T.C. Summary Opinion 2004-96
UNITED STATES TAX COURT
MOTI G. BIJLANI, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 5850-02S. Filed July 26, 2004.
Moti G. Bijlani, pro se.
Robert W. Mopsick, for respondent.
PAJAK, 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. Unless otherwise
indicated, section references are to the Internal Revenue Code in
effect for the year in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure. The decision to be
entered is not reviewable by any other court, and this opinion
should not be cited as authority.
- 2 -
Respondent determined a deficiency of $1,354 in petitioner’s
1999 Federal income tax, and an addition to tax of $135 under
section 6651(a)(1).
The issues for decision are: (1) Whether petitioner, a
nonresident alien, is entitled to claimed Schedule A deductions,
and (2) whether petitioner is liable for an addition to tax under
section 6651(a)(1).
Some of the facts in this case have been stipulated and are
so found. Petitioner resided in North Bergen, New Jersey, at the
time he filed his petition.
Section 7491(a) does not apply because petitioner did not
satisfy the requirements of that section. The burden of proof
remains on petitioner. Rule 142(a).
During 1999, petitioner, a British citizen, was a
nonresident alien in the United States. Petitioner owned rental
real property (rental property) in Union City, New Jersey.
Petitioner was a tenant stockholder of a cooperative housing
corporation (co-op) in North Bergen, New Jersey, where he resided
in 1999 while in this country.
Respondent received petitioner’s 1999 Form 1040NR, U.S.
Nonresident Alien Income Tax Return, on June 12, 2001. On his
Form 1040NR, petitioner reported net income of $13,729 from his
rental property (rental income) and $501 from taxable interest.
He showed a “zero” tax due on his Form 1040NR.
- 3 -
On Schedule A, Itemized Deductions, attached to his Form
1040NR, petitioner claimed “Other Miscellaneous Deductions”,
pertaining to his co-op, in the amount of $9,336 (rounded). On
his Schedule A, petitioner listed the breakdown of these
deductions as real estate taxes of $1,920.16, mortgage interest
of $215.77, and “incurred expenses of $7,200 including
companionship” totaling $9,335.93. Respondent denied
petitioner’s claimed deductions in full.
Section 873(a) provides, in relevant part, that “In the case
of a nonresident alien individual, the deductions shall be
allowed only for purposes of section 871(b) * * * if * * * they
are connected with income which is effectively connected with the
conduct of a trade or business within the United States”.
Respondent in the notice of deficiency determined that
petitioner’s rental income was effectively connected with the
conduct of a business within the United States.
The claimed Schedule A deductions pertain to petitioner’s
co-op. Petitioner admitted that he resided in his co-op while he
was in the United States during 1999. Petitioner claimed that he
managed his rental property from his co-op. Petitioner paid
$401.50 per month to the co-op for mortgage and maintenance fees
for a total of $4,818. Petitioner admitted at trial that the
$2,382 difference between the $7,200 claimed deduction and the
$4,818 in co-op mortgage and maintenance fees was for telephone
- 4 -
bills, electric bills, and other living expenses. After trial,
the record was reopened and petitioner submitted a document
showing real estate tax expenses of $1,920.16 and mortgage
interest expense of $215.77.
We find that petitioner did not prove that any of the
claimed Schedule A deductions pertaining to his co-op were
attributable to the management of his rental property.
Unfortunately for petitioner, his personal expenses incurred in
connection with his co-op, where he resided, are nondeductible
personal living expenses. Sec. 262(a). We do not address the
restrictions under section 280A because this section was not
raised at trial. Petitioner would be well advised to consult a
United States tax expert before filing future nonresident
returns.
On this record, we have no choice but to conclude that
petitioner has not established his entitlement to the claimed
Schedule A deductions. Accordingly, we sustain respondent’s
determination on this issue.
Section 6651(a)(1) imposes an addition to tax for failure to
timely file a tax return, unless the taxpayer established that
failure to do so is due to reasonable cause and not willful
neglect. The taxpayer must prove both reasonable cause and lack
of willful neglect. Crocker v. Commissioner, 92 T.C. 899, 912
(1989). “Reasonable cause” requires the taxpayer to demonstrate
- 5 -
that he exercised ordinary business care and prudence. United
States v. Boyle, 469 U.S. 241, 246 (1985). Willful neglect is
defined as a “conscious, intentional failure or reckless
indifference.” Id. at 245.
Petitioner did not file his 1999 tax return until June 12,
2001. Respondent has satisfied his burden of production with
respect to the addition to tax under section 6651(a)(1). Sec.
7491(c); Higbee v. Commissioner, 116 T.C. 438, 447 (2001).
Although we sympathize with petitioner’s health problems,
petitioner provided no evidence that his failure to timely file
his 1999 tax return was due to reasonable cause and not willful
neglect. Therefore, we conclude that petitioner is liable for
the addition to tax under section 6651(a)(1) for taxable year
1999.
Contentions we have not addressed are irrelevant, moot, or
without merit.
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
for respondent.