Ramirez v. Comm'r ( 2007 )


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  •                         T.C. Memo. 2007-347
    UNITED STATES TAX COURT
    JUAN AND ESTHER RAMIREZ, Petitioners v.
    COMMISSIONER OF INTERNAL REVENUE, Respondent
    Docket No. 12141-06.               Filed November 26, 2007.
    Juan and Esther Ramirez, pro se.
    Michael W. Berwind, for respondent.
    MEMORANDUM FINDINGS OF FACT AND OPINION
    COHEN, Judge:   Respondent determined deficiencies and
    penalties with respect to petitioners’ Federal income tax as
    follows:
    - 2 -
    Penalty
    Year         Deficiency               I.R.C. sec. 6662
    2002             $58,816                 $11,763.20
    2003              95,217                  19,043.40
    2004              87,442                  17,488.40
    Unless otherwise indicated, all section references are to the
    Internal Revenue Code in effect for the years in issue.
    After concessions by the parties, the sole issue for
    decision is whether petitioners are liable for the accuracy-
    related penalties determined by respondent pursuant to section
    6662 for substantial understatements of their Federal tax
    liability for the years in issue.
    FINDINGS OF FACT
    Some of the facts have been stipulated, and the stipulated
    facts are incorporated in our findings by this reference.
    Petitioners resided in California at the time they filed their
    petition.      For purposes of trial only, this case was consolidated
    with a related worker classification case at docket No. 12139-06.
    The amounts of total tax liability that petitioners reported
    on their income tax returns for the years in issue and the
    deficiencies determined by respondent, which amounts include
    disallowed credits, for those years are as follows:
    Year           Tax on return         Corrected tax            Understatement
    2002              $4,499                 $61,219*                   $58,816
    2003               5,769                 100,326*                    95,217
    2004              11,566                  99,008                     87,442
    *
    Includes credits disallowed by respondent for this year.
    - 3 -
    Petitioners have conceded the deficiencies in tax as determined
    by respondent.   Petitioners understated gross receipts on their
    Schedule C, Profit or Loss From Business, for all the years in
    issue.   Petitioners have conceded that they understated gross
    receipts by $267,273 for 2003, which amount was nearly half of
    the actual gross receipts in that year.
    OPINION
    Under section 6662, a taxpayer may be liable for a penalty
    of 20 percent on the portion of an underpayment of tax
    attributable to a substantial understatement of tax.      Sec.
    6662(a).   The term “substantial understatement” is defined as the
    greater of 10 percent of the tax required to be shown on the
    return for the taxable year or $5,000.    Sec. 6662(d).    However,
    the accuracy-related penalty is not imposed with respect to any
    portion of the understatement as to which the taxpayer acted with
    reasonable cause and in good faith.     Sec. 6664(c)(1); Higbee v.
    Commissioner, 
    116 T.C. 438
    , 448-449 (2001).    The decision as to
    whether the taxpayer acted with reasonable cause and in good
    faith depends upon all the pertinent facts and circumstances.
    Sec. 1.6664-4(b)(1), Income Tax Regs.    Relevant factors include
    the taxpayer’s efforts to assess his proper tax liability,
    including the taxpayer’s reasonable and good faith reliance on
    the advice of a tax professional.   See
    id. - 4 -
    The amounts required to be reported by petitioners on their
    income tax returns for the years in issue and the understatements
    determined by respondent for those years are set forth in our
    findings.    The amount of the understatement for each of the years
    in issue is more than 10 percent of the tax required to be shown
    and greater than $5,000, which meets the section 6662(d)
    definition of “substantial understatement”.    Thus, petitioners
    substantially understated their income for those years, and
    respondent’s burden of production under section 7491(c) has been
    met.
    Petitioner Juan Ramirez (petitioner) argued at trial that he
    was not aware that petitioners’ income tax liability was
    substantially understated on their returns for the years in
    issue, because he simply turned over all records to his
    accountant and paid what she told him to pay.    The return
    preparer was not called as a witness at trial.    Even if
    petitioners did not review their returns for the years in issue
    and relied blindly on the calculations of petitioner’s
    accountant, such course of action is not reasonable, especially
    in light of the substantial amounts of petitioner’s gross
    receipts in those years, petitioner’s business experience, and
    the large discrepancy between the tax liability reported and the
    tax liability actually owed.    Petitioners have not met their
    burden of proving that they acted with reasonable cause and in
    - 5 -
    good faith with regard to their substantial understatements of
    tax.
    To reflect the foregoing,
    Decision will be entered
    for respondent.
    

Document Info

Docket Number: No. 12141-06

Judges: "Cohen, Mary Ann"

Filed Date: 11/26/2007

Precedential Status: Non-Precedential

Modified Date: 11/21/2020