Doxtator v. Commissioner
| Decision Date | 18 May 2005 |
| Docket Number | Dkt. No. 1508-03. |
| Parties | Allen and Mary Doxtator v. Commissioner. |
| Court | U.S. Tax Court |
Allen and Mary Doxtator, pro se.
Mark J. Miller, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
Respondent determined deficiencies in income taxes and penalties under section 6662(a)1 with respect to petitioners' 1997, 1999, and 2000 taxable years as follows:
Penalty
Year Deficiency Sec. 6662(a)
1997 $7,702 $363.00
1999 6,671 43.60
2000 4,926 58.40
Following concessions,2 the issues remaining for decision are: (1) Whether $23,480, $22,450, and $13,550 received by petitioner Mary Doxtator (Mrs. Doxtator) in 1997, 1999, and 2000, respectively, from the Oneida Tribe of Indians of Wisconsin (Oneida Tribe or Tribe) for services as a judicial officer are subject to income tax and self-employment tax; (2) whether petitioner Allen Doxtator (Mr. Doxtator) was engaged in a trade or business in 1997 and 2000, entitling petitioners to cost of goods sold of $225 in 1997 and trade or business deductions of $7,580 and $7,748 for 1997 and 2000, respectively; (3) whether petitioners received short-term capital gain of $1,000 and longterm capital gain of $146 in 1999; (4) whether petitioners received taxable dividends of $281 in 1999; (5) whether $3,000 petitioners received from the Oneida Tribe in 1999 is taxable; (6) whether petitioners are entitled to charitable contribution deductions of $5,899 and $3,969 in 1997 and 2000, respectively; (7) whether petitioners are entitled to a casualty loss in 2000 of $4,516, or $1,090 as conceded by respondent; (8) whether petitioners are liable for an accuracy-related penalty under section 6662(a) based on a substantial understatement of income tax or on negligence for 1997 and 1999; and (9) whether petitioners are liable for the accuracy-related penalty under section 6662(a) based on negligence for 2000. In addition, petitioners challenge our jurisdiction to decide certain of the foregoing issues, as more fully discussed infra.
Some of the facts have been stipulated and are incorporated by this reference.3
Petitioners resided in Wisconsin at the time they filed the petition in this case. Petitioners are husband and wife and filed joint Federal income tax returns for 1997, 1999, and 2000. Petitioners are Native Americans and members of the Oneida Tribe.
In 1997, 1999, and 2000, Mrs. Doxtator worked for the Oneida Tribe as a "judicial officer" of the Oneida Appeals Commission and the Oneida Personnel Commission. The business of the Oneida Tribe is run by a business committee. Mrs. Doxtator was appointed to the position of judicial officer for a 3-year term by the business committee of the Oneida Tribe. In her capacity as a judicial officer, she heard disputes between the Oneida Tribe and its employees. The hearings were conducted at various locations to which Mrs. Doxtator traveled at her own expense. Her decisions were binding on the Tribe and its employees. She controlled her own schedule and heard as many or as few cases as she chose. She received a $125 stipend per case heard, regardless of its duration.
Mrs. Doxtator received $23,480, $22,450, and $13,550 in 1997, 1999, and 2000, respectively, as compensation for her services as a judicial officer from the Oneida Tribe. The Oneida Tribe issued Forms 1099-MISC, Miscellaneous Income, reporting these payments to Mrs. Doxtator in each year. Petitioners did not report on their 1997, 1999, or 2000 return, nor pay selfemployment taxes with respect to, the foregoing amounts received by Mrs. Doxtator. Respondent determined that the foregoing amounts were subject to income and self-employment tax.
Petitioners attached to their 1997 and 2000 returns a Schedule C, Profit or Loss from Business, for an undertaking called "Native American Finance". According to Mr. Doxtator, the Native American Finance business consisted of Mr. Doxtator's activities in contacting Native American tribes to advise tribal leaders of a revenue ruling that he believed eliminated liability for employment taxes for elected tribal officials. In return for this information, Mr. Doxtator sought a "finder's fee" equal to 6 percent of the taxes recovered pursuant to the ruling. He contacted tribes seeking meetings to present his advice and requested that the tribes provide him with meals and lodging in connection with his travel to the meetings. Mr. Doxtator traveled as far as 500 miles for such meetings and made repeat visits in some instances.
During the years at issue, Mr. Doxtator never received payment of any finder's fees. He considered there to be oral agreements regarding his fees with the tribes with whom he met. After failing to receive payment, he did not seek written contracts; instead, he sought to recover the fees by requesting payment from newly elected members of the tribal leadership.
On the 1997 Schedule C for Native American Finance, petitioners reported gross receipts of $613, cost of goods sold of $225, and expenses of $7,580. On the 2000 Schedule C for Native American Finance, petitioners reported gross receipts of $465 and expenses of $7,748. The amount reported as gross receipts comprised reimbursements of travel expenses to Mr. Doxtator by the tribes he visited. Some of the expenses claimed on the 1997 and 2000 Schedules C were Mrs. Doxtator's travel expenses incurred in connection with her duties as a judicial officer.
Respondent determined that Native American Finance was not a trade or business and disallowed the claimed cost of goods sold in 1997 and the deductions for the claimed expenses for 1997 and 2000. The determination shifted the 1997 and 2000 reported gross receipts from Schedule C to line 21, "Other Income", of the Form 1040, U.S. Individual Income Tax Return.
On January 20, 1999, Mrs. Doxtator purchased 600 shares of American Pad & Paper Co. for a total cost of $650.50 which she sold on April 21, 1999, for net proceeds of $989.46. On February 12, 1999, Mrs. Doxtator purchased 200 shares of Williams Coal Seam Gas for $1,850.50 which she sold on March 19, 1999, for net proceeds of $1,986.93. On March 19, 1999, Mrs. Doxtator purchased 400 shares of Burnham PAC PPTYS, Inc., for $4,188 which she sold on April 23, 1999, for $4,586.84. On April 27, 1999, Mrs. Doxtator sold 100 shares of Jevic Transportation, Inc., for net proceeds of $899.46.4 On May 4, 1999, Mrs. Doxtator bought 200 shares of Arkansas Best Corp. Del. for $7,263 which she sold on July 6, 1999, for net proceeds of $7,249.25. On July 12, 1999, Mrs. Doxtator sold 1 share of Patriot American Hospitality, that was received pursuant to a cash merger on June 20, 1999, for net proceeds of $11.61.
On February 8, 1999, a check for $5,000, payable to Mr. Doxtator, and drawn by Melinda Doxtator, his mother, cleared her account.
Petitioners reported no capital gains on their 1999 return. Respondent determined that petitioners received $15,720 in 1999 from the sale of stocks in which they had a basis of $14,720, resulting in short-term capital gain of $1,000 in 1999. Respondent further determined that petitioners had long-term capital gain of $146 in that year.
Petitioners reported no dividend income on their 1999 return. Respondent determined that petitioners failed to report $281 of taxable dividends in 1999.
Oneida Tribe payments
During 1999, petitioners each received $1,500 from the Oneida Tribe and were issued Forms 1099 that reported these payments as nonemployee compensation.
The payments constituted a distribution of the profits from a casino owned and operated by the Oneida Tribe. The casino (and an associated hotel) were built on land purchased by the Oneida Tribe from "noncompetent"5 Tribe members in 1968. The Tribe purchased the land using proceeds it received pursuant to a judgment by the Indian Claims Commission in Docket No. 75 that were distributed pursuant to the Act of September 27, 1967, Pub. L. 90-93, 81 Stat. 229, 25 U.S.C. secs. 1141-1147 (2000).
Petitioners did not report the two payments (totaling $3,000) on their 1999 return. Respondent determined that the payments were taxable per capita payments in that year.
Petitioners claimed deductions for charitable contributions on their 1997 and 2000 returns of $5,899 and $3,969, respectively. The notice of deficiency disallowed these deductions for failure to substantiate.
Petitioners claimed a casualty loss of $4,516 on their 2000 return.
In April 2000, a water main adjacent to petitioners' residence broke and their basement was flooded with 4 to 5 feet of water. Petitioners' loss was not covered by insurance. The notice of deficiency disallowed the claimed $4,516 casualty loss.
Petitioners previously appeared before this Court for redetermination of a deficiency with respect to their 1991 taxable year. In that case, at docket No. 6313-95S, petitioners argued that tier II railroad retirement benefits received by Mr. Doxtator were exempt from Federal income tax because of petitioners' status as Native Americans. We concluded, in an unpublished Summary Opinion that has been made part of the record in this case, that petitioners had failed to identify any statute or treaty that would exempt the retirement benefits from tax and accordingly sustained the deficiency. Our opinion was filed on March 20, 1997.
OPINIONPetitioners contend that this Court does not have jurisdiction over that portion of their deficiencies that relates to "Treaty rights of the Oneida, income derived from The Sovereign Government of the Oneida, and income from an investment made by the Oneida Government, i.e. enrolled membership." Petitioners concede our jurisdiction with respect to the issues...
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