BEFORE THE UTAH STATE TAX COMMISSION
PETITIONER, ) FINDINGS OF FACT,
) CONCLUSIONS OF LAW,
Petitioner, ) AND FINAL DECISION
v. ) Appeal No. 01-1485
) Account No. #####
AUDITING DIVISION )
OF THE UTAH STATE TAX ) Tax Type: Income Tax
COMMISSION, ) Tax Year: 1995
Respondent. ) Judge: Davis
B. Blaine Davis, Administrative Law Judge
For Petitioner: PETITIONER
For Respondent: Mr. Tim Bodily, Assistant Attorney General
Mr. Ben Rasmussen, from the Auditing Division
Ms. Becky McKenzie, from the Auditing Division
Mr. Brent Taylor, from the Auditing Division
Ms. Dorothy Akins
Ms. Jean Ballard
STATEMENT OF THE CASE
This matter came before the Utah State Tax Commission for a Formal Hearing on December 3, 2002. Based upon the evidence and testimony presented at the hearing, the Tax Commission hereby makes its:
FINDINGS OF FACT
1. The tax in question is income tax.
2. The year in question is 1995.
3. Petitioner did not file an individual income tax return for the calendar year 1995.
4. Respondent received information from the Internal Revenue Service indicating that Petitioner should have filed a tax return for 1995. Based upon that information, Respondent performed an audit on Petitioner. As a portion of that audit, Respondent audited three separate bank accounts which were in the name of Petitioner or businesses or entities owned or controlled by Petitioner.
5. Based upon that audit, it was determined that Petitioner had deposited a total amount of $$$$$ in those three bank accounts. Respondent deducted $$$$$ of those deposits which did not represent income. The balance of $$$$$ was received from sources which constituted adjustable gross income to Petitioner. Respondent allowed Petitioner an amount of $$$$$ as a standard deduction, and $$$$$ for personal exemptions, leaving taxable income of $$$$$.
6. Based upon that income, Respondent imposed tax upon Petitioner for 1995 of $$$$$, together with a 100% penalty for fraud with intent to evade the tax pursuant to the provisions of Utah Code Ann. §59-1-401(5)(a)(iv), together with a 10% late filing penalty and 10% late payment penalty pursuant to Utah Code Ann. §59-1-401(1) and (2).
7. On or about September 7, 2001, Petitioner was found guilty of a third-degree felony of tax evasion in the Third Judicial District Court in and for Salt Lake County, State of Utah, for evading taxes for the calendar year of 1995 which is the year at issue in this proceeding. As a part of the sentence thereon, Petitioner was to pay to the Tax Commission an amount of $$$$$ as restitution for the costs and expenses to the Commission for pursuing the criminal matter.
8. At the formal hearing, Petitioner was given numerous opportunities to present factual evidence, testimony, or legal arguments why the audit assessment made by Respondent should not be sustained. Petitioner did not present any factual testimony which disputed the facts testified to by Respondent's witnesses, nor did he present any persuasive legal arguments that the audit assessment was not correct. Instead, Petitioner continually made statements such as, "I conditionally accept the court's offer to have me present evidence upon proof of claim that there is a controversy before the court." Petitioner made other similar conditional acceptances of matters.
9. At 12:19 a.m., approximately eight hours and 41 minutes before the hearing was scheduled to commence, Petitioner faxed to the Appeals Unit of the Tax Commission a document entitled Judicial Notice of Stipulations. Based upon representations of Respondent and its legal counsel, there were no stipulations and Respondent had not agreed to stipulate to any statements, representations, or requests contained in the said Judicial Notice of Stipulations, or any other documents attached thereto. It is therefore determined that the documents filed by Petitioner had no legal force or effect and are irrelevant to a determination of this matter.
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 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:
Utah Code Ann. §59-1-401 provides in relevant part as follows:
(1)(a) The penalty for failure to file a tax return within the time prescribed by law including extensions is the greater of $20 or 10% of the unpaid tax due on the return.
(2) The penalty for failure to pay tax due shall be the greater of $20 or 10% of the unpaid tax for:
(a) failure to pay any tax, as reported on a timely filed return;
(b) failure to pay any tax within 90 days of the due date of the return, if there was a late filed return subject to the penalty provided under Subsection (1)(a);
(c ) failure to pay ant tax within 30 days of the date of mailing any notice of deficiency of tax unless a petition for redetermination or a request for agency action is filed within 30 days of the date of mailing the notice of deficiency;
(d) failure to pay any tax within 30 days after the date the commission’s order constituting final agency action resulting from a timely filed petition for redetermination or request for agency action is issued or is considered to have been denied under Subsection 63-46b-13(3)(b); and
(e) failure to pay any tax within 30 days after the date of a final decision resulting from a timely filed petition for judicial review.
. . . .
. . . .
(iv) If the underpayment is due to fraud with intent to evade the tax, the penalty is the greater of $500 per period or 100% of the underpayment.
In this matter, Petitioner has not presented any factual evidence to refute that he is a resident of the State of Utah, that he had income within the State of Utah during 1995, that he did not file an income tax return, that the tax amount imposed by Respondent is erroneous, or that the penalties imposed by Respondent should not have been imposed.
It is also determined that Respondent has met its burden of proof to establish that the 100% fraud with intent to evade penalty imposed by Utah Code Ann. §59-1-401(5)(a)(iv) should be imposed.
DECISION AND ORDER
Based upon the foregoing, it is determined that the audit assessment made by Respondent is appropriate and it is hereby sustained, together with the 10% penalty for failure to file a tax return within the time prescribed by law, the 10% penalty for failure to pay a tax due, and the 100% penalty for fraud with intent to evade the tax is hereby sustained. The Petition for Redetermination is hereby denied. It is so ordered.
DATED this 30th day of December , 2002.
G. Blaine Davis
Administrative Law Judge
BY ORDER OF THE UTAH STATE TAX COMMISSION:
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