Income Tax

Signed 12/30/02









v. ) Appeal No. 01-1323

) Account No. #####


THE UTAH STATE TAX ) Tax Type: Income Tax

COMMISSION, ) Tax Year: 1997, 1998 & 1999


Respondent. ) Judge: Davis




G. Blaine Davis, Administrative Law Judge



For Petitioner: PETITIONER 1


For Respondent: Mr. Tim Bodily, Assistant Attorney General

Mr. Dan Engh, from the Auditing Division

Ms. Brenda Salter, from the Auditing Division




This matter came before the Utah State Tax Commission for a Formal Hearing on December 17, 2002. Based upon the evidence and testimony presented at the hearing, the Tax Commission hereby makes its:


1. The tax in question is income tax.

2. The years in question are calendar years 1997, 1998, and 1999.

3. For 1997 and 1998, Petitioner filed both federal and State of Utah Individual Income Tax Returns. Pursuant to notification received from the Internal Revenue Service of a change in taxable income of the Petitioner, Respondent mailed Statutory Notices of Audit Change to Petitioner making substantial changes in those returns.

4. For calendar year 1999, Petitioner did not file either a federal income tax return or a State of Utah income tax return. Respondent received information from the Internal Revenue Service relating to income received by Petitioner, and based upon that information from the Internal Revenue Service, Respondent prepared a Statutory Notice of Estimated Income Tax.

5. At the Formal Hearing, Petitioner acknowledged that she was a resident of the State of Utah, having lived in CITY, Utah.

6. Petitioner also acknowledged that for the years in question she received certain retirement income from the COMPANY, together with compensation for investments she had made and interest income from credit unions.

7. Petitioner represented she believed the incomes and interest received were not a revenue taxable activity because she has a right to earn a living without having her income subject to income tax.

8. Neither Petitioner nor her representative presented any factual testimony which would indicate her income was not subject to income tax.

9. The primary position of Petitioner related to procedural issues. One of the arguments she raised related to Section 6103(d) of the Internal Revenue Code which relates to disclosure to state tax officials and state and local law enforcement agencies. The Commission determines nothing therein prevents the requirement to file an income tax return.

10. Petitioner also argued that under Internal Revenue Code Section 441(g) she does not keep books and records, and therefore is not required to file a return. The Commission determines that nothing within Section 441(g) of the Internal Revenue Code prevents the requirement of filing an income tax return.

11. Respondent presented documents from the Internal Revenue Service showing that for 1997 and 1998 the Internal Revenue Service has made assessments on amounts of income similar to those used by Respondent to make the assessments herein.

12. For 1999, Respondent presented evidence to establish that information was received from the Internal Revenue Service substantiating the amounts of income on which Respondent has made its assessment herein.

13. For 1999, Respondent also imposed a 10% penalty for failure to file the tax, plus a 10% penalty for failure to pay tax due pursuant to Utah Code Ann. 59-1-401.


The state of Utah imposes income tax on individuals who are residents of the state in Utah Code Ann. 59-10-104 as follows:

". . . a tax is imposed on the state taxable income, as defined in Section 59-10-112, of every resident individual . . ."


State taxable income is defined in Utah Code Ann. 59-10-112 as follows:


"State taxable income in the case of a resident individual means his federal taxable income (as defined by Section 59-10-111) with the modifications, subtractions, and adjustments provided in Section 59-10-114. . . ."


Federal taxable income is defined in Utah Code Ann. 59-10-111 as follows:


"Federal taxable income" means taxable income as currently defined in Section 63, Internal Revenue Code of 1986.


Taxable income is defined in the Internal Revenue Code at 23 USC 63 as:


"Except as provided in subsection (b), for purposes of this subtitle, the term "taxable income" means gross income minus the deductions allowed by this chapter (other than the standard deduction)."


Gross income is defined in the Internal Revenue Code at 23 USC 61(a) as:


"Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items:

(1) Compensation for services, including fees, commissions, fringe benefits, and similar items; . . ."

The requirement to file a federal income tax return is established by IRC.6012.


Utah Code Ann. 59-10-502, provides in relevant part:


"An income tax return with respect to the tax imposed by this chapter shall be filed by:

(1) Every resident individual, estate, or trust required to file a federal income tax return for the taxable year; . . . ."

The Utah Legislature has determined that a $500 penalty is necessary in the following circumstances as set out in Utah Code Ann. 59-1-401(7):


"If any taxpayer, in furtherance of a frivolous position, has a prima facie intent to delay or impede administration of the tax law and files a purported return that fails to contain information from which the correctness of reported tax liability can be determined or that clearly indicates that the tax liability shown must be substantially incorrect, the penalty is $500."


The Utah Legislature has specifically provided that the taxpayer bear the burden of proof in proceedings before the Tax Commission. Utah Code Ann. 59-10-543 provides the following:

"In any proceeding before the commission under this chapter, the burden of proof shall be upon the petitioner except for the following issues, as to which the burden of proof shall be upon the commission:

(1) whether the petitioner has been guilty of fraud with intent to evade tax. . ."


Utah Code Ann. 59-1-401 imposes a penalty in the greater amount of $20 or 10% of the unpaid tax due on the return for failure to file a tax return, and an additional penalty of $20 or 10% of the unpaid tax for failure to pay the tax due.


After reviewing the arguments of Petitioner, it is determined that all of the arguments of Petitioner are without merit and that no factual or legal reason was presented why the audit assessment should not be sustained.


Based upon the foregoing, the Tax Commission hereby sustains the audit assessment made by Respondent for the tax years 1997, 1998, and 1999, including the failure to file and failure to pay penalties established therein. The Petition for Redetermination is hereby denied. It is so ordered.

DATED this 30th day of December , 2002.



G. Blaine Davis

Administrative Law Judge



The Commission has reviewed this case and the undersigned concur in this decision.

DATED this 30th day of December , 2002.





Pam Hendrickson R. Bruce Johnson

Commission Chair Commissioner





Palmer DePaulis Marc B. Johnson

Commissioner Commissioner