                                  T.C. Memo. 2013-146



                            UNITED STATES TAX COURT



      GREGORY T. CAMPION AND SHEILA J. CAMPION, Petitioners v.
         COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 16912-09.                             Filed June 6, 2013.



      Gregory T. Campion and Sheila J. Campion, pro se.

      Laura A. Price, for respondent.



               MEMORANDUM FINDINGS OF FACT AND OPINION


      FOLEY, Judge: After concessions, the issues for decision are whether

petitioners failed to report income and are liable for section 6662 accuracy-related

penalties relating to 2004 and 2005.1


      1
          Unless otherwise indicated, all section references are to the Internal
                                                                           (continued...)
                                        -2-

[*2]                           FINDINGS OF FACT

       During 2004 and 2005 Mr. Campion was a night shift team leader and

custodian of evidence with the Drug Enforcement Agency’s Atlanta Airport Task

Force. On March 1, 2006, Mr. Campion was indicted in the U.S. District Court for

the Northern District of Georgia (District Court) on seven counts of converting

property of another as an officer or employee of the United States, seven counts of

embezzlement of public funds, and two counts of money laundering. Mr.

Campion was subsequently indicted, pursuant to section 7206(1), for filing false

2003 and 2004 Federal income tax returns. On September 24, 2008, Mr. Campion

pleaded guilty to filing a false 2004 return (i.e., the remaining charges were

dismissed), was sentenced to 21 months’ imprisonment, and was required to pay

$80,095 of restitution to the Internal Revenue Service and $12,519 of restitution to

the Georgia Department of Revenue.

       Respondent audited petitioners’ 2004 and 2005 returns and, using the bank

deposits method, determined that petitioners had unreported income of $204,417

and $21,791 relating to 2004 and 2005, respectively. In addition, respondent

determined that petitioners were liable for section 6662 accuracy-related penalties.

       1
      (...continued)
Revenue Code in effect for the years in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure.
                                         -3-

[*3] Respondent, on April 10, 2009, sent petitioners a notice of deficiency relating

to 2004 and 2005. Petitioners timely filed their petition with the Court. At the

time the petition was filed, Mr. Campion resided in Virginia and Ms. Campion

resided in Florida.

                                      OPINION

      Petitioners contend that the District Court determined their 2004 tax liability

and that respondent is collaterally estopped from relitigating this amount.2

Although Mr. Campion pleaded guilty to willfully making and subscribing a false

return, petitioners’ 2004 tax liability was not an essential element of the

Government’s case and was not actually litigated. See sec. 7206(1); United States

v. Clarke, 562 F.3d 1158, 1163-1164 (11th Cir. 2009); Hi-Q Pers., Inc. v.

Commissioner, 132 T.C. 279, 289-290 (2009); Peck v. Commissioner, 90 T.C.

162, 166-167 (1988) (holding that “[t]he parties must actually have litigated the

issues and the resolution of these issues must have been essential to the prior

decision” in order for collateral estoppel to apply), aff’d, 904 F.2d 525 (9th Cir.




      2
       Collateral estoppel, rather than the related doctrine of res judicata, may
apply when a civil case follows a criminal case. See Helvering v. Mitchell, 303
U.S. 391, 397 (1938) (“The difference in degree of the burden of proof in criminal
and civil cases precludes application of the doctrine of res judicata.”); United
States v. Barnette, 10 F.3d 1553, 1560-1561 (11th Cir. 1994).
                                        -4-

[*4] 1990). Therefore, respondent is not collaterally estopped from determining a

deficiency relating to 2004.

      We sustain respondent’s determinations of petitioners’ unreported income

relating to 2004 and 2005. Petitioners were required, but failed, to maintain

adequate records. See sec. 6001. Thus, respondent had the authority to

reconstruct income in accordance with the bank deposits method. See sec. 446(b);

Clayton v. Commissioner, 102 T.C. 632, 645 (1994) (“The use of the bank deposit

method for computing unreported income has long been sanctioned by the

courts.”); Petzoldt v. Commissioner, 92 T.C. 661, 686-687 (1989). Respondent

established that petitioners owned the bank accounts subject to respondent’s

analysis. See Blohm v. Commissioner, 994 F.2d 1542, 1548-1549 (11th Cir.

1993) (holding that the Commissioner’s determination relating to unreported

income is presumed correct where it is supported by a “minimal evidentiary

showing”), aff’g T.C. Memo. 1991-636. Pursuant to the bank deposits method, all

money deposited into petitioners’ bank accounts is presumed to be taxable and

respondent is not required to establish a likely source of the deposits. See Clayton

v. Commissioner, 102 T.C. at 645-646. Petitioners failed to prove that the analysis
                                        -5-

[*5] was erroneous.3 See Welch v. Helvering, 290 U.S. 111, 115 (1933); Blohm v.

Commissioner, 994 F.2d at 1548-1549; Clayton v. Commissioner, 102 T.C. at

645-646.

      Respondent further determined that petitioners are liable for section 6662(a)

and (b)(1) accuracy-related penalties relating to 2004 and 2005. Respondent

bears, and has met, the burden of production relating to these penalties and has

established that petitioners were negligent in filing their 2004 and 2005 returns.

See sec. 7491(c); Higbee v. Commissioner, 116 T.C. 438, 446, 448-449 (2001).

Petitioners have not established reasonable cause for the underpayments or that the

returns were prepared in good faith. See sec. 6664(c)(1); Higbee v.

Commissioner, 116 T.C. at 448-449. Accordingly, we sustain respondent’s

determinations.

      Contentions we have not addressed are irrelevant, moot, or meritless.

      To reflect the foregoing,


                                                    Decision will be entered

                                              under Rule 155.

      3
        Pursuant to sec. 7491(a), the burden of proof may shift to the
Commissioner if the taxpayer introduces credible evidence with respect to any
factual issue. This section is inapplicable because petitioners failed to maintain
records. See sec. 7491(a)(2).
