Davis v. Comm'r of Internal Revenue

• Decision Date: 26 October 1983
• Docket Number: Docket No. 20161–81.
• Parties: JAMES J. DAVIS AND PEGGY DAVIS, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
• Court: U.S. Tax Court

81 T.C. 806

81 T.C. No. 49

JAMES J. DAVIS AND PEGGY DAVIS, Petitioners

v.COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 20161–81.

United States Tax Court

Filed October 26, 1983.

Ps, H & W, claimed deductions for charitable contributions to the “Universal Life Church.” W received an honorary Doctor of Divinity “degree” and a Doctor of Universal Life “degree” from the Universal Life Church, Inc. Ps also received a charter from Universal Life Church, Inc., for a congregation or chapter of their own. W opened two checking accounts in the name of Universal Life Church over which she had sole signatory power. H drew checks on his personal account payable to Universal Life Church. W endorsed one of these checks and purchased a cashier's check with the proceeds. The rest of the checks were deposited in the Universal Life Church checking accounts over which W had sole signatory power. H & W used theIr personal checking accounts and the two Universal Life Church accounts over which W had sole signatory power interchangeably to pay various personal and family expenses.

Held, Ps' motion to quash subpoenas compelling them to testify, based on Fifth Amendment privilege against self-incrimination, was properly denied. Ps did not demonstrate a real and appreciable danger of self-incrimination.

Held further, Ps' motion to exclude from evidence banking records of the Universal Life Church accounts under W's sole signatory power was properly denied. These records were relevant to the charitable contributions issue and were not protected by any First Amendment privilege of Ps or of their Universal Life Church chapter. These bank records were not records of Universal Life Church, Inc., of Modesto, California, so no privilege of that entity was affected.

Held further, documents from Universal Life Church, Inc., of Modesto, California, purporting to evidence Ps' contributions to it, were properly excluded as hearsay. The business records exception, Federal Rules of Evidence 803(6), does not apply. The documents were prepared specifically for trial, and Ps failed otherwise to establish the documents as business records through the “custodian or other qualified witness.”

Held further, Ps failed to prove that they made any charitable contributions to Universal Life Church, Inc., of Modesto, California.

Held further, Ps failed to prove that any contributions they may have made to their own Universal Life Church chapter qualified as charitable contributions under sec. 170(c)(2), I.R.C. 1954.

Held further, Ps failed to report interest and dividend income in 1978 and 1979.

Held further, Ps are liable for additions to tax under sec. 6651(a), I.R.C. 1954 and sec. 6653(a), I.R.C. 1954. James J. Davis and Peggy Davis, pro se.

Wayne R. Appleman, for the respondent.

PARKER, Judge:

Respondent has determined the following deficiencies in, and additions to, petitioners' Federal income taxes:

+---------------------------------------------------+
                ¦Year  ¦Deficiency  ¦Sec. 6651(a)1  ¦Sec. 6653(a)2  ¦
                +------+------------+---------------+---------------¦
                ¦      ¦            ¦               ¦               ¦
                +------+------------+---------------+---------------¦
                ¦1976  ¦$7,288      ¦0              ¦$364           ¦
                +------+------------+---------------+---------------¦
                ¦1977  ¦11,902      ¦0              ¦780            ¦
                +------+------------+---------------+---------------¦
                ¦1978  ¦11,422      ¦0              ¦571            ¦
                +------+------------+---------------+---------------¦
                ¦1979  ¦11,989      ¦$304           ¦805            ¦
                +---------------------------------------------------+
                

The following issues are presented for our determination: (1) whether petitioners are entitled to charitable contributions deductions under section 170 for amounts allegedly given to the Universal Life Church; (2) whether petitioners omitted interest and dividend income from their 1978 and 1979 joint returns; (3) whether petitioners are liable for the delinquency addition under section 6651(a) for 1979; and (4) whether petitioners are liable for the negligence addition under section 6653(a) for all four years. On brief, petitioners ask the Court to reconsider various evidentiary rulings made at trial, and we shall address those questions prior to dealing with the substantive issues.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found. The stipulation of facts and exhibits attached thereto are incorporated herein by this reference.

Petitioners resided in Anchorage, Alaska, at the time they filed their petition in this case. Petitioners filed joint Federal income tax returns for the calendar years 1976, 1977, 1978, and 1979 with the Internal Revenue Service. Petitioners signed their 1979 return on June 30, 1980, and the Internal Revenue Service Center at Ogden, Utah, received their 1979 return on July 7, 1980.

During all of the years in issue, petitioner James J. Davis (Mr. Davis) was employed in Alaska by Page Communications-Alaska, Inc., and he resided in Alaska. During 1976 and part of 1977, petitioner Peggy Davis (Mrs. Davis) worked as a real estate broker and resided in Cocoa Beach, Florida. Sometime in 1977, she moved herself and her two children to Alaska to be with Mr. Davis. Mrs. Davis worked for various employers in Alaska for the remainder of 1977 and during 1978 and 1979.

Mrs. Davis received an honorary Doctor of Divinity “degree” from the Universal Life Church, Inc., (ULC, Inc.) dated June 3, 1975. That document, No. 12,477, purported to be signed by Kirby J. Hensley, D.D., President, Universal Life Church, Inc., whose headquarters was listed on the document as P.O. Box 3528, Phoenix, Arizona 85030. Petitioners received another document, No. 13,470, dated September 4, 1975, from ULC, Inc., labelled as a “Charter” that provided:

CHARTER

This is to certify that Universal Life Church [Name of Church] of Cocoa Beach State or Province of Florida has been granted by Universal Life Church, Inc., Modesto. That document listed the headquarters of ULC, Inc., as 601 Third Street, Modesto, California 95351. Mrs. Davis also received a Doctor of Universal Life “degree,” dated September 8, 1975, from ULC, Inc. That document referred to her as the “Reverend Peggy Davis” and was also purportedly signed by Kirby J. Hensley, D.D., President, Universal Life Church, Inc., whose headquarters was listed on the document as P.O. Box 3528, Phoenix, Arizona 85030. While we have referred to both the entity in Modesto, California, and that in Phoenix, Arizona as “ULC, Inc.,” the record does not establish whether this is one corporation or two separate corporations. The record does not establish that petitioners ever set up a corporation or other separate legal entity after receiving their Charter for the Universal Life Church of Cocoa Beach, Florida.

During the years 1976 through 1979, Mrs. Davis had sole signatory control over a checking account (No. 52–0–883–4) in the name of Universal Life Church, P.O. Box 335, Cocoa Beach, Florida 32931, with the United National Bank in Cocoa Beach, Florida. That account was not in the name of ULC, Inc., nor in the name of the Universal Life Church, Inc. of Modesto, California. The address listed for this account was petitioners' Post Office Box number in Cocoa Beach, Florida.

During 1977, 1978, and 1979, Mrs. Davis had sole signatory control over a checking account (No. 00–04627–2) in the name of Universal Life Church, 1-D-6 Fairview Manor Apts., Fairbanks, Alaska 99701, or P.O. Box 2757, Fairbanks, Alaska 99707, with the First National Bank of Fairbanks in Fairbanks, Alaska. That account was not in the name of ULC, Inc., nor in the name of the Universal Life Church, Inc. of Modesto, California. The address listed for this account was an apartment in Fairbanks where Mrs. Davis had resided when she first moved to Alaska.

In 1979, Mrs. Davis had signatory control over six certificate of deposit accounts in the name of Universal Life Church with the Arctic First Federal Savings & Loan Association in Fairbanks, Alaska. Those certificate of deposit accounts were not in the name of ULC, Inc.,nor in the name of the Universal Life Church, Inc. of Modesto, California. Each account was opened with a deposit of $10,000. Five of these certificates of deposit were purchased with funds from the Universal Life Church account at First National Bank of Fairbanks over which Mrs. Davis had sole signatory power. One of these five accounts earned interest in the amount of $473.49 during 1979. The address shown for all six accounts was Mrs. Davis' Post Office Box number in Fairbanks.

Neither the Universal Life Church, Inc. of Modesto, California (ULC Modesto) nor ULC, Inc. (which may be the same entity as ULC Modesto) had any control over or ownership interest in any of the Universal Life Church accounts over which Mrs. Davis had signatory authority. ULC Modesto left to petitioners the manner in which petitioners' Universal Life Church “congregation” would raise and spend money. The record does not establish whether or not petitioners had a Universal Life Church “congregation” in Cocoa Beach, Florida, or in Alaska during the years before the Court.

On December 27, 1976, petitioners took out a loan in the amount of $28,300 with the First Federal Savings and Loan Association in Cocoa Beach, Florida. They used the funds to purchase a condominium in Cocoa Beach. Petitioners continued to own the condominium during 1977, 1978, and 1979. Mrs. Davis paid at least part of the mortgage payments on the condominium with checks from the Universal Life Church accounts over which she had sole signatory authority. Petitioners deducted the interest from this mortgage loan on their 1976, 1977, 1978, and 1979 joint returns.

During the years in issue, Mr. Davis maintained a checking account at the Alaska National Bank of the North in Fairbanks, Alaska. During 1978 and 1979, Mr. Davis also maintained a checking account at the United National...