                            T.C. Summary Opinion 2015-65



                           UNITED STATES TAX COURT



                ROBERT GLENN MCDOUGALL, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 23565-13S.                           Filed November 9, 2015.



      Robert Glenn McDougall, pro se.

      Joseph E. Nagy and Bryant W.H. Smith, for respondent.



                                SUMMARY OPINION


      PANUTHOS, Chief Special Trial Judge: This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in effect when the

petition was filed.1 Pursuant to section 7463(b), the decision to be entered is not


      1
          Unless otherwise indicated, subsequent section references are to the
                                                                        (continued...)
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reviewable by any other court, and this opinion shall not be treated as precedent

for any other case.

       In a notice of deficiency dated July 8, 2013, respondent determined a

deficiency of $10,920 in petitioner’s 2010 Federal income tax, a section

6651(a)(1) addition to tax of $1,048.05 for failure to timely file a return, and a

section 6651(a)(2) addition to tax of $721.99 for failure to timely pay tax. After

concessions,2 the issues for decision are: (1) whether petitioner received $4,171 of

additional wage income; (2) whether petitioner is liable for an addition to tax

under section 6651(a)(1) for failure to timely file his 2010 Federal income tax

return; and (3) whether petitioner is liable for an addition to tax under section

6651(a)(2) for failure to timely pay tax for 2010.




      1
       (...continued)
Internal Revenue Code in effect for the year in issue, and all Rule references are to
the Tax Court Rules of Practice and Procedure.
      2
      The notice of deficiency included payments reported on Forms W-2, Wage
and Tax Statement, from approximately 18 employers. Before trial petitioner
conceded receipt of all amounts of wage income except for the amounts from two
employers: $3,767 from Audio Visual Projection Services, Inc., and $404 from
Swank Audio Visuals, LLC.
                                          -3-

                                      Background

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

facts and the attached exhibits are incorporated herein by this reference. At the

time the petition was filed, petitioner resided in California.

        During 2010 petitioner was a stagehand in California. Petitioner worked

out of a local union hall and did audiovisual work for conventions and business

meetings. He was hired as a temporary employee by various equipment providers

who had the contracts for particular conventions and shows. Petitioner submitted

an hourly timesheet to each of his employers, who would then pay him by check.

Petitioner usually deposited checks to his bank account. Sometimes petitioner

would accumulate a few checks before making a deposit. Petitioner is uncertain

whether he received all of the Form W-2 income that respondent determined.

        Petitioner was arrested the second week of January of 2011 and was

incarcerated until June 2012. Petitioner’s motorhome and van were seized, and he

lost all of his records after his arrest and incarceration.

        Petitioner did not file a timely return for 2010. On April 1, 2013, the

Internal Revenue Service (IRS) prepared a substitute for return for 2010 under

section 6020(b). The IRS issued a notice of deficiency for 2010 dated July 8,

2013.
                                        -4-

      Petitioner timely filed a petition to dispute the determinations in the notice

of deficiency. On November 5, 2014, respondent received petitioner’s signed

2010 Form 1040EZ, Income Tax Return for Single and Joint Filers With No

Dependents. This return reported some of the income that respondent had

determined in the notice of deficiency and included all of the determined

withholding. Petitioner did not assert that he made any Federal tax payments in

addition to the withholding and further claims that the withholding exceeds the tax

owed, resulting in an overpayment of tax.

      As indicated, petitioner conceded all of the income determined in the notice

of deficiency with the exception of wage income of $3,767 from Audio Visual

Projection Services, Inc., and $404 from Swank Audio Visuals, LLC. These

employers issued petitioner 2010 Forms W-2 for the respective amounts.

Petitioner explained that because all of his records were lost and his employers

often paid him late or not at all, he does not know whether he was paid for all of

the work that he performed in 2010.

      In the notice of deficiency respondent also determined an addition to tax

under section 6651(a)(1) for petitioner’s failure to timely file his 2010 Federal

income tax return and an addition to tax under section 6651(a)(2) for petitioner’s

failure to timely pay tax for 2010.
                                         -5-

                                     Discussion

I.    Unreported Income

      Gross income includes all income from whatever source derived. Sec.

61(a). In general, the Commissioner’s determination set forth in a notice of

deficiency is presumed correct, and the taxpayer bears the burden of proving

otherwise. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Pursuant

to section 7491(a), the burden of proof as to factual matters shifts to the

Commissioner under certain circumstances. Petitioner did not allege or otherwise

show that section 7491(a) applies. See sec. 7491(a)(2)(A) and (B). Therefore,

section 7491(a) does not shift the burden of proof.

      In unreported income cases, the Commissioner must base the deficiency on

some substantive evidence that the taxpayer received the unreported income.

Hardy v. Commissioner, 181 F.3d 1002, 1004 (9th Cir. 1999), aff’g T.C. Memo.

1997-97. If the Commissioner introduces some evidence that the taxpayer

received unreported income, the burden shifts to the taxpayer. Id. The Forms W-2

from Audio Visual Projection Services, Inc., and from Swank Audio Visuals,

LLC, are sufficient evidence to shift the burden of proof to petitioner.

      We also note that section 6201(d) provides that in any court proceeding,

where a taxpayer asserts a reasonable dispute with respect to any item of income
                                        -6-

reported on an information return and the taxpayer has fully cooperated with the

Secretary, the Secretary has the burden of producing reasonable and probative

information concerning the deficiency in addition to the information on the return.

The key term in the foregoing sentence is “a reasonable dispute.” This Court has

concluded that a taxpayer does not raise a reasonable dispute for purposes of

section 6201(d) merely by testifying that he is uncertain, cannot remember, or does

not know. See, e.g., Agudelo v. Commissioner, T.C. Memo. 2015-124, at *10;

Parker v. Commissioner, T.C. Memo. 2012-66.

      Petitioner testified that he did not know whether he received the income.

Thus, he did not raise a reasonable dispute for purposes of section 6201(d) and

section 6201(d) does not apply. Accordingly, respondent does not have the

burden of producing reasonable and probative information concerning the

deficiency in addition to the information on the return.

      The Forms W-2, from Audio Visual Projection Services, Inc., for $3,767

and from Swank Audio Visuals, LLC, for $404 reflect that these two employers

paid wages to petitioner. Petitioner acknowledges that he performed services for

each of the employers. Petitioner’s uncertainty as to whether he received wages

earned from these two employers was no doubt caused in part by his incarceration

in early 2011. However, petitioner’s uncertainty does not satisfy his burden of
                                         -7-

proof. We conclude that petitioner has failed to satisfy his burden of proving that

he did not receive the omitted income and respondent’s determination is sustained.

II.   Section 6651 Additions to Tax

      A.     Failure To Timely File Addition to Tax

      Section 6651(a)(1) imposes an addition to tax for failure to file a return on

the date prescribed (including extensions) unless the taxpayer can establish that

the failure is due to reasonable cause and not due to willful neglect.3

      Respondent has satisfied his burden of production under section 7491(c),

since the parties stipulated that respondent received petitioner’s 2010 tax return on

November 5, 2014.4 Therefore, petitioner bears the burden of proving that his

failure to file a return was due to reasonable cause and not due to willful neglect.



      3
       If the Secretary makes a return for the taxpayer under sec. 6020(b), it is
disregarded for purposes of determining the amount of the addition to tax under
sec. 6651(a)(1), but it is treated as a return filed by the taxpayer for purposes of
determining the amount of the addition to tax under sec. 6651(a)(2). Sec. 6651(g).
      4
       The record does not address whether petitioner requested an extension of
time to file his return for 2010. Petitioner does not assert that he requested an
extension. The tax return for 2010 would normally have been due on April 15,
2011. The latest date to which petitioner could have extended the time for filing
his 2010 return was October 17, 2011. See sec. 1.6081-4, Income Tax Regs. The
addition to tax under sec. 6651(a)(1) is calculated at 5% per month or any part
thereof, not to exceed 25% of the amount of tax required to be shown on the tax
return. Petitioner did not file his tax return until November 5, 2014, at least three
years after the due date.
                                        -8-

See Higbee v. Commissioner, 116 T.C. 438, 446 (2001); Ruggeri v.

Commissioner, T.C. Memo. 2008-300.

      B.     Failure To Timely Pay Addition to Tax

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

shown as tax on the taxpayer’s return on or before the date prescribed unless the

taxpayer can establish that the failure is due to reasonable cause and not due to

willful neglect.5

      Respondent has satisfied his burden of production under section 7491(c) by

establishing that petitioner did not pay the tax due for 2010 by the due date of

April 15, 2011. Therefore, petitioner bears the burden of proving that his failure

to timely pay tax was due to reasonable cause and not due to willful neglect. See

Higbee v. Commissioner, 116 T.C. at 446; Ruggeri v. Commissioner, T.C. Memo.

2008-300.

      C.     Exceptions to Section 6651 Additions to Tax

      Reasonable cause is a defense to the section 6651(a)(1) and (2) additions to

tax. Petitioner contends that he was unable to timely file his return and pay his tax

because he was incarcerated and his business records were confiscated. This

      5
        The amount of the addition to tax under sec. 6651(a)(2) reduces the amount
of the addition to tax under sec. 6651(a)(1) for any month to which an addition to
tax applies under both paragraphs. Sec. 6651(c)(1).
                                          -9-

Court has previously concluded that incarceration at the time the return was due

does not constitute reasonable cause for failure to timely file. See, e.g., Mendes v.

Commissioner, 121 T.C. 308, 321 (2003); Thrower v. Commissioner, T.C. Memo.

2003-139. In Cherry v. Commissioner, T.C. Memo. 2013-3, at *12, this Court

concluded that a taxpayer did not have reasonable cause for failure to file when he

was incarcerated and lost his records. In Kohn v. Commissioner, T.C. Memo.

2009-117, aff’d, 377 F. App’x 578 (8th Cir. 2010), this Court concluded that the

criminal investigation and incarceration of a taxpayer did not constitute reasonable

cause for either his failure to timely file his return or his failure to timely pay the

tax shown on the return. On the basis of the facts in this case, we conclude

petitioner has not shown his failure to timely file a return or timely pay tax was

due to reasonable cause. Petitioner is liable for the section 6651(a)(1) and (2)

additions to tax.

      We have considered all of the parties’ arguments, and, to the extent not

addressed herein, we conclude that they are moot, irrelevant, or without merit.

      To reflect the foregoing,


                                                       Decision will be entered

                                                for respondent.
