Counts v. Commissioner

MEMORANDUM FINDINGS OF FACT AND OPINION

NIMS, Judge: Respondent determined a deficiency of $4,470 in petitioners' joint 1980 Federal income taxes. Subsequently, by amended answer, respondent alleged he had improperly calculated the above deficiency and determined based on a married separate filing status that petitioners were individually liable for the following deficiencies in and additions *112 to income taxes for 1980:

The issues presented for decision are:

(1) whether petitioners Jerry W. Counts (Mr. Counts) and Rae A. Counts (Mrs. Counts) are entitled to deduct $17,540.62 and $4,532.25, respectively, of wages received as non-taxable receipts;

(2) whether Mrs. Counts is required to include $1,760 of unemployment compensation in gross income under section 85;

(3) whether petitioners are each liable for the addition to tax under section 6651(a)(1) for failure to timely file a return;

(4) whether respondent correctly determined petitioners' deficiencies in and additions to income taxes based on a married separate filing status; and

(5) whether petitioners are each liable for the addition to tax under section 6653(a) for negligence or intentional disregard of rules and regulations.

FINDINGS OF FACT

Petitioners, husband and wife, resided at Zephyrhills, Florida, at the time their petition was filed in this case.

Mr. Counts, a truck driver, received $17,540.62 in wages from*114 Carr Bros. Institutional Foods and Paper Company, Inc. in 1980. Mrs. Counts was employed by the Kmart Corporation and earned $4,532.25. In addition, Mrs. Counts received $1,760 of unemployment compensation from the Florida Department of Labor and Employment Security during the taxable year at issue.

Petitioners submitted to the Internal Revenue Service a Form 1040 containing numerous alterations for the 1980 taxable year. The headings entitled "Income" and "Adjustments to Income" in the margin of the form were obliterated and replaced with the words "Receipts" and "Adjustments to Receipts." On line 24 of the form, the caption "Employee business expense (attach Form 2106)" was replaced with "Non-taxable receipts." Among the remaining changes was the addition of the following statements to the paragraph immediately preceding petitioners' signatures: "Signed involuntarily under threat of statutory punishment" and "By signing this form I do not waive any of my constitutional rights."

Petitioners indicated a joint return filing status on the altered Form 1040. Although petitioners reported wages in the amount of $22,072.87 on line 8 of the form, they subsequently deducted*115 that amount on line 24 as non-taxable receipts.

OPINION

Non-Taxable Receipts Deduction

The first issue for decision is whether petitioners are entitled to deduct the amount of their wages received as non-taxable receipts. Mr. and Mrs. Counts were compensated $17,540.62 and $4,532.25, respectively, during the taxable year at issue. Petitioners argue that they are entitled to deduct the amounts received as non-taxable receipts because "labor performed by them does not constitute 'income' within the meaning of the Internal Revenue Code for purposes of taxation * * *."

We have repeatedly rejected in prior cases the argument made by petitioners. The wages received by petitioners are includable in gross income. Section 61; ; . Petitioners' argument is frivolous and the deduction for non-taxable receipts is therefore denied.

Unemployment Compensation

The next issue for decision is whether Mrs. Counts is required to include in gross income $1,760 of unemployment compensation under section 85. ² Mrs. Counts neither denies receiving the*116 unemployment compensation nor argues that the funds are not includable in gross income under section 85. We therefore hold for respondent on this issue. ³

*117 Addition to Tax for Failure to Timely File a Return

Respondent determined that petitioners are each liable for the addition to tax under section 6651(a)(1) ⁴ for failure to timely file a return. Respondent argues the addition to tax is applicable because the altered Form 1040 submitted by petitioners does not constitute a legally sufficient Federal income tax return. We agree. We recently considered this issue in , and held that the addition to tax for failure to timely file a return must be sustained because an altered Form 1040 is not a return. . Moreover, since petitioners in the instant case deliberately submitted an altered form, their failure to timely file a return was not due to reasonable cause. Accordingly, the additions to tax under section 6651(a)(1) are sustained.

*118 Petitioners' Filing Status

The next issue for decision is whether respondent properly computed the deficiencies in and additions to petitioners' income taxes on a married separate filing status rather than on a joint return filing status. Since respondent's computations based on a separate filing status were raised by amended answer, respondent bears the burden of proof on this issue. Rule 142(a).

If a taxpayer fails to timely file a return, and the Commissioner is required to make the joint or separate return election in computing taxable income, that election may not thereafter be altered by the taxpayer. , affd. on this issue, . Petitioners in the instant case, as discussed above, failed to timely file a return. Accordingly, we hold respondent properly determined the deficiencies in and additions to petitioners' income taxes based on a separate filing status.

Addition to Tax for Negligence

The final issue for decision is whether petitioners are each liable for negligence or intentional disregard of rules and regulations under section 6653(a). *119 We believe petitioners' submission of the altered Form 1040 to the Internal Revenue Service demonstrates an intentional disregard of rules and regulations. Accordingly, the addition to tax under section 6653(a) is sustained.

To reflect the foregoing,

Decision will be entered for the respondent.