T.C. Summary Opinion 2014-110
UNITED STATES TAX COURT
AVA MAUREEN SAWYER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 1165-07S. Filed December 23, 2014.
Ava Maureen Sawyer, pro se.
Adam P. Sweet, for respondent.
SUMMARY OPINION
COLVIN, 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
1 Subsequent section references are to the Internal Revenue Code in effect for the year in issue, and Rule references are to the Tax Court Rules of Practice and Procedure. Dollar amounts are rounded to the nearest dollar. -2-
Pursuant to section 7463(b), the decision to be entered is not reviewable by any
other court, and this opinion shall not be treated as precedent for any other case.
Respondent determined a deficiency in petitioner’s Federal income tax for
2001 of $1,833 and additions to tax of $372 for failure to timely file under section
6651(a)(1) and $397 for failure to timely pay under section 6651(a)(2). After
concessions, the issues for decision are:
1. Whether we have jurisdiction to decide whether petitioner’s income tax
liability for 2001 was discharged in her bankruptcy proceeding. We hold that we
do not.
2. Whether we have jurisdiction to decide whether petitioner may claim an
$867 overpayment credit from the year 2000. We hold that we do not.
3. Whether petitioner is liable for an addition to tax for failure to timely file
under section 6651(a)(1) and an addition to tax for failure to timely pay under
section 6651(a)(2). We hold that she is.
Background
Some of the facts have been stipulated and are so found. Petitioner resided
in Virginia when the petition was filed. -3-
A. Events Related to 2000 and 2001
Petitioner withdrew money from her individual retirement accounts (IRAs)
in 2000. During 2001 she made three withdrawals totaling $11,786 from her
IRAs. She did not reach age 55 in 2000 or 2001. Petitioner was not employed in
2000 or 2001.
Petitioner wrote a check for $1,308 dated April 16, 2001, to the Internal
Revenue Service (IRS). The record does not disclose any specific statement of
petitioner’s intent regarding this remittance. When petitioner made this
remittance, she knew withdrawals from her IRAs in 2000 and 2001 would result in
early withdrawal penalties. Other than her IRA withdrawals she had almost no
other income for tax year 2000 or 2001. Respondent applied the April 16, 2001,
remittance to her 2000 tax year.
Petitioner submitted a $180 payment with her request for an extension of
time to file her 2001 tax return. She did not timely file a tax return for 2000 or
2001.
B. Respondent’s Proposed Assessment and Notice of Deficiency for 2001
On March 20, 2006, respondent sent petitioner a proposed income tax
assessment for taxable year 2001. Because petitioner had not filed a tax return for -4-
2001, respondent prepared a substitute for return using information from third-
party reports. See sec. 6020(b).
Respondent sent a notice of deficiency to petitioner for tax year 2001 on
October 16, 2006, determining that during 2001 petitioner had received a total
distribution of $11,786 from her IRAs and $25 of interest income.2 Respondent
determined that petitioner was entitled to a personal exemption and a standard
deduction and that she was liable for a 10% penalty on account of her early IRA
withdrawals. Finally, respondent determined that petitioner was liable for
additions to tax for failure to timely file under section 6651(a)(1) and failure to
timely pay under section 6651(a)(2). On January 16, 2007, petitioner timely filed
a petition with the Court.
C. Bankruptcy Proceedings
On October 17, 2007, petitioner filed for bankruptcy under chapter 13 with
the U.S. Bankruptcy Court for the Eastern District of Virginia. On November 1,
2012, petitioner received a discharge (not further described in the record) under
chapter 13 of the U.S. Bankruptcy Code.
2 Petitioner does not challenge respondent’s determination that she received $11,786 of taxable IRA distributions subject to an early withdrawal penalty and $25 of taxable interest income. We deem petitioner to have conceded these issues. -5-
D. Petitioner’s Tax Returns for 2000 and 2001
At the request of a U.S. attorney representing the IRS as a creditor, on April
11, 2007, petitioner submitted her 2000 and 2001 tax returns to him. Petitioner’s
2000 tax return was filed with the Commissioner on June 11, 2007. On that return
petitioner reported taxable IRA distributions, no other taxable income, and a tax
liability of $441 from early IRA distributions. Also on that return she reported
that $441 of the $1,308 payment she had made on April 16, 2001, reduced to zero
the amount of her unpaid tax for 2000, and she applied the remaining $867 to
Respondent received petitioner’s 2001 tax return in 2007 before filing the
answer on December 4, 2007. On that return petitioner reported $11,036 of
taxable IRA distributions, $923 of tax as a result of early distributions from an
IRA, $867 of overpayment from 2000 applied to 2001, and $180 paid with a
request for an extension of time to file.3
3 Petitioner’s tax return also reflects $31 of taxable interest income and $181 of capital gain. Respondent does not challenge these amounts. -6-
Discussion
A. Burden of Proof
The taxpayer generally bears the burden of proving that the Commissioner’s
deficiency determination is in error. Rule 142(a)(1). The burden of proving a
factual issue relating to tax liability shifts to the Commissioner under certain
circumstances. Sec. 7491(a). Petitioner has not shown and does not contend that
section 7491 applies. Thus, petitioner bears the burden of proving that
respondent’s determinations in the notice of deficiency are in error. See Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).
B. Effect of Bankruptcy
Petitioner contends that her 2001 tax liability was discharged by the
bankruptcy court. She claims that as a result of that discharge respondent is barred
from pursuing a deficiency against her. We have said that this Court lacks
jurisdiction to decide whether a tax debt may be or has been discharged:
In exercising our jurisdiction to redetermine deficiencies, we are without jurisdiction to “allow or disallow a claim against a debtor’s estate * * * or to discharge taxes as a bankruptcy court might.” Fotochrome, Inc. v. Commissioner, 57 T.C. 842, 847 (1972). In Graham [v. Commissioner, 75 T.C. 389 (1980)], when confronted with the identical argument, we held that we lacked “the requisite subject matter jurisdiction to decide whether the petitioner’s deficiencies * * * were discharged in the bankruptcy proceeding.” 75 T.C. at 399. Accordingly, we are without subject matter jurisdiction -7-
and petitioners, if they wish a ruling on their dischargeability position, would be required to seek the jurisdiction of the bankruptcy court. [Neilson v. Commissioner, 94 T.C. 1, 9 (1990).]
Thus, we hold that we lack jurisdiction to decide whether the bankruptcy court
discharged petitioner’s tax liability for 2001.
C.
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T.C. Summary Opinion 2014-110
UNITED STATES TAX COURT
AVA MAUREEN SAWYER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 1165-07S. Filed December 23, 2014.
Ava Maureen Sawyer, pro se.
Adam P. Sweet, for respondent.
SUMMARY OPINION
COLVIN, 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
1 Subsequent section references are to the Internal Revenue Code in effect for the year in issue, and Rule references are to the Tax Court Rules of Practice and Procedure. Dollar amounts are rounded to the nearest dollar. -2-
Pursuant to section 7463(b), the decision to be entered is not reviewable by any
other court, and this opinion shall not be treated as precedent for any other case.
Respondent determined a deficiency in petitioner’s Federal income tax for
2001 of $1,833 and additions to tax of $372 for failure to timely file under section
6651(a)(1) and $397 for failure to timely pay under section 6651(a)(2). After
concessions, the issues for decision are:
1. Whether we have jurisdiction to decide whether petitioner’s income tax
liability for 2001 was discharged in her bankruptcy proceeding. We hold that we
do not.
2. Whether we have jurisdiction to decide whether petitioner may claim an
$867 overpayment credit from the year 2000. We hold that we do not.
3. Whether petitioner is liable for an addition to tax for failure to timely file
under section 6651(a)(1) and an addition to tax for failure to timely pay under
section 6651(a)(2). We hold that she is.
Background
Some of the facts have been stipulated and are so found. Petitioner resided
in Virginia when the petition was filed. -3-
A. Events Related to 2000 and 2001
Petitioner withdrew money from her individual retirement accounts (IRAs)
in 2000. During 2001 she made three withdrawals totaling $11,786 from her
IRAs. She did not reach age 55 in 2000 or 2001. Petitioner was not employed in
2000 or 2001.
Petitioner wrote a check for $1,308 dated April 16, 2001, to the Internal
Revenue Service (IRS). The record does not disclose any specific statement of
petitioner’s intent regarding this remittance. When petitioner made this
remittance, she knew withdrawals from her IRAs in 2000 and 2001 would result in
early withdrawal penalties. Other than her IRA withdrawals she had almost no
other income for tax year 2000 or 2001. Respondent applied the April 16, 2001,
remittance to her 2000 tax year.
Petitioner submitted a $180 payment with her request for an extension of
time to file her 2001 tax return. She did not timely file a tax return for 2000 or
2001.
B. Respondent’s Proposed Assessment and Notice of Deficiency for 2001
On March 20, 2006, respondent sent petitioner a proposed income tax
assessment for taxable year 2001. Because petitioner had not filed a tax return for -4-
2001, respondent prepared a substitute for return using information from third-
party reports. See sec. 6020(b).
Respondent sent a notice of deficiency to petitioner for tax year 2001 on
October 16, 2006, determining that during 2001 petitioner had received a total
distribution of $11,786 from her IRAs and $25 of interest income.2 Respondent
determined that petitioner was entitled to a personal exemption and a standard
deduction and that she was liable for a 10% penalty on account of her early IRA
withdrawals. Finally, respondent determined that petitioner was liable for
additions to tax for failure to timely file under section 6651(a)(1) and failure to
timely pay under section 6651(a)(2). On January 16, 2007, petitioner timely filed
a petition with the Court.
C. Bankruptcy Proceedings
On October 17, 2007, petitioner filed for bankruptcy under chapter 13 with
the U.S. Bankruptcy Court for the Eastern District of Virginia. On November 1,
2012, petitioner received a discharge (not further described in the record) under
chapter 13 of the U.S. Bankruptcy Code.
2 Petitioner does not challenge respondent’s determination that she received $11,786 of taxable IRA distributions subject to an early withdrawal penalty and $25 of taxable interest income. We deem petitioner to have conceded these issues. -5-
D. Petitioner’s Tax Returns for 2000 and 2001
At the request of a U.S. attorney representing the IRS as a creditor, on April
11, 2007, petitioner submitted her 2000 and 2001 tax returns to him. Petitioner’s
2000 tax return was filed with the Commissioner on June 11, 2007. On that return
petitioner reported taxable IRA distributions, no other taxable income, and a tax
liability of $441 from early IRA distributions. Also on that return she reported
that $441 of the $1,308 payment she had made on April 16, 2001, reduced to zero
the amount of her unpaid tax for 2000, and she applied the remaining $867 to
Respondent received petitioner’s 2001 tax return in 2007 before filing the
answer on December 4, 2007. On that return petitioner reported $11,036 of
taxable IRA distributions, $923 of tax as a result of early distributions from an
IRA, $867 of overpayment from 2000 applied to 2001, and $180 paid with a
request for an extension of time to file.3
3 Petitioner’s tax return also reflects $31 of taxable interest income and $181 of capital gain. Respondent does not challenge these amounts. -6-
Discussion
A. Burden of Proof
The taxpayer generally bears the burden of proving that the Commissioner’s
deficiency determination is in error. Rule 142(a)(1). The burden of proving a
factual issue relating to tax liability shifts to the Commissioner under certain
circumstances. Sec. 7491(a). Petitioner has not shown and does not contend that
section 7491 applies. Thus, petitioner bears the burden of proving that
respondent’s determinations in the notice of deficiency are in error. See Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).
B. Effect of Bankruptcy
Petitioner contends that her 2001 tax liability was discharged by the
bankruptcy court. She claims that as a result of that discharge respondent is barred
from pursuing a deficiency against her. We have said that this Court lacks
jurisdiction to decide whether a tax debt may be or has been discharged:
In exercising our jurisdiction to redetermine deficiencies, we are without jurisdiction to “allow or disallow a claim against a debtor’s estate * * * or to discharge taxes as a bankruptcy court might.” Fotochrome, Inc. v. Commissioner, 57 T.C. 842, 847 (1972). In Graham [v. Commissioner, 75 T.C. 389 (1980)], when confronted with the identical argument, we held that we lacked “the requisite subject matter jurisdiction to decide whether the petitioner’s deficiencies * * * were discharged in the bankruptcy proceeding.” 75 T.C. at 399. Accordingly, we are without subject matter jurisdiction -7-
and petitioners, if they wish a ruling on their dischargeability position, would be required to seek the jurisdiction of the bankruptcy court. [Neilson v. Commissioner, 94 T.C. 1, 9 (1990).]
Thus, we hold that we lack jurisdiction to decide whether the bankruptcy court
discharged petitioner’s tax liability for 2001.
C. Availability of Credit for Petitioner’s Remittance on April 16, 2001
Petitioner claims a credit for $867 as a result of the remittance she made on
April 16, 2001. Respondent asserts that petitioner is not entitled to that credit
because respondent properly applied the $1,308 remittance to her 2000 tax year
and any overpayment for 2000 is time barred under section 6511.
Respondent applied petitioner’s $1,308 remittance toward her 2000 tax
liability. There is no evidence that when petitioner made the remittance she
intended it to apply to 2001 or that she intended to make a tax deposit. See
Risman v. Commissioner, 100 T.C. 191, 197 (1993) (stating that “[a] taxpayer’s
intent to have a remittance treated as a payment or as a mere deposit is generally to
be established by all of the relevant facts and circumstances”);4 Deaton v.
Commissioner, T.C. Memo. 2005-1, aff’d, 440 F.3d 223 (5th Cir. 2006). Thus, to
4 We note that several appellate courts have expressed disagreement with other aspects of the Court’s reasoning in Risman v. Commissioner, 100 T.C. 191 (1993), i.e., with respect to where a remittance is made in conjunction with a request for an extension. -8-
the extent the 2000 remittance exceeds petitioner’s 2000 tax liability, it was an
overpayment of tax for 2000.
Our jurisdiction to decide a taxpayer’s tax liability “extends to the entire
subject matter of the correct tax for the taxable year”. Naftel v. Commissioner, 85
T .C. 527, 533 (1985). In deciding a taxpayer’s tax liability for a year over which
we have jurisdiction, section 6214(b) provides that we lack “jurisdiction to
determine whether or not the tax for any other year * * * has been overpaid or
underpaid”.
Section 6214(b) provides our authority for “computing, as distinguished
from ‘determining,’ the correct tax liability for a year not in issue when such a
computation is necessary to a determination of the correct tax liability for a year
that has been placed in issue.” Lone Manor Farms, Inc. v. Commissioner, 61 T.C.
436, 440 (1974), aff’d without published opinion, 510 F.2d 970 (3d Cir. 1975).
Petitioner contends that the overpayment from her 2000 tax year (over
which we lack jurisdiction in this case) is creditable to 2001. We disagree.
Section 6214(b) provides that we may not redetermine an overpayment for a year
over which we lack jurisdiction; similarly, we lack jurisdiction to credit any such
overpayment to 2001. Solberg v. Commissioner, T.C. Memo. 2011-221; Porter v.
Commissioner, T.C. Memo. 2010-54. -9-
D. Additions to Tax
Section 7491(c) places on the Commissioner the burden of producing
evidence of liability for additions to tax. To meet that burden, the Commissioner
must produce evidence showing that it is appropriate to impose the particular
addition to tax, but the Commissioner need not produce evidence relating to
defenses such as reasonable cause or substantial authority. Higbee v.
Commissioner, 116 T.C. at 446; H.R. Conf. Rept. No. 105-599, at 241 (1998),
1998-3 C.B. 747, 995. Once the Commissioner meets the burden of production,
the taxpayer must, in order to avoid liability for additions to tax, produce evidence
that the Commissioner’s determination is incorrect; e.g., that the failure was due to
reasonable cause and not willful neglect. United States v. Boyle, 469 U.S. 241,
245 (1985); Higbee v. Commissioner, 116 T.C. at 446; H.R. Conf. Rept. No. 105-
599, supra at 241, 1998-3 C.B. at 995. Reasonable cause exists if the taxpayer
exercised ordinary business care and prudence but nevertheless could not file the
return or pay the tax when due. Boyle, 469 U.S. at 246; Bank of the West v.
Commissioner, 93 T.C. 462, 471 (1989). - 10 -
1. Failure To File
Section 6651(a)(1) imposes an addition to tax for failure to file timely a
required tax return. Respondent has met the burden of production with respect to
this addition to tax because petitioner was required to file but did not timely file a
return for 2001.5 To prevail, petitioner must show that the untimely filing was due
to reasonable cause and not willful neglect. Petitioner claims that she did not
timely file her 2001 return because in 2001 and 2002 she was consumed with a
protracted, personal legal dispute. We acknowledge that petitioner was involved
in a protracted personal legal dispute, but we do not believe it justified late filing
of her 2001 return. We sustain the section 6651(a)(1) addition to tax for 2001.
2. Failure To Pay
Section 6651(a)(2) provides for an addition to tax where there is a failure to
timely pay the amount of tax shown on a return. A return properly prepared by the
Secretary under section 6020(b) is treated as the return filed by the taxpayer for
purposes of determining an addition to tax under section 6651(a)(2). Sec.
6651(g)(2). The 2001 substitute for return meets the requirements of section
6020(b). Petitioner made an estimated tax payment of $180 for the 2001 tax year.
5 The record establishes that petitioner’s income exceeded the income threshold for nonfilers for 2001. See sec. 6012(a)(1). - 11 -
We held above that the Court lacks jurisdiction to decide whether petitioner may
apply an $867 overpayment credit to her 2001 tax year. There is no evidence that
petitioner made any other payments applicable to her 2001 tax year. The record
establishes that she has not fully paid her tax liability for 2001. Consequently,
respondent has met the burden of production with respect to the section 6651(a)(2)
addition to tax.
Petitioner contends that she is not liable for the addition to tax for failure to
timely pay for 2001 because she believed she had fully paid that tax liability. We
disagree. As stated above, there is no evidence that petitioner intended the April
16, 2001, remittance to apply to her income tax liability for 2001. We find
petitioner has failed to show she had reasonable cause for failing to timely pay her
2001 tax liability, and we sustain the section 6651(a)(2) addition to tax for 2001.
To reflect the foregoing,
Decision will be entered under
Rule 155.