BEFORE THE UTAH STATE TAX
COMMISSION
____________________________________
XXXXX, )
:
Petitioners, ) FINDINGS OF FACT,
: CONCLUSIONS
OF LAW,
v. ) AND FINAL DECISION
:
COLLECTION
DIVISION OF THE ) Appeal No. 92-0381
UTAH STATE TAX
COMMISSION, :
) Account
No. XXXXX
:
Respondent. )
_____________________________________
STATEMENT OF CASE
This
matter came before the Utah State Tax Commission for a formal hearing on
XXXXX. Paul F. Iwasaki, Presiding
Officer, heard the matter for and on behalf of the Commission. Present and representing the Petitioners was
XXXXX. Present and representing the
Respondent was XXXXX, Assistant Utah Attorney General.
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 XXXXX, XXXXX,
XXXXX and XXXXX.
3. One of the Petitioner's XXXXX is and during
the audit period in question was a cement contractor.
4. In XXXXX, the Petitioner had what he
described as "an altercation" with the Internal Revenue Service. Thereafter, the Petitioner stopped filing
his federal income tax returns and also his state income tax returns. Prior to XXXXX, the Petitioners had filed
their federal and state income tax returns.
5. The Petitioners filed late returns for the
years XXXXX, XXXXX and XXXXX in XXXXX.
The return for XXXXX was filed in XXXXX.
6. The Compliance Auditing Section of the
Collection Division audited the returns of the Petitioners and determined that
the income reported by the Petitioners on the returns would not support the
lifestyle and expenses for a family of seven.
The Compliance Auditing Section then estimated the income necessary to
sustain the lifestyle the Petitioners exhibited through the "expenditure
re-adjustment" method. This method
utilized cost of living estimates provided by the United States Department of
Labor, Bureau of Labor Statistics to arrive at an average income figure for a
family such as Petitioners'.
7. This methodology was utilized because the Petitioner
either did not keep, or would not provide, adequate documentation concerning
his income or expenses, to the extent that suitable documentation regarding
expenses was provided; however, those expenses were allowed by the Collection
Division.
8.
The Petitioners did not argue that the
expenditure re-adjustment methodology was improper, but rather, argued that
they were entitled to greater allowances for exemptions were allowed by the
Collection Division.
9. As a result of the audit, the Collection
Division assessed tax deficiencies in the amounts of $$$$$; $$$$$; $$$$$; and
$$$$$ for the years XXXXX, XXXXX, XXXXX and XXXXX respectively. The Petitioners were further assessed a 10%
penalty for late filing, a 10% penalty for late payment, and a 15% penalty for
intent to evade the tax due.
CONCLUSIONS OF LAW
There
is imposed on each resident individual, estate, or trust for each taxable year
a tax measured by the amount of his "taxable income" for such year as
determined for federal income tax purposes, subject to certain adjustments.
(Utah Code Ann. §59-10102(1).)
Every
person liable for any tax imposed by this chapter, or for the collection
thereof, shall keep such records, render such statements, make such returns,
and comply with such rules as the Commission may from time to time by rule
prescribe. (Utah Code Ann. §59-10-501(1).)
Every
taxpayer shall keep adequate records for income tax purposes of a type which
clearly reflect income and expense, gain or loss, and all transactions
necessary in the conduct of business activities.
Records
of all transactions affecting income or expense, or gain or loss, and of all
transactions for which deductions may be claimed, should be preserved by the
taxpayer to enable preparation of returns correctly and to substantiate claims.
All such records shall be made available to an authorized agent of the Tax
Commission when requested, for review or audit. (Utah State Tax Commission
Administrative RuleR865-9I-18).)
The
petitioning party shall have the burden of proof to establish that his petition
should be granted. (Utah State Tax Commission Administrative Rule
R861-1A-7(G).)
DECISION AND ORDER
In
the present case, the Petitioner does not contest the Respondent's methodology
in adjusting the income tax returns for the years in question, but rather,
argues that adjustments to those estimates were necessary. Specifically, the Petitioner argued that
expenditure estimates for food, housing, house furnishings, apparel, transportation,
entertainment, reading, education, and insurance were overstated. The Petitioner then set forth amounts which
it claimed to be correct for each of those items.
The
Petitioner was unable to independently verify any of the figures which it
claimed to be correct figures for the above mentioned expenditures. Indeed, those figures were merely estimates
of the Petitioner made two to five years after the expenses were incurred.
The
Commission finds that the Petitioner's complete reliance upon his memory in
determining the amounts actually expended on the contested items is not
sufficient to establish with any degree of reasonable accuracy the actual
amounts spent by the Petitioner.
Therefore, the Petitioner has failed to meet its burden of proof to show
that the Collection Division's assessment was incorrect.
Based
upon the foregoing, the Tax Commission affirms the determination of the
Collection Division for the periods in question. It is so ordered.
DATED
this 12th day of November, 1992.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
ABSENT
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco S.
Blaine Willes
Commissioner Commissioner