Babcock v. Commissioner
| Decision Date | 12 September 1979 |
| Docket Number | Docket No. 11488-77. |
| Parties | Reuben H. Babcock v. Commissioner. |
| Court | U.S. Tax Court |
Reuben H. Babcock, pro se, Moore, Idaho. Thomas N. Thompson, for the respondent.
Memorandum Findings of Fact and Opinion
Respondent determined a deficiency in petitioner's income tax for 1971 of $821, plus an addition to the tax for fraud under section 6653(b)1 of $410. In his amended answer, respondent conceded the fraud penalty but asserted that petitioner is liable for additions to the tax for delinquent filing under section 6651(a) and for negligence under section 6653(a). The issues for decision are:
1. The amount of net farm income earned by petitioner and his wife in 1971, half of which is taxable to petitioner as community income.
2. Whether petitioner is subject to self-employment tax on this net farm income earned in 1971.
3. Whether petitioner is entitled to various itemized deductions in 1971.
4. Whether petitioner is liable for an addition to the tax for delinquent filing of his tax return.
5. Whether any part of petitioner's underpayment of tax in 1971 was due to negligence.
At the time he filed his petition, petitioner was a resident of Moore, Idaho.
Petitioner is a farmer. In 1971 he was married and a resident of Idaho. In that year he had total farm receipts of $14,221.22. He incurred farming expenses totaling $8,908.58 in 1971.
Petitioner filed a "tax protestor return" for 1971. On the document filed by petitioner as his income tax return, he listed only his and his wife's names, their social security numbers, their address and the names of their children. Petitioner's name was printed at the bottom of the form, and the declaration under penalties of perjury was crossed out. Petitioner attached a statement to this "return": "If you have any questions please read the U.S. Constitution."2
In his notice of deficiency, respondent determined that petitioner had total farm receipts of $14,221.22 and farming expenses of $5,983.94 in 1971. Respondent determined that petitioner's net farming income ($8,237.28) was community income, half of which was taxable to petitioner. Respondent further determined that petitioner was liable for self-employment tax on the total net farm income. Respondent also allowed petitioner the standard deduction in 1971. Additionally, respondent determined that all or part of petitioner's underpayment of tax in 1971 was due to fraud. In his amended answer, respondent conceded the fraud penalty, but respondent asserted that petitioner is subject to additions to the tax under section 6651(a) for delinquent filing of his return and under section 6653(a) for negligence.
OpinionThe first issue is the amount of the net farm income earned by petitioner and his wife in 1971, half of which is taxable to petitioner as community income. Specifically, we must consider the amount of petitioner's gross farm receipts and farm expenses in that year. Respondent determined that petitioner had total farm receipts of $14,221.22 and farming expenses of $5,983.94 in 1971. Respondent's determination is presumptively correct, and petitioner bears the burden of proving respondent's determination wrong. Welch v. Helvering 3 USTC ¶ 1164, 290 U.S. 111 (1933); Rule 142(a), Tax Court Rules of Practice and Procedure.
With respect to respondent's determination of petitioner's farm income in 1971, petitioner did not present any specific evidence contradicting this determination. Petitioner asserted at trial that he had a notebook in which he maintained records of his income, but he was unable or unwilling to produce this notebook. On the other hand, respondent supported his determination with the bank records of petitioner's deposits during 1971. We conclude that petitioner has failed to carry his burden of proof; accordingly, we sustain respondent's determination of petitioner's gross farm receipts.
As to petitioner's farming expenses, after trial petitioner submitted receipts for farming expenses incurred in 1971 totaling $8,908.58. On brief respondent conceded that petitioner was entitled to deduct farming expenses in this amount. However, petitioner presented no evidence other than his unsubstantiated testimony of any farming expenses in excess of the amount of these receipts. Petitioner failed to present any records of his expenses other than these receipts, and the other expenses which he claimed in his petition were mere estimates. Such unsubstantiated estimates of his farm expenses do not satisfy his burden of proof. Accordingly, we conclude that petitioner had total farming expenses of $8,908.58 in 1971.
Subtracting petitioner's farming expenses from his gross receipts, we hold that petitioner had net farm income of $5,312.64 in 1971. Petitioner was married throughout that year. Under section 32-906, General Laws of Idaho (1963), property acquired after marriage is, generally, community property. There is a rebuttable presumption that any asset acquired during marriage is community property. Guy v. Guy, 98 Idaho 205, 560 P. 2d 876 (1977). Respondent does not contend that it was separate property. In this case, no evidence was presented that any portion of petitioner's net farm income was not community property. Accordingly, half of his net farm income in 1971 is taxable to petitioner. Hopkins v. Bacon 2 USTC ¶ 613, 282 U.S. 122 (1930); Goodell v. Koch 2 USTC ¶ 612, 282 U.S. 118 (1930); Poe v. Seaborn 2 USTC ¶ 611, 282 U.S. 101 (1930).
The next issue is whether petitioner is subject to self-employment tax on the net farm income earned in 1971. Section 1401 imposes a self-employment tax on an individual's self-employment income. In relevant part, section 1402 (a) provides that an individual's "net earnings from self-employment" is the gross income derived by the individual from the trade or business, less the deductions attributable to such trade or business. However, with respect to the income from a trade or business in a community property state, section 1402(a)(5)(A) provides:
In this case, petitioner presented neither evidence nor argument disputing respondent's determination that he was subject to self-employment tax for the entire amount of the net farm income earned by himself and his wife in 1971. Specifically, petitioner did not produce any evidence which showed that his wife exercised substantially all of the management and control of their farming business. Accordingly, we...
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