DocketNumber: Docket No. 1419-11S
Citation Numbers: 2012 T.C. Summary Opinion 81, 2012 Tax Ct. Summary LEXIS 77
Judges: DEAN
Filed Date: 8/13/2012
Status: Non-Precedential
Modified Date: 4/17/2021
PURSUANT TO
Decision will be entered for respondent.
DEAN,
Respondent issued petitioner a notice of deficiency (notice) in which he determined a deficiency of $3,820 and a section 6662(a) accuracy-related penalty of $764 for 2008. The issues for decision are whether petitioner is: (1) entitled to a section 165 casualty loss deduction; and (2) liable for a section 6662(a) accuracy-related penalty.
Some of the facts have been stipulated and are so found. The stipulation of facts and the attached exhibits are incorporated herein by reference. Petitioner *78 resided in Maryland when he filed his petition.
In 2007 petitioner was the registered owner of a 2001 Saleen Ford Mustang (Mustang). On February 6, 2007, the Mustang was damaged in an accident with an uninsured motorist who was at fault for the accident. 1
Petitioner's basis in the Mustang was $25,482. The Mustang's fair market value (FMV) just before the accident was $28,500. Its FMV immediately after the accident and before any repairs was $2,250.
The total cost to repair the Mustang was $18,772.79. Petitioner filed a claim with his insurance company (Nationwide), and it paid $18,522.79 of the repair cost directly to Mike's Auto Body, Inc. (Mike's). Petitioner's only out-of-pocket expense was his deductible of $250. Petitioner regained possession of the Mustang on June 29, 2007.
Nationwide attempted to recover payment, including petitioner's deductible, from the uninsured motorist. Nationwide then forwarded collection attempts to outside counsel in September of 2007. Petitioner did not personally *79 bring a lawsuit or seek to recover damages in any other way from the uninsured motorist.
Petitioner timely filed his 2008 Federal income tax return and claimed a deduction for casualty and theft losses of $17,287 on Schedule A, Itemized Deductions. Petitioner included Form 4684, Casualties and Thefts, with his return. Petitioner did not enter any amount on Form 4684, line 3, Insurance or other reimbursement (whether or not you filed a claim).
Respondent issued petitioner the notice dated December 10, 2010, in which he determined that petitioner was not entitled to a deduction for a casualty or theft loss for 2008 because "[i]nsurance proceeds or any other recovery received, or expected to be received, reduce your casualty or theft loss deduction." Respondent also determined that petitioner was liable for an accuracy-related penalty for 2008.
Generally, the Commissioner's determinations are presumed correct, and the taxpayer bears the burden of proving that those determinations are erroneous. Rule 142(a);
The only reason listed for respondent's determination in the notice is that receipt of insurance proceeds will reduce a casualty or theft loss deduction. Respondent's motion for leave to amend answer in which he alleges that petitioner deducted the casualty loss on the return for the wrong year was granted on January 31, 2012. The Court will address this argument first.
Section 165(a) provides: "There shall be allowed as a deduction any loss sustained
The Mustang was involved in an accident, repaired, and returned to petitioner in 2007. Petitioner claimed a deduction for casualty and theft losses in relation to the Mustang for 2008. Petitioner admitted at trial he claimed the deduction for the wrong year, testifying: "There is no doubt, I filed in the wrong year." The proper year to claim the deduction was 2007.
Even if the correct year for the deduction was 2008, petitioner's only expense not reimbursed by insurance was his deductible of $250, which does not exceed 10% of his adjusted gross income for 2008.
Petitioner is not allowed a deduction for casualty and theft losses for 2008. Respondent's determination is sustained.
Section 6662(a) and (b)(1) and (2) authorizes the Commissioner to impose a penalty equal to 20% of the portion of an underpayment of tax that is attributable to negligence or disregard of rules or regulations or any substantial understatement of income tax. The Commissioner bears the *82 initial burden of production with respect to the taxpayer's liability for the section 6662(a) penalty. Sec. 7491(c). At trial the Commissioner must introduce sufficient evidence "indicating that it is appropriate to impose the relevant penalty."
Respondent determined that petitioner was liable for a section 6662(a) accuracy-related penalty of $764 due to negligence or disregard of rules or regulations or for a substantial understatement of income tax for 2008. 2
For purposes of section 6662, negligence is any failure to make a reasonable attempt to comply with the provisions of the Internal Revenue Code, and disregard includes any careless, reckless, or intentional disregard. Sec. 6662(c);
Respondent has met his burden of production under section 7491(c) because petitioner claimed a deduction for casualty and theft losses on his return and did not include in his computation of the deduction any of the insurance proceeds paid directly to Mike's.
A taxpayer may avoid liability for the section 6662 penalty if the taxpayer demonstrates that he or she had a reasonable basis for the underpayment and that he or she acted in good faith with respect to the underpayment. Sec. 6664(c)(1);
Petitioner argues that he did have reasonable cause for and acted in good faith with respect to the underpayment. He argues that he read the Form 4684 instructions and believed that he had not received any reimbursement from Nationwide because Nationwide paid Mike's directly to repair the Mustang and that he did not directly receive any proceeds from the insurance company.
Section 165(a) provides that a deduction for a loss will be allowed if the loss is "not compensated for by insurance or otherwise." The regulations under section 165 provide that a deduction for a loss will be allowed if the loss is "not made good by insurance".
Petitioner's loss was compensated for by, made good by, and covered by Nationwide. The fact that Nationwide did not provide proceeds directly to petitioner does not mean that he was not reimbursed by Nationwide. Petitioner's narrow definition of "reimbursement" is not the definition a reasonably prudent person would use in his situation.
Respondent's determination to impose a section 6662(a) accuracy-related penalty for negligence is sustained.
We have considered all of petitioner's arguments, and, to the extent not addressed herein, we conclude that they are moot, irrelevant, or without merit.
To reflect the foregoing,
1. Petitioner testified that the car was actually his son's car but was titled in his name for financing reasons. The record does not reflect who was driving the car at the time of the accident.↩
2. The Court need not decide whether petitioner is liable for a sec. 6662(a) penalty for a substantial understatement of income tax.↩
3. The Court notes that Internal Revenue Service tax form instructions cannot be relied upon as authoritative sources of law.