T.C. Summary Opinion 2007-203
UNITED STATES TAX COURT
RENARD HALLIBURTON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13967-06S. Filed December 5, 2007.
Renard Halliburton, pro se.
Lisa R. Woods, for respondent.
HAINES, Judge: This case was heard pursuant to the
provisions of section 7463 of the Internal Revenue Code in effect
when the petition was filed.1 Pursuant to section 7463(b), the
decision to be entered is not reviewable by any other court, and
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended. Amounts are rounded to
the nearest dollar.
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this opinion shall not be treated as precedent for any other case.
Respondent determined a deficiency in petitioner’s 2002
Federal income tax of $6,480, as well as additions to tax under
section 6651(a)(1) and (2) of $1,082 and $842, respectively, and
section 6654(a) of $193.
After concessions,2 the issues for decision are: (1)
Whether petitioner failed to report a taxable distribution and
other income of $1,830, and $12,000, respectively, in 2002; and
(2) whether petitioner is liable for additions to tax under
sections 6651(a)(1) and 6654(a).
Background
The parties’ stipulation of facts and the attached exhibits
are incorporated herein by this reference. Petitioner resided in
Saint Paul, Minnesota, when he filed this petition.
On August 8, 2002, petitioner received $12,000 from Amex
Financial Corp. (Amex) in settlement of a class action racial
discrimination suit against Amex.3 Amex mailed petitioner a Form
1099-MISC, Miscellaneous Income, stating it paid petitioner the
$12,000 in 2003. During 2002, petitioner also received a taxable
distribution of $1,830 from the National Finance Center Thrift
Savings Plan (National).
2
Respondent concedes that petitioner is not liable for the
sec. 6651(a)(2) addition to tax.
3
Petitioner did not contend that the $12,000 was not
included in gross income under sec. 104(a)(2).
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On March 23, 2005, respondent filed a substitute for return
for petitioner and on April 11, 2005, assessed the tax shown
thereon. On May 8, 2006, petitioner filed his Form 1040, U.S.
Individual Income Tax Return, for 2002 (2002 return), in which he
failed to report receiving the $12,000 from Amex and the $1,830
from National. Respondent treated the 2002 return as an amended
return.
On May 9, 2006, respondent mailed petitioner a notice of
deficiency for 2002. The notice of deficiency was mailed before
respondent could take into consideration petitioner’s 2002
return. Using third-party payor information, respondent
determined petitioner owed $6,480 in Federal income tax on the
basis of: (1) Wage income of $21,816 from the Xerox Corporation,
$409 from Labor Ready Midwest, Inc., and $759 from the Doherty
Employment Group; (2) a taxable distribution of $1,830 from
National; and (3) other income of $12,000 from Amex. In the
notice of deficiency, respondent calculated tax using married
filing separately rates and allowed a standard deduction, one
personal exemption, a self-employment tax deduction of $848, and
an adjustment to prepayment credit of $1,669.
Petitioner filed an amended petition with the Court on
September 11, 2006.4
4
Petitioner’s original petition was timely filed with the
Court on July 19, 2006.
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On January 16, 2007, respondent mailed petitioner a letter
asking whether he received $12,000 from Amex and $1,830 from
National in 2002. Petitioner responded on March 30, 2007, in a
letter stating he received $12,000 from Amex in 2002 and reported
the income on his Form 1040X, Amended U.S. Individual Income Tax
Return, for 2003 (2003 amended return) because Amex’s Form 1099-
MISC reported it paid him the $12,000 in 2003. The letter also
stated that petitioner received the $1,830 distribution in 2002.
Discussion
Petitioner admits he received $12,000 from Amex and $1,830
from National in 2002 and failed to report the income in 2002.
Petitioner contends, however, that because he reported the
$12,000 on his 2003 amended return, he was not required to report
it in 2002.
Section 451(a) provides that the amount of any item of gross
income shall be included in the gross income for the taxable year
in which received by the taxpayer, unless, under the method of
accounting used in computing taxable income, such amount is to be
properly accounted for as of a different period. Fed. Home Loan
Mortgage Corp. v. Commissioner, 125 T.C. 248 (2005).
Although petitioner reported the $12,000 in 2003 because the
Form 1099-MISC was mistakenly dated 2003, he received the amount
in 2002. Petitioner produced no evidence to show he used a
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method of accounting requiring him to report the $12,000 in a
period other than the period ending December 31, 2002.
Accordingly, the Court holds that petitioner was required to
report the $12,000 in 2002.
Respondent determined that petitioner is liable for
additions to tax under sections 6651(a)(1) and 6654(a).
Respondent bears the burden of production with respect to
petitioner’s liability for the additions to tax. Sec. 7491(c);
Higbee v. Commissioner, 116 T.C. 438, 446-447 (2001). To meet
his burden of production, respondent must come forward with
sufficient evidence indicating it is appropriate to impose the
additions to tax. Higbee v. Commissioner, supra at 446-447.
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 was due to reasonable cause and not
willful neglect. The parties stipulated that petitioner did not
timely file the 2002 return. Respondent has met his burden of
production. Petitioner did not show reasonable cause for failing
to timely file a return for 2002. Sec. 6651(a)(1). Therefore,
the Court holds that petitioner is liable for the section
6651(a)(1) addition to tax for 2002.
Section 6654(a) imposes an addition to tax on an individual
taxpayer who underpays his estimated tax. The addition to tax
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is calculated with respect to four required installment payments
of the taxpayer’s estimated tax liability. Sec. 6654(b) and (c).
Each installment is equal to 25 percent of the “required annual
payment”. Sec. 6654(d)(1)(A). The “required annual payment” is
generally equal to the lesser of (1) 90 percent of the tax shown
on the individual’s return for that year (or, if no return is
filed, 90 percent of his or her tax for such year), or (2) if the
individual filed a return for the immediately preceding taxable
year, 100 percent of the tax shown on that return. Sec.
6654(d)(1)(B); Wheeler v. Commissioner, 127 T.C. 200, 210-211
(2006); Heers v. Commissioner, T.C. Memo. 2007-10.
Respondent introduced evidence to show petitioner was
required to file a Federal income tax return for 2002, failed to
report income for 2002, and failed to make estimated tax payments
for 2002 (with the exception of the withheld tax). In order to
permit the Court to make the analysis required by section
6654(d)(1)(B)(ii), respondent must introduce evidence showing
whether petitioner filed a return for the preceding taxable year
and, if so, the amount of tax shown on that return. See Wheeler
v. Commissioner, supra at 212. Respondent did not do so.
Without that evidence, this Court cannot identify the number
equal to 100 percent of the tax shown on petitioner’s 2001
return, complete the comparison required by section
6654(d)(1)(B), and conclude petitioner had a required annual
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payment for 2002 that was payable in installments under section
6654. Therefore, the Court finds respondent failed to meet his
burden of production. Accordingly, respondent’s determination
regarding the section 6654 addition to tax is not sustained.
In reaching these holdings, the Court has considered all
arguments made and, to the extent not mentioned, concludes that
they are moot, irrelevant, or without merit.
To reflect the foregoing,
Decision will be entered
for respondent as to the
deficiency and the addition to
tax under section 6651(a)(1),
and for petitioner as to the
additions to tax under
sections 6651(a)(2) and 6654.