The opinion
T.C. Summary Opinion 2004-34
UNITED STATES TAX COURT
LOUIS BONNER, JR. AND CELESTE BONNER, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2421-02S. Filed March 18, 2004.
Louis Bonner, Jr. and Celeste Bonner, pro se.
Emile L. Hebert, III, for respondent.
COUVILLION, Special Trial Judge: This case was heard
pursuant to section 74631 in effect at the time the petition was
filed. The decision to be entered in this case is not reviewable
by any other court, and this opinion should not be cited as
authority.
1
Unless otherwise indicated, section references are to
the Internal Revenue Code in effect for the year at issue.
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Respondent determined a deficiency of $2,508 in petitioners'
Federal income tax for 1999.
The sole issue for decision is whether Louis Bonner, Jr.
(petitioner) received payments during 1999 that constitute gross
income under section 61(a)(1) as compensation for services
rendered.
Some of the facts were stipulated. Those facts, with the
exhibits annexed thereto, are so found and are incorporated
herein by reference. Petitioners, husband and wife, were
residents of Shreveport, Louisiana, at the time the petition was
filed.
Petitioner is a cabinet maker, building such things as
kitchen cabinets, bookcases, and shelves. He has been engaged in
this kind of work for approximately 30 years. Petitioner Celeste
Bonner was employed by Century Telephone Co. during the year in
question in the collections department. At trial, she was
employed by Alltell Telephone Co.
Petitioners filed a joint Federal income tax return for 1999
on which they reported wage and salary income of $37,314, taxable
interest income of $13, and taxable pension income of $755, all
of which totaled $38,082. In their tax computation, petitioners
included the 10-percent tax under section 72(t) for early
distributions from a qualified plan in the amount of $76.
Respondent determined that petitioners failed to include on their
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return self-employment income earned by petitioner in his
woodworking activity in addition to the wage and salary income he
earned and correctly reported on the income tax return for 1999.
Petitioner contends that his sole employment during 1999 was
with Bollinger Cabinet Co., and he only worked for that employer
from late April through the remainder of 1999. He contends that
he was not gainfully employed from January 1, 1999, until his
employment with Bollinger Cabinet Co. beginning in late April
1999. A third-party payer, Jerry Brown, filed an information
return with the Internal Revenue Service that reflected
nonemployee compensation payments to petitioner of $8,946 during
the year 1999. This income was not reported on petitioners'
Federal income tax return for 1999; consequently, the notice of
deficiency includes these payments as gross income and allows
petitioners a deduction for one-half of the self-employment tax
thereon. Sec. 164(f).
Petitioners deny that they received any income from Mr.
Brown during 1999. Petitioner contends he was unemployed from
January to late April 1999, when he commenced employment with
Bollinger Cabinet Co. Petitioner, however, admitted that in
years past, beginning in 1997 and in 1998, he performed cabinet
work for Mr. Brown and his wife but denied that he performed any
services for Mr. Brown during 1999 or received any compensation
from Mr. Brown for past services. For the year 1998, Mr. Brown,
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as a payer, had filed an information return with the Internal
Revenue Service for payments of $25,980 to Mr. Bonner.
Petitioners failed to include these payments as income on their
1998 Federal income tax return. A notice of deficiency was
issued to them for that income, and they instituted an action in
this Court challenging the proposed deficiency in docket No. 839-
01S. At the trial of that case, petitioner denied receiving any
money from Mr. Brown during 1998, and, only when petitioner was
confronted with the canceled checks at trial, did he reluctantly
concede that the payments had in fact been made. A decision was
entered in favor of respondent, T.C. Summary Opinion 2001-170.
The case for petitioners' 1998 tax year is relevant to the
current case because that case brings into focus petitioner's
credibility on the issue before this Court as to whether similar
payments were received from Mr. Brown during 1999. Section 7491
provides that the burden of proving facts relevant to a
deficiency may shift to the Commissioner under section 7491 if
the taxpayer introduces credible evidence with respect to any
factual issue relevant to ascertaining a tax liability, provided
the taxpayer has substantiated all items at issue and has
generally maintained books and records with respect to the item
at issue. Petitioner maintained no books and records of the
income he earned during 1999, and the Court holds that section
7491 is not applicable in this case. Section 6201(d), however,
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provides that, if the taxpayer in a court proceeding reasonably
disputes income reported on an information return and fully
cooperates with the Commissioner, the burden of producing
reasonable and probative information in addition to the
information return shifts to the Commissioner. Although, as
noted, petitioner vehemently denied receiving any payments from
Mr. Brown during 1998 in the earlier case, at the trial of this
case, petitioner took an entirely different position for the 1998
tax year, readily agreeing that he had received income payments
from Mr. Brown during 1998, contrary to what he testified in the
earlier case, but emphatically denying he had performed any
services for Mr. Brown during 1999. The evidence submitted by
respondent overwhelms petitioner's testimony. That evidence
consists of records from Mr. Brown for 1999 that describe
numerous jobs or projects for which Mr. Brown compensated
petitioner for services rendered. The documentary information
also includes what purports to be the initials of petitioner with
the dollar amounts paid for each project, the totals of which
equal the amount reported on the information return filed with
respondent. In his testimony, petitioner acknowledged his
familiarity with most of the projects identified on these
documents, and, when questioned whether he had inscribed the
initials "LB" on the documents, he testified: "I can't recall
it." Based on the preponderance of the evidence presented to the
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Court, including the Court's view on the credibility of the
testimony, the Court holds that petitioner did receive
compensation payments from Mr. Brown during 1999, as reported by
the third-party payer, and the requirements of section 6201(d)
have been satisfied. Respondent, therefore, is sustained.
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
for respondent.