T.C. Summary Opinion 2004-90
UNITED STATES TAX COURT
BARRY APPEL, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 15310-03S. Filed July 14, 2004.
Barry Appel, pro se.
Brian E. Derdowski, Jr., for respondent.
PANUTHOS, Chief Special Trial Judge: This case was heard
pursuant to the provisions of section 7463 of the Internal
Revenue Code in effect at the time the petition was filed. The
decision to be entered is not reviewable by any other court, and
this opinion should not be cited as authority. Unless otherwise
indicated, subsequent 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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Respondent issued petitioner three separate notices of
deficiency, each dated June 6, 2003, determining that petitioner
was liable for deficiencies in Federal income taxes and additions
to tax in the following amounts for the 1997, 1998, and 1999
taxable years:
Additions to Tax
Year Deficiency Sec. 6651(a)(1) Sec. 6651(a)(2) Sec. 6654
1997 $30,884 $2,905.88 To be determined $1,371.69
1998 29,573 3,044.03 To be determined 934.42
1999 11,330 100.00 To be determined 539.47
Petitioner filed a timely petition with the Court in which
he does not dispute the deficiencies determined, but only
disputes the additions to tax. Respondent did not file an answer
to the petition.1
At the time of trial, respondent filed a pretrial memorandum
wherein he asserted increased deficiencies and increased
additions to tax. The parties filed a stipulation of facts
wherein petitioner agreed to the increased deficiencies and
increased additions to tax under section 6654 and also agreed
that if the failure to file tax returns for the 1997, 1998, and
1999 taxable years was not due to reasonable cause, then the
1
Petitioner elected to have his case conducted as a small
tax case under the proceedings of sec. 7463. For the election to
be valid, the “amount of the deficiency placed in dispute” may
not exceed $50,000 for any one taxable year. Sec. 7463(a), (e);
Kallich v. Commissioner, 89 T.C. 676, 679-680 (1987). Taking
into account petitioner’s concessions in the present case, we
concur with his election to conduct his case as a small tax case
because the amount placed in dispute for each of the years in
issue does not exceed $50,000.
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increased additions to tax under section 6651(a)(1) applied as
follows:
Additions to Tax
Year Deficiency Sec. 6651(a)(1) Sec. 6654
1
1997 $30,087 $3,030 $1,407
1998 30,234 3,548 798
1999 52,625 9,601 1,629
1
Although the amount of deficiency actually decreased for
1997, the addition to tax under sec. 6651(a)(1) increased for the
corresponding taxable year. Respondent attributes this increase
to a “miscalculation” in the notice of deficiency.
After concessions,2 the issue for decision is whether
petitioner is liable for the additions to tax and increased
additions to tax under section 6651(a)(1) for the 1997, 1998, and
1999 taxable years.3
2
Respondent concedes that petitioner is not liable for any
additions to tax under sec. 6651(a)(2) for the 1997, 1998, and
1999 taxable years. Petitioner concedes that he is liable for
the deficiencies in Federal income taxes for the 1997 through
1999 taxable years, including increased deficiencies, as
indicated in respondent’s pretrial memorandum and the stipulation
of facts. Petitioner further concedes that he is liable for the
additions to tax under sec. 6654 for the 1997, 1998, and 1999
taxable years.
3
Although respondent did not file an answer, he seeks
increased deficiencies and increased additions to tax. Because
of the stipulation of facts and petitioner’s lack of objection,
the issue of increased additions to tax under sec. 6651(a)(1) is
tried with petitioner’s express or implied consent. See Rule
41(b)(1); Woods v. Commissioner, 91 T.C. 88, 93 (1988); McGee v.
Commissioner, T.C. Memo. 2000-308; Wicker v. Commissioner, T.C.
Memo. 1993-431, affd. without published opinion 50 F.3d 12 (8th
Cir. 1995). Moreover, the issue of increased additions to tax
under sec. 6654 for the 1997 and 1999 taxable years is
computational in nature. See sec. 6654(a).
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Background
Some of the facts have been stipulated, and they are so
found. The stipulation of facts and the attached exhibits are
incorporated herein by this reference. At the time the petition
was filed, petitioner resided in Guttenberg, New Jersey.
From January 1, 1997, to April 1, 1999, petitioner was a
stockbroker at the American Stock Exchange in New York, New York.
During the years in issue, petitioner had various health problems
that required him to undergo surgery on an outpatient basis with
follow-up medical appointments about once a month. Also during
the years in issue, petitioner’s spouse, Barbara Appel, suffered
from severe health problems, and petitioner had to care for her
and manage the affairs of the household. Petitioner nevertheless
continued working at the American Stock Exchange with a few days
of absences due to his surgery and related follow-up medical
appointments.
Petitioner requested and received extensions to file his
Federal income tax returns for the 1997, 1998, and 1999 taxable
years. Taking into account such extensions, petitioner’s 1997
return was due October 15, 1998; his 1998 return was due October
15, 1999; and his 1999 return was due October 15, 2000. However,
petitioner did not file any Federal income tax returns by the
corresponding due dates.
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After filing the petition, petitioner prepared returns for
the 1997, 1998, and 1999 taxable years and then sent them via
certified mail to respondent’s New Jersey Appeals Office in an
envelope bearing a postmark date of “December 10, 2003”.
Petitioner did not remit any payment with these returns.
Respondent received and accepted the returns as filed on
December 11, 2003. The 1997 return reported “total tax” of
$30,087. The 1998 return reported “total tax” of $30,234. The
1999 return reported “total tax” of $52,625. The amounts
reflected on the returns provided the bases for the increased
deficiencies for the 1998 and 1999 taxable years and the
correlative increased additions to tax under section 6651(a)(1)
and section 6654.
Petitioner contends that he should not be liable for the
additions to tax under section 6651(a)(1) because his failure to
file his returns for the 1997, 1998, and 1999 taxable years was
due to reasonable cause and not due to willful neglect.
Specifically, petitioner contends that his health problems and
those of his spouse should relieve him of any liability under
section 6651(a)(1).
Discussion
The Commissioner bears the burden of proof in respect of any
increased additions to tax. Beck Chem. Equip. Corp. v.
Commissioner, 27 T.C. 840, 856 (1957). The Commissioner also has
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the “burden of production in any court proceeding with respect to
the liability of any individual for any * * * addition to tax”
under section 6651(a). Sec. 7491(c). To meet this burden, the
Commissioner must come forward with sufficient evidence
indicating that it is appropriate to impose the relevant penalty
or addition to tax. Higbee v. Commissioner, 116 T.C. 438, 446
(2001). Once the Commissioner meets his burden of production,
the taxpayer must come forward with evidence sufficient to
persuade a court that the Commissioner’s determination is
incorrect. Id. at 447. The taxpayer also bears the burden of
proof with regard to issue of reasonable cause. Id. at 446.
In the present case, respondent has satisfied his burden of
production under section 7491(c) by establishing that
petitioner’s 1997, 1998, and 1999 Federal income tax returns were
not timely filed. Petitioner does not assert, nor did he present
any evidence, that the returns for the years in issue were
received or mailed before the due dates.
Section 6651(a)(1) imposes an addition to tax of 5 percent
per month of the amount of tax required to be shown on the
return, not to exceed 25 percent, for failure to timely file a
return. The addition to tax under section 6651(a)(1) is imposed
unless the taxpayer establishes that the failure was due to
reasonable cause and not willful neglect. Illness may constitute
reasonable cause so long as the taxpayer can establish that
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illness incapacitated the taxpayer to such a degree that he or
she was unable to file the return. See Snyder Air Prods., Inc.
v. Commissioner, 71 T.C. 709, 718 (1979); Marrin v. Commissioner,
T.C. Memo. 1997-24, affd. 147 F.3d 147 (2d Cir. 1998).
The record does not establish that the failures to file were
due to reasonable cause and not willful neglect. While
petitioner and Barbara Appel had health problems during the years
in issue, petitioner continued working at the American Stock
Exchange. Petitioner’s health did not prevent him from caring
for his spouse, managing the affairs of the household, or
requesting an extension to file his 1997, 1998, and 1999 Federal
income tax returns. While we sympathize with the ongoing medical
issues of petitioner and his spouse and acknowledge the
substantial amount of time and energy expended by petitioner as a
caregiver to his spouse, we do not conclude that petitioner was
so incapacitated so as to constitute reasonable cause for failing
to file returns for the years in issue. Respondent is sustained
on this issue.
Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing and the parties’ concessions,
Decision will be entered
under Rule 155.