T.C. Memo. 2010-193
UNITED STATES TAX COURT
PATRICIA A. BROOKSHIRE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3474-09. Filed September 1, 2010.
Patricia A. Brookshire, pro se.
Olivia J. Hyatt, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
COHEN, Judge: Respondent determined deficiencies in
petitioner’s income tax and additions to tax for 2004 and 2006 as
follows:
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Additions to Tax
Year Deficiency Sec. 6651(a)(1) Sec. 6651(a)(2) Sec. 6654(a)
1
2004 $12,356 $2,751.97 $2,446.20 $350.08
1
2006 12,634 1,766.25 628.00 346.29
1
The addition to tax will continue to accrue from the due
date of the return at a rate of 0.5 percent for each month, or
fraction thereof, of nonpayment, not exceeding 25 percent.
The issues for decision are whether petitioner had unreported
income during the years in issue, whether she had deductions
beyond those conceded by respondent, and whether she is liable
for the additions to tax. All section references are to the
Internal Revenue Code in effect for the years in issue, and all
Rule references are to the Tax Court Rules of Practice and
Procedure.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference.
Petitioner resided in Georgia at the time that she filed her
petition. Petitioner was a graphic designer and computer
technician during the years in issue.
During 2004, petitioner received wages of $12,196 from U.S.
Personnel. Petitioner received nonemployee compensation from
Columbia Theological Seminary, Inc., of $2,837 in 2004; from
Agnes Scott College of $18,510 in 2004 and $2,900 in 2006; and
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from the Westminster Schools of $17,554 in 2004 and $3,850 in
2006. During 2006, petitioner received wages of $10,858 from Pat
Cornelius & Associates, Inc., and $50,696 from DigiPrint Ink,
Ltd.
Petitioner received interest income totaling $1,117 in 2006.
Petitioner failed to file Federal income tax returns for
2003, 2004, 2005, and 2006. Respondent prepared substitutes for
returns for petitioner for 2004 and 2006, using a filing status
of single. Notices of deficiency were sent to petitioner on
November 10, 2008, for 2004 and 2006. The notices were based on
third-party reporting of petitioner’s income as set forth above.
OPINION
The petition in this case had attached a form containing a
hodgepodge of frivolous, irrelevant, and spurious arguments
common to petitions following a program of tax defiance. See
Jensen v. Commissioner, T.C. Memo. 2010-143; Sullivan v.
Commissioner, T.C. Memo. 2010-138; Cook v. Commissioner, T.C.
Memo. 2010-137. The form sets out a general denial of tax
liability; a claim of various deductions and exemptions and a
filing status other than allowed in the statutory notice; an
assertion that the figures used “stem from illegal immigrants”
using the taxpayer’s Social Security number; an allegation that
penalties should be waived because “the Internal Revenue Code is
so complex and confusing”; a claim for credit “for the illegal
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telephone excise tax” for each year; a claim of deductible
expenses of tax preparation and advice on filing (even though no
return was filed); and a claimed lack of records allegedly
justifying reconstruction and estimates, with a citation of and
quotation from Cohen v. Commissioner, 266 F.2d 5 (9th Cir. 1959),
remanding T.C. Memo. 1957-172. The petition and the attachment
referred to petitioner as “he” and used the possessive “his”
throughout, although petitioner is female. Petitioner requested
Columbia, South Carolina, as the place of trial.
Before, during, and after trial, petitioner presented an
“affidavit of expenses and deductions” that she insisted should
be accepted as proof of her business expenses for the years in
issue. When the case was called for trial, petitioner belatedly
presented some receipts substantiating expenses, and respondent
conceded some deductions. Petitioner stipulated the items of
income set forth above and the third-party records that were the
subject of information returns on which the substitutes for
returns and notices of deficiency were based.
The Court ordered seriatim briefs, with respondent filing
the opening brief, so that the record could be clarified as to
what deductions were agreed and why others were denied. In her
brief, petitioner admitted that she received wages and other
income but that she maintained no records of amounts paid to her.
She attempted to avoid the stipulation and renewed hearsay
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objections to the evidence of her income received with the
stipulation. She has shown neither error in the stipulation nor
any reason to relieve her from it. See Rule 91(e). Even if they
had not been stipulated, the business records of the payors of
income would have been received in evidence under Rules 803(6)
and 902(11) of the Federal Rules of Evidence. Petitioner has not
raised any reasonable dispute with respect to any item of income.
See sec. 6201(d). We conclude that she had unreported income in
the amounts set forth in our findings.
Many of the expenses petitioner claimed were disallowed for
lack of substantiation of amount, time, place, and business
purpose under section 274(d). Petitioner presented a mileage log
that was inconsistent with her testimony and, as she admitted,
was not correct; she has now conceded that she is not entitled to
deduct mileage for 2006. Some of the transportation expenses and
entertainment expenses claimed were nondeductible personal
expenses, such as those for commuting, social entertainment, and
gifts. See sec. 262. Her claimed medical expenses, even if
accepted without substantiation, would not be deductible because
they do not exceed 7.5 percent of her adjusted gross income. See
sec. 213(a). Petitioner presented no evidence verifying
charitable contributions as required by section 170 and section
1.170A-13(a)(1), Income Tax Regs.
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Respondent conceded that petitioner was entitled to deduct a
portion of the expenses of an office in her home during 2004,
when most of petitioner’s income was nonemployee compensation.
Petitioner attempts to recharacterize her wage income in both
years as nonemployee compensation in order to claim expenses,
including her office in the home, as business expenses deductible
in full rather than employee expenses limited by section 67(a) to
the extent that the aggregate of miscellaneous deductions exceeds
2 percent of adjusted gross income. She admitted during her
testimony that some items were reimbursable by her employer, but
she failed to seek reimbursement. She has not persuaded us that
she was other than an employee, and her theory is implausible.
To the extent that respondent has conceded some employee
expenses, the limitation of section 67(a) will apply.
Petitioner claims deductions for computers and other
equipment purchased in 2004. If petitioner had filed a tax
return for 2004, she might have elected under section 179 to
deduct, rather than depreciate, the cost of equipment purchased
and placed in service that year. Her failure to file a return or
to meet the other applicable requirements now precludes that
opportunity. See Visin v. Commissioner, T.C. Memo. 2003-246,
affd. 122 Fed. Appx. 363 (9th Cir. 2005); Verma v. Commissioner,
T.C. Memo. 2001-132; Fors v. Commissioner, T.C. Memo. 1998-158;
Starr v. Commissioner, T.C. Memo. 1995-190, affd. without
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published opinion 99 F.3d 1146 (9th Cir. 1996). She has neither
claimed depreciation nor presented evidence adequate to determine
an allowance for depreciation in either year.
As to almost all of the expenses that she claimed,
petitioner lacked corroborative receipts, canceled checks or
other records of expenditures. Some of the documents she
presented were illegible, patently unreliable, or contradicted
her claims. (The receipts that she produced included Diet Coke
purchased at WalMart because she was thirsty). Petitioner
asserts that she did the best that she could considering the
passage of time and seeks to rely on Cohan v. Commissioner, 39
F.2d 540, 543-544 (2d Cir. 1930). In cases in which the Cohan
principle is applied and estimates are accepted, we bear heavily
against “the taxpayer whose inexactitude is of * * * [her] own
making.” Id. at 544. We can estimate the amount of the
deductible expense only when the taxpayer provides evidence
sufficient to establish a rational basis upon which the estimate
can be made. See Vanicek v. Commissioner, 85 T.C. 731, 742-743
(1985).
Certainly the necessity of reconstructing in 2010 expenses
allegedly incurred in 2004 and 2006 and the unreliability of
recollection and estimates are problems of petitioner’s own
making. She failed to file tax returns for at least 4 years,
when contemporaneous schedules of deductions would have, or
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should have, been based on contemporaneous records. She failed
to keep records of her income and expenses. She refused to
cooperate when contacted by respondent, and she complied only
belatedly and incompletely with the Court’s orders and Rules
requiring that records be turned over and that facts and
documents be stipulated. She obstructed the determination of her
tax liabilities by pursuing frivolous positions promoted by
unreliable sources and did not seek competent tax advice. We are
not persuaded that she is entitled to any deductions not conceded
by respondent.
Respondent has satisfied the burden of going forward under
section 7491(c) with respect to the additions to tax for failure
to file returns or to pay tax under section 6651(a) and the
failure to pay estimated taxes under section 6654(a). See Higbee
v. Commissioner, 116 T.C. 438, 446 (2001). Petitioner’s only
excuse is that for 2004 and 2006 she believed that her business
expenses “counter-balanced” the wages she earned and that she did
not owe taxes. A single individual must file a return on receipt
of gross income, such as wages, exceeding $7,950 in 2004 or
$8,450 for 2006, regardless of whether or not taxes are owed.
See sec. 6012(a). We do not believe that petitioner
misunderstood the requirements of law or that she believed that
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she did not have taxable income. She has not shown reasonable
cause under section 6651(a) or an exception to the addition to
tax under section 6654. The additions to tax on the recomputed
deficiencies will be sustained.
To reflect respondent’s concessions,
Decision will be entered
under Rule 155.