Kold-Warren v. Comm'r ( 2007 )

T.C. Summary Opinion 2007-197
UNITED STATES TAX COURT
CHAD W. AND ALIZA KOLD-WARREN, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 24445-05S. Filed November 21, 2007.
Chad W. and Aliza Kold-Warren, pro se.
Michael S. Hensley, for respondent.
WHALEN, Judge: This case was heard pursuant to the
provisions of section 7463 of the Internal Revenue Code in effect
when the petition was filed. All section references are to the
Internal Revenue Code in effect for the year in issue, and all
Rule references are to the Tax Court Rules of Practice and
Procedure, unless otherwise indicated. Pursuant to section
7463(b), the decision to be entered is not reviewable by any
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other court, and this opinion shall not be treated as precedent
for any other cases.
The Court issued a bench opinion in this case on November
16, 2006, and directed therein that the decision be entered
pursuant to the procedures set forth in Rule 155 of the Tax Court
Rules of Practice and Procedure. In accordance with those
procedures, each party submitted a computation of the deficiency.
Respondent’s Computation for Entry of Decision was filed March
21, 2007. Petitioners’ Alternative Computation for Entry of
Decision was filed April 5, 2007. Respondent’s Reply to
Petitioners’ Alternative Computation for Entry of Decision,
referred to herein as respondent’s revised computation, was filed
June 15, 2007. The case is before the Court to resolve the
differences between the parties regarding the amount of the
deficiency to be entered by the Court.
Respondent’s original computation asks the Court to
redetermine a deficiency for 2002 of $10,246 and to redetermine
petitioners’ liability for a penalty of $2,049.20 under section
6662(a). Respondent’s revised computation concedes that the
original computation is incorrect on a number of points.
Respondent’s revised computation asks the Court to decide that
there is a deficiency of $5,913 in petitioners’ income tax for
2002, as computed in respondent’s revised computation, and to
decide further that petitioners are liable for an accuracy-
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related penalty under section 6662(a) in the amount of 20 percent
of the deficiency, or $1,182.60.
Petitioners’ alternative computation asks the Court to
decide that the amount of the deficiency is $2,225. Petitioners’
computation does not discuss the accuracy-related penalty under
section 6662(a). Nevertheless, we note that the Court expressly
sustained respondent’s determination of the accuracy-related
penalty in its bench opinion, and petitioners’ liability for the
accuracy-related penalty under section 6662(a) is not in issue in
these proceedings under Rule 155. The decision in this case will
include petitioners’ liability for an accuracy-related penalty in
the amount of 20 percent of the deficiency.
A summary of the deficiency computations of both parties is
appended hereto as Appendix. There are six differences between
petitioners’ computation and respondent’s revised computation.
The attached summary highlights those six differences. We
address each of them below.
Item No. 1: Petitioners’ computation claims a capital loss
of $1,848, whereas respondent’s revised computation allows a
capital loss of $1,719, a difference of $129. Paragraph 13 of
the Stipulation of Facts states that petitioners incurred a
capital loss of $1,719 during 2002. Accordingly, the capital
loss allowed in respondent’s revised computation is correct.
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Item No. 2: Petitioners’ computation claims miscellaneous
deductions, subject to the 2-percent of adjusted gross income
limitation, of $18,191, whereas respondent’s revised computation
allows a higher amount, $18,360, a difference of $169. The
amount allowed by respondent is the sum of $16,672, and $1,688.
These amounts are set forth in paragraphs 6 and 7 of the
Stipulation of Facts, respectively. They relate to deductions
for depreciation and other automobile expenses for the
unreimbursed employee business use of petitioners’ truck.
Accordingly, the miscellaneous deductions, subject to the 2-
percent of adjusted gross income limitation, allowed in
respondent’s revised computation, $18,360, is correct.
Item No. 3: Petitioners’ computation calculates tax of
$8,439, based upon taxable income of $59,421.52, whereas
respondent’s revised computation calculates tax of $9,827, based
upon taxable income of $59,384. The tax computed by respondent
is $1,388 more than the tax computed by petitioners.
Respondent’s tax computation, based upon the tax table for
married individuals filing joint returns, is correct, i.e.,
(($59,384-$46,700) x .27) +$6,405.
Item No. 4: Petitioners compute no alternative minimum tax,
whereas respondent’s revised computation computes alternative
minimum tax of $1,688. The alternative minimum tax is not
mentioned in the Stipulation of Facts, and it was not raised as
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an issue at trial. In their computation, petitioners point out
that alternative minimum tax of $1,553 was reported on their
return for 2002, but no alternative minimum tax was determined
“per exam”. In effect, petitioners’ computation suggests that
alternative minimum tax is not applicable because none was
computed in the notice of deficiency.
We disagree. There is nothing in the record to suggest that
respondent conceded the alternative minimum tax in this case, and
petitioners have shown no reason why the alternative minimum tax
is not applicable. No alternative minimum tax was determined by
respondent in the notice of deficiency because there was no
excess of tentative minimum tax over regular tax, based upon the
adjustments determined in the notice of deficiency. See sec.
55(a). Based upon the adjustments redetermined in these
proceedings, the situation is different. This is simply a
computational matter. We agree with respondent that alternative
minimum tax is applicable, and we agree with the amount computed
in respondent’s revised computation, $1,688.
Item No. 5: Petitioners claim a child tax credit of $500,
the same amount claimed on their return, whereas respondent’s
revised computation allows zero. Respondent disallowed the child
tax credit in the notice of deficiency as a result of the
application of the limitation based on petitioners’ adjusted
gross income. See sec. 24(b)(1). Similarly, based upon the
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adjusted gross income redetermined in these proceedings,
petitioners are still not entitled to the child tax credit by
reason of the limitation set forth in section 24(b)(1).
Item No. 6: Petitioners’ computation claims a credit for
Federal income tax withheld of $5,714, whereas respondent’s
revised computation allows a credit of $5,602, or $112 less. We
note that petitioners’ return claimed a refund of $112.
Respondent’s revised computation correctly reduced the amount of
the credit for Federal income tax withheld by the amount claimed
by petitioners as a refund on their return.
For the reasons set forth above, we agree with the
computation of the deficiency set forth in respondent’s revised
computation. Accordingly,
Decision will be entered in
accordance with respondent’s reply
to petitioners’ alternative
computation for entry of decision.
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Appendix
Petitioners Respondent Differences
Wages 128,299.00 128,299.00
Taxable interest 2,456.00 2,456.00
Dividends 22.00 22.00
Capital gain or loss -1,848.00 -1,719.00 -129.00 1
Rental real estate losses -25,000.00 -25,000.00
Other income: gambling 18,947.00 18,947.00
Adjusted gross income 122,876.00 123,005.00 -129.00
Medical and dental -0- -0-
Taxes 9,003.00 9,003.00
Home interest 10,021.00 10,021.00
Contributions 750.00 750.00
Miscellaneous deductions 18,191.00 18,360.00 -169.00 2
subject to 2% AGI limit
2% AGI 2,457.52 2,460.00 -2.48
Excess miscellaneous 15,733.48 15,900.00 -166.52
deductions
Other miscellaneous 18,947.00 18,947.00
deductions
Total itemized 54,454.48 54,621.00 -166.52
deductions
Adjusted gross income 122,876.00 123,005.00 -129.00
Total itemized deductions 54,454.48 54,621.00 -166.52
AGI less itemized deductions 68,421.52 68,384.00 37.52
Exemptions -9,000.00 -9,000.00 -0-
Taxable income 59,421.52 59,384.00 37.52
Tax from tax table 8,439.00 9,827.00 -1,388.00 3
Alternative minimum tax -0- 1,688.00 -1,688.00 4
Less credits (child care) 500.00 -0- 500.00 5
Total tax less credits 7,939.00 11,515.00 -3,576.00
Federal tax withheld 5,714.00 5,602.00 112.00 6
Deficiency 2,225.00 5,913.00 -3,688.00