90-1430 - Individual Income

 

BEFORE THE UTAH STATE TAX COMMISSION

____________________________

In Re: ) FINDINGS OF FACT,

: CONCLUSIONS OF LAW,

XXXXX ) AND FINAL DECISION

:

: Appeal No. 90-1430

: Account No. XXXXX

_____________________________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission for a formal hearing on XXXXX. Joseph G. Linford, Presiding Officer, heard the matter for and on behalf of the Commission. Present and representing the Petitioner was XXXXX.

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 individual income tax.

2. The period in question is the tax year XXXXX.

3. The additional tax due for the period in question on Petitioner's individual income tax was the result of an Internal Revenue Service (IRS) audit based upon the XXXXX Tax Reform Act. The audit involved the allowance of investment interest versus interest incurred in purchasing and operating an active trade or business, and the IRS ultimately determined that Petitioner's interest on a stock business acquisition was investment interest.

4. Petitioner, under the advice of his accountant, did not include this as income on his tax return for the period in question because the accountant felt that the recent law change gave no guidance as to the application of the law to Petitioner's circumstances. Based on these facts, the IRS waived penalties assessed on the federal income tax and Petitioner requests that the Utah State Tax Commission also waive the penalties associated with this period.

5. By letter dated XXXXX, the Tax Commission reduced the penalties assessed from $$$$$ to $$$$$. This was a XXXXX reduction. Shortly before this reduction was granted, an additional $$$$$ was added in error to the original penalty amount of $$$$$. Petitioner was evidently not informed of this additional, erroneous assessment. Therefore, when the XXXXX decision from the Tax Commission was received by Petitioner, it appeared to Petitioner that the reduction of the penalty was in the amount of only $$$$$, when in actuality the Commission intended a XXXXX reduction in the penalty amount.

CONCLUSIONS OF LAW

The Tax Commission is granted the authority to waive, reduce, or compromise penalties and interest upon a showing of reasonable cause. (Utah Code Ann. 59-1-401(8).)

DECISION AND ORDER

The evidence shows that Petitioner acted under the advise of his accountants in completing and filing the tax return for the period in question. The difficulty was caused by a change in the federal law, the complexity of which rendered it difficult for Petitioner and his professional tax preparers to determine the correct amount of tax. This indicates that the penalty for the period in question should be waived.

Based upon the foregoing, the Tax Commission finds that sufficient cause has been shown which would justify a waiver of the penalty associated with the tax year XXXXX. Interest shall be adjusted to account for the waiver of the penalty. It is so ordered.

DATED this 20 day of December, 1990.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

ABSENT

R. H. Hansen Roger O. Tew

Chairman Commissioner

Joe B. Pacheco G. Blaine Davis

Commissioner Commissioner