T.C. Memo. 2000-277
UNITED STATES TAX COURT
HUBERT R. G. RANEY, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 18200-98. Filed August 30, 2000.
Hubert R. G. Raney, pro se.
J. Scot Simpson, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
RUWE, Judge: Respondent determined deficiencies in
petitioner’s Federal income taxes and additions to tax as
follows:
Additions to Tax
Year Deficiency Sec. 6651(f) Sec. 6654(a)
1994 $7,991 $5,856 $404
1995 8,166 6,119 442
1996 8,168 6,042 428
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The issues for decision are: (1) Whether petitioner
received taxable wage and pension income during each of the years
in issue; (2) whether petitioner is liable for additions to tax
under section 6651(f)1 for fraudulent failure to file income tax
returns for the years in issue; and (3) whether petitioner is
liable for the additions to tax under section 6654(a) for failure
to pay estimated tax for the years in issue.
When this case was called for trial, respondent moved,
pursuant to Rule 91(f), to compel petitioner to enter into a
proposed stipulation of facts. After hearing the parties on the
motion, we determined that there was no real dispute about the
facts proposed for stipulation and that there was no good reason
why the facts and exhibits attached to the stipulation should not
be made part of the evidentiary record. We therefore granted
respondent’s motion and deemed the matters contained in the
proposed stipulation to be facts for purposes of this case. See
Rule 91(f). After we granted the motion, the parties decided
that they would not call any witnesses, and the case was
submitted on the stipulated facts.
1
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.
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FINDINGS OF FACT
Petitioner resided in Tampa, Florida, at the time he filed
his petition. Petitioner was married and had no dependent
children during the years in issue.
Petitioner was employed by the U.S. Postal Service. During
the years 1994, 1995, and 1996, petitioner received wage income
from the U.S. Postal Service in the amounts of $34,490, $35,261,
and $35,428, respectively. Petitioner received Forms W-2, Wage
and Tax Statement, from the U.S. Postal Service reflecting these
wages. Petitioner also received pension income from the Defense
Finance and Accounting Service for the years 1994, 1995, and 1996
in the amounts of $6,258, $6,420, and $6,591, respectively.
Petitioner provided the U.S. Postal Service with Forms W-4,
Employee’s Withholding Allowance Certificate, dated February 15,
1994, and April 7, 1993; he claimed 15 withholding allowances on
each form. The U.S. Postal Service withheld Federal income taxes
from petitioner’s wages in the amounts of $183.95, $7.84, and
$112 for the years 1994, 1995, and 1996, respectively.
Petitioner made no estimated tax payments for the years in issue.
Petitioner sent Forms 1040, U.S. Individual Income Tax
Return, to respondent for the years in issue. The Forms 1040
were received by the Internal Revenue Service on December 17,
1997. On those Forms 1040, petitioner reported no income.
Respondent did not accept the above-referenced Forms 1040 as tax
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returns. Petitioner has not filed any other income tax returns
for the years in issue.
In correspondence with respondent, petitioner indicated that
he did not believe that the tax laws required him to pay tax on
the income that he received. Petitioner continues to take that
position in his brief.
OPINION
Petitioner received wage income from the U.S. Postal Service
during each of the years 1994, 1995, and 1996 in the respective
amounts of $34,490, $35,261, and $35,428. Petitioner also
received pension income during 1994, 1995, and 1996 in the
respective amounts of $6,258, $6,420, and $6,591.2 Petitioner
generally argues that no act of Congress authorizes taxation of
these amounts. We disagree. All these amounts constitute gross
income under section 61. Petitioner’s arguments to the contrary
are wholly without merit and not worthy of further analysis. We
hold that petitioner has deficiencies in income taxes in the
amounts determined in the notice of deficiency.
Respondent also determined that petitioner is liable for
additions to tax pursuant to section 6651(f) for fraudulent
failure to file returns for each of the years in issue. The
2
In computing the amount of the deficiencies, respondent
determined that petitioner was liable for an increase in tax of
10 percent on the pension distributions pursuant to sec. 72(t).
Petitioner has not disputed this and offered no evidence on this
point.
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existence of fraud is a question of fact to be resolved upon
consideration of the entire record. See Gajewski v.
Commissioner, 67 T.C. 181, 199 (1976), affd. without published
opinion 578 F.2d 1383 (8th Cir. 1978); Estate of Pittard v.
Commissioner, 69 T.C. 391 (1977). Fraud is not to be imputed or
presumed, but rather must be established by independent evidence
of fraudulent intent. See Beaver v. Commissioner, 55 T.C. 85, 92
(1970); Otsuki v. Commissioner, 53 T.C. 96 (1969). Fraud may not
be found under “circumstances which at the most create only
suspicion.” Davis v. Commissioner, 184 F.2d 86, 87 (10th Cir.
1950); Petzoldt v. Commissioner, 92 T.C. 661, 700 (1989).
A finding of fraud requires proof of specific intent to
evade a tax believed to be owing. If an understatement of tax
is caused by a good faith misunderstanding of the tax laws, the
understatement would not be due to fraud. See Niedringhaus v.
Commissioner, 99 T.C. 202, 217 (1992). A good faith
misunderstanding for this purpose can exist even if the
misunderstanding is objectively unreasonable. See id. at 216-
217. We have cautioned, however, that a good faith
misunderstanding of the law is different than disagreement with
the law or a belief that the law is or may be unconstitutional.
See id. at 217-218.
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The main thrust of petitioner’s position in this case is
that the tax laws do not require him to pay taxes on the income
that he received. While we believe that petitioner’s position is
objectively unreasonable, the sparse evidence in the record
before us does not clearly and convincingly negate petitioner’s
implicit claim that he was acting on his good faith understanding
of the law. Of course, we may question whether petitioner’s
purported misunderstanding of the law was the product of good
faith. However, suspicions are not a substitute for evidence.3
See id. at 210. Respondent bears the burden of proving
fraudulent intent by clear and convincing evidence. See sec.
7454(a); Rule 142(b). Respondent has not done so. We therefore
hold that petitioner is not liable for the additions to tax under
section 6651(f).4
Petitioner bears the burden of proof regarding the section
6654(a) additions to tax for failure to pay estimated tax.
Petitioner offered no evidence regarding the section 6654(a)
3
The record before us contains no evidence of petitioner’s
business experience, educational background, prior history of
filing income tax returns, or dealings with the Internal Revenue
Service, prior to 1994.
4
In respondent’s brief, he requests that we, on our own
motion, impose an additional penalty under sec. 6673. Given the
fact that petitioner has prevailed on the sec. 6651(f) issue, we
decline respondent’s invitation.
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additions to tax, nor did he address this issue in his brief. We
therefore uphold respondent’s determination on this issue.
Decision will be entered
for respondent with respect
to the deficiencies and the
additions to tax under section
6654(a) and for petitioner
with respect to the additions
to tax under section 6651(f).