T.C. Summary Opinion 2004-175
UNITED STATES TAX COURT
MARIE SUZE BIEN-AIME, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3456-04S. Filed December 27, 2004.
Marie Suze Bien-Aime, pro se.
Miriam C. Dillard, for respondent.
DEAN, Special Trial Judge: This case was heard pursuant to
the provisions of section 7463 of the Internal Revenue Code in
effect at the time that the petition was filed. Unless otherwise
indicated, all 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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The decision to be entered is not reviewable by any other court,
and this opinion should not be cited as authority.
Respondent determined deficiencies in petitioner's Federal
income taxes and accuracy-related penalties as follows:
Penalty
Year Deficiency Sec. 6662(a)
2000 $10,235 $1,994.80
2001 8,265 1,275.80
After a concession,1 the issues remaining for decision are
whether petitioner: (1) Received unreported income during 2000
and 2001; (2) is entitled to deductions on Schedule A, Itemized
Deductions, in excess of those allowed by respondent for 2000 and
2001; and (3) is liable for accuracy-related penalties for 2000
and 2001.
Background
The stipulation of facts and the exhibits received into
evidence are incorporated herein by reference. Petitioner
resided in Coral Springs, Florida, at the time the petition was
filed.
A. Petitioner's 2000 Tax Return
For 2000, petitioner paid a return preparer to complete her
Form 1040, U.S. Individual Income Tax Return. On the return,
petitioner reported $63,885 in wages and $7,318 of Federal tax
1
Respondent concedes that petitioner reported $936 of
nonemployee compensation from Sunrider International and the
corresponding self-employment tax.
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withheld. Petitioner reported no other income for 2000.
Petitioner signed the return without reviewing it when it was
presented to her by her preparer. Petitioner described him as a
"professional".
On her 2000 Schedule A, petitioner reported $20,014 of
medical and dental expenses, $3,353 of real estate taxes, $8,621
of mortgage interest, $4,000 of charitable contributions and
$18,719 of miscellaneous business expenses.
1. Petitioner's Income
Respondent received Forms W-2, Wage and Tax Statement, from
third-party payors reporting that petitioner received the
following wages during 2000:
Vendor Amount
Vitas Healthcare $38,401
Harrison Group 2,224
Sunshine Companies II 6,181
Memorial Healthcare System 9,938
Holy Cross Long Term Care 9,945
Total 66,689
Respondent also received information from third-party payors
reporting additional payments to petitioner. Fidelity
Investments issued two Forms 1099-B, Proceeds From Broker and
Barter Exchange Transactions, reporting $5,097 in stock proceeds
paid to petitioner. Sunrider International issued a Form 1099-
MISC, Miscellaneous Income, reporting nonemployee compensation of
$936. First Union National Bank and Washington Mutual Bank each
issued a Form 1099-INT, Interest Income, reporting interest
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income of $74 and $11, respectively. Fiserv Securities issued a
Form 1099-DIV, Dividends and Distributions, reporting $570 of
capital gain dividends and $58 of ordinary dividends.
2. Petitioner's Deductions
Respondent received a Form 1098, Mortgage Interest
Statement, issued by Market Street Mortgage for 2000 reporting
that petitioner paid $11,006 in mortgage interest. Respondent
allowed petitioner a mortgage interest deduction for this higher
amount. Respondent also allowed petitioner's reported deduction
for real estate taxes. Petitioner's remaining deductions were
disallowed due to lack of substantiation.
3. Accuracy-Related Penalty
Respondent determined that petitioner is liable for an
accuracy-related penalty under section 6662(a) for 2000.
B. Petitioner's 2001 Tax Return
For 2001, petitioner again retained the same preparer. On
her Form 1040, she reported $56,621 in wages and $2,024 of income
from capital gains. Petitioner also reported $8,386 of Federal
tax withheld. She reported no other income for 2001.
Petitioner did not review the return before signing and mailing
it.
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On her 2001 Schedule A, petitioner reported $20,044 of
medical and dental expenses, $3,353 of real estate taxes, $8,621
of mortgage interest, $4,000 of charitable contributions and
$18,132 of miscellaneous business expenses.
1. Petitioner's Income
Respondent received Forms W-2 from third-party payors
reporting that petitioner received the following wages during
2001:
Vendor Amount
Kindred Nursing Centers $10,403
Vitas Healthcare 15,551
Memorial Healthcare System 40,092
Holy Cross Long Term Care 976
Total 67,022
Respondent also received information from third-party payors
reporting additional payments to petitioner. Washington Mutual
Bank issued a Form 1099-INT reporting interest income of $21.
Fiserv Securities issued both a Form 1099-DIV reporting $19 of
capital gain dividends and Form 1099-B reporting $2,000 of stock
proceeds.
2. Petitioner's Deductions
Respondent received Forms 1098 issued by Market Street
Mortgage and Alliance Mortgage for 2001 reporting that petitioner
paid $4,551 and $6,333, respectively in mortgage interest.
Respondent allowed petitioner a mortgage interest deduction for
this higher amount. Respondent also allowed petitioner's
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reported deduction for real estate taxes. Petitioner's remaining
deductions were disallowed due to lack of substantiation.
3. Accuracy-Related Penalty
Respondent determined that petitioner is liable for an
accuracy-related penalty under section 6662(a) for 2001.
Discussion
Generally, the Commissioner's determinations of unreported
income in a notice of deficiency are presumed correct, and the
taxpayer has the burden of proving that those determinations are
erroneous. See Rule 142(a); Welch v. Helvering, 290 U.S. 111,
115 (1933). In certain circumstances, however, section
7491(a)(1) places the burden of proof on the Commissioner.
Petitioner has not alleged or shown that section 7491 is
applicable in this case.
Petitioner did not call any witnesses or otherwise introduce
any evidence to show error in respondent's determinations of her
proper income tax liability. Petitioner, in fact, made no
argument that respondent's adjustments are incorrect. She feels
she was misled by her return preparer. The Court finds that
petitioner has failed to meet her burden and, subject to a
concession by respondent, sustains respondent's determination
with respect to the 2000 and 2001 unreported income.
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Petitioner has not provided any evidence to substantiate an
allowance of itemized deductions in excess of those allowed by
respondent. Respondent's determination is sustained.
Under section 7491(c), the Commissioner has the burden of
production in any court proceeding with respect to the liability
of any individual for any penalty or addition to tax. Higbee v.
Commissioner, 116 T.C. 438, 446-447 (2001). In order to meet his
burden of production, the Commissioner must come forward with
sufficient evidence indicating that it is appropriate to impose
the addition to tax for failure to file in the particular case.
Id. at 446. 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.
Respondent determined petitioner is liable for an
accuracy-related penalty pursuant to section 6662(a) for each of
the years in issue. Section 6662(a) imposes a penalty of 20
percent of the portion of the underpayment which is attributable
to, inter alia, negligence or disregard of rules or regulations.
Sec. 6662(b)(1). Negligence is the "'lack of due care or failure
to do what a reasonable and ordinarily prudent person would do
under the circumstances.'" Neely v. Commissioner, 85 T.C. 934,
947 (1985) (quoting Marcello v. Commissioner, 380 F.2d 499, 506
(5th Cir. 1967)). It includes any failure by the taxpayer to
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keep adequate books and records or to substantiate items
properly. Sec. 1.6662-3(b)(1), Income Tax Regs. The term
"disregard" includes any careless, reckless, or intentional
disregard. Sec. 6662(c).
No penalty shall be imposed if it is shown that there was
reasonable cause for the underpayment and the taxpayer acted in
good faith with respect to the underpayment. Sec. 6664(c). The
determination of whether a taxpayer acted with reasonable cause
and in good faith is made on a case-by-case basis, taking into
account all pertinent facts and circumstances. The most
important factor is the extent of the taxpayer's effort to assess
the taxpayer's proper tax liability.
The evidence in the record shows that petitioner failed to
report substantial amounts of income for her 2000 and 2001 tax
years. Petitioner made no effort to review the returns before
signing them and blamed her return preparer for the omissions.
Taxpayers have a duty to read a return and to make sure all
items are included. Magill v. Commissioner, 70 T.C. 465, 479-480
(1978) (citing Bailey v. Commissioner, 21 T.C. 678, 687 (1954)),
affd. 651 F.2d 1233 (6th Cir. 1981). Petitioner's failure to
carefully review her return was not reasonable. See Guenther v.
Commissioner, T.C. Memo. 1995-280. On the basis of the record,
the Court concludes that petitioner is liable for the
accuracy-related penalty under section 6662(a) for 2000 and 2001.
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Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be entered
under Rule 155.