BEFORE THE UTAH STATE TAX COMMISSION
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
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.
R. H. Hansen Roger O. Tew
Joe B. Pacheco S. Blaine Willes