DocketNumber: No. 11370-05
Citation Numbers: 94 T.C.M. 338, 2007 Tax Ct. Memo LEXIS 298, 2007 T.C. Memo. 295
Judges: Goeke
Filed Date: 9/27/2007
Status: Non-Precedential
Modified Date: 4/18/2021
MEMORANDUM FINDINGS OF FACT AND OPINION
GOEKE, Judge: This petition arises from petitioner Paul E. Ballmer's receipt of $ 337,122.53 in the 2001 tax year from a lawsuit he filed against the California Franchise Tax Board (FTB). Respondent determined a deficiency of tax of $ 109,215, an addition to tax under
(1) Whether $ 337,122.53 received by petitioner in 2001pursuant to a jury award is gross income that may be excluded under
(2) Whether petitioner is liable for an addition to tax under
(3) Whether petitioner is liable for an addition to tax under
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The stipulations of facts and related exhibits are incorporated herein by this reference. Petitioner lived in Los Angeles, California, at the time his petition was filed.
In 1997, petitioner filed a complaint in the Los Angeles County Superior Court against the FTB. Petitioner alleged that the FTB violated the California Information Practices Act of 1977,
Petitioner's lawsuit was tried before a jury, and in April 2001, the jury awarded petitioner $ 250,000 in damages for emotional distress. Petitioner was also awarded costs of $ 4,165.68 and attorney's fees of $ 78,450. On July 20, 2001, the FTB issued a check to petitioner in the amount of $ 337,122.53, which included the $ 332,615.68 reflected in the judgment as well as $ 4,506.85 of postjudgment interest.
In addition *300 to the proceeds from the lawsuit, petitioner received payments for Social Security benefits in 2001 totaling $ 7,128. Petitioner did not file any Federal income tax return for 2001, nor has he filed a return for any of the taxable years 1986 through 2003. For some of these years, respondent prepared substitutes for returns and sought to collect the determined tax liabilities from petitioner.
Petitioner testified that he had reviewed the Internal Revenue Code for many years and could find nothing that made him liable for Federal taxes or required him to file a return. Petitioner further testified that he did not believe that the amount he received from the FTB was income. Petitioner did not, however, seek advice from any tax professionals with respect to these conclusions.
Respondent issued a notice of deficiency to petitioner on March 16, 2005. Respondent adjusted petitioner's income to include the $ 337,122.53 received from the FTB and determined a deficiency of $ 109,215. Respondent also asserted an addition to tax under
OPINION
The Commissioner's determinations of *301 deficiencies in tax generally are presumed correct, and the taxpayer bears the burden of proving that those determinations are erroneous.
As *302 applicable here, (a) In General. -- Except in the case of amounts attributable to (and not in excess of) deductions allowed under section 213 (relating to medical, etc., expenses) for any prior taxable year, gross income does not include -- * * * * (2) the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness; * * * * * * * For purposes of paragraph (2), emotional distress shall not be treated as a physical injury or physical sickness. 2 * * *
The parties *303 stipulated that petitioner received the $ 337,122.53 in question in 2001 and agree that no part of the judgment would be excluded from income pursuant to
Petitioner's argument is quite similar to that asserted before and ultimately rejected by the Court of Appeals for the District of Columbia Circuit.
We see no reason to depart from these decisions or the statutory language. Accordingly, we conclude petitioner's award of compensatory damages for emotional distress is gross income under
Respondent determined that petitioner was liable for additions to tax under
Petitioner admits that he did not file a return for 2001 but maintains that he had reasonable cause for not filing. Petitioner testified that he had reviewed
On cross-examination, petitioner admitted that he had not reviewed the flush language of
Petitioner's attempt to cloak his argument of reasonable cause in the initialMurphydecision is also unpersuasive. First, as discussed above, the Court of Appeals for the D.C. Circuit vacated its initial decision and has since determined that damages for emotional distress are gross income. Further, there is no evidence before the Court that petitioner performed an analysis similar to that of the D.C. Circuit, nor that he received any advice from a competent tax professional, at the time he chose not to file a return for 2001.
We find that petitioner has failed to meet his burden of demonstrating that his failure to file a return was due to reasonable cause and not willful neglect. Thus, petitioner is liable for the addition to tax for failure to file under
Respondent also determined that petitioner is liable for an addition to *308 tax under
Respondent introduced evidence to show petitioner was required to file a return for 2001 and failed to do so and that petitioner failed to make any estimated tax payments for 2001. The parties agree that petitioner did not file a return for the 2000 tax year. Thus, respondent has met his burden of production with respect to the addition to tax under
Petitioner, however, maintains that he did not *309 have any liability for the 2000 tax year and thus was not required to make estimated tax payments for the 2001 tax year. In prior years when petitioner did not file a return and respondent received information concerning petitioner's income, respondent prepared substitutes for returns and sought to collect the determined liabilities. The fact that respondent did not file a substitute for return or seek to collect payment for 2000 supports petitioner's position that he did not have any liability for 2000. Accordingly, we find petitioner is not liable for an addition to tax under
To reflect the foregoing,
Decision will be entered under
1. Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the year at issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.↩
2.
3. At first, the Court of Appeals for the District of Columbia Circuit agreed with a position similar to petitioner's and held that compensation for the loss of a personal attribute such as well-being was not income within the meaning of the Sixteenth Amendment.
William H. And Avilda L. Edwards v. Commissioner of ... , 680 F.2d 1268 ( 1982 )
Antonio R. Durando Naomiann N. Durando v. United States , 70 F.3d 548 ( 1995 )
United States v. Boyle , 105 S. Ct. 687 ( 1985 )
Cathy Miller Hardy v. Commissioner of Internal Revenue , 181 F.3d 1002 ( 1999 )
James T. Sinyard Monique T. Sinyard v. Commissioner of ... , 268 F.3d 756 ( 2001 )
Murphy v. Internal Revenue Service , 493 F.3d 170 ( 2007 )
Welch v. Helvering , 54 S. Ct. 8 ( 1933 )
Commissioner v. Glenshaw Glass Co. , 75 S. Ct. 473 ( 1955 )
United States v. Burke , 112 S. Ct. 1867 ( 1992 )
Commissioner v. Schleier , 115 S. Ct. 2159 ( 1995 )