                                T.C. Memo. 2013-129




                          UNITED STATES TAX COURT




                    JUANITA WRIGHT, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent




      Docket No. 26646-09.                           Filed May 20, 2013.




      Juanita Wright, pro se.

      Brian S. Jones, for respondent.




            MEMORANDUM FINDINGS OF FACT AND OPINION


      COHEN, Judge: Respondent determined a $4,846 deficiency and additions

to tax of $1,020.37, $566.87, and $212.95 pursuant to sections 6651(a)(1) and (2)

and 6654(a), respectively, for 2006. After concessions, the issues for decision are

whether petitioner is entitled to deductions for a casualty loss, noncash charitable
                                         -2-

[*2] contributions, attorney’s fees, and tax preparation fees and whether she is liable

for the additions to tax under section 6651(a)(1) and/or (2). All section references

are to the Internal Revenue Code in effect for 2006, and all Rule references are to

the Tax Court Rules of Practice and Procedure.

                                FINDINGS OF FACT

      Some of the facts have been stipulated, and the stipulated facts are

incorporated in our findings by this reference. Petitioner resided in Maryland

when her petition was filed. During 2006, she received taxable income from

wages, Social Security benefits, a Maryland State tax refund, interest, pension

payments, and a pension distribution.

      Petitioner filed a Form 1040, U.S. Individual Income Tax Return, for 2006 on

October 9, 2009, and attached a Schedule A, Itemized Deductions. She claimed a

total of $19,851 in itemized deductions, including medical expenses, cash charitable

contributions, State and local taxes withheld, legal fees, safe deposit box rental, and

investment expenses, which have now been stipulated.

      The largest item claimed on petitioner’s Schedule A, which is still in

dispute, is a casualty loss of $10,739 ($15,000, reduced to reflect statutory
                                          -3-

[*3] limitations of $100 and 10% of adjusted gross income). Petitioner’s claim is

based on water damage to her rented apartment, clothing, books, and other personal

possessions on August 12, 2006.

      Petitioner filed a claim for reimbursement for physical damage to her property

and consequential damages, such as dry cleaning and storage fees, with Nationwide

Insurance. She also claimed additional living expenses. Nationwide Insurance

made payments to petitioner as follows:


                Date          Amount            Designation of Payment
              9/19/2006       $634.43           Living expenses
              9/20/2006        233.07           Living expenses

              10/9/2006        768.46           Living expenses
             10/12/2006        750.00           Personal property, papers,
                                                boxes, heater, books
                                                copies
             11/21/2006       1,761.23          Living expenses $861.23;
                                                 personal property $900
             12/12/2006        611.19           Personal property
              9/18/2007       1,500.00          Personal property
              3/19/2008       2,051.51          Living expenses

      The $1,500 payment made on September 18, 2007, was made after an

attorney employed by petitioner provided to the insurance company an itemized list

of clothing damaged in the August 12, 2006, casualty.
                                         -4-

[*4]   In 2006, petitioner paid $150 for preparation of her 2005 tax return and paid

$500 to Jo Ann P. Myles for legal services relating to a landlord/tenant dispute.

       Petitioner secured an extension of time to October 15, 2007, to file her 2006

Federal income tax return, and she paid $50 with the request for extension and $261

through withholding in 2006. On May 30, 2007, she fell and fractured her leg. She

was in the hospital for about a week and then in a rehabilitation center for about

three weeks. Afterwards her leg was in a cast for several months. She did not file a

Federal income tax return for 2006 before October 9, 2009, after the Internal

Revenue Service (IRS) prepared and executed a substitute for return under section

6020(b) and sent petitioner a notice of deficiency. She did, however, file a timely

return for 2007 on which she claimed a $300 refund.

                                      OPINION

Procedural Matters

       The petition in this case was filed November 9, 2009, and amended January

8, 2010. In the amended petition, petitioner disputed the income reported to the IRS

and the additions to tax. The case was first set for trial on January 24, 2011, but

was continued on petitioner’s informal request.

       The case was again set for trial on December 5, 2011. Included with the

notice setting case for trial was the Court’s standing pretrial order. The parties
                                         -5-

[*5] were advised, among other things, of the necessity of exchanging documents

that the party expects to offer into evidence at trial no later than November 21,

2011. On August 17, 2011, respondent served a request for production of

documents seeking production of documents that petitioner intended to use in her

case and a request for admissions. Petitioner sought an extension of time to respond

to both requests, which the Court extended to October 31, 2011, in an order that

included the following:

            Petitioner is warned that if she fails to timely file the response to
      respondent’s request for admissions or if the Court determines that the
      response does not comply with the requirements of Rule 90(c), Tax
      Court Rules of Practice and Procedure, with regard to any matter in the
      requested admissions, the Court may order that the matter is deemed
      admitted for purposes of this proceeding.

      The case was called and recalled on December 5, 2011. Petitioner again

requested a continuance to obtain additional documents. She had not produced

records from her insurance company despite respondent’s repeated requests for such

records. The Court granted petitioner’s motion for continuance in an order that

included the following:

            ORDERED that on or before February 29, 2012, petitioner shall
      provide to respondent’s counsel any and all documents or other
      materials that petitioner wishes to rely upon in support of her case;
                                          -6-

      [*6] unless otherwise ordered by the Court, petitioner shall not be
      entitled to rely upon or introduce into evidence documents or other
      materials that are not provided to respondent’s counsel by February 29,
      2012. It is further

              ORDERED that on or before March 30, 2012, the parties shall
      file a joint status report reflecting the then-present status of this case.

      In a joint status report filed April 5, 2012, respondent conceded medical

expenses, cash contributions, safety deposit box rent, investment expenses, and

legal expenses on the basis of documents that petitioner provided. The case was

then set for trial on June 25, 2012.

      On April 10, 2012, petitioner filed another motion for continuance, which was

denied. On June 15, 2012, she filed another motion for continuance, which was set

for hearing on June 25, 2012. At the hearing respondent explained that petitioner

had failed to produce insurance company records, so respondent subpoenaed those

records. The motion for continuance was granted because petitioner represented

that she was suffering from dental problems, and the case was set for trial on

November 5, 2012. The Court’s standing pretrial order again reminded the parties

of the necessity of exchanging documents at least 14 days before trial.
                                          -7-

[*7]   At the time of trial, the parties filed a stipulation attaching various documents

received from petitioner and from Nationwide Insurance. Additional documents

were presented by petitioner. Some were received in evidence, and some were

excluded because they were untimely under the outstanding orders and some

because they were unnecessary in view of petitioner’s uncontradicted testimony

about her medical condition in 2007. At the conclusion of trial, the Court ordered

respondent to proceed with a brief summarizing respondent’s position on the

evidence and issues and ordered an answering brief from petitioner. Thereafter,

petitioner filed motions to reopen the record for further documents and to be

relieved of the stipulation. Both motions were denied. After three continuances and

three years between the petition and the trial, there was no excuse for extending the

proceedings. An order dated November 16, 2012, among other things, included the

following:

              Petitioner is advised that she should confine any further
       communications to the Court to her response to respondent’s opening
       brief, when filed, in her reply brief due February 21, 2013. She is
       further advised that Rule 143(c), Tax Court Rules of Practice and
       Procedure provides in part that “ex parte affidavits, statements in
       briefs, and unadmitted allegations in pleadings do not constitute
       evidence.” Finally, she is advised that the form and contents of briefs
       are set forth in Rule 151(e), Tax Court Rules of Practice and
       Procedure. It is further
                                         -8-

       [*8] ORDERED that copies of Rules 143 and 151 are attached to this
       Order to be served on petitioner.

       After another extension of time requested by petitioner, her answering brief

was filed. Attached to it were over 150 pages of copies of materials expressly

excluded from evidence during trial, not previously presented, or duplicative of

documents received in evidence. Although the attachments were not appropriate for

filing and could be stricken, they have been included as part of the record to

demonstrate petitioner’s persistence in disregarding time limitations and the Court’s

orders and Rules. We have not considered the improper attachments in our findings

of fact.

       Petitioner has the burden of proving that she is entitled to the deductions

that she claims. See Rule 142(a); New Colonial Ice Co. v. Helvering, 292 U.S.

435 (1934). The evidence includes some records as to the casualty loss but only

petitioner’s testimony as to other deductions. We need not accept petitioner’s

testimony and may reject it when inconsistencies or improbabilities render it

unreliable. See Fleischer v. Commissioner, 403 F.2d 403, 406 (2d Cir. 1968),

aff’g T.C. Memo. 1967-85; Tokarski v. Commissioner, 87 T.C. 74, 77 (1986). In

view of the many inconsistencies in the evidence and in petitioner’s evolving

claims, we conclude that many of her recollections and reconstructions are not
                                         -9-

[*9] reliable. As indicated below, however, we have accepted her testimony as to

her medical situation in 2007 and a $150 deduction for a tax preparation fee

payment consistent with our statements during the trial that we would do so.

Casualty Loss

      There is no dispute that in 2006 petitioner suffered water damage to her

property. Respondent contends, however, that any loss is not deductible until

petitioner’s claim was resolved by Nationwide Insurance, that the claim was still

pending as of the end of 2006, and that, in any event, petitioner has not

substantiated any loss not reimbursed by insurance. See section 1.165-1(d)(2)(i),

Income Tax Regs., which precludes deduction of a casualty loss in a year in which

there exists a claim for reimbursement with respect to which there is a reasonable

prospect of recovery.

      Petitioner contends that she was told in 2006 that her claim against

Nationwide Insurance was closed and that the subsequent payments were the result

of “reopening” that claim. The record of ongoing communications between her and

the insurance company, however, contradicts that contention. She testified that the

$1,500 she received in 2007 “wasn’t part of the $15,000” and she was “going to

take it off of my 2008 taxes”. However, all of her claims were identified as

resulting from water damage on August 12, 2006, and were part of the same
                                        - 10 -

[*10] claim against the insurance company. Her testimony and the Nationwide

Insurance records undermine her claim that the amount of loss from the 2006

casualty was resolved during 2006.

      Petitioner also argues that she was never compensated for the value of her

clothing, textbooks, photographs, x-rays, and other personal property. She denies

receiving any payments in 2006 for damaged items, but again her contention is

contradicted by records of the insurance company. She relies on her estimates of

replacement costs or original costs, but she has not shown the fair market value of

any of the property at the time of the loss. See sec. 1.165-7(a)(2), (b)(1), Income

Tax Regs. She has not shown what items were not compensated by insurance, and

her representations with respect to the insurance claim have been inconsistent and

unreliable. We have no rational basis on which to estimate the correct allowance, if

any. See Vanicek v. Commissioner, 85 T.C. 731, 742-743 (1985), distinguishing

Cohan v. Commissioner, 39 F.2d 540, 544 (2d Cir. 1930). We agree with

respondent’s contentions. Petitioner is not entitled to any deduction for the casualty

loss claimed for 2006.

Charitable Contributions

      Similarly, petitioner did not provide any substantiation of noncash items

donated to charity by identifying the name and address of the donee organization,
                                         - 11 -

[*11] the date and location of the contribution, and a description of the items and

the fair market value of the items. See sec. 1.170A-13(b)(1), (2)(ii), Income Tax

Regs. She merely claims she dropped unidentified items in a neighborhood box

designated for charity. Again we have no rational basis on which to estimate the

correct amount, if any, for the noncash contribution. See Vanicek v. Commissioner,

85 T.C. at 742-743. Petitioner is not entitled to any additional charitable

contribution deduction beyond that conceded by respondent for cash contributions.

Tax Preparation Fee

      On her 2006 Schedule A, petitioner claimed a $150 tax preparation fee. The

document she initially provided to the IRS to substantiate that claim related to $107

paid for preparation of her 2006 return in 2009, so respondent doubted her

credibility and rejected the claimed deduction. Petitioner testified at trial that she

paid $150 for preparation of her 2005 return, after receiving a senior citizen

discount. She asserts in her posttrial brief that she paid $215. Notwithstanding

these inconsistencies, we accept her testimony that she paid $150 in 2006, and that

amount is allowable as a miscellaneous deduction under section 212(3), subject to

the 2% of adjusted gross income floor of section 67(a).
                                        - 12 -

[*12] Attorney’s Fee

      The $500 attorney’s fee petitioner paid relating to her landlord/tenant dispute

is a nondeductible personal expense. See sec. 262. She is not entitled to any

deduction for attorney’s fees beyond the stipulated amount paid to recover income.

Section 6651(a) Additions to Tax

      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 the taxpayer shows that such failure is due to reasonable cause and not due to

willful neglect. The amount of the addition is equal to 5% of the amount required to

be shown as tax on the delinquent return for each month or fraction of a month

during which the return remains delinquent, up to a maximum addition of 25% for

returns more than four months delinquent.

      Section 6651(a)(2) provides for an addition to tax for failure to pay the

amount shown as tax on a return, including a substitute for return prepared by the

IRS. See sec. 6651(g)(2). That addition accrues at the rate of 0.5% of the amount

shown on the return for each month or fraction of a month during which the failure

to pay continues, up to a maximum of 25%. The total additions under section

6651(a) are limited if an addition applies under both section 6651(a)(1) and (2).
                                         - 13 -

[*13] Sec. 6651(c). Each addition is for a separate and distinct infraction, is

imposed on a different amount, and is imposed for a different period. See Estate

of Rauhoff v. Commissioner, T.C. Memo. 1982-494.

      The Commissioner bears the burden of production with respect to the

liability of any individual for any penalty or addition to tax. Sec. 7491(c). That

burden is to show that imposition of the penalty or addition to tax is appropriate.

Higbee v. Commissioner, 116 T.C. 438, 446 (2001). If the Commissioner carries

that burden, the taxpayer must come forward with evidence sufficient to persuade

us that imposition of the penalty or addition to tax is incorrect (e.g., because of the

existence of reasonable cause and the absence of willful neglect). See id. at 446-

447. Respondent’s burden is met here because the 2006 return was not filed until

2009 and the amount shown on the substitute for return has not been paid.

      Petitioner contends that the 2007 stay in the hospital and rehabilitation

facility and the cast that remained on her leg are reasonable cause for her failure

to timely file her 2006 return. Petitioner argues that she had continuing medical

issues, that some of the records necessary to the preparation of her 2006 return

were damaged and that she had to obtain copies, and that she was displaced with

her personal and business items in storage at the time the return was due.

Respondent argues that the timely filing of the 2007 return and petitioner’s ability
                                           - 14 -

[*14] to carry on negotiations with Nationwide Insurance and perform other tasks

during 2007 negate reasonable cause. We are persuaded that the failure to file her

2006 return by the October 2007 due date was due to petitioner’s circumstances and

that the minimal activities she conducted during 2007 do not contradict her position,

although we are troubled by the delay in filing the return that continued through

2008 and most of 2009. On balance, we conclude that petitioner had reasonable

cause for late filing of the return and is not liable for the section 6651(a)(1) addition

to tax.

          The addition to tax for failure to pay under section 6651(a)(2), however, is

avoided only if the taxpayer shows that she exercised ordinary business care and

prudence in providing for payment of the liability and was nevertheless either

unable to pay the tax or would suffer an undue hardship. Sec. 301.6651-1(c)(1),

Proced. & Admin. Regs. Petitioner paid only $50 on her 2006 liability with her

application for extension of time and only $311 total, including amounts withheld

from her 2006 income. Except for circumstances not present here, an extension

of time for filing a return does not operate to extend the time for payment of the

tax. Sec. 1.6081-1(a), Income Tax Regs. Thus, this addition to tax applies

separately, even if reasonable cause exists for late filing of the return. Petitioner’s

explanation of the ongoing health issue and the unavailability of records necessary
                                         - 15 -

[*15] to filing her return does not apply equally to the simpler task of making a

payment. See also Taylor v. Commissioner, T.C. Memo. 2009-27. There is no

evidence that petitioner was unable to pay the tax that was due or would suffer

undue hardship from making payment. The addition to tax under section 6651(a)(2)

is applicable to petitioner’s late payment, up to a maximum of 25% of the unpaid

tax.

       We have considered the other arguments of the parties. Many of petitioner’s

arguments are not based on the evidence and are belated. We do not, for example,

address her arguments about application of subsequent payments of tax to years

other than 2006, except to note that overpayments by a taxpayer may be applied to

other tax liabilities of the taxpayer at the discretion of the IRS. See sec. 6402(a);

Weber v. Commissioner, 138 T.C. 348, 355-356 (2012); sec. 301.6402-3(a)(6)(i),

Proced. & Admin. Regs.

       To reflect the stipulation and our conclusions,


                                                        Decision will be entered

                                                  under Rule 155.
