2,216 for the tax year 2016.
On the evidence before us and using the burden of proof principles explained below, the Court finds that Petitioner is not entitled to claim the education credits or to claim the IRA contribution deduction.
Background
Some of the facts have been stipulated and are so found. Respondent filed Proposed Trial Exhibits 1000-R through 1003-R, which were entered into the record at the beginning of the trial. Petitioner filed Proposed trial exhibits, which the Court renumbered as Proposed Trial Exhibits 500-P, 501-P, 502-P, 503-P, and 504-P. The Court did not admit Petitioner's Trial Exhibits 500-P, 501-P, and 502-P on the basis that they were not relevant. The Court did admit into the record, and the Respondent did not object to , Proposed Trial Exhibits 503-P and 504-P. Petitioner resided in California at the time he filed his petition in this case.
On April 24th, 2021, Petitioner timely filed a petition in this case seeking redetermination of the Notice of Deficiency for 2016. Petitioner timely filed a Federal individual income tax return for 2016. On that return, Petitioner claimed American Opportunity Credits of $1,015 on Form 886, Education Credits, for adjusted qualified education expenses incurred while attending National University. On the Form 8863, Petitioner had checked the box that he was enrolled at least half-time at an eligible educational institution for an academic period beginning in 2016 in a program leading towards a post- secondary degree, certificate, or other recognized post-secondary educational credential. Also on his 2016 return, Petitioner claimed an IRA contribution deduction of $2,216. During 2016, Petitioner was enrolled in a Thrift Savings Plan, TSP, to which his employer made contributions that were deducted from Petitioner's wages.
Discussion
I. Burden of proof
The Commissioner's determination of a taxpayer's liability in a Notice of Deficiency normally is presumed correct, and the taxpayer bears the burden of proving that the determination is incorrect. Rule 142(a), Welch v. Helvering, 290 U.S. 111, 115 (1933). Deductions and credits are a matter of legislative grace, and the taxpayer bears the burden of proving entitlement to any deduction claimed. See INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). Furthermore, taxpayers are required to maintain records sufficient to substantiate their claimed deductions and credits. See IRC section 6001; Treasury Reg. section 1.6001-1(a).
Under section 7491(a), the burden of proof may shift to Respondent if taxpayer produces credible evidence with respect to any relevant factual issue that meets other requirements. Petitioner has not argued that the section 7491(a) applies nor established that its requirements are met. The burden of proof remains with the Petitioner.
II. Education Credits
The Internal Revenue Code allows for a variety of education credits, including the American Opportunity Credit, which Petitioner claimed in this case. The American Opportunity Credit provides for 100 percent of so much of the qualified tuition and related expenses paid by Petitioner during the taxable year for education furnished to the eligible student during any academic period beginning in such taxable year as does not exceed $2,000 plus 25 percent of such expenses so paid as exceeds $2,000 but does not exceed $4,000. IRC section 25A(b)(1). To be eligible for the credit, a student must be enrolled in at least one academic period for the year in which the credit is claimed.
Petitioner has not provided evidence that he paid the claimed education expenses in 2016, and thus, he has not met his burden of proving that he is entitled the claimed American Opportunity Credits. Exhibit 504-P reflects the amounts Petitioner paid with respect to an educational program that were paid during 2015. While Petitioner testified that he paid additional amounts in 2016, he did not provide any documentary evidence to prove that. Accordingly, the Court will sustain Respondent's disallowance of the education credits.
III. IRA contributions
Generally, an individual is entitled to a deduction equal to the qualified retirement contributions of the individual for the taxable year. IRC section 219(a), Treasury Reg. section 1.219-1(a). A qualified retirement contribution is defined by section 219(e) to include any amount paid in cash for the taxable year by or on behalf of an individual to an individual retirement plan for such individual's benefit. An individual retirement plan means an individual retirement account described in section 408(a) and an individual retirement annuity described in section 408(b); IRC section 7701(a)(17).
An IRA and a Thrift Savings Plan (TSP) are separately defined by the Internal Revenue Code. Section 7701(a)(37) provides that an IRA means an individual retirement account described in section 408(a). Section 7701(j)(1) provides that TSP is treated as a trust described in section 401(a).
To prove his entitlement to claim a deduction for qualified retirement contributions, Petitioner provided a TSP statement detailing his contributions to the TSP in 2016. However, contributions to a TSP are not considered qualified retirement contributions as discussed above and thus not eligible to the claimed IRA contribution deduction. See section 7701(j)(1)(C).
Accordingly, the Court will sustain Respondent's disallowance of the IRA contribution deduction.
To reflect the foregoing, a decision will be entered in favor of Respondent. This concludes the Court's bench opinion.
(Whereupon, at 9:07 a.m., the above-entitled matter was concluded.)
CERTIFICATE OF TRANSCRIBER AND PROOFREADER
We, the undersigned, do hereby certify that the foregoing pages, numbers 1 through 10 inclusive, are the true, accurate and complete transcript prepared from the verbal recording made by electronic recording by Amanda Self on February 1, 2023 before the United States Tax Court at its remote session in San Diego, CA, 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.
Javacia Huff, CDLT-223, Transcriber
Date 2/7/23
Shoshana Chana Axtell, CDLT-106, Proofreader
Date 2/7/23