BUCKARDT v. Comm'r Of INTERNAL REVENUE
| Decision Date | 01 July 2010 |
| Docket Number | Docket No. 27949-07. |
| Parties | ELMER JON BUCKARDT, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | United States Tax Court |
Elmer Jon Buckardt, pro se.
Lisa M. Oshiro, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
On September 4, 2007, respondent Commissioner of Internal Revenue (whom we refer to here as the IRS) mailed notices of deficiency for the taxable years 2003, 2004, and 2005 to petitioner Elmer Jon Buckardt (Buckardt). In
those notices, the IRS determined the following deficiencies in income tax and additions to tax for late filing, late payment, and failure to pay estimated income tax: 1
Year
Deficiency
6654
2003
$42,862
$9,643.95
$8,572.40
$1,121.68
2004
20, 551
4, 623.98
2, 877.14
596.55
2005
20, 283
4, 563.68
1, 622.64
The issues for decision are: (1) Whether Buckardt is liable for income tax on his receipt of pension and annuity distributions for the tax years at issue, (2) whether he is liable for the section 6651(a)(1) late-filing addition to tax for the tax years at issue, (3) whether he is liable for the section 6651(a)(2) late-payment addition to tax for the tax years at issue, (4) whether he is liable for the section 6654 failure-to-payestimated-tax addition to tax for the tax years at issue, and (5) whether he is liable for a penalty under section 6673.
Some of the facts have been stipulated and are so found. The stipulation of facts and the attached exhibits are incorporated in this opinion by this reference.
Buckardt received $98,960 from State Street Retiree Services in each of the years 2003, 2004, and 2005. He also received $63,855 from American Trust Church Co. in 2003. Buckardt did not file timely tax returns for 2003, 2004, and 2005, nor did he make any tax payments for any of the years. The IRS created substitute tax returns on his behalf on July 23, 2007. It then issued notices of deficiency for 2003, 2004, and 2005 on September 4, 2007. Buckardt timely petitioned this Court on December 4, 2007. On January 8, 2008, the IRS received Forms 1040, U.S. Individual Income Tax Return, for 2003, 2004, and 2005 from Buckardt. Each Form 1040 was dated in the month of December 2007, and contained zeros in every box requesting a dollar amount, except for the standard deduction and personal exemption boxes. This case was called from the calendar for the trial session of this Court on June 22, 2009, at Seattle, Washington, and a trial was held. The IRS filed a Motion for Penalties Under Section 6673 at trial.
At trial, Buckardt argued that the Code requires the IRS to assess a tax before issuing a notice of deficiency, that he had a right to a copy of the record of the assessment, and that therecord of assessment is required to be made on a Form 23-C, Assessment Certificate--Summary Record of Assessments. The Court informed him that the IRS could not yet assess a deficiency in his tax for any of the years at issue. Buckardt also argued that section 861 exempted the payments he received from taxation. The Court instructed him that the argument was "unmeritorious * * * [and] hasn't been accepted by any courts."
OPINIONBuckardt bears the burden of proof as to the determination of the deficiencies contained in the notices. See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Pension and annuity income is includable in gross income pursuant to section 61(a)(9) and (11). Buckardt asserts that he does not have the burden of proof because the IRS did not provide evidence of his alleged income. The Court of Appeals for the Ninth Circuit in Hardy v. Commissioner, 181 F.3d 1002, 1004-1005 (9th Cir. 1999), affg. T.C. Memo. 1997-97, explained how the burden of proof shifts in cases of unreported income:
Generally, a presumption of correctness attaches to notices of deficiency in the Tax Court. See Palmer v. United States Internal Revenue Serv., 116 F.3d 1309, 1312 (9th Cir. 1997); Rapp v. Commissioner, 774 F.2d 932, 935 (9th Cir. 1985); Delaney v. Commissioner, 743 F.2d 670, 671 (9th Cir. 1984). For the presumption to apply, however, the Commissioner must base the deficiency on some substantive evidence that the taxpayer received unreported income. See id.; see also United States v. Janis, 428 U.S. 433, 442 * * * (1976)( that the presumption does not apply when the IRS makes a naked assessment without foundation). If the Commissioner introduces some evidence that the taxpayer received unreported income, the burden shifts to the taxpayer to show by a preponderance of the evidence that the deficiency was arbitrary or erroneous. See Rapp, 774 F.2d at 935. * * *
Buckardt stipulated that he received $98,960 from State Street Retiree Services in each of the years 2003, 2004, and 2005 and $63,855 from American Trust Church Co. in 2003. The Tax Court has held that if the IRS produces evidence of receipt, such as a bank deposit, "there is no requirement that * * * [the IRS] produce evidence linking petitioner to an income-producing activity as a precondition to requiring petitioner to meet his burden of proof." Tokarski v. Commissioner, 87 T.C. 74, 76-77 (1986). Thus, the burden is on Buckardt to prove that his receipts were not gross income includable under section 61.
Buckardt has not met his burden of proof. He admits in his brief that he received the payments mentioned above and that "such [amounts] [derive] from a domestic class of gross income" but not "from a taxable specific source." Thus, he admits to receiving gross income. He also did not provide testimony or other evidence that the funds he received were not includable in his income, for example, because they were loan repayments.
Buckardt makes two arguments in an effort to prove that even though the payments were includable as gross income under section 61, he nevertheless does not owe any tax. First, he argues thatthe source rules of section 861 and its accompanying regulations exclude his pension and annuity income from taxation. We have repeatedly held this argument (the "section 861 argument") to be frivolous and groundless. See Takaba v. Commissioner, 119 T.C. 285, 294-295 (2002); Williams v. Commissioner, 114 T.C. 136, 138-139 (2000); Olson v. Commissioner, T.C. Memo. 2004-234; Dashiell v. Commissioner, T.C. Memo. 2004-210. Section 61 includes in gross income "all income from whatever source derived". (Emphasis added.) Section 61 thus includes all sources of income and does not cross-reference section 861 or its accompanying regulations in any way. Dashiell v. Commissioner, supra (). This Court has explained:
Takaba v. Commissioner, supra at 295 (quoting Corcoran v. Commissioner, T.C. Memo. 2002-18). Buckardt's section 861argument is as groundless as similar arguments based on section 861 made by taxpayers before him.
He also claims that an assessment on Form 23-C must precede the issuance of a notice of deficiency and that he has the right to obtain a copy of the assessment (together, the "assessment argument"). This claim is groundless. See Cain v. Commissioner, T.C. Memo. 2006-148.
During the years at issue, Buckardt was married, but he and his wife did not file joint returns. At the time he filed his petition, Buckardt was a resident of the state of Washington. Washington state law provides that all property acquired during a marriage is presumed to be community property. See Wash. Rev. Code Ann. sec. 26.16.030 (West 2005); In re Marriage of Short, 890 P.2d 12, 14 (Wash. 1995). In applying the Code, state law determines the scope of property rights, but federal tax law prescribes the tax treatment of those property rights. See Hackl v. Commissioner, 118 T.C. 279, 290 (2002), affd. 335 F.3d 664 (7th Cir. 2003). In a community property state, the correct federal income-tax treatment of income that has been received by one spouse is that 50 percent of the income is includable in that spouse's taxable income. Poe v. Seaborn, 282 U.S. 101, 118 (1930); Commissioner v. Dunkin, 500 F.3d 1065, 1069-1070 (9th Cir. 2007), revg. 124 T.C. 180 (2005). Buckardt did not address the possibility that half of the pension and annuity income heearned is includable in his wife's taxable income, not his. But Buckardt has the burden of proving that the community property rule applies and that the determinations in the notices of deficiency are incorrect. See Rule 142(a); Welch v. Helvering, 290 U.S. at 115. Under Washington law, the portion of a pension attributable to wages earned during marriage by Washington residents is community property. Wilder v. Wilder, 534 P.2d 1355, 1357 (Wash. 1975); Payne v. Payne, 512 P.2d 736, 737-738 (Wash. 1973); Devine v. Devine, 711 P.2d 1034, 1035 (Wash. Ct. App. 1985). We do not know how much of the income at issue in this case is attributable to a pension (as opposed to an annuity) and how much of it is attributable to wages earned...
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