Baker v. Commissioner
| Decision Date | 20 June 1994 |
| Docket Number | Docket No. 21409-91. |
| Citation | 67 T.C.M. 3114 |
| Parties | Robert F. & Pamela E. Baker v. Commissioner. |
| Court | U.S. Tax Court |
Robert F. Baker, pro se. Charlotte A. Mitchell, for the respondent.
Memorandum Findings of Fact and Opinion
Respondent determined the following deficiencies in, and additions to, petitioners'1 Federal income tax:
Additions to Tax
----------------------------------------------------------------------------
Section Section Section Section Section Section
Year Deficiency 6651(a)2 6653(a)(1) 6653(a)(2) 6653(a)(1)(A) 6653(a)(1)(B) 6661(a)
1985 $20,896 $ -- $1,045 * $ -- -- $5,224
1986 1,383 346 -- -- 69 * --
1987 13,170 3,293 -- -- 659 * --
* 50 percent of the interest due on the portion of the underpayment attributable to negligence. Respondent determined that
the entire amount of the underpayment was attributable to negligence
The issues remaining for decision are:3
(1) Is Mr. Baker entitled for each of the years at issue to reduce the gross receipts and to deduct from the gross income of his concrete pumping business amounts in excess of those allowed by respondent? We hold that he is not.
(2) Is Mr. Baker entitled for 1986 to a casualty loss deduction in excess of the amount allowed by respondent? We hold that he is to the extent stated herein.
(3) Is Mr. Baker liable for 1986 and 1987 for the addition to tax for failure to file timely the return for each such year? We hold that he is.
(4) Is Mr. Baker liable for each of the years at issue for the additions to tax for negligence? We hold that he is.
(5) Is Mr. Baker liable for 1985 for the addition to tax for a substantial understatement of income tax? We hold that he is.
Some of the facts have been stipulated by Mr. Baker and respondent and are so found.
At the time the petition was filed, Mr. Baker resided in Modesto, California, and Ms. Baker resided in Tracy, California.
Petitioners filed joint Federal income tax returns for the years at issue. Their returns for 1986 and 1987 were filed late on March 1, 1989.
During the years at issue, Mr. Baker, who was self-employed, operated a concrete pumping business, called "Baker's Concrete Pumping" (BCP).
In October 1986, a fire occurred at Mr. Baker's house (October 1986 fire).
Gross receipts for BCP in the amount of $21,662.26 were reported in Schedule C of petitioners' 1985 return (1985 Schedule C). During 1985, deposits in the amount of $70,805 were made into an account Mr. Baker maintained at Central Bank in Newark, California (Central Bank account). Respondent determined that $49,143 of income with respect to those deposits had not been reported in the 1985 Schedule C.4
Gross receipts for BCP in the amount of $40,262.72 were reported in Schedule C of petitioners' 1986 return (1986 Schedule C). During 1986, deposits in the amount of $86,317.35 were made into the Central Bank account. During November and December 1986, a total of $10,353.85 was deposited into an account maintained in the name of BCP at Bank of the West in Santa Clara, California (Bank of the West BCP account). Of the total deposited, $3,000 was transferred at the end of 1986 from another account of Mr. Baker. The Bank of the West BCP account was overdrawn and had a deficit of $64.58 at the end of 1986. Respondent did not obtain records for those accounts prior to the issuance of the notice. She therefore did not determine that Mr. Baker had unreported income for 1986 with respect to any of those deposits.
Gross receipts for BCP in the amount of $55,755.68 were reported in Schedule C of petitioners' 1987 return (1987 Schedule C). During 1987, Mr. Baker made deposits in the amount of $100,654 into the Bank of the West BCP account. During 1987, Mr. Baker maintained a second account at Bank of the West; amounts deposited into that account during 1987 were transferred from other accounts and are not includable in Mr. Baker's income for that year. Respondent determined that $44,899 of income with respect to the deposits into the Bank of the West BCP account had not been reported in the 1987 Schedule C.
In computing BCP's gross income in the 1985 Schedule C, Mr. Baker showed $1,907 as the cost of goods sold and/or of operations, calculated as follows:
Beginning Inventory .................. $14,652.00
Purchases ............................ 1,737.00
Cost of Labor ........................ 2,284.00
Materials and Supplies ............... 2,973.00
Other Costs .......................... 47.00
Less Ending Inventory ................ (19,786.00)
__________
Cost of Goods Sold and/or of
Operations ......................... $1,907.00
Respondent allowed the cost of goods sold and/or of operations claimed in the 1985 Schedule C.
In computing BCP's gross income in the 1986 Schedule C, Mr. Baker showed $27,899.47 as the cost of goods sold and/or of operations, calculated as follows:
Beginning Inventory ................... $19,786.00
Cost of Labor ........................ 2,671.50
Materials and Supplies ............... 18,198.87
Less Ending Inventory ................ (12,756.90)
__________
Cost of Goods Sold and/or of
Operations ......................... $27,899.47
Respondent allowed the cost of goods sold and/or of operations claimed in the 1986 Schedule C.
In computing BCP's gross income in the 1987 Schedule C, Mr. Baker showed $40,544.07 as the cost of goods sold and/or of operations, calculated as follows:
Beginning Inventory .................. $12,756.90
Cost of Labor ........................ 9,565.63
Materials and Supplies ............... 28,668.54
Less Ending Inventory ................ (10,447.00)
__________
Cost of Goods Sold and/or of
Operations ......................... $40,544.07
Respondent allowed the cost of goods sold and/or of operations claimed in the 1987 Schedule C.
In computing BCP's gross income for 1985, 1986, and 1987, Mr. Baker reduced BCP's reported gross receipts for each of those years by "returns and allowances" in the amounts of $1,169, $2,650, and $3,819, respectively. Respondent disallowed those claimed reductions of BCP's gross receipts by "returns and allowances".
In the 1985 Schedule C, Mr. Baker claimed the following deductions from BCP's gross income:
Type of Expense Amount
Advertising ............................ $ 329.00
Bad Debts from Sales or Services ....... 1,273.00
Bank Service Charges ................... 180.00
Car and Truck Expenses ................. 2,695.00
Insurance .............................. 2,275.00
Laundry and Cleaning ................... 125.00
Legal and Professional Services ........ 125.00
Office Expense ......................... 204.00
Rent on Business Property .............. 2,850.00
Repairs ................................ 2,142.00
Travel and Entertainment ............... 406.00
Utilities and Telephone ................ 1,287.00
__________
Total Deductions Claimed ............. $13,891.00
In the 1986 Schedule C, Mr. Baker claimed the following deductions from BCP's gross income:
Type of Expense Amount
Advertising ............................ $ 232.24
Bank Service Charges ................... 150.00
Car and Truck Expenses ................. 2,623.79
Insurance .............................. 656.50
Legal and Professional Services ........ 125.00
Rent on Business Property .............. 3,000.00
Repairs ................................ 3,280.29
__________
Total Deductions Claimed ............. $10,067.82
Respondent allowed all the foregoing expense deductions for 1985 and 1986 except those for insurance and "rent on business property".
In the 1987 Schedule C, Mr. Baker claimed the following deductions from BCP's gross income:
Types of Expense Amount
Bank Service Charges ................... $ 150.00
Car and Truck Expenses ................. 2,175.00
Legal and Professional Services ........ 1,075.00
Office Expense ......................... 85.00
Rent on Business Property .............. 3,000.00
Repairs ................................ 3,820.97
Supplies ............................... 3,656.37
Utilities and Telephone ................ 2,110.00
__________
Total Deductions Claimed ............. $16,072.34
Respondent allowed all the foregoing expense deductions for 1987 except those for supplies and "rent on business property".
In petitioners' 1986 return, Mr. Baker reported a casualty loss of "personal use property" in the amount of $2,000, and he deducted $1,689.14 as a casualty loss in that return. Respondent determined that Mr. Baker was not entitled to $1,160 of the claimed casualty loss deduction.
OpinionMr. Baker has the burden of establishing error in respondent's determinations. Rule 142(a); Welch v. Helvering [3 USTC ¶ 1164], 290 U.S. 111, 115 (1933); Zmuda v. Commissioner [84-1 USTC ¶ 9442], 731 F.2d 1417, 1422 (9th Cir. 1984), affg. [Dec. 39,468] 79 T.C. 714 (1982).
Mr. Baker presented no evidence and made no argument5 reg...
To continue reading
Request your trial