Judges: "Halpern, James S."
Attorneys: Marc Kirch, pro se. Kaelyn J. Romey , for respondent.
Filed: Sep. 13, 2007
Latest Update: Dec. 05, 2020
Summary: T.C. Memo. 2007-276 UNITED STATES TAX COURT MARC KIRCH, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 7051-06L. Filed September 13, 2007. Marc Kirch, pro se. Kaelyn J. Romey, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION HALPERN, Judge: This case is before the Court to review a determination (the determination) by respondent’s Appeals Office (Appeals) to proceed with the collection of petitioner’s Federal income tax liability for 1999. We review the determinatio
Summary: T.C. Memo. 2007-276 UNITED STATES TAX COURT MARC KIRCH, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 7051-06L. Filed September 13, 2007. Marc Kirch, pro se. Kaelyn J. Romey, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION HALPERN, Judge: This case is before the Court to review a determination (the determination) by respondent’s Appeals Office (Appeals) to proceed with the collection of petitioner’s Federal income tax liability for 1999. We review the determination..
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T.C. Memo. 2007-276
UNITED STATES TAX COURT
MARC KIRCH, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 7051-06L. Filed September 13, 2007.
Marc Kirch, pro se.
Kaelyn J. Romey, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
HALPERN, Judge: This case is before the Court to review a
determination (the determination) by respondent’s Appeals Office
(Appeals) to proceed with the collection of petitioner’s Federal
income tax liability for 1999. We review the determination
pursuant to section 6330(d)(1).1
1
While petitioner requests redetermination of a
deficiency, clearly this case concerns a collection action, and
we shall treat it as such.
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All section references are to the Internal Revenue Code of
1986, as amended. All dollar amounts have been rounded to the
nearest dollar.
Some facts have been stipulated and are so found. The
stipulation of facts, with attached exhibits, is incorporated
herein by this reference.
FINDINGS OF FACT
Petitioner resided in Berkeley, California, at the time the
petition was filed.
During 1999 and 2000, petitioner worked full time as a
facilities technician for Pacific Bell. On both his 1999 and
2000 Federal income tax returns, petitioner declared his
occupation to be “facilities technician”.
Beginning in 1998 and continuing through 2000, petitioner
traded securities on his own account. He did not have any
customers for his trading activity in 1999.
Petitioner, a calendar year taxpayer, filed his 1999 Federal
income tax return on July 6, 2001. He reported $28,160 in Form
W-2, Wage and Tax Statement, income from Pacific Bell and a net
short-term capital gain of $96,767 from his securities trading
activity. He reported a tax liability of $32,246. He has paid
only $3,447 of that liability. Respondent assessed the tax
petitioner reported on the return, along with additions to tax
for late filing and failure to pay.
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Petitioner also filed his 2000 Federal income tax return on
July 6, 2001. He reported, among other things, a net short-term
capital loss of $129,436 from his trading activity.
Petitioner did not submit to the Internal Revenue Service
(IRS) or attach to his 1999 return an IRS Form 3115, Application
for Change in Accounting Method, making an election under section
475(f) to use the mark-to-market method of accounting.
Petitioner did not submit to the IRS or attach to his 2000
return an IRS Form 3115 making an election under section 475(f)
to use the mark-to-market method of accounting.
On or about February 23, 2006, petitioner attempted to file
IRS Forms 1040-X, Amended U.S. Individual Income Tax Return, for
1999 and 2000. Petitioner’s purpose in attempting to file
amended returns was to carry back a net operating loss claimed in
2000 to offset the net short-term capital gain reported for 1999.
Respondent did not allow petitioner’s amended returns.
On November 6, 2004, respondent issued a Collection Due
Process Notice to petitioner concerning his 1999 tax liability,
and on December 6, 2004, petitioner filed an IRS Form 12153,
Request for a Collection Due Process Hearing. On February 23,
2006, respondent conducted a collection due process hearing for
petitioner. During the course of that hearing, petitioner
submitted the Forms 1040-X to the Appeals settlement officer
conducting the hearing for transmission to the appropriate IRS
office. Petitioner did not raise any collection alternative
during the hearing.
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By Notice of Determination Concerning Collection Action(s)
Under Section 6320 and/or 6330, Appeals determined that the
proposed collection action (levy) for 1999 should proceed. An
attachment to the notice explains that (1) petitioner’s claim for
a loss carryback was not timely and (2) since he had raised no
collection alternative, collection by levy was correct.
OPINION
Petitioner challenges his underlying liability for 1999, and
respondent agrees that petitioner’s liability is appropriately
before the Court. See sec. 6330(c)(2)(B).
Petitioner was a trader in securities during 1999 and 2000.
The parties have stipulated that he had no customers for his
trading activity in 1999, and he has failed to show (and does not
claim) that he had any customers for that activity in 2000. Due
to the fact that he did not have customers, he was not a dealer,
and he must treat the securities that he bought and sold as
capital assets.2 His net capital loss for 2000 could, therefore,
2
As we recently described the situation in Chen v.
Commissioner, T.C. Memo. 2004-132:
In general, for Federal tax purposes, a person who
purchases and sells securities falls into one of three
distinct categories: dealer, trader, or investor. See
King v. Commissioner,
89 T.C. 445, 458-459 (1987).
Both traders and dealers are engaged in the trade or
business of buying and selling securities. Only the
dealer’s business, however, involves sales to customers
in the ordinary course of that business. Consequently,
only the dealer’s securities fall within the exception
to capital asset status that is provided for “property
held by the taxpayer primarily for sale to customers in
the ordinary course of his trade or business”. Sec.
1221(a)(1). Thus, “traders * * * occupy an unusual
(continued...)
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only be carried forward (i.e., to later years). See sec.
1212(b). As a trader in securities, however, he was eligible
under section 475 to elect the mark-to-market accounting method
for his securities trading activity. See sec. 475(f). Under the
mark-to-market accounting method, a trader in securities is
eligible to elect to “recognize gain or loss on any security held
in connection with such trade or business at the close of any
taxable year as if such security were sold for its fair market
value * * * [at yearend]”. See sec. 475(f)(1)(A)(i). In
general, any gains or losses with respect to those securities,
whether deemed sold at yearend under the mark-to-market method of
accounting or actually sold during the taxable year, “shall be
treated as ordinary income or loss.” Sec. 475(d)(3)(A)(i),
(f)(1)(D). An ordinary loss resulting in a net operating loss is
first carried back to the two preceding years before it is
carried forward. See sec. 172(a) and (b).
The procedures for traders in securities to make a mark-to-
market election under section 475(f) are specified in Rev. Proc.
99-17, 1999-1 C.B. 503. In general, the election must be made no
later than the due date (without regard for extensions) of the
original return for the taxable year immediately preceding the
election year and must be attached either to that return or, if
applicable, to a request for extension of time to file that
2
(...continued)
position with respect to the tax laws. Traders may
engage in a trade or business which produces capital
gains and losses rather than ordinary income and
losses.” King v. Commissioner, supra at 457.
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return.
Id., 1999-1 C.B. at 504-505. Petitioner does not claim
that he has made a mark-to-market election in compliance with
section 475(f) and Rev. Proc.
99-17, supra. Nor is petitioner
entitled to the benefit of relief under section 301.9100-3,
Proced. & Admin. Regs., to extend the time to make the section
475(f) election. See generally Vines v. Commissioner,
126 T.C.
279 (2006). Petitioner has neither requested that relief, nor is
there any evidence that he would not be using hindsight in
requesting that relief. The hindsight would be in using 2000
losses to shelter 1999 gains. See sec. 301.9100-3(b)(3)(iii),
Proced. & Admin. Regs. (taxpayer is deemed not to have met the
requirement of having acted reasonably and in good faith where he
uses hindsight in requesting relief). Petitioner is not entitled
to the benefits of section 475(f).
Section 6651(a)(1) provides for an addition to tax in the
event a taxpayer fails to file a timely return (determined with
regard to any extension of time for filing), unless it is shown
that such failure is due to reasonable cause and not due to
willful neglect. Section 6651(a)(2) provides for an addition to
tax for failure to make timely payment of the tax shown on a
return, unless it is shown that such failure is due to reasonable
cause and not due to willful neglect. Respondent bears the
burden of production with respect to those additions to tax. See
sec. 7491(c). In order to carry that burden, respondent must
produce sufficient evidence establishing that it is appropriate
to impose the additions. Higbee v. Commissioner,
116 T.C. 438,
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446-447 (2001). Once respondent has done so, the burden of proof
is upon petitioner to show that respondent’s determination of the
additions is incorrect. See
id. at 447.
Petitioner filed his 1999 Federal income tax return on July
6, 2001. That return was due on April 17, 2000. See sec.
6072(a). Accordingly, petitioner filed his 1999 return over a
year late. Also, petitioner failed to pay timely the full amount
of his 1999 liability. Respondent has carried his burden of
production, and petitioner has shown neither reasonable cause nor
a lack of willful neglect for either failure. Therefore, we
sustain the section 6651(a)(1) and (2) additions to tax.
To reflect the foregoing,
Decision will be entered
for respondent.