Craig J. Schieder ( 2022 )

United States Tax Court
T.C. Memo. 2022-104CRAIG J. SCHIEDER,
Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent
—————
Docket No. 4048-20. Filed October 11, 2022.
—————
Craig J. Schieder, pro se.
Marissa J. Savit and Thomas A. Deamus, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
URDA, Judge: Petitioner, Craig J. Schieder, challenges a notice
of deficiency issued by the Internal Revenue Service (IRS) that
determined a deficiency of $30,963 in his federal income tax for his 2017
tax year as well as an addition to tax under section 6651(a)(1) 1 of
$2,925. 2 After initially asserting frivolous arguments on his 2017 tax
return and in his original petition in this Court, Mr. Schieder changed
tack and challenged various aspects of the IRS’s notice. We will uphold
the Commissioner’s determinations in the notice of deficiency as
1 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. We round all monetary amounts
to the nearest dollar.
2 The Commissioner has previously conceded the other addition to tax under
section 6651(a)(2) and a penalty under section 6662(a) as determined in the notice of
deficiency.
Served 10/11/22
2
[*2] modified by the Commissioner’s answer to the amended petition
and subject to the Commissioner’s concessions.
FINDINGS OF FACT
This case was tried in October 2021 at our Atlanta, Georgia,
remote trial session (via Zoomgov). Mr. Schieder elected not to testify
at trial and did not submit a posttrial brief (even after he requested, and
we granted, an extension of time to do so). We base our factual findings
on the testimony of the two trial witnesses, as well as the admitted
exhibits. 3 Mr. Schieder lived in New York when he timely filed his
petition.
I. Mr. Schieder’s 2017 Work and Tax Reporting
During 2017 Mr. Schieder worked as a recreational vehicle (RV)
salesman for Colton Auto, Inc. (Colton), selling RVs manufactured by
companies including Tiffin Motor Homes, Inc. (Tiffin), Thor Motor Coach
(Thor), and Forest River, Inc. (Forest River). Mr. Schieder earned
$139,448 from Colton, as well as assorted payments from several other
companies in the RV industry: (i) $6,100 from Tiffin; (ii) $1,000 from
Thor; (iii) $2,100 from Forest River; (iv) $2,572 from Freightliner
Custom Chassis Co. (Freightliner); and (v) $850 from Grand Design RV,
LLC (Grand Design).
Mr. Schieder filed a federal income tax return for 2017 that was
dated November 20, 2018, and received by the IRS on December 26,
2018. On this return Mr. Schieder claimed a refund of $17,965,
reporting, inter alia, no income and itemized deductions of $8,782.
3 At trial we reserved ruling on Exhibits 2-J and 20-R, Mr. Schieder’s 2017
federal income tax return and an IRS tax return transcript, respectively, to give Mr.
Schieder an opportunity to set forth in writing any objection that he might have to
these exhibits. Mr. Schieder has forfeited his chance by failing to file a brief, and we
will admit both exhibits. We pause to explicitly reject Mr. Schieder’s contention that
the 2017 tax return offered by the Commissioner was not his actual return. The
Commissioner introduced a signed 2017 tax return accompanied by a postmarked
envelope and a packet of supporting information comprised of third-party reporting
forms and explanatory documents written by Mr. Schieder. Although Mr. Schieder
attached a different version of the tax return to his petition, we are wholly unconvinced
that Mr. Schieder filed that version with the IRS. The version attached to his petition
explicitly featured the written representation “copy of return filed,” included modified
copies of third-party reporting (with additional commentary by Mr. Schieder), and
omitted his explanatory documents. We see nothing to disturb the conclusion that
Exhibit 2-J is the actual 2017 return Mr. Schieder filed.
3
[*3] With his return, Mr. Schieder included a pay stub from Colton
and Forms 1099-MISC, Miscellaneous Income, from Tiffin, Grand
Design, Thor, and Forest River which reported the amounts those
companies had paid him. He also attached Forms 4852, Substitute for
Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions
From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs,
Insurance Contracts, etc., relating to each company, on which he
represented that he had not received wages within the meaning of the
Internal Revenue Code.
Mr. Schieder expanded upon this contention in a cover letter and
a six-page document styled as an affidavit. In the letter he stated that
the payments he received from the various companies neither
constituted “‘Wages’ as the term is clearly defined in . . . §[§] 3401(a) and
3121(a)” nor “gains, profit, or income within the meaning of relevant
law.” He further asserted that the “amounts reported are all true and
correct which I am requesting be credited back to me including Social
Security and Medicare taxes which are ‘federal income’ based taxes
which were improperly imposed.” In the affidavit Mr. Schieder then laid
out what he saw as the legal underpinnings for his contention that he
did not owe tax on his earnings.
II. Notice of Deficiency and Tax Court Proceedings
The IRS thereafter issued to Mr. Schieder a notice of deficiency,
determining a deficiency in income tax of $30,963 and a penalty of
$2,925 for the late filing of his return. In its notice the IRS increased
Mr. Schieder’s taxable income to $135,065, an amount based primarily
upon the recognition of $139,448 in income from Colton and $6,100 from
Tiffin, reduced by the standard deduction of $6,350.
In this Court the Commissioner asserted in his answer to Mr.
Schieder’s amended petition an increased deficiency based upon $6,522
in additional unreported income not recognized in the notice of
deficiency. Specifically, the Commissioner asserted that Mr. Schieder
was liable for tax on the income received in 2017 from Forest River,
Thor, Freightliner, and Grand Design, as shown on IRS transcripts and
the Forms 1099-MISC attached to his 2017 tax return. These income
adjustments produced a revised deficiency of $32,940 and a revised
addition to tax of $3,369.
At the close of trial the Court ordered the parties to submit
simultaneous briefs. The Commissioner timely filed his brief on
4
[*4] January 20, 2022; Mr. Schieder did not file a posttrial brief. 4 When
a party fails to file a brief on issues that have been tried, we may
consider those issues waived or conceded. See, e.g., Nicklaus v.
Commissioner, 117 T.C. 117, 120 n.4 (2001); Stringer v. Commissioner,
84 T.C. 693, 704–08 (1985), aff’d without published opinion, 789 F.2d
917 (4th Cir. 1986). We will exercise our discretion not to do so here.
OPINION
I. Unreported Income
The IRS’s determinations in a notice of deficiency are generally
presumed correct, and the taxpayer bears the burden of proving those
determinations erroneous. Rule 142(a); Welch v. Helvering, 290
U.S. 111, 115 (1933). For this presumption to adhere in cases involving
omitted income, “the Commissioner must establish a ‘minimal
evidentiary showing’ connecting the taxpayer with the alleged income-
producing activity or demonstrate that the taxpayer actually received
unreported income.” Walquist v. Commissioner, 152 T.C. 61, 67 (2019)
(citations omitted); Tucker v. Commissioner, T.C. Memo. 2014-51,
at *12; accord Llorente v. Commissioner, 649 F.2d 152, 156 (2d
Cir. 1981), aff’g in part, rev’g in part 74 T.C. 260 (1980). Once the
Commissioner has produced evidence linking the taxpayer to an income-
producing activity, the burden of proof shifts to the taxpayer to prove by
a preponderance of the evidence that the IRS’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).
The Commissioner has plainly met his burden here. At trial the
Commissioner introduced IRS transcripts showing payments to Mr.
Schieder by each of the companies in 2017. For each of the companies
besides Freightliner, the Commissioner further introduced the
respective tax reporting forms (most of which Mr. Schieder himself
attached to his return) and supporting financial documentation, such as
checks, from the companies’ custodians of records. Mr. Schieder thus
bears the burden of proving by a preponderance of the evidence that the
4 Approximately two months after the original due date for opening briefs, Mr.
Schieder moved for an extension of time to file his brief, which the Court granted. Mr.
Schieder did not file a brief by the extended deadline.
5
[*5] Commissioner’s determination of unreported income is arbitrary or
erroneous. 5 See Estate of Gilford v. Commissioner, 88 T.C. 38, 51 (1987).
In his amended petition Mr. Schieder took the position that he did
not “actually or constructively receive” the income reported. He added
specifics only with respect to Tiffin, asserting that he was paid $5,770
rather than $6,100 as reflected in the notice of deficiency. Mr. Schieder
failed to adduce any evidence to show that the Commissioner’s
determination of unreported income is arbitrary or erroneous. The
evidence before us, i.e., the IRS transcripts, third-party tax reporting,
and third-party payment records, convincingly supports the
Commissioner’s determination of Mr. Schieder’s 2017 unreported
income stated in the notice of deficiency, as increased in the answer to
the first amended petition. 6
II. Itemized Deductions
Mr. Schieder also challenges in his amended petition the
Commissioner’s unexplained disallowance of itemized deductions of
$8,782 claimed on his return. The taxpayer generally bears the burden
of 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). The taxpayer is
required to maintain records that are sufficient to enable the
Commissioner to determine his correct tax liability. § 6001. “In
addition, the taxpayer bears the burden of substantiating the amount
and purpose of the claimed deduction.” Higbee v. Commissioner, 116
T.C. 438, 440 (2001).
In this case Mr. Schieder offered no evidence at trial to
substantiate the itemized deductions claimed on his return. The record
before us establishes, and the Commissioner concedes, that Mr. Schieder
paid state income tax of $6,423. Mr. Schieder is entitled to deduct this
5The Commissioner retains the burden of proof as to the increased deficiency
stemming from the income adjustments he asserted in his answer, i.e., the payments
received from Forest River, Thor, Freightliner, and Grand Design. See Rule 142(a);
Parker v. Commissioner, T.C. Memo. 2012-66, 2012 WL 796414, at *3–4.
6 Mr. Schieder also asserts in his amended petition that he met the
requirements of section 6201(d), such that the Commissioner was required to adduce
“reasonable and probative information” in support of the deficiency in addition to
information returns. Mr. Schieder did not satisfy section 6201(d), failing both to raise
a “reasonable dispute” with respect to any item reported on an information return and
to fully cooperate with the IRS.
6
[*6] amount pursuant to section 164(a)(3) instead of the standard
deduction of $6,350. 7
III. Self-Employment Tax
Mr. Schieder further asserts that the notice of deficiency
incorrectly determined that he was liable for tax on self-employment
income, denying that he was self-employed during 2017. As an initial
matter, we note that the Commissioner’s post-trial brief assumes that
the amount of self-employment income at issue includes the unreported
income amounts identified in the notice of deficiency as well as the
increased amounts set forth in his answer to the amended petition. The
Commissioner’s answer failed, however, to allege that those additional
amounts constituted self-employment income, as the notice of deficiency
had done with respect to the Tiffin payment. We thus will analyze only
the self-employment income determined in the notice of deficiency. See
Rule 36(b).
Mr. Schieder bears the burden of showing that the income he
received from Tiffin does not constitute self-employment income. See,
e.g., Wang v. Commissioner, T.C. Memo. 2016-123, at *3. Mr. Schieder
failed to put on any evidence and thus fails to satisfy his burden in this
regard, and we will accordingly uphold the determination in the notice.
7 At trial we reserved ruling on the Commissioner’s motion to amend his
pleadings to conform to the evidence. In his answer to Mr. Schieder’s amended
petition, the Commissioner alleged that the IRS “did not disallow any itemized
deductions” on his 2017 tax return. The notice of deficiency plainly shows that the
deductions Mr. Schieder claimed were not allowed, and we will grant the
Commissioner’s motion. In a related vein, we reject Mr. Schieder’s contention that the
lack of an explanation for the disallowance of his itemized deductions caused the notice
of deficiency to lose its presumption of correctness and rendered the entire notice
erroneous. As an initial matter, “[t]here is no burden on the Commissioner to justify
his disallowance of a claimed deduction.” LaBow v. Commissioner, 763 F.2d 125, 132
(2d Cir. 1985) (quoting Hanover Ins. Co. v. Commissioner, 598 F.2d 1211, 1219 (1st Cir.
1979, aff’g 69 T.C. 260 (1977)), aff’g in part and rev’g in part on other grounds T.C.
Memo. 1983-417); see also Barnes v. Commissioner, 408 F.2d 65, 68 (7th Cir. 1969),
aff’g T.C. Memo. 1967-250. In any event, “[w]hen the Commissioner concedes certain
facts or issues, the notice of deficiency is still presumed correct.” Wycoff v.
Commissioner, T.C. Memo. 2017-203, at *34–35 (citing U.S. Holding Co. v.
Commissioner, 44 T.C. 323, 328 (1965)); accord Paccar, Inc. v. Commissioner, 849 F.2d
393, 400 (9th Cir. 1988), aff’g 85 T.C. 754 (1985).
7
[*7] IV. Section 6651(a)(1) Addition to Tax
Section 6651(a)(1) imposes an addition to tax for the failure to
timely file a required return unless the taxpayer can establish that the
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 show 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, 116 T.C. at 447.
The facts before us establish that Mr. Schieder was required to
file a return for 2017. The Commissioner met his burden of production
in this case by introducing an account transcript for Mr. Schieder’s 2017
tax year, which showed that he filed his 2017 tax return on
December 26, 2018, more than eight months after the deadline to do so.
See Robertson v. Commissioner, T.C. Memo. 2014-143, at *7.
The burden thus shifts to Mr. Schieder 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. Schieder has offered no
explanation or evidence that would support such a conclusion. As Mr.
Schieder has not met his burden, we hold that he is liable for the
addition to tax under section 6651(a)(1).
V. Conclusion
In sum, we sustain the determinations by the IRS in the notice of
deficiency as modified by the Commissioner’s answer to the amended
petition and subject to the Commissioner’s concessions.
To reflect the foregoing,
An appropriate order will be issued, and decision will be entered
under Rule 155.