T.C. Memo. 2011-15
UNITED STATES TAX COURT
MARTIN ALONZO CAMPBELL, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 14035-09. Filed January 20, 2011.
Martin Alonzo Campbell, pro se.
James P.A. Caligure, for respondent.
MEMORANDUM OPINION
HALPERN, Judge: Respondent determined a deficiency of
$22,644 and an accuracy-related penalty of $4,528.80 with respect
to petitioner’s 2007 Federal income tax. Principally,
respondent’s determination of a deficiency results from his
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disallowance of certain business expenses claimed by petitioner
on the ground that petitioner was unable to substantiate them.1
Unless otherwise stated, all section references are to the
Internal Revenue Code in effect for 2007, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
Some facts have been stipulated and are so found. The
stipulation of facts, with accompanying exhibits, is incorporated
herein by this reference. We need find few facts in addition to
those stipulated and shall not separately set forth our findings
of fact.
Petitioner bears the burden of proof as to the deficiency.
See Rule 142(a).2
Background
Petitioner resided in New York at the time he filed the
petition.
Petitioner filed a Form 1040, U.S. Individual Income Tax
Return, for 2007, including a Schedule C, Profit or Loss From
Business, on which he reported income and expenses both from his
1
Respondent also made an adjustment increasing the amount of
petitioner’s self-employment tax. The adjustment is
computational and presents no issue that we need further address.
2
Petitioner has not raised the issue of sec. 7491(a), which
shifts the burden of proof to the Commissioner in certain
situations. We conclude that sec. 7491(a) does not apply here
because petitioner has not produced any evidence that he has
satisfied the preconditions for its application.
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business as a tax return preparer and from his real estate
investments.3 He reported $48,000 of rental income from his real
estate investments. For lack of substantiation, respondent
disallowed the following expenses shown on the Schedule C:
Utilities $5,678
Other expenses 67,403
Repairs and maintenance 6,215
Legal and professional services 7,902
The parties have stipulated in part, and respondent concedes
in part, that, of the $67,403 of other expenses, petitioner may
deduct $54,797 as interest and taxes paid in connection with his
real estate investments. They have further stipulated that
petitioner may deduct the $5,678 claimed for utilities, also
related to his real estate investments. Petitioner offered no
evidence at trial substantiating the remaining disallowed
expenses. At the conclusion of that trial, we held the record
open for respondent to redetermine whether, taking into account
the stipulated and conceded expenses, petitioner had made a
substantial understatement of income tax, on which an accuracy-
related penalty under section 6662(a) and (b)(2) could be
imposed. We accorded petitioner the opportunity to respond to
respondent’s computation.
3
Respondent argues, and petitioner does not disagree, that
the income and expenses related to his real estate investments
should have been reported on a Schedule E, Supplemental Income
and Loss.
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Respondent has supplied us with his calculations showing a
reduced deficiency of $5,334 and a resulting accuracy-related
penalty of $1,067 for substantial understatement of income tax.
Petitioner has responded, objecting to respondent’s calculations
only on the ground that a 2007 Form 1040X, Amended U.S.
Individual Income Tax Return, dated September 30, 2010, and
attached to his response, shows additional deductible amounts he
paid for insurance and taxes. The Form 1040X was not received
into evidence (indeed, it was not signed until more than 2 weeks
after the trial in this case concluded), nor is there any
evidence that it was submitted to respondent or accepted by him.
Moreover, a tax return does not establish the truth of the facts
stated therein. E.g., Wilkinson v. Commissioner, 71 T.C. 633,
639 (1979).
Conclusion
Petitioner has failed to prove that the deficiency in his
2007 Federal income tax is any less than the $5,334 as calculated
by respondent. Nor has he shown reasonable cause for the
underpayment of tax resulting from his substantial understatement
of income tax, which would negate the resulting accuracy-related
penalty. See sec. 6664(c)(1).
Decision will be entered
for respondent.