Roberts v. Comm'r of Internal Revenue

Decision Date23 September 1974
Docket NumberDocket No. 2868-72.
PartiesE. JAN ROBERTS, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
CourtU.S. Tax Court

OPINION TEXT STARTS HERE

Martin Radoff, for the petitioner.

Stephen B. Zorick, Jr., for the respondent.

1. The petitioner refused to offer proof to establish his right to deductions for a casualty loss and employee business expenses. The Commissioner disallowed both deductions. Held, the Commissioner's determination not arbitrary or unreasonable where the petitioner refused to provide the Commissioner with any proof to support the deductions. Held, further, the petitioner has no right to have his return presumed correct. Held, further, the petitioner's privilege against self-incrimination not violated by requiring him to prove his deductions. Held, further, the petitioner did not meet his burden of proof when the only evidence offered was his testimony that his return was correct.

2. The petitioner seeks a refund for the tax surcharge in 1969. Held, the tax surcharge of sec. 51, I.R.C. 1954, is a tax on income and does not have to be apportioned among the States. U.S. Const. amend. XVI.

SIMPSON, Judge:

The Commissioner determined a deficiency of $1,081.09 in the petitioner's Federal income tax for the year 1969. The issues to be decided are: (1) Whether the Commissioner was arbitrary and unreasonable in not allowing the petitioner's deductions for a casualty loss and employee business expenses; (2) whether the petitioner has the right to have his return presumed correct because it was signed under penalties of perjury; (3) whether the petitioner's fifth amendment privilege against self-incrimination is violated by requiring him to bear the burden of proving his claimed deductions; (4) whether the petitioner has sustained his burden of proving his claimed deductions; and (5) whether the tax surcharge imposed by section 51 of the Internal Revenue Code of 19541 is a tax imposed on income.

FINDINGS OF FACT

Some of the facts have been stipulated, and those facts are so found.

The petitioner, E. Jan Roberts, resided in Los Angeles, Calif., at the time of filing his petitioner herein. He filed his individual Federal income tax return for the year 1969 with the district director for Southern California.

During the year 1969, the petitioner was employed as a contracts consultant and in public relations. He also prepared tax returns. On his tax return for 1969, the petitioner claimed a deduction from gross income of $3,963.18 as employee business deductions. The petitioner also itemized his deductions from adjusted gross income. Of these deductions, only the casualty loss deduction for $470 and the medical deduction of $402.40 are in issue. The petitioner paid the tax which he determined was due, including a tax surcharge imposed by section 51 in the amount of $40.

The petitioner's tax return for 1969 was selected by audit by the Commissioner. In administrative conferences, the petitioner was asked to furnish proof to support his claimed employee business expenses and casualty loss. He did not attempt to do so. The Commissioner thereupon determined that the petitioner's deductions for those items were disallowed. After recomputing the petitioner's adjusted gross income, the Commissioner made a corresponding adjustment in the petitioner's deduction for medical expenses. Other deductions claimed by the petitioner were not disallowed.

At the trial of this case, the petitioner testified that he had documents establishing his claimed deductions. He also testified that his return was correct. However, he refused to offer such documents in evidence, based on his claimed privilege against self-incrimination.

OPINION

The first issue we must decide is whether the Commissioner was arbitrary and unreasonable in not allowing the petitioner's deductions for his employee business expenses and casualty loss.

Section 6201(a) authorizes and requires the Secretary of the Treasury or his delegate to make inquiries, determinations, and assessments of all taxes imposed by the Internal Revenue Code. The Secretary has delegated this authority to the Commissioner and members of his staff, including the district directors. Sec. 301.6201-1, Proced. & Admin. Regs. In most cases, if the Commissioner or a member of his staff determines that there is a deficiency in any tax, the petitioner then has the burden of proving such determination to be incorrect. Welch v. Helvering, 290 U.S. 111 (1933); Burnet v. Houston, 283 U.S. 223 (1931); Fuller v. Commissioner, 313 F.2d 73 (C.A. 6, 1963), affirming on this issue a Memorandum Opinion of this Court. However, if the petitioner can show that the determination by the Commissioner was arbitrary and unreasonable, the burden of proof is shifted to the Commissioner. Helvering v. Taylor, 293 U.S. 507 (1935).

The petitioner apparently contends that the Commissioner's determination was arbitrary and unreasonable— because of the alleged manner in which his return was selected for audit, and because his deductions were denied without citing specific statutory authority for doing so. We must decide whether the determination was arbitrary.

The petitioner claimed that he had had various disputes with Internal Revenue Service employees over his 1967 Federal income tax return, and that he had been prohibited by the district director from appearing before the Commissioner's agents as a tax adviser. The petitioner suggested that his return was selected for audit because of those controversies. However, the record contains absolutely no evidence as to the reasons for having selected his return for audit and no proof that his return was selected for audit because of those controversies. In view of the petitioner's failure to support his allegations, we do not even reach the question of whether the allegations, if established by competent proof, would be sufficient to shift to the Commissioner the burden of proving the determination to be correct. See Crowther v. Commissioner, 269 F.2d 292, 293 (C.A. 9, 1959), reversing on other issues 28 T.C. 1293 (1957); Philip F. Flynn, 40 T.C. 770 (1963).

The apparent thrust of the petitioner's second argument is that the Commissioner may assess deficiencies only when he has specific information that a claimed deduction is not permitted, and that the Commissioner cannot find a deficiency merely because the petitioner does not attempt to furnish proof of his claimed deduction.2 We find no merit in this argument. Taxpayers have no inherent right to deductions; they are matters of legislative grace. Interstate Transit Lines v. Commissioner, 319 U.S. 590, 593 (1943); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 550 (1934). The taxpayer must be able to point to some particular statute to justify his deduction and establish that he comes within its terms. Deputy v. DuPont, 308 U.S. 488, 493 (1940); White V. United States, 305 U.S. 281 (1938). While the petitioner might have been entitled to some or all of the deductions claimed by him, he refused to furnish the Commissioner with any records or other evidence to prove his right to any of such deductions. Because of such refusal on his part, the petitioner is in no position to challenge the reasonableness of the Commissioner's determination, nor complain of the procedural or evidentiary consequences resulting therefrom. See Joseph F. Giddio, 54 T.C. 1530 (1970); Arthur Figueiredo, 54 T.C. 1508 (1970), affirmed in an unpublished opinion (C.A. 9, Mar. 14, 1973); Marko Durovic, 54 T.C. 1364, 1390 (1970), affirmed in part, reversed in part on other grounds 487 F.2d 36 (C.A. 7, 1973), certiorari denied 417 U.S. 919 (1974); Estate of Henry Wilson, 2 T.C. 1059, 1084-1086 (1943).

The Commissioner's determination is not make arbitrary or unreasonable because of his failure to have all the facts when the failure is caused solely by the petitioner. Surely, a taxpayer cannot thwart a bona fide investigation so easily and benefit thereby. We hold that when a taxpayer refuses to substantiate his claimed deductions, the Commissioner is not arbitrary or unreasonable in determining that the deductions should be denied.

The second issue which we must decide is whether the petitioner's Federal income tax return must be presumed correct. The petitioner signed his return under penalty of perjury, as is required of all taxpayers. Sec. 6065(a). He argues that since he is a resident of California, we must apply to the making of his return a maxim of California jurisprudence, under which it is presumed that the law has been obeyed.3 According to such argument, his return is thus presumed to be correct, and the Commissioner has the burden of proving it to be incorrect. The California rule is required to be applied, the petitioner claims, by Federal statute4 and by Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938). We do not agree.

‘State law may control only when the federal taxing act, by express language or necessary implication, makes its own operation dependent upon state law.’ Burnet v. Harmel, 287 U.S. 103, 110 (1932). See Bankers Pocahontas Coal Co. v. Burnet, 287 U.S. 308 (1932). Federal law and not State law determines the presumptions to be applied in interpreting the Internal Revenue Code. Robinson v. Commissioner, 63 F.2d 652 (C.A. 6, 1933), affirming 21 B.T.A. 1373 (1931), certiorari denied 289 U.S. 758 (1933); Estate of Julian Peabody, 41 B.T.A. 1 (1940). While State law may be determinative of some issues in Federal tax litigation (see, e.g., Commissioner v. Estate of Bosch, 387 U.S. 456 (1967)), it does not apply to shift the burden of proof to the Commissioner in this case. The California presumption, relied upon by the petitioner in this case, is inconsistent with Federal law. Under such law, merely signing a tax return under penalty of perjury does not establish the facts contained therein. Seaboard Commercial Corp., 28 T.C. 1034, 1051 (1957); Louis Halle, 7 T.C. 245, 247-250 (1946), affd. 175 F.2d...

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