T.C. Memo. 2006-136
UNITED STATES TAX COURT
JAMES A. SHINAULT, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 11360-04. Filed June 27, 2006.
James A. Shinault, pro se.
J. Craig Young, for respondent.
MEMORANDUM OPINION
WELLS, Judge: Respondent determined a $9,378 deficiency in
tax, and additions to tax pursuant to sections 6651(a)(1) and
6654(a) of $2,345 and $504.39, respectively, for petitioner’s
taxable year 2000. The issues we must decide are:
1. Whether petitioner’s correct filing status for taxable
year 2000 is that of a married individual filing separately.
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2. Whether petitioner is entitled to additional personal
exemptions for taxable year 2000.
3. Whether petitioner is entitled to the earned income
credit for taxable year 2000.
4. Whether petitioner is entitled to the child tax credit
for taxable year 2000.
5. Whether petitioner is entitled to certain Schedule C
business deductions for taxable year 2000.
6. Whether petitioner’s failure to file his 2000 Federal
income tax return was due to reasonable cause and not willful
neglect.
7. Whether petitioner is liable for an addition to tax
pursuant to section 6654(a) for failure to make estimated tax
payments for taxable year 2000.
Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
Background
At the time of filing the petition in the instant case,
petitioner resided in Waterloo, South Carolina. During taxable
year 2000 petitioner was a self-employed motorcycle mechanic and
received $36,864 in nonemployee compensation. Petitioner did not
timely file a Form 1040, U.S. Individual Income Tax Return, for
taxable year 2000 or pay any tax for that year because, at the
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time the return was due, he believed he was not required to file
tax returns or pay taxes because money he received for his labor
was a nontaxable exchange of equal value.1 Petitioner, however,
did timely file a tax return for taxable year 2001. Based on a
Form 1099 issued to petitioner by Lauren’s Cycle Sales, Inc. for
taxable year 2000, respondent determined a $9,378 deficiency in
tax and additions to tax pursuant to sections 6651(a)(1) and
6654(a) in the amounts of $2,3452 and $504.39, respectively, and
sent petitioner a notice of deficiency on April 7, 2004.
Respondent computed the deficiency using the tax rates under
section 1(c) for an unmarried individual who is not a head of
household. Petitioner timely petitioned this Court contending:
“I do not have any tax liability. I deny the figures and content
of the Notice of Deficiency. I dispute the computations. In the
year in question I had dependents, deductions, credits, business
expenses, etc. Local taxes, interest, dependent son.”
1
We note that petitioner has previously appeared before this
Court. In docket No. 19512-03L, a case in which we entered oral
findings of fact and opinion pursuant to sec. 7459 and Rule 152,
petitioner contended, among other frivolous contentions, that he
did not owe taxes for taxable year 1993 because respondent sent
the notice of determination to a “straw man” when respondent used
all capital letters to spell petitioner’s name. Petitioner
subsequently had a change of heart regarding the tax laws and
started filing returns, beginning with taxable year 2001.
2
The addition to tax pursuant to sec. 6651(a)(1) determined
in the notice of deficiency was originally, and incorrectly,
calculated as $3,704.31.
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Shortly before trial, petitioner provided respondent’s
counsel with a Form 1040, the Form 1099 from Lauren’s Cycle
Sales, Inc., and a Schedule C, Profit or Loss From Business, on
which petitioner claimed $19,525 in expenses.3 The Form 1040 is
dated November 1, 2005, and purports to be a joint return. The
Form 1040 bears the signature of a return preparer but is not
signed by petitioner or his spouse.
Discussion
As a general rule, the Commissioner’s determinations in the
notice of deficiency are presumed correct, and the taxpayer bears
the burden of proving an error. Rule 142(a); Welch v. Helvering,
290 U.S. 111, 115 (1933). The Commissioner has the burden of
production regarding whether it is appropriate to impose
penalties, additions to tax, or additional amounts. Sec.
7491(c); Higbee v. Commissioner, 116 T.C. 438, 446 (2001). The
Commissioner, however, does not have the obligation to introduce
evidence regarding reasonable cause. Higbee v. Commissioner,
3
Petitioner claimed $6,000 for advertising expenses, $7,316
for car and truck expenses, and $6,209 for depreciation and sec.
179 expenses. Line 31 of petitioner’s Schedule C reflects a net
profit of $17,339 after deducting expenses of $19,525 from
petitioner’s $36,864 income.
The Form 1040 that petitioner gave to respondent’s counsel
shortly before trial purports to be a joint Federal income tax
return and lists three personal exemptions, one each for
petitioner, his spouse, and their son. After claiming several
other deductions and credits, petitioner claims that his total
tax liability for taxable year 2000 is only $646.
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supra at 446-447. A taxpayer may claim married filing jointly
status if he and his spouse are legally eligible to file jointly
and in fact do file. See secs. 1(a), 6013; Columbus v.
Commissioner, T.C. Memo. 1998-60, affd. without published opinion
162 F.3d 1172 (10th Cir. 1998).
Respondent contends that petitioner’s correct filing status
is that of married individual filing a separate return. See sec.
1(d). Petitioner testified at trial that he sent a joint Federal
tax return for taxable year 2000 to the Internal Revenue Service
in Atlanta, Georgia, in November of 2005. Petitioner, however,
failed to produce a signed copy of his return or a certified mail
receipt despite testifying that he had both. Respondent’s
transcripts of account contained no evidence of any 2000 tax
return for petitioner. Based on the record in the instant case,
we conclude that petitioner has failed to prove that his filing
status is not married filing separately.
Petitioner bears the burden of showing that he is entitled
to claim any additional exemptions. Rule 142(a); Welch v.
Helvering, supra; Columbus v. Commissioner, supra. A taxpayer
filing a separate return may claim an exemption for his spouse
“if the spouse, for the calendar year in which the taxable year
of the taxpayer begins, has no gross income and is not the
dependent of another taxpayer.” Sec. 151(b). A taxpayer also
may claim an additional exemption for each individual who is a
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dependent as defined in section 152. Sec. 151(c). A dependent
generally includes a son or daughter of the taxpayer if: The
taxpayer provided over half of the child’s support during the
calendar year, and the child is under the age of 19 or is a full
time student and under the age of 24. Secs. 151(a), (c), 152(a).
In the instant case, petitioner’s son was 12 years old
during taxable year 2000 and lived with petitioner and his spouse
for the entire year. At trial, petitioner testified that his
spouse was not employed during taxable year 2000 and further
testified that his dependent son has always lived with petitioner
and his spouse. We believe petitioner’s testimony that his
spouse did not have any income during taxable year 20004 and that
his minor son was a dependent. Accordingly, petitioner is
entitled to two additional exemptions for his spouse and minor
son.
Regarding petitioner’s claimed Schedule C business expenses,
deductions are a matter of legislative grace, and the taxpayer
bears the burden of proving that he is entitled to the claimed
deductions. Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S.
79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435
(1934). The taxpayer must maintain records sufficient to enable
the Commissioner to determine the correct tax liability. Sec.
4
We infer from petitioner’s testimony that his spouse is not
the dependent of another taxpayer.
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6001; Meneguzzo v. Commissioner, 43 T.C. 824, 831-832 (1965);
sec. 1.6001-1(a), Income Tax Regs. The taxpayer also bears the
burden of substantiating the amount and purpose of the claimed
deductions. Hradesky v. Commissioner, 65 T.C. 87, 90 (1975),
affd. per curiam 540 F.2d 821 (5th Cir. 1976); sec. 1.6001-1(a),
Income Tax Regs.
In the instant case, the only evidence petitioner presented
supporting his claimed Schedule C deductions was his own
uncorroborated testimony, which was vague and did not elaborate
on any of the claimed Schedule C expenses. This Court is not
compelled to accept as true uncorroborated evidence of an
interested witness even though uncontradicted. Marcella v.
Commissioner, 222 F.2d 878, 883 (8th Cir. 1955), affg. in part
and vacating in part a Memorandum Opinion of this Court.
Accordingly, we hold that petitioner has failed to prove that he
is entitled to the claimed Schedule C deductions for taxable year
2002.
Section 32(a)(1) provides that an eligible individual shall
be allowed an earned income credit against his income tax.
However, in the case of a married individual, section 32(d)
provides that section 32 applies only if the individual filed a
joint return. As of the date of trial, respondent’s transcript
of account contained no evidence that petitioner had filed a
joint return for taxable year 2000. Accordingly, we hold that
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petitioner has not proved that he is entitled to the earned
income credit.
Under section 24(a), a taxpayer is entitled to a child tax
credit for each qualifying child. A qualifying child is any
child of the taxpayer for whom the taxpayer is allowed a
deduction under section 151 and who is under the age of 17.
Sec. 24(c). We have found that petitioner’s son was 12 years
old during taxable year 2000 and that petitioner is allowed a
deduction under section 151. Accordingly, we hold that
petitioner has shown that he is entitled to a child tax credit
for his minor son for taxable year 2000.
Section 6651(a)(1) imposes an addition to tax for a failure
to file an income tax return. A taxpayer may be relieved of the
penalties, however, if he can demonstrate that the failure is due
to reasonable cause and not due to willful neglect. Higbee v.
Commissioner, supra at 446-447. Willful neglect means
intentional failure or reckless indifference. United States v.
Boyle, 469 U.S. 241, 245 (1985). Section 301.6651-1(c)(1),
Proced. & Admin. Regs., states that if a taxpayer exercises
ordinary business care and prudence and is nevertheless unable to
file on time, then the delay is due to reasonable cause.
Petitioner did not timely file his 2000 tax return because at the
time it was due he believed that the amounts paid to him by
Lauren’s Cycle Sales, Inc. were a nontaxable exchange of equal
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value for his labor. Misguided interpretations of the
Constitution or other typical tax protester arguments are not
reasonable cause. See Yoder v. Commissioner, T.C. Memo. 1990-
116. Accordingly, we hold that petitioner is liable for the
addition to tax under section 6651(a)(1) for taxable year 2000.
Section 6654(a) imposes an addition to tax for failure to
pay estimated income tax. Section 6654 applies where prepayments
of tax, either through withholdings or by making estimated
quarterly payments, do not equal the percentage of total
liability required under the statute, unless one of the several
statutory exceptions applies. Niedringhaus v. Commissioner, 99
T.C. 202, 222 (1992). The taxpayer bears the burden of showing
he qualifies for an exception. Habersham-Bey v. Commissioner, 78
T.C. 304, 319-320 (1982). We find that petitioner does not
qualify for any such exception. Accordingly, we hold that
petitioner is liable for the addition to tax under section 6654
for taxable year 2000.
To reflect the foregoing,
Decision will be entered
under Rule 155.