                          T.C. Summary Opinion 2012-54



                         UNITED STATES TAX COURT



                   STAN B. VAUGHAN, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 3597-10S.                          Filed June 13, 2012.



      Stan B. Vaughan, pro se.

      Wesley J. Wong, for respondent.



                              SUMMARY OPINION


      GERBER, 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


      1
       Unless otherwise indicated, all section references are to the Internal Revenue
Code in effect for the years in issue, and all Rule references are to the Tax Court
Rules of Practice and Procedure.
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Pursuant to section 7463(b), the decision to be entered is not reviewable by any

other court, and this opinion shall not be treated as precedent for any other case.

      Respondent determined deficiencies in petitioner’s 2007 and 2008 Federal

income tax of $3,693 and $3,330, respectively. The deficiencies for both years are

attributable to respondent’s disallowance of petitioner’s casualty and theft loss

deductions. We consider here whether petitioner is entitled to any part of the

claimed deductions. In addition, petitioner contended that for tax years 2007 and

2008 respondent’s statutory notice of deficiency was either rescinded or invalid, and

we consider the merits of those contentions.

                                    Background2

      On Schedule A, Itemized Deductions, of his 2007 Federal income tax return

(return) petitioner claimed a casualty or theft loss deduction of $36,302.57.

Petitioner explained on his 2007 return that the loss was attributable to the


      2
        This case is procedurally unusual. At trial the parties presented
31 stipulated documents. Petitioner, who bears the burden of showing that
respondent’s determinations are in error, chose not to testify, even though the Court
thoroughly explained the procedures. The Court asked the parties to provide a
written explanation of the evidence to assist the Court in better understanding the
significance of each document and how it did or did not show that respondent erred.
The Court advised the parties that their explanations did not constitute evidence but
were to assist the Court in understanding the evidence. For the most part,
petitioner’s explanations in his posttrial documents filed with the Court consisted of
procedural reasons why the notice of deficiency was either rescinded or invalid.
                                         -3-

embezzlement of his campaign funds3 by someone who had signature authority on

his political campaign account. Likewise, on his 2008 return petitioner claimed a

$46,470.87 casualty loss deduction and explained that it was attributable to the loss

of personal property connected with Itex Corp. (Itex). For each year the amount of

the casualty loss exceeded the amount of income petitioner reported so that he

reported no tax liability. The amounts of the income tax deficiencies represent the

amounts of tax that petitioner would have been liable for had he not claimed the loss

deductions.

      On March 30, 2009, respondent notified petitioner that his 2007 return had

been selected for examination. The notification letter for 2007 set an appointment

date of May 20, 2009, and indicated that petitioner’s “Casualty and Theft Loss” was

being questioned. The letter listed the type of proof that petitioner could use to

substantiate a loss. Petitioner requested that the appointment be moved to May 12,

2009, and the examiner agreed. Petitioner attended and began to set up a recording

device. The examiner advised that, although a taxpayer has a right to make a

recording of an examination, the taxpayer must provide 10 days’ notice. The

examiner noted that petitioner in an April 3, 2009, letter stated that he did not waive

his right to make a recording, but he did not state that he intended to make one.

      3
       Petitioner ran for the Nevada State Assembly during 2006.
                                           -4-

Petitioner did not provide the examiner with any documents or statements in support

of his reported loss.

        On June 1, 2009, respondent sent petitioner a second notification that the

casualty and theft loss deduction on his 2008 return was being questioned and the

return had been selected for examination, also listing the type of proof that could be

used to substantiate a loss. The notification letter for 2008 did not set an

appointment date and, instead, requested that petitioner call the examiner within 10

days to schedule an appointment. Different examiners had originally been assigned

for the 2007 and 2008 tax years; ultimately, however, a single examiner handled the

case.

        Petitioner in a letter dated June 4, 2009, sent by certified mail June 5, 2009,

responded to the 2008 examination notification, advising that he would like the

examination to take place “on any date after July 25, 2009” and that he intended “to

make a sound recordings of any meetings with examination personnel”. Also in a

separate letter dated June 4, 2009, petitioner wrote to respondent regarding the

examination for his 2007 tax year. Apparently, respondent’s notification had a

misplaced comma so that the examination for the year 2007 was shown as
                                          -5-

“200,712”.4 Petitioner made light of the fact that he doubted that he would likely

not “still be around in another 198,603 years.” In that letter petitioner notified

respondent that he intended to make sound recordings of any examinations by

respondent.

      Petitioner did not satisfy the tax examiner with respect to the claimed

deductions. The tax examiner’s report dated June 12, 2009, proposed to disallow

the loss deductions claimed for 2007 and 2008 and had the same proposed income

tax deficiencies as were eventually set forth in the notice of deficiency. Petitioner

filed a protest that respondent received on June 23, 2009, but no changes were made

to the proposed deficiencies. Petitioner then requested an Appeals review.

Petitioner did not contact the examiner to schedule an appointment to meet and/or to

provide supporting documentation. Along with petitioner’s protest he provided

some documentation, but the examiner did not find it sufficient to substantiate

petitioner’s losses.

      On July 5, 2009, petitioner advised the examiner that his formal response to

the protest was “unacceptable”. In a letter dated November 24, 2009, petitioner

sent to respondent’s counsel a letter, which among other matters proposed that the

      4
       We assume that the intended designation by respondent was “2007, 12”,
which likely indicated that the year was 2007 and the period under examination was
12 months or a calendar year.
                                         -6-

notice of deficiency be rescinded. Petitioner enclosed a Form 8626, Agreement to

Rescind Notice of Deficiency, signed by him, urging respondent to reach

agreement on that matter. Petitioner suggested that this action was appropriate

because he had not been afforded the opportunity to pursue a proper appeal.

Along with the Form 8626, petitioner sent a Form 872, Consent to Extend the Time

to Assess Tax, that would have extended the assessment period to March 22,

2012.

        The statutory notice of deficiency was mailed to petitioner on November 19,

2009, and he timely petitioned this Court. After his case was docketed with this

Court, a July 26, 2010, letter from Appeals offered petitioner a settlement

conference with Appeals concerning his 2007 and 2008 tax years. That letter stated

that petitioner would be given the opportunity to provide more information about the

theft loss connected with his political campaign for 2007. The letter noted that

petitioner had indicated that he had lent the money to his political campaign and

inquired as to why it was not reported as a “bad debt expense” as opposed to a theft

loss. With respect to 2008, the Appeals letter indicated that the loss deduction

claimed for 2008 was in connection with an “Intagio account” and that Intagio had

been bought out by a competitor and was to have honored petitioner’s account

balances. It noted that petitioner had indicated that
                                         -7-

the new company would not honor his account because he worked for a

competitor.

      In a Nevada financial disclosure statement, filed May 3, 2006, petitioner

indicated that his sources of income were his service in the Nevada State Assembly,

employment by the U.S. Postal Service, and a position as an officer of the World

Chess Federation. As a Nevada assemblyman, petitioner was required to report the

sources and expenditures of funds received in his election campaign. For 2006

petitioner reported that he received more than $500,000, most of which he

contributed to himself to run his campaign.

                                     Discussion

      We first consider whether the notice of deficiency that underlies the petition

was valid. Petitioner argues that respondent’s failure to sign and/or to notify

petitioner that respondent’s agent did not execute the Form 8626 that petitioner had

signed and sent to respondent, coupled with the fact that petitioner did not receive

an Appeals hearing, is tantamount to respondent’s concession of the case.

      This Court’s deficiency jurisdiction is dependent upon the issuance of a valid

notice of deficiency and the timely filing of a petition. See Rule 13; Monge v.

Commissioner, 93 T.C. 22, 27 (1989). The Court has jurisdiction to decide whether

it has jurisdiction in a particular case. See, e.g., Kluger v. Commissioner, 83 T.C.
                                          -8-

309 (1984). The record reflects that a notice of deficiency was issued to petitioner

and that he timely filed a petition seeking redetermination of respondent’s deficiency

determinations for his 2007 and 2008 tax years. Petitioner has not provided any

authority for the proposition that a taxpayer’s proposal that an outstanding notice of

deficiency be rescinded becomes unilaterally effective where the Commissioner

takes no action. Although the Commissioner has authority to rescind a notice of

deficiency, there is no indication that the parties reached a mutual understanding or

agreement regarding rescission of the notice in this case. Section 6212(d) provides

the Secretary with authority to rescind a notice of deficiency. It is integral to the

meaning of that statute that there be mutual consent between a taxpayer and the

Secretary to effect a rescission. See, e.g., Slattery v. Commissioner, T.C. Memo.

1995-274.

      Petitioner contends, in effect, that he was not provided with due process and,

accordingly, that the notice is invalid because of constitutional violations. In making

this argument, petitioner seeks to go behind the notice of deficiency and have the

Court consider whether the notice is valid. See Greenberg’s Express, Inc. v.

Commissioner, 62 T.C. 324 (1974). On the basis of the documents stipulated by
                                         -9-

the parties,5 it does not appear that petitioner was denied due process in connection

with administrative examination for his 2007 and 2008 tax years. Although in the

first instance petitioner was not afforded a full opportunity to show that he was

entitled to the loss deductions in issue, he was not denied a conference or Appeals

hearing. It was petitioner’s choice not to respond to respondent’s offers to discuss

his case and/or to present evidence to support the loss deductions claimed.

Respondent’s issuance of a notice of deficiency was sufficient to provide this Court

with jurisdiction over the subject matter of petitioner’s 2007 and 2008 tax years.

See sec. 6212(d). Accordingly, we hold that the notice of deficiency for 2007 and

2008 is valid.

       Next we consider whether petitioner has shown that he is entitled to

deductions for a casualty or theft loss for 2007 and/or 2008. Petitioner bears the

burden of substantiating the claimed losses. See sec. 6001; Rule 142(a). The

record in this case, consisting of documents agreed to by the parties, shows that

petitioner claimed loss deductions on his 2007 and 2008 returns. See sec. 165.




      5
         We reiterate that petitioner was thoroughly advised about the possible need
to give testimony, call witnesses, and present documents when this case was called
for trial. Although given the opportunity, he chose to rely entirely on the documents
offered to the Court. On the basis of the records offered, it does not appear that
petitioner was denied due process in the administrative portion of this case.
                                         - 10 -

It shows that petitioner was involved in a political campaign for a Nevada Assembly

seat and that money reportedly was received and, to some extent, spent for that

purpose. It does not show, as petitioner claims, that for 2007 someone embezzled

more than $36,000 from his political campaign funds. The record is void of any

evidence that petitioner suffered a loss that is deductible for 2007 or that he had lent

the money to his campaign and incurred a loss from a bad debt.

      With respect to the claimed loss of more than $46,000 for 2008, petitioner

claimed on his return that it was attributable to Itex. There is no evidence in the

record, however, that indicates the nature of petitioner’s relationship to Itex or

why that relationship resulted in a loss that he could deduct for his 2008 tax year.

      Petitioner has not provided the Court with any evidence that would support

deductions for casualty or theft losses for 2007 and 2008. The losses have merely

been identified and have not been substantiated. Petitioner failed to present any

substantial evidence to respondent in the administrative portion of this case.

Instead, he mounted a procedural approach/attack, both during the examination and

in the controversy before this Court. Petitioner has not provided evidence of his

alleged losses, and we accordingly hold that he is not entitled to deductions for

casualty or theft losses for 2007 and 2008.
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In view of the foregoing,


                                           Decision will be entered

                                     for respondent.
