William F. v. Comm'r of Internal Revenue
| Decision Date | 07 May 1987 |
| Docket Number | Docket No. 27103-84. |
| Citation | 88 T.C. 1175,88 T.C. No. 66 |
| Parties | WILLIAM F. and JOAN M. JUDGE, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Petitioners filed their returns for the years 1976 and 1978 in 1980 and 1982, respectively. In 1982, respondent determined additions to tax pursuant to sections 6651(a)(1), 6651(a)(2), and 6654 based upon the tax liabilities shown on the return for 1978. Respondent then audited petitioners' returns for 1976 and 1978 and, in 1983, petitioners signed a Form 4549, Income Tax Examination Changes, agreeing to the Commissioner's determination of deficiencies in tax for both of the years. Petitioners, however, objected to the Commissioner's determination of further additions to tax based on the increased tax liabilities to which they had agreed. Respondent then issued a notice of deficiency determining additions to tax pursuant to section 6651(a)(1) based on the increased tax liabilities. Petitioners amended their petition to request that we find an overpayment of the additions to tax determined by respondent pursuant to sections 6651(a)(1), 6651(a)(2), and 6654 to the extent such additions were based on the tax liability shown in their return for 1978. Respondent amended his answer to place in dispute additions to tax pursuant to section 6653(a) for the years 1976 and 1978.
HELD, pursuant to section 6512(b), I.R.C., this Court does have jurisdiction to determine overpayments of additions to tax under section 6651(a)(1), whether or not such additions are based on amounts shown in a return, under section 6651(a)(2), and under section 6654, whether or not a return has been filed, if we otherwise have jurisdiction to redetermine the underlying tax. HELD FURTHER, petitioners are liable for additions to tax pursuant to section 6651(a)(1), I.R.C., for failure to file timely returns for the years 1976 and 1978. HELD FURTHER, petitioners are liable for additions to tax pursuant to section 6651(a)(2), I.R.C., for failure to make timely payments of tax for the year 1978. HELD FURTHER, petitioners are liable for an addition to tax pursuant to section 6654, I.R.C., for the year 1978 for failure to make payments of estimated tax. HELD FURTHER, petitioners are liable for additions to tax pursuant to section 6653(a), I.R.C., for negligence or intentional disregard of the rules and regulations for the years 1976 and 1978. Eugene J. Fons, for the petitioners.
Edward G. Langer, for the respondent.
By notice of deficiency dated May 1, 1984, respondent determined, pursuant to section 6651(a)(1) 1, the following additions to petitioners' Federal income taxes:
+----------------------+
¦Taxable year ¦Addition¦
+-------------+--------¦
¦1976 ¦$778.68 ¦
+-------------+--------¦
¦1978 ¦949.87 ¦
+----------------------+
Subsequently, respondent amended his answer to place in dispute additions to tax pursuant to section 6653(a) in the amounts of $155.54 and $2,779.72 for the years 1976 and 1978, respectively.
The issues for decision are:
(1) Whether this Court has jurisdiction over additions to tax under section 6651(a)(1) for failure to timely file returns and section 6651(a)(2) for failure to timely pay tax, when such additions are based on amounts shown in a return, and under section 6654 for failure to make estimated tax payments when a return has been filed;
(2) Whether petitioners are liable for additions to tax pursuant to section 6651(a)(1) for failure to file timely returns for the years 1976 and 1978;
(3) Whether petitioners are liable for additions to tax pursuant to section 6651(a)(2) for failure to make timely payments of tax for the year 1978; (4) Whether petitioners are liable for an addition to tax pursuant to section 6654 for the year 1978 for failure to make payments of estimated tax; and
(5) Whether petitioners are liable for additions to tax pursuant to section 6653(a) for negligence or intentional disregard of the rules and regulations for the years 1976 and 1978.
Some of the facts have been stipulated and are so found. The stipulation of facts and attached exhibits are incorporated herein by this reference. Petitioners William F. and Joan M. Judge resided in Milwaukee, Wisconsin at the time of the filing of the petition in this case.
Petitioners' Federal individual income tax return, Form 1040, for the year 1976 was signed by their return preparer on August 31, 1979. This Form 1040 was filed with the Internal Revenue Service on January 7, 1980 and shows adjusted gross income of $25,255.61. Petitioners' total corrected income tax liability for 1976 was $3,110.70. Petitioners' Form 1040 for 1978 was filed on August 25, 1982 and shows adjusted gross income of $188,191.81. Petitioners' total corrected income tax liability for 1978 was $55,594.47.
On November 22, 1982, respondent assessed petitioners an addition to the tax under section 6651(a)(1) for 1978 in the amount of $12,948.75, which was paid by January 13, 1984. At the same time, respondent also determined that petitioners were subject to additions to tax under section 6651(a)(2) in the amount of $11,651 for failure to make timely payments of their 1978 tax liability and under section 6654 in the amount of $1,657 for failure to make estimated tax payments in 1978. Such amounts were also paid by petitioners. 2
Petitioners' Form 1040 for 1970 was filed on October 30, 1974. Petitioner William Judge (petitioner) signed and filed a request for extension of time for filing the 1970 return on April 27, 1971. This request was approved which extended the time for filing until June 15, 1971.
Petitioners' Forms 1040 for the years 1971, 1972 and 1973 were filed on March 14, 1980. Petitioners' Form 1040 for 1971 was signed by a return preparer on August 19, 1976. Petitioners' Forms 1040 for 1972 and 1973 were signed by petitioner on April 26, 1978. Petitioners Forms 1040 for 1974 and 1975 were filed on February 13, 1980, although they had been signed by petitioner on May 30, 1978.
On October 5, 1979, the Kansas City Service Center mailed Form 4901 to petitioner which informed him that the Kansas City Service Center had no record of receiving his Form 1040 for the year 1977. It also advised him that if he had not filed his return, he should file it within the following two weeks. Petitioners failed to file a return for 1977. A Form 1040 for 1977 was completed for petitioners on May 14, 1982 by their accountant and was signed by petitioners.
On December 4, 1976, a U.S. Partnership Return of Income, Form 1065, for the fiscal year ending August 31, 1976 was filed for the One Hour Martinizing Partnership (One Hour). This return was signed by petitioner. A Form 1065 for the year 1976 for the Hillcrest Apartments Partnership (Hillcrest) was signed by petitioner on May 2, 1978 and filed an August 28, 1978. A Form 1065 for 1977 for Hillcrest was signed by petitioner on January 5, 1979.
A Form 1065 for 1975 for the Fred Harwood Joint Venture (Fred Harwood), was signed by a return preparer on April 12, 1976. This Form 1065, signed by petitioner, was filed on July 21, 1980. A Form 1065 for 1976 for Fred Harwood was signed by a return preparer on May 19, 1979. This Form 1065, signed by petitioner, was filed on July 14, 1980.
Petitioner was furnished with Forms K-1 for Storybook Enterprises partnership for the years 1976, 1977, and 1978 and a Form K-1 for Meadows of Brookfield partnership for 1978 shortly after the end of each of those years.
Petitioner underwent coronary bypass surgery in January of 1976. After his surgery, petitioner went back to work on a part-time basis. Petitioner's doctor prescribed an anti-depressant for him. The prescription for the anti-depressant was discontinued by the end of 1976 and petitioner's doctor did not treat him for depression after December 1976.
Petitioner employed Eleanore Gafney as a general secretary and daily bookkeeper in his office from 1975 through June 1, 1978. The books and records of Meadows of Brookfield and Storybook Enterprises were primarily maintained by third parties located outside of petitioner's office. The tax returns of Storybook Enterprises and Meadows of Brookfield were prepared based upon such books and records.
During the years 1976, 1977 and 1978, petitioner had numerous business checking accounts upon which he signed checks. During 1976, petitioner signed twenty-five documents relating to real estate transactions such as disclosure-settlement statements, closing statements and mortgage loan settlements. During 1977, petitioner signed four documents relating to real estate transactions such as disclosure-settlement statements and closing statements. During 1978, petitioner also signed a closing statement.
On April 14, 1976, petitioner signed a Wisconsin Real Estate Transfer Return. On April 18, 1977, petitioner signed a claim release with respect to a debt owed to him. On April 30, 1976, petitioner signed two agreements relating to the transfer of certain real property by petitioner to another party. Petitioner prepared warranty deeds that were filed with county offices in Wisconsin on June 1, 1976, July 29, 1976, and June 15, 1977. Petitioner also prepared a satisfaction of mortgage that was filed with a county office in Wisconsin on July 29, 1976.
Late in 1979, a criminal investigation of petitioner was opened by the Criminal Investigation Division, Milwaukee, Wisconsin for the years 1976, 1977 and 1978. The initial contact with petitioner by the special agent assigned to the case was on December 21, 1979. By letter dated October 31, 1981, petitioner was informed by the Criminal Investigation Division that he was no longer the subject of investigation.
On June 16, 1983, petitioner signed a Form 4549, Income Tax Examination Changes, agreeing to the Commissioner's determination of deficiencies in tax for the years 1976 and 1978 but objecting to the additions to tax pursuant to ...
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