T.C. Memo. 2018-7



                         UNITED STATES TAX COURT



                    JAMES S. PLATO, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 12667-14.                         Filed January 24, 2018.



      James S. Plato, pro se.

      Portia N. Rose, Kristen I. Nygren, and Paul Cooperman Feinberg, for

respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION


      PARIS, Judge: The Internal Revenue Service (IRS or respondent)

determined a deficiency in petitioner’s Federal income tax of $165,133.80 and

additions to tax in relation to his Federal income tax of $35,477.06, $39,418.95,
                                              -2-

[*2] and $7,138.53 under sections 6651(a)(1) and (2) and 6654, respectively, for

2007.1

         The issues2 remaining for decision are whether petitioner is liable for

additions to tax for: (1) failure to timely file a Federal tax return, (2) failure to pay

tax shown on the return, and (3) failure to pay estimated tax for 2007.

                                     FINDINGS OF FACT

         Some of the facts have been stipulated and are so found. The first

stipulation of facts, the first supplemental stipulation of facts, and the facts drawn

from the stipulated exhibits are incorporated herein by this reference. Petitioner

resided in Texas when he timely filed his petition.

         Petitioner separated from his wife in December 2007, and they have not

lived together since then.3 In the matter of petitioner’s divorce action community

property assets, including a stock brokerage account and a section 401K



         1
      Unless otherwise stated, all section references are to the Internal Revenue
Code in effect for the tax year in issue, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
         2
        The parties resolved the underlying deficiency in this case and filed a
stipulation of settled issues on October 6, 2015. Respondent also conceded that
petitioner is entitled to a foreign tax credit of $43 and that petitioner is not liable
for a sec. 72(t) additional tax of $918.
         3
             As of the time of trial petitioner’s divorce was not finalized.
                                         -3-

[*3] retirement account, were liquidated subject to a stipulation order in December

2007. Petitioner prepared and signed a Form 1040, U.S. Individual Income Tax

Return, for 2007 reporting the filing status of married filing jointly and a tax

liability of $46,073 (joint return).4 On April 15, 2008, he left the joint return and a

check for $46,073 “under the mat at the front door” of his wife’s residence for her

to sign and mail to the IRS. There is no evidence in the record that the return was

mailed or the check negotiated. Petitioner did not request an extension of time to

file the joint return, but he asked his wife to request an extension. Neither the

request for an extension of time nor the joint return was filed with the IRS.

          The IRS prepared a substitute for return (SFR) for 2007.5 The SFR is not a

part of the record in this case. On the basis of the SFR, the IRS issued petitioner a

notice of deficiency, determining a deficiency and additions to tax for 2007.

During the course of the examination and after the notice of deficiency dated May

5, 2014, petitioner submitted a 2007 Form 1040 reporting a filing status of married



      4
       The parties filed a supplemental stipulation of facts that included as an
exhibit a copy of the joint return signed only by petitioner and not by his spouse
and dated April 14, 2008. Petitioner submitted the copy of the joint return to
respondent during the audit.
      5
       The IRS account transcript for petitioner’s tax period ending December 31,
2007, reports that the SFR was prepared on December 10, 2012. In his pretrial
memorandum respondent contends that the SFR was prepared on March 3, 2014.
                                         -4-

[*4] filing separately (separate return) and tendered a payment of $43,490 with the

separate return. Respondent accepted the payment made with the separate return

on March 16, 2015, and it is the basis for the stipulation of settled issues entered

into by the parties and the basis for the recalculation of the additions to tax for

which respondent determined petitioner was liable. See supra note 2.

                                      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 those determina-

tions erroneous. Rule 142(a); Welch v. Helvering, 

, 115 (1933). As

the parties resolved the underlying deficiency; only the additions to

tax remain in issue. Under section 7491(c) respondent has the burden of

production with respect to petitioner’s liability for any penalty or addition to tax.

II.   Additions to Tax

      A.     Failure To Timely File a Tax Return and Failure To Pay Tax Shown
             on Return

      Section 6651(a)(1) and (2) imposes additions to tax for failure to timely file

a Federal income tax return and failure to timely pay the tax shown on a return,

respectively, unless it is shown that the failure is due to reasonable cause and not
                                         -5-

[*5] due to willful neglect. The addition to tax under subsection (a)(1) is equal to

5% of the amount required to be shown as tax on the delinquent return for each

month or fraction thereof during which the return remains delinquent, up to a

maximum addition of 25% for returns more than four months delinquent. The

addition to tax under subsection (a)(2) is 0.5% of the amount shown as tax on the

return for each month or fraction thereof during which such failure continues, up

to a maximum amount of 25%. A taxpayer is not liable for an addition to tax for

failure to timely file or pay if he shows the untimeliness was due to reasonable

cause and not due to willful neglect. Sec. 6651(a)(1) and (2); Higbee v.

Commissioner, 

, 447 (2001).

             1.     Failure To Timely File a Tax Return

      Petitioner was required to, but did not, timely file a Federal income tax

return for 2007. Respondent has met his burden of production for the 6651(a)(1)

addition to tax for 2007. Petitioner argues that he had reasonable cause and did

not willfully neglect his filing obligation for 2007 because he signed the joint

return on April 15, 2008, and then left it and a check for the liability reported on

that return “under the mat” of his wife’s residence. Petitioner argues that his

actions in attempting to file the joint return coupled with his history of compliance

in filing tax returns amount to reasonable cause for his failure to file a tax return
                                         -6-

[*6] for 2007. Petitioner argues that Willis v. Commissioner, 

(4th

Cir. 1984), rev’g T.C. Memo. 1983-180, supports his contention that the Court

should consider his history of timely filing tax returns.

      In Willis, the taxpayer and his secretary-comptroller reviewed the taxpayer’s

return. 

After the taxpayer was satisfied with the return’s contents, he

instructed his secretary-comptroller to draw and endorse a corporate check to

cover the tax liability, to transfer funds from the taxpayer’s personal account to

cover the corporate check, and to mail the tax return and check to the IRS. 

secretary-comptroller then inadvertently failed to timely mail the

taxpayer’s tax return, and the IRS received it 12 days late. 

Court of

Appeals for the Fourth Circuit included the taxpayer’s history of timely filing in

its analysis of whether the taxpayer acted with reasonable cause. 

It also stated that the “[t]axpayer did all possible to see that the return was timely

filed with [the] IRS”. 

      Petitioner’s reliance on Willis is misplaced for two reasons. The first is that

Willis was effectively overturned by Boyle v. Commissioner, 

(1985)

(holding that a taxpayer cannot rely on an agent to timely file a tax return).6 The

      6
      Moreover, Willis v. Commissioner, 

(4th Cir. 1984), rev’g
T.C. Memo. 1983-180, is a U.S. Court of Appeals for the Fourth Circuit case.
                                                                   (continued...)
                                         -7-

[*7] second is that petitioner did not do everything possible to see that any return

was filed with the IRS. Petitioner left the joint return and a check for $46,073

under the doormat of his wife’s residence. Petitioner did not request an extension

of time to file the joint return, but he asked his wife to request an extension of time

to file. Indeed, petitioner took no further action to comply with his requirement to

file a tax return until respondent issued him a notice of deficiency. Additionally,

the Court has held that failure to obtain a spouse’s signature on a married filing

jointly return when the couple is separated does not always constitute reasonable

cause for failure to timely file a tax return. See Sutherland v. Commissioner, T.C.

Memo. 1991-619.

      Petitioner received the notice of deficiency dated May 5, 2014, and

thereafter submitted the separate return to respondent and tendered a payment of

$43,490 with his return. The transcript of account for 2007 shows that respondent

accepted the payment made with the separate return on March 16, 2015. For the


      6
       (...continued)
Petitioner’s case is appealable to the U.S. Court of Appeals for the Fifth Circuit,
which has long held that a taxpayer cannot rely on an agent to timely file a tax
return. See Millette & Assocs., Inc. v. Commissioner, 

, 124-125 (5th
Cir. 1979) (citing Logan Lumber Co. v. Commissioner, 

(5th Cir.
1966), aff’g and remanding T.C. Memo. 1964-126, and Dritz v. Commissioner,
T.C. Memo. 1969-175, aff’d, 

(5th Cir. 1970)), aff’g T.C. Memo.
1978-180.
                                          -8-

[*8] reasons stated above, the Court finds that petitioner did not have reasonable

cause for failing to timely file a tax return for 2007. Thus, respondent’s

determination of an addition to tax for failure to timely file a tax return is

sustained, and petitioner is liable for that addition to tax.

             2.     Failure To Pay Tax Shown on Return

      Respondent filed an SFR for petitioner for 2007, which was the basis for the

notice of deficiency in this case. A return prepared by the Commissioner in

accordance with section 6020(b) is treated as the return filed by the taxpayer for

the purpose of determining the amount of the addition under section 6651(a)(2).

Sec. 6651(g)(2); Wheeler v. Commissioner, 

, 208-209 (2006).

Respondent’s burden of production under section 7491(c) requires that he

introduce evidence that he made an SFR for 2007 that satisfies the requirements of

section 6020(b). See Cabirac v. Commissioner, 

, 170 (2003), aff’d

without published opinion, 

(3d Cir. 2004);

Gleason v. Commissioner, T.C. Memo. 2011-154, 

; see also

Wheeler v. Commissioner, 

.

      To constitute a section 6020(b) SFR, “the return must be subscribed, it must

contain sufficient information from which to compute the taxpayer’s tax liability,

and the return form and any attachments must purport to be a ‘return’.” Rader v.
                                         -9-

[*9] Commissioner, 

, 382 (2014) (quoting Spurlock v.

Commissioner, T.C. Memo. 2003-124, 

, at *10), aff’d in part,

616 F. App’x 391 (10th Cir. 2015). The Court has held that the requirements of

section 6020(b) have been met where an SFR consists of Form 4549, Income Tax

Examination Changes; Form 886-A, Explanation of Items; and Form 13496, IRC

Section 6020(b) Certification. See id.; Gleason v. Commissioner, 

, at *12.

      Respondent entered into evidence a Form 3623, Statement of Account, a

Form 4549, and a Form 886-A. The Form 3623 has the docket number for

petitioner’s case typed at the top of the form. Thus, the Form 3623 was not a part

of the SFR prepared before petitioner filed a petition with the Court and was

issued a docket number for his case. The Forms 4549 and 886-A are both dated

“12/15/2015” and contain calculations based on petitioner’s separate return. There

is no Form 13496 in the record. Respondent has failed to meet his burden of

production with respect to the appropriateness of imposing the section 6651(a)(2)

addition to tax. Therefore, the determination in the notice of deficiency of the

addition to tax for failure to pay the tax shown on the return is not sustained.
                                         - 10 -

[*10] B.       Failure To Pay Estimated Tax

      Section 6654 imposes an addition to tax on an individual who underpays his

estimated tax. The addition to tax is calculated with reference to four required

installment payments of the taxpayer’s estimated tax liability. Sec. 6654(c) and

(d). Each required installment is equal to 25% of the “required annual payment.”

Sec. 6654(d)(1)(A). The required annual payment equals the lesser of: (1) 90% of

the tax shown on the individual’s return for that year (or, if no return is filed, 90%

of his tax for such year) or (2) if the individual filed a valid return for the

immediately preceding taxable year, 100% of the tax shown on that return. See

sec. 6654(d)(1)(B). There are limited exceptions to the requirement to pay

estimated tax that are not applicable here. See sec. 6654(e).

      If taxpayers who filed a married filing jointly return for the prior tax year

file married filing separately returns for the taxable year for which the estimated

tax payments are being calculated, the regulations provide a special rule for

calculating their required annual payments. Sec. 1.6654-2(e), Income Tax Regs.7

      7
          Sec. 1.6654-2(e), Income Tax Regs., provides in part:

      Special rule in case of change from joint return or separate return for
      the preceding taxable year.--(1) Joint return to separate returns.--In
      determining the applicability of the exceptions * * * of this section to
      an underpayment of estimated tax, a taxpayer filing a separate return
                                                                        (continued...)
                                        - 11 -

[*11] The taxpayers’ prior year tax liabilities would be the taxes the spouses

would be liable for if they each filed a married filing separately return for that

year. Sec. 1.6654-2(e)(1) and (2), Example (1), Income Tax Regs.

      An IRS account transcript for the 2006 joint return was entered into

evidence. The transcript shows that petitioner and his spouse reported adjusted

gross income of $74,717 and tax per the return of $5,144 for 2006. Although

there were withholding payments of $7,458 made in 2007, community property

law in the State of petitioner’s residence requires that amount to be allocated when

the married spouses chose to file separately.8 No information was entered into


      7
       (...continued)
      who filed a joint return for the preceding taxable year shall be subject
      to the following rule: The tax--

             (i) Shown on the return for the preceding taxable year, or

             (ii) Based on the tax rates and personal exemptions for the
      current taxable year but otherwise determined on the basis of the facts
      shown on the return for the preceding taxable year, and the law
      applicable to such year, shall be that portion of the tax which bears
      the same ratio to the whole of the tax as the amount of the tax for
      which the taxpayer would have been liable bears to the sum of the
      taxes for which the taxpayer and his spouse would have been liable
      had each spouse filed a separate return for the preceding taxable year.
      ***
      8
     The 2006 joint return reflects a total tax liability of $5,144; the withholding
payments of $7,458 in 2007 are more than 100% of the tax shown on petitioner’s
                                                                        (continued...)
                                        - 12 -

[*12] evidence that allocated the adjusted gross income and tax per return for 2006

between petitioner and his spouse. Therefore, the Court cannot complete its

analysis to decide petitioner’s required annual payment under section

6654(d)(1)(B) for 2007 because, although it can calculate 90% of petitioner’s tax

for 2007 under clause (i), it cannot identify the number equal to 100% of the tax

shown on petitioner’s 2006 return under clause (ii). See Wheeler v.

Commissioner, 

. Respondent has failed to carry his burden of

production; thus, the addition to tax for failure to pay estimated tax for 2007 is not

sustained.

      The Court has considered all of the arguments made by the parties, and to

the extent they are not addressed herein, they are considered unnecessary, moot,

irrelevant, or without merit.

      To reflect the foregoing,


                                                      Decision will be entered

                                                 under Rule 155.




      8
       (...continued)
2006 joint return before the application of the regulations to account for filing
separately in a community property State.