T.C. Memo. 2007-76
UNITED STATES TAX COURT
STACY N. DAVENPORT, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 23917-05. Filed April 2, 2007.
Stacy N. Davenport, pro se.
Carrie L. Kleinjan, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
FOLEY, Judge: By notice of deficiency dated September 19,
2005, respondent determined a deficiency in and additions to
petitioner’s 2002 Federal income tax. The issues for decision
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are whether petitioner is liable for unreported income and the
section 6654(a)1 and section 6651(a)(1) and (2) additions to tax.
FINDINGS OF FACT
During 2002, petitioner performed services for S. McClain,
Inc. (McClain). Between March 29 and September 6, 2002, McClain
issued, and sent to petitioner’s home, 24 checks payable to DDR
Truck Associates (DDR). Those checks totaled $63,850.
Petitioner deposited those checks into, and paid his salary from,
a bank account in the name of DDR over which he had signature
authority.
McClain issued petitioner a Form 1099-MISC, Miscellaneous
Income, which stated that in 2002 McClain paid petitioner
$63,850. McClain subsequently issued a corrected Form 1099-MISC
to petitioner (i.e., stating that it paid petitioner zero in
2002) and a Form 1099-MISC to DDR (i.e., stating that it paid DDR
$63,850 in 2002). Petitioner did not file a return, pay tax, or
make estimated tax payments relating to 2002.
On August 17, 2005, respondent, pursuant to section 6020(b),
prepared a substitute for return (SFR) relating to 2002. On
September 19, 2005, respondent sent petitioner a notice of
1
Unless otherwise indicated, all 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.
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deficiency relating to 2002. Respondent determined that
petitioner was liable for a deficiency and additions to tax for
failure to file a tax return, pursuant to section 6651(a)(1);
timely pay tax, pursuant to section 6651(a)(2); and pay estimated
income tax, pursuant to section 6654(a).
On December 19, 2005, petitioner, while residing in Hamburg,
Pennsylvania, filed his petition with the Court.
OPINION
Generally, a notice of deficiency is presumed correct, and
the taxpayer bears the burden of proving that the determination
is erroneous. Welch v. Helvering, 290 U.S. 111, 115 (1933).
Respondent provided sufficient predicate evidence connecting
petitioner to the unreported income. Berkery v. Commissioner, 91
T.C. 179, 195 (1988). Thus, the notice of deficiency is presumed
correct, and petitioner has the burden of proof.2
Petitioner contends that the $63,850 from McClain is
attributable to DDR and that DDR is a separate legal entity from
which he received a salary. Conversely, respondent contends that
DDR does not exist, and that the $63,850 is attributable to
petitioner. There is insufficient evidence to establish the
2
Sec. 7491(a) is inapplicable because petitioner failed to
introduce credible evidence within the meaning of sec.
7491(a)(1).
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existence of DDR. Moreover, when petitioner was questioned at
trial about how much of the $63,850 he was paid from DDR, he was
evasive and responded: “I don’t have that information.”
Petitioner’s testimony was not credible. We conclude that he
received $63,850 for the services he rendered to McClain, and we
sustain the deficiencies as determined by respondent.
Respondent also determined additions to tax for failure to
file tax returns, pursuant to section 6651(a)(1); timely pay tax,
pursuant to section 6651(a)(2); and pay estimated income tax,
pursuant to section 6654(a). Respondent, pursuant to section
7491(c), has the burden of production relating to the additions
to tax.
Respondent established that petitioner failed to file a
return relating to 2002. In addition, respondent, at trial,
proffered an SFR that met the requirements of section 6020(b) and
established that petitioner failed to timely pay tax relating to
2002. See Wheeler v. Commissioner, 127 T.C. 200, 208-209 (2006).
Petitioner did not establish reasonable cause for the failure to
file or timely pay tax relating to 2002. Sec. 6651(a)(1) and
(2). Accordingly, we sustain the section 6651(a)(1) and (2)
additions to tax as determined by respondent.
In order to satisfy his burden of production relating to the
section 6654 addition to tax, respondent, at a minimum, must
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establish that petitioner had a required annual payment pursuant
to section 6654(d)(1)(B). Wheeler v. Commissioner, supra at 211.
The required annual payment is generally equal to the lesser of
90 percent of the tax shown for the subject taxable year (or, if
no return was filed, 90 percent of the tax for such year), or 100
percent of the tax shown on the taxpayer’s return for the
preceding year. Sec. 6654(d)(1)(B)(i) and (ii); Wheeler v.
Commissioner, supra at 211.
Respondent established that petitioner had a tax liability
relating to 2002 (i.e., the subject taxable year). Respondent
has not produced credible evidence relating to 2001 (i.e., the
preceding year). Respondent contends that his transcript (i.e.,
a “summary of Mr. Davenport’s tax account of all the years opened
[sic], returns filed, or not filed”) demonstrates that petitioner
did not file a return relating to 2001. The transcript is
reproduced in pertinent part below.
Tax Period Posted Return
1986 POSTED
1987 NONE
1988 NONE
1990 POSTED
1992 POSTED
1993 POSTED
1994 POSTED
1995 POSTED
1996 NONE
1997 POSTED
1998 NONE
1999 NONE
2002 SUBST4
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At trial, respondent’s only witness, Ms. Gallagher,
testified that the transcript, as it relates to 2002, “shows that
no return was filed by Mr. Davenport, but it shows a substitute
for return was prepared by the IRS.” Indeed, the transcript
shows “SUBST4" relating to 2002. When Ms. Gallagher was asked
whether petitioner filed a return relating to 2001, she stated
that 2001 “is not even on this transcript [thus] no return [was]
filed”. We do not arrive at the same conclusion. The transcript
makes reference to 13 of petitioner’s tax years yet there is no
reference to 2001. Moreover, the transcript indicates that
returns were filed for certain years (i.e., “POSTED”) and not
filed for other years (i.e., “NONE”). Because there is no entry
relating to 2001, we conclude that the transcript is insufficient
to prove that petitioner failed to file a return for that year.
Without credible evidence relating to 2001, we cannot
identify the number equal to 100 percent of the tax shown on
petitioner’s 2001 return (i.e., the preceding year), complete the
comparison required by section 6654(d)(1)(B), or conclude that
petitioner had a required annual payment relating to 2002.
Wheeler v. Commissioner, supra at 211-212. Accordingly,
respondent has not met his burden of production relating to, and
petitioner is not liable for, the section 6654 addition to tax.
Contentions we have not addressed are irrelevant, moot, or
meritless.
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To reflect the foregoing,
Decision will be entered
under Rule 155.