T.C. Memo. 2000-86
UNITED STATES TAX COURT
RICHARD HENRY AND CARMEN M. STRICKLAND, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 9799-95. Filed March 14, 2000.
Richard H. Strickland, pro se.
Steven M. Roth, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
GERBER, Judge: Respondent determined a deficiency in
petitioners’ 1990 Federal income tax of $3,365, a section
6651(a)(1)1 addition to tax of $88 and a section 6662(a) penalty
1
Unless otherwise stated, all section references are to
the Internal Revenue Code in effect for the taxable years in
issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
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of $673. Respondent also determined a deficiency in petitioners’
1991 Federal income tax of $13,438 and a section 6662(a) penalty
of $2,688. After concessions,2 the only substantive issue for
our consideration is whether petitioners are entitled to deduct
any of the 1990 Schedule C car and truck expenses. Petitioners
also allege that the audits and resulting deficiency
determinations were improperly conducted, and they ask that
damages be awarded for any injuries they may have suffered as a
result.
FINDINGS OF FACT3
Petitioners Richard H. and Carmen M. Strickland resided in
West Covina, California, at the time their petition was filed.
Carmen M. Strickland is a petitioner in this case because she
filed a joint return with Richard Strickland. Subsequent
references to “petitioner” refer only to Richard Strickland.
Petitioner filed his 1990 Federal income tax return on
August 26, 1991. Petitioner did not receive an extension, nor
did he offer an explanation for the late filing.
The 1990 tax return included a deduction on Schedule C for
car and truck expenses, in the amount of $8,020. Respondent
disallowed the $8,020 deduction. That disallowance, along with
2
Respondent has conceded the 1991 deficiency and related
penalty.
3
The stipulation of facts and the exhibits attached thereto
are incorporated herein by this reference.
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an income adjustment, resulted in a $3,365 income tax deficiency.
Petitioner admits that there was an error in his 1990 return
requiring the income adjustment. He has offered no evidence to
either substantiate the Schedule C expenses or to show that they
were ordinary and necessary.
OPINION
Petitioner does not seek to show that respondent’s
adjustments to income and deductions were in error; instead he
asks the Court to “waive” the 1990 deficiency and award $50,000
in damages from respondent. Petitioner contends that the above
relief is justified due to respondent’s alleged improper audit
procedures and actions. Petitioner contends that respondent’s
following actions were improper: (1) Violation of the Privacy
Act of 1974, Pub. L. 93-579, 88 Stat. 1896 (the Privacy Act),
when respondent’s agent informed petitioner that his was a
“routine” audit, (2) failure to meet the burden of production
allegedly imposed by section 6201, and (3) lack of substantial
justification to begin the audit that led to the deficiency
determination. Petitioner claims that he was injured by these
alleged improprieties and should be compensated by being relieved
from the 1990 deficiency. He also claims that he is entitled to
section 7435 civil damages because respondent’s counsel
“intentionally misstated facts” in his proposed stipulation of
facts included in his motion, under Rule 91(f), to show cause why
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such facts should not be stipulated. Said facts were deemed to
be admitted as a sanction for petitioner’s failure to comply with
the Court’s order, dated December 16, 1996.
This Court is a court of limited jurisdiction. See Naftel
v. Commissioner, 85 T.C. 527, 529 (1985). Two of petitioner’s
claims fall outside that jurisdiction. Actions under the Privacy
Act, codified as 5 U.S.C. 552a (1994), and pursuant to section
7435 are both properly brought in U.S. District Courts. See
Crowell v. Commissioner, 102 T.C. 683, 693 (1994) (“The exclusive
remedy for individuals seeking redress for a violation of the
Privacy Act is a civil action in Federal District Court pursuant
to 5 U.S.C. section 552a(g)(1)”.); sec. 7435 (taxpayer must bring
section 7435 action in a district court and “Such civil action
shall be the exclusive remedy for recovering damages”). We do
not have the authority to address these claims.
Petitioner also contends that he was injured by respondent’s
alleged failure to meet a burden of production under section 6201
when respondent did not produce a requested Form 1099 discussed
during the audit. Assuming that respondent ever had such a
burden, the document was related only to the 1991 deficiency,
which respondent has conceded.
Petitioner’s only remaining claim of injury is that the
deficiency notice was the result of an audit that was not
substantially justified. This allegation stems from petitioner’s
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theory of a third party’s malicious information instigating the
audit. As a general rule, we do not look behind the deficiency
notice. See Greenberg’s Express, Inc. v. Commissioner, 62 T.C.
324, 330 (1974). The Court of Appeals for the Ninth Circuit has
recognized an exception to this rule and has looked behind the
notice of deficiency in cases involving unreported income where
the Commissioner introduced no substantive evidence but rested on
the presumption of correctness and the taxpayer challenged the
notice of deficiency on the grounds that it was arbitrary. See
Weimerskirch v. Commissioner, 596 F.2d 358 (9th Cir. 1979), revg.
67 T.C. 672 (1977). This exception to the rule is not applicable
to the instant case; therefore, we shall not look behind the
deficiency notice to evaluate the audit procedure. There is no
inherent evil residing in the fact that the Commissioner may
institute an audit based on information received from a third
party. We find petitioner’s claims of injury and request for
damages to be either without merit or without our jurisdiction.
The remaining matter in this case is whether petitioner is
entitled to the Schedule C car and truck expense deductions he
claimed. Initially, we observe that petitioner bears the burden
of proving by a preponderance of evidence that the Commissioner’s
disallowance was in error. See Olton Feed Yard, Inc. v. United
States, 592 F.2d 272, 275 (5th Cir. 1979) (citing Helvering v.
Taylor, 293 U.S. 507, 515 (1935)). Petitioner has presented no
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evidence regarding these expenses; therefore, we hold for
respondent on this issue.
Respondent also determined an accuracy-related penalty under
section 6662(a), which imposes an addition to tax in the amount
of 20 percent of any underpayment attributable to negligence. To
avoid this negligence penalty, petitioner has the burden of
showing that his actions were not careless, reckless, or made
with intentional disregard of rules or regulations. See Delaney
v. Commissioner, 743 F.2d 670 (9th Cir. 1984), affg. T.C. Memo.
1982-666. Because petitioner has presented no evidence as to why
his actions were reasonable, petitioners are liable for the
section 6662 penalty for the taxable year 1990. See Lyszkowski
v. Commissioner, T.C. Memo. 1995-235, affd. 79 F.3d 1138 (3d Cir.
1996). In addition, petitioner’s allegations that respondent’s
actions were improper do not constitute reasonable cause.
Respondent also determined that petitioners were subject to
an addition to tax for failure to timely file a tax return. This
addition is imposed by section 6651(a)(1) unless petitioner can
show that the late filing was due to reasonable cause. See Bixby
v. Commissioner, 58 T.C. 757 (1972). Petitioner has offered no
evidence to show that respondent’s determination of the addition
to tax was in error. Accordingly, petitioners are liable for the
section 6651(a)(1) addition to tax for their 1990 tax year.
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In light of the foregoing,
Decision will be entered for
petitioners with respect to the 1991 tax
year and for respondent for the 1990 tax
year.