Professional Documents
Culture Documents
1
Unless indicated otherwise, all chapter and section
references are to chapters and sections of the Internal Revenue
Code of 1986 as in effect for the year in issue, except as to
sec. 7463, which is as in effect for proceedings commenced on the
date the petition in the instant case was filed.
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Penalty
Petitioner Deficiency Sec. 6662
Petitioners had filed separate tax returns for 2003, and the
returns. After they filed the separate tax returns and before
2
At trial respondent’s counsel clarified that the penalty is
for negligence or disregard of rules or regulations, and not for
any other category to which sec. 6662 applies.
3
None of the limitations set forth in sec. 6013(b)(2)
applies, and so the joint return is effective (respondent so
concedes) in accordance with sec. 6013(b)(1), and petitioners’
liabilities are joint and several. Sec. 6013(d)(3). See sec.
6017 and sec. 1.6017-1(b)(2), Income Tax Regs., as to the self-
employment taxes.
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the joint tax return status supersedes both (a) the filing status
each petitioner claimed on his or her separate tax return and (b)
that (in the peculiar setting of the instant case) any such
increase results solely from the shift from separate tax returns
had claimed on his separate tax return and that respondent had
liability.
to Brian. Lisa’s case has not been severed; thus she remains a
804 (1986).
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4
Petitioners concede that they are not entitled to the
following:
Respondent has also conceded that certain payments were made but
not conceded the deductibility of the payments. Neither side has
enlightened the Court as to how the payments relate to any of the
issues before the Court.
5
The redetermination of Brian’s self-employment taxes
depends on concessions and resolutions of disputes as to his Tax
Doctor and Computer Doctor businesses.
2003.
issue by issue.
Analysis
A. In General
and the taxpayers have the burden of proving otherwise. See Rule
142(a);6 Welch v. Helvering, 290 U.S. 111, 115 (1933). Brian has
6
Unless indicated otherwise, all Rule references are to the
Tax Court Rules of Practice and Procedure.
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had been made, then we would have concluded that the requirements
proof would not have been shifted. But section 7491(c) imposes
B. Schedule E
from the Miami property and deducted this amount from unrelated
cost of the Miami property must be allocated between the land and
the building.
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tax return did not include a Form 4562 relating to the joint tax
Table 1
Item Information
2. Specific Deductions
disallowed.
7
As explained supra, respondent asserted in the answer an
increased deficiency based on contentions about the effect of
sec. 469 but abandoned this entire assertion on brief. As a
result, we have concluded that the situation has returned to what
it was before the sec. 469 issue was raised.
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loan cost and amortized over the life of the mortgage loan. On
1. Office Expenses
8
Brian did not on his separate tax return (and petitioners
do not on their joint tax return) claim any deductions for
business use of the home in connection with Brian’s Tax Doctor
business. They did claim such deductions in connection with
Brian’s Computer Doctor business (discussed infra), but the
parties have stipulated that petitioners are not entitled to such
deductions in connection with that business.
9
The parties stipulated a lease agreement showing “Tax
Doctor, Inc. A Florida Corporation” as lessee. The parties do
not clarify the apparent conflict between (1) the lease
agreement’s referral to Tax Doctor as a corporation and (2)
petitioners’ claim of the deduction on a Schedule C as a sole
proprietorship, a claim agreed to by respondent; we leave the
parties where we find them on this matter.
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2003.
2. Depreciation
(a) move all the Tax Doctor business equipment and furniture out
of his home, (b) entertain clients, and (c) gain new revenue; and
and (e), Income Tax Regs., a taxpayer must keep such permanent
10
The Hummer deductions are shown as $8,318 of special
depreciation, $971 of regular depreciation, and $5,000 of sec.
179 expense. Two other items are shown as $735 and $61 on the
Form 4562, making up the total claimed $15,085.
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F.2d 540, 543-544 (2d Cir. 1930). But sections 274(d)11 and
11
Sec. 274(d) provides, in pertinent part, as follows:
* * * * * * *
* * * * * * *
* * * * * * *
* * * * * * *
unless the taxpayer provides both the amount of each business use
“and the total use of the listed property for the taxable
period.”
12
(...continued)
subparagraph (B), the term “listed property”
means--
1,256. Brian testified that the Hummer log “came from the
that he input the mileage to his laptop computer and added the
end of each week. The Hummer log is the printout from his laptop
drove the Hummer for commuting “Every now and then” but did not
show those miles on the Hummer log because “Why would I record
Brian testified that the Hummer log was updated at the end
numbers were lower than the Hummer log totals because he had to
that, if the Hummer log indeed was updated weekly through the
been used for the tax return, especially the joint tax return.
The fact that the joint tax return still was based on estimates,
placed in service on October 20, 2003. The Hummer log shows that
lease for rent of the Miami Lakes office. This lease was dated
deposited by the lessor that same day. Yet the Hummer log
between October 6 and November 16, 2003. When asked what the
November 16, 2003, was erroneous, and he admitted that “there may
The Hummer log does not show the total use of the Hummer
(Nov. 6, 1985). Brian points out that the Form 4562 shows 240
miles commuting and 234 miles for other personal purposes. But
Hummer.
3. Other Expenses
petitioners’ claimed $827 car and truck expenses for Brian’s Tax
deficiency.
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Table 2
Brian’s Petitioners’
Schedule C Separate Joint Tax
Line Item Tax Return Tax Return
Brian’s separate tax return; i.e., all but $1,020 rent for
2. Increased Amounts
Brian had deducted on his separate tax return. See supra table
14
On brief petitioners made the following argument:
“Schedule C Deductions are accurate and should be allowed. This
is proven by all of the additional receipts and documents the
forced the respondent to accept existence. As seen by admitted
items the day of court.” [Reproduced literally.] Apart from
that generic statement, petitioners’ brief did not provide any
discussion of any of the expenses for the Computer Doctor
business.
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9 and 21.
On brief respondent contends for the first time that (1) all
note 14.
deficiency, but the joint tax return was the starting point for
proof.
dispute. We will not consider an issue raised for the first time
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3. Reduced Amounts
for taxes and licenses (item 23) and $250 for travel (item 24a).
affd. 424 F.2d 639 (2d Cir. 1970). We treat petitioners’ joint
trial that the joint tax return was to be the starting point.
joint tax return and did not contend at trial that those
E. IRA Contributions
15
At the trial we described the situation in Bermingham v.
Commissioner, T.C. Memo. 1994-69, Issue II. A.(3), to illustrate
the difference between allowability of the deduction on the one
hand, and negligence on the other hand.
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16
Sec. 6662 provides, in pertinent part, as follows:
* * * * * * *
This does not include the amendment to the heading of the section
made by sec. 812(e)(1) of the American Jobs Creation Act of 2004,
Pub. L. 108-357, 118 Stat. 1580.
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Commissioner, 762 F.2d 891, 895 (11th Cir. 1985), affg. T.C.
reasonable cause for such portion and that the taxpayer acted in
Regs.
production, then the taxpayer has the burden of proving that (1)
applies. Id.
on this major matter of dispute the major books and records item
its reliability but even its existence at the time when, Brian
the instant case was tried, Brian did not present appropriate
books and records to show that he was not negligent even though
(2) Brian has been negligent, and (3) petitioners have failed to
joint tax return she becomes jointly and severally liable for any
Decision will be