                         T.C. Memo. 2009-298



                       UNITED STATES TAX COURT



            GEORGE M. & MACKIE FINNEY, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 29119-08.               Filed December 22, 2009.



     George M. & Mackie Finney, pro sese.

     Daniel N. Price, for respondent.



               MEMORANDUM FINDINGS OF FACT AND OPINION


     COHEN, Judge:    Respondent determined a deficiency of $4,476

in petitioners’ Federal income taxes for 2005.   The deficiency

resulted from disallowance of a claimed “FNS [fuel from a

nonconventional source] Credit” under former section 29, now

section 45K.   All section references are to the Internal Revenue

Code.
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                         FINDINGS OF FACT

     All of the material facts have been stipulated, and the

stipulated facts are incorporated in our findings by this

reference.   Petitioners resided in Texas at the time their

petition was filed.   Petitioner George M. Finney is retired from

the military, and petitioner Mackie Finney is a nurse.

Petitioners met Silas Anderson, a tax return preparer, through an

acquaintance at their church.   Anderson prepared petitioners’ tax

return for 2005.

     On the Form 1040, U.S. Individual Income Tax Return, that

Anderson prepared for petitioners, petitioners’ tax liability was

reduced by a claim of $4,484 on Form 8907, Nonconventional Source

Fuel Credit, from a facility allegedly placed in service on

December 1, 1996.   On a Schedule C, Profit or Loss From Business,

alleged receipts of $1,389 and expenses of $1,348 were reported

from an “Alternative Energy” business.   As a result of the

reporting on Schedule C and Form 8907, petitioners claimed a

refund of $3,020 from prepayments of $4,215.

     The transactions reported on Schedule C and Form 8907

attached to petitioners’ 2005 return were fictitious.    They arose

from petitioners’ purported transaction with one or more

promoters who purportedly owned landfills that produced

alternative fuels, enabling petitioners to claim fuel from a

nonconventional source (FNS) tax credits.   The promoters
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purported to sell petitioners a share of the landfills for a

percentage of the expected FNS tax credits.    In fact, the

promoters had no ownership interest in the landfills, and

alternative fuels within the meaning of former section 29, now

section 45K, were not produced.

     Anderson received a percentage of the proceeds paid to the

promoters of the FNS program.    Mrs. Finney gave Anderson

cashier’s checks for $3,566 in 2005 and $3,587 in 2006.      There is

no explanation in the record for the earlier check.    The latter

check was the amount Anderson requested in relation to

petitioners’ 2005 return.

     On April 2, 2009, the U.S. Department of Justice issued a

press release announcing the filing of a civil injunction lawsuit

against 32 individuals, including Anderson, “seeking to bar them

from promoting an alleged tax scam involving bogus income tax

credits claimed for sham sales of methane from landfills”.

                                OPINION

     Subject to various limitations, former section 29,

redesignated section 45K for years ending after December 31,

2005, provided a credit for producing fuel from a nonconventional

source.   The credit is based on the fuel produced and

attributable to the taxpayer.    Because neither petitioners nor

the persons they dealt with had an interest in a fuel-producing

source and no fuel was produced, we need not explore the
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complexities of the credit provision.   See generally S/V Drilling

Partners v. Commissioner, 114 T.C. 83 (2000); Nielson-True Pship.

v. Commissioner, 109 T.C. 112 (1997), affd. sub nom. True Oil Co.

v. Commissioner, 170 F.3d 1294 (10th Cir. 1999).

     Petitioners stipulated that the promoter or promoters that

they dealt with did not own landfills and that the landfills that

they allegedly invested in did not produce any alternative fuels

entitling them to the FNS credit.   By the time of trial, they did

not dispute respondent’s determination; but they wanted to

confront Anderson in Court.

     Petitioners and Anderson testified at trial.   Mrs. Finney

testified that the checks given to Anderson were for taxes and

his services, that she did not intend to go into any business at

the time that she delivered the cashier’s checks to Anderson, and

that she did not sign any papers relating to any business.   Mr.

Finney testified that he had formerly prepared tax returns for

petitioners, but that Mrs. Finney wanted to use Anderson’s

services; Mr. Finney claimed that he had not participated in the

preparation of the 2005 return.

     Anderson testified that he met with both of the Finneys and

that they executed all relevant documents for the alleged

business activities referred to on the 2005 return and that he

was only a “facilitator” who received a small commission on the
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amounts paid for the FNS credit.    He testified that the checks

were paid over to an entity known as Gas Recovery Partners 2 GP.

     Because of the concessions in the stipulation, we do not

have to resolve the disputes among the witnesses.    There is no

penalty in issue, so we do not decide whether it was reasonable

for petitioners to sign the tax return Anderson prepared if they

had no knowledge of the alleged alternative energy business

reported on Schedule C or did not understand that they were

claiming a tax credit in order to secure a refund of prepayments

on their taxes.   We do not decide whether they were innocent

victims or collaborators in a “tax scam” identified by the

Department of Justice.   The stipulated facts establish that they

were not entitled to the credit and that the related adjustments

in the notice of deficiency are correct.    To reflect the

foregoing,


                                        Decision will be entered

                                   for respondent.
