T.C. Memo. 1998-40
UNITED STATES TAX COURT
JOSEPH L. GUILLO, SR., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 24225-95. Filed February 3, 1998.
Held: Respondent's motion for summary judgment is
granted, and for 1986 through 1990, petitioner is
liable for Federal income and self-employment taxes on
unreported income and for additions to tax under secs.
6651 and 6654, I.R.C.
Joseph L. Guillo, Sr., pro se.
Rachael J. Zepeda, for respondent.
MEMORANDUM OPINION
SWIFT, Judge: This case is before the Court under Rule
121(b) on respondent's motion for summary judgment as to
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petitioner's liabilities for Federal income and self-employment
taxes on unreported income and for additions to tax under
sections 6651 and 6654.
Respondent determined deficiencies and additions to tax with
respect to petitioner's Federal income and self-employment taxes,
as follows:
Additions to tax
Year Deficiency Sec. 6651(a)(1) Sec. 6654
1986 $16,505 $4,126 $ 796
1987 20,009 5,002 1,080
1988 17,234 4,309 1,102
1989 20,522 5,131 1,389
1990 15,886 3,972 1,045
Unless otherwise indicated, 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. All figures are rounded.
When the petition was filed, petitioner resided in Sedona,
Arizona.
For 1986 through 1990, petitioner failed to file Federal
income tax returns. During audit, respondent reconstructed
petitioner's taxable income for the years in issue using the bank
deposits method. On October 10, 1995, respondent issued to
petitioner a notice of deficiency with the above adjustments.
On November 20, 1995, petitioner timely filed a petition for
the years in issue. On January 22, 1996, respondent timely filed
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an answer alleging, among other things, that because petitioner
failed to file Federal income tax returns for the years in issue,
the period of limitations on assessment had not expired.
Petitioner failed to respond to the answer, and on May 21, 1996,
this Court granted respondent's motion under Rule 37(c) for entry
of an order that the undenied allegations in respondent's answer
be deemed admitted.
During discovery, petitioner consistently refused delivery
of and failed to respond to respondent's correspondence that was
mailed to petitioner. On several occasions, messages, such as
"return to sender" or "no such person at this location", were
handwritten on the correspondence that was refused by petitioner
and returned to respondent.
On October 4, 1996, after confirming petitioner's address
with petitioner over the telephone, respondent served on
petitioner two copies of requests for admission of factual
matter, one by regular first-class mail and one by certified
mail. Petitioner did not respond to the requests for admission,
and, under Rule 90(c), each factual matter set forth in the
requests for admission was deemed admitted.
Based on the above deemed admissions under Rules 37(c) and
90(c), the following facts are established in this case.
During 1986 through 1990, petitioner was married and was self-
employed as a chiropractor. For the years in issue, petitioner
did not file Federal income tax returns.
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During the years in issue, petitioner maintained two joint
checking accounts numbered 604366 and 86409 at Peoples Bank of
Oxford. Petitioner also maintained an account numbered 304380 at
Citadel Federal Credit Union.
During 1986, 1987, 1988, 1989, and 1990, respectively, funds
totaling $41,459, $54,824, $57,825, $59,051, and $62,755 were
deposited into or credited to the above accounts on petitioner's
behalf. The following schedule reflects for each year in issue
the bank or credit union, account number, and total funds
deposited into or credited to the above accounts.
Deposits/Credits for 1986
Institution Account No. Deposits/Credits
Peoples Bank of Oxford 604366 $ 5,632
Peoples Bank of Oxford 86409 25,290
Citadel Fed. Cred. Union 304380 10,537
Total Deposits/Credits $41,459
Deposits/Credits for 1987
Institution Account No. Deposits/Credits
Peoples Bank of Oxford 604366 $ 5,405
Peoples Bank of Oxford 86409 37,451
Citadel Fed. Cred. Union 304380 11,968
Total Deposits/Credits $54,824
Deposits/Credits for 1988
Institution Account No. Deposits/Credits
Peoples Bank of Oxford 604366 $13,976
Peoples Bank of Oxford 86409 34,771
Citadel Fed. Cred. Union 304380 9,078
Total Deposits/Credits $57,825
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Deposits/Credits for 1989
Institution Account No. Deposits/Credits
Peoples Bank of Oxford 604366 $ 6,513
Peoples Bank of Oxford 86409 46,481
Citadel Fed. Cred. Union 304380 6,057
Total Deposits/Credits $59,051
Deposits/Credits for 1990
Institution Account No. Deposits/Credits
Peoples Bank of Oxford 604366 $15,064
Peoples Bank of Oxford 86409 32,737
Citadel Fed. Cred. Union 304380 14,954
Total Deposits/Credits $62,755
For 1986, of the above $41,459 in total funds deposited into
or credited to petitioner's accounts, $1,130 constituted interest
income earned on petitioner's deposits. Petitioner was entitled
to a personal exemption in the amount of $1,080.
For 1986, petitioner received taxable income in the amount
of $40,379 (total deposits/credits of $41,459 less personal
exemption of $1,080 equals $40,379). For 1986, petitioner's
total Federal tax liability equaled $16,505, of which $11,545
constituted income taxes and $4,960 constituted self-employment
taxes.
For 1987, of the above $54,824 in total funds deposited into
or credited to petitioner's accounts, $1,914 constituted interest
income earned on petitioner's deposits, and $1,629 constituted
rental income from the Housing Authority of the City of Chester.
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Petitioner was entitled to a personal exemption of $1,900 and a
standard deduction of $1,880.
For 1987, petitioner received taxable income in the amount
of $51,044 (total deposits/credits of $54,824 less personal
exemption of $1,900 and less standard deduction of $1,880 equals
$51,044). For 1987, petitioner's total Federal tax liability
equaled $20,009, of which $14,622 constituted income taxes and
$5,387 constituted self-employment taxes.
For 1988, of the above $57,825 in total funds deposited into
or credited to petitioner's accounts, $1,596 constituted interest
income earned on petitioner's deposits, $2,217 constituted rental
income from the Housing Authority of the City of Chester, and
$7,000 constituted a nontaxable transfer between accounts.
Petitioner was entitled to a personal exemption of $1,950 and a
standard deduction of $3,100.
The following schedule reflects the calculation of
petitioner's 1988 taxable income.
Petitioner's 1988 Taxable Income
Item Amount
Total deposits/credits $57,825
Nontaxable transfer (7,000)
Personal exemption (1,950)
Standard deduction (3,100)
Taxable income $45,775
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For 1988, petitioner's total Federal tax liability equaled
$17,234, of which $11,375 constituted income taxes and $5,859
constituted self-employment taxes.
For 1989, of the above $59,051 in total funds deposited into
or credited to petitioner's accounts, $395 constituted interest
income earned on petitioner's deposits, and $2,442 constituted
rental income from the Housing Authority of the City of Chester.
For 1989, petitioner also received $1,164 in interest income that
was not deposited into or credited to the above accounts.
Petitioner was entitled to a personal exemption of $2,000 and a
standard deduction of $3,200.
The following schedule reflects the calculation of
petitioner's 1989 taxable income.
Petitioner's 1989 Taxable Income
Item Amount
Total deposits/credits $59,051
Interest income 1,164
Personal exemption (2,000)
Standard deduction (3,200)
Taxable income $55,015
For 1989, petitioner's total Federal tax liability equaled
$20,522, of which $14,272 constituted income taxes and $6,250
constituted self-employment taxes.
For 1990, of the above $62,755 in total funds deposited into
or credited to petitioner's bank accounts, $371 constituted
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interest income earned on petitioner's deposits, $3,490
constituted taxable Social Security benefits, $2,486 constituted
rental income from the Housing Authority of the City of Chester,
$11,004 constituted nontaxable transfers between petitioner's
accounts, and $3,490 constituted nontaxable Social Security
benefits.
Also for 1990, petitioner received $2,639 in interest income
that was not deposited into or credited to his accounts.
Petitioner was entitled to a deduction of $2,961 for one-half of
his self-employment tax liability, a personal exemption of
$2,050, and a standard deduction of $3,375.
The following schedule reflects the calculation of
petitioner's 1990 taxable income.
Petitioner's 1990 Taxable Income
Item Amount
Total deposits/credits $62,755
Interest income 2,639
Nontaxable transfers (11,004)
Nontaxable Social Security income (3,490)
One-half self-employment taxes (2,961)
Personal exemption (2,050)
Standard deduction (3,375)
Taxable income $42,514
For 1990, petitioner's total Federal tax liability equaled
$15,886, of which $9,964 constituted income taxes, and $5,922
constituted self-employment taxes.
For 1986 through 1990, petitioner did not have reasonable
cause for failing to file his Federal income tax returns.
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Also for the years in issue, petitioner did not pay any
estimated taxes, and petitioner did not qualify under section
6654(e) for an exception to the statute requiring payment of
estimated taxes.
Discussion
Summary judgment or partial summary judgment may be granted
if pleadings, answers to interrogatories, admissions, and other
acceptable material show that no genuine issue as to any material
fact exists and that a decision may be entered as a matter of
law. Rule 121(b). This Court has held in numerous cases that
deemed admissions alone may support summary adjudication in favor
of respondent in cases involving unreported income. Frazier v.
Commissioner, 91 T.C. 1, 12-13 (1988); Marshall v. Commissioner,
85 T.C. 267 (1985); Doncaster v. Commissioner, 77 T.C. 334, 337-
338 (1981).
Where a motion for summary judgment is made and supported as
provided under Rule 121, the opposing party may not rest upon
mere allegations or denials in pleadings, but the opposing party
must set forth specific facts showing that there exists a genuine
issue for trial. Rule 121(d).
Where affirmative allegations and requests for admission are
deemed admitted under Rules 37(c) and 90(c), facts underlying the
deemed admissions are conclusively established unless the Court
on motion permits withdrawal or modification of the admissions.
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See Rule 90(c); Marshall v. Commissioner, supra at 271-273;
Morrison v. Commissioner, 81 T.C. 644, 651 (1983); Doncaster v.
Commissioner, supra at 336-337.
Respondent argues for the years in issue that the deemed
admissions establish that petitioner received unreported income,
that petitioner is liable for the deficiencies and additions to
tax, and that respondent is entitled to summary judgment as a
matter of law.
Petitioner opposes respondent's motion for summary judgment
on the grounds that the presumption of correctness should not
attach to respondent's determination of unreported income, that,
without supporting evidence, the deemed admissions fail to prove
that petitioner received unreported income, and that petitioner
was not required to provide respondent with any information
through discovery or otherwise that would aid respondent in
satisfying respondent's burden of proof as the moving party on
the motion for summary judgment.
We agree with respondent, and we reject petitioner's
arguments as unpersuasive and without merit.
The deemed admissions in this case are sufficiently factual
to support a summary adjudication in favor of respondent. The
admitted facts establish that petitioner received unreported
income during the years in issue in the amounts determined by
respondent, that petitioner, without reasonable cause, failed to
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file Federal income tax returns, and that petitioner failed to
pay estimated taxes. Petitioner has offered no credible facts
that contradict the deemed admissions.
Petitioner's argument that he may ignore respondent's
discovery requests where respondent bears the burden of proof on
an issue lacks merit. Under Rule 70(b), nonprivileged
information should be provided in discovery if the information is
reasonably calculated to lead to discovery of admissible
evidence. Who bears the burden of proof on an issue has no
effect on the obligation to comply with appropriate discovery
requests. Rule 70(b); Piscatelli v. Commissioner, 64 T.C. 424,
426 (1975).
For the reasons stated above, we conclude that factual
allegations and admissions that were deemed admitted under Rules
37(c) and 90(c) establish that petitioner received unreported
income during the years in issue, and we have found that
petitioner is liable for deficiencies and additions to tax as
determined by respondent. Accordingly, we conclude that no
factual matter remains in dispute, and we grant respondent's
motion for summary judgment as a matter of law.
An appropriate order
and decision for respondent
will be entered.
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