T.C. Memo. 2013-146
UNITED STATES TAX COURT
GREGORY T. CAMPION AND SHEILA J. CAMPION, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 16912-09. Filed June 6, 2013.
Gregory T. Campion and Sheila J. Campion, pro se.
Laura A. Price, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
FOLEY, Judge: After concessions, the issues for decision are whether
petitioners failed to report income and are liable for section 6662 accuracy-related
penalties relating to 2004 and 2005.1
1
Unless otherwise indicated, all section references are to the Internal
(continued...)
-2-
[*2] FINDINGS OF FACT
During 2004 and 2005 Mr. Campion was a night shift team leader and
custodian of evidence with the Drug Enforcement Agency’s Atlanta Airport Task
Force. On March 1, 2006, Mr. Campion was indicted in the U.S. District Court for
the Northern District of Georgia (District Court) on seven counts of converting
property of another as an officer or employee of the United States, seven counts of
embezzlement of public funds, and two counts of money laundering. Mr.
Campion was subsequently indicted, pursuant to section 7206(1), for filing false
2003 and 2004 Federal income tax returns. On September 24, 2008, Mr. Campion
pleaded guilty to filing a false 2004 return (i.e., the remaining charges were
dismissed), was sentenced to 21 months’ imprisonment, and was required to pay
$80,095 of restitution to the Internal Revenue Service and $12,519 of restitution to
the Georgia Department of Revenue.
Respondent audited petitioners’ 2004 and 2005 returns and, using the bank
deposits method, determined that petitioners had unreported income of $204,417
and $21,791 relating to 2004 and 2005, respectively. In addition, respondent
determined that petitioners were liable for section 6662 accuracy-related penalties.
1
(...continued)
Revenue Code in effect for the years in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure.
-3-
[*3] Respondent, on April 10, 2009, sent petitioners a notice of deficiency relating
to 2004 and 2005. Petitioners timely filed their petition with the Court. At the
time the petition was filed, Mr. Campion resided in Virginia and Ms. Campion
resided in Florida.
OPINION
Petitioners contend that the District Court determined their 2004 tax liability
and that respondent is collaterally estopped from relitigating this amount.2
Although Mr. Campion pleaded guilty to willfully making and subscribing a false
return, petitioners’ 2004 tax liability was not an essential element of the
Government’s case and was not actually litigated. See sec. 7206(1); United States
v. Clarke, 562 F.3d 1158, 1163-1164 (11th Cir. 2009); Hi-Q Pers., Inc. v.
Commissioner, 132 T.C. 279, 289-290 (2009); Peck v. Commissioner, 90 T.C.
162, 166-167 (1988) (holding that “[t]he parties must actually have litigated the
issues and the resolution of these issues must have been essential to the prior
decision” in order for collateral estoppel to apply), aff’d, 904 F.2d 525 (9th Cir.
2
Collateral estoppel, rather than the related doctrine of res judicata, may
apply when a civil case follows a criminal case. See Helvering v. Mitchell, 303
U.S. 391, 397 (1938) (“The difference in degree of the burden of proof in criminal
and civil cases precludes application of the doctrine of res judicata.”); United
States v. Barnette, 10 F.3d 1553, 1560-1561 (11th Cir. 1994).
-4-
[*4] 1990). Therefore, respondent is not collaterally estopped from determining a
deficiency relating to 2004.
We sustain respondent’s determinations of petitioners’ unreported income
relating to 2004 and 2005. Petitioners were required, but failed, to maintain
adequate records. See sec. 6001. Thus, respondent had the authority to
reconstruct income in accordance with the bank deposits method. See sec. 446(b);
Clayton v. Commissioner, 102 T.C. 632, 645 (1994) (“The use of the bank deposit
method for computing unreported income has long been sanctioned by the
courts.”); Petzoldt v. Commissioner, 92 T.C. 661, 686-687 (1989). Respondent
established that petitioners owned the bank accounts subject to respondent’s
analysis. See Blohm v. Commissioner, 994 F.2d 1542, 1548-1549 (11th Cir.
1993) (holding that the Commissioner’s determination relating to unreported
income is presumed correct where it is supported by a “minimal evidentiary
showing”), aff’g T.C. Memo. 1991-636. Pursuant to the bank deposits method, all
money deposited into petitioners’ bank accounts is presumed to be taxable and
respondent is not required to establish a likely source of the deposits. See Clayton
v. Commissioner, 102 T.C. at 645-646. Petitioners failed to prove that the analysis
-5-
[*5] was erroneous.3 See Welch v. Helvering, 290 U.S. 111, 115 (1933); Blohm v.
Commissioner, 994 F.2d at 1548-1549; Clayton v. Commissioner, 102 T.C. at
645-646.
Respondent further determined that petitioners are liable for section 6662(a)
and (b)(1) accuracy-related penalties relating to 2004 and 2005. Respondent
bears, and has met, the burden of production relating to these penalties and has
established that petitioners were negligent in filing their 2004 and 2005 returns.
See sec. 7491(c); Higbee v. Commissioner, 116 T.C. 438, 446, 448-449 (2001).
Petitioners have not established reasonable cause for the underpayments or that the
returns were prepared in good faith. See sec. 6664(c)(1); Higbee v.
Commissioner, 116 T.C. at 448-449. Accordingly, we sustain respondent’s
determinations.
Contentions we have not addressed are irrelevant, moot, or meritless.
To reflect the foregoing,
Decision will be entered
under Rule 155.
3
Pursuant to sec. 7491(a), the burden of proof may shift to the
Commissioner if the taxpayer introduces credible evidence with respect to any
factual issue. This section is inapplicable because petitioners failed to maintain
records. See sec. 7491(a)(2).