Allnutt v. Commissioner, Docket No. 6133-00.
| Decision Date | 18 October 2004 |
| Docket Number | Docket No. 6133-00. |
| Citation | 88 T.C.M. 372 |
| Parties | Fred Allnutt v. Commissioner. |
| Court | U.S. Tax Court |
Fred Allnutt, pro se.
Bradley C. Plovan, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
Respondent determined deficiencies in petitioner's Federal income tax and additions to tax and penalties as follows:
After concessions, the issues remaining for decision are:
1. Whether petitioner's bases in equipment he sold in 1987-90 exceeded the amounts conceded by respondent (the basis issue). We hold that they did not.
2. Whether petitioner is liable for: (a) Additions to tax for negligence under section 6653(a) for 1987-88; (b) the accuracy-related penalty under section 6662(a) for 1989-90 and 1992-97; and (c) additions to tax for failure to timely file returns under section 6651(a) for 1987-90 and 1992. We hold that he is.
3. Whether petitioner complied with requirements for issuing subpoenas to several prospective witnesses. We hold that he did not, and thus the subpoenas were not enforceable.
4. Whether the Court properly denied petitioner's motions to recuse the trial Judge and for a hearing on whether certain conduct of respondent's trial counsel was fraudulent. We hold that those motions were properly denied.
Unless otherwise specified, section references are to the Internal Revenue Code in effect for the years in issue, and Rule references are to the Tax Court Rules of Practice and Procedure.
Some of the facts have been stipulated and are so found. Petitioner resided in Maryland when he filed the petition.
Petitioner was the sole proprietor of JFC Excavating in 1987-90. Petitioner bought the following excavating equipment:
Purchase Purchase
Date Description Price
Oct. 14, 1983 Terex TS14B, Ser. $84,500.00
No. 69699
Nov. 26, 1984 Caterpillar 953LGP, 88,500.00
Ser. No. 20Z355
Oct. 16, 1986 Case 1835, Ser. No. 14,561.65
17168653
Petitioner sold these three pieces of equipment (the three pieces of equipment) and 58 other pieces of excavating equipment in 1987-90.
Petitioner's tax years 1981-86 were at issue in Allnutt v. Commissioner [Dec. 47,107(M)], T.C. Memo. 1991-6 (Allnutt I), affd. without published opinion 956 F.2d 1162 (4th Cir. 1992). We dismissed Allnutt I to the extent it related to issues on which petitioner had the burden of proof because petitioner failed to state a claim upon which relief could be granted. Id. We also (1) deemed admitted undenied allegations of fact and granted the Commissioner's motion for summary judgment relating to petitioner's liability for the fraud penalty; (2) held that petitioner had taxable income of $433,059 for 1981, $409,575 for 1982, $386,090 for 1983, $342,223 for 1984, $298,355 for 1985, and $1,913,176 for 1986; (3) sustained additions to tax under section 6654 for failure to pay estimated tax; and (4) imposed a penalty under section 6673 for instituting the proceeding primarily for delay and for maintaining frivolous positions. Id.
Petitioner attempted to relitigate his 1981-86 tax liability in a bankruptcy case. Allnut v. Friedman,1 Bankruptcy No. 92-5-7401-JS (D. Md., Jan. 20, 1995). In Allnut v. Friedman, supra, the District Court said that petitioner's liability for tax years 1981-86 had been fully adjudicated before he filed the bankruptcy petition and held that he was barred by res judicata under 11 U.S.C. section 505(a)(2)(A)2 from relitigating his 1981-86 tax liability. The opinion of the District Court in Allnut v. Friedman, supra, was filed more than 2 years before petitioner filed his returns for the years in issue.
Safoet A. Ashai, a certified public accountant (C.P.A.), prepared petitioner's Federal income tax returns for the years in issue. Petitioner filed his returns for 1987-90 and 1992-95 on March 10, 1997. His filing status was married filing separately for the years in issue. Petitioner reported substantial gross receipts from his excavating business for each year in issue. In his returns for the years in issue, petitioner reported gains from 49 items of property as follows:
Number Total Total Total
of Purchase Adjusted Sale Total
Year Items Price Basis Price Gain
1987 13 $529,000 $145,950 $293,400 $147,450
1988 7 474,000 84,420 272,000 187,580
1989 5 288,000 39,060 109,500 70,440
1990 24 1,896,000 511,519 1,014,000 502,481
In the notice of deficiency, respondent determined that petitioner's adjusted basis in each asset was zero. Petitioner also reported losses totaling $297,264.40 from 12 items of property sold in 1987-90. Respondent made no determination relating to the property petitioner reported selling at a loss.
In Allnutt v. Commissioner [Dec. 54,969(M)], T.C. Memo. 2002-311 (Allnutt II), a prior opinion filed in the instant case, we held that (1) the notice of deficiency for tax years 1987-90 and 1992-95 was timely issued; and (2) because of our decision in Allnutt I, petitioner was barred by res judicata from arguing that he had losses in 1981-86 which he could carry forward to the years in issue (1987-90 and 1992-97).
The issues decided in Allnutt II were tried on October 24, 2001. Petitioner prepared 10 subpoenas for Internal Revenue Service (IRS) employees to appear as witnesses at the Court's trial session beginning on October 22, 2001. Petitioner did not tender witness fees or mileage to the summoned witnesses. Also, the return of service for those subpoenas did not contain the date and time of service and did not contain a sworn statement signed and dated by the person making service that he or she had delivered the subpoena to the summoned witness and tendered fees and mileage pursuant to Rule 148. The Court granted respondent's motions to quash those subpoenas.
On May 13, 2003, we set the remaining issues (basis and additions to tax) for trial for July 15, 2003. A standing pretrial order was served on petitioner on May 13, 2003, which required the parties to identify in writing and exchange documents to be used at trial at least 15 days before trial.
Petitioner did not exchange any documents 15 days or more before July 15, 2003. On July 10, 2003, petitioner faxed to respondent (1) a list of equipment entitled "Recapitulation of Equipment Purchased and Sold by Fred Allnutt", and (2) 20 invoices and purchase orders for equipment petitioner bought in 1981-92.
Petitioner prepared subpoenas for respondent's revenue agent who audited petitioner's returns for the years in issue and his supervisor. Each of these subpoenas was stamped received on June 27, 2003, by respondent's disclosure office3 in Baltimore. The returns of service for these subpoenas did not contain the date or time of service and did not contain a sworn statement signed and dated by the person making service verifying that he or she had delivered the subpoena to the summoned witness and had tendered fees and mileage pursuant to Rule 148. The Court granted respondent's motions to quash the subpoenas.
At trial on July 15, 2003, petitioner stated that he had 100 boxes of records to support the bases he claimed for equipment that he sold in the years in issue, but that he did not have them with him. Trial was continued to give petitioner more time to present his records to respondent.
On July 28, 2003, petitioner faxed to respondent a list entitled "Fred W. Allnutt, Equipment" that petitioner had not previously given to respondent.
On November 5, 2003, further trial was set for January 5, 2004, to give petitioner another opportunity to offer evidence relating to the basis issue. Also on November 5, 2003, the Court ordered petitioner to provide to respondent, not later than December 22, 2003, all documents that he wanted to use at trial to substantiate his claimed bases, organized by asset. Petitioner failed to provide any additional documents to respondent by December 22, 2003.
On December 17, 2003, petitioner again prepared subpoenas for respondent's revenue agent who audited petitioner's returns for the years in issue and his supervisor. Respondent's disclosure office in Baltimore received each of those subpoenas on December 30, 2003. Petitioner did not personally serve the subpoenas or tender witness fees or mileage. Respondent filed motions to quash the subpoenas...
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