T.C. Memo. 2009-18
UNITED STATES TAX COURT
DOLORES JEAN HALBIN, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 5799-06. Filed January 28, 2009.
Dolores Jean Halbin, pro se.
Charles M. Berlau, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
MARVEL, Judge: In a notice of deficiency dated December 16,
2005, respondent determined that petitioner was liable for a
Federal income tax deficiency of $7,794 and additions to tax
pursuant to section 6651(a)(1) and (2)1 for 2004. Petitioner
1
Unless otherwise provided, all section references are to
the Internal Revenue Code in effect for the year in issue and all
(continued...)
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filed a timely petition seeking a redetermination of the
deficiency and the additions to tax. After concessions, the
issues for decision are as follows:
1. Whether petitioner2 is entitled to claim a dependency
exemption deduction for her son for 2004; and
2. whether petitioner is liable for the additions to tax
under section 6651(a)(1) and (2).
FINDINGS OF FACT
Some of the facts have been stipulated. We incorporate the
stipulated facts into our findings by this reference. Petitioner
resided with her husband, Gene E. Halbin (Mr. Halbin), on a 10-
acre farm in Missouri on the date her petition was filed.
During 2004 petitioner worked as a school nurse at a school
located approximately 58 miles from her home, and before he got
too sick to work, Mr. Halbin worked in an HVAC (heating,
ventilating, and air conditioning) business that he was trying to
develop into a full-time business. In addition, both petitioner
and Mr. Halbin performed various farm chores that included but
were not limited to raising honeybees and maintaining their
1
(...continued)
Rule references are to the Tax Court Rules of Practice and
Procedure.
2
Respondent has conceded that any income tax deficiency for
2004 will be calculated to reflect that petitioner and her
husband filed a joint Federal income tax return for 2004 after
the notice of deficiency was issued and that their correct filing
status for 2004 is married filing jointly.
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hives, harvesting and selling honey, and raising crops and exotic
birds.
Dependency Exemption for Son
Petitioner and Mr. Halbin have one son, Eric G. Halbin
(Eric). On June 24, 2003, as he was leaving his parents’ farm,
Eric’s vehicle was hit head-on by a U.S. Postal Service mail
carrier who was driving down the wrong side of the road. It took
approximately 3 hours for emergency personnel to extricate Eric
from his vehicle. Eric suffered severe physical injuries
including but not limited to a fractured right knee, a severely
dislocated left hip, internal bleeding, and a head injury.
Eric’s hip was out of socket for 7-1/2 hours, leading to other
physical problems. As a result of his injuries, Eric for some
time could not walk, drive, or work.
When Eric was released from the hospital, he returned to his
home in Kansas, which he was in the process of buying. Because
Eric had no income, however, he was unable to pay his basic
living expenses, including his utilities and mortgage payment.
Although petitioner and Mr. Halbin attempted to help Eric with
his expenses, they could not afford to keep making his payments.
Eric was finally forced to move to his parents’ home because he
could not afford to live by himself.3
3
By December 2003 utilities to Eric’s home had been turned
off. In approximately September 2005 the financial institution
(continued...)
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Eric resided with his parents from December 2003 to sometime
in December 2006. During 2004 Eric had no income and received no
government payments. Petitioner and Mr. Halbin paid all of his
living expenses, including his grocery and medical expenses,4 and
they paid all of the housing costs for their home.
2004 Delinquent Return
In addition to Eric’s accident in 2003, petitioner and Mr.
Halbin had to contend with other problems. In 2003 Mr. Halbin
developed an illness that was not diagnosed correctly until 2004,
when he had surgery to remove his gall bladder.5 Until his
condition was finally diagnosed, Mr. Halbin thought that he was
dying of cancer. At times Mr. Halbin was so sick that he could
not get out of bed. Other times he was able to help petitioner
around the farm. It fell on petitioner, who was still holding
down a full-time job, to care for both Mr. Halbin and Eric during
2004.
During 2004 and 2005 petitioner and Mr. Halbin were also
undergoing an examination of their 2003 Federal income tax return
by the IRS. On a date that does not appear in the record but was
3
(...continued)
holding Eric’s loan foreclosed on his home.
4
Petitioner did not receive any reimbursement for her son’s
medical expenses, and she did not claim the expenses on her tax
returns.
5
The surgery took place on Dec. 31, 2004.
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probably sometime before August 22, 2005, petitioner and/or Mr.
Halbin spoke with the auditor about their various problems and
told the auditor that they needed more time to file their 2004
Federal income tax return.6 As the April 15, 2005, filing
deadline approached, petitioner obtained an extension form, but
she did not complete it or file it before April 15, 2005.
Neither petitioner nor Mr. Halbin filed a timely 2004 Federal
income tax return. Petitioner testified that with all of the
problems7 she had in 2004 and 2005, she forgot about filing the
extension form and/or the 2004 Federal income tax return.
Delinquent 2004 Joint Return; Agreed Adjustments
For reasons that do not appear in the record, the IRS
allegedly prepared and processed a substitute for return for
petitioner on or about August 22, 2005, only 4 months after the
filing deadline, and mailed a notice of deficiency for 2004 to
6
Mr. Halbin testified that during the course of his 30-year
marriage, except for 2004, he and petitioner filed timely joint
Federal income tax returns. Usually Mr. Halbin prepared the
joint returns, but for some years (e.g., 2000, 2002, and 2003) a
paid preparer did so. For 2004, however, petitioner and Mr.
Halbin did not hire a return preparer because they could not
afford to do so.
7
In July 2004 a new neighbor sprayed chemicals on the
neighbor’s property without warning petitioner. After the
spraying, petitioner’s honeybees and hives died. Petitioner
testified that she lost 20 hives, that each hive was worth $500,
and that each of the hives that was destroyed would have produced
60 pounds of honey. After Mr. Halbin became ill, petitioner and
Mr. Halbin lost a potential lavender crop because the lavender
seeds, which are very sensitive to temperature, were not planted
at the proper time.
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petitioner on December 16, 2005. Petitioner timely petitioned
this Court on March 22, 2006.
On October 23, 2006, counsel for respondent received a joint
Federal income tax return for 2004 from petitioner and Mr. Halbin
dated October 18, 2006. On February 16, 2007, counsel for
respondent received another joint Federal income tax return for
2004 dated February 7, 2007. The parties have stipulated that
petitioner and Mr. Halbin had the following items of income for
2004:
1
Wages $52,190
Income tax refund 1,772
Income--HVAC/electric activity 7,112
Income-honey/lavender/bird activity 4,800
1
Federal income tax withholding on petitioner’s wage income
was $1,341.
The parties have also stipulated that respondent will recalculate
the 2004 deficiency using joint return rates, that he will allow
two personal exemptions (for petitioner and Mr. Halbin), and that
petitioner and Mr. Halbin may deduct the following expenses:
Honey/lavender/exotic bird
activity expenses $4,630.63
HVAC/electric activity
expenses 3,443.21
Schedule A expenses:
State & local taxes $1,997.88
Medical expenses 3,910.02
Real estate taxes 719.37
Personal property taxes 211.70
Mortgage interest 11,343.00
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OPINION
Petitioner contends that she is entitled to a dependency
exemption deduction for her son, Eric, for 2004 and that she is
not liable for the section 6651(a)(1) and (2) additions to tax.
Petitioner does not contend that the burden of proof, which is
normally placed on the taxpayer pursuant to Rule 142, should be
shifted to respondent under section 7491(a), and she did not
introduce evidence to establish that the requirements of section
7491(a) have been satisfied. Consequently, petitioner has the
burden of proof with respect to disputed factual matters. Rule
142(a).
Dependency Exemption Deduction for Son
Section 151(a) authorizes a taxpayer to deduct allowable
personal exemptions. Section 151(c)(1) authorizes a taxpayer to
deduct a personal exemption for each qualifying dependent, as
defined in section 152, whose gross income for the relevant year
is less than the exemption amount. Section 152(a) provides in
pertinent part that the term “dependent” means a son of the
taxpayer over half of whose support for the relevant year was
received from the taxpayer.
In deciding whether an individual received over half of his
support from the taxpayer, we must take into account “the amount
of support received from the taxpayer as compared to the entire
amount of support which the individual received from all
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sources”. Sec. 1.152-1(a)(2)(i), Income Tax Regs. A taxpayer
claiming a dependency exemption deduction must prove by competent
evidence the total amount of the dependent’s support from all
sources for the relevant year and must prove that the taxpayer
provided more than one-half of the dependent’s total support.
See Blanco v. Commissioner, 56 T.C. 512, 514-515 (1971).
During 2004 petitioner’s son, Eric, was 26 years old and
incapacitated from an automobile accident. He resided during
2004 in his parents’ home. Both petitioner and Mr. Halbin
testified credibly that they paid 100 percent of Eric’s expenses
during 2004, including his grocery and medical expenses, that
Eric could not and did not work during 2004, and that Eric had no
income or support from sources other than his parents.8 The
testimony establishes Eric’s total support from all sources and
proves that petitioner and her husband provided all of Eric’s
support during 2004. We conclude on this record that petitioner
is entitled to a dependency exemption deduction for Eric.
Section 6651(a)(1) Addition to Tax
Petitioner failed to file a timely 2004 Federal income tax
return. Respondent determined that petitioner was liable for the
8
Respondent inquired of petitioner and Mr. Halbin whether
Eric received any payments from the State of Kansas during 2004,
but they denied having knowledge of any government payments to
Eric before 2006 when Eric’s disability claim was finally
resolved. Respondent did not introduce any evidence to refute
their testimony.
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section 6651(a)(1) addition to tax because of petitioner’s
failure to file her 2004 Federal income tax return by the due
date. Petitioner contends that she is not liable for the
addition to tax because she had reasonable cause for her failure
to file a timely 2004 return. Petitioner argues that the many
personal problems with which she was dealing in 2004 and 2005
justified her failure to file her return by the April 15, 2005,
deadline.9
Section 6651(a)(1) imposes an addition to tax for failure to
file a return in the amount of 5 percent of the tax required to
be shown on the return for each month during which such failure
continues, but not exceeding 25 percent in the aggregate, unless
it is shown that such failure is due to reasonable cause and not
due to willful neglect. See United States v. Boyle, 469 U.S.
241, 245 (1985).
Although respondent has the initial burden of production
with respect to the section 6651 addition to tax, see sec.
7491(c), respondent satisfied that burden with evidence that
petitioner did not file a timely Federal income tax return for
2004, a fact that petitioner does not dispute. Consequently,
petitioner must prove that she is not liable for the addition to
9
We did not require the parties to file posttrial briefs.
Our summary of petitioner’s arguments is derived from
petitioner’s testimony and arguments at trial.
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tax. Petitioner contends that she had reasonable cause for her
failure to file a timely 2004 Federal income tax return.
The record is replete with evidence that petitioner
struggled throughout 2004 and 2005 with a panoply of serious
personal problems, including Mr. Halbin’s illness, surgery, and
recuperation, Eric’s injuries from his car accident, the
destruction of petitioner’s beehives, and the collapse of the
farm’s lavender crop. Petitioner was the principal source of
income for her family during this difficult period, and after
very long workdays she had to summon the strength to deal with
the farm and the physical problems of her family members.
Although Mr. Halbin was able to assist in some ways during 2004
and 2005, his illness, which was undiagnosed for many months,
made it very difficult for him to provide reliable help for
petitioner.
While we are very sympathetic to the difficult situation
petitioner endured, we cannot decide this issue on sympathy.
Rather, we must examine the facts in the record to decide whether
petitioner had reasonable cause for failing to file her return
within the meaning of section 6651(a).
Section 301.6651-1(c)(1), Proced. & Admin. Regs., provides
that a taxpayer who claims that he or she had reasonable cause
for failing to file a return must make an affirmative showing of
all facts in support of that claim. If the facts presented
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demonstrate that the taxpayer exercised ordinary business care
and prudence and was nevertheless unable to file the return when
due, the delay is due to reasonable cause. Id.
Both petitioner and Mr. Halbin testified that they attempted
to contact the IRS regarding their belief that they needed more
time to file their 2004 Federal income tax return. However, the
record does not establish when the call or calls were made or,
specifically, whether the calls were made before the return
filing deadline. The record does establish that petitioner
obtained the form to request an automatic extension to file but
that she failed to complete and file the form before the return
filing deadline. When asked why she did not file the request for
an automatic extension, petitioner testified that she forgot
about the filing deadline and that filing the 2004 return was not
on her radar.
Petitioner held a full-time job throughout 2004 and into
2005. She paid bills, did farm chores, and helped Mr. Halbin and
Eric with their physical challenges. Both Mr. Halbin, who had
surgery in December 2004, and Eric, whose automobile accident
occurred in 2003, were recuperating and improving physically in
2005. The record demonstrates that petitioner could function and
was functioning at several different levels in 2005.
Unfortunately for petitioner, the record also establishes that
even though she was aware of her return filing obligation, she
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forgot to do what was necessary to deal with that filing
obligation before the filing deadline.
The record does not support a conclusion that petitioner
exercised “ordinary business care and prudence” with regard to
her 2004 filing obligation. See sec. 301.6651-1(c)(1), Proced. &
Admin. Regs.
We hold that petitioner has not proven that she had
reasonable cause for her failure to file a timely 2004 Federal
income tax return.
Section 6651(a)(2) Addition to Tax
Respondent also determined that petitioner was liable for
the addition to tax imposed by section 6651(a)(2) for failure to
pay the amount of tax shown on a return. The addition to tax
under section 6651(a)(2) applies only when an amount of tax is
shown on a return. Cabirac v. Commissioner, 120 T.C. 163, 170
(2003). Petitioner did not file a timely Federal income tax
return for 2004.10 Although we did not direct the parties to
file posttrial briefs, we assume for purposes of this analysis
that respondent based his determination that petitioner was
10
Although petitioner and her husband submitted two joint
Federal income tax returns to respondent for 2004, the documents
were submitted after respondent issued his notice of deficiency,
and they apparently were not treated as returns for purposes of
this case. In addition, neither document showed an unpaid
Federal income tax liability. Consequently, we analyze this
issue as if petitioner did not file a Federal income tax return
for 2004.
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liable for the section 6651(a)(2) addition to tax on his
assertion that he made a substitute for return for 2004 under
section 6020(b) (SFR) that qualifies as a return for purposes of
section 6651(a)(2).
An SFR is treated as a return filed by the taxpayer for
purposes of determining whether the section 6651(a)(2) addition
to tax applies. Wheeler v. Commissioner, 127 T.C. 200, 208-209
(2006), affd. 521 F.3d 1289 (10th Cir. 2008). However, the
claimed SFR must satisfy the requirements of section 6020(b).
Id. at 209; see also Cabirac v. Commissioner, supra at 170-173.
We have held that the Commissioner’s burden of production
under section 7491(c) with respect to the section 6651(a)(2)
addition to tax requires that the Commissioner introduce evidence
that a return showing an unpaid tax liability was filed for the
year in question. See Wheeler v. Commissioner, supra at 210. In
a case such as this where the Commissioner is relying upon an
alleged SFR to support his determination under section
6651(a)(2), the Commissioner must introduce evidence that an SFR
satisfying the requirements of section 6020(b) was made. See id.
Respondent did not do so. Although the record includes certain
deemed admissions under Rule 90(c) and various stipulations of
fact, neither the deemed admissions nor the stipulations
mentioned, much less established, that respondent made an SFR
meeting the requirements of section 6020(b) or that petitioner
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filed a Federal income tax return for 2004 showing an unpaid tax
liability. Because the record does not contain evidence that
petitioner failed to pay a tax shown on a Federal income tax
return for 2004, we conclude that respondent has not satisfied
his burden of production under section 7491(c) with respect to
the section 6651(a)(2) addition to tax.
Because of our holding, we do not need to decide whether
petitioner had reasonable cause for any alleged failure to pay
tax within the meaning of section 6651(a)(2).
To reflect the foregoing,
Decision will be entered
under Rule 155.