T.C. Memo. 2015-152
UNITED STATES TAX COURT
SCOTT A. WHITTINGTON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 2060-13, 11096-14. Filed August 11, 2015.
Scott A. Whittington, pro se.
Lisa M. Oshiro, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
COHEN, Judge: Respondent determined deficiencies, additions to tax, and
penalties with respect to petitioner’s Federal income tax liabilities for 2006
through 2011 as follows:
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[*2] Scott A. Whittington, Docket No. 2060-13
Additions to tax
Sec. Sec. Sec.
Year Deficiency 6651(a)(1) 6651(a)(2) 6654
2006 $56,971 $12,818.48 $14,242.75 $2,696.09
2007 58,381 13,135.73 14,595.25 2,657.06
2008 68,092 15,320.70 (1) 2,188.27
2009 64,345 14,477.63 (1) 1,540.59
Scott A. Whittington, Docket No. 11096-14
Additions to tax
Sec. Sec. Sec.
Year Deficiency 6651(a)(1) 6651(a)(2) 6654
2010 $56,172 $12,429.23 (1) $1,182.47
2011 43,363 9,701.78 (1) 853.15
1
The notices of deficiency state that these amounts are to be computed or
will be computed at a later date.
The determination included 50% of income earned by petitioner’s wife. At the
same time, respondent determined deficiencies with respect to petitioner’s wife on
the theory that earnings of petitioner and of his wife were community property
under Washington State statutes.
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[*3] The cases of petitioner and his wife were consolidated for trial, but at the
conclusion of trial respondent conceded that petitioner and his wife had
maintained their earnings as separate property. Because petitioner’s wife had filed
timely returns reporting her income and “married filing separately” status,
decisions were entered in her favor.
Respondent submitted revised computations of petitioner’s liability showing
the following amounts:
Scott A. Whittington, Docket No. 2060-13
Additions to tax
Sec. Sec. Sec.
Year Deficiency 6651(a)(1) 6651(a)(2) 6654
2006 $51,864 $11,669.40 $12,966.00 $2,454.42
2007 52,162 11,736.45 13,040.50 2,374.07
2008 61,401 13,815.23 15,350.25 1,973.19
2009 59,236 13,328.10 14,809.00 1,418.27
Scott A. Whittington, Docket No. 11096-14
Additions to tax
Sec. Sec. Sec.
Year Deficiency 6651(a)(1) 6651(a)(2) 6654
2010 $53,971 $12,143.48 $13,222.90 $1,157.46
2011 42,206 9,496.35 7,808.11 835.58
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[*4] Petitioner objects to those computations on the ground that the income
amounts determined by respondent include reimbursements of expenses petitioner
incurred on behalf of Tomarco Contractor Specialties, Inc. (Tomarco), and/or
Seismic Support Services, LLC (Seismic). He further objects on the ground of
alleged defects in substitutes for return prepared under section 6020(b). The issue
for decision is whether any further adjustments to respondent’s computations are
merited. All section references are to the Internal Revenue Code in effect for the
years in issue, and all Rule references are to the Tax Court Rules of Practice and
Procedure.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated facts are
incorporated in our findings by this reference. Petitioner resided in Washington
State when he filed his petitions. During the years in issue, he received
compensation for his services from Seismic, an entity that he had formed in 2003
to serve as a contractor for Tomarco. Petitioner was a 95% partner in Seismic and
performed most of the services provided by Seismic. During the years in issue, he
received compensation for his services. He also received income in the form of
partnership distributions, mileage and travel reimbursements, and gambling
winnings.
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[*5] Most of the payments to petitioner from Seismic for 2007, 2008, and 2009
were determined to be guaranteed payments in Seismic Support Servs., LLC v.
Commissioner, T.C. Memo. 2014-78. In T.C. Memo. 2015-151, filed this date, the
Court determines that Seismic made guaranteed payments to petitioner during
2010 and 2011. Contrary to the stipulation filed by the parties in these cases, T.C.
Memo. 2014-78 did not make a determination with respect to 2006. In the notice
of deficiency in docket No. 2060-13, however, respondent determined that
petitioner received compensation for services subject to income and self-
employment tax in 2006 as well as in 2007, 2008, and 2009.
Petitioner received checks from Tomarco for $740, $3,664, $6,568, $9,807,
$13,645, and $692 during the years 2006, 2007, 2008, 2009, 2010, and 2011,
respectively. Petitioner received checks from Seismic bearing notations of
mileage reimbursement for $6,139.45, $10,425, $9,718, $13,595, $16,642, and
$10,743 during the years 2006, 2007, 2008, 2009, 2010, and 2011, respectively.
The mileage reimbursement amounts were deducted on Seismic’s partnership tax
returns in determining the amounts distributed to petitioner as the controlling
partner of Seismic.
Petitioner stopped filing Federal income tax returns sometime in the 1990s,
and he did not file Federal income tax returns or pay any tax for any of the years in
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[*6] issue. When the Internal Revenue Service (IRS) commenced an audit based
on information received from third parties who made payments to petitioner, he
wrote a series of letters containing frivolous arguments and insulting terminology
in which he denied that he was required to file tax returns or pay income tax. He
maintained similar tactics during the course of these cases and did not raise any
bona fide dispute with respect to the amounts or nature of payments that he had
received during the years in issue. The only substantive and meritorious argument
raised in his petitions was that the determinations of community property in the
notices of deficiency were erroneous.
The notices of deficiency were based on properly prepared and certified
substitutes for return prepared by the IRS under section 6020(b).
OPINION
At the call of the case for trial and at the commencement of trial, petitioner
requested “that the Court allow me time to call the witnesses that prepared the
notice of deficiency and the substitute for returns for Scott Whittington.” He had
not subpoenaed any witnesses before trial, purporting to believe that the Court had
to issue the subpoenas under seal when the case was called. Apparently he had
read only the first sentence of Rule 147(a), which is followed by:
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[*7] A subpoena, including a subpoena for the production of
documentary evidence or electronically stored information, signed
and sealed but otherwise blank, shall be issued to a party requesting
it, who shall fill it in before service. Subpoenas may be obtained at
the Office of the Clerk in Washington, D.C., or from a trial clerk at a
trial session.
In any event, the persons preparing the notices of deficiency or the
substitutes for return were not proper witnesses. A trial before the Court is a
proceeding de novo, and our redeterminations of petitioner’s tax liabilities are
based on the merits and not on any matters occurring before the notices of
deficiency were sent. Greenberg’s Express, Inc. v. Commissioner, 62 T.C. 324,
327-328 (1974).
In his petitions and in requests for admissions that he filed, petitioner
asserted that he had no income during the years in issue and was not required to
file returns. The stipulation, however, contained bank records and copies of
checks for payments by Tomarco and Seismic establishing his receipt of
compensation for services, as well as evidence of gambling income and other
income. All of that income was gross income under section 61 and taxable income
under section 63, and the amounts far exceeded the levels requiring a return under
sections 1(d), 6011(a), and 6012(a). Petitioner’s claims to the contrary are
frivolous and require no further comment. See Crain v. Commissioner, 737 F.2d
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[*8] 1417, 1418 (5th Cir. 1984). He presented no evidence that he is not subject to
self-employment tax. The stipulated facts also established that the section 6020(b)
returns conformed to the statutory requirements and that the additions to tax were
appropriate. Petitioner presented no evidence of reasonable cause for his admitted
failure to file returns and pay taxes.
The only testimony at trial concerned the community property issue.
Petitioner’s wife testified that when she married petitioner she did not understand
or approve of his tax views, so they decided to keep their finances separate. At the
conclusion of the trial, respondent conceded the community property issue. As is
common in cases involving spouses residing in community property States, the
deficiency determinations in the statutory notices included 100% of petitioner’s
income and 50% of his wife’s income. As a result, it was necessary to recompute
the deficiencies in petitioner’s cases to eliminate income earned by his wife during
the years in issue. Respondent also conceded a minor error in incorporating
information from forms filed by Seismic in 2009. Pursuant to the Court’s
direction, respondent submitted revised computations of deficiencies and additions
to tax, following the procedures of Rule 155. Petitioner filed his objections to the
revised computations.
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[*9] Petitioner did not claim any deductions for vehicle or other travel expenses
in his petitions or pretrial filings. He argued at the conclusion of the trial and in
his objection to the revised computations that reimbursements he received from
Tomarco and Seismic should not be included in his taxable income. Although
transmittals of checks from Tomarco paying his claims for reimbursement and a
purported mileage log were attached to the stipulation, respondent objected to
those exhibits on hearsay grounds; those exhibits were not received for the truth of
their contents. Petitioner failed to present evidence that he incurred the expenses
for which reimbursement was claimed or testimony explaining the preparation of
the log or the significance of the numbers recorded on it. Because he was not an
employee of either Tomarco or Seismic during the years in issue, he was not
entitled to exclude the reimbursements from gross income under section 62(a)(2).
Because he did not file tax returns for the years in issue, he did not properly claim
any deductions for the expenses to be offset against the payments from Tomarco
or Seismic, and the record is devoid of any underlying documents supporting his
reimbursement claims. He failed to substantiate the time, place, and business
purpose of the mileage paid for by Seismic as required by section 274(d).
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[*10] Rule 149(b) provides, in part:
(b) Failure of Proof: Failure to produce evidence, in support of
an issue of fact as to which a party has the burden of proof and which
has not been conceded by such party’s adversary, may be ground for
dismissal or for determination of the affected issue against that party.
Facts may be established by stipulation in accordance with Rule 91,
but the mere filing of such stipulation does not relieve the party, upon
whom rests the burden of proof, of the necessity of properly
producing evidence in support of facts not adequately established by
such stipulation.
Petitioner had the burden of proof with respect to respondent’s determinations and
particularly concerning the deductions he now claims. See Rule 142(a); New
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934); Rockwell v.
Commissioner, 512 F.2d 882, 886 (9th Cir. 1975), aff’g T.C. Memo. 1972-133.
He failed to satisfy that burden in every respect, and he is not entitled to deduct
the amounts recorded as reimbursements by the payors.
Petitioner also argues that the substitutes for return prepared under section
6020(b) failed to satisfy requirements in cases involving the adequacy of returns
submitted by taxpayers. Those cases are inapposite. Section 6020(b) provides
requirements for substitutes for return prepared by the IRS. Section 6020(b)(2)
provides that “[a]ny return so made and subscribed by the Secretary shall be prima
facie good and sufficient for all legal purposes.”
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[*11] In any event, neither a return nor a substitute for return is a prerequisite to a
notice of deficiency. Roat v. Commissioner, 847 F.2d 1379, 1381-1382 (9th Cir.
1988); Hartman v. Commissioner, 65 T.C. 542, 546 (1975). The existence or
absence of a substitute for return under section 6020 is thus irrelevant to the
validity of the statutory notice. It is relevant only to additions to tax under section
6651(a)(2). See Wheeler v. Commissioner, 127 T.C. 200, 209-210 (2006), aff’d,
521 F.3d 1289 (10th Cir. 2008). To the extent that petitioner’s arguments depend
on the claimed invalidity of substitutes for return prepared under section 6020(b),
they have no merit.
In summary, petitioner has presented neither evidence nor arguments
showing that respondent’s revised computations are incorrect.
To reflect the foregoing,
Decisions will be entered for the
amounts shown in respondent’s
posttrial computations.