DocketNumber: Tax Ct. Dkt. No. 10421-95
Citation Numbers: 1997 T.C. Memo. 415, 74 T.C.M. 604, 1997 Tax Ct. Memo LEXIS 488
Judges: LARO
Filed Date: 9/18/1997
Status: Non-Precedential
Modified Date: 4/18/2021
MEMORANDUM OPINION
LARO, JUDGE: Respondent moves pursuant to
Additions to Tax | |||||
Sec. | Sec. | Sec. | Sec. | ||
Year | Deficiency | 6653(b)(1)(A) | 6653(b)(1)(B) | 6653(b)(1) | 6651(f) |
1987 | $ 23,320 | $ 17,490 | 50% of the | -- | -- |
interest due | |||||
on $ 23,320 | |||||
1988 | 18,554 | -- | -- | $ 13,916 | -- |
1989 | 9,658 | -- | -- | -- | $ 7,244 |
Respondent asserts in the alternative that petitioner is liable for the additions to tax under
Based on matters deemed admitted, respondent claims that there is no genuine issue of material fact as to either petitioner's liability for deficiencies in his 1987 through 1989 Federal income tax or petitioner's liability for the fraud additions under
BACKGROUND
Petitioner and his spouse Angela M. Campbell (Ms. Campbell) filed joint Federal income tax returns for 1983 through 1986. Despite demonstrated knowledge of the requirement to file tax returns, petitioner and Ms. Campbell failed to file Federal income tax returns for 1987 through 1989. Using the expenditure method for reconstruction of*491 income, respondent determined that the gross income of petitioner and Ms. Campbell was $126,846, $108,438, and $47,969 for 1987 through 1989, respectively. Respondent determined that petitioner's community property share for the respective years was $63,423, $54,219, and $23,984. On June 15, 1995, petitioner petitioned the Court for a redetermination of respondent's determination. Petitioner was incarcerated at the Montgomery County jail in Conroe, Texas, when he petitioned the Court.
On April 19, 1996, respondent filed a motion for continuance of trial on the ground that petitioner was undergoing criminal prosecution, and petitioner's criminal trial was scheduled to commence on May 20, 1996. Contemporaneously, respondent filed a motion to consolidate for trial, briefing, and Opinion petitioner's case at docket number 10421-95 with Ms. Campbell's case at docket number 10419-95. Petitioner's and Ms. Campbell's cases were set for separate trials at the trial session beginning June 10, 1996. The Court granted both of respondent's motions, and the trial was rescheduled for the trial session beginning on November 12, 1996. In or around May 1996, petitioner*492 was found guilty of a felony crime and sentenced to 10 years' imprisonment in a Federal correctional facility.
On August 26, 1996, pursuant to
1. Petitioner did not file federal income tax returns when they were due for the taxable years 1987, 1988, and 1989.
2. Petitioner has not filed federal income tax returns at any time for the taxable years 1987, 1988, and 1989.
* * * * * * *
4. Prior to 1987, petitioner and his spouse filed joint federal income tax returns for the taxable years 1983, 1984, 1985, and 1986.
* * * * * * *
6. During the taxable years 1987, 1988, and 1989, petitioner was engaged in the following cash activities:
a. professional cardplayer;
b. gambling;
c. sale of illegal narcotics; and
d. repair and sales of used automobiles.
* * * * * * *
12. On or about July 22, 1988, approximately $17,841.00 in cash was seized from petitioner's residence at 113 Brandon Road, Conroe, Texas by law enforcement officials.
13. The money seized on July 22, 1988, was owned by petitioner and his spouse.
* * * * * * *
16. Petitioner*493 and his spouse wrote checks in the total amount of $30,246.06 which were paid during 1987 out of petitioner's checking account #055-005-33836 at Texas Commerce Bank.
17. Petitioner and his spouse wrote checks in the total amount of $56,111.82 which were paid during 1988 out of petitioner's checking account #055-005-33836 at Texas Commerce Bank.
18. Petitioner and his spouse wrote checks in the total amount of $27,291.87 which were paid during 1987 out of petitioner's checking account #055-005-34271 at Texas Commerce Bank.
19. Petitioner and his spouse wrote checks in the total amount of $11,633.38 which were paid during 1988 out of petitioner's checking account #055-005-34271 at Texas Commerce Bank.
20. Petitioner and his spouse wrote checks in the total amount of $23,545.40 which were paid during January, 1989 out of petitioner's checking account #055-005-33836 at Texas Commerce Bank.
21. Petitioner and his spouse wrote checks in the total amount of $452.00 which were paid during January, 1989, out of petitioner's checking account #055-005-34271 at Texas Commerce Bank.
22. Petitioner and his spouse had no nontaxable sources of income during the taxable*494 years 1987, 1988, and 1989 * * *.
23. The total unreported gross income of petitioner and his spouse for the taxable year 1987 is $126,845.94.
24. Petitioner's share of the total unreported gross income for 1987, under the community property laws of Texas, is $63,422.97.
25. The total unreported gross income for petitioner and his spouse for the taxable year 1988 is $108,438.07.
26. Petitioner's share of the total unreported gross income for 1988, under community property laws of Texas, is $54,219.04.
27. The total unreported taxable income for petitioner and his spouse for the taxable year 1989 is $47,968.80.
28. Petitioner's share of the total unreported gross income for 1989, under the community property laws of Texas, is $23,984.40.
* * * * * * *
32. Petitioner's correct tax liability, including self- employment tax, for the taxable years 1987, 1988, and 1989, is $23,320.00, $18,554.00, and $9,658.00, respectively.
33. Petitioner has not made any payments of tax for the income tax liabilities due for 1987, 1988, or 1989.
34. Petitioner's failure to file a federal income tax return for each of the taxable years 1987, 1988, and 1989, *495 was fraudulent with the intent to evade the payment of taxes on taxable income earned in each respective year.
35. Petitioner failed to maintain complete and adequate records of the activities he conducted in cash during the taxable years 1987, 1988, and 1989, with the intent to evade the payment of taxes on such business transactions in each respective year.
36. Petitioner failed to produce any records of his business or personal activities for respondent during the examination of his income tax liabilities for the taxable years 1987, 1988, and 1989.
37. Petitioner's failure to produce any records of his business or personal activities for respondent during the examination of petitioner's income tax liabilities for the taxable years 1987, 1988, and 1989 was fraudulent with the intent to evade the payment of taxes for each respective year.
Petitioner failed to respond to respondent's requests for admission as required by
At the trial session beginning November 12, 1996, there was no appearance by or on behalf of petitioner or Ms. Campbell. Respondent submitted to the Court a decision document with respect to Ms. Campbell and informed the Court that petitioner remained *496 incarcerated. Respondent also informed the Court that petitioner and respondent had reached a basis for settlement, that a decision document had been sent to petitioner, and that petitioner had subsequently mailed the decision document back to respondent, and respondent was awaiting delivery. Upon respondent's request for additional time to await delivery of decision document, the Court ordered that petitioner's and Ms. Campbell's cases be severed and that petitioner's case be continued with jurisdiction retained.
Petitioner had not in fact mailed the proposed decision document and settlement computations to respondent. During late November and December of 1996, respondent repeatedly attempted to contact petitioner and Ms. Campbell. Petitioner did not respond to respondent's correspondence or phone calls. Following respondent's status report dated January 28, 1997, the Court ordered that jurisdiction is no longer retained by the Division and that petitioner's case be restored to the general docket. The case was set for trial at the trial session beginning on September 15, 1997.
On August 8, 1997, respondent filed a motion for summary judgment moving the Court that, based on matters*497 deemed admitted by petitioner as set forth in respondent's requests for admission, we find petitioner liable for the deficiencies and additions to tax as shown in the notice of deficiency. In the event that the Court denies respondent's motion for summary judgment, respondent also contemporaneously filed a motion for writ of habeas corpus and testificandum to secure petitioner's presence at the September 15, 1997, trial session. On August 11, 1997, the Court ordered a response from petitioner to respondent's motion for summary judgment to be received on or before August 18, 1997. Petitioner has not complied with the Court's order. Petitioner has not filed any motion to withdraw the deemed admissions pursuant to
DISCUSSION
Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials of phantom factual issues.
if the pleadings, answers to interrogatories, depositions, admissions, and any other acceptable materials, together with the affidavits, if any, show*498 that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law.
Because summary adjudication decides an issue against a party before trial, we grant such a remedy cautiously and sparingly, and only after carefully ascertaining that the moving party has met all requirements for summary adjudication.
The Court will not resolve disagreements over material factual issues through summary adjudication.
The first issue is whether petitioner is liable for the deficiencies. Respondent asks the Court to hold as a matter of law that petitioner owes the deficiencies as determined in the notice of deficiency. The deficiencies are in the amounts of $23,320, $18,554, and $9,658 for 1987 through 1989, respectively. Under
Petitioner has admitted facts which overwhelmingly establish substantial, intentional omissions of taxable income for 1987 through 1989. The admissions establish that petitioner was engaged in activities such as gambling, sales of illegal narcotics, and car sales and repairs, and that petitioner received unreported income from these activities. Specifically, petitioner is deemed to have admitted under
6. During the taxable years 1987, 1988, and 1989, petitioner was engaged in the following cash activities:
a. professional cardplayer;
b. gambling;
c. sale of illegal narcotics; and
d. repair and sales of used automobiles.
* * * * * * *
23. The total unreported gross income of petitioner and his spouse for the taxable year 1987 is $126,845.94.
24. Petitioner's share*501 of the total unreported gross income for 1987, under the community property laws of Texas, is $63,422.97.
25. The total unreported gross income for petitioner and his spouse for the taxable year 1988 is $108,438.07.
26. Petitioner's share of the total unreported gross income for 1988, under community property laws of Texas, is $54,219.04.
27. The total unreported taxable income for petitioner and his spouse for the taxable year 1989 is $47,968.80.
28. Petitioner's share of the total unreported gross income for 1989, under the community property laws of Texas, is $23,984.40.
* * * * * * *
32. Petitioner's correct tax liability, including self- employment tax, for the taxable years 1987, 1988, and 1989, is $23,320.00, $18,554.00, and $9,658.00, respectively.
The deemed admissions establish that there is no genuine issue of material fact with respect to the underlying deficiencies and support respondent's determination in this regard.
The second issue is whether petitioner is liable for the additions to tax for fraud under
The additions to tax for fraud are civil sanctions "provided primarily as a safeguard for the protection of the revenue and to reimburse the government for the heavy expense*503 of investigation and the loss resulting from the taxpayer's fraud."
Under
1.
To impose liability under
Petitioner failed to file Federal income*505 tax returns for 1987 and 1988. The deemed admissions establish that petitioner's tax liabilities for 1987 and 1988 are $23,320 and $18,554, respectively. Since for purposes of
2. FRAUDULENT INTENT
Under
Because matters deemed admitted pursuant to
34. Petitioner's failure to file a federal income tax return for each of the taxable years 1987, 1988, and 1989, was fraudulent with the intent to evade the payment of taxes on taxable income earned in each respective year.
35. Petitioner failed to maintain complete and adequate records of the activities he conducted in cash during the taxable years*507 1987, 1988, and 1989, with the intent to evade the payment of taxes on such business transactions in each respective year.
36. Petitioner failed to produce any records of his business or personal activities for respondent during the examination Of his income tax liabilities for the taxable years 1987, 1988, and 1989.
37. Petitioner's failure to produce any records of his business or personal activities for respondent during the examination of petitioner's income tax liabilities for the taxable years 1987, 1988, and 1989 was fraudulent with the intent to evade the payment of taxes for each respective year.
In support of a finding of fraud, courts have relied on a number of indicia of fraud in deciding
Second, failure to maintain adequate books and records and failure to produce business records during the examination process are evidence of fraud. The deemed admissions in pertinent part establish that petitioner
failed to maintain complete and adequate records of the activities he conducted in cash during the taxable years 1987, 1988, and 1989 * * * and that petitioner failed to produce any records of his business or personal activities for respondent during the examination of petitioner's income tax liabilities for the taxable years 1987, 1988, and 1989.
Furthermore, petitioner is deemed to have admitted that his failure to produce records "was fraudulent with the intent to evade the payment of taxes".
Third, failing to file tax returns is evidence of fraud. "The mere failure to file tax returns, even over an extended period of time, does not per se establish fraud * * * however, the failure to file tax returns*510 is persuasive circumstantial evidence of fraud."
In conclusion, petitioner's deemed admissions support a finding of fraud. Respondent has established by clear and convincing evidence that petitioner acted fraudulently in failing to file returns and report income for 1987 through 1989.
An appropriate order will be issued and decision will be entered.
1. Rule references are to the Tax Court Rules of Practice and Procedure. Section references are to the Internal Revenue Code in effect for the years in issue. Unless otherwise indicated, dollar amounts are rounded to the nearest dollar.↩
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Shiosaki v. Commissioner , 61 T.C. 861 ( 1974 )
Doncaster v. Commissioner , 77 T.C. 334 ( 1981 )
Espinoza v. Commissioner , 78 T.C. 412 ( 1982 )
Morrison v. Commissioner , 81 T.C. 644 ( 1983 )