| UNITED STATES TAX COURT | |
| NNABUGWU C. EZE,
Petitioner, Vs. Respondent |
Docket No.: 21425—19
|
POST-TRIAL BRIEF
Petitioner files this Post-trial brief and will argue that the Petitioner has satisfied all the requirements of USC 26 U.S.C. § 7491(a). In that regard, the Petitioner states as follows:
TABLE OF CONTENTS
Petitioner complied with the requirements of USC 26 U.S.C. § 7491(a) 7
TABLE OF AUTHORITIES
Cases
INDOPCO, Inc. v. Comm’r, 503 U.S. 79, 84 (1992) 7
Welch v. Helvering, 290 U.S. 111, 115 (1933) 7
Statutes
26 U.S. Code § 7491 (a) (1) 8
26 U.S.C. § 7491(a) 1, 7
Rules
Tax Court Rule 142(a) 7
FACTUAL BACKGROUND
The taxpayer ran a consulting and home construction business in 2015 and 2016. He paid/incurred necessary and ordinary expenses as a result of running of the business. He created and maintained mileage logs, invoices, receipts showing trips, purpose of the trips, people he was in consultation with, payment and other evidence. The taxpayer also made valid and deductible payments on qualified mortgage insurance in 2016 on his primary residence. Interestingly, IRS ignored the evidence presented before it despite the multiple submissions.
Petitioner filed a Petition on or about December 3, 2019 at this Court. Notably, Petitioner disputes the notice of deficiency (NOD) on the Petition due to absence of any affirmative allegations regarding disallowance of all expenses. The authenticity and relevance of documentation presented by the petitioner in regards to petitioner C1 and C2’s business was indicated by the respondent during the trial on March 29, 2022 and Respondent’s Pretrial memorandum without any evidence or witness testimony. Other than misprint error or “Tx” on the phone records, the respondent approved that the other receipts for C1 and C2 totaling $190,775 were authentic during trial and then called into question the authenticity due to Petitioner not being able to remember two tools on receipts used 6-7 years ago. The matter of contention was on the phone expenses totaling $7,676 which was not corroborated by the witnesses purported subpoenaed by the respondent including AT&T, Cricket Wireless and Respondent IRS agents, since the witnesses defaulted.
The compliance department of the Respondent commenced the audit for 2014 tax year in 2016 and added tax year 2015 & 2016 in 2017. Petitioner received “No Change Report” for 2014 and 2015 & 2016, upon which the case was then sent to the Respondents in 2019. In the Petitioner’s documentation, the Petitioner provided documents to the Compliance Department but there was no documents emanating from the Compliance department, Respondent, expert witnesses or any other third parties in reference to the authenticity of the Petitioner’s documentation. Respondent and Judge refused Petitioner’s request for postponement that would have also benefited Respondent on the basis that Respondent had “worked very hard on obtaining witnesses especially for remote trial” per the statement and letter from Judge denying postponement.
Upon response of the Petitioner on Form 91f motion filed by the Respondent to force stipulation, the judge requested more items that were presented by Petitioner to be added to the Respondent’s motion. The Respondent refused to add the additional items in the list (listed as additional items on pre-trial memorandum) as ordered by the court or allow for more time for Petitioner to review items to confirm if the Petitioner provided them to Respondent as was the case with items 10-P and 11-P that were not provided to Respondent by Petitioner. For instance, on the March 28, 2022 pretrial Memorandum submitted to court, the Respondent had listed the individuals the Petitioner had home improvement contracts with, as a potential motion to enforce subpoenas on the individuals. The Respondent however did not include the Home improvement contracts as part of the documentation during trial. Petitioner did not have enough time or experience to properly and quickly submit the additional documents to court when Petitioner’s Representative requested to be removed from case approximately a week before trial.
During trial, the Respondent contented that the Petitioner failed to provide names of the people that may have aided the Petitioner with Home improvement business. Item 32 (Exhibit 16-P Petitioner’s insurance ID card) provided by the Respondent contains the name of one of the two individuals mentioned by the Petitioner during trial under the Petitioner’s name on the insurance card.
Petitioner asserts that the Respondent’s and Judge’s allegation that during the trial, the Petitioner, a reputable person in Maryland, may have stood outside the Home Depot and collected cash receipts totaling $176,288 (2015-77,013 and 2016-99,275) from customers is outrageous. The Respondent called into question almost all the documents without evidence or any witness testimonies or documentation from companies that provided the receipts. Respondent received all documentation provided to IRS Compliance except for bank statement (which was never requested by Compliance) per stipulated facts presented at trial and additional items mentioned in Respondent’s pretrial memorandum. Respondent’s Compliance agents reviewed the case for approximately 3 years and Respondent reviewed the case for a little over 2 years yet no witness or signed documents from witnesses calling into question the authenticity of Petitioner’s back up documents. The Petitioner calls upon the Judge to accept all documents to which the Respondent has no documented proof of authenticity or witness testimony because the Respondent indicated the intention to call representatives of the IRS and other witnesses to testify on the examination and issues in the case per page 3 of the Respondent’s pretrial memorandum. Additionally, in an attempt to authenticate business records, the IRS representatives /Compliance team who examined documentation for almost 3 years were not present to testify or provide any third party evidence that call into question the business records. The representatives not only failed to show up for the trial but also did not send any signed documentation in support of the Respondent’s allegations.
In the 2015 and 2016 tax years, the Petitioner earned $256,825 in 1099 income and spent $198,451 in expenses, with a net of $58,364. The Respondent continues to question the source of the money used for expenses yet Petitioner’s wife was also available if needed, for support as Petitioner stated during trial.
The Respondent and Judge questioned the Laguardia airport location on the home improvement mileage log without checking the full address on the calendar Respondent submitted to the court as part of stipulated facts. The first mileage logs for both businesses without full addresses were completed contemporaneously while the second with full addresses additionally requested by Compliance was not.
Reasons for disagreement with IRS’s decision on the Case
IRS had dismissed the deduction of $6,667 for car and truck expenses and $77,013 for other ordinary and necessary expenses. The expenses had been incurred in connection with operation of the tax payer’s home construction business for 2015 tax year. The expenses had been substantiated per Sec 274 of the IRC.
IRS also disallowed deduction of $9,655 for car and truck expenses and $99,275 for ordinary and necessary expenses. The expenses had been incurred in connection with operation of the taxpayer’s home construction business for 2016 tax year. They had been substantiated in accordance with Sec 274 of the IRC.
IRS had also disallowed the deduction of $21,490 for car and truck expenses and $11,451 for other expenses for ordinary and necessary expenses incurred in the running of the taxpayer’s consulting business for 2015 tax year. This was despite substantiation per Sec 274 of the IRC.
Further, IRC disallowed deduction of $30,533 for car and truck expenses and $8,579 for other expenses for ordinary and necessary expenses incurred in running of the taxpayer’s business for 2016 tax year. This was despite substantiation per Sec 274 of the IRC.
The IRS also dismissed $2,847 of qualified mortgage insurance premium that was paid by the taxpayer in 2016 on his primary residence.
Lastly, the taxpayer has no liability for the increase in tax of $39,241 for 2015 and $45,735 for 2016. The reason being, he filed his taxes on time, claimed valid substantiated deductions of schedule C business expenses and home mortgage insurance.
ARGUMENT
Petitioner complied with the requirements of USC 26 U.S.C. § 7491(a)
The taxpayer bears the burden of proving the Commissioner’s determinations are erroneous. Tax Court Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). The burden of proof may shift to the IRS if the taxpayer establishes that he or she complied with the requirements of 26 U.S.C. § 7491(a) to substantiate items, to maintain required records, and to cooperate fully with the IRS’s reasonable requests.
Petitioner further avers that, as a taxpayer, he has the burden of proving (and substantiating with adequate records) his entitlement to any deductions claimed. Rule 142(a); INDOPCO, Inc. v. Comm’r, 503 U.S. 79, 84 (1992); 26 U.S.C. § 6001.
Rule 142(a) (1) specifically provides that:
The burden of proof shall be upon the petitioner, except as otherwise provided by statute or determined by the Court; and except that, in respect of any new matter, increases in deficiency, and affirmative defenses, pleaded in the answer, it shall be upon the respondent. As to affirmative defenses,
Further, 26 U.S. Code § 7491 (a) (1) provides that “[i]f, in any court proceeding, a taxpayer introduces credible evidence with respect to any factual issue relevant to ascertaining the liability of the taxpayer for any tax imposed by [the Code], the Secretary shall have the burden of proof with respect to such issue.” In order to qualify for a shift in the burden of proof on a factual issue, a taxpayer must satisfy the requirements of section 7491 (a) (2): (1) the taxpayer must have complied with all applicable substantiation requirements; (2) the taxpayer must have maintained all required records and cooperated with reasonable requests by the IRS for witnesses, information, documents, meetings, and interviews.
In the instant action, the Petitioner avers that he has duly satisfied his burden of proof regarding the allegations in the Petition.
First, Petitioner concedes $24 in interest for tax year 2015 and $13 in interest for tax year 2016.
Next, in support of the entitlement to C1 Expenses, Petitioner provided the following information:
- ATT U-verse Statements- Respondent claimed without evidence or witness testimony from subpoenaed AT&T wireless personnel that the issues with this receipt rendered it unauthentic instead of misprint errors as Petitioner with over 17 years in information technology stated during trial. Without witness testimony Respondent assumed TX to be Texas in the amount area which does not make sense since Texas has no state taxes and the bill’s mailing address was clearly in Maryland. Respondent should have been aware that purported subpoenaed AT&T personnel and his own IRS agents would not be available to testify then Respondent should have accepted Petitioner’s multiple requests’ for postponement of trial. Respondent’s agents listed as witnesses on pre-trial memorandum submitted to court did not show up to “testify about examination and issues in this case. Also, they did not show up to authenticate business records” per Respondent’s pre-trial memorandum. Further, during March 15, 2022 Petitioner’s representative requested more time for Petitioner’s witnesses to be present at trial but Respondent objected.
- Payment summary from Liberty Christian School- This was added as professional education but should have been added as child care expense on return as childcare was needed as Petitioner ran businesses until wife returned from work. Also, Representatives from the IRS were not present to testify about the examination and issues in this case especially to shed light that childcare is a valid 1040 expense;
- Calendars- they provided completed addresses where Petitioner drove for Home Improvement business and doctor’s offices for IT business. Called witnesses from the IRS were not present to testify about the examination and issues in this case and to authenticate business records per respondent pre-trial memorandum;
- Contemporaneous mileage logs displayed at trial. The logs provided with incomplete addresses at trial were contemporaneous. The only logs that were non-contemporaneous where the logs with the complete addresses additionally provided. Per the trial statement, petitioner wrote down mileage at beginning of trip and mileage at the end of the trip daily. Respondent agents listed as witnesses on pre-trial memorandum did not show to testify about examination and issues in this case. Also, they did not show up to authenticate business records per pre-trial memorandum. Further, during March 15, 2022 conference call, Petitioner’s representative requested more time for Petitioners witnesses to be present at trial but Respondent objected;
- Copy of Petitioner’s insurance ID card. The card shows three vehicles- 2 of which were used in Petitioner’s two business- Mercedes and Ford expedition.
- Work Authorization Forms. Petitioner notes that the forms are listed on page 7 of Respondent’s March 28, 2022 pretrial memorandum submitted to the tax court. The Respondent states that it received the Work Authorization Form and without evidence, questions the authenticity. The form requested by Compliance describes a summary of Petitioner’s job duties which states that Petitioner was required to travel to medical professionals offices for the new Electronic Health Records system. The Respondent listed this document as additional documents on pre-trial memorandum but did not include this document as part of the stipulated facts (like the home improvement contracts) for trial and still claims Petitioner provided no evidence tying his travel to his Information Technology business. Responded purported to have subpoenaed National Computer Services Consultants who did not show up. It is also worth noting that Respondent did not accept Petitioner’s multiple requests to postpone trial and questioned without evidence or witness testimony the authenticity of the Work Authorization Form during the trial.
- Work ID Northrop Grumman. Petitioner notes that the forms are listed on page 7 of Respondent’s March 28, 2022 pretrial memorandum submitted to the tax court. The Respondent states that it received ID for Northrop Grumman. National Computer Services Corporation is a sub-contractor to Northrop Grumman the company that provided Petitioner with work assignments and Work Authorization form as Petitioner stated during trial. Respondent purported to have subpoenaed National Computer Services Consultants who did not show up. It is also instrumental to note that Respondent did not accept Petitioner’s request to postpone trial and questioned without evidence or witness testimony in the pre-trial memorandum the authenticity of the additional documents provided to him.
In support of the Petitioner’s entitlement to C2 Expenses, Petitioner provided thus:
- Cricket wireless receipts- Respondent claimed without evidence or witness testimony from subpoenaed Cricket wireless personnel that the issues with this receipt rendered it unauthentic instead of misprint errors as Petitioner with over 17 years in information technology stated during trial. Respondent should have been aware that the purported subpoenaed Cricket personnel and his own IRS agents called as witnesses would not be available to testify then Respondent should have accepted Petitioner’s multiple requests’ for postponement before trial. Also, during March 15, 2022 Petitioner representative requested more time for Petitioner’s witnesses to be present at trial but Respondent objected.
- Home Depot Receipts, Lowes Receipts and 84 Lumber Receipts- These were all paid in cash and per Petitioner’s testimony during trial, the payments were made in cash because Petitioner at the time had a money market savings account that Petitioner received payments from National Computer Services. Money market accounts at the time cannot be used at Point of sale but can be used at ATMs. Petitioner was asked about credit cards and he informed the court that he has a student loan default for decades that IRS is well aware of because Petitioner’s refunds are always scheduled to be intercepted. When one defaults on a federal loan, one is unable to be given any type of credit.
- Contemporaneous mileage logs- the only logs that were non-contemporaneous were the logs with the complete addresses additionally provided to compliance and Respondent per Compliance request although they were provided Petitioner’s calendar. The logs provided with incomplete address were contemporaneous as stated during trial. Per the trial statement, petitioner wrote down mileage at the beginning of a trip and mileage at the end of the trip daily. Respondent had no documentation or witness testimony that questioned the authenticity of these logs. Respondent also subpoenaed individuals Petitioner had contracts with per Respondent’s pre-trial memorandum which ties the business to the logs. Respondent did not accept Petitioners multiple requests’ for postponement. Respondent’s IRS agents listed as witness on pre-trial memorandum did not show up to “testify about examination and issues in this case. They did not also show up to authenticate business records” per Respondent pre-trial memorandum. Neither did witnesses Petitioner had contracts with that were subpoenaed by Respondent. During March 15, 2022 conference call, Petitioner representative requested more time for Petitioners witnesses to be present at trial but Respondent objected.
- Bank Statement. According to Petitioner’s testimony during trial and per the Respondent’s request (bank Statement was never requested by Compliance), Petitioner provided bank statement to Respondent but this was one of many documents not listed on the stipulated facts just like Respondent listed on pretrial memorandum to subpoena individuals that were under contract with Petitioner on Petitioner’s home improvement business but Respondent failed to include the contracts and invoices provided to Respondent for trial. It is therefore unclear where all these names on the memorandum come from if Petitioner did not provide contracts. Also, Petitioner’s 1099 income from his IT business clearly is enough income to support Petitioner’s Home Improvement business; even if it did not, then Petitioner’s wife listed on the mortgage interest statement and on Petitioners Insurance card (exhibit 16-P) would be able to provide support.
- Invoices from Tire House Auto Center. Petitioner took standard mileage and not actual mileage. Petitioner contends that actual mileage requires a taxpayer to provide maintenance receipts but for reasons known to Respondent and its agents, they continued to request that Petitioner provide this invoice but case was still not closed after this evidence which listed maintenance for both vehicles was provided;
- Contracts. Petitioner notes that on page 7, on Respondent’s March 28, 2022 pretrial memorandum that was submitted to the court, Respondent states that he received contracts from Petitioner which connects mileage logs to the home improve business but Respondent did not forward all documents provided to him and still states there is no evidence tying Petitioner’s mileage logs to his home improvement business. Respondent also subpoenaed individuals Petitioner had contracts with on the pre-trial memorandum but still stated during trial that there were no documents to associate logs/receipts to business expenses.
Petitioner further contends that the Respondent has since failed to meet its burden of proof. For instance, the Respondent called into question almost all the documents without evidence or any witness testimonies. Petitioner requested twice to postpone the case so Petitioner could hire competent counsel but Respondent emphatically refused. If Respondent knew he did not have time to subpoena or force subpoenaed witnesses then Respondent should have agreed with the postponement request by Petitioner. Accordingly, the Petitioner calls upon the Judge to accept all documents to which the Respondent has no documented proof of authenticity or witness testimony because the Respondent indicated the intention to call representatives of the IRS to testify on the examination and issues in the case, on page 3 of the Respondent’s pretrial memorandum. Additionally, in an attempt to authenticate business records, the IRS representatives/Compliance team would be in a position to support Respondent allegations and issues if any, in this case. The representatives not only failed to show for the trial but also did not send any signed documentation in support of the Respondent’s allegations after almost 3 years of examination. Further, the authenticity of the phone expenses totaling $7,676 was not corroborated by the witnesses subpoenaed by the Respondent- AT&T, Cricket Wireless and IRS representatives or any documented evidence since the witnesses defaulted.
CONCLUSION
In short, the Plaintiff has sufficiently met his burden to prove the averments in the Petition. The Respondent has in turn failed to meet its burden of proof as alleged hereinabove. Accordingly, this matter should be held in Petitioner’s favor, in the interest of justice.
DATED:
Respectfully submitted,
Signature
____________________
NNABUGWU C. EZE
(443) 316-1334
Petitioner, Pro Se
CERTIFICATE OF SERVICE
I hereby certify that on [ENTER DATE], a copy of the foregoing Brief has been filed in this Court and a copy thereof sent to the Respondent in the following address:
[ENTER ADDRESSES FOR RESPONDENT].
Signature
____________________
NNABUGWU C. EZE
(443) 316-1334
Petitioner, Pro Se
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