DocketNumber: No. 5919-00
Citation Numbers: 2001 T.C. Memo. 212, 82 T.C.M. 409, 2001 Tax Ct. Memo LEXIS 244
Judges: \"Wells, Thomas B.\"
Filed Date: 8/9/2001
Status: Non-Precedential
Modified Date: 4/17/2021
2001 Tax Ct. Memo LEXIS 244">*244 Decision will be entered under Rule 155.
MEMORANDUM OPINION
WELLS, CHIEF JUDGE: Respondent determined the following deficiencies in, addition to, and accuracy-related penalties with respect to petitioners' Federal income taxes for taxable years 1995 and 1996:
Accuracy-related
Addition to Tax Penalties
_______________ ________________
Year Deficiency
____ __________ _______________ ________________
1995 $ 72,792 $ 11,258 $ 12,968.00
1996 17,658 -- 3,531.60
Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.
After concessions by respondent, 1 we must decide the following issues: 22001 Tax Ct. Memo LEXIS 244">*245 (1) Whether petitioners are entitled to deductions for interest that they paid with respect to delinquent Federal income taxes for 1984, 1985, 1986, 1987, and 1993; (2) whether petitioners are liable for the addition to tax under
BACKGROUND
The parties submitted the instant case fully stipulated pursuant to Rule 122. The stipulated facts are incorporated herein by reference and2001 Tax Ct. Memo LEXIS 244">*246 are found as facts in the instant case. Petitioners resided in Dallas, Texas, when they filed their petition.
Petitioners were delinquent in paying their Federal income taxes for 1984, 1985, 1986, 1987, and 1993. During the taxable year 1995, petitioners paid $ 228,180.67 in statutory interest under section 6601(a) on the aforementioned delinquent Federal income tax liabilities.
On April 15, 1996, petitioners filed with the Internal Revenue Service (IRS) Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. On August 14, 1996, petitioners filed with the IRS Form 2688, Application for Additional Extension of Time To File U.S. Individual Income Tax Return. The original due date of petitioners' 1995 tax return was April 15, 1996, and with extensions the due date was October 15, 1996. On June 16, 1997, petitioners filed their joint 1995 Federal income tax return.
Petitioners claimed deductions on their 1995 and 1996 tax returns for a portion of the $ 228,180.67 of statutory interest that they paid on their delinquent taxes during 1995. In particular, for 1995, petitioners reported $ 166,358 as an expense on Schedule C, Profit or Loss From2001 Tax Ct. Memo LEXIS 244">*247 Business, and $ 41,589 as an investment interest expense on Form 4952, Investment Interest Expense Deduction. Of the $ 41,589 reported on Form 4952, petitioners claimed a deduction of $ 18,674 on Schedule A, Itemized Deductions, of their 1995 return and carried over the balance of $ 22,915 as an interest expense on Schedule A of their 1996 return.
In the notice of deficiency sent to petitioners for 1995 and 1996, respondent determined that the deductions that petitioners claimed for investment interest and Schedule C interest expenses represented nondeductible personal interest expenses under
Petitioners filed a petition contesting the notice of deficiency. When the instant case was called for trial, the parties agreed to submit the case as fully stipulated. The Court, pursuant to Rule 151, ordered the submission of briefs 75 days following trial. Petitioners failed to submit a brief. After respondent submitted an initial brief, the Court granted respondent's request for leave not to file a reply brief.
DISCUSSION
INTEREST DEDUCTIONS FOR DELINQUENT PAYMENT OF TAXES
Petitioners contend in their petition that their deductions were allowable as (1) interest paid or2001 Tax Ct. Memo LEXIS 244">*248 accrued on indebtedness properly allocable to a trade or business, or (2) investment interest. Respondent contends that the disputed amounts are nondeductible personal interest expenses. It is well settled that determinations made by the Commissioner to disallow deductions in a notice of deficiency normally are presumed to be correct, and the taxpayer bears the burden of proving that those determinations are erroneous.
2001 Tax Ct. Memo LEXIS 244">*249 We have held that interest paid on delinquent Federal income tax liabilities is personal interest and nondeductible under
Because we agree with respondent that petitioners failed to prove that the interest expense was incurred on indebtedness properly allocable to petitioners' trade or business or to their investment activities, we need not and do not consider sec. 1.163- 9T(b)(2)(i)(A), 2001 Tax Ct. Memo LEXIS 244">*250 Temporary Income Tax Regs.,
ADDITION TO TAX
Respondent determined that petitioners are liable for an addition to tax for 1995 pursuant to
With extensions, petitioners' return for taxable year 1995 was due on October 15, 1996. The parties have stipulated that petitioners filed their return for 1995 on June 16, 1997, approximately 8 months after it was due. The record is devoid of any showing that petitioners' failure to file timely was due to reasonable cause and not due to willful neglect. E.g.,
ACCURACY-RELATED PENALTY
For 1996, 4 respondent determined that petitioners are liable for the accuracy-related penalty provided under
The record contains no evidence as to petitioners' reasonable cause or good faith for claiming the deductions in issue nor any other evidence that would show error in respondent's determination of the penalty. Accordingly, we sustain respondent's determination that petitioners are liable for the accuracy-related penalty under 6662(a) for 1996.
To reflect the foregoing2001 Tax Ct. Memo LEXIS 244">*253 and respondent's concessions,
Decision will be entered under Rule 155.
1. Respondent conceded the following items: (1) The adjustment in the notice of deficiency of $ 15,954 for alleged unreported interest income for 1995; (2) $ 26,136 of the total adjustment in the notice of deficiency for itemized deductions for 1996; and (3) the accuracy-related penalty under
2. Certain computational issues also remain for 1995, resolution of which flows automatically from our resolution of the determinations in the notice that we address herein.↩
3.
4. As stated above, respondent conceded the accuracy-related penalty for 1995.↩
James L. Redlark Cheryl L. Redlark v. Commissioner of ... , 141 F.3d 936 ( 1998 )
United States v. Boyle , 105 S. Ct. 687 ( 1985 )
Welch v. Helvering , 54 S. Ct. 8 ( 1933 )
Indopco, Inc. v. Commissioner , 112 S. Ct. 1039 ( 1992 )
Redlark v. Comm'r , 106 T.C. 31 ( 1996 )