Larry T. Williams ( 2022 )


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  •                      United States Tax Court
    
    T.C. Memo. 2022-7
    LARRY T. WILLIAMS,
    Petitioner
    v.
    COMMISSIONER OF INTERNAL REVENUE,
    Respondent
    —————
    Docket No. 939-20.                                         Filed February 7, 2022.
    —————
    Larry T. Williams, pro se.
    Michael K. Foster II and Daniel C. Munce, for respondent.
    MEMORANDUM FINDINGS OF FACT AND OPINION
    URDA, Judge: Petitioner, Larry T. Williams, challenges a notice
    of deficiency issued by the Internal Revenue Service (IRS) that
    determined a deficiency of $49,100 in his federal income tax for his 2016
    tax year as well as an addition to tax under section 6651(a)(1) 1 of
    $12,273 and an accuracy-related penalty under section 6662(a) of
    $9,820. 2 The notice of deficiency disallowed certain deductions claimed
    by Mr. Williams in connection with his business. Rather than
    attempting to demonstrate errors by the IRS in its determination, Mr.
    Williams has chosen to focus his challenge on frivolous and groundless
    1 Unless otherwise indicated, all statutory references are to the Internal
    Revenue Code, Title 26 U.S.C., in effect at all relevant times, all regulation references
    are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant
    times, and all Rule references are to the Tax Court Rules of Practice and Procedure.
    We round all monetary amounts to the nearest dollar.
    2 The Commissioner has conceded a portion ($2,453) of the addition to tax
    under section 6651(a)(1) as well as the full $9,820 penalty under section 6662(a).
    Served 02/07/22
    2
    [*2] arguments. We will uphold the Commissioner’s determination,
    subject to certain concessions.
    FINDINGS OF FACT
    This case was tried at our Atlanta, Georgia, remote trial session
    (via Zoomgov). We base our factual findings on the deemed admissions
    of facts, as well as the testimony of Mr. Williams, the sole trial witness.
    See Rule 90(c); Silver v. Commissioner, 
    T.C. Memo. 2021-98
    , at *2–3.
    Mr. Williams lived in Florida when he timely filed his petition.
    During 2016 Mr. Williams worked as a consultant for a business
    called Lows Consultant, LLC, working on behalf of National Group
    Protection, Inc. Mr. Williams filed his 2016 Federal income tax return
    3-1/2 months late. On that return he reported gross business income of
    $174,956 and business expenses of $174,829, which produced a taxable
    income of $127. Mr. Williams’ business expenses included, inter alia,
    $73,651 of travel expenses, $43,117 of car and truck expenses, $28,689
    of “other” expenses, $7,255 of supplies, and $6,322 of meal and
    entertainment expenses.
    The IRS thereafter determined that Mr. Williams had failed to
    substantiate his 2016 expenses and issued him a notice of deficiency that
    disallowed most of his claimed deductions. 3 The IRS further determined
    an addition to tax for failure to file timely under section 6651(a)(1) of
    $12,273 and an accuracy-related penalty under section 6662(a) of
    $9,820. 4
    OPINION
    I.      Burden of Proof
    The Commissioner’s determinations in a notice of deficiency are
    generally presumed correct, and the taxpayer bears the burden of
    proving error in the determinations. See Rule 142(a); Welch v.
    Helvering, 
    290 U.S. 111
    , 115 (1933). The taxpayer bears the burden of
    In his pretrial memorandum respondent conceded $22,380 of travel expenses
    3
    and $151 of other expenses for parking.
    4 In his pretrial memorandum respondent conceded the full section 6662(a)
    accuracy-related penalty of $9,820. Respondent further conceded a portion ($2,453) of
    the addition to tax under section 6651(a)(1) for failure to file timely on the ground that
    Mr. Williams filed his return about 3-1/2 months late, rather than five months as
    asserted in the notice of deficiency.
    3
    [*3] proving his entitlement to any deduction or credit claimed on his
    return. INDOPCO, Inc. v. Commissioner, 
    503 U.S. 79
    , 84 (1992); New
    Colonial Ice Co. v. Helvering, 
    292 U.S. 435
    , 440 (1934).
    Mr. Williams does not contend, and the evidence does not
    establish, that the burden of proof should shift to the Commissioner
    under section 7491(a). He thus bears the burden of proof with regard to
    the deficiency. To the extent Mr. Williams challenges the addition to
    tax under section 6651(a)(1), the Commissioner bears the burden of
    production with respect to that addition to tax. See § 7491(c).
    II.   Legal Background
    Gross income includes all income from whatever source derived.
    See § 61(a); see also Commissioner v. Glenshaw Glass Co., 
    348 U.S. 426
    ,
    429 (1955); Helvering v. Clifford, 
    309 U.S. 331
    , 334 (1940). Section
    162(a) generally allows a deduction for ordinary and necessary expenses
    paid or incurred during the taxable year in carrying on a trade or
    business. The taxpayer bears the burden of proving that his reported
    business expenses were actually incurred and were “ordinary and
    necessary.” See § 162(a); Rule 142(a).
    The taxpayer bears the burden of substantiating expenses
    underlying his claimed deductions by keeping and producing records
    sufficient to enable the Commissioner to determine the correct tax. See
    
    Treas. Reg. § 1.6001-1
    (a), (e). Failure to keep and present such records
    counts heavily against a taxpayer’s attempted proof. See Rogers v.
    Commissioner, 
    T.C. Memo. 2014-141
    , at *17.
    In certain circumstances the Court may approximate the amount
    of an expense if the taxpayer proves it was incurred but cannot
    substantiate the exact amount (Cohan rule).              See Cohan v.
    Commissioner, 
    39 F.2d 540
    , 543–44 (2d Cir. 1930). But the taxpayer
    must provide some basis for such an estimate. See Vanicek v.
    Commissioner, 
    85 T.C. 731
    , 742–43 (1985). A court may not apply the
    Cohan rule to approximate expenses subject to the stricter
    substantiation requirements under section 274(d), including expenses
    for travel (including meals and lodging while away from home) and with
    respect to the business use of any listed property (such as a passenger
    automobile). See Sanford v. Commissioner, 
    50 T.C. 823
    , 827–28 (1968),
    aff’d per curiam, 
    412 F.2d 201
     (2d Cir. 1969); see also §§ 274(d)(1), (4),
    280F(d)(4)(A).
    4
    [*4] The Commissioner disallowed Mr. Williams’ deductions for lack
    of substantiation. Mr. Williams does not challenge either the facts on
    which the Commissioner’s determination is based or his calculation of
    tax. Mr. Williams instead raises assorted frivolous or groundless
    arguments that have been oft rejected by this Court, including among
    other things, that the U.S. Government went bankrupt and no longer
    exists, that the Internal Revenue Code does not constitute “law,” and
    that he is not a U.S. citizen. See, e.g., Ulloa v. Commissioner, 
    T.C. Memo. 2010-68
    , 
    2010 WL 1330387
    ; I.R.S. Notice 2010-33, 2010-
    17 I.R.B. 609
    . We will not painstakingly address his assertions “with
    somber reasoning and copious citation of precedent; to do so might
    suggest that these arguments have some colorable merit.” Crain v.
    Commissioner, 
    737 F.2d 1417
    , 1417 (5th Cir. 1984); see also Wnuck v.
    Commissioner, 
    136 T.C. 498
    , 512 (2011).
    We accordingly uphold the Commissioner’s deficiency
    determination, subject to the concessions he has made during the
    pendency of the proceedings in this Court.
    III.   Addition to Tax
    A.    Section 6651(a)(1) Addition to Tax
    Section 6651(a)(1) imposes an addition to tax for the failure to file
    a required return timely unless the taxpayer can establish that such
    failure was due to “reasonable cause and not due to willful neglect”.
    United States v. Boyle, 
    469 U.S. 241
    , 243 (1985). The Commissioner
    bears the initial burden of production to introduce evidence that the
    return was filed late. See § 7491(c). The taxpayer then bears the burden
    of proving that the late filing was due to reasonable cause and not willful
    neglect. Boyle, 
    469 U.S. at 245
    ; Higbee v. Commissioner, 
    116 T.C. 438
    ,
    447 (2001).
    The facts before us establish that Mr. Williams was required to
    file a return for 2016. The Commissioner met his initial burden in this
    case by introducing Form 4340, Certificate of Assessments, Payments,
    and Other Specified Matters, for Mr. Williams’ 2016 tax year, which
    showed that Mr. Williams filed his 2016 tax return on May 17, 2018,
    around 3-1/2 months after the extended deadline to do so. See Murray
    v. Commissioner, 
    T.C. Memo. 2017-67
    , at *11. The burden thus shifts to
    Mr. Williams to prove that the untimely filing was due to reasonable
    cause and not willful neglect. See Rule 142(a); Higbee, 116 T.C.
    at 446–47. Mr. Williams has offered no explanation or evidence that
    5
    [*5] would support such a conclusion. As Mr. Williams has not met his
    burden, we hold that he is liable for the addition to tax under
    section 6651(a)(1) (as reduced by the Commissioner’s concession).
    B.     Penalty Under Section 6673(a)(1)(B)
    The Commissioner further seeks a penalty against Mr. Williams
    pursuant to section 6673(a)(1)(B). Section 6673(a)(1)(B) provides this
    Court with the discretion to require a taxpayer to pay to the Government
    a penalty of up to $25,000 when a taxpayer takes a frivolous or
    groundless position in this Court.         Although Mr. Williams has
    repeatedly advanced frivolous or groundless positions in this case, the
    Court declines to impose a section 6673 penalty at this time. We warn
    Mr. Williams that we are unlikely to be lenient going forward should he
    choose again to press frivolous or groundless arguments like the ones he
    relied upon in this case.
    IV.   Conclusion
    In sum, we sustain the IRS’ determinations in the notice of
    deficiency, other than the expenses, penalty, and portion of the addition
    to tax conceded by the Commissioner.
    To reflect the foregoing,
    Decision will be entered under Rule 155.