                              T.C. Memo. 2014-143



                        UNITED STATES TAX COURT



                  KEITH ROBERTSON, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 20848-12.                         Filed July 21, 2014.



      Keith Robertson, pro se.

      Bradley C. Plovan, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


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

determined a deficiency in petitioner’s 2009 Federal income tax of $10,027 and

additions to tax of $1,280, $682, and $125 pursuant to sections 6651(a)(1),
                                        -2-

[*2] 6651(a)(2), and 6654, respectively.1 We sustain all of these determinations

except the addition to tax under section 6651(a)(2).

                              FINDINGS OF FACT

      Some facts have been stipulated and are so found, and we incorporate the

stipulation of facts by this reference. Petitioner was born in 1968. He resided in

Maryland when he filed his petition.

      Petitioner was employed during 2009 by Motorola, Inc., which paid him

compensation of $60,256 for that year. This amount is shown as “wages, tips, and

other compensation” on the Form W-2, Wage and Tax Statement, that Motorola

furnished him for 2009 and is confirmed by Motorola’s business records.

Petitioner admitted at trial that he worked for Motorola during 2009 and that he

received the compensation shown on the Form W-2. Motorola withheld $4,340 of

Federal income tax from his wages.

      Petitioner received a distribution of $4,333 in 2009 from a section 401(k)

plan managed by The Northern Trust Co. (Northern Trust). This amount is shown

as a “gross distribution” on the Form 1099-R, Distributions From Pensions,


      1
        Unless otherwise indicated, all statutory references are to the Internal
Revenue Code in effect for 2009, and all Rule references are to the Tax Court
Rules of Practice and Procedure. All monetary amounts are rounded to the nearest
dollar.
                                        -3-

[*3] Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts,

etc., that Northern Trust furnished him for 2009, and the entire amount is shown

on the Form 1099-R as “taxable.” Petitioner admitted that he received this

income, and he did not contend that it was exempt from tax. He was not age 59½

during 2009, and he did not allege any basis on which this early distribution from

his section 401(k) plan would be excepted from the 10% additional tax imposed

by section 72(t). Northern Trust withheld no Federal income tax from this

distribution.

      Petitioner did not file a Federal income tax return for 2008 or for 2009, and

he did not remit any tax payments for 2009 beyond the amounts withheld by his

employer. The IRS prepared a substitute for return (SFR) for 2009 based on the

information returns that it received.2 In its calculations the IRS allowed a standard

deduction for a single filer and one exemption. It also determined the afore-

mentioned additions to tax and the 10% additional tax imposed by section 72(t).

The IRS mailed petitioner a notice of deficiency based on the SFR, and petitioner

timely sought review in this Court.


      2
        The parties submitted a stipulation of facts that includes an IRS transcript
of petitioner’s 2009 account referencing a “substitute for return” dated August 24,
2011. However, respondent did not submit the SFR into evidence or otherwise
demonstrate that it met the requirements of section 6020(b).
                                        -4-

[*4]                                 OPINION

I.     Burden of Proof

       The Commissioner’s determination of a deficiency is generally presumed

correct, though the taxpayer can rebut this presumption. See sec. 7491(a); Rule

142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). In unreported income

cases, the IRS has the burden of going forward with some evidence linking the

taxpayer to the income-producing activity, but the burden of proof remains on the

taxpayer to show that the IRS determination was arbitrary or erroneous. See

Williams v. Commissioner, 999 F.2d 760, 763-766 (4th Cir. 1993), aff’g T.C.

Memo. 1992-153; Dunne v. Commissioner, T.C. Memo. 2008-63, 95 T.C.M.

(CCH) 1236, 1239-1240.

       With respect to additions to tax under sections 6651 and 6654, respondent

bears the burden of production, but petitioner bears the burden of proof. See sec.

7491(c). To meet his burden of production, respondent “must come forward with

sufficient evidence indicating that it is appropriate to impose the relevant penalty.”

Higbee v. Commissioner, 116 T.C. 438, 446 (2001). The evidence required to

meet this burden is not necessarily identical for each addition to tax, as discussed

in more detail below. See, e.g., Spurlock v. Commissioner, T.C. Memo. 2003-124,

85 T.C.M. (CCH) 1236, 1242-1245.
                                         -5-

[*5] II.     Tax Deficiency

       Compensation for services is included in gross income. See sec. 61(a)(1).

Distributions from an employees’ trust are also included in gross income. See

secs. 61(b), 72(a)(1), 402(b)(2). One type of employees’ trust is commonly

referred to as a “401(k) plan,” a qualified cash or deferred arrangement plan

established for the benefit of employees who meet certain criteria. Sec. 401(k);

Weaver-Adams v. Commissioner, T.C. Memo. 2014-73, at *4-*5. Distributions

from a qualified retirement account (which includes a 401(k) account) to a

taxpayer under 59½ years of age at the time of the distribution are subject to a

10% additional tax unless an exception applies. Secs. 72(t), 401(k), 4974(c).

       Respondent has established through information returns and the payors’

business records that petitioner during 2009 received wages of $60,256 from

Motorola and a taxable early distribution of $4,333 from a 401(k) plan held by

Northern Trust. Petitioner admitted that he received this income. His sole con-

tention at trial was that he filed a tax return for 2009 reporting all of this income

and that he would have paid any tax owing when he submitted his return.

       The IRS transcript of petitioner’s account reflects that the IRS received no

return from petitioner for 2009 and instead prepared an SFR on August 24, 2011.

Petitioner did not produce a copy of the 2009 return he allegedly filed. Petitioner
                                         -6-

[*6] likewise produced no evidence (such as a USPS certified mail receipt) that he

mailed a 2009 return to the IRS. Petitioner testified that he lost all of his financial

and tax records when he was evicted from a residence.

      Petitioner testified that he would have paid whatever tax was shown as due

on the 2009 return that he supposedly filed. But he produced no evidence (such as

canceled checks, bank statements, or electronic bank records) to evidence such

payment. He asserted that he paid the tax by money order and that third-party

records of such a payment are not available. He offered no evidence of this apart

from his own testimony. It is well established that a taxpayer’s uncorroborated

testimony need not be accepted by the Court. See, e.g., Tokarski v. Commis-

sioner, 87 T.C. 74, 77 (1986).

      Petitioner’s explanation of events is further undermined by the fact that he

did not file a Federal income tax return for 2008 either, as evidenced by the IRS

transcript of his 2008 account. As shown on that transcript, the IRS also prepared

an SFR for him for that year. Motorola’s payroll records show a reduction in

petitioner’s 2009 take-home pay of $5,893 for a “tax levy.” In the light of this

pattern of past noncompliance, we do not find credible petitioner’s testimony that

he was in full compliance with his tax obligations for 2009.
                                        -7-

[*7] Respondent has established that petitioner was born in 1968 and was thus

younger than 59½ in 2009. Petitioner failed to demonstrate that the distribution

from his 401(k) plan met any exception to the 10% additional tax for an early

distribution from a qualified retirement plan. Sec. 72(t)(1) and (2). We will

therefore sustain the tax deficiency of $10,217 that respondent determined in the

notice of deficiency, which represents the tax on petitioner’s wages and 401(k)

plan distribution plus the 10% additional tax under section 72(t).

III.   Additions to Tax

       A.    Section 6651(a)(1)

       Section 6651(a)(1) provides for an addition to tax of 5% of the tax required

to be shown on a return for each month, or a fraction thereof, for which there is a

failure to file the return, not to exceed 25% in the aggregate. The introduction into

evidence of an account transcript showing that petitioner has not filed a tax return

for the year at issue is sufficient to meet respondent’s burden of production for the

section 6651(a)(1) failure to timely file penalty. Holmes v. Commissioner, T.C.

Memo. 2011-31, 101 T.C.M. (CCH) 1141, 1144. Respondent introduced

petitioner’s 2009 account transcript showing that he did not file a 2009 return.

The only evidence that petitioner produced was his own uncorroborated testimony,
                                        -8-

[*8] which, for the reasons previously stated, we do not find credible. We will

therefore sustain the imposition of the section 6651(a)(1) addition to tax.

      B.     Section 6651(a)(2)

      Section 6651(a)(2) provides for an addition to tax when a taxpayer fails to

pay the tax shown on a return, unless the taxpayer proves that the failure to pay

was due to reasonable cause and not due to willful neglect. An SFR prepared by

the IRS pursuant to section 6020(b) is treated as the “return” filed by the taxpayer

for purposes of section 6651(a)(2) when the taxpayer fails to file his own timely

return. See sec. 6651(g). To meet its burden of production under section 7491(c)

with respect to the section 6651(a)(2) addition to tax, the IRS must introduce into

evidence a tax return. Wheeler v. Commissioner, 127 T.C. 200, 208-211 (2006),

aff’d, 521 F.3d 1289 (10th Cir. 2008). This can be done by introducing a copy of

the SFR into evidence or by stipulation of the parties that the SFR is valid and

meets the requirements of section 6020. See, e.g., Wheeler, 127 T.C. at 208-211;

Gardner v. Commissioner, T.C. Memo. 2013-67, at *23-*24. The IRS cannot rely

solely on account transcripts stating that an SFR was prepared in order to meet this

burden of production. Ibid.

      Respondent failed to meet his burden of production under section 7491(c)

with respect to the section 6651(a)(2) addition to tax since respondent did not
                                          -9-

[*9] introduce into evidence a copy of the SFR or provide a stipulation by the

parties as to the SFR’s validity for purposes of section 6020. The 2009 account

transcript introduced into evidence includes only a “summary reference” to an

SFR, which is not enough to meet respondent’s burden of production under

section 7491(c). Wheeler, 127 T.C. at 208-211. We accordingly will not sustain

the section 6651(a)(2) addition to tax.

      C.     Section 6654

      Section 6654(a) provides for an addition to tax when an individual under-

pays the required estimated tax. Where, as here, a taxpayer does not file a return

for the current tax year or the immediately preceding tax year, then the “required

annual payment” that must be paid is equal to 90% of the tax due for the current

taxable year. Sec. 6654(d)(1)(B). This payment is due in four required

installments. Sec. 6654(c).

      Respondent has established that petitioner did not file a tax return for 2008

or for 2009. Thus, petitioner’s “required annual payment” for 2009 is 90% of the

tax due for that year. See sec. 6654(a), (d)(1)(B). Petitioner’s income tax liability

for tax year 2009 is $10,027. Petitioner’s required annual payment is thus $9,024

--90% of his 2009 liability. Petitioner paid only $4,340 of tax via withholding

from his wages. See secs. 6513(b), 6654(g)(1). Because petitioner had a required
                                       - 10 -

[*10] annual payment that he underpaid, we will sustain the section 6654(a)

addition to tax for 2009. To reflect the foregoing,


                                       Decision will be entered for respondent

                                as to the deficiency and the additions to tax under

                                sections 6651(a)(1) and 6654 and for petitioner

                                as to the addition to tax under section 6651(a)(2).
