Opinion
413-19S
04-18-2023
RICHARD E. EVANS, DECEASED, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER OF DISMISSAL AND DECISION
Joseph H. Gale, Judge.
The Petition in this case was timely filed in response to a notice of deficiency issued to petitioner determining a deficiency in his 2011 Federal income tax of $24,711, and additions to tax under sections 6651(a)(1), 6651(a)(2), and 6654 of $5,164, $5,738, and $451, respectively. On October 7, 2020, respondent filed a Motion to Dismiss for Lack of Prosecution (Motion to Dismiss) requesting that this case be dismissed for failure to properly prosecute and that a decision be entered sustaining the deficiency and additions to tax as determined in the notice of deficiency. By Order and Order Show to Cause dated October 23, 2020, as modified by Order dated November 9, 2020, the Court (1) calendared respondent's Motion to Dismiss for hearing at the calendar call of the remote Atlanta, Georgia trial session commencing February 1, 2021, and (2) directed petitioner to file a response in writing showing cause why respondent's Motion to Dismiss should not be granted and this case should not be dismissed for failure to properly prosecute.
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure. Dollar amounts have been rounded to the nearest dollar.
Having received no response from petitioner, who also did not appear at the hearing, the Court by Order of Dismissal and Decision entered and served on April 6, 2021, dismissed this case for failure to properly prosecute and entered a decision sustaining the aforementioned deficiency and additions to tax. However, for reasons described in the Court's Order served May 26, 2021, it thereafter became apparent to the Court that petitioner had died at some point while the case was pending. Accordingly, by the foregoing Order the Court vacated the aforementioned Order of Dismissal and Decision and directed respondent to file a status report listing any potential heirs at law of the decedent petitioner.
On July 8, 2021, respondent filed a Status Report, therein advising, inter alia, that the decedent petitioner is survived by one adult child, Brooke Evans Christianson. Thus, in accordance with the principles of Nordstrom v. Commissioner, 50 T.C. 30, 32 (1968), the Court, by Order served July 14, 2021, provided notice of this proceeding to Ms. Christianson and directed her to file a motion for substitution of proper party, or otherwise make her intentions known by written notice to the Court, by September 13, 2021, if she wished to prosecute this case on behalf of the decedent petitioner.
Respondent thereafter filed a First Supplement to Status Report (Supplement) on September 3, 2021. Attached as an exhibit to respondent's Supplement was a Certification of Death issued by the State of Florida Bureau of Vital Statistics, which indicated that petitioner died on April 9, 2021, in Pinellas County, Florida, and was never married. The Supplement also advised the Court that respondent's counsel had spoken with Ms. Christianson, who had advised respondent that no estate had been created for the decedent petitioner and that no assets remained to be distributed. She also advised respondent of her intention to pursue this case on behalf of the decedent petitioner. Accordingly, by Order served July 21, 2022, we extended until August 19, 2022, the deadline for Ms. Christianson to file a motion for substitution of proper party or otherwise to provide written notice of her intentions to the Court. To date, Ms. Christianson has not filed such a motion or otherwise made her intentions known by written notice to the Court.
The Court may dismiss a case at any time and enter a decision against a taxpayer for failure properly to prosecute his case, failure to comply with the Rules of this Court or any order of the Court, or for any cause which the Court deems sufficient. Rule 123(b); Stearman v. Commissioner, 436 F.3d 533, 535-37 (5th Cir. 2006), aff'g T.C. Memo. 2005-39; Bauer v. Commissioner, 97 F.3d 45, 48-49 (4th Cir. 1996); Edelson v. Commissioner, 829 F.2d 828, 831 (9th Cir. 1987), aff'g T.C. Memo. 1986-223. When a petitioner dies, the Court generally will order that a representative or successor be substituted as the proper party. Rule 63(a). In the event that no representative of a decedent comes forward to prosecute the decedent's case before this Court, the procedural means for bringing the case to a close is dismissal for lack of prosecution. See Nordstrom, 50 T.C. at 32; see also Wyler v. Commissioner, T.C. Memo. 1990-285, 1990 WL 74410, at *3.
Under the circumstances, we are satisfied that dismissal of this case for lack of prosecution is appropriate. Because Ms. Christianson represented to respondent that no action has been commenced for the administration of petitioner's estate, there is no indication that any representative or fiduciary is currently authorized to act on behalf of the estate of the decedent petitioner. Ms. Christianson, as petitioner's heir at law, has notice of this case and has been afforded ample time to file a motion for substitution of proper party or otherwise to provide written notice to the Court if she wished to continue the prosecution of this case. She has not done so. We will therefore grant respondent's Motion to Dismiss and enter a decision in his favor.
In the notice of deficiency (a copy of which is attached to the Petition) respondent determined a deficiency of $24,711 in petitioner's 2011 Federal income tax. The notice of deficiency indicates that petitioner failed to file a Federal income tax return for 2011, and that, pursuant to section 6020(b), respondent prepared and filed a substitute for return reporting the following items of income: dividend income of $12, nonemployee compensation of $62,288, wages of $16,980, and Social Security benefits of $19,814. The notice of deficiency indicates that the foregoing unreported income determinations were based on information returns filed by third-party payers for the year at issue reporting that the amounts in question were paid to petitioner. In the Petition, which was filed by counsel, petitioner does not dispute having received the foregoing items of unreported income. Rather, he asserts only that he "has additional expenses to offset his compensation which he will present at a hearing along with back up documents for same."
The Commissioner's determinations in a notice of deficiency are generally entitled to a presumption of correctness. See Rule 142(a). In a case involving unreported income, as in the instant matter, the U.S. Court of Appeals for the Fourth Circuit, where appeal in this case lies absent a stipulation to the contrary, has held that the presumption of correctness applies once the Commissioner makes a "minimal evidentiary showing" to support a link between the taxpayer and an income-producing activity. See Williams v. Commissioner, 999 F.2d 760, 766 (4th Cir. 1993), aff'g T.C. Memo. 1992-153. If the Commissioner produces evidence linking the taxpayer with an income-producing activity, the burden of proof shifts back to the taxpayer to prove by a preponderance of the evidence that the Commissioner's determinations are arbitrary or erroneous. Helvering v. Taylor, 293 U.S. 507, 515 (1935); Tokarski v. Commissioner, 87 T.C. 74, 76-77 (1986).
Here, petitioner has not assigned error to respondent's determination that he failed to report the items of income determined in the notice of deficiency, and we therefore deem him to have conceded that he received such income. See Rule 34(b)(4). Furthermore, even if petitioner had raised a dispute concerning the unreported income, the notice of deficiency itself-which indicates that respondent determined the specific amounts of the unreported income items based on information returns filed by third-party payers-would satisfy respondent's burden of production. See Banister v. Commissioner, T.C. Memo. 2008-201, 2008 WL 3925877, at *2 (finding that a notice of deficiency indicating third parties paid the taxpayer the specific amounts in question satisfied the minimal evidentiary burden, even though direct evidence was not in the record, where the taxpayer implicitly acknowledged that he received at least some income during the year at issue), aff'd, 418 Fed.Appx. 637 (9th Cir. 2011). Therefore, the presumption of correctness attaches to the notice of deficiency in this case.
Petitioner thus has not asserted a reasonable dispute with respect to respondent's unreported income determinations. Accordingly, section 6201(d), which may in certain circumstances shift the burden of production to the Commissioner when a disputed information return forms the basis of his deficiency determination, does not apply in this case.
Rule 34(b)(4), which was in effect when the Petition was filed, has since been amended stylistically and redesignated as Rule 34(b)(1)(G).
All of the material allegations set forth in the Petition in support of the assignments of error have been denied in respondent's Answer. Petitioner has not claimed or shown entitlement to any shift in the burden of proof under section 7491(a). See § 7491(a)(2)(B). Accordingly, the burden of proof rests with petitioner concerning any error in the deficiency determination. As petitioner adduced no evidence in support of the assignments of error in the Petition, he has failed to satisfy his burden of proof. We thus sustain the deficiency in full.
In the notice of deficiency respondent also determined that petitioner is liable for additions to tax under sections 6651(a)(1), 6651(a)(2), and 6654. Section 6651(a)(1) imposes an addition to tax for failure to file a timely return, unless the taxpayer proves that such failure is due to reasonable cause and is not due to willful neglect. Section 6651(a)(2) imposes an addition to tax for failure to pay the amount of tax shown on a return, unless the taxpayer proves that such failure is due to reasonable cause and is not due to willful neglect. Section 6654 imposes an addition to tax on an individual taxpayer who underpays his estimated tax.
The Commissioner generally bears the burden of production with respect to any penalty, addition to tax, or other additional amount (collectively, penalty), where the taxpayer has contested it in his petition. See § 7491(c); Funk v. Commissioner, 123 T.C. 213, 216-18 (2004); Swain v. Commissioner, 118 T.C. 358, 363-65 (2002). To satisfy the burden, the Commissioner must offer sufficient evidence to indicate that it is appropriate to impose the penalty. Higbee v. Commissioner, 116 T.C. 438, 446 (2001). If the Commissioner satisfies his burden of production, the taxpayer bears the burden of proving it is inappropriate to impose the penalty because of reasonable cause, substantial authority, or a similar provision. Id. at 446-47; see also § 6664(c); Wheeler v. Commissioner, 127 T.C. 200, 206 (2006), aff'd, 521 F.3d 1289 (10th Cir. 2008).
For certain penalties, section 6751(b)(1) requires written supervisory approval to be obtained before the penalty may be imposed, and in those circumstances the Commissioner's burden of production under section 7491(c) includes demonstrating his compliance with the foregoing written supervisory approval requirement. See Graev v. Commissioner, 149 T.C. 485, 493 (2017), supplementing and overruling in part 147 T.C. 460 (2016). However, written supervisory approval need not be obtained for the additions to tax at issue in this case. See § 6751(b)(2)(A).
Respondent has proffered no evidence in support of his burden of production with respect to the additions to tax in this case, instead noting that petitioner has not alleged any specific error in respondent's determination of the additions to tax, and arguing for the application of the Court's holdings in Funk and Swain that where, as here, a petition fails to state a claim with respect to penalties, the Commissioner incurs no obligation to produce evidence in support of such determinations pursuant to section 7491(c). See Funk, 123 T.C. at 218; Swain, 118 T.C. at 364-65. In view of petitioner's failure to put the additions to tax at issue, respondent is correct that, under Funk and Swain, petitioner is deemed to have conceded the additions to tax, and respondent accordingly bears no burden of production with respect to them. See Roye v. Commissioner, T.C. Memo. 2012-246, 2012 WL 3656345, at *7 (deeming taxpayer to have conceded additions to tax under sections 6651(a)(2) and 6654 where neither his petition nor his amended petition assigned error to, or contested in any way, the additions to tax; sustaining the additions to tax without considering whether the Commissioner met his burden of production under section 7491(c)); Carlo v. Commissioner, T.C. Memo. 2005-165, 2005 WL 1563278, at *3 (deeming taxpayer to have conceded additions to tax under sections 6651(a)(1), 6651(a)(2), and 6654, where his petition did not contain any specific allegations regarding the additions to tax, or facts to support any such allegations; holding that the Commissioner therefore had no burden of production under section 7491(c) with respect to such additions to tax). Petitioner bears the burden of proof with respect to any exculpatory factors for penalties. See Higbee, 116 T.C. at 446-47; Wheeler, 127 T.C. at 206. As petitioner has adduced no evidence in support of any exculpatory factors, we sustain respondent's determination of the additions to tax in this case.
The foregoing considered, it is
ORDERED that the Clerk of the Court is directed to change petitioner's mailing address in the Court's records to the address listed in the Certificate of Service attached to respondent's First Supplement to Status Report, filed September 3, 2021. It is further
ORDERED that in addition to regular service, the Clerk of the Court shall serve a copy of this Order of Dismissal and Decision upon Brooke Evans Christianson at the mailing address listed for her in the Certificate of Service attached to respondent's First Supplement to Status Report, filed September 3, 2021. It is further
ORDERED that the Court's Order Show to Cause dated October 23, 2020, as modified by the Court's Order dated November 9, 2020, is hereby made absolute. It is further
ORDERED that respondent's Motion to Dismiss for Lack of Prosecution, filed October 7, 2020, is granted, in that this case is hereby dismissed for failure to properly prosecute. It is further
ORDERED and DECIDED that there is a deficiency in petitioner's 2011 Federal income tax due in the amount of $24,711 and additions to tax under sections 6651(a)(1), 6651(a)(2), and 6654, due of $5,164; $5,738; and $451, respectively.