Sutherland v. Comm'r

¶3MEMORANDUM FINDINGS OF FACT AND OPINION

¶4CHABOT, Judge: Respondent determined deficiencies in Federal individual income taxes and additions to tax under section 6653(b) ¹ (fraud), as follows:

¶5

¶6The issues for decision are as follows:

¶7(1) Whether respondent erred in*561 determining the deficiencies asserted herein; and

¶8(2) Whether petitioner is liable for additions to tax under section 6653(b).

¶9FINDINGS OF FACT

¶10Some of the facts have been stipulated; the stipulation and the stipulated exhibits are incorporated herein by this reference.

¶11At the time the petition in this case was filed, petitioner resided in New York, New York.

¶12During 1971, 1972, and 1973, petitioner worked as a private duty nurse. Petitioner was referred to patients through Sullivan's Nurses Registry (hereinafter referred to as "Sullivan's") and was paid directly by the patients. The amounts petitioner reported to Sullivan's as income from patients for 1971, 1972, and 1973 were the amounts are actually received in each of these years. The amounts so reported to Sullivan's, the corresponding amounts reported by petitioner on her Federal income tax returns from her work as a private duty nurse, and the understatements of gross income from patients for each of the years are shown in table 1.

¶13Table 1

¶14Gross Income From Patients

¶15*562 During 1971, 1972, and 1973, petitioner maintained a savings bank account at the New York Bank for Savings from which she received interest income in the amounts of $309.68, $455.20, and $578.28, respectively. These amounts were not reported on petitioner's Federal income tax returns for 1971, 1972, and 1973.

¶16Petitioner kept her own records as to her correct income. This amount was the same as the amount determined by respondent.

¶17In addition to the foregoing, respondent determined a number of positive and negative adjustments to petitioner's business expenses which netted out to increased private duty nursing income of $307.90 for 1971, $411.30 for 1972, and $530 for 1973.

¶18Petitioner did not itemize "below-the-line" deductions on her Federal income tax returns.

¶19Petitioner was graduated from high school and thereafter took dramatic arts and literary courses and a business course. Petitioner trained in a number of hospitals.

¶20Petitioner was aware that she was required to pay income taxes; she timely filed income tax returns for each of the years here in issue. Petitioner did not file returns for 1974 through 1978.

¶21Petitioner omitted income on her returns so that*563 she would not have to pay any income tax. Petitioner knowingly and intentionally "manipulated the figures" on her returns so that she would not have to pay any income tax. Petitioner admitted to tax evasion and committing fraud on her 1971, 1972, and 1973 income tax returns.

¶22…

¶23Petitioner understated her adjusted gross income for each of the years in issue. A part of the underpayment of tax resulting from these understatements of income was due to fraud for each of the years in issue.

¶24OPINION

¶251. Deficiency in Income Tax

¶26Petitioner stipulated that she understated gross receipts from her private duty nursing business and that she omitted savings bank interest income from her tax returns for each of the years in issue, in the amounts determined by respondent. Petitioner has not challenged any of respondent's adjustments to income and she has not claimed entitlement to any deductions (other than and business expense deductions allowed by respondent).

¶27We hold for respondent on the asserted deficiencies.

¶282. Fraud Addition to Tax

¶29Respondent determined that all or a part of the underpayments in income taxes for 1971, 1972, and 1973 were due to petitioner's fraud. *564 Petitioner does not dispute that there were underpayments and that she manipulated her returns, evaded taxes, and committed fraud, but raises several purported justifications for her actions. We agree with respondent.

¶30In order to sustain his determination as to the fraud addition to tax ² for a year, respondent must prove, by clear and convincing evidence, that some part of an underpayment for that year is due to fraud.Sec. 7454(a); ³Rule 142(b), Tax Court Rules of Practice and Procedure; e.g., Stone v. Commissioner,56 T.C. 213, 220 (1971); Otsuki v. Commissioner,53 T.C. 96, 105 (1969). He need not prove the precise amount of underpayment resulting from fraud, but only that there is some underpayment and that some part of it is attributable to fraud. Plunkett v. Commissioner,465 F.2d 299, 303 (CA7 1972), affg. a Memorandum Opinion of this Court; ⁴Otsuki v. Commissioner,supra at 105; Estate of Brame v. Commissioner,25 T.C. 824, 832 (1956), affd. per curiam 256 F.2d 343 (CA5 1958).

¶31*565 Viewing the record as a whole, we conclude that respondent has sustained his burden of proof by clear and convincing evidence for each of the years in issue. Petitioner understated gross receipts from her private duty nursing and from her interest on her savings account for each of the years in issue. Petitioner omitted this income so that she would not have to pay any tax, even though she was aware that she was required to pay income taxes. Petitioner knowingly and intentionally manipulated her income tax returns, and admitted to tax evasion and fraud for each of the years before the Court. Petitioner filed no returns for 1974 through 1978. This record leaves no doubt that at least part of the underpayment of taxes for each year in issue was due to petitioner's knowing and conscious fraud.

¶32Petitioner, however, asserts that her actions were justified for several reasons, directing our attention to (1) her strong belief that the Government has no right to compel her to support that which her conscience tells her is "unjus, un-American, unconstitutional, inhumane, corrupt and morally wrong"; (2) her belief that she has the right, under "the Amendments of the Constitution of the*566United States of America, the Bill of Rights, and the Declaration of Independence," to rebel against the government and refuse to support it through taxes; and (3) her assertions that she cannot "afford to pay City, State, Federal and Social Security taxes, without being placed in a state of poverty and welfare" and that "an individual of low income, such as myself, does not deliberately intend to defraud the government of its taxes but is compelled to do so because of economic reasons and for self-preservation".

¶33We do not doubt the sincerity of petitioner's complaints about the present state of society and government, and the sincerity of her judgments as to priorities in her personal budget as between paying her Federal income taxes and paying other items. However, such beliefs are not relevant to the issue of whether petitioner committed fraud on her 1971, 1972, and 1973 returns.

¶34Such beliefs do not detract from the showing that has been made on the record herein. ( Pigman v. Commissioner,31 T.C. 356, 370 (1958); L. Schepp Co. v. Commissioner,25 B.T.A. 419, 440 (1932)) that petitioner voluntarily and intentionally violated her known legal*567 duty; she did so in order to defraud the Federal Government of her income taxes. United States v. Pomponio,429 U.S. 10, 12 (1976).

¶35We hold for respondent on the fraud additions to tax.

¶36Decision with be entered for the respondent