T.C. Memo. 2002-265
UNITED STATES TAX COURT
EDWARD T. O’TOOLE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2235-00. Filed October 15, 2002.
Edward T. O’Toole, pro se.
C. Teddy Li, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
COLVIN, Judge: Respondent determined that petitioner Edward
T. O’Toole is liable for deficiencies and additions to tax as
follows:
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Additions to tax
Year Deficiency Sec. 6651 Sec. 6654
1993 $2,441 $507 $83.05
1994 1,894 126.75 18.31
1995 4,808 852.50 176.50
1996 8,307 1,732.75 360.76
1997 2,786 364 69.99
The issues for decision are:
1. Whether petitioner bears the burden of proof as to
respondent’s deficiency determinations. We hold that he does.
2. Whether petitioner had unreported income of $21,733 in
1993, $18,252 in 1994, $32,014 in 1995, $44,866 in 1996, and
$24,650 in 1997. We hold that he did, except we hold that he had
unreported income of $17,430 in 1993.
3. Whether petitioner is liable for the additions to tax
for failure to file income tax returns and failure to pay
estimated tax for the years in issue. We hold that he is.
Unless otherwise specified, section references are to the
Internal Revenue Code in effect for the years in issue. Rule
references are to the Tax Court Rules of Practice and Procedure.
FINDINGS OF FACT
A. Petitioner
Petitioner resided in Glyndon, Maryland, when he filed his
petition in this case. Petitioner retired in 1986.
B. Petitioner’s Income
Petitioner received the following amounts of pension income
during the years in issue:
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Payer 1993 1994 1995 1996 1997
Maryland State $766 $1,839 $1,863 $1,914 $1,969
Retirement System
U.S. Office of 12,864 13,107 13,130 12,807 13,260
Personnel & Management
Total 13,630 14,946 14,993 14,721 15,229
Petitioner received the following amounts of dividend income
during the years in issue:
Payer 1993 1994 1995 1996 1997
ACM Government $572 $725 $646 $568 --
Spectrum Fund
Avalon Properties 17 108 146 149 $153
Balt. Gas & Elec. 63 66 69 69 72
Baltimore Bancorp 1 10 -- -- --
Capital One Financial -- -- 21 30 30
Corp.
Central Maine Power 62 36 36 36 36
Co.
PSI Energy, Inc. 128 186 186 186 186
SCANA Corp. 120 126 126 129 135
Signet Banking Corp. 75 96 75 75 60
Total 1,038 1,353 1,305 1,242 672
Petitioner received the following amounts of interest income
during the years in issue:
Payer 1993 1994 1995 1996 1997
1st Mariner Bank -- -- $261 $117 --
American National Bank $11 $15 16 4 --
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Baltimore County 426 104 137 43 --
Savings Bank
Bradford Federal 28 32 34 12 --
Savings Bank
Crestar Bank -- -- -- 13 --
Eastern Savings Bank 5 3 8 2 --
Fairfax Savings Bank -- 20 38 16 --
First National Bank -- -- -- 1 --
Garibaldi Federal 567 -- -- -- --
Savings Bank
Hamilton Federal 19 23 31 11 --
Savings & Loan
Household Bank F.S.B. 58 -- -- -- --
Internal Revenue 224 -- -- -- --
Service
Loyola Federal Savings 71 65 73 -- --
Bank
Marylands Bank F.S.B. -- 323 -- -- --
MBNA America 12 17 27 9 --
Mercantile Safe 21 -- -- -- --
Deposit & Trust
Northfield Federal 150 21 20 4 --
Savings
Provident Bank of 55 48 57 20 --
Maryland
Sparks State Bank 23 110 -- -- --
Washington Federal -- 10 6 -- --
Savings Bank
Total 1,670 791 708 252 --
Petitioner received winnings of $1,092 from the Maryland
State Lottery in 1993. Petitioner received capital gain income
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of $1,162 from the sale of stocks and bonds in 1994. Petitioner
received Social Security benefits of $15,008 in 1995, $8,502 in
1996, and $8,749 in 1997.
C. Petitioner’s Income Tax Returns
Petitioner did not file income tax returns for the years in
issue. He had the following amounts of income tax withheld from
various pension, dividends, and interest payments: $413 in 1993;
$1,387 in 1994; $1,398 in 1995; $1,376 in 1996; and $1,330 in
1997.
OPINION
A. Whether Petitioner Bears the Burden of Proof
Petitioner contends that respondent bears the burden of
proof under section 7491(a).1 We disagree.
1
Sec. 7491 provides in pertinent part:
SEC. 7491. BURDEN OF PROOF.
(a) Burden Shifts Where Taxpayer Produces Credible
Evidence.--
(1) General Rule.--If, in any court proceeding, a
taxpayer introduces credible evidence with respect to
any factual issue relevant to ascertaining the
liability of the taxpayer for any tax imposed by
subtitle A or B, the Secretary shall have the burden of
proof with respect to such issue.
(2) Limitations.--Paragraph (1) shall apply with
respect to an issue only if--
(A) the taxpayer has complied with the
requirements under this title to substantiate any
(continued...)
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Taxpayers bear the burden of proving that section 7491
applies. H. Conf. Rept. 105-599, at 239 (1998), 1998-3 C.B. 747,
993; S. Rept. 105-174, at 45 (1998), 1998-3 C.B. 537, 581.
Section 7491 applies to court proceedings arising in connection
with examinations beginning after July 22, 1998. Internal
Revenue Service Restructuring and Reform Act of 1998, Pub. L.
105-206, sec. 3001(a), 112 Stat. 726. On September 11, 1996,
respondent requested transcripts of reports from third parties
showing amounts paid to petitioner. Absent contrary evidence, we
infer from this fact that the examination in this case began
before July 22, 1998. Thus, section 7491 does not apply, the
notice of deficiency is presumed to be correct, and petitioner
bears the burden of proving that respondent’s determination is
incorrect. Sec. 7491(a); Rule 142(a)(1); Welch v. Helvering, 290
U.S. 111, 115 (1933).2
1
(...continued)
item;
(B) the taxpayer has maintained all records
required under this title and has cooperated with
reasonable requests by the Secretary for
witnesses, information, documents, meetings, and
interviews; * * *.
2
However, at par. B-3, below, we conclude that respondent
bears the burden of producing evidence that petitioner received
wage income in 1993.
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Petitioner contends that respondent bears the burden of
proof on the grounds that he is innocent until proven guilty.
Petitioner incorrectly relies on the burden of proof that applies
to a criminal case.
B. Whether Petitioner Had Unreported Income in the Amounts
Determined by Respondent
Petitioner contests respondent’s determination that
petitioner had unreported income of $21,733 in 1993, $18,252 in
1994, $32,014 in 1995, $44,866 in 1996, and $24,650 in 1997. We
disagree with petitioner for reasons discussed next.
1. Petitioner’s Contentions Regarding All Years in Issue
Petitioner contends that respondent erroneously determined
that petitioner is taxable on income reported on several Forms
1099 which misspelled or failed to include an apostrophe in his
name. We disagree because petitioner’s Social Security number
appears on all of the Forms 1099 at issue.
Petitioner points out that respondent withdrew or did not
offer into evidence all of the exhibits identified in
respondent’s pretrial memorandum. Petitioner contends that this
shows that respondent’s determination is incorrect. We disagree.
Respondent’s decision not to offer documents into evidence does
not benefit petitioner because petitioner bears the burden of
proof.
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Petitioner contends that he has no deficiencies in income
tax because he deposited more funds with respondent than the
amount of taxes respondent contends he owes for the years in
issue. We disagree. First, petitioner has not shown that he
deposited funds with respondent. Second, the term “deficiency”
is generally defined by statute as the difference between the
total amount of tax that the Commissioner determines should have
been reported on the return and the amount that the taxpayer
reported on the return. Sec. 6211(a). The amount of a
deficiency is not reduced by amounts of tax deposited by or
withheld from the taxpayer.
Petitioner testified that the payments he received from the
Federal Government were nontaxable disability payments. His
testimony was uncorroborated. We are not convinced that
petitioner was paid on account of disability in any of the years
in issue.
2. Whether Petitioner Had $1,092 in Income From Lottery
Winnings in 1993
Petitioner contends that he is not taxable on the $1,092
that he won in the lottery in 1993 because he and another
individual shared the winnings. Petitioner’s claim is
unconvincing because he did not identify the other alleged
lottery winner or otherwise corroborate his claim.
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3. Whether Petitioner Received Wage Income in 1993
Respondent determined that petitioner received wages of
$4,303 in 1993, consisting of $1,867 from Linda Diamon (not
otherwise identified in the record) and $2,436 from the State of
Maryland - Central Payroll.
Respondent determined that petitioner received wage income
in 1993 based on Forms W-2, Wage and Tax Statement, from “Linda
Diamon” and the “State of Maryland - Central Payroll”. However,
petitioner retired in 1986 and denied receiving any wage income
in 1993. There is no evidence in the record that petitioner
received wages in 1993 from Linda Diamon or the State of
Maryland, or that petitioner was employed or received wages in
1993. The Forms W-2 to which respondent refers are not in the
record. There are no entries on petitioner’s IRS transcripts for
1993 that refer to Forms W-2 from Linda Diamon or the State of
Maryland - Central Payroll. Respondent called no witness to
describe how respondent made the determination that petitioner
received wages in 1993, and we believe (or leave no reason to
doubt) petitioner’s denial that he received wages in 1993. Cf.
Cebollero v. Commissioner, 967 F.2d 986 (4th Cir. 1992), affg.
T.C. Memo. 1990-618. We conclude that petitioner did not receive
wage income in 1993 of $1,867 from Linda Diamon and $2,436 from
the State of Maryland - Central Payroll.
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4. Whether Petitioner Had Capital Gains in 1994
First Fidelity Bank N.A. New Jersey issued four Forms 1099-
B, Proceeds From Broker and Barter Exchange Transactions, showing
that it paid petitioner capital gains of $1,162 from the sale of
stocks and bonds in 1994. Petitioner contends that the amounts
identified as capital gains in the Forms 1099-B were loans. We
disagree. Petitioner’s uncorroborated testimony that these
amounts were loans was unconvincing.
5. Whether $20,169 That Petitioner Deposited in a Bank
Account in 1997 Was Income to Petitioner
Respondent determined that petitioner’s cash deposit of
$20,169 to an FNB Bank of Maryland account in 1997 was income to
petitioner. Petitioner does not dispute that the $20,169 was
deposited in his bank account in 1997.
A bank deposit is prima facie evidence of income. Tokarski
v. Commissioner, 87 T.C. 74, 77 (1986). In O’Dwyer v.
Commissioner, 266 F.2d 575, 588 (4th Cir. 1959), affg. 28 T.C.
698 (1957), the U.S. Court of Appeals for the Fourth Circuit held
that the taxpayers had the burden of overcoming the presumption
of correctness that a bank deposit was unreported income. There
was no evidence in the record as to the source of the deposit,
and the Fourth Circuit found that the taxpayers failed to
overcome the presumption because they offered no evidence or
testimony about the deposit. Id. Thus, petitioner bears the
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burden of proving that the $20,169 deposit was not taxable
income. Petitioner testified that the $20,169 deposit was a
nontaxable transfer from another account. Petitioner’s testimony
was vague, and he offered no other evidence about the $20,169
bank deposit. We are not convinced that the deposit was not
income. We conclude that the $20,169 deposit was taxable income,
and that petitioner had unreported income of $17,430 in 1993,
$18,252 in 1994, $32,014 in 1995, $44,866 in 1996, and $24,650 in
1997.
C. Whether Petitioner Is Liable for the Addition to Tax for
Failure To File Returns
A taxpayer is liable for an addition to tax of up to 25
percent for failure to file a Federal income tax return unless
the failure was due to reasonable cause and not willful neglect.
Sec. 6651(a)(1).
Respondent determined that petitioner is liable for the
addition to tax under section 6651(a)(1) for failure to file
returns for the years in issue. Petitioner contends that he is
not liable because he had reasonable cause for not filing
returns. Petitioner points out that the names on some of the
Forms 1999, 1098, Mortgage and Interest Statement, and W-2 on
which his Social Security number appears include Otoole, O Toole,
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and O. Toole. Petitioner contends that his failure to report
those amounts in income was due to reasonable cause. We
disagree.
It should have been obvious to petitioner that the amounts
were taxable to him because his Social Security number appears on
the Forms 1099, 1098, and W-2. Petitioner has not shown that his
failure to file was due to reasonable cause and not willful
neglect.
D. Whether Petitioner Is Liable for the Addition to Tax for
Failure To Pay Estimated Tax
Respondent determined that petitioner is liable for the
addition to tax under section 6654 for failure to pay estimated
tax for the years in issue. We have jurisdiction to review this
determination because petitioner did not file a return for any of
the years in issue. Sec. 6665(b)(2); Meyer v. Commissioner, 97
T.C. 555, 562 (1991). A taxpayer is liable for the addition to
tax for failure to pay estimated tax unless the taxpayer shows
that he or she meets one of the exceptions provided in section
6654(e), none of which apply here.
Petitioner contends that he had deposited enough money to
pay any tax liability he may have for 1993, 1994, 1995, 1996, and
1997. He contends that he maintained a $5,000 “‘estimated tax
applied’ fund” with respondent and that the dividends he received
were subject to “31% backup tax” withholding. However,
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petitioner did not show that he deposited funds in addition to
the taxes withheld from him in those years, that respondent’s
determinations with respect to the section 6654 addition were
erroneous, or that any exception applies in the years in issue.
We conclude that petitioner is liable for the addition to
tax for failure to pay estimated tax under section 6654 for the
years in issue.
Decision will be
entered under Rule 155.