Canatella v. Commissioner of Internal Revenue, 062617 FEDTAX, 19375-13
|Opinion Judge:||MORRISON, JUDGE.|
|Party Name:||RICHARD A. CANATELLA, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent|
|Attorney:||Richard A. Canatella, for himself. L. Katrine Shelton, Brenn C. Bouwhuis, and Charles B. Burnett, for respondent.|
|Case Date:||June 26, 2017|
|Court:||United States Tax Court|
Richard A. Canatella, for himself.
L. Katrine Shelton, Brenn C. Bouwhuis, and Charles B. Burnett, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
The respondent (referred to here as the "IRS") issued a notice of deficiency to the petitioner, Richard A. Canatella, for the taxable years 2008, 2009, and 2010. The IRS determined tax deficiencies of $248, 262 for 2008, $92, 758 for 2009, and $128, 167 for 2010, and accuracy-related penalties under section 6662(a) of $49, 652 for 2008, $18, 552 for 2009, and $25, 633 for 2010.1 Canatella timely filed a petition under section 6213(a) for redetermination of the deficiencies.2 We have jurisdiction under section 6214. In this opinion we hold: 1. The Court did not err in allowing the revenue agent to remain in the courtroom after Canatella's request to exclude fact witnesses from the courtroom at the beginning of trial. See infra part 1.
2. The counsel for the IRS did not engage in misconduct due to the mislabeling of exhibits. See infra part 2.
3. The IRS's bank-deposits analysis is not erroneous as a whole. However, $124, 000 in deposits were improperly characterized as income to Canatella for 2008. See infra part 3.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
In 2008-10, Canatella operated a law firm doing business as Cotter & Del Carlo. He was the only lawyer in the firm, which operated as a sole proprietorship. Before its winding up of business in 2010, the firm had been in existence over 40 years and specialized in probate matters.
As a result of litigation or settlements, Canatella often received funds payable to his clients and was obligated to hold the funds in trust until distributions were warranted. From 2008 to 2010, Canatella maintained 20 bank accounts at six financial institutions.
Tax Reporting; Notice of Deficiency
Canatella filed late Forms 1040, "U.S. Individual Income Tax Return", for 2008, 2009, and 2010. Canatella filed both his 2008 and 2009 returns on June 10, 2011, and his 2010 return on November 4, 2011.
During each of the three years, Canatella filed under the status of married-filing-separately. An accountant prepared each of the returns. On his returns for 2008, 2009, and 2010, Canatella did not report any income other than the business income that he reported on his Schedules C, "Profit or Loss From Business". The Schedules C reported the following business income, expenses (broken down into various categories), and gain/loss from the operation of Cotter & Del Carlo:
|Gross receipts||$509, 486.00||$382, 372.00||$170, 654.00|
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