Roderick v. Comm'r

T.C. Summary Opinion 2007-6
UNITED STATES TAX COURT
DANIEL J. AND JOYCE A. RODERICK, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 23130-05S. Filed January 10, 2007.
Daniel J. and Joyce A. Roderick, pro se.
James H. Brunson, for respondent.
WELLS, Judge: This case was heard pursuant to the
provisions of section 7463 in effect at the time the petition was
filed. The decision to be entered is not reviewable by any other
court, and this opinion should not be cited as authority. All
section references are to the Internal Revenue Code, as amended,
and all Rule references are to the Tax Court Rules of Practice
and Procedure.
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Respondent determined a deficiency in petitioners’ Federal
income tax of $27,414 and a section 6662(a) penalty of $5,405 for
their 2003 taxable year. After concessions1 by petitioner Daniel
J. Roderick (petitioner),2 the issues we must decide are whether
petitioner must include in income for 2003 the entire amount of
nonemployee compensation he received from GMAC Mortgage
Corporation (GMAC) or whether a portion of that income belonged
to another taxpayer who worked with petitioner, and whether
petitioner is entitled to deduct certain nonreimbursed business
expenses.
Background
Some of the facts have been stipulated. The parties’
stipulation of facts is incorporated in this opinion by
1
Petitioner Daniel J. Roderick (petitioner) concedes that he
received compensation from GMAC Mortgage Corporation (GMAC) and
pension and annuity income from Fidelity Investments and that he
should have reported both receipts on petitioners’ 2003 tax
return. Petitioner’s concessions support respondent’s position
that the sec. 6662(a) penalty is appropriate. Moreover,
petitioners did not assign error to the sec. 6662(a) penalty and
have therefore conceded the issue. See Rule 34(b)(4); Funk v.
Commissioner, 123 T.C. 213, 215 (2004). Accordingly, petitioners
are liable for the sec. 6662(a) penalty.
2
Petitioners are now divorced, and petitioner Joyce A.
Roderick did not appear at trial on Oct. 30, 2006, in Atlanta,
Georgia. Petitioner and respondent sought to enter a stipulation
of facts signed by petitioner and respondent but not by
petitioner Joyce A. Roderick. By order dated Oct. 30, 2006, we
dismissed the instant case for lack of prosecution insofar as it
relates to petitioner Joyce A. Roderick. Respondent and
petitioner read the stipulation of facts into the record.
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reference and are found as facts. At the time of filing the
petition, petitioners resided in Alpharetta, Georgia. Petitioner
entered into a short-term consulting agreement with his former
employer, GMAC, after his position was eliminated. Petitioner
submitted invoices to GMAC on February 1 and March 1, 2003,
totaling $43,977.76 and $34,967.70, respectively, for services
rendered and expenses incurred. Both invoices instructed GMAC to
wire transfer payment to a Bank of America account “For Benefit
of Daniel J. Roderick” and listed petitioner’s Bank of America
account number and Social Security number. GMAC paid
petitioner’s invoices on February 12 and March 26, 2003. Despite
receiving payment for the consulting services that petitioner
performed for GMAC, petitioners failed to include those amounts
on their 2003 tax return. Petitioners also failed to include on
their 2003 tax return $7,552 in pension and annuity distribution
income that petitioner received from Fidelity Investments.
Discussion
Petitioner concedes that he received compensation from GMAC
and pension and annuity income from Fidelity Investments and that
he should have reported both receipts on petitioners’ 2003 tax
return. Petitioner contends, however, that he transferred
$39,249.70 to Kathleen A. Mulvey (Ms. Mulvey), who performed some
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of the consulting services for GMAC.3 Petitioner also contends
that he should be allowed to deduct certain business expenses
that he omitted from his 2003 tax return.
As a general rule, the Commissioner’s determinations in the
notice of deficiency are presumed correct and the burden of
proving an error is on the taxpayer. Rule 142(a); Welch v.
Helvering, 290 U.S. 111, 115 (1933).4 Gross income includes
compensation for services and pension income. Sec. 61(a)(1),
(11). Income tax cannot be avoided through an assignment of
income. Lucas v. Earl, 281 U.S. 111 (1930).
At trial, petitioner credibly testified that because Ms.
Mulvey had not timely submitted certain taxpayer identification
to GMAC, petitioner agreed he would let GMAC pay him and he would
then forward Ms. Mulvey her share. Petitioner offered as
evidence copies of the invoices that he sent to GMAC on
February 1 and March 1, 2003. The February 1 invoice indicated
that Ms. Mulvey had provided $19,000 in professional services to
GMAC and incurred $282 in reimbursable expenses. The March 1
invoice indicated that Ms. Mulvey had provided $19,000 in
3
Ms. Mulvey reported to petitioner when they were both
employed by GMAC. Ms. Mulvey’s position at GMAC was also
eliminated.
4
Petitioner does not contend that the burden of proof has
shifted to respondent under sec. 7491(a).
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professional services to GMAC and incurred $967.70 in
reimbursable expenses.
Petitioner also credibly testified, and provided
corroborating bank statements showing, that $19,282 and
$19,967.70 were debited from his account on February 13 and
March 27, 2003, respectively. On the basis of petitioner’s
testimony and corroborating evidence, we conclude that petitioner
was merely a conduit for the $39,249. Accordingly, we hold that
the $39,249 that petitioner received from GMAC and in turn paid
to Ms. Mulvey is not includable in petitioners’ gross income.
Regarding the nonreimbursed business expenses petitioners
seek to deduct, deductions are a matter of legislative grace.
INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). The
taxpayer bears the burden of proving he is entitled to deductions
and must present adequate documentation to support any deductions
claimed. Welch v. Helvering, supra at 115; see also Nowland v.
Commissioner, 244 F.2d 450, 453 (4th Cir. 1957) (holding the
taxpayer bears the “burden of proving the amount of the
deductible expenses since deductions are a matter of statutory
privilege and must be shown by substantial evidence”). At trial
petitioner submitted numerous receipts and documentation
substantiating his business expenses for taxable year 2003. With
the exception of three automobile payments to Saab Financial
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Service Corp. and one payment to “Dents & Dings”,5 we are
satisfied with petitioner’s showing and hold that petitioner is
entitled to the claimed business expense deductions for 2003.
To reflect the foregoing,
Decision will be entered
under Rule 155.
5
Petitioner labeled these payments “company car” but
provided no further evidence. We infer from the Saab Financial
Services Corp.’s statements that petitioner has been making
payments on the automobile for some time before the taxable year
in issue and had numerous payments remaining. The combination of
the statements from Saab and the repair slip from Dents & Dings
suggests that petitioner’s automobile is for his personal use.
Petitioner may not deduct personal expenses. See sec. 262(a).