Andrew Ethan MacTaggart ( 2022 )

United States Tax Court
Washington, DC 20217
ANDREW ETHAN MACTAGGART,
Petitioner
v. Docket No. 6465-21.
COMMISSIONER OF INTERNAL
REVENUE,
Respondent
ORDER
Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is
ORDERED that the Clerk of the Court shall transmit herewith to petitioner
and to respondent a copy of the pages of the transcript of the trial in the above case
before Judge Joseph Robert Goeke containing his oral findings of fact and opinion
rendered at the Houston, Texas trial session at which this case was heard.
In accordance with the oral findings of fact and opinion, a decision will be
entered for respondent as to the deficiency in income tax and for petitioner as to the
penalty pursuant to I.R.C. section 6662(a).
(Signed) Joseph Robert Goeke
Judge
Served 05/11/22
3
1 Bench Opinion by Judge Joseph Robert Goeke
2 April 27, 2022
3 Andrew Ethan MacTaggart v. Commissioner of
JG
4 Docket No. 6465-21
5 THE COURT: The Court has decided to render the
6 following as it's oral findings of fact and opinion in
7 this case. This bench opinion is made pursuant to the
8 authority granted by section 7459(b) of the Internal
9 Revenue Code and Tax Court Rule 152. And it shall not be
10 relied upon as precedent in any other case.
11 Rule references in this opinion are to the Tax
12 Court Rules of Practice and Procedure, and section
13 references are to the Internal Revenue Code, as amended,
14 and in effect at all relevant times.
15 The IRS issued a notice of deficiency asserting
16 an increase in petitioner's income tax and the section
(a)
17 6662(d) penalty. Respondent has conceded the penalty, but
JG
18 the deficiency of $23,624 for 2017 remains in dispute.
19 This Court has jurisdiction under section 6213(a) because
20 petitioner timely petitioned this Court after the notice
21 of deficiency was issued. On the evidence before us, and
22 using the burden of proof principles explained below, the
23 Court finds facts as follows:
24 Petitioner resided in Texas at the time he filed
25 the petition in this case. The record of trial consists
4
1 of three exhibits and petitioner's testimony. Petitioner
2 provided services for Valspar Inc. for which he was paid
3 $119,838 in 2017. The amended return petitioner filed for
4 2017 is in the record and it confirms his testimony that
5 he received $119,838 for Valspar. In the amended return
6 petitioner asserts the $119,838 was not taxable income.
7 The amended return also seeks a refund of all the income
8 tax withheld by Valspar from petitioner's wages in 2017.
9 Petitioner's amended return notes he changed the
10 W-2 he originally received from Valspar to reflect his
11 position regarding the non-taxability of the amounts he
12 was paid by Valspar. Turning to the legal analysis and
13 opinion in this case, we first note that petitioner's
14 position is a discredited argument which is inconsistent
15 with section 61(a)(1). The introduction of section
16 61(a)reads as follows. "Except as otherwise provided in
17 this subtitle gross income means all income from whatever
18 source derived, including (but not limited to) the
19 following items:" Subsection (1) of section 61(a) provides
JG
20 as follows. "Compensation for services including fees,
21 commissions, fringe benefits and similar items."
22 Respondent's determination is generally presumed
23 correct in deficiency cases and the taxpayer has the
24 burden of proof. Tax Court Rule 142(a), and Welch v.
25 Helvering, 290 U.S. 111 (1933). The burden of proof may
5
1 shift to respondent as to certain factual issues which a
2 taxpayer presents credible evidence in support of it.
3 Section 7491(a). In the present case petitioner has not
4 presented any such evidence, and the burden of proof is
5 not shifted under section 7491(a).
6 In cases asserting the failure to report income
7 the Court of Appeals for the Fifth Circuit, where an
8 appeal in this case would ordinarily lie, has held that
9 the IRS must establish a factual foundation to support
10 that the taxpayer engaged in the income producing
11 activity. The Court of Appeals has held that such
12 evidence is necessary before the burden of proof would
13 shift to the taxpayer to establish that the income is not
14 taxable. Here petitioner's testimony and the amended
15 return, which is an exhibit in the record, meet the
16 requirements of the factual foundation. Parker v.
17 Commissioner, 117 F.3d 785, 787 (5th Cir. 1997). In
18 Bindel v. Commissioner, T.C. Memo. 2022-39, the tax court
19 recently dismissed arguments very similar to the arguments
20 petitioner is making in the present case regarding the
21 non-taxability of income. Bindel contains a quote from
22 Crain v. Commissioner, 737 F.2d 1417 (5th Cir. 1984).
23 This quote fits the present case very well, "We perceive
24 no need to refute these arguments with somber reasoning
25 and copious citation of precedent; to do so might suggest
6
1 that these arguments have some colorable merit."
2 Petitioner's arguments clearly merit that analysis and we
3 will make no further discussion of those.
4 We appreciate the fact that ultimately
5 petitioner was willing to admit that he actually received
6 $119,838 for services in 2017. We advised the petitioner
7 that should he continue to pursue frivolous arguments
8 about the taxability of such income, he might face
9 sanctions. Based upon the record of trial and our
that JG
10 analysis of the law the clearly applies to petitioner's
11 situation, a decision will be entered on the deficiency in
12 income tax for respondent. And because of respondent's
13 concession, a decision will be entered for the petitioner
14 relative to the addition to tax under section 6662(a).
15 This concludes the Court's oral findings of fact
16 and opinion in this case.
17 (Whereupon, at 9:55 a.m., the above-entitled
18 matter was concluded.)
19
20
21
22
23
24
25