DocketNumber： Nos. 15557-99, 4590-00L
Citation Numbers： 91 T.C.M. 1053, 2006 Tax Ct. Memo LEXIS 85, 2006 T.C. Memo. 82
Judges： "Ruwe, Robert P."
Filed Date： 4/24/2006
Status： Non-Precedential
Modified Date： 11/20/2020
MEMORANDUM FINDINGS OF FACT AND OPINION
RUWE, Judge: These cases were consolidated for purposes of trial, briefing, and opinion. On August 20, 1999, respondent issued a notice of deficiency, which determined deficiencies and penalties with respect to petitioner's Federal income taxes as follows:
Penalty
Year Deficiency
1989 $ 46,052 $ 34,539.00
1990 38,577 28,932.75
1991 52,452 39,339.00
1992 23,427 17,570.25
The issue for 1989 is whether petitioner has placed respondent's deficiency determination in issue. If he has, the next issue is whether assessment of the deficiency determined for*86 1989 is barred by the statute of limitations.
After concessions by the parties, the issues for decision in docket No. 15557-99 with respect to 1990, 1991, and 1992 are: (1) Whether petitioner received and failed to report substantial amounts of farm income for 1990, 1991, and 1992; *87 (2) whether petitioner received and failed to report interest income of $ 3,069 in 1990, $ 3,153 in 1991, and $ 8,784 in 1992; (3) whether petitioner is entitled to claim a loss of $ 31,000 in 1991 from the sale of one of his farms; (4) whether petitioner had farm expenses in amounts greater than allowed by respondent;
Some of the facts have been stipulated and are so found. The stipulation of facts, the first, second, third, and fourth supplemental stipulations of facts, and the attached exhibits are incorporated herein by this reference. The stipulations of facts include transcripts and exhibits from petitioner's criminal prosecution, which commenced on March 16, 1998. The stipulations incorporate the trial testimony of the witnesses from the criminal prosecution as though it were given during the course of the trial in this Court.
The petition in docket No. 15557-99 was filed on September 28, 1999. The petition in docket No. 4590-00L was filed on April 25, 2000. When he filed the petitions in these cases, petitioner was incarcerated in a Federal penitentiary in Elkton, Ohio. Upon release from prison in 2002, petitioner resided in Wabash, Indiana.
Petitioner married Judith Ann Mosier on or about June 28, 1959. Michael Hoover and Tadd Hoover are two of the couple's children. Petitioner and Ms. Mosier divorced on July 25, 1990.
Farm Business
From the 1970s through 1992, farming was petitioner's primary source of income. Michael Hoover and Tadd Hoover worked for petitioner during*89 the years in issue.
Beginning in the late 1970s and continuing through 1992, petitioner's farming activities included a dairy herd operation. During the years at issue, petitioner's dairy herd consisted of approximately 60 cows, 30 heifers, and 17 calves. Petitioner sold all the milk produced by his dairy herd to Best Ever Dairy of Anderson, Indiana (Best Ever Dairy), from 1989 to 1992. *90 did not give any of the milk proceeds to Michael Hoover.
After petitioner's September 27, 1988, letter, petitioner sent an undated letter to Best Ever Dairy that revised the payment method. Petitioner directed Best Ever Dairy to issue one check payable to petitioner in the amount of $ 10 and a second check payable to Tadd Hoover in an amount equal to the balance due. Petitioner also instructed Best Ever Dairy to mail both checks to petitioner. From August 30, 1990, through December 31, 1992, Best Ever Dairy followed petitioner's instructions.
The milk proceeds belonged to petitioner. When Tadd Hoover received checks from Best Ever Dairy, he endorsed the checks and gave them to petitioner. Sometime after petitioner told Best Ever Dairy to split the milk sales checks between Harvey Hoover and Michael Hoover or Tadd Hoover, petitioner advised Michael that he was reporting all of the milk sales on his tax returns and paying the taxes due on the milk sales.
Petitioner's milk sales to Best Ever Dairy were computed by Best Ever Dairy in terms of gross sales from which it deducted certain expenses attributable to petitioner and remitted the net amount to petitioner. Petitioner received*91 milk sale proceeds from Best Ever Dairy as follows: The above-stated expenses consisted of hauling, market orders,
Year Gross Sales Expenses Net Sales
____ ___________ ________ _________
1990 $ 146,416.57 $ 8,615.19 $ 137,801.38
1991 101,047.40 7,278.94 93,768.46
1992 117,274.22 8,456.73 108,817.49
The above-stated expenses consisted of hauling, market orders, NDPRB, CCC, and Cream LIC expenses. *92 the cattle were ultimately made payable to petitioner or Michael Hoover in amounts totaling $ 3,455 in 1990, $ 1,375 in 1991, and $ 375 in 1992. *93 240 Michael Hoover 125
1992 219 Harvey Hoover 375
Petitioner also sold dairy cattle through Rochester Sale Barn in 1990, 1991, and 1992. Although Rochester Sale Barn issued checks to either Tadd Hoover or Michael Hoover, petitioner received the proceeds from the checks. Petitioner's gross sales, expenses, and net sales from Rochester Sale Barn were as follows:
Year Gross Sales Expenses Net Sales
____ *94 ___________ ________ _________
1990 $ 698.60 $ 18.75 $ 679.85
1991 1,643.15 36.60 1,606.55
1992 4,793.80 116.35 4,677.45
Respondent concedes that these amounts should be given capital gains treatment.
From 1987 through 1992, petitioner also sold livestock through the Stony Pike Livestock Auction (Stony Pike). Although Stony Pike issued most of the checks to Tadd Hoover, *95 Respondent concedes that these amounts should be given capital gains treatment.
Petitioner's farming operation also included the planting and harvesting of corn during the years 1989 through 1992. On August 21, 1990, Ag Max, a grain elevator that buys and sells grain, issued a $ 17,208.11 check to Tadd Hoover and Michael Hoover for the purchase of 6,104.42 bushels of petitioner's corn.
From 1989 through 1992, petitioner stored corn at, and bought cattle feed from, Roann Farm Center, Inc. (Roann), a grain elevator and feed operation in Wabash, Indiana. Petitioner maintained his corn inventory held in storage with Roann in the name of Michael Hoover or Tadd Hoover. Roann paid petitioner $ 7,680 on April 25, 1990, $ 17,500 on April 15, 1991, and $ 6,200 on February 4, 1992, for shelled corn. These payments were made by checks payable to Michael Hoover in 1990, Tadd Hoover in 1991, and petitioner in 1992.
Petitioner's brother, Fred Hoover, also engaged in farming. Fred Hoover rented farm land from petitioner during the years in issue. Fred Hoover paid rent to petitioner of $ 10,500 in 1990, $ 2,475 in 1991, and $ 2,475 in 1992.
Petitioner and Fred Hoover also practiced a bartering*96 system in which they exchanged goods and services. Fred Hoover maintained an account of debts due to and owed by petitioner during the years in issue. These records reflect that Fred Hoover paid petitioner for the excess of goods and services provided by petitioner as follows:
Year Goods and
Service Provided Amount Date Check Issued
________________ ______ _________________
1990 $ 5,569.32 2/1/91
1991 7,598.75 1/22/92
1992 4,743.32 2/3/93
Interest Income
In 1990, 1991, and 1992, petitioner received interest income as follows:
Source 1990 1991 1992
______ ____ ____ ____
Bank One $ 583 -- --
Fidelity Federal 188 -- --
First Merchants Bank 139 *97 $ 814 $ 512
Bureau of Public Debt -- 80,468 --
(U.S. savings bonds)
Ft. Wayne National -- -- 6,317
Bank CDs
Lafayette Life Ins. Co. -- -- 13
Tucker Land Contract 2,930 2,339 1,942
______ ______ ______
On his income tax returns, petitioner reported gross income from farming of $ 35,551 in 1989, $ 21,953 in 1990, $ 14,069 in 1991, and $ 20,700 in 1992. On his Schedules F, Farm Income and Expenses, petitioner reported his gross income from farming as Other income, including Federal and follows:
Year Source Amount
____ ______ ______
1989 Sale of livestock, produce, grains, and $ 14,636
other products raised
Agricultural program payments 20,596
Other income, including Federal and State 319
gasoline or fuel tax credit or refund
1990 Sale of livestock, produce, grains, and 12,426
other products raised
Agricultural program payments *99 5,585
Crop insurance proceeds and certain disaster 3,708
payments
Other income, including Federal and State 234
gasoline or fuel tax credit or refund
1991 Sale of livestock, produce, grains, and 13,788
other products raised
Other income, including Federal and State 281
gasoline or fuel tax credit or refund
1992 Sale of livestock, produce, grains, and 19,865
other products raised
Other income, including Federal and 405
State gasoline or fuel tax credit or
refund
On his income tax returns for 1990, 1991, and 1992, petitioner claimed expenses on Schedules F as follows:
1990 1991 1992
____ ____ ____
Fertilizers & lime $ 6,124 $ 7,980 $ 7,260
Gasoline,*100 fuel & oil 2,640 2,875 3,251
Insurance 859 1,025 825
Repairs & maintenance 937 4,545 1,987
Seeds & plants 1,661 1,235 1,359
Supplies 879 1,462 1,162
Custom hire 2,565 2,990 2,540
(Machine Work)
Other expenses 954 196 104
Depreciation 7,871 5,622 4,016
Mortgage interest 11,575 10,670 --
Utilities -- -- 4,470
Taxes 1,348 1,226 891
______ ______ ______
Total 37,413 39,826 27,865
Petitioner reported net farming losses of $ 7,600 in 1989, $ 15,460 in 1990, $ 25,757 in 1991, and $ 7,595 in 1992. After*101 concessions, respondent agrees that petitioner incurred allowable farm expenses in 1990, 1991, and 1992 as follows: *102 1,068 3,476
Depreciation 20,910 14,293 11,986
Rent -- 8,260 9,456
Taxes 1,929 1,857 398
______ ______ ________
Total 63,381 54,652 *103 reported that the farm was sold for $ 75,000 on January 20, 1991. Form 4797 also shows that petitioner's basis in the farm property was $ 106,000. Respondent disallowed the claimed loss and increased petitioner's taxable income by $ 31,000. *104 March 19, 1998, a jury found petitioner guilty of three counts of filing false Federal income tax returns for 1990, 1991, and 1992. *105 to Purdue University, Division of Financial Aid
* * * in the sum of $ 13,543.00 and finally, the remainder shall
be distributed to the Internal Revenue Service for application
to Mr. Hoover's tax liability.
Petitioner failed to turn over the 304 U.S. saving bonds to the U.S. Attorney's Office on or before August 7, 1998.
The U.S. attorney filed a motion for an order to show cause why petitioner should not be held in contempt of the District Court's restitution order by failing to turn over the 304 U.S. Saving Bonds. On September 18, 1998, the District Court conducted a trial on the Government's motion. The District Court held that petitioner was in contempt of the court's March 19, 1998, order "when he transferred -- using that in its ordinary English sense -- 150 United States savings bonds with a face value of $ 1,000 to Michael Hoover after having been expressly*106 ordered in this courtroom on March 19, 1998, not to do so." The District Court then ordered that petitioner "is committed to the Bureau of Prisons for a term of six months, to be served consecutively to the sentence heretofore imposed in this cause."
On September 22, 1998, Michael Hoover turned over 165 U.S. savings bonds to the U.S. Attorney's Office. On September 23, 1998, Michael Hoover turned over 52 U.S. savings bonds to the U.S. Attorney's Office. Also on September 23, 1998, Michael Hoover informed the U.S. attorney that he had cashed 12 of the U.S. savings bonds; however, he did not turn over the proceeds of these savings bonds to the U.S. attorney. On January 11, 1999, Michael Hoover turned over 60 U.S. savings bonds to the U.S. Attorney's Office. The U.S. attorney turned over 277 U.S. savings bonds to the District Court clerk's office for liquidation. The clerk of the District Court liquidated the U.S. savings bonds and received proceeds of $ 236,925.60. On June 30, 1999, respondent served a notice of jeopardy levy on the clerk of the District Court for the proceeds of the savings bonds minus the restitution claims.
Petitioner appealed his conviction, sentence, and restitution*107 order to the Court of Appeals for the Seventh Circuit. The Court of Appeals affirmed petitioner's conviction but modified the U.S. District Court's restitution order, finding that the District Court exceeded its authority when it ordered petitioner to surrender savings bonds to pay his tax liability.
On September 20, 1999, petitioner's attorney in his criminal case filed a letter with the clerk of the District Court that stated that the Court of Appeals for the Seventh Circuit had modified petitioner's restitution order. The District Court modified its*108 judgment order "by deleting the requirement that * * * [petitioner] make restitution to the Internal Revenue Service and the requirement that U.S. Savings Bonds be held for that purpose."
The District Court ordered disbursement of the proceeds held by the clerk of the District Court from the liquidation of the U.S. savings bonds as follows: (1) $ 6,754.65 for attorney's fees, (2) $ 8,200 for accounting services, (3) $ 1,150 for expert testimony fees, and (4) $ 3,191.77 for the costs of prosecution. The District Court ordered the clerk to release the remaining funds. After payment of restitution to all claimants except respondent, the remaining proceeds of $ 209,916.51 were paid to respondent on February 29, 2000, pursuant to the notice of jeopardy levy.
On February 28, 2001, Michael Hoover and Tadd Hoover filed a letter with the District Court requesting it to order the U.S. Attorney's Office to deliver to them the U.S. savings bonds that were surrendered to the court clerk. On April 16, 2001, the U.S. District Court entered an order declining to take any action in response to the letter submitted by Michael Hoover and Tadd Hoover.
Collection Actions
On June 28, 1999, respondent*109 made a jeopardy assessment of petitioner's deficiencies, and penalties for 1989, 1990, 1991, and 1992. On that same date, respondent sent to petitioner a Notice of Jeopardy Levy and Right of Appeal, which stated:
I am notifying you that I have found that you have consistently
attempted to conceal your reportable income and assets through
the use of nominees, thereby putting our collection of the
income tax you owe for the tax period(s) in jeopardy. Therefore,
* * * I have approved the issuance of a levy to collect the
amount your [sic] owe, although we have not provided you a
notice of intent to levy and/or notice of your right to a
hearing, generally required by
Respondent's notice of jeopardy levy and right to appeal informed petitioner that he was entitled to request (1) an administrative review under
Two days later, respondent sent a letter to petitioner informing him that respondent had made a jeopardy assessment pursuant to
On June 30, 1999, respondent filed a notice of Federal tax lien in the Wabash, Indiana County Recorder's Office regarding jeopardy assessments of income taxes, interest, and penalties for 1989, 1990, 1991, and 1992. On July 5, 1999, respondent sent to petitioner a Letter 3172, Notice of Federal Tax Lien Filing and Right to a Hearing Under
Petitioner executed and mailed to respondent a Form 12153, Request for a Collection Due Process Hearing, dated July 23, 1999. In that Request for a Collection Due Process Hearing, petitioner appealed both the notice of Federal tax lien and the notice of levy. On September 13, 1999, the Appeals officer sent a letter to petitioner establishing a conference date of October 20, 1999. By letter*111 dated September 22, 1999, petitioner requested that the conference be moved to Cleveland, Ohio, where he was incarcerated.
Sometime between December 8, 1999, and January 11, 2000, respondent's Appeals officer and petitioner conducted a telephone conference regarding petitioner's request for a hearing. During the telephone conference, petitioner did not question the amounts of gross income respondent determined for 1990, 1991, and 1992. Instead, petitioner asserted that his expenses were too low and that he was taxed using the incorrect rate of tax. Petitioner also informed respondent's Appeals officer that he could not pay the income taxes, interest, and penalties assessed for 1990, 1991, and 1992. During the telephone discussions, petitioner and the Appeals officer did not discuss collection alternatives.
By letter dated January 11, 2000, the Appeals officer confirmed that a telephone conference had occurred, and the Appeals officer canceled the proposed face-to-face meeting. The letter also contained respondent's proposed findings and invited petitioner to contact the Appeals officer to arrange further telephone discussions if he had any questions. Petitioner did not contact the*112 Appeals officer after receiving the January 11, 2000, letter. On March 23, 2000, respondent issued a Notice of Determination Concerning Collection Action(s) Under
OPINION
Generally, the Commissioner's determinations in a notice of deficiency are presumed to be correct, and the taxpayer bears the burden of proving that the Commissioner's determinations are erroneous.
Specifically,
If, in any court proceeding, a taxpayer introduces credible
evidence with respect to any factual issue relevant to
*113 ascertaining the liability of the taxpayer for any tax imposed
by subtitle A or B, the Secretary shall have the burden of proof
with respect to such issue.
Petitioner failed to maintain books and records relating to his farming business. Furthermore, the parties have stipulated that petitioner did not submit any books or records to respondent's agents during the examination of his 1990, 1991, and 1992 income tax returns. Because petitioner failed to satisfy the requirements of
Petitioner argues that respondent assessed the 1989 deficiency after the period of limitations had expired. Specifically, with respect to the 1989 taxable year, petitioner argues on brief that "The assessments for 1989 were not within 3 yrs next to the year of investigation. The Internal Revenue Service assessment date were [sic] June 28, 1999".
Respondent argues that "Petitioner did not dispute the deficiency for tax year 1989 in his petition". We disagree. Petitioner was not represented by counsel. His petitions are not models of clarity. However, it seems to us that the best reading is that he was contesting respondent's deficiency determinations for all years in the notice of deficiency. The petition in docket No. 15557- 99 was filed using a preprinted Government form. Paragraph 3 of the form had space for listing only 3 years of disputed deficiencies. In paragraph 3 of his petition filed in docket No. 15557-99, petitioner lists the years 1990, 1991, and 1992 and the amounts in dispute for those years. However, in paragraph 4 of the form, which is entitled "Set forth those adjustments, i.e. changes, in the NOTICE OF DEFICIENCY with which*115 you disagree and why you disagree", petitioner states that "The Tax Year December 31, 1989 doesn't count. $ 46,052.00 Tax 34,539.00 Addition to". In docket No. 4590-00L, petitioner claims in paragraph 4 of the same type of preprinted form petition that "the Tax Years December 31, 1989 and December 31, 1990 is [sic] past the Statute of limitations."
Petitioner has consistently argued that the assessment of the 1989 deficiency was barred by the statute of limitations. In his pretrial memorandum, petitioner stated: "It is not to be over-looked that the IRS also added alleged tax deficiency(s) for Tax Year 1989, for approximately $ 46,000.00; being even further beyond the statute of limitations." At trial, petitioner testified: "And they even had 1989 as part of the deficiency and that was past the limit because you can only go back three years from the time that the investigation started. So 1989 would have been past the statute of limitations." Finally, in his answering brief, petitioner argued that "The assessments for 1989 were not within 3 yrs next to the year of investigation. The Internal Revenue Service assessment date * * * [was] June 28, 1999." We conclude that petitioner*116 has placed the deficiency for the year 1989 in dispute by raising the statute of limitations.
III. 1990, 1991, and 1992
Respondent argues that petitioner failed to report farm income of $ 173,663.38 in 1990, $ 121,595.51 in 1991, and $ 119,393.46 in 1992. *118 that his assets were sold in the divorce proceeding and that he lost $ 156,000 from the sale of his assets.
A. Unreported Gross Income
Using the specific items method, respondent reconstructed petitioner's gross income for 1990, 1991, and 1992 from bank records and third-party payor records. Respondent's method accurately reflects petitioner's gross income because the method calculated petitioner's income using proceeds that he received from his farming business. Even though some of the canceled checks and invoices list Tadd Hoover or Michael Hoover as the payee, we agree with the Court of Appeals for the Seventh Circuit that these proceeds were actually petitioner's gross income
*120 In his farming business, petitioner received gross receipts from the sale of milk, livestock, corn, and shelled corn. The evidence, including copies of canceled checks, settlement sheets, receipts, invoices, and the testimony from petitioner's criminal proceeding, clearly and convincingly establishes that petitioner failed to report gross income from his farming business.
We adjust respondent's calculation of petitioner's total unreported farming income with respect to the bartering income he received from Fred Hoover. Respondent determined that petitioner received bartering income of $ 5,569.32 in 1990, $ 7,598.75 in 1991, and $ 4,743.32 in 1992. The records of Fred Hoover reflect that in 1991 he issued a $ 5,569 check to petitioner for the excess of goods and services attributable to 1990. Because petitioner received the check for $ 5,569 in 1991, petitioner failed to report this income in 1991, not in 1990 as respondent argues. See
We hold that petitioner received and failed to report total farming income of $ 168,094.06 in 1990, $ 119,566.08 in 1991, and $ 120,748.89 in 1992. *122 Rochester Sale Barn 679.85 1,606.55 4,677.45
Stony Pike 12,722.72 11,340.75 10,875.20
Fred Hoover -- -- 5,569.32 7,598.75
bartering
Fred Hoover -- rent 10,500.00 2,475.00 2,475.00
__________ __________ __________
Total farm income 190,047.06 133,635.08 141,018.89
Less reported 21,953.00 14,069.00 20,270.00
ordinary farm income __________ __________ __________
Total unreported 168,094.06 119,566.08 120,748.89
farm income
*123 B. Interest Income
On brief, petitioner argues that he did not receive interest income. The stipulation of facts and the attached exhibits show that petitioner received interest income of $ 3,840 in 1990,
Respondent now agrees that petitioner is entitled to deduct farm expenses of $ 63,381 in 1990, $ 54,652 in 1991, and $ 55,389 in 1992, which are in excess of the amounts petitioner claimed on his returns. Despite petitioner's claim that he "had farm expenses greater than allowed by respondent", petitioner failed to offer any documents, records, or other evidence to support his assertion. We hold that petitioner is entitled to deduct business expenses in 1990, 1991, and 1992 only as determined by respondent.
D. Capital Loss
Petitioner claimed a capital loss of $ 31,000 on his 1991 tax return. On brief, petitioner now asserts that he is entitled to a capital loss of $ 48,000, which resulted from the sale of his farm.
The taxpayer bears the burden of proving the loss claimed.
Petitioner offered only his tax returns and a letter prepared by his certified public accountant as evidence of the claimed capital loss.
IV. Fraud Penalty --
As stated supra, we find that respondent has clearly and convincingly proven that petitioner received and failed to report income from his farming business in 1990, 1991, and 1992. If the Commissioner proves that any portion of an underpayment of tax is attributable to fraud, the entire underpayment shall be treated as attributable to fraud, except that when the taxpayer establishes by a preponderance of the evidence that any portion of the underpayment was not attributable to fraud, the fraud penalty shall not apply to that portion of the underpayment.
"Fraud is defined as an intentional wrongdoing*127 designed to evade tax believed to be owing."
The indicia or badges of fraud serve as circumstantial evidence of fraudulent intent.
Petitioner consistently understated his income by substantial amounts for the years 1990, 1991, and 1992.
Petitioner failed to cooperate with tax authorities. Petitioner's effort to prevent respondent from obtaining information from the H&R Block employee shows that he attempted to impede respondent's investigation and indicates that petitioner intended to evade taxes. See
Petitioner maintained inadequate business records. As stated in the criminal proceeding, petitioner "did not keep many business records; according to his sons, he merely kept track of 'some things' by handwritten notes on scraps of paper."
Petitioner devised a scheme to conceal his income and divert it to his children with the intent of avoiding income taxes. Petitioner instructed his customers to issue checks payable to his children. Petitioner attempted to disguise his farming income by diverting to his children farming receipts that were owed to petitioner. We find that this scheme of concealing his assets provides further evidence that petitioner attempted to avoid income taxes.
Although a criminal conviction under
Petitioner consistently understated income in 1990, 1991, and 1992, was convicted of filing false Federal income tax returns, made a false statement on a student loan application, interfered with respondent's investigation, failed to maintain books and records, and devised a scheme to conceal his income. We hold that respondent has proven by clear and convincing evidence that petitioner understated his income in 1990, 1991, and 1992 with the fraudulent intent to evade taxes.
V. 1990, 1991, and 1992 -- Statute of Limitations
Petitioner argues that respondent's Appeals officer abused his discretion in sustaining the filing of a Federal tax lien and in issuing a notice of jeopardy levy. Since we have found that the assessment of a deficiency for 1989 is barred by the statute of limitations, there is no deficiency to collect for 1989.
We sustain respondent's collection actions regarding 1990, 1991, and 1992. When the Commissioner determines that a taxpayer has a deficiency in tax, he is authorized to send a notice of that deficiency to the taxpayer.
*133 No levy may be made on any property or right to property of any
person unless the Secretary has notified such person in writing
of their right to a hearing under this section before such a
levy is made. Such notice shall be required only once for the
taxable period to which the unpaid tax * * * relates.
If the Secretary makes a finding that the collection of such tax
is in jeopardy, notice and demand for immediate payment of such
tax may be made by the Secretary and, upon failure or refusal to
pay such tax, collection thereof by levy shall be lawful without
regard to the 10-day period provided in this section.
In the context of jeopardy collection, the Commissioner must provide the taxpayer with*134 a
Petitioner argues that respondent abused his discretion in determining that the collection of petitioner's deficiencies, interest, and penalties was in jeopardy. Again, we disagree with petitioner. *135
The assessment of the determined deficiency for 1989 is barred by the 3-year statute of limitations. Petitioner fraudulently understated his taxable income on his returns for 1990, 1991, and 1992 and is liable for fraud penalties pursuant*136 to
Decision will be entered under
1. Respondent calculated the farming income that petitioner failed to report on his Federal income tax returns as follows:
Source 1990 1991 1992
______ ____ ____ ____
Best Ever Dairy $ 137,801.38 $ 93,768.46 $ 108,817.49
Jon Hayes 3,455.00 1,375.00 1,875.00
Ag Max 17,208.11 -- --
Roann 7,680.00 17,500.00 6,200.00
Rochester Sale Barn 679.85 1,606.55 4,677.45
Stony Pike 12,722.72 11,340.75 10,875.20
Fred Hoover -- 5,569.32 7,598.75 4,743.32
Bartering
Fred Hoover -- rent 10,500.00 2,475.00 2,475.00
__________ __________ __________
Total farm income 195,616.38 135,664.51 139,663.46
Less reported
ordinary farm
income 21,953.00 14,069.00 20,270.00
__________ __________ __________
Total unreported 173,663.38 121,595.51 119,393.46
farm income
Less unreported 13,402.57 12,947.30 15,552.65
capital gains __________ __________ __________
farm income
Net unreported 160,260.81 108,648.21 103,840.81
ordinary farm
income↩
2. In the notice of deficiency, respondent determined that petitioner had farm expenses of $ 25,969 in 1990, $ 14,826 in 1991, and $ 27,524 in 1992. Respondent now acknowledges in the stipulation that petitioner's allowable farm expenses are $ 63,381 in 1990, $ 54,652 in 1991, and $ 55,388 in 1992.↩
3. 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.↩
4. The taxes involved in the collection action are the income tax liabilities for 1989, 1990, 1991, and 1992 that are in issue in docket No. 15557-99.↩
5. From 1988 to 2003, Best Ever Dairy has been known as Best Ever Dairy, East Side Jersey Dairy, and Prairie Farms Dairy.↩
6. The parties did not explain the expenses listed as NDPRB, CCC, and Cream LIC.↩
7. Respondent asserts that petitioner received income in 1992 of $ 1,875 from the sale of calves to the Hayeses. The record contains only one canceled check from 1992; the Hayeses issued a $ 375 check to petitioner in 1992. Respondent relies on a summary exhibit prepared and used by a revenue agent in the criminal prosecution of petitioner to argue that petitioner received $ 1,875 from the Hayeses in 1992. We find that petitioner received $ 375 from the Hayeses in 1992.↩
8. Of the 20 checks in the record, 17 checks were issued to Tadd Hoover, 2 checks were issued to Michael Hoover, and 1 check was issued to petitioner.↩
1. The parties have stipulated that petitioner received
interest income of $ 3,979 in 1990. For purposes of this opinion, we
shall use $ 3,840 as the amount of petitioner's 1990 interest income.↩
9. These allowable expenses are in addition to the Best Ever Dairy, Rochester Sale Barn, and Stony Pike expenses netted against income.↩
1. The parties have stipulated that respondent
determined that petitioner incurred allowable expenses totaling
$ 55,389 in 1992. The $ 1 overstatement is due to rounding. For
purposes of this opinion, we shall use $ 55,389 as the amount of
petitioner's 1992 allowable expenses.↩
10. Respondent's notice of deficiency shows this item as an increase in income with no explanation.↩
11. Petitioner was also charged with and convicted on one count of making false statements on a student loan application.↩
12. The Commissioner bears the burden of proving fraud by clear and convincing evidence.
13.
14. These amounts include both ordinary farm income and capital gains income. Respondent asserts that petitioner's capital losses will offset the capital gains income, and the capital gains income will not result in additional tax.↩
15. Petitioner asserts that he did not receive the income determined by respondent, and warns: "I have been taxed on Income I didn't receive and will never receive. If something is not done I will go public with this including congress, senators, Television, Newspapers."↩
16. Tadd Hoover testified that the checks that he received from the family business were not his. Tadd Hoover further testified that he "would sign the back of * * * [the checks] and let dad do whatever he wanted with them." The parties stipulated that the testimony of Tadd Hoover from petitioner's criminal proceeding is incorporated as though given during the course of the trial of the U.S. Tax Court cases.↩
17. Respondent concedes that the following amounts of the unreported farm income from the sale of breeding stock to the Rochester Sale Barn and Stony Pike should be given capital gains treatment: $ 13,402.57 in 1990, $ 12,947.30 in 1991, and $ 15,552.65 in 1992.↩
18. The stipulation of facts states that petitioner received interest income totaling $ 3,979 in 1990. This appears to be a mathematical error.↩
19. Petitioner's certified public accountant did not support his letter and computation with documentation.↩
Halle v. Commissioner , 7 T.C. 245 ( 1946 )
Wright v. Commissioner , 84 T.C. 636 ( 1985 )
Halle v. Commissioner of Internal Revenue , 175 F.2d 500 ( 1949 )
Joseph R. Dileo, Mary A. Dileo, Walter E. Mycek, Jr., ... , 959 F.2d 16 ( 1992 )
Indopco, Inc. v. Commissioner , 112 S. Ct. 1039 ( 1992 )
United States v. Harvey L. Hoover , 240 F.3d 593 ( 2001 )
United States v. Harvey L. Hoover , 175 F.3d 564 ( 1999 )
Spies v. United States , 63 S. Ct. 364 ( 1943 )
Robert W. Bradford v. Commissioner of Internal Revenue , 796 F.2d 303 ( 1986 )
Parks v. Commissioner , 94 T.C. 654 ( 1990 )
Welch v. Helvering , 54 S. Ct. 8 ( 1933 )
Dorn v. Comm'r , 119 T.C. 356 ( 2002 )
Petzoldt v. Commissioner , 92 T.C. 661 ( 1989 )
I. Hal Millsap, Jr., and Frances Millsap v. Commissioner of ... , 387 F.2d 420 ( 1968 )
Chris D. Stoltzfus and Irma H. Stoltzfus v. United States , 398 F.2d 1002 ( 1968 )