T.C. Memo. 2017-106
UNITED STATES TAX COURT
CATHERINE ANN RIGGINS, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2784-15. Filed June 8, 2017.
Catherine Ann Riggins, pro se.
Michelle M. Robles, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
PUGH, Judge: In a notice of deficiency respondent determined a deficiency
of $45,310 and additions to tax of $10,194.75, $4,984.10, and $812.32 pursuant to
sections 6651(a)(1) and (2) and 6654(a), respectively, with respect to petitioner’s
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[*2] 2012 tax year.1 At trial petitioner filed a motion in limine to preclude the
admission of certain evidence. The issues for decision are: (1) whether
petitioner’s motion in limine should be granted; (2) whether petitioner is entitled
to head-of-household filing status, an exemption for one dependent, various
deductions, expense deductions claimed on Schedule C, Profit or Loss From
Business, an earned income credit, and an additional child tax credit as reflected
on a Federal income tax return submitted after respondent issued the notice of
deficiency; (3) whether petitioner is liable for additions to tax under section
6651(a)(1) and (2); and (4) whether documents respondent offered after trial
should be admitted into evidence. Respondent has conceded that petitioner had
$122,356 of gross receipts during 2012 rather than the $148,605 determined in the
notice of deficiency and is not liable for the addition to tax under section 6654(a).
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated facts are
incorporated in our findings by this reference. At the time the petition was filed,
petitioner resided in Florida.
1
Unless otherwise indicated, all section references are to the Internal
Revenue Code of 1986, as amended and in effect for the year at issue. Rule
references are to the Tax Court Rules of Practice and Procedure.
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[*3] Petitioner, a lawyer, did not file a Federal income tax return for her 2012 tax
year before receiving a notice of deficiency for that year. Respondent therefore
prepared a substitute for return pursuant to section 6020(b) (which petitioner
claims she did not receive)2 and on October 20, 2014, issued a notice of deficiency
based on that substitute for return. The notice of deficiency reflected $148,605 in
gross receipts from her work as an attorney, assumed a filing status of single, and
included only one personal exemption and the standard deduction. It also advised
petitioner that respondent would accept her 2012 tax return and that filing that
return might reduce the amount due.
On December 30, 2014, after respondent had issued the notice of deficiency,
petitioner submitted her Form 1040, U.S. Individual Income Tax Return, for 2012.
On Schedule C she reported $122,356 in gross receipts from her law practice for
2012 (respondent concedes that this amount is correct). Petitioner also claimed
2
Respondent’s records indicate that petitioner may have been the subject of
identity theft, resulting in an incorrect address being used on a notice to her of
taxes owed pursuant to the substitute for return. The actual substitute for return
was not sent to petitioner, and she appears to have been unaware of the possible
identity theft. Sec. 6020 and sec. 301.6020-1, Proced. & Admin. Regs., do not
require respondent to provide the substitute for return, and we find that the fact
that respondent used the wrong address for the earlier notice does not affect our
jurisdiction or the outcome of this case although it is a curious detail. The notice
of deficiency upon which the case is based was correctly addressed to petitioner,
and she does not argue that she did not receive that notice.
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[*4] head-of-household filing status, two personal exemptions (claiming one
dependent), various deductions, Schedule C expense deductions, an earned income
tax credit, and an additional child tax credit and as a result claimed that she was
owed a refund. On January 7, 2015, respondent received petitioner’s 2012 Form
1040. On January 29, 2015, petitioner timely filed her petition, in which she
stated: “Pursuant to my completed 2012 IRS Form 1040, I am owed a refund.
Accordingly, I do not owe any taxes to the IRS for the 2012 tax year; and,
therefore, my return was timely filed.”
On or about February 23, 2015, respondent’s service center processed
petitioner’s 2012 Form 1040 and offset her claimed overpayment against a nontax
debt. On or about February 25, 2015, respondent entered litigation hold codes on
petitioner’s account, preventing any further action from being taken until the
resolution of this case. On March 30, 2015, respondent filed an Answer denying
petitioner’s allegation that she did not owe any tax and that her return was timely
filed but not otherwise addressing her 2012 Form 1040.
At trial petitioner did not present evidence of her deductions, credits, or
filing status beyond the 2012 Form 1040 that she had filed.3 Instead she argued, in
3
Even though respondent had conceded that petitioner’s gross receipts for
2012 were $122,356, she offered some evidence at trial to show that the gross
(continued...)
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[*5] a motion in limine and at trial, that respondent had voluntarily redetermined
her tax liability by accepting the 2012 Form 1040 that she had filed after the notice
of deficiency was issued. Therefore, she argued, respondent should be precluded
from offering any evidence inconsistent with the redetermined tax liability and no
longer may rely upon the original notice of deficiency, citing Smaczniak v.
Commissioner, 998 F.2d 238 (5th Cir. 1993), rev’g T.C. Memo. 1991-87. She
further argued that the Court lacks jurisdiction over her redetermined tax liability
because that redetermined liability resulted in a refund, citing section 6512(b)(2)
and Estate of Smith v. Commissioner, 429 F.3d 533, 539 (5th Cir. 2005), vacating
123 T.C. 15 (2004). We took petitioner’s motion in limine under advisement and
asked the parties to address the issue in posttrial briefs. As to her failure to file a
return before the notice of deficiency was issued, petitioner admitted that she was
“slothful” but testified that her “understanding of the law is that when you’re
entitled to a refund you have to file * * * [a return] within three years” and
therefore had until April 15, 2016, to file a return for 2012.
3
(...continued)
receipts she received in 2012 should have been $122,356 instead of $148,605, as
shown in the notice of deficiency, to illustrate her point that the notice of
deficiency was incorrect.
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[*6] OPINION
I. Effect of Postpetition Processing of Petitioner’s Return
We first must decide what effect if any we must give the postpetition
processing of petitioner’s 2012 Form 1040 and the issuance to her of a refund.
Section 6512(a) provides that “[i]f the Secretary has mailed to the taxpayer a
notice of deficiency * * * and if the taxpayer files a petition with the Tax Court
within the time prescribed * * *, no credit or refund of income tax for the same
taxable year * * * shall be allowed or made” other than (as relevant here) as
determined in a final decision of the Tax Court or as collected in excess of the
amount in our decision, or to the extent determined as part of our overpayment
jurisdiction. Ordinarily, the burden of proof in cases before the Court is on the
taxpayer. See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).
Petitioner invoked our jurisdiction by filing her petition for redetermination,
which has the effect of restricting respondent’s ability to assess or collect the taxes
determined to be owed in the notice of deficiency until our decision becomes final.
See sec. 6213. Because she filed a petition, respondent must assess the entire
amount that we determine to be a deficiency in our decision. See sec. 6215. And
respondent may not allow a credit or refund for the year to which the petition
relates, except as we determine under our concurrent jurisdiction to determine
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[*7] overpayments (or in other circumstances not relevant here). See sec. 6512(a)
and (b).
Petitioner now seeks to end-run the statute giving the Court exclusive
jurisdiction over the tax year at issue once she filed her petition. Petitioner relies
on two cases to argue that respondent may not rely on the liability originally
determined in the notice of deficiency from which she petitioned us for
redetermination. Petitioner cites Smaczniak v. Commissioner, 998 F.2d 238,
arguing that “when the IRS accepts a tax return filed after the issuance of a notice
of deficiency and voluntarily redetermines the tax liability, IRS waives its right to
rely on its original tax liability determination.” Petitioner then cites Estate of
Smith v. Commissioner, 429 F.3d 533, arguing that this Court lacks jurisdiction to
review respondent’s determination that she was owed a refund.
These cases do not support petitioner’s position. In Smaczniak the main
issue was whether res judicata applied in a subsequent proceeding involving the
same claim and the same tax year. The years at issue in Smaczniak were 1984-87,
but the taxpayer husband had been before the Court in a prior proceeding for tax
years 1980-83 at docket No. 10479-86. In that prior case the Court entered a final
decision against the taxpayer husband because he had failed properly to prosecute
his case and failed to comply with the Court’s Rules. Smaczniak v.
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[*8] Commissioner, 998 F.2d at 239. After that final decision, and while an
appeal was pending, the taxpayers submitted joint tax returns for 1980-83, the
years at issue in the case at docket No. 10479-86, and the IRS accepted those
returns and redetermined the amounts of the taxpayers’ tax liabilities for those
years. Id. In Smaczniak, the taxpayers attempted to raise issues relating to tax
years 1980-83. Id. at 241. The U.S. Court of Appeals for the Fifth Circuit rejected
the Commissioner’s affirmative defense of res judicata, reasoning that
the IRS may not rely on a prior judgment of a court regarding a
taxpayer’s deficiency when the IRS has, subsequent to that court’s
judgment, voluntarily redetermined the amount of the taxpayer’s
deficiency. Res judicata is an affirmative defense, which can be
waived. By voluntarily redetermining Mr. Smaczniak’s tax liability,
the IRS in effect waived its right to rely on Mr. Smaczniak’s liability
as originally determined by the Tax Court. * * * [Id. at 242; citations
and fn. ref. omitted.]
The Court of Appeals was careful to limit its holding, specifying that it applied
only for purposes of res judicata and only in limited circumstances. See id. at 242
n.14. Smaczniak thus does not support petitioner’s argument that respondent is
precluded from relying on the notice of deficiency or that she no longer bears the
burden of proving that the notice of deficiency is erroneous.
In Estate of Smith, we had previously determined, through Rule 155
computations, that the taxpayer was owed a refund for overpayment of tax. The
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[*9] Commissioner then took this amount, reduced it by the taxpayer’s unpaid
interest for the same year, and refunded to the taxpayer the reduced amount. The
taxpayer filed a motion seeking a refund of the entire amount. We granted the
motion, holding that even though it resulted in a windfall to the taxpayer (since the
Court had not taken the unpaid interest into account in its decision), the
Commissioner was required to refund the full amount of the taxpayer’s
overpayment, without reduction. The U.S. Court of Appeals for the Fifth Circuit
reversed the Court’s holding that since we had not addressed the underpayment of
interest, the Commissioner had authority pursuant to section 6402 to reduce the
overpayment of tax that we had determined by the amount of unpaid interest. Our
order to the Commissioner to refund the entire amount of the overpayment
therefore exceeded our jurisdiction under section 6512(b). Estate of Smith v.
Commissioner, 429 F.3d at 539. Estate of Smith likewise does not preclude us
from redetermining petitioner’s tax liability here.
Petitioner has not established that respondent’s processing of her return and
offset of her nontax debt was anything other than an error. Petitioner has not
presented, nor are we aware of, any cases holding that postpetition processing of a
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[*10] tax return and issuance of a refund or offset constitutes a binding settlement
of the liability at issue in the petition.4 Nor does she so argue.
Petitioner’s contention that respondent no longer can rely on the notice of
deficiency is similar to the argument that the IRS has rescinded the notice of
deficiency even though the formal procedures have not been followed. This
argument consistently has been rejected. In Slattery v. Commissioner, T.C.
Memo. 1995-274, 1995 Tax Ct. Memo LEXIS 284, at *10, this Court stated:
Section 6212(d) provides that the Secretary may, with the consent of
the taxpayer, rescind any notice of deficiency mailed to the taxpayer.
Clearly, the statute requires mutual consent by the Secretary and the
4
General principles regarding the enforcement of settlements in the Tax
Court were set out in Dorchester Indus. Inc. v. Commissioner, 108 T.C. 320, 330
(1997) (quoting Manko v. Commissioner, T.C. Memo. 1995-10), aff’d, 208 F.3d
205 (3d Cir. 2000), as follows:
“In a tax case, it ‘is not necessary that the parties execute a closing
agreement under section 7121 in order to settle a case pending before
this Court, but, rather, a settlement agreement may be reached
through offer and acceptance made by letter, or even in the absence of
a writing.’ Lamborn v. Commissioner, T.C. Memo. 1994-515.
Settlement offers made and accepted by letters are enforced as
binding agreements. Haiduk v. Commissioner, T.C. Memo. 1990-
506; see also Himmelwright v. Commissioner, T.C. Memo. 1988-
114.”
Furthermore, this Court in Johnson v. Commissioner, 136 T.C. 475, 497 (2011),
aff’d, 502 F. App’x 1 (D.C. Cir. 2013) held that “[T]he Commissioner is * * * not
bound by an apparent settlement where an agent is without authority to
compromise a taxpayer’s tax liability.”
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[*11] taxpayer to effect a rescission of a notice of deficiency. We know of
no authority deeming a notice of deficiency rescinded in absence of a
formal rescission. * * * [Fn. ref. omitted.]
In either a settlement or a formal rescission, there must be a meeting of the minds
between the parties. That did not happen here.
We hold that respondent’s processing of petitioner’s 2012 Form 1040 and
offset after he issued the notice of deficiency and after she filed her petition
seeking our redetermination of her tax liability does not limit his authority to rely
upon that notice of deficiency, nor does it restrict our jurisdiction to redetermine
her tax liability as set forth in that notice. We therefore will deny petitioner’s
motion in limine and now turn to the redetermination of her tax liability.
II. Petitioner’s 2012 Federal Tax Liability
Petitioner claimed head-of-household filing status, two personal
exemptions, various deductions, Schedule C expense deductions, an earned
income credit, and an additional child tax credit on the 2012 Form 1040 that she
submitted after respondent issued the notice of deficiency. Petitioner bears the
burden of demonstrating that she is entitled to these items. See INDOPCO, Inc. v.
Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292
U.S. 435, 440 (1934). Even if a taxpayer files a return after the Commissioner
issues a notice of deficiency, the taxpayer still must come forward with evidence
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[*12] as to any deductions claimed on the return. See Van Vorst v. Commissioner,
T.C. Memo. 1993-353, 1993 Tax Ct. Memo LEXIS 352, at *35 n.9; see also
McCabe v. Commissioner, T.C. Memo. 1983-325, 1983 Tax Ct. Memo LEXIS
466. The return itself is not considered evidence. Wilkinson v. Commissioner, 71
T.C. 633, 639 (1979) (“The fact that a return is signed under penalty of perjury is
not sufficient to substantiate deductions claimed on it.”); Ehrensperger v.
Commissioner, T.C. Memo. 1994-279, 1994 Tax Ct. Memo LEXIS 284, at *16
(“The entries on the returns of petitioner and his spouse are not evidence to
establish the truth of the matters set forth therein but merely a statement of their
claim.”); McCabe v. Commissioner, 1983 Tax Ct. Memo LEXIS 466, at *8
(explaining that an amended return admitted into evidence as a statement of the
taxpayer’s present position “does not affect the jurisdiction of this Court or * * *
[the taxpayer’s] burden to show error in the notice of deficiency”).
Petitioner had the opportunity to present evidence at trial and did submit
evidence supporting a reduction to her gross receipts even though respondent had
agreed already to reduce them. Petitioner, however, failed to introduce at trial any
evidence, either documents or testimony, other than her general statement that her
return was accurate, to substantiate her claimed filing status, deductions, or
credits, relying instead solely upon her 2012 Form 1040. Therefore, in the
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[*13] absence of any evidence, we sustain respondent’s determination that she is
not entitled to these items. See Baker v. Commissioner, T.C. Memo. 2008-247,
2008 Tax Ct. Memo LEXIS 244, at *9-*11 (rejecting taxpayer’s returns as
evidence of deductions because no other evidence was introduced except
taxpayer’s nonspecific testimony of their accuracy, explaining that “[w]hat a
taxpayer needs to substantiate his deductions and losses are records sufficient to
permit verification of a deduction or loss”).
III. Additions to Tax Under Section 6651(a)(1) and (2)
Respondent determined that petitioner is liable for additions to tax under
section 6651(a)(1) and (2). Section 6651(a)(1) imposes an addition to tax for
failure to file a return by the date prescribed unless the taxpayer shows that the
failure to file was due to reasonable cause and not willful neglect. Section
6651(a)(2) imposes an addition to tax for failure timely to pay the amount of tax
shown on a return unless the taxpayer shows that the failure to pay was due to
reasonable cause and not willful neglect.
The addition to tax under section 6651(a)(2) applies only when an amount
of tax is shown on a return. Wheeler v. Commissioner, 127 T.C. 200, 208 (2006),
aff’d, 521 F.3d 1289 (10th Cir. 2008); Cabirac v. Commissioner, 120 T.C. 163,
170 (2003), aff’d without published opinion, 94 A.F.T.R.2d (RIA) 2004-5490 (3d
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[*14] Cir. 2004). Under section 6651(g)(2), a substitute for return prepared by the
Secretary pursuant to section 6020(b) is treated as a return filed by the taxpayer for
the purposes of section 6651(a)(2).
The Commissioner bears the burden of production with respect to a
taxpayer’s liability for these additions to tax. Sec. 7491(c). Once the
Commissioner meets the burden of production, the taxpayer bears the burden of
proving that her failure timely to file the required return did not result from willful
neglect and that the failure was due to reasonable cause. See Higbee v.
Commissioner, 116 T.C. 438, 447 (2001).
Respondent has met his burden of production under section 7491(c) with
respect to the section 6651(a)(1) addition to tax by showing that petitioner failed
to file her 2012 income tax return before the issuance of the notice of deficiency.
Likewise respondent has met his burden of production with respect to the section
6651(a)(2) addition to tax by showing that respondent prepared a valid substitute
for return for petitioner for tax year 2012. The fact that petitioner may not have
received notice that the substitute for return was prepared does not change our
conclusion; the statute requires a return, not notice of payment due, and the
substitute for return constitutes the return for the purposes of calculating the
addition to tax for failure to pay. See sec. 6651. And the addition to tax is
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[*15] calculated from the time the payment was due, which is the due date of the
original return, not the date the substitute for return was prepared. See sec.
6651(g)(2); sec. 301.6651-1(f), Example (2), Proced. & Admin. Regs. There is no
requirement in section 6020 that the Commissioner send notice to a taxpayer that a
substitute for return has been prepared, and there is no requirement in section 6651
that the taxpayer receive notice that the substitute for return was prepared for the
Commissioner to assess the addition to tax for failure timely to pay. In fact, we
have upheld additions to tax where the substitute for return was prepared only
days before the notice of deficiency was sent to the taxpayer. Gleason v.
Commissioner, T.C. Memo. 2011-154. There, the substitute for return was
prepared only six days before the issuance of a notice of deficiency, and the record
does not indicate that the Commissioner sent notice that the substitute for return
was prepared, other than the notice of deficiency (although the taxpayer had
received notice of an earlier substitute for return). Id. As respondent has met the
burden of production with respect to the additions to tax under section 6651(a)(1)
and (2), petitioner has the burden of proving that her failure timely to file and pay
was due to reasonable cause and not willful neglect. See Higbee v. Commissioner,
116 T.C. at 447. Petitioner took the position that she was not required to file a
return until advised by respondent. Petitioner’s legal position is expressly
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[*16] contradicted by section 6012(a)(1)(A), which requires that individuals file
returns if their income exceeds the exemption amount plus the standard deduction.
Courts long have held that ignorance of the law is no excuse, and we will not
make an exception here. United States v. Int’l Minerals & Chem. Corp., 402 U.S.
558, 563 (1971) (“The principle that ignorance of the law is no defense applies
whether the law be a statute or a duly promulgated and published regulation.”);
Carlebach v. Commissioner, 139 T.C. 1, 17 (2012). And we find petitioner’s
claimed ignorance of the law particularly unappealing because she is a lawyer. In
addition, petitioner did not make any other argument to justify her failure timely to
pay. As to petitioner’s failure timely to pay, she maintained at trial and in posttrial
briefing that she did not have an obligation to file a return until advised by
respondent because she was due a refund, which as we note above does not
establish reasonable cause for her failure to comply with the law. She now must
accept the consequences of resting her entire case on this one argument.
Consequently, we sustain respondent’s additions to tax under section 6651(a)(1)
and (2) for petitioner’s 2012 tax year.
IV. Respondent’s Motion To Reopen the Record
Respondent filed a Motion to Reopen the Record to add Form 2866,
Certificate of Official Record, and corresponding Form 4340, Certificate of
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[*17] Assessments, Payments, and Other Specified Matters, for petitioner’s Form
1040 for the tax period ending December 31, 2012, that is current through
February 17, 2016, identified as Exhibit 18-R, and the certified Account
Transcript for petitioner’s Form 1040 for tax period ending December 31, 2012,
that is current through February 22, 2016, identified as Exhibit 19-R.
Respondent argued that we should reopen the record for these documents
under Soltan v. Commissioner, T.C. Memo. 2010-91, because these documents are
not cumulative or impeaching, they are material, and they probably would change
the outcome of the case. These documents show that respondent was able to
recover the offset against petitioner’s nontax debt and freeze her claimed refund
for 2012, pending the Court’s determination. Petitioner filed a late response to
respondent’s motion in which she repeated her position at trial that he should be
precluded from relying on the original notice of deficiency. She also argued that
the documents are not timely, contain posttrial information, are contrary to the
stipulation of facts, are contrary to the statutory scheme for recovering an
erroneous refund, are hearsay, and are not relevant.
We granted respondent’s motion and reopened the record solely for the
purpose of allowing him to offer into evidence Exhibit 18-R and Exhibit 19-R so
that the parties could brief the issues raised by his motion in the context of the
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[*18] evidence in the case and so that we could decide his motion in that context.
We conclude that whether respondent was successful in recovering petitioner’s
refund has no effect on the outcome of this case. Therefore we will exclude
Exhibit 18-R and Exhibit 19-R from the record as irrelevant.
Any contentions we have not addressed we deem irrelevant, moot, or
meritless.
To reflect the foregoing,
Decision will be entered under
Rule 155.