T.C. Summary Opinion 2010-54
UNITED STATES TAX COURT
ALBERT LAWRENCE BOMER, JR., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 27711-08S. Filed April 26, 2010.
Albert Lawrence Bomer, Jr., pro se.
Alicia A. Mazurek, for respondent.
ARMEN, Special Trial 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
1
Unless otherwise indicated, all subsequent section
references are to the Internal Revenue Code in effect for the
year in issue.
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other court, and this opinion shall not be treated as precedent
for any other case.
Respondent determined a deficiency in petitioner’s 2007
Federal income tax of $4,667 and an accuracy-related penalty
under section 6662(a) and (b)(1) of $933.40. The issues for
decision are: (1) Whether petitioner is entitled to an earned
income credit, and (2) whether petitioner is liable for the
accuracy-related penalty. We hold that petitioner is not
entitled to an earned income credit and that petitioner is liable
for the accuracy-related penalty.
Background
All of the facts have been stipulated, and they are so
found. We incorporate by reference the parties’ stipulation of
facts and accompanying exhibits. Petitioner resided in the State
of Michigan when the petition was filed.
Throughout 2007 petitioner was incarcerated at the Standish
Maximum Correctional Facility in Standish, Michigan. Petitioner
has been incarcerated since 1997 and is serving a 40-year
sentence.
While incarcerated petitioner filed his 2007 Federal income
tax return reporting wages of $15,640 and claiming an earned
income credit of $4,667. Respondent’s records do not indicate
that petitioner had wages in 2007. Petitioner is unable to
disclose how the income reported on his 2007 Federal income tax
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return was earned, but asserts that the income was not from work
completed within the prison.
In a notice of deficiency respondent determined that
petitioner is not entitled to an earned income credit.
Respondent also determined that petitioner is liable for the
accuracy-related penalty based on negligence or disregard of
rules or regulations.
Discussion
I. Earned Income Credit
An eligible individual is allowed an earned income credit
for the taxable year in an amount equal to the credit percentage
of so much of the taxpayer’s earned income as does not exceed the
earned income amount. Sec. 32(a). Earned income includes wages,
salaries, tips, and other employee compensation. Sec.
32(c)(2)(A)(i). However, section 32(c)(2)(B) excludes certain
items from the definition of earned income. Specifically,
section 32(c)(2)(B)(iv) provides that “no amount received for
services provided by an individual while the individual is an
inmate at a penal institution shall be taken into account” in
determining a taxpayer’s earned income.
Petitioner contends that income he reported on his 2007
Federal income tax return was not earned for work completed
within the prison. Regardless of petitioner’s contention, the
sole inquiry is whether a taxpayer earned income while he was an
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inmate at a penal institution; other factors, such as the source
of the income, are irrelevant. Rogers v. Commissioner, T.C.
Memo. 2004-245.
In construing a statute, courts generally seek the plain and
literal meaning of its language. See United States v. Locke, 471
U.S. 84, 93 (1985); United States v. Am. Trucking Associations,
Inc., 310 U.S. 534, 543 (1940); Wilson v. Commissioner, T.C.
Memo. 2001-139. Under the plain and literal language of section
32(c)(2)(B)(iv), it makes no difference whether a taxpayer
performed services at a location inside or outside the penal
institution. Rogers v. Commissioner, supra.
Because petitioner was an inmate at a penal institution
throughout 2007, all of his income is excluded from the
computation of the earned income credit. Therefore, we hold that
petitioner is not entitled to the earned income credit.
II. Section 6662(a) Penalty
Section 6662(a) and (b)(1) imposes a penalty equal to 20
percent of the amount of any underpayment attributable to
negligence or disregard of rules or regulations. The term
“negligence” includes any failure to make a reasonable attempt to
comply with tax laws, and “disregard” includes any careless,
reckless, or intentional disregard of rules or regulations. Sec.
6662(c). The Commissioner bears the burden of production, sec.
7491(c), but, if satisfied, the taxpayer then bears the ultimate
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burden of persuasion, Higbee v. Commissioner, 116 T.C. 438, 446
(2001). Respondent has met his burden; therefore, the burden is
on petitioner.
Section 6664 provides an exception to the imposition of the
accuracy-related penalty if the taxpayer establishes that there
was reasonable cause for, and the taxpayer acted in good faith
with respect to, the underpayment. Sec. 6664(c)(1); sec. 1.6664-
4(a), Income Tax Regs. The determination of whether the taxpayer
acted with reasonable cause and in good faith is made on a case-
by-case basis, taking into account all pertinent facts and
circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs.
After considering the totality of the facts and
circumstances, we are satisfied that petitioner did not have
reasonable cause to believe that he was entitled to the earned
income credit and did not act in good faith within the meaning of
section 6664(c)(1). Accordingly, we hold that petitioner is
liable for the accuracy-related penalty under section 6662.
Conclusion
We have considered all of the arguments made by petitioner,
and, to the extent that we have not specifically addressed them,
we conclude that they are irrelevant or without merit.
To reflect the foregoing,
Decision will be entered
for respondent.