Eisenstein v. Commissioner

MEMORANDUM FINDINGS OF FACT AND OPINION

FEATHERSTON, Judge: This case was assigned to Special Trial Judge Peter J. Panuthos for the purpose of hearing, consideration, and ruling on respondent's Motion for Summary Judgment, filed herein. ^1*240 After a review of the record, we agree with and adopt his opinion which is set forth below.

OPINION OF SPECIAL TRIAL JUDGE

PANUTHOS, Special Trial Judge: This case is before the Court on respondent's Motion for Summary Judgment filed on December 23, 1986, pursuant to Rule 121, Tax Court Rules of Practice and Procedure.

In his notice of deficiency, dated April 12, 1985, respondent determined deficiencies and additions to tax for the taxable years 1980 and 1981 as follows:

The adjustments in the notice of deficiency are as follows:

The basis for respondent's determination of unreported income for the taxable years 1980 and 1981, was determined by reference to bank deposits and cash payments. At the time of filing the petition herein, petitioner *241 resided at North Miami Beach, Florida.

PROCEDURAL BACKGROUND

After issuance of the notice of deficiency, dated April 12, 1985, a petition was filed on July 15, 1985. ² Respondent's Answer was filed on July 21, 1986. ^3*242 In his Answer, respondent makes affirmative allegations in support of the additions to tax for fraud under section 6653(b) and in support of his defense that the statute of limitations does not bar assessment and collection of the deficiencies. No reply having been filed, respondent's Motion for Entry of Order that Undenied Allegations in Answer Be Deemed Admitted was filed on October 6, 1986. The motion was granted on November 10, 1986. ⁴ Based on the granting of respondent's motion, the affirmative allegations set forth in paragraphs 7(a) through (s) and 8(a) through (e) of respondent's Answer are deemed admitted.

On December 23, 1986, respondent's Motion for Summary Judgment was filed. ⁵ When this matter was called for hearing at the Motions Session of the Court in Washington, D.C. on February 25, 1987, no appearance was made by or on behalf of petitioner. Counsel for respondent appeared and presented argument in support of his motion. Since no response was received to the Notice of Hearing, dated January 14, 1987, and, further, since there was no appearance by petitioner, the Court issued an Order to show cause, dated February 26, 1987, directing that petitioner be served by regular mail in addition to normal service. The Order further directed that service be made *243 on Thomas A. Lopez, a C.P.A. located in South Miami, Florida. ^6*244

The following findings of fact are based upon the record including allegations in respondent's Answer, which have been deemed admitted.

FINDINGS OF FACT

During the taxable years 1980 and 1981, petitioner was a salesman and architect. Petitioner derived taxable income from these activities. Petitioner failed to maintain or submit for examination by respondent, complete and adequate books of accounts and records of his income-producing activities for the taxable years 1980 and 1981. As a result of petitioner's failure to keep adequate books of account and records, and refusal to furnish to respondent such records, petitioner's correct adjusted gross income for the taxable years 1980 and 1981 was determined by use of the bank deposits and cash expenditures method. The increase in adjusted gross income of petitioner for the taxable years 1980 and 1981 is as follows:

*245 During the taxable years 1980 and 1981, petitioner did not receive any nontaxable or excludable income, receipts, cash, or other assets, other than that accounted for in the above schedule. Petitioner, during the taxable years 1980 and 1981, did not receive any gifts, inheritances, legacies or devises.

The correct income tax liability, the amount shown on his return and the understatement of income tax liability are set forth as follows:

Petitioner's failure to maintain complete and accurate records of his income-producing activities and his failure to produce complete and accurate records to respondent in connection with examination of petitioner's income tax returns for the taxable years 1980 and 1981 was fraudulent with the intent to evade tax. Petitioner fraudulently and with intent to evade tax made false and misleading statements to respondent's agents during the examination of petitioner's income tax returns. Part of the underpayment of tax required to be shown on petitioner's return for each of the taxable years 1980 and 1981 is due *246 to fraud.

Petitioner's income tax return for the taxable year 1980 was filed on April 15, 1981. On March 1, 1984, petitioner executed an agreement in writing pursuant to the provisions of section 6501(c)(4) extending the period for assessment to a period on or before the 90th day after (a) the Internal Revenue Service received a Form 872T, Notice of Termination of Special Consent to Extend the Time to Assess Tax, or (b) the Internal Revenue Service mails Form 872T to the taxpayers, or (c) the Internal Revenue Service mails a notice of deficiency. With respect to the taxable year 1981, petitioner's Federal income tax return was filed on April 15, 1982. The notice of deficiency with respect to the taxable years 1980 and 1981 was issued on April 12, 1985. Respondent did not receive a Notice of Termination of Special Consent to Extend the Time to Assess Tax from petitioner for the taxable year 1980. The assessment and collection of deficiencies in income tax for the taxable years 1980 and 1981 as set forth in the notice of deficiency are not barred by the statute of limitations. ^7*247

OPINION

Rule 121 provides that a party may move for summary judgment upon all or any part of the legal issues in controversy if there are no genuine issues of material fact. Rule 121(b). The burden of proving that there are no genuine issues of material fact is on the moving party. Espinoza v. Commisisoner,78 T.C. 412, 416 (1982).

The factual allegations in the answer respecting respondent's determination of a deficiency in income tax for the taxable years 1980 and 1981 have been deemed admitted. Accordingly, we conclude that there is no genuine issue of material fact with respect to the deficiency determination. Respondent is entitled to a judgment respecting that determination as a matter of law. ⁸

With respect to the additions to tax under section 6653(b) the burden of proof is on respondent to prove by clear and convincing evidence that an underpayment exists *248 and that a part of the underpayment of tax is due to fraud with the intent to evade tax. Section 7454(a); Rule 142(b); Grosshandler v. Commissioner,75 T.C. 1 (1980); Stratton v. Commisisoner,54 T.C. 255 (1970). We have previously determined that respondent's burden can be satisfied through the undenied facts deemed admitted under Rule 37(c). Doncaster v. Commissioner,77 T.C. 334 (1981) (a Court reviewed opinion).⁹ The material factual allegations in the answer with respect to fraud which have been deemed admitted clearly and convincingly establish that for the taxable years 1980 and 1981 an underpayment of tax exists and part of the underpayment is due to fraud with intent to evade tax.

Furthermore, the material factual allegations in the answer with respect to respondent's defense that the statute of limitations is not a bar to assessment and collection of *249 the deficiencies are sufficient to establish that the statute of limitations has not expired for the taxable years in issue. Furthermore, since a part of the underpayment of tax for the taxable years 1980 and 1981 is due to fraud with intent to evade tax, the statute is open under section 6501(c)(1). Vannaman v. Commissioner,54 T.C. 1011, 1018 (1970).

Since there is no genuine issue as to any material fact present in the record, respondent is entitled to a decision as a matter of law. Respondent's Motion for Summary Judgment will be granted.

An appropriate order and decision will be entered.