Mayer v. Commissioner , 80 T.C.M. 393 ( 2000 )


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  •                          T.C. Memo. 2000-295
    UNITED STATES TAX COURT
    SOLOMON MAYER, Petitioner v.
    COMMISSIONER OF INTERNAL REVENUE, Respondent
    Docket No. 23357-96.              Filed September 20, 2000.
    .
    Jerome Kamerman, for petitioner.
    Monica E. Koch, for respondent.
    MEMORANDUM FINDINGS OF FACT AND OPINION
    SWIFT, Judge:    For the years in issue, respondent determined
    deficiencies in petitioner’s Federal income taxes and additions
    to tax as follows:
    Additions to Tax
    Year       Deficiency     Sec. 6651(a)(1)      Sec. 6654
    1991        $34,838           $ 3,635           $ 706
    1993         75,020            11,650             1,819
    1994         83,520            13,775            2,677
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    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.
    After concessions, the primary issues for decision are:
    (1) For 1991, whether $22,192 in interest income relating to a
    bank certificate of deposit should be charged to petitioner;
    (2) for 1994, the amount of gambling costs petitioner realized to
    offset petitioner’s gambling income; and (3) whether petitioner
    is liable for additions to tax under sections 6651(a)(1) and
    6654.
    FINDINGS OF FACT
    Some of the facts have been stipulated and are so found.
    When the petition was filed, petitioner resided in Brooklyn,
    New York.
    During the years in issue, petitioner was an officer and
    shareholder of Delta Realty Development Corp. (Delta Realty).    In
    1988, Delta Realty purchased a parcel of real estate located in
    Newark, New Jersey, with the intention to renovate the building
    located on the property.    In order to purchase the real estate,
    Delta Realty obtained a $2.5-million loan from Bank Leumi Trust
    Co. of New York (Bank Leumi).
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    Also in 1988, another loan from Bank Leumi was obtained
    apparently in the amount of $1.5 million.1   The evidence does not
    establish whether Delta Realty or petitioner was the debtor on
    this loan.   The proceeds from this loan were used to purchase a
    Bank Leumi certificate of deposit (Bank Leumi CD).
    For 1988 and 1991, petitioner was issued by Bank Leumi
    Forms 1099-INT, Interest Income, indicating that petitioner
    received interest income due on the Bank Leumi CD.   On the
    Form 1099-INT for 1991, it was indicated that petitioner received
    $22,192 in interest income on the Bank Leumi CD.
    Prior to 1991, petitioner won a large cash prize in the
    New York State Lottery with respect to which petitioner during
    the years in issue received an annual payment of $101,500.
    In January of 1994, petitioner traveled to Las Vegas,
    Nevada, and played the slot machines at Caesar’s Palace Casino.
    In 1994, petitioner was issued Forms 1099 from Caesar’s
    Palace indicating that petitioner had winnings in 1994 of
    $162,000 from playing the Caesar’s Palace slot machines.
    Petitioner did not maintain any financial records relating to his
    gambling winnings and costs.
    For 1991, 1993, and 1994, petitioner failed to file Federal
    income tax returns.
    1
    Petitioner claims the loan was for $4 million. However, a
    letter from the attorneys who represented Delta Realty suggests
    that the loan was in the amount of $1.5 million.
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    On audit, respondent prepared and filed Federal income tax
    returns for petitioner for 1991, 1993, and 1994.
    Among other adjustments, for 1991 respondent charged
    petitioner with the $22,192 in interest income on the Bank Leumi
    CD.   For 1994, respondent charged petitioner with the $162,000 in
    gambling winnings from Caesar’s Palace and the $101,500 in
    lottery winnings.   Due to lack of substantiation, respondent
    allowed petitioner no gambling costs.   Respondent also did not
    allow petitioner an exemption for his wife for any of the years
    in dispute.
    In early 1995, in conjunction with a criminal investigation
    of petitioner, the attorney general of New York was granted a
    subpoena and seized many of petitioner’s business records.    The
    indictment against petitioner was later dismissed.   In 1998, the
    attorney general of New York returned to petitioner some of his
    business records.
    OPINION
    For the years in issue, respondent’s adjustments ordinarily
    carry with them a presumption of correctness.   See Rule 142(a);
    Welch v. Helvering, 
    290 U.S. 111
    (1933).   However, with regard to
    the $22,192 in interest income relating to the certificate of
    deposit, petitioner contends that under section 6201(d) the
    burden should be on respondent to prove that the interest income
    should be charged to petitioner.
    - 5 -
    Section 6201(d) provides that if a taxpayer, in a court
    proceeding, asserts a reasonable dispute with respect to income
    reported on an information return and has fully cooperated with
    respondent, then the burden of producing reasonable and probative
    information relating to the alleged income may shift to
    respondent.   See Hardy v. Commissioner, 
    181 F.3d 1002
    (9th Cir.
    1999), affg. T.C. Memo. 1997-97; Dennis v. Commissioner,
    T.C. Memo. 1997-275.   Section 6201(d) provides as follows:
    SEC. 6201(d). Required reasonable verification of
    information returns.
    In any court proceeding, if a taxpayer asserts a
    reasonable dispute with respect to any item of income
    reported on an information return filed with the
    Secretary under subpart B or C of part III of
    subchapter A of chapter 61 by a third party and the
    taxpayer has fully cooperated with the Secretary
    (including providing, within a reasonable period of
    time, access to and inspection of all witnesses,
    information, and documents within the control of the
    taxpayer as reasonably requested by the Secretary), the
    Secretary shall have the burden of producing reasonable
    and probative information concerning such deficiency in
    addition to such information return.
    The evidence indicates that petitioner has not satisfied the
    cooperation requirement of section 6201(d).   Petitioner failed to
    file his Federal income tax returns for the years in issue.
    Petitioner produced minimal records for respondent’s
    representatives.   Petitioner is not entitled to the benefits of
    section 6201(d).
    - 6 -
    Based on the evidence before us, we conclude that the
    $22,192 in interest income received on the Bank Leumi CD should
    be charged to petitioner.   We note particularly petitioner’s
    failure to provide any personal bank records that would
    substantiate that he did not receive this interest income and
    petitioner’s failure to provide any bank records of Delta Realty
    that would substantiate petitioner’s claim that Delta Realty
    received this interest income.
    We are not persuaded that, in spite of the seizure of some
    of petitioner’s records, petitioner could not have located and
    produced for the Court documentation that would have
    substantiated petitioner’s claim that the $22,192 in interest
    income was not received by petitioner, if in fact that were true.
    Section 165(d) allows a deduction for losses from wagering
    transactions to the extent of gains from such transactions.     See
    sec. 1.165-10, Income Tax Regs.    Section 6001 and the
    corresponding regulations require taxpayers to keep sufficient
    records to substantiate the amount of gross income, deductions,
    and credits claimed.   See sec. 1.6001-1(a), Income Tax Regs.
    Respondent has suggested that taxpayers who gamble regularly
    maintain diaries of gambling winnings and costs supplemented by
    verifiable documentation to comply with section 6001.     See Rev.
    Proc. 77-29, 1977-2 C.B. 538.    Respondent suggests that the
    documentation should contain information regarding the dates and
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    type of specific wagers, the names and addresses of the gambling
    establishments, names of witnesses, and the amounts won or lost.
    Generally, respondent considers verifiable documentation to
    consist of the following:   Forms W-2G (Certain Gambling
    Winnings), actual winnings slips given to taxpayers by casinos,
    wagering tickets, credit records, and bank withdrawal forms.
    Where taxpayers fail to satisfy their burden of
    demonstrating the amount of their gambling costs and fail to
    provide documentation or other corroborating evidence, we may
    disallow claimed gambling costs.   See Zielonka v. Commissioner,
    T.C. Memo 1997-81; Klabacka v. Commissioner, T.C. Memo. 1987-77.
    The following schedule reflects petitioner’s and
    respondent’s respective computations of petitioner’s claimed net
    gambling winnings for 1994.
    Computations of Petitioner’s 1994 Net Gambling Winnings
    Petitioner          Respondent
    Gross winnings            $837,570            $162,000
    Gambling costs            (898,050)              -0-
    Lottery winnings           101,500             101,500
    Net winnings           $ 41,020            $263,500
    At trial, petitioner submitted an unsigned letter from
    Caesar’s Palace that indicated that for 1994 petitioner put an
    estimated $898,050 into slot machines and had estimated slot
    machine winnings of $837,570, for an estimated net gambling loss
    (just from slot machines and before taking into account lottery
    winnings) of $60,480.   The letter states:   "Please note the
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    tracking system used to arrive at estimated win or loss
    information provides estimates only and does not constitute an
    accurate accounting record. * * * This information should be used
    as a supplement to your own records or information."      The
    Caesar’s Palace letter we regard as highly suspect.      It is
    unsigned.    By its terms, it is only an estimate and is to be
    supplemented by petitioner’s own records.      We regard the letter
    as unreliable evidence and give it no weight.
    Petitioner has presented no documentation of his gambling
    costs.    Petitioner acknowledges that he maintained no records of
    his gambling activities.    Petitioner has failed to satisfy his
    burden of proof, and, on the evidence before us, we allow
    petitioner no gambling costs for 1994.
    Under section 151(b), a taxpayer who does not file a joint
    return with his or her spouse may not claim an exemption for the
    spouse unless the spouse for the year had no gross income and is
    a dependent of the taxpayer.    See sec. 1.151-1(b), Income Tax
    Regs.    Petitioner has presented insufficient evidence regarding
    his wife to qualify her as a dependent.      We disallow petitioner’s
    claim of his wife as an exemption.
    Section 6651(a) provides for an addition to tax for failure
    to file timely Federal income tax returns unless there is
    reasonable cause for such failure.      Section 6654(a) generally
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    imposes an addition to tax for failure to pay estimated income
    taxes.
    For 1994 only, petitioner offers the excuse that the seizure
    of his business records in 1995 and the return of only some of
    those records by the attorney general of New York constitutes
    reasonable cause for petitioner’s failure to file his 1994
    Federal income tax return.   We disagree.      Petitioner had a
    pattern of not filing his income tax returns.       We regard
    petitioner’s argument that he would have filed for 1994 but for
    the seizure of his records as not credible.
    We sustain respondent’s determination of all of the
    additions to tax.
    To reflect the foregoing,
    Decision will be entered
    under Rule 155.
    

Document Info

Docket Number: No. 23357-96

Citation Numbers: 80 T.C.M. 393, 2000 Tax Ct. Memo LEXIS 345, 2000 T.C. Memo. 295

Judges: \"Swift, Stephen J.\"

Filed Date: 9/20/2000

Precedential Status: Non-Precedential

Modified Date: 11/20/2020