T.C. Memo. 1999-363
UNITED STATES TAX COURT
DOUGLAS MICHAEL RILEY, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3896-98. Filed November 1, 1999.
Douglas M. Riley, pro se.
John Q. Walsh, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
GALE, Judge: Respondent determined deficiencies in
petitioner’s Federal income tax, additions to tax, and penalties
as follows:
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Additions to Tax Penalty
Sec. Sec. Sec.
Year Deficiency 6651(a)(1) 6651(a)(2) 6662(a)
1992 $10,407 $1,961 $1,961 $2,081
1993 12,378 2,284 1,675 2,476
1994 1,054 100 88 9
1995 1,496 337 67 299
In his answer, respondent asserted a claim for increased
additions to tax under section 6651(a)(1)1 of $218, $253, $109,
and $37 for 1992, 1993, 1994, and 1995, respectively.
After concessions,2 we must decide the following issues:
(1) Whether petitioner is entitled to casualty loss
deductions during the years 1992 through 1995 for the loss of a
“nonviable fetus”. We hold he is not.
(2) Whether petitioner is liable for additions to tax under
section 6651(a)(1). We hold he is.
(3) Whether petitioner is liable for accuracy-related
penalties under section 6662(a). We hold he is.
1
Unless otherwise noted, 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.
2
The parties have stipulated that petitioner received
unreported unemployment compensation during 1994 of $6,110. In
addition, respondent has conceded that petitioner is not liable
for additions to tax under sec. 6651(a)(2) for failure to pay for
any of the years in issue. Finally, respondent concedes that
petitioner is entitled to mortgage interest deductions for the
years 1992 through 1995 of $4,158, $5,644, $4,437, and $4,384,
respectively, to the extent those deductions exceed the standard
deductions for the years in issue.
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(4) Whether petitioner is liable for a penalty under
section 6673 for maintaining a frivolous or groundless position
in these proceedings. We hold he is.
FINDINGS OF FACT3
At the time of filing the petition, petitioner resided in
Schaumburg, Illinois. On December 16, 1996, petitioner filed
Forms 1040, U.S. Individual Income Tax Return, for the years 1992
through 1995. Before that date, petitioner had not filed any tax
returns for those years. For the years 1992 through 1995,
petitioner’s tax returns reported adjusted gross income of
$53,029, $60,406, $7,154, and $16,399, respectively. In
addition, petitioner received unemployment compensation in 1994
of $6,110 that was not reported on his return for that year.
Each of petitioner’s tax returns for the years in issue
included a Schedule A, Itemized Deductions, and a Form 4684,
Casualties and Thefts. On each Form 4684, petitioner claimed a
casualty loss for a “nonviable fetus”. For the years 1992
through 1995, petitioner claimed casualty loss deductions of
$50,729, $58,056, $4,704, and $13,899, respectively. Petitioner
claimed that the casualty loss occurred in either 1974 or 1975.4
3
Some of the facts have been stipulated, and we incorporate
by this reference the parties’ stipulation of facts and the
attached exhibits.
4
The returns for 1992 and 1993 state the casualty occurred
in June 1974. The returns for 1994 and 1995 state the casualty
occurred in June 1975. At trial, petitioner testified that the
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OPINION
1. Casualty Loss Deductions
Petitioner asserts that as a result of his then-wife’s
decision to terminate her pregnancy in 1974 or 1975, petitioner
suffered a “theft/casualty” loss of a “nonviable fetus”. In
response to this loss, petitioner claims entitlement to casualty
loss deductions for each of the years 1992 through 1995 of
$50,729, $58,056, $4,704, and $13,899, respectively. These
losses roughly correspond to the amount of gross income reported
for each year.
Section 165(a) allows a deduction for losses sustained
during the taxable year which are not compensated for by
insurance or otherwise. Under section 165(c), however, an
individual may deduct a loss not connected with a trade or
business or with a transaction entered into for profit if the
loss arose from “fire, storm, shipwreck, or other casualty, or
from theft.” Sec. 165(c)(3). Casualty losses under section 165
must be deducted for the taxable year in which the loss was
sustained. See sec. 1.165-7(a)(1), Income Tax Regs. Losses due
to theft may be deducted during the taxable year in which the
taxpayer discovered the loss. See sec. 165(e).
casualty loss resulted when his then wife elected to terminate
her pregnancy in August 1974.
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There is no authority for treating a nonviable fetus as
“property” for purposes of section 165(c)(3)--a proposition in
support of which petitioner has advanced no argument.
Petitioner’s claim is frivolous for two additional reasons.
First, a casualty loss deduction may be taken only for the
taxable year in which the loss was sustained, and a theft loss
deduction may be taken only for the taxable year in which the
taxpayer discovers the theft. See sec. 1.165-7(a)(1), Income Tax
Regs.; sec. 165(e). As petitioner’s former wife terminated her
pregnancy in the mid-1970's, and as petitioner has presented no
evidence suggesting that he did not discover his wife’s actions
until nearly 20 years later, petitioner’s deductions for the
years 1992 through 1995 are untimely. Second, petitioner has not
sought to prove or otherwise justify the amounts deducted, which
roughly correspond with his gross income for each of the years in
issue. As petitioner bears the burden of proof with respect to
these amounts, petitioner’s claim must fail. See Rule 142(a).
Accordingly, we sustain respondent’s disallowance of the
casualty/theft losses claimed by petitioner.
2. Liability for Additions to Tax Under Section 6651(a)(1)
Additions to tax under section 6651(a)(1) apply in the case
of failure to file timely tax returns, unless the failure is due
to reasonable cause. An addition equals 5 percent of the amount
required to be shown as tax on the return for each month or
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fraction thereof during which the failure to file continues, up
to a maximum of 25 percent. See sec. 6651(a)(1).
The parties have stipulated that respondent received the
returns for each of the years in issue on December 16, 1996.
This was more than 5 months after the due dates, including any
extensions available to petitioner pursuant to section 6081(a),
for the returns for taxable years 1992, 1993, and 1994. With
respect to the 1995 taxable year, respondent has no record
indicating that petitioner was granted an extension of time to
file for that year, and petitioner has offered no evidence with
respect to any extension. Accordingly, we conclude that the 1995
return was filed more than 5 months after its due date.
Petitioner has offered no evidence of reasonable cause.
Therefore, petitioner is liable for section 6651(a)(1) additions
to tax equal to 25 percent of the amount of the tax required to
be shown on the return for each of the years in issue.
3. Accuracy-Related Penalties Under Section 6662
Petitioner bears the burden of proving that the
determinations pursuant to section 6662(a) are erroneous. See
Rule 142(a). Petitioner has introduced no evidence relating to
these determinations. Therefore, he is liable for accuracy-
related penalties under section 6662(a).
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4. Liability for Penalty Under Section 6673
Section 6673 authorizes this Court to award a penalty to the
United States not in excess of $25,000 whenever it appears to the
Court that proceedings have been instituted or maintained by the
taxpayer primarily for delay, the taxpayer’s position in such
proceedings is frivolous or groundless, or the taxpayer
unreasonably failed to pursue available administrative remedies.
Previously, on its own motion, this Court has awarded damages to
the United States where the taxpayer advanced frivolous and
groundless contentions. See Abrams v. Commissioner, 82 T.C. 403
(1984). In the instant case, petitioner claimed utterly
groundless casualty losses, arising from his former wife’s
decision to terminate a pregnancy almost 20 years earlier, in
amounts obviously calculated to offset the taxable income he
reported. Notwithstanding the Court’s warning that such claims
appeared frivolous, petitioner proceeded to trial. Petitioner
has wasted the time and resources of this Court and respondent.
We will accordingly exercise our discretion under section 6673 to
require petitioner to pay a penalty to the United States of
$1,000.
To reflect the foregoing,
Decision will be entered
under Rule 155.