BEFORE THE UTAH STATE TAX COMMISSION
In Re: )
XXXXX ) FINDINGS OF FACT,
: CONCLUSIONS OF LAW,
: AND FINAL DECISION
: Appeal No. 90-2048
: 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 Petitioners were XXXXX & 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 income tax.
2. The periods in question are the tax years XXXXX and XXXXX.
3. In XXXXX, Petitioners bought into a tax shelter through XXXXX. In XXXXX, Petitioners bought into the tax shelter again. Petitioners have never received anything from XXXXX to indicate that this tax shelter exists.
4. In XXXXX, Petitioners were notified by the Internal Revenue Service (IRS) that they had additional tax liability for the years in question due to the disallowance of the tax shelter. XXXXX told Petitioners that they did not have to pay these taxes because the statute of limitations had run out on the assessment of this tax.
5. Correspondence and negotiations occurred between Petitioners through XXXXX and the IRS through XXXXX, when Petitioners took out a second mortgage on their home and paid the IRS tax liability of $$$$$.
6. In XXXXX, XXXXX moved from the state of Utah to XXXXX. Since that time, XXXXX has been convicted on criminal charges for some of his activities regarding tax shelters.
7. Petitioners kept working through XXXXX from XXXXX when they first became acquainted with him until XXXXX when he left the state, even after it became evident to them that there were difficulties in XXXXX's manner of proceeding. However, Petitioners testified that they felt that they were already committed and XXXXX continued to make them promises that things would work out and they, therefore, continued to work with him with the hope that the difficulties would be solved.
8. Penalties and interest have been assessed to Petitioners' account for the deficiencies in tax due for the years in question which were the result of the facts as outlined above. Petitioners now request that these penalties and interest be waived based upon the circumstances of this case.
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
It is apparent that Petitioners were negligent by entering into a questionable enterprise and then continuing with that enterprise when its difficulties became evident. Therefore, the assessment of the negligence penalty is appropriate in this case. Additionally, interest should not be waived because the state was deprived 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 and XXXXX. It is so ordered.
DATED this 15 day of February, 1991.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H. Hansen Roger O. Tew
Joe B. Pacheco G. Blaine Davis