BEFORE THE UTAH STATE TAX COMMISSION
In Re: ) FINDINGS OF FACT,
: CONCLUSIONS OF LAW,
XXXXX ) AND FINAL DECISION
: Appeal No. 90-1500
: 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 periods in question are the tax years XXXXX, XXXXX, and XXXXX.
3. Petitioner stated that about the year XXXXX he purchased certain investments as tax shelters. Part of the inducement to enter into these investments were letters from attorneys, representing the entities in which Petitioner was investing, which certified as to the sound nature of the investments and their value as tax shelters.
4. These investments have since gone awry and have caused Petitioner substantial financial strain.
5. Petitioner stated that five or six years after he made the investments, the Internal Revenue Service (IRS) disallowed the deductions for these investments, pursuant to an audit, and assessed penalty and interest. The IRS has since waived the penalty, but not the interest.
6. The XXXXX tax year is involved in these difficulties because of a carryback of the investment deductions and their disallowance to that year.
7. The day before the hearing was spent by Petitioner in bankruptcy court. He has filed a Chapter 7 bankruptcy.
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 difficulties which led to the imposition of the penalties and interest in this case were caused by Petitioner's own actions. Petitioner may have thought at the time he purchased his investments that he was sufficiently prudent and careful, but the evidence indicates otherwise. The state is in no way responsible for the difficulties in this case. Under such circumstances, the law requires that a penalty be imposed. Petitioner's bankruptcy does not discharge such penalties and interest. Additionally, interest should not be waived because the state was deprived of the use of the tax funds in question for a period of time, through no fault of its own, and should be compensated for that loss of use.
Based upon the foregoing, the Tax Commission finds that sufficient cause has not been shown which would justify a waiver of the penalty and interest associated with the tax years XXXXX, XXXXX, and XXXXX. It is so ordered.
DATED this 14 day of February, 1991.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H. Hansen Roger O. Tew
Joe B. Pacheco G. Blaine Davis