                            T.C. Summary Opinion 2017-72



                            UNITED STATES TAX COURT



            KEVIN C. HARRIS AND TERESA A. HARRIS, Petitioners v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 13016-15S.                            Filed September 7, 2017.



      Kevin C. Harris, for himself.

      Joline M. Wang, Douglas S. Polsky, and Randall L. Eager, Jr., for

respondent.



                                 SUMMARY OPINION


      MORRISON, Judge: This case was heard pursuant to the provisions of

section 7463 of the Internal Revenue Code of 1986, as amended.1 Pursuant to


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

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. We sustain

the determination of the Internal Revenue Service (or IRS) that the petitioners,

Kevin and Teresa Harris, have a deficiency of $1,587. Our jurisdiction rests on

section 6213(a).

                                    Background

      During the 2012 tax year, Kevin Harris had four individual retirement

accounts, or IRAs, at his bank. He received total distributions of $13,060 from the

four IRAs during that year.

      On or before October 15, 2013, the Harrises filed a joint income tax return

on Form 1040, the U.S. Individual Income Tax Return. They reported as income

the distributions from only one of the IRAs totaling $3,800.

      On February 9, 2015, the IRS issued a notice of deficiency to the Harrises

reflecting its determination that the Harrises had failed to report the remaining

$9,260 of distributions. The IRS determined a deficiency of $1,587. A deficiency

is defined as the difference between the tax due and the tax reported (with

exceptions not applicable here). Sec. 6211(a).

      1
      (...continued)
Revenue Code of 1986, as amended, and all references to Rules are to the Tax
Court Rules of Practice and Procedure.
                                         -3-

      In May 2015, Kevin Harris filed a timely petition with this Court for

redetermination of the deficiency. He resided in Kansas when he filed the

petition. The petition did not contain the signature of his wife, Teresa Harris. It

was thus unclear to the IRS whether she intended to join in the petition.

      In June 2015, the IRS assessed the amount of the deficiency against her

individually.

      In August 2015, Teresa Harris sent a signed document ratifying the petition

to the Tax Court, thereby joining in the petition of her husband. She resided in

Kansas when she ratified the petition.

      In September 2015, the IRS reversed the assessment it made against her.

The same month, the IRS sent her a letter stating that it had decreased her tax by

the amount of the assessment and that the amount due was zero.

                                     Discussion

      The burden of proof is on the taxpayers, here the Harrises. Rule 142(a).

Although there are exceptions to this burden-of-proof rule, none of the exceptions

applies in this case. See sec. 7491(a)(1).
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1.    The source of two $5,000 contributions to Kevin Harris’ IRAs

      Kevin Harris funded the four IRAs in part through a contribution of $5,000

in 2006 and a contribution of $5,000 in 2007. As to the source of these two

$5,000 contributions, Kevin Harris testified as follows:

      !       His father had died in 2002 owning an IRA;

      !       the proceeds of this IRA were distributed after his father’s death;

      !       the conservator of his father’s estate paid tax on the distributions; and

      !       Kevin Harris’ brother paid Kevin Harris $10,000--consisting of the

              proceeds of the IRA distributions--as part of the settlement of his

              father’s estate.

On the basis of these factual predicates, the Harrises theorize that the $9,260 of

unreported distributions from Kevin Harris’ IRAs in the year 2012 is not taxable.

In their view, the distributions ultimately consisted of amounts that had already

been taxed.

      Contributions to an IRA are tax deductible for the year contributed (within

certain limits as to the amount). Sec. 219 (a) and (b). When a distribution is made

from an IRA, the recipient must include it in income for the year of the

distribution. Sec. 408(d)(1). If the owner of an IRA dies and the decedent’s estate

or a beneficiary receives a distribution from the IRA, the estate or beneficiary must
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include the distribution in income under the income-in-respect-of-a-decedent rule

of section 691(a)(1). See Estate of Kahn v. Commissioner, 125 T.C. 227, 231-232

(2005). This perhaps explains why the conservator of Kevin Harris’ father’s estate

might have paid income tax on distributions from the father’s IRA. However, it is

difficult to understand why this tax payment would affect the taxability of

distributions from Kevin Harris’ own IRAs. It is undisputed that he funded his

IRAs with tax-deductible contributions. The distributions should be included in

the Harrises’ income, see sec. 408(d)(1), unless an exception applies, such as the

exception for rollovers, see sec. 408(d)(3).

      After the trial we explained to the Harrises that we did not understand their

theory of how the source of the two $5,000 contributions would affect the

taxability of the distributions from the IRAs owned by Kevin Harris. We

explained that briefs would assist the Court in resolving the case. We then ordered

each party to file a brief. Although Kevin Harris is a retired lawyer, the Harrises’

brief did not cite any legal authority for their argument about the relevance of the

source of the two $5,000 contributions. We are not persuaded that their legal

theory is correct. In addition, Kevin Harris’ testimony about the source of the two

$5,000 contributions was vague and unsupported by any documentation. His

testimony about this matter therefore does not support any findings of fact.
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      We hold that the $9,260 of unreported distributions from Kevin Harris’

IRAs in the year 2012 is includible in the Harrises’ income.

2.    September 2015 letter from the IRS to Teresa Harris

      The Harrises’ next argument is that their deficiency is zero because the

September 2015 letter represents a binding decision by the IRS that the deficiency

is zero. Neither the IRS’s abatement of the assessment against Teresa Harris nor

the September 2015 letter has such an effect. Once a taxpayer files a petition with

the Tax Court, the IRS is barred by section 6503(a)(1) from assessing the

deficiency until 60 days after the Tax Court’s decision becomes final. The IRS

assessed the deficiency against Teresa Harris individually after she did not sign

her husband’s Tax Court petition. Once she ratified the petition and became a

party to the case, the IRS reversed its assessment in recognition of section

6503(a)(1). Neither the reversal of the assessment, nor the September 2015 letter

reflecting the reversal, suggests that Teresa Harris’ deficiency was zero. After our

decision becomes final, the IRS is permitted to reassess the deficiency. See Pavich

v. Commissioner, T.C. Memo. 2006-167, 92 T.C.M. (CCH) 120, 121 (2006);

Connell Business Co. v. Commissioner, T.C. Memo. 2004-131, 87 T.C.M. (CCH)

1384, 1387-1388 (2004); Pfeifer v. Commissioner, T.C. Memo. 1983-437, 46

T.C.M. (CCH) 857 (1983). Furthermore, the September 2015 letter was not in any
                                         -7-

form that would bind the IRS. It was not a concession made in court. It was not a

settlement signed by the Harrises and the lawyers who represent the IRS in the

Tax Court. See secs. 7452, 7803(b)(2)(D). It was not a closing agreement. See

sec. 7121. The letter therefore does not affect the Harrises’ deficiency amount.

3.    Interest

      The Harrises next argue they should be relieved of interest on their 2012

unpaid tax liability. A taxpayer who fails to pay tax is liable for interest accruing

from the day the payment was due until the tax is paid. Sec. 6601(a). In 1986

Congress enacted section 6404(e), a provision that granted the IRS the discretion

to abate interest. See Tax Reform Act of 1986, Pub. L. No. 99-514, sec. 1563(a),

100 Stat. at 2762. Under that provision, the Tax Court lacked jurisdiction to

review a refusal by the IRS to abate interest. See 508 Clinton Street Corp. v.

Commissioner, 89 T.C. 352, 356 (1987). In 1996 Congress supplied the Tax

Court with jurisdiction through what is now designated section 6404(h) to

determine whether the IRS’s failure to abate interest under section 6404

constituted an abuse of discretion. Taxpayer Bill of Rights 2, Pub. L. No. 104-

168, sec. 302(a), 110 Stat. at 1457-1458 (1996). Section 6404(h) imposes

conditions on the jurisdiction of the Tax Court. Tax Court jurisdiction is

predicated on (1) the mailing of a final determination by the IRS not to abate
                                         -8-

interest and (2) the taxpayer’s filing of a petition for review with the Tax Court

within 180 days of the mailing of such a determination. Sec. 6404(h)(1) (before

amendment by the Consolidated Appropriations Act, 2016, Pub. L. No. 114-113,

div. Q, sec. 421(a), 129 Stat. at 3123 (2015), effective for claims for abatement of

interest filed with the IRS after December 18, 2015). The Harrises, who seek to

invoke this Court’s jurisdiction, must prove we have jurisdiction. See Fehrs v.

Commissioner, 65 T.C. 346, 348 (1975). They have not proven that the IRS

mailed a final determination not to abate interest.

      In 2015, Congress amended the Code to change the jurisdictional

prerequisites for reviewing IRS refusals to abate interest. Under the 2015

amendment, Tax Court jurisdiction is predicated on (1) either (a) the IRS’s mailing

of the final determination not to abate interest or (b) the taxpayer’s filing with the

IRS of a claim for abatement of interest, and (2) the taxpayer’s filing of petition

for review with the Tax Court within 180 days of the earlier of the mailing of any

such determination or the filing of any such claim. Sec. 6404(h)(1) (after

amendment by the Consolidated Appropriations Act, 2016, sec. 421(a)). The 2015

amendment applies only to claims for abatement of interest filed with the IRS after

December 18, 2015. Consolidated Appropriations Act, 2016, sec. 421(b). The
                                       -9-

Harrises have not shown that they filed a claim with the IRS for abatement of

interest. Thus they have not proven that the 2015 amendment applies.

      The Court has no jurisdiction to determine whether the underpayment

interest should be abated.

      To reflect the foregoing,


                                             Decision will be entered for

                                      respondent.
