Anyanwu v. Comm'r

BLESSING U. ANYANWU, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent

Anyanwu v. Comm'r

Docket Nos. 24377-10, 24378-10.

United States Tax Court

T.C. Memo 2014-123; 2014 Tax Ct. Memo LEXIS 123;

June 19, 2014, Filed

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Decisions will be entered under Rule 155.

">*123 Blessing U. Anyanwu, Pro se.

Blaine Charles Holiday, for respondent.

BUCH, Judge.

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BUCH

MEMORANDUM FINDINGS OF FACT AND OPINION

BUCH, Judge: In these consolidated cases respondent issued two notices of deficiency, one for 2006 and another for 2007. Respondent determined the following deficiencies, addition to tax, and penalties with respect to Blessing Anyanwu's Federal income tax for years 2006 and 2007:^{Addition to taxPenaltyYearDeficiencysec. 6651(a)(1)sec. 6662(a)2006$162,212— - - - -$32,4422007172,623$41,29934,525}

After respondent issued the notices of deficiency, he conceded $99,800 of the adjustment for 2007 because he erroneously disallowed a greater depreciation deduction than Ms. Anyanwu had actually claimed. The issues remaining for consideration are whether Ms. Anyanwu has unreported income; whether she is entitled to various deductions, some personal and others principally relating to her rental properties; and whether she is liable">*124 for an addition to tax and penalties. We hold that Ms. Anyanwu proved that a portion of her income came from nontaxable sources and that she is entitled to deductions beyond those respondent allowed. Further, respondent met his burden of production as to the addition to tax and penalties, and Ms. Anyanwu did not establish any grounds on which the addition to tax and penalties should not apply in these cases.

FINDINGS OF FACT

Ms. Anyanwu resided in Minnesota at the time the petitions were filed.

Ms. Anyanwu and her husband, Ernest Anyanwu, divorced in 2005. Although they were divorced during the years in issue, their business and financial interests remained intertwined. For example, they continued to work together at a home healthcare business. Further, although the Anyanwus agree that Ms. Anyanwu was awarded their real estate holdings in the divorce, in her testimony Ms. Anyanwu refers to activities done by her and her then ex-husband Advantage Home Care">*125

In 1994 the Anyanwus started Home Advantage Health Services (Home Advantage), a home healthcare business. The Anyanwus transferred Home Advantage to Mr. Simeon, a person they knew from their church, in 2006. Home Advantage was transferred in name only. Mr. Simeon did not pay the Anyanwus for their interest in either cash or property, and Ms. Anyanwu did not report the sale on her tax return. The business was renamed Advantage Home Care.

As it turned out, Mr. Simeon could not operate the business because he did not have a background in healthcare. Because Ms. Anyanwu is a registered nurse, she runs Advantage Home Care; she signs all of the checks for Advantage Home Care and verifies that the proper services were provided to the patients. Mr. Anyanwu also works for Advantage Home Care, and he is responsible for billing and for submitting claims for reimbursement through Medicare and Medicaid.

II. Real Estate

The Anyanwus owned various real estate properties jointly during their marriage, and the properties were awarded to Ms. Anyanwu in the divorce. Ms. Anyanwu did not receive rent payments from all of the properties because some were unoccupied. The rent on the occupied properties ranged">*126 between $800 and $1,500 per month and averaged approximately $1,000 per month.

At least some of the properties were listed as Section 8 housing.Section 8 housing applications in his name only, the rental assistance payments were made out to him. The Anyanwus attempted to list the properties in Ms. Anyanwu's name with the various housing authorities but were unsuccessful. As a result, the checks were still made payable to Mr. Anyanwu, and he endorsed them to Ms. Anyanwu.

During 2006 the Anyanwus sold two properties: the Alyssa Road property and the Florida Circle property. The sale of the Alyssa Road property resulted in proceeds of $140,837, and the sale of the Florida Circle property resulted in proceeds of approximately $52,946. Although Ms. Anyanwu lived in the Alyssa Road property at the">*127 time it was sold, the Anyanwus also bought and repaired distressed houses. Because they were repairing these homes, they purchased items such as equipment, materials, carpet, and appliances.

III. Underlying Liabilities

Ms. Anyanwu timely filed her 2006 Form 1040, U.S. Individual Income Tax Return. The return included Schedule A, Itemized Deductions, claiming deductions for State and local income taxes, real estate taxes, home mortgage interest, and gifts to charity. The return also included Schedule E, Supplemental Income and Loss, listing eight rental properties. The return shows a filing status of "Married Filing Separately" and reports Mr. Anyanwu as her spouse.

Ms. Anyanwu did not file her 2007 income tax return before the April 15, 2008, deadline, and there is no evidence that she properly filed a request for an extension. Again, Ms. Anyanwu included a Schedule A claiming itemized deductions for State and local income taxes, home mortgage interest, and gifts to charity. In addition, she attached a Schedule E to the return listing nine rental properties. As with the 2006 return, she selected "Married Filing Separately" filing status and reports Mr. Anyanwu as her spouse.

Ms. Anyanwu's">*128 2006 and 2007 returns were selected for examination. During the examination respondent performed a bank deposits analysis on Ms. Anyanwu's accounts for the years in issue and determined that she had additional unreported income.

Respondent issued a notice of deficiency for the 2006 taxable year on August 5, 2010, making the following adjustments: increased Ms. Anyanwu's income using results from respondent's bank deposits analysis; disallowed the claimed charitable contribution, home mortgage interest, real estate taxes, depreciation, and Schedule E mortgage interest deductions for lack of substantiation; and made other computational adjustments. In addition, respondent determined a section 6662(a) accuracy-related penalty.

Respondent also issued a notice of deficiency for the 2007 taxable year on August 5, 2010, making adjustments similar to those for 2006, including the following: increased Ms. Anyanwu's income using results from respondent's bank deposits analysis; disallowed the claimed charitable contribution, home mortgage interest, depreciation, and Schedule E mortgage interest deductions for lack of substantiation; and made other computational adjustments. Respondent also determined a section 6662(a) accuracy-related">*129 penalty and a section 6651(a)(1) failure to timely file addition to tax.

Ms. Anyanwu timely petitioned the Court with regard to both notices, and the Court consolidated the cases.

IV. Proceedings Before the Tax Court

In late 2011 respondent filed a motion to show cause why proposed facts and evidence should not be accepted as established. The motion explained that Ms. Anyanwu had not provided any documents to substantiate her income or deductions after being given multiple opportunities to do so. The motion also included a proposed stipulation of facts. The stipulation listed some basic facts such as where Ms. Anyanwu lived and when her returns were filed. The stipulation further stated that Ms. Anyanwu had not provided any explanation of nontaxable sources of income to account for her excess deposits and could not substantiate items underlying any of the deductions disallowed in the notice of deficiency. The Court granted respondent's motion and ordered Ms. Anyanwu to respond to respondent's motion. After receiving no response from Ms. Anyanwu, the Court deemed all of the facts and evidence set forth in respondent's proposed stipulation of facts to be established.

In February 2012 the Court held a pretrial">*130 conference with the parties in St. Paul, Minnesota. The Court continued the cases to allow Ms. Anyanwu time to gather the relevant documents.

These cases were calendared for trial during the Court's April 22, 2013, St. Paul, Minnesota, trial session. At the time for trial the parties appeared and provided joint exhibits consisting of documents that Ms. Anyanwu argued showed her nontaxable sources of income and substantiated items underlying her deductions. Notwithstanding the previous stipulation, respondent agreed that an additional four exhibits could be admitted.*131 OPINIONI. Burden of Proof

The Commissioner's determinations in the notice of deficiency are generally presumed correct, and taxpayers bear the burden of proving otherwise.section 7491(a), Ms. Anyanwu does not claim that the burden">*131 has shifted to respondent, and likewise we do not find it appropriate to shift the burden to respondent.

Income tax deductions are a matter of legislative grace, and the burden of proving entitlement to any claimed deduction rests on the taxpayer.Omitted Income

Where a taxpayer fails to keep sufficient records under section 6001, the Commissioner may compute taxable income through a method that "does clearly reflect income".2014 Tax Ct. Memo LEXIS 123">*132 of the income.*133 have been excluded would be to show that the deposit is derived from a nontaxable source.Loans

Ms. Anyanwu testified that she lent money to various people, including family members and members of her church. Although Ms. Anyanwu provided copies of canceled checks she received and stated that they were repayments of loans, she did not provide any evidence of any loans. Ms. Anyanwu has not proven that any of the payments from family members or friends are nontaxable.

Ms. Anyanwu also made loans to Advantage Home Care during 2006 and 2007. She provided copies of wire transfers and canceled checks made payable to Advantage Home Care and copies of checks made payable to her from Advantage Home Care. We find that Ms. Anyanwu has proven that the repayments are nontaxable. The record reflects $122,000 in either">*133 canceled checks or wire transfer receipts that Ms. Anyanwu paid to Advantage Home Care during the years in issue. Consistent with that, the record shows $123,026 in payments from Advantage Home Care to Ms. Anyanwu during the years in issue. Some of the checks say "Reimbursement" in the memo line, and one says "Rent".Tax Refunds

Generally, State tax refunds are taxable to a recipient who deducted the tax for a prior year unless the deduction did not provide a Federal tax benefit.2014 Tax Ct. Memo LEXIS 123">*134 submitted copies of refund checks from the U.S. Treasury and the State of Minnesota. The check from the U.S. Treasury was made payable to Mr. Anyanwu but was endorsed to Ms. Anyanwu. The check from the State of Minnesota was made payable only to Ms. Anyanwu. Both checks represented refunds for the 2005 taxable year.

Ms. Anyanwu did not provide any evidence to show that the State refund should be nontaxable. However, the Federal refund is not taxable because Federal taxes are not allowed as a deduction. Accordingly, the State tax refund is includible in her income, and the Federal tax refund is not.

C. Real Estate Proceeds

Before we proceed to the specifics of the taxable nature of the proceeds, we need to address the assignment of income doctrine. Many of the checks relating to the properties are written to Mr. Anyanwu and then endorsed to Ms. Anyanwu. The assignment of income doctrine prevents an individual from avoiding taxation on income by assigning that income to another.2014 Tax Ct. Memo LEXIS 123">*135 the properties in the divorce. Many of the checks relating to the rental properties were written to Mr. Anyanwu because his name was still associated with the properties. The Anyanwus do not dispute that Ms. Anyanwu owned the properties, and as a result she is the one responsible for the tax.

Section 1001(c) generally requires taxpayers to recognize the entire amount of gain or loss on the sale or exchange of property. Gain from the sale or other disposition of property is the excess of the amount realized over the adjusted basis of the property.2014 Tax Ct. Memo LEXIS 123">*136 reported only Mr. Anyanwu's name as the sole owner of the property. The statement said Mr. Anyanwu was unmarried, and only his signature appears on the warranty deed conveying the property to the new owners. Nonetheless, because the property had been awarded to Ms. Anyanwu in the divorce, the proceeds are properly attributed to her. Ms. Anyanwu did not provide a similar document for the Florida Circle property.

At trial Ms. Anyanwu stated that she did not believe any amounts received from the sales needed to be included in her income because she and Mr. Anyanwu had previously paid taxes on the real estate. At trial Ms. Anyanwu testified that she lived in the Alyssa Road property at the time it was sold. However, she did not testify or provide other evidence to show that she met the requirements under section 121 to exclude the gain from the sale of that property from her income. As for the Florida Circle property, Ms. Anyanwu testified that it was a property that she bought, repaired, and sold with Mr. Anyanwu. There is no evidence to suggest that she lived in Florida Circle property. Accordingly, on the record before us, the gain from the sale of the Alyssa Road property and the Florida Circle">*137 property should be included in income.

D. Transfers Between Accounts and Checks Payable to Herself

Ms. Anyanwu provided wire transfer receipts totaling $54,000. Ms. Anyanwu also provided copies of canceled checks made payable to herself totaling $15,000. These transactions are nontaxable, and any such transactions during the years in issue should not be included in income.

E. Escrow Overpayments

Ms. Anyanwu submitted copies of canceled checks from various insurance, escrow, and mortgage companies. Ms. Anyanwu argued in her brief that the checks represent overpayments of escrow accounts. One of the checks was made payable to Mr. Anyanwu but endorsed to Ms. Anyanwu, one of the checks was made payable to Mr. Anyanwu and endorsed by Mr. Anyanwu, and the others were made payable to Ms. Anyanwu. All of the checks are dated during 2006.

We have previously held that amounts held in escrow accounts and returned as refunds are nontaxable.2014 Tax Ct. Memo LEXIS 123">*138 to her.

F. Deposits From Tenants

If an amount is received under a "present claim of full ownership, subject to the lessor's unfettered control," and is to be applied to the rent at a subsequent time during the term, it is treated as taxable income to the lessor upon receipt.2014 Tax Ct. Memo LEXIS 123">*139 her brief she stated that the amounts were returned to the tenants when they moved out, but in one place she labeled them "security deposits" and in another place she called them "background checks". Regardless of the characterization, Ms. Anyanwu did not sufficiently explain the deposits, and therefore we hold that they are taxable.

G. Payment From Estate

Ms. Anyanwu submitted a copy of a canceled check for $10,000 that states in the memo line that is payment from a person's estate. Because inheritances are nontaxable, the $10,000 should not be included in Ms. Anyanwu's taxable income. Further, the check was made payable to Mr. Anyanwu, and there is no evidence to show that it was endorsed to Ms. Anyanwu. Thus, for multiple reasons, it should not be included in her taxable income.

H. Checks to Others

Ms. Anyanwu provided copies of deposit slips and checks that she argues were not made payable to her, not endorsed by her, or not for the years in issue. We address each in turn.

First, Ms. Anyanwu provided a deposit slip and copies of checks made payable to Home Advantage, the predecessor to Advantage Home Care. These checks total $55,687. The checks were made payable to Home Advantage and">*140 were deposited in an account belonging to Home Advantage. Accordingly, they should not be included in Ms. Anyanwu's income.

Second, Ms. Anyanwu provided payroll checks from Advantage Home Care and other checks made payable to Mr. Anyanwu totaling $67,989. Mr. Anyanwu testified that although the checks were deposited in the Anyanwus' joint account, those amounts were included in his income for 2006 and 2007. The checks were made payable to and endorsed by Mr. Anyanwu and should not be included in Ms. Anyanwu's income.

Third, Ms. Anyanwu provided checks made payable to unrelated third parties. At trial respondent called John Knoll, a personal banker at U.S. Bank, one of Ms. Anyanwu's banks, to explain why checks would have been provided to Ms. Anyanwu that were written to unrelated persons. Mr. Knoll explained that when a check is deposited it goes to a department that copies the check and electronically files it. If during this process a check is misplaced or gets out of order, it will be imaged incorrectly. However, although the image is incorrect, the check would not be deposited into Ms. Anyanwu's account. In short, although the images of these checks erroneously appear in Ms. Anyanwus's">*141 bank records, these checks were not deposited into her account. Because they were not deposited into her account, they were not included in respondent's bank deposits analysis in the first instance.

Lastly, we address checks for years other than the years in issue. The checks totaled $19,785 and were all written in 2005. Checks dated for years other than the years in issue also should not be included in Ms. Anyanwu's income for the years before us.DeductionsA. Schedule A Deductions

Income tax deductions are a matter of legislative grace, and the burden of proving entitlement to any claimed deduction rests on the taxpayer.Real Property Taxes

Section 164(a)(1) allows taxpayers to deduct "State and local, and foreign, real property taxes." On her 2006 return Ms. Anyanwu deducted nearly $5,000 for real estate taxes. Ms. Anyanwu did not provide any documents at trial and simply mentioned paying real property taxes on various properties. In her brief she stated that the information was submitted to the Internal Revenue Service when the tax returns were filed. Ms. Anyanwu">*142 has not presented sufficient evidence to prove that the deduction should be allowed. Accordingly, respondent's disallowance of the real property tax deduction is sustained.

2. Charitable Contributions

Section 170(a)(1) allows a deduction for any charitable contribution, as defined in section 170(c), as long as the contribution can be verified under regulations prescribed by the Secretary. In order to substantiate monetary charitable contributions, the taxpayer must maintain one of the following: (1) a canceled check; (2) a receipt from the donee charitable organization showing the name of the donor, the date of the contribution, and the amount of the contribution; or (3) other reliable written records showing the name of the donee, the date of the contribution, and the amount of the contribution.*144 provided any goods or services in consideration for any property contributed, and (3) a description and good-faith estimate">*143 of the value of any provided goods or services or if such goods or services consist of intangible religious benefits, a statement to that effect.*145 ">*144 were prepared but both state: "You may retain this receipt for income tax purposes." Accordingly, we find that the summaries were contemporaneous.

Although Ms. Anyanwu admitted to having altered the summaries to remove Mr. Anyanwu's name, the checks provided match the summaries and bear only Ms. Anyanwu's name. For 2006 there are five amounts listed on the summary that do not have a corresponding check; and because Ms. Anyanwu did not prove that she made those contributions, we will not allow them. Further, the contribution made on December 31, 2006, is listed on the summary as $1,000 even though Ms. Anyanwu submitted a canceled check payable to the church on 12/31/06 for $2,800. Because of the requirements of section 170, we can allow only $1,000 as a deduction. All of the contributions on the 2007 summary match the checks that Ms. Anyanwu provided.

On the basis of the foregoing, we will allow charitable contribution deductions of $19,700 for 2006 and $26,600 for 2007, subject to the limitations under section 170(b)(1)(A).

3. Home Mortgage Interest

Generally, a taxpayer may claim a deduction for "all interest paid or accrued within the taxable year on indebtedness."2014 Tax Ct. Memo LEXIS 123">*145 and legally enforceable obligation for payment of money.section 163(h)(2)(D) which allows a deduction for qualified residence interest. A qualified residence is the taxpayer's personal residence and one other residence of the taxpayer which is selected by the taxpayer and used by the taxpayer as a residence.*147 she failed to establish the amounts of any deductible interest payments with respect to any qualified residence.

For 2007 Ms. Anyanwu provided multiple Forms 1098, Mortgage Interest Statement. Some of the Forms 1098 were addressed to Ms. Anyanwu, some were addressed to Mr. Anyanwu, and some were addressed to Mr. and Ms. Anyanwu. All of the Forms 1098 addressed to">*146 Ms. Anyanwu, except one, were labeled with the same Alyssa Road address that appears on the returns for 2006 and 2007.*148 B. Schedule E Deductions

Taxpayers are allowed a deduction for "ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business".2014 Tax Ct. Memo LEXIS 123">*147 grace,*149 1. Depreciation Expense or Depletion

Under section 167(a), taxpayers are allowed as a deduction a reasonable allowance for the exhaustion, wear, and tear of property used in a trade or business or property held for the production of income. The deduction for any tangible property is generally determined by using the applicable depreciation method, an applicable recovery period, and the applicable convention.2014 Tax Ct. Memo LEXIS 123">*148 *150 submitted canceled checks to show that she paid $10,300 towards one contract but otherwise did not provide any evidence to show that she paid for the expenses. Further, Ms. Anyanwu provided payment receipts to show that insurance premiums were paid on the properties but it is not clear to which properties the receipts related, and the receipts were addressed to both Mr. and Ms. Anyanwu. Ms. Anyanwu also provided a canceled check dated in 2006 to what appears to be a homeowners association. However, the memo line states only "926 and 892".2014 Tax Ct. Memo LEXIS 123">*149 Lastly, Ms. Anyanwu submitted a canceled check to "Custom Granite" for $1,500, but there is no explanation of why that expense was incurred. Ms. Anyanwu did attach a Federal Depreciation Schedule to her 2006 return, but she did not provide any testimony or other evidence at trial to explain the numbers appearing on the schedule.

Respondent conceded $99,800 of the adjustment for 2007, which equals the difference between respondent's disallowance and the amount Ms. Anyanwu actually claimed on her return. In order to prove the remaining amount of the 2007 disallowance, Ms. Anyanwu provided only invoices of work performed to substantiate the depreciation expense or depletion deduction. All of the invoices were addressed to Mr. Anyanwu, and there were no corresponding documents to show that Ms. Anyanwu incurred the expenses.

Further, Ms. Anyanwu provided nothing to show her basis in any of the properties. On the basis of this lack of evidence, respondent's determinations, reduced by his previous concession of $99,800 for 2007, are sustained for the years in issue.

2. Mortgage Interest

Section 212 allows a deduction for all ordinary and necessary expenses paid or incurred during the taxable year for the management, conservation, or maintenance of property held for the production of income.

As stated previously, Ms. Anyanwu provided copies of canceled checks to prove the mortgage interest, and these checks, which do not differentiate between principal and interest, are not enough to substantiate the">*150 deduction for 2006. Again, Ms. Anyanwu provided multiple Forms 1098 for 2007 and all but one addressed to her listed the same address. Some of the Forms 1098 were also addressed to Mr. Anyanwu, and some were addressed to Mr. and Ms. Anyanwu. Because we cannot determine which Forms 1098 correspond to which properties, we will allow Ms. Anyanwu to deduct the total amount listed on those Forms 1098 that were addressed solely to her on Schedule E. However, this is only the case regarding the Forms 1098 addressed solely to Ms. Anyanwu, because we are unable to determine what portion Ms. Anyanwu paid of the interest listed on the Forms 1098 not addressed solely to her. Any additional amount beyond the total reported on the Forms 1098 addressed to Ms. Anyanwu is disallowed.

All other Schedule E adjustments for 2006 and 2007 are computational.

IV. Filing Status

Finally, we address Ms. Anyanwu's filing status. For 2006 and 2007 she filed her returns as "Married Filing Separately". She stated at trial that this was an error made by the return preparer and she should have filed as "Single". We agree that "Single" is the appropriate filing status, and it should be adjusted as part of the Rule 155 computations.">*151

V. Section 6651(a)(1) Addition to Tax

Section 6651(a)(1) imposes an addition to tax for failing to timely file a Federal income tax return, unless it is shown that the failure is due to reasonable cause and not due to willful neglect. Respondent bears the burden of production with respect to any penalty or addition to tax.section 6651(a)(1) for the 2007 taxable year. At trial Ms. Anyanwu testified that she filed her return after the April 15, 2008, deadline. However, Ms. Anyanwu also testified that she believed that her return preparer filed an extension request before the deadline. Although she provided the Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, she did not establish that she timely filed the extension request. Moreover, respondent's records show that the extension request was included with the untimely return.

Accordingly, we find that respondent has met his burden of production, and because Ms. Anyanwu was not able to prove any defenses, the addition to tax under section 6651(a)(1) is sustained.

VI. Section 6662(a) Accuracy-Related Penalty

Section 6662(a) and (b)(1) and (2) imposes a 20% accuracy-related penalty on "any portion">*152 of an underpayment of tax required to be shown on a return" if the underpayment is due to, among other reasons, negligence, disregard of rules or regulations, or any substantial understatement of income tax. As with section 6651(a), respondent bears the burden of production as to the penalty.*155 An understatement of income tax is "substantial" if the understatement exceeds the greater of 10% of the tax required to be shown on the return or $5,000.2014 Tax Ct. Memo LEXIS 123">*153 underpayment for each year depends on the Rule 155 computations. If these computations establish a substantial understatement of income tax for any year, respondent has met his burden of production with respect to that year.*156 errors.2014 Tax Ct. Memo LEXIS 123">*154 is at the very top of the returns, and we find it unlikely that it would have gone unnoticed if Ms. Anyanwu had given her returns even a cursory review before they were filed. As a result, Ms. Anyanwu did not act reasonably.

Accordingly, the penalties under section 6662(a) for 2006 and 2007 are sustained.

VII. Conclusion

On the basis of our examination of the record before us and the parties' arguments at trial, we find that Ms. Anyanwu failed to show that most of respondent's adjustments are incorrect. However, Ms. Anyanwu did prove that a portion of the money in her accounts came from nontaxable sources, such as loans, a Federal tax refund, transfers between accounts, checks written to herself, escrow overpayments, and a payment from an estate. Ms. Anyanwu also proved that she is entitled to a charitable contribution deduction for each of the years in issue and a Schedule E mortgage interest deduction for 2007. Further, respondent met his burden of production with respect to the addition to tax and penalties, and Ms. Anyanwu failed to meet her burden of proving that they should not apply.

To reflect the foregoing and the concessions of the parties,

Decisions will be entered under Rule 155.

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Footnotes

• 1. 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. All monetary amounts are rounded to the nearest dollar.↩

• 2. After the years in issue, Mr. and Ms. Anyanwu remarried.↩

• 3. The Section 8 housing program under the United States Housing Act of 1937 authorizes a private landlord who rents to a low-income tenant to receive assistance payments from the U.S. Department of Housing and Urban Development (HUD) in an amount calculated to make up the difference between the tenant's rent payments and the contract rent agreed upon by the landlord and HUD. See Cisneros v. Alpine Ridge Grp., 508 U.S. 10">508 U.S. 10, 508 U.S. 10">12 (1993); see also42 U.S.C. sec. 1437f (2006)↩.

• 4. SeeRule 91(e)↩ ("The Court will not permit a party to a stipulation to qualify, change, or contradict a stipulation in whole or in part, except that it may do so where justice requires.").

• 5. Rule 142(a); Welch v. Helvering, 290 U.S. 111">290 U.S. 111, 290 U.S. 111">115↩ (1933).

• 6. INDOPCO, Inc. v. Commissioner, 503 U.S. 79">503 U.S. 79, 503 U.S. 79">84 (1992); see alsoRule 142(a)↩.

• 7. Sec. 6001↩.

• 8. Sec. 446(b)↩.

• 9. Nicholas v. Commissioner, 70 T.C. 1057">70 T.C. 1057, 70 T.C. 1057">1064↩ (1978).

• 10. Clayton v. Commissioner, 102 T.C. 632">102 T.C. 632, 102 T.C. 632">645-646 (1994) (citing DiLeo v. Commissioner, 96 T.C. 858">96 T.C. 858, 96 T.C. 858">868 (1991), aff'd, 959 F.2d 16">959 F.2d 16↩ (2d Cir. 1992)).

• 11. Burgo v. Commissioner, 69 T.C. 729">69 T.C. 729, 69 T.C. 729">743 n.14 (1978) (quoting Troncelliti v. Commissioner, T.C. Memo. 1971-72↩).

• 12. Tokarski v. Commissioner, 87 T.C. 74">87 T.C. 74, 87 T.C. 74">77↩ (1986).

• 13. Gemma v. Commissioner, 46 T.C. 821">46 T.C. 821, 46 T.C. 821">833↩ (1966).

• 14. See Nicholas v. Commissioner, 70 T.C. 1057">70 T.C. 1064↩.

• 15. It is unclear why "Rent" would be written in the memo line because neither party argued that Advantage Home Care rented property from Ms. Anyanwu.↩

• 16. Sec. 111(a); sec. 1.111-1(a), Income Tax Regs.↩

• 17. Lucas v. Earl, 281 U.S. 111">281 U.S. 111↩ (1930).

• 18. Helvering v. Horst, 311 U.S. 112">311 U.S. 112, 311 U.S. 112">116-117 (1940); Lucas v. Earl, 281 U.S. 111">281 U.S. at 114-115↩.

• 19. Sec. 1001(a)↩.

• 20. Sec. 121(a)↩.

• 21. See Coleman v. Commissioner, T.C. Memo. 1979-139↩.

• 22. Mantell v. Commissioner, 17 T.C. 1143">17 T.C. 1143, 17 T.C. 1143">1147-1148 (1952); see also Astor Holding Co. v. Commissioner, 135 F.2d 47">135 F.2d 47, 135 F.2d 47">48 (5th Cir. 1943), aff'g↩ a Memorandum Opinion of the Board of Tax Appeals.

• 23. Warren Serv. Corp. v. Commissioner, 110 F.2d 723">110 F.2d 723, 110 F.2d 723">724 (2d Cir. 1940), aff'g on this point, rev'g on another39 B.T.A. 856">39 B.T.A. 856 (1939); Mantell v. Commissioner, 17 T.C. 1143">17 T.C. 1148↩.

• 24. Hirsch Improvement Co. v. Commissioner, 143 F.2d 912">143 F.2d 912, 143 F.2d 912">915 (1944), aff'g a Memorandum Opinion of this Court; Astor Holding Co. v. Commissioner, 135 F.2d 47">135 F.2d at 48↩.

• 25. See Estate of Spiegel v. Commissioner, 12 T.C. 524">12 T.C. 524, 12 T.C. 524">527↩ (1949).

• 26. INDOPCO, Inc. v. Commissioner, 503 U.S. 79">503 U.S. at 84; see alsoRule 142(a)↩.

• 27. Sec. 6001↩.

• 28. Van Dusen v. Commissioner, 136 T.C. 515">136 T.C. 515, 136 T.C. 515">533 (2011); sec. 1.170A-13(a)(1), Income Tax Regs.↩

• 29. Sec. 170(f)(8)(A)↩.

• 30. Sec. 170(f)(8)(B)↩.

• 31. Sec. 170(f)(8)(c)↩.

• 32. Sec. 163(a)↩.

• 33. Linder v. Commissioner, 68 T.C. 792">68 T.C. 792, 68 T.C. 792">796↩ (1977).

• 34. Sec. 163(h)↩.

• 35. Sec. 163(h)(4)(A)↩.

• 36. One Form 1098 lists a different number for Ms. Anyanwu's address on Alyssa Road, but this appears to be a typographical error.↩

• 37. Sec. 162(a)↩.

• 38. Sec. 262(a)↩.

• 39. INDOPCO, Inc. v. Commissioner, 503 U.S. 79">503 U.S. at 84↩.

• 40. Sec. 6001; sec. 1.6001-1(a), Income Tax Regs.↩

• 41. Sec. 1.6001-1(e), Income Tax Regs.↩

• 42. Cohan v. Commissioner, 39 F.2d 540">39 F.2d 540, 39 F.2d 540">543-544↩ (2d Cir. 1930).

• 43. Vanicek v. Commissioner, 85 T.C. 731">85 T.C. 731, 85 T.C. 731">742-743↩ (1985).

• 44. Sec. 168(a)↩.

• 45. Sec. 1.167(a)-10(b), Income Tax Regs.↩

• 46. Secs. 167(c), 1011, 1012; sec. 1.167(g)-1, Income Tax Regs.↩

• 47. Broz v. Commissioner, 137 T.C. 46">137 T.C. 46, 137 T.C. 46">58 (2011), aff'd, 727 F.3d 621">727 F.3d 621 (6th Cir. 2013); sec. 1.167(a)-5, Income Tax Regs.↩

• 48. Ms. Anyanwu listed properties with address numbers of 892 and 926 on her 2007 Schedule E but not her 2006 Schedule E.

• 49. Sec. 7491(c)↩.

• 50. See Higbee v. Commissioner, 116 T.C. 438">116 T.C. 438, 116 T.C. 438">447↩ (2001)

• 51. Sec. 7491(c)↩.

• 52. Sec. 6664(c)(1)↩.

• 53. Sec. 6662(c)↩.

• 54. Neely v. Commissioner, 85 T.C. 934">85 T.C. 934, 85 T.C. 934">947 (1985) (quoting Marcello v. Commissioner, 380 F.2d 499">380 F.2d 499, 380 F.2d 499">506 (5th Cir. 1967), aff'g in part, remanding in part43 T.C. 168">43 T.C. 168 (1964), andT.C. Memo. 1964-299↩).

• 55. See Higbee v. Commissioner, 116 T.C. 438">116 T.C. 449; sec. 1.6662-3(b)(1), Income Tax Regs.↩

• 56. Sec. 6662(d)(1)(A)↩.

• 57. See Olagunju v. Commissioner, T.C. Memo. 2012-119; Jarman v. Commissioner, T.C. Memo. 2010-285↩.

• 58. Neonatology Assocs., P.A. v. Commissioner, 115 T.C. 43">115 T.C. 43, 115 T.C. 43">98 (2000), aff'd, 229 F.3d 221">229 F.3d 221 (3d Cir. 2002); sec. 1.6664-4(b), Income Tax Regs.↩

• 59. Metra Chem Corp. v. Commissioner, 88 T.C. 654">88 T.C. 654, 88 T.C. 654">662↩ (1987).