T.C. Memo. 1999-59
UNITED STATES TAX COURT
ROBERT J. GEIGER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3665-97. Filed March 1, 1999.
Robert J. Geiger, pro se.
Alan S. Kline, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
CARLUZZO, Special Trial Judge: This case was heard pursuant
to the provisions of section 7443A(b)(3) of the Internal Revenue
Code of 1986, as amended and in effect at the time the petition
was filed, and Rules 180, 181, and 182. Subsequent section
references are to the Internal Revenue Code in effect for 1992.
Rule references are to the Tax Court Rules of Practice and
Procedure.
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In a notice of deficiency issued to petitioner on November
20, 1996, respondent determined a deficiency in his 1992 Federal
income tax in the amount of $1,951, and an addition to tax under
section 6651(a)(1) in the amount of $488.
The issues for decision are: (1) Whether various items of
income attributed to petitioner in the notice of deficiency must
be included in his 1992 income; (2) whether petitioner is liable
for the 10-percent additional tax imposed by section 72(t) with
respect to a distribution from a qualified retirement plan; (3)
whether petitioner, who did not file a 1992 Federal income tax
return, is liable for the addition to tax under section
6651(a)(1) for his failure to do so; and (4) whether a penalty
under section 6673(a) should be imposed upon petitioner.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
Petitioner was born on July 16, 1947. He was 45 years old and
married as of the close of 1992. He resided in Bethlehem,
Pennsylvania, at the time the petition was filed.
Petitioner graduated from Wittenberg University in 1970. He
majored in business administration, a curriculum that included
accounting courses. Apparently, after graduating from college,
petitioner served in the U.S. Army for a period of time.
In 1972 petitioner began working for Geiger's Beverage,
Incorporated (Geiger's), a family owned corporation engaged in
the business of malt beverage distribution. Petitioner was
employed by Geiger's from 1972 until 1987 or 1988. During some
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or all of that time, he served as Geiger's treasurer. His day-
to-day responsibilities included managing Geiger's warehouse and
routing functions.
Geiger's stock was owned by petitioner, his brother Michael
Geiger (Geiger's secretary), his mother Alma Geiger (Geiger's
president), and his sister Janice Lee Costner (Geiger's vice
president). The spouses of the Geiger siblings also held some
interest in Geiger's as well.
In 1988, all of the assets of Geiger's were purchased by
Linda K. Woodward, Incorporated. Petitioner's employment with
Geiger's was terminated as a result.
After the sale of its assets, Geiger's adopted a 5-year plan
of liquidation. The final distributions in liquidation were made
to its shareholders during 1992. After reviewing certain of
Geiger's books and records, petitioner's brother computed the
appropriate amounts of distributions in liquidation, and on
December 12, 1992, prepared the Form 1096 and Forms 1099
regarding the distributions. Petitioner's mother was responsible
for making the distributions. In calculating the amount of
distributions due to his siblings, petitioner's brother included
the share holdings of their spouses. Consequently, only four
Forms 1099 were generated; one for each Geiger sibling, and one
for petitioner's mother.
In 1992, as reflected in Geiger's books and records, the
corporation made a $15,282 distribution in liquidation to
petitioner, as one of its shareholders.
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During 1992, petitioner maintained an interest bearing
checking account at the First Valley Bank. For years prior to
the year in issue, he received refunds of Federal income taxes,
sometimes amounting to thousands of dollars.
Respondent's Information Return Master File (IRMF)
transcript indicates that several payors issued information
returns to petitioner for the taxable year 1992 as follows:
Type of
Payor Form income Amount
Geiger's Bvgs., Inc. 1099B S-T cap. gains $15,282
First Valley Bank 1099-INT Interest 34
U.S. Treasury Dept. 1099-INT Interest 16
Manufacturer's Life 1099R Taxable distr. 1,771
In the notice of deficiency issued to petitioner on November
20, 1996, respondent determined that petitioner must include the
above items of income (the items of income) in his 1992 income.
In computing his 1992 taxable income, respondent took the items
of income into account and allowed petitioner a personal
exemption deduction and the standard deduction appropriate for a
married individual who files a separate return. Petitioner's
1992 Federal income tax liability and the deficiency here in
dispute were computed by application of the applicable rate of
Federal income tax to petitioner's taxable income and adding to
that amount the additional tax imposed by section 72(t) on the
distribution from Manufacturer's Life. Respondent further
determined that petitioner is liable for the addition to tax
under section 6651(a) for his failure to file a 1992 Federal
income tax return.
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OPINION
Petitioner does not deny receipt of any of the items of
income. Nor does he claim that any particular item of income has
been overstated or should be reduced either on technical or
factual grounds. Furthermore, he does not claim entitlement to
deductions or credits not already allowed in the notice of
deficiency, and he does not contend that respondent erred in
determining his filing status.
Petitioner is aware and understands that, in general,
determinations made by the Commissioner in a notice of deficiency
are presumptively correct, and the taxpayer has the burden of
proving them in error. Rule 142(a); Welch v. Helvering, 290 U.S.
111, 115 (1933). However, relying upon cases such as Portillo v.
Commissioner, 932 F.2d 1128 (5th Cir. 1991), affg. in part, revg.
in part and remanding T.C. Memo. 1990-68; Anastasato v.
Commissioner, 794 F.2d 884 (3d Cir. 1986), vacating and remanding
T.C. Memo. 1985-101; and Gerardo v. Commissioner, 552 F.2d 549
(3d Cir. 1977), affg. in part, revg. in part and remanding T.C.
Memo. 1975-341, petitioner takes the position that the
determinations made in the notice of deficiency in this case are
arbitrary and excessive, and therefore the determinations are not
entitled to a presumption of correctness. Petitioner goes on to
argue that without the presumption of correctness, the
determinations made in the notice of deficiency cannot be
sustained. According to petitioner, the determinations are
invalid because they are based upon "naked assertions".
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During his presentation at trial and in his brief,
petitioner correctly (more or less) recited the general
principles that govern the burden of proof in deficiency
proceedings. However, he mistakenly proceeded as though those
principles relieved him of his burden of proof in this case.
Unlike taxpayers in Portillo v. Commissioner, supra,
Anastasato v. Commissioner, supra, and Gerardo v. Commissioner,
supra, who denied receipt of all, or portions of, certain income
charged to each in notices of deficiency, petitioner has not
denied, either in a pleading or in his testimony, that he
received any of the items of income. Unsupported by such a
denial, his claim that respondent's determination is arbitrary
and excessive is itself nothing more than a "naked assertion"
that does not entitle him to the relief from the burden of proof
that he seeks. Because petitioner did not deny receipt of some
or all of the items of income, or point to some other error made
in the notice of deficiency, we fail to see how respondent's
determinations could be arbitrary and excessive. See White v.
Commissioner, T.C. Memo. 1997-459.
There is insufficient evidence in the record to apply the
body of law established in the line of cases upon which
petitioner relies. Petitioner's case-in-chief amounted to little
more than his testimony that he could not remember whether he
received any of the items of income. As we advised petitioner at
trial, we consider his testimony in this regard incredible given
his educational background and apparent good health. As
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recognized by other Federal courts, we understand the
difficulties encountered in proving a negative; however, if
petitioner did not receive any of the items of income, we would
expect that, at the very least, he would tell us so. See Wichita
Terminal Elevator Co. v. Commissioner, 6 T.C. 1158 (1946), affd.
162 F.2d 513 (10th Cir. 1947).
Nevertheless, to the extent that respondent had an
obligation to link petitioner to the income-generating activities
relating to the items of income, he has satisfied that obligation
through the introduction of predicate evidence. Absent some
showing by petitioner as to how the distribution in liquidation
should have been divided between himself and his spouse, there is
no basis for making any apportionment. In any case, the
presumption of correctness to which the Commissioner is normally
entitled remains intact in this case.
The burden of proof in this case is upon petitioner.
Rule 142(a); Welch v. Helvering, supra at 115.
His testimony that he cannot remember any of the relevant
transactions that gave rise to the items of income is
insufficient to satisfy his burden of proof. Because he has
failed to meet that burden, the determinations made in the notice
of deficiency, including the additional tax imposed by section
72(t) and the addition to tax under section 6651(a) are
sustained.
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By motion made at the conclusion of trial, respondent
requests the Court to impose a penalty on petitioner under
section 6673(a). Section 6673(a)(1) authorizes the Tax Court to
require a taxpayer to pay a penalty not to exceed $25,000 if the
proceedings have been instituted or maintained by the taxpayer
primarily for delay or if the taxpayer's position in such
proceeding is frivolous or groundless. Sec. 6673(a)(1)(A) and
(B). A position maintained by the taxpayer is "frivolous" where
it is "contrary to established law and unsupported by a reasoned,
colorable argument for change in the law." Coleman v.
Commissioner, 791 F.2d 68, 71 (7th Cir. 1986).
Petitioner's pretrial correspondence to respondent contained
arguments that are typically deemed frivolous for purposes of
section 6673(a). The objectionable arguments, however, are
contained in documents introduced into evidence not by
petitioner, but by respondent. Petitioner's position in this
case focused almost entirely on issues related to the burden of
proof, demonstrated by his ill-fated strategy to proceed as
though it did not rest with him. Although we consider
petitioner's position on the point to be tenuous, we do not
consider it to be frivolous within the meaning of section
6673(a). Respondent's motion for a penalty under that section
will therefore be denied.
To reflect the foregoing,
An appropriate order and
decision will be entered.