T.C. Memo. 2005-19
UNITED STATES TAX COURT
TONY MALFATTI, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 17616-03. Filed February 8, 2005.
Tony Malfatti, pro se.
Rebecca Duewer-Grenville, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
VASQUEZ, Judge: Respondent determined deficiencies in and
additions to petitioner’s Federal income tax as follows:
Additions to Tax
Year Deficiency Sec. 6651(a)(1) Sec. 6654(a)
1998 $9,161 $2,223.00 $405.52
1999 8,741 2,185.25 423.01
2000 2,887 721.75 154.24
2001 1,187 296.75 --
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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.
Petitioner petitioned the Court to redetermine the
deficiencies and additions to tax.1 We must decide whether: (1)
Petitioner had unreported income in the amounts determined by
respondent for 1998, 1999, 2000, and 2001; (2) petitioner is
liable for the section 6651(a) addition to tax for 1998, 1999,
2000, and 2001; (3) petitioner is liable for the section 6654(a)
addition to tax for 1998, 1999, and 2000; and (4) whether to
impose a penalty pursuant to section 6673(a).
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. At the time he filed the
petition, petitioner resided in Oakland, California.
Petitioner did not file tax returns for 1998, 1999, 2000,
and 2001. Petitioner received total income of $38,863, $42,486,
$23,806, and $16,830, in 1998, 1999, 2000, and 2001,
respectively. Respondent received information from third parties
1
Petitioner also alleged that the deficiencies/liabilities
determined by respondent are excise taxes.
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(The Gus Team, Have-a-Party Productions, Johnny B. Soroka,
Randall L. Biagi, Bay Area Motorcycle Training, Earl Heckscher
Orchestra, Kellco Training Institute, Debs Motorcycle Training,
James Labarbera, Hornblower Yachts, Joel Nelson Productions,
Bonnie Kellogg/Two Wheel Safety, and Mark William Lytal)
reporting that petitioner received the aforementioned income
during the years in issue. No Federal income tax was withheld
from the aforementioned income.
Petitioner did not cooperate with respondent at any time
during the administrative or judicial process. Petitioner failed
to meet with or to provide respondent with any information that
would have enabled respondent to properly determine petitioner’s
tax liability.
OPINION
A. Burden of Proof
Generally, respondent’s deficiency determinations set forth
in the notices of deficiency are presumed correct, and petitioner
bears the burden of showing the determination is in error. Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). There are
exceptions to this rule.
Section 7491(a) shifts the burden of proof to the
Commissioner with respect to a factual issue affecting the tax
liability of a taxpayer who meets certain preliminary conditions.
Petitioner failed to cooperate with respondent and did not
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produce any credible evidence with respect to any matter in this
case. See sec. 7491(a). Furthermore, petitioner did not claim
that section 7491(a) applies. Accordingly, section 7491(a) does
not apply in this case.
Section 6201(d) provides that if a taxpayer asserts a
reasonable dispute with respect to any item of income reported on
an information return filed with the Secretary by a third party
and the taxpayer has fully cooperated with the Secretary, the
Secretary shall have the burden of producing reasonable and
probative information concerning such deficiency in addition to
such information return. As noted supra, petitioner failed to
cooperate with respondent. Accordingly, section 6201(d) does not
apply in this case.
Additionally, the U.S. Court of Appeals for the Ninth
Circuit (to which an appeal would normally lie) has held that in
order for the presumption of correctness to attach to the notice
of deficiency in unreported income cases,2 the Commissioner must
establish “some evidentiary foundation” linking the taxpayer to
the income-producing activity, Weimerskirch v. Commissioner, 596
F.2d 358, 361-362 (9th Cir. 1979), revg. 67 T.C. 672 (1977), or
2
Although Weimerskirch v. Commissioner, 596 F.2d 358 (9th
Cir. 1979), revg. 67 T.C. 672 (1977), was an unreported income
case regarding illegal source income, the U.S. Court of Appeals
for the Ninth Circuit applies the Weimerskirch rule in all cases
involving the receipt of unreported income. See Edwards v.
Commissioner, 680 F.2d 1268, 1270-1271 (9th Cir. 1982); Petzoldt
v. Commissioner, 92 T.C. 661, 689 (1989).
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“demonstrating that the taxpayer received unreported income”,
Edwards v. Commissioner, 680 F.2d 1268, 1270 (9th Cir. 1982); see
also Rapp v. Commissioner, 774 F.2d 932, 935 (9th Cir. 1985).
Once there is evidence of actual receipt of funds by the
taxpayer, the taxpayer has the burden of proving that all or part
of those funds are not taxable. Tokarski v. Commissioner, 87
T.C. 74 (1986).
There is ample evidence, including petitioner’s admissions,
linking petitioner to several income-producing activities--he
worked as a musician, mechanic, and motorcycle instructor during
the years in issue. At trial, respondent submitted Forms W-2,
Wage and Tax Statement, Forms 1099-MISC, Miscellaneous Income,
employer records, and the testimony of several of petitioner’s
employers as to the validity of these underlying documents. The
witnesses also testified that they paid petitioner income during
the years in issue. Respondent satisfied his Weimerskirch
obligation, and petitioner bears the burden of proving
respondent’s determinations are in error.
B. Deficiencies
Petitioner alleged that he did not receive the income
determined by respondent. Petitioner relies on his own
testimony. The Court is not required to accept petitioner’s
unsubstantiated testimony. See Wood v. Commissioner, 338 F.2d
602, 605 (9th Cir. 1964), affg. 41 T.C. 593 (1964).
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Petitioner was not credible. His testimony was questionable
in certain material respects, and under the circumstances
presented here, we are not required to, and generally do not,
rely on petitioner’s testimony to sustain his burden of
establishing error in respondent’s determinations. See Lerch v.
Commissioner, 877 F.2d 624, 631-632 (7th Cir. 1989), affg. T.C.
Memo. 1987-295; Geiger v. Commissioner, 440 F.2d 688, 689-690
(9th Cir. 1971), affg. per curiam T.C. Memo. 1969-159; Tokarski
v. Commissioner, supra at 77. Accordingly, we sustain
respondent’s determination regarding the unreported income for
all the years.
C. Additions to Tax
Section 7491(c) requires that respondent bear the burden of
production regarding additions to tax. To meet this burden,
respondent must present evidence indicating that it is
appropriate to impose the addition to tax. See Higbee v.
Commissioner, 116 T.C. 438, 446 (2001).
Section 6651(a)(1) imposes an addition to tax for failure to
file a return on the date prescribed (determined with regard to
any extension of time for filing), unless the taxpayer can
establish that such failure is due to reasonable cause and not
due to willful neglect. Petitioner admitted he did not file tax
returns for 1998, 1999, 2000, and 2001. Thus, respondent
satisfied his burden of production.
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Contrary to his assertions, petitioner was required to file
Federal income tax returns for each of the years in issue because
his income exceeded the maximum amount exempt from filing in each
of the taxable years. Secs. 6012, 6072. Petitioner offered no
evidence that his failure to timely file was due to reasonable
cause and not due to willful neglect. We conclude that
petitioner is liable for an addition to tax pursuant to section
6651(a)(1).
Section 6654 imposes an addition to tax for failure to pay
estimated income tax. Forms 4340, Certificate of Assessments,
Payments, and Other Specified Matters, Forms W-2, Forms 1099, and
the testimony of petitioner’s employers establish that petitioner
failed to pay the required estimated tax for 1998, 1999, and
2000. We conclude that respondent satisfied his burden of
production regarding this issue.
Petitioner presented no evidence that he is not liable for
this addition to tax for any of the years in issue. Accordingly,
we hold that petitioner is liable for the addition to tax
pursuant to section 6654(a).
D. Penalty Pursuant to Section 6673(a)
Respondent filed a motion asking the Court to impose a
penalty pursuant to section 6673(a). Section 6673(a)(1)
authorizes this Court to require a taxpayer to pay to the United
States a penalty not to exceed $25,000 if the taxpayer took
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frivolous or groundless positions in the proceedings or
instituted the proceedings primarily for delay.
In the petition, petitioner alleged that the deficiencies
determined by respondent are excise taxes. This argument is
frivolous and groundless.
At trial, petitioner mainly objected to the admission of any
evidence that tended to prove that he earned income during the
years in issue and sought to impugn the integrity of his former
employers by implying that they overstated the income they paid
him in order to obtain a fraudulently higher deduction (for
compensation paid) on their own tax returns. He feigned lack of
memory regarding his earnings during the years in issue even
though he admitted working for all the employers who were called
as witnesses and that he was paid for services he rendered to
those employers. Furthermore, in a home loan application
petitioner signed in 2001, petitioner listed his monthly income
as $9,625.
Petitioner established his pattern of delay early on when he
failed to cooperate with respondent. Petitioner failed to meet
with or to provide respondent with any information that would
have enabled respondent to properly determine petitioner’s tax
liability or resolve this case without trial. Furthermore, after
asking the Court for additional briefing time at the conclusion
of the trial, petitioner failed to file any posttrial briefs. We
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conclude that petitioner instituted and maintained this
proceeding primarily for delay.
Accordingly, we hold that petitioner is liable for a $15,000
penalty pursuant to section 6673(a).
In reaching all of our holdings herein, we have considered
all arguments made by the parties, and to the extent not
mentioned above, we find them to be irrelevant or without merit.
To reflect the foregoing,
An appropriate order
and decision will be entered
for respondent.