T.C. Memo. 1996-260
UNITED STATES TAX COURT
PATRICK W. HEALEY AND NANCY L. MARSHALL, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 222-94, 2613-95. Filed June 6, 1996.
Patrick W. Healey, for petitioners.
Lisa K. Hartnett, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
COLVIN, Judge: Respondent determined that petitioners are
liable for a deficiency in Federal income tax, an addition to
tax, and a penalty as follows:
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Addition to Accuracy-Related
Tax Penalty
Year Deficiency Sec. 6651(a)(1) Sec. 6662(a),(c)1
1990 $1,181.38 $6,503.94 $6,607.52
1991 -- 3,375.00 --
1992 -- 2,404.00 --
1
Respondent determined that petitioners were liable for
negligence under sec. 6662(a) and (c), but not substantial
understatement under sec. 6662(d). Thus, we do not consider
whether petitioners are liable under sec. 6662(d).
After concessions by petitioners, we must decide the
following issues:
1. Whether petitioners' Applications for Automatic
Extension of Time to File U.S. Individual Income Tax Return
(Forms 4868) for the years in issue are valid. We hold that they
are not, because petitioners did not properly estimate their tax
liability.
2. Whether petitioners are liable for additions to tax
under section 6651(a)(1) for failure to timely file income tax
returns for 1990, 1991, and 1992. We hold that they are.
3. Whether petitioners are liable for the accuracy-related
penalty under section 6662(a) and (c) for negligence for 1990.
We hold that they are.
4. Whether imposition of the additions to tax for failure
to timely file under section 6651(a)(1) and failure to timely pay
under section 6651(a)(2) and the accuracy-related penalty for
negligence under section 6662(a) and (c) for 1990 violates the
Double Jeopardy Clause of the Fifth Amendment to the U.S.
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Constitution (Double Jeopardy Clause) or otherwise unlawfully
penalizes petitioners twice for the same conduct. We hold that
it does not.
5. Whether respondent's determination that petitioners are
liable for the addition to tax for failure to timely file under
section 6651(a)(1) for 1991 and 1992 is invalid because
respondent unlawfully selected them for audit. We hold that it
is not.
6. Whether petitioners have made a prima facie showing
that the addition to tax under section 6651(a)(1) was selectively
applied to them by respondent. We hold that they have not.
Thus, petitioners are not entitled to discover from respondent
statistics relating to respondent’s application of the addition
to tax under section 6651(a)(1) to other taxpayers.
References to petitioner are to Patrick W. Healey.
References to petitioner wife are to Nancy L. Marshall. Section
references are to the Internal Revenue Code in effect for the
years in issue. Rule references are to the Tax Court Rules of
Practice and Procedure.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
A. Petitioners
Petitioners are married and lived in Lincoln, Nebraska, when
they filed the petitions in these cases.
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Petitioner is an attorney and senior partner in the law firm
Healey & Wieland in Lincoln, Nebraska. He has had more than 30
years' experience as an attorney, specializing in litigation. He
was a partner at his law firm during the years in issue. He had
access to all financial records of his law firm.
Petitioner received draws from his law firm of $106,250 in
1990, $93,000 in 1991, and $144,120 in 1992. Petitioner
entertained clients as part of his business.
Petitioner reached age 59½ in 1990, which entitled him to
receive a $35,000 distribution from his law firm’s pension fund.
He received that amount during 1990 and deposited it in his bank
account. Petitioner knew that he was required to report the
$35,000 as income on his tax return. When he prepared his 1990
income tax return in August 1991, he did not remember in which
year he had received the distribution. He did not check his
records to see when he had received it.
Petitioner wife is an artist, musician, and teacher. She
held shows and entertained clients during the years in issue.
B. Petitioners’ Application for Extension of Time To File
Income Tax Returns
1. Petitioners' 1990 Tax Year
a. Application for Extension of Time To File
Petitioner’s law firm had not prepared its partnership tax
return for 1990 by April 15, 1991. On April 15, 1991, petitioner
prepared and petitioners filed a Form 4868 in which they
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requested a 4-month extension of the time to file their 1990 tax
return.
The Form 4868 petitioners filed stated:
Total tax liability for 1990. This is the amount you
expect to enter on line 27 of Form 1040A, or line 54 of
Form 1040. If you do not expect to owe tax, enter zero
(-0-) . . . . .
Caution: You MUST enter an amount on line 1 or your
extension will be denied. You can estimate this
amount; but be as exact as you can with the information
you have. If we later find that your estimate was not
reasonable, the extension will be null and void.[1]
Petitioners did not estimate their tax liability for 1990 on
line one of the Form 4868. Petitioners reported that they had
paid estimated taxes of $4,800 and had a balance due of $1,200,
which they paid when they filed the Form 4868.
b. Petitioners’ Federal Income Tax Return for 1990
Petitioner prepared petitioners’ Federal income tax return
for 1990. Petitioners filed it on August 15, 1991. They
reported that petitioner’s income from his law firm was $110,615
and that petitioners’ tax liability was $18,773.21. They
subtracted their estimated tax payments and the payment they made
with the Form 4868, and reported a balance due of $12,773.21.
Petitioners deducted $3,580 for meals and entertainment
expenses on their 1990 return. Petitioners did not keep
1
The Forms 4868 that petitioners signed for 1991 and 1992,
discussed below, also contained this language.
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contemporaneous records of the business purpose of those
expenses.
c. Audit of Petitioners’ 1990 Tax Return
Respondent audited petitioners' 1990 return in September
1991. Respondent issued a Request for Payment of $565.56 for
underpayment of estimated tax, $255.46 for late payment of tax,
and $439.59 for interest (a total of $1,260.61) because
petitioners did not pay the amount shown on their return.
Petitioners then paid those amounts to respondent. Respondent
also made several adjustments to which petitioners agreed.
Counting those adjustments, petitioners’ 1990 tax liability was
$31,856.
Petitioners concede that they should have reported that
the $35,000 pension distribution and an additional $5,581 from
petitioner wife's business was income in 1990. Petitioners
concede that they erroneously claimed a dependency exemption
for their daughter, Robin, in 1990, and $22,833 in itemized
deductions for unreimbursed employee expenses and personal
property taxes. After the audit, respondent concluded that
petitioners could deduct $15,316 more in business expenses for
petitioner's law practice than they claimed on their 1990
Schedule E.
Petitioners disagreed with respondent's conclusions for
1990 that: (i) They could not deduct $3,580 for meals and
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entertainment expenses due to lack of substantiation; (ii) their
1990 Form 4868 was invalid; and that (iii) they are liable for
the addition to tax for failure to timely file their 1990 return
and the accuracy-related penalty. On December 21, 1992,
petitioners signed a Form 870, Waiver of Restrictions on
Assessment and Collection of Deficiency in Income Tax and
Acceptance of Overassessment for 1990. Respondent referred the
case to respondent's Appeals Office and issued a notice of
deficiency for 1990 on October 8, 1993. Petitioners filed their
petition for 1990 (docket No. 222-94) on January 3, 1994.
2. Petitioners' 1991 Tax Year
a. Application for Extension of Time To File for 1991
Petitioner prepared and petitioners filed a Form 4868 on
April 15, 1992, seeking to extend the time to file their 1991
return by 4 months to August 17, 1992. On it, petitioners
estimated that their total tax liability for 1991 was $9,800.
They reported that they had made estimated tax payments of $4,800
and had a balance due of $5,000, which they paid with the Form
4868.
b. Petitioners’ Federal Income Tax Return for 1991
Petitioner prepared petitioners’ 1991 income tax return.
Respondent received petitioners' income tax return for 1991 on
August 20, 1992. On that return, petitioners reported that they
received $105,322 in income from petitioner’s law firm and that
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their tax liability was $24,865.52. After subtracting withheld
and estimated tax and tax paid with the Form 4868, they reported
that they had a balance due of $14,849.52, which they paid with
the return.
Respondent issued a notice of correction of petitioners'
1991 tax return on October 5, 1992, making certain adjustments
and imposing penalties and interest. Petitioners filed an
amended 1991 return on January 29, 1993, on which they reported a
corrected tax liability of $25,118.
3. Petitioners' 1992 Tax Year
a. Application for Extension of Time To File for 1992
Petitioner prepared and petitioners filed a Form 4868 for
1992 on April 15, 1993, in which they estimated that their total
tax liability for 1992 was $22,000. They reported that they had
made estimated tax payments of $12,000 and had a balance due of
$10,000, which they paid with the Form 4868.
b. Petitioners’ Federal Income Tax Return for 1992
Petitioner prepared petitioners’ joint Federal income tax
return for 1992. Respondent received it on August 23, 1993. The
envelope in which the return was mailed was postmarked August 16,
1993. They reported that they received income of $141,244 from
petitioner’s law firm and had a tax liability of $35,844.53.
After subtracting withheld and estimated tax and the payment they
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made when they filed the Form 4868, they reported that they had a
balance due of $13,776.33, which they paid with the return.
4. Audit of Petitioners’ 1991 and 1992 Returns
On September 26, 1994, respondent's auditor wrote a letter
to petitioners enclosing a report recommending additions to tax
under section 6651(a)(1) in the amount of $3,375 for 1991 and
$2,404 for 1992. The letter said the 1991 and 1992 returns had
the same disputed Form 4868 issue that was present on
petitioners’ 1990 return, and that respondent’s auditor wanted to
keep the 3 years together.
Respondent issued a notice of deficiency for 1991 and 1992
on December 19, 1994. Petitioners filed the petition for tax
years 1991 and 1992 (docket No. 2613-95) on February 16, 1995.
5. Summary
The following compares the amount of tax liability
petitioners estimated on Forms 4868 for the years in issue with
the amounts they reported on Forms 1040 or have otherwise
conceded for those years:
Tax Liability
Tax Estimated Tax Reported Conceded by
Year on Form 4868 on Form 1040 Petitioners
1990 $6,000 $18,773.21 $31,856
1991 9,800 24,865.52 25,118
1992 22,000 35,776.33 35,776
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C. Petitioners’ Discovery Request Relating to Imposition of
Addition to Tax Under Section 6651(a)(1) by Respondent
The parties filed a joint motion to calendar and consolidate
these cases. The Court granted the motion on March 6, 1995.
Paragraph 5 of that motion provides:
5. In the event that the Court grants the
foregoing Motion to Calendar and Consolidate, the
parties hereby stipulate that the petitioners, at the
conclusion of the trial of the consolidated cases, may
file a motion to keep the record open for a reasonable
period of time to pursue discovery of any information
described in Exhibit A, attached, which the Court may
determine is relevant and material to the issues in
these cases. Respondent will not object to the motion
on the grounds that it constitutes untimely discovery
or that petitioners have failed to comply with the
requirements of Branerton Corp. v. Commissioner, 61
T.C. 691 (1974); however, respondent reserves the right
to make any and all other objections.
Exhibit A to that motion is a copy of petitioners’ Amended
Interrogatories to Respondent. In it, petitioners requested data
about the number of taxpayers who filed Forms 4868 for 1990,
1991, and 1992; how many owed more taxes than they paid by the
original due date of the return before extensions; what
percentage of those taxpayers owed more than 10, 20, 30, 40, 50,
60, 100, 200, and 500 percent more than the amount they paid by
the original due date of their return; and for how many of those
taxpayers the Commissioner assessed both the addition to tax
under section 6651(a)(1) and the penalty under section 6662(b)(1)
and (c).
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OPINION
A. Whether Petitioners' Forms 4868 Are Valid
1. Contentions of the Parties
Petitioners contend that the Forms 4868 that they filed for
1990, 1991, and 1992 are valid because they used the same method
to estimate their tax liability for the years in issue that they
have always used, petitioner was busy with his work, petitioners
did not receive the partnership tax returns or Schedules K-1
for 1990 from the law firm in time to prepare the returns by
April 15, 1991, and, as to their estimate for 1990, they did not
know that they had received the $35,000 pension distribution in
1990.
Respondent contends that the Forms 4868 are invalid because
petitioners did not properly estimate their tax liabilities for
the years to which the Forms 4868 relate.
2. Background
A calendar year taxpayer generally must file returns by
April 15 after the close of the calendar year. Sec. 6072(a).
The Commissioner may grant a reasonable extension of time to file
a return. Sec. 6081(a). A 4-month extension is automatic if a
taxpayer timely files a properly prepared Form 4868. Sec.
1.6081-4(a)(1) and (2), Income Tax Regs.
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A Form 4868 is invalid if the taxpayer fails to properly
estimate his or her tax liability based on information available
to the taxpayer when the extension is requested. Clayton v.
Commissioner, 102 T.C. 632, 650 (1994); Crocker v. Commissioner,
92 T.C. 899, 908, 911 (1989). A taxpayer must estimate his or
her tax liability carefully and must make a reasonable attempt to
find information on which to base the estimate. Crocker v.
Commissioner, supra. The mere fact that a taxpayer
underestimates his or her tax liability does not invalidate a
Form 4868 or void an automatic extension. Id. at 907.
3. Whether Petitioners Properly Estimated Their Tax
Petitioners contend that they estimated their tax with
reasonable care on Forms 4868 for the years in issue. They
contend that the lack of tax documents, such as partnership tax
returns from petitioner’s law firm and a Form 1099 for the
pension distribution, is reasonable cause for their failure to
estimate their tax for 1990 more accurately. They also argue
that their oversight was understandable in the rush of completing
and filing their Form 4868 for 1990.
We disagree. Petitioner has shown no reason why he, as
senior partner, could not have obtained the partnership returns
sooner. Petitioners could have ascertained the amount of the
draws that petitioner received from his law firm in each year in
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issue and that he received from the pension distribution in 1990.
Those amounts would have enabled petitioners to estimate their
tax liability for the years in issue far more accurately than
they did. Petitioner’s draws and the income that he reported
from his law firm are as follows:
Income From
Year Draws Law Firm
1990 $106,250 $110,615
1991 93,000 105,322
1992 144,120 141,244
Petitioners did not follow the instructions on the Forms
4868 for 1990. Line 1 of Form 4868 calls for the total tax
liability for 1990 that the taxpayer expects to enter on his or
her individual income tax return. For 1990, petitioners did not
make an entry on line 1 of Form 4868. One could infer that
petitioners made a tax liability estimate of $6,000 based on
the Form 4868 by adding the balance due ($1,200) to the total
payments and credits ($4,800). However, $6,000 would not have
been a reasonable estimate; $6,000 is less than one-fifth of the
1990 tax liability ($31,856) to which they later agreed. For
1991, petitioners’ estimate of their tax was about two-fifths of
their liability as reported on their income tax return, and for
1992, their estimate was about two-thirds of their liability as
reported on their income tax return. See table at par. B-5 of
the Findings of Fact, p. 9. Petitioners did not make a bona fide
attempt to base their estimate on information that was reasonably
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available to them for the years in issue. See Crocker v.
Commissioner, supra at 910; Boatman v. Commissioner, T.C. Memo.
1995-356 (Form 4868 invalidated when the taxpayers, whose tax
liability was $118,601, estimated that their tax liability was
$60,000).
Petitioners contend that their situation is like that of the
taxpayers in Hudspeth v. Commissioner, T.C. Memo. 1985-628, revd.
and remanded on another issue 914 F.2d 1207 (9th Cir. 1990). We
disagree. We concluded in Hudspeth that the taxpayers properly
estimated their tax liability based on information available to
them at the time. Petitioners had but did not use information
which was available to properly estimate their tax liability.
We also have considered Jacobs v. Commissioner, T.C. Memo.
1994-252, in deciding this case. In Jacobs, the taxpayer
husband, a lawyer, included his monthly billings in his estimated
income but did not include in his monthly billings, or in his
estimated income, about $29,500 of fees from a personal injury
lawsuit which had been deposited in a client trust account. We
held that the taxpayers properly estimated their tax according to
their regular bookkeeping procedures based on the total of the
monthly billings. We found that their failure to count the
client trust fund in estimating their tax on the Form 4868 did
not invalidate their extension request. Here, there is no
evidence of how petitioners estimated the tax liability shown on
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their Forms 4868 or that they considered petitioner’s partnership
draws or income. For 1992, for which petitioners estimated that
their tax liability was two-thirds of what they later reported on
their Form 1040, there is no evidence that the error related to
an unusual item. Thus, petitioners have not shown that they used
a reasonable method to estimate their tax liabilities when they
filed the Forms 4868 for the years in issue.
Petitioners contend that respondent should have informed
them in a timely manner that their Forms 4868 were invalid. We
disagree. Holding otherwise would unreasonably require the
Commissioner to conduct a detailed examination of every extension
request before approving it. Crocker v. Commissioner, supra at
911.
Petitioners did not properly estimate their tax liability on
the Forms 4868 they filed for 1990, 1991, and 1992. Thus, we
hold that those forms are invalid. See id. at 910.
B. Whether Petitioners Are Liable for Additions to Tax for
Failure To Timely File Under Section 6651(a)
Section 6651(a)(1) provides for an addition to tax up to 25
percent for failure to timely file Federal income tax returns
unless the taxpayer shows that such failure was due to reasonable
cause and not willful neglect. United States v. Boyle, 469 U.S.
241, 245 (1985); Baldwin v. Commissioner, 84 T.C. 859, 870
(1985); Davis v. Commissioner, 81 T.C. 806, 820 (1983), affd.
without published opinion 767 F.2d 931 (9th Cir. 1985).
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Petitioners relied on the automatic extensions for the years
in issue as a defense to the addition to tax for failure to
timely file under section 6651(a). Reliance on an automatic
extension is not reasonable cause for a taxpayer's failure to
timely file a return if the taxpayer failed to properly estimate
his or her tax liability in requesting the extension. Crocker v.
Commissioner, 92 T.C. 899 (1989).
We conclude that petitioners are liable for the additions to
tax under section 6651(a).
C. Whether Petitioners Are Liable for the Accuracy-Related
Penalty Under Section 6662(a)
Respondent determined that petitioners are liable for the
accuracy-related penalty for 1990 under section 6662(a) and (c)
because of negligence (see note 1 to table, p. 2). Taxpayers are
liable for a penalty equal to 20 percent of the portion of the
underpayment to which section 6662 applies. Sec. 6662(a). For
purposes of section 6662(a), negligence includes any failure to
make a reasonable attempt to comply with the provisions of the
Internal Revenue Code. Sec. 6662(c).
Negligence frequently involves a failure to report income
or an overstatement of deductions. Marcello v. Commissioner, 380
F.2d 509 (5th Cir. 1967), affg. T.C. Memo. 1964-303; Beus v.
Commissioner, 261 F.2d 176 (9th Cir. 1958), affg. 28 T.C. 1133
(1957); Estate of Mason v. Commissioner, 64 T.C. 651 (1975),
affd. 566 F.2d 2 (6th Cir. 1977). Petitioners did not explain
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why they did not report all of petitioner wife’s income, and they
could have easily checked to see when they had received the
$35,000 pension distribution.
Failure to keep adequate records is evidence of negligence.
Marcello v. Commissioner, supra; Magnon v. Commissioner, 73 T.C.
980 (1980). A taxpayer is required to maintain records
sufficient to correctly prepare his or her tax return. Sec.
1.6001-1(a), Income Tax Regs. Petitioners had insufficient
records to support their claimed deduction of expenses for meals
and entertainment, $6,818 in business expense deductions for
petitioner wife's activities, and $22,833 in itemized deductions
for unreimbursed employee expenses and personal property taxes.
Petitioners contend that they were not negligent in
erroneously claiming a dependency exemption for their daughter,
Robin, because they did not know how much she earned.
Petitioner apparently assumed without checking that they could
claim an exemption for her. There is no evidence that they tried
to find out how much she earned.
Petitioners’ understatement of income and overstatement of
deductions and the inadequacy of their records are sufficient to
show that they were negligent. We conclude that petitioners are
liable for the accuracy-related penalty for 1990 under section
6662(a).
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D. Whether the Double Jeopardy Clause Bars Imposition of the
Additions to Tax for Failure To Timely File and Pay Under
Section 6651(a)(1) and (2) and the Penalty for Negligence
Under Section 6662(a) and (c)
Petitioners contend that imposition of both the addition to
tax for failure to timely file and pay under section 6651(a)(1)
and (2)2 and the accuracy-related penalty under section 6662(a)
and (c) for negligence is unlawful and violates the Double
Jeopardy Clause because those sections penalize the same conduct.
We disagree.
1. Sections 6651(a)(1) and (2) and 6662(a) Are Not
Punishment for Purposes of the Double Jeopardy Clause
The Double Jeopardy Clause forbids "any person * * * subject
for the same offense to be twice put in jeopardy of life or
limb."3 Petitioners contend that sections 6651(a)(1) and (2)
and 6662(a) impose punishment as defined in Department of Revenue
v. Kurth Ranch, 511 U.S. __, 114 S. Ct. 1937 (1994), and United
2
See par. D-3, p. 21.
3
The Fifth Amendment to the Constitution provides as
follows:
No person shall be held to answer for a capital,
or otherwise infamous crime, unless on a presentment or
indictment of a Grand Jury, except in cases arising in
the land or naval forces, or in the Militia, when in
actual service in time of War or public danger; nor
shall any person be subject for the same offense to be
twice put in jeopardy of life or limb; nor shall be
compelled in any criminal case to be a witness against
himself, nor be deprived of life, liberty, or property,
without due process of law; nor shall private property
be taken for public use, without just compensation.
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States v. Halper, 490 U.S. 435 (1989). A civil sanction is
punishment for double jeopardy purposes if it is not solely
remedial but also serves punitive goals of deterrence or
retribution. Department of Revenue v. Kurth Ranch, 511 U.S. at
__, 114 S. Ct. at 1944; United States v. Halper, supra at 448-
449; see Barnette v. Commissioner, 95 T.C. 341, 346-347 (1990)
(discussing Halper).
Additions to tax such as section 6651(a) are not punishment
for purposes of the Double Jeopardy Clause. The U.S. Supreme
Court has said:
The remedial character of sanctions imposing additions
to a tax has been made clear by this Court in passing
upon similar legislation. They are provided primarily
as a safeguard for the protection of the revenue and to
reimburse the Government for the heavy expense of
investigation and the loss resulting from the
taxpayer’s fraud. [Helvering v. Mitchell, 303 U.S.
391, 401 (1938).]
See Miller v. Commissioner, T.C. Memo. 1994-249 (increased
interest under section 6621(c) not punishment); Dillon v.
Commissioner, T.C. Memo. 1981-583. The accuracy-related penalty
under section 6662(a) and (c) for negligence is also remedial.
See Helvering v. Mitchell, supra at 399-406 (the 50-percent
addition to tax for civil fraud is remedial and not punitive for
double jeopardy purposes); United States v. Alt, ___ F.3d ___
(6th Cir., May 15, 1996); Ianniello v. Commissioner, 98 T.C. 165,
176-177 (1992). The accuracy-related penalty under section
6662(a) is 20 percent. It is less severe than the addition to
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tax for fraud. We conclude that the accuracy-related penalty
under section 6662(a) and (c) is not punishment for purposes of
the Double Jeopardy Clause.
Sections 6651(a) and 6662(a) are quite different than the
Montana drug tax, the imposition of which the U.S. Supreme Court
held violated the Double Jeopardy Clause. Department of Revenue
v. Kurth Ranch, 511 U.S. at __, 114 S. Ct. at 1944. Montana
imposed almost $900,000 in taxes and penalties against six
individuals who pleaded guilty to possession or storage of
dangerous drugs. Id. at __, 114 S. Ct. at 1942, 1946-1947.
Montana assessed the tax on illegally possessed marijuana and
hash oil which had been confiscated. The tax equaled about 800
percent of the market value of the confiscated drugs. The tax
applied only in cases in which the State had imposed a criminal
penalty for possession of illegal drugs. Id. at __, 114 S. Ct.
at 1947. The Supreme Court held that the Montana drug tax is the
equivalent of criminal punishment for purposes of the Double
Jeopardy Clause. Id. at __, 114 S. Ct. at 1948. Sections
6651(a) and 6662(a) and (c) are very different from the Montana
drug tax; those sections are remedial and intended to compensate
the Government for a taxpayer’s noncompliance. Thus, Department
of Revenue v. Kurth Ranch, supra, does not control here. See
United States v. Alt, supra.
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2. Sections 6651(a)(1) and 6662(a) Do Not Punish the Same
Conduct for Purposes of the Double Jeopardy Clause
The Double Jeopardy Clause applies only if a person is put
in jeopardy twice for the same conduct. Conduct is different for
double jeopardy purposes if the two proceedings require proof of
different facts. “[T]he test to be applied to determine whether
there are two offenses or only one, is whether each provision
requires proof of a fact which the other does not.” Blockburger
v. United States, 284 U.S. 299, 304 (1932); see also Brown v.
Ohio, 432 U.S. 161, 166 (1977). If each statutory provision
requires proof of a fact that the other does not, the Blockburger
test is met and the provisions are not the same for double
jeopardy purposes. Iannelli v. United States, 420 U.S. 770, 785
n.17 (1975).
Section 6651(a)(1) and (2) applies to failure to timely file
a return and pay tax. Section 6662(a) and (c) requires proof of
negligence. Thus, conduct under section 6651(a)(1) and (2) and
section 6662(a) and (c) is not the same for double jeopardy
purposes. See sec. 1.6662-2(a), Income Tax Regs. Petitioners
are liable for the addition to tax for failure to timely file
under section 6651(a)(1) for 1990 because they did not properly
estimate their tax liability on their Forms 4868, thus
invalidating respondent’s consent based on those forms to extend
filing dates for those returns by 4 months. See pars. A and B,
pp. 10, 14. They are liable for the accuracy-related penalty
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under section 6652 (a) and (c) for 1990 because they
underreported their income, overstated their deductions, and
failed to keep adequate records. See par. C, p. 15. Also, the
additions for tax for negligence and late filing are remedial.
We conclude that the Double Jeopardy Clause does not shield
petitioners from liability for additions to tax under sections
6651(a) and 6662(a).
Petitioners also contend that respondent unlawfully (other
than in violation of the Double Jeopardy Clause) penalized them
twice for the same conduct. Petitioners have not given any
authority to support this theory, and we are aware of none.
3. Imposition of the Addition to Tax Under Section
6651(a)(2)
Respondent determined that petitioners are liable for the
additions to tax under section 6651(a)(1) for all of the years in
issue but did not determine that petitioners are liable under
section 6651(a)(2). Before respondent determined that
petitioners were liable for the addition to tax under section
6651(a)(1), respondent issued a Request for Payment for 1990 to
petitioners to pay the addition to tax under section 6651(a)(2).
The Commissioner may assess tax without issuing a notice of
deficiency if a taxpayer does not pay the amount shown on his or
her return. Sec. 6213(b)(1). Petitioners paid the addition to
tax for late payment under section 6651(a)(2) before respondent
determined that they are liable for the addition to tax under
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section 6651(a)(1). Petitioners contend that the imposition of
additions to tax under section 6651(a)(1) and (2) violates the
Double Jeopardy Clause. We disagree.
Section 6651(a)(1) provides for an addition to tax for
failure to timely file Federal income tax returns of 5 percent
per month up to 25 percent of the difference between the correct
amount of tax and the amount paid before the due date plus
credits. Section 6651(a)(2) provides for an addition to tax of
0.5 percent per month up to 25 percent for failure to pay the
amount shown or required to be shown on a return. A taxpayer may
fail to file and pay a tax, and thus be subject to both section
6651(a)(1) and (2). See sec. 6651(c)(1). If that occurs, the
amount of the addition to tax under section 6651(a)(1) is reduced
by the amount of the addition to tax under section 6651(a)(2) for
any month to which an addition to tax applies under both
paragraphs (1) and (2). The combined amounts under paragraphs
(1) and (2) cannot exceed 5 percent per month. Sec. 6651(c)(1).
Also, section 6651(a)(1) requires proof of different facts from
section 6651(a)(2). See Iannelli v. United States, supra;
Blockburger v. United States, supra. Also, the additions to tax
under section 6651(a)(1) and (2) are remedial. Thus, we conclude
that imposition of additions to tax under section 6651(a)(1) and
section 6651(a)(2) does not violate the Double Jeopardy Clause.
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E. Whether Petitioners Are Not Liable for Additions to Tax
Under Section 6651(a) Because Respondent Selectively Applied
It to Them
1. Background
Petitioners contend that they are not liable for additions
to tax under section 6651(a) because, in petitioners’ view,
respondent selectively applied it to them. We disagree.
The standard for evaluating a claim of selective or
discriminatory prosecution in a criminal case is as follows:
the person asserting such a claim bears the burden of
establishing, prima facie, both:
(1) that, while others similarly situated have
not generally been proceeded against because of
conduct of the type forming the basis of the
charge against him, he has been singled out for
[investigation], and (2) that the government's
discriminatory selection of him for
[investigation] has been invidious or in bad
faith, i.e., based upon such impermissible
considerations as race, religion, or the desire
to prevent his exercise of constitutional rights.
[St. German of Alaska E. Orthodox Catholic Church
v. United States, 840 F.2d 1087, 1095 (2d Cir.
1988).]
Petitioners' claim lacks merit if it does not meet the standard
applied in criminal cases. Karme v. Commissioner, 673 F.2d 1062,
1064 (9th Cir. 1982), affg. 73 T.C. 1163 (1980).
2. Petitioners’ Discovery Request
Petitioners seek to discover statistical information about
respondent’s imposition of additions to tax under section 6651
against taxpayers who filed Forms 4868 for the years in issue.
Petitioners argue that they will not know whether it was rational
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for respondent to impose the penalties unless respondent responds
to their discovery requests. Petitioners speculate that the
facts they seek may show that petitioners were treated unlawfully
or arbitrarily, or lead to evidence showing that there was
unlawful discrimination.
Respondent contends that the data would be irrelevant and
production would be burdensome.
We need not allow discovery relating to a claim that
respondent has selectively enforced the law or unlawfully
discriminated unless the proponent makes a prima facie showing
that both elements of the standard stated above are met. St.
German of Alaska E. Orthodox Catholic Church v. United States,
supra; United States v. Bohrer, 807 F.2d 159, 161 (10th Cir.
1986); United States v. Bustamante, 805 F.2d 201, 202 (6th Cir.
1986); United States v. Moon, 718 F.2d 1210, 1229 (2d Cir. 1983);
United States v. Ness, 652 F.2d 890, 892 (9th Cir. 1981); United
States v. Catlett, 584 F.2d 864, 866 (8th Cir. 1978); Penn-
Field Indus., Inc. v. Commissioner, 74 T.C. 720, 724 (1980)
(Internal Revenue Service (IRS) was not required to produce audit
data to taxpayer which failed to make a prima facie case that it
was improperly selected for audit); Davis v. Commissioner, 65
T.C. 1014, 1022-1024 (1976) (IRS was not required to produce
letter rulings relating to other taxpayers who had claimed
deductions similar to those claimed by taxpayer). Petitioners
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have not made a prima facie showing that either of the elements
are met; i.e., (1) That respondent applied section 6651(a)(1) to
petitioners while not proceeding against others who were
similarly situated; or (2) that respondent selectively
discriminated against them based on impermissible considerations
such as race, religion, or the desire to prevent the exercise of
constitutional rights.
3. Petitioners’ Allegation That Respondent’s
Determinations for 1991 and 1992 Are Punishment for
Petitioners’ Challenge to Respondent’s Determination
for 1990
Petitioners contend that respondent’s determinations for
1991 and 1992 unlawfully punishes them for challenging
respondent’s determination for 1990. We disagree.
The Commissioner has broad authority to investigate and
examine persons who may be liable for taxes. Greenberg's
Express, Inc. v. Commissioner, 62 T.C. 324, 328-329 (1974). The
IRS “can investigate merely on suspicion that the law is being
violated, or even just because it wants assurance that it is
not.” United States v. Powell, 379 U.S. 48, 57 (1964); United
States v. Morton Salt Co., 338 U.S. 632, 642-643 (1950).
Petitioners point out that respondent issued the notice of
deficiency for 1991 and 1992 after petitioners filed the petition
contesting respondent’s 1990 determination. There is nothing
improper about this sequence of events or the fact that
respondent audited petitioners for 3 consecutive years. See
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Foxman v. Renison, 625 F.2d 429, 432 (2d Cir. 1980) (IRS audit
of taxpayer’s returns for 4 consecutive years was not an unlawful
selective audit). Petitioners filed their 1991 and 1992 returns
on August 20, 1992, and August 23, 1993, respectively. It would
have been virtually impossible for respondent to make a
determination relating to petitioners’ 1991 and 1992 tax years
as early as the determination was made for 1990. We infer no
improper motive or bias in respondent’s determinations for 1991
and 1992.
Petitioners point out that on September 26, 1994,
respondent’s auditor wrote petitioners a letter attaching her
report of proposed income tax examination changes for
petitioners’ 1991 and 1992 tax years (additions to tax for
failure to file under section 6651(a)(1)). She said in the
letter that she forwarded those reports to keep them with the
1990 file because they all presented the same Form 4868 issue.
Petitioners contend that the letter from respondent's auditor
shows that respondent determined that the additions to tax apply
for 1991 and 1992 because petitioners challenged respondent’s
determination for 1990. We disagree. The September 26, 1994,
letter shows that respondent's auditor wanted to keep
petitioners' 1990, 1991, and 1992 audits together because they
presented the same disputed Form 4868 issue. It does not show
that respondent had an improper motive.
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4. Conclusion
For the foregoing reasons, we deny petitioners' motion to
compel further discovery relating to whether respondent has
illegally or selectively enforced the law in this case.
To reflect concessions by petitioners and the foregoing,
Decisions will be
entered for respondent.