George M. & Mackie Finney, Petitioner
T.C.
r T .C . Memo : . 2009-29 8 UNITED STATES TAX COUR T GEORGE M . & MACKIE FINNEY, Petitioners v . COMMISSIONER OF INTERNAL REVENUE, Responden t Docket No . 29119-08 .
Filed December 22, 2009 .
George M . & Mackie Finney, pro sese .
Daniel N . Price , for respondent .
MEMORANDUM FINDINGS OF FACT AND OPINIO N COHEN, Judge : Respondent determined a deficiency of $4,47 6 in petitioners' Federal income taxes for 2005 . The deficiency resulted from disallowance of a claimed "FNS [fuel from a nonconventional source] Credit" under former section 29, now, section 45K . All section references are to the Internal Revenue Code .
SERVED JQEC 2 2 2009 FINDINGS' OF FAC T All of the material facts have been stipulated, and th e stipulated facts are incorporated in our findings by thi s reference . Petitioners resided in Texas at the time their petition was filed ., Petitioner George M . Finney is retired from the military, and petitioner Mackie Finney is a nurse .
Petitioners met Silas Anderson, a tax return preparer, through an acquaintance at their church . Anderson prepared petitioners' tax return for 2005 .
On the Form 1040,'U .S . Individual Income Tax Return, that Anderson prepared for petitioners, petitioners' tax liability was reduced by a claim of $4,484 on Form 8907, Nonconventional Source Fuel Credit, from a facility allegedly placed in service on December 1, 1996 . On a Schedule C, Profit or Loss From Business, alleged receipts of $1,389 and expenses of $1,348 were reported from an "Alternative Energy" business . As a result of the reporting on Schedule C and Form 8907, petitioners claimed a refund of $3,020 from prepayments of $4,215 .
The transactions reported on Schedule C and Form 8907 attached to petitioners' 2005 return were fictitious . They arose from petitioners' purported transaction with one or more promoters who purportedly owned landfills that produced alternative fuels, enabling petitioners to claim fuel from a nonconventional source (FNS) tax credits . The promoters _ ,3 _ purported to sell-petitioners a share of the landfills for a .percentage of the expected'FNS tax credits . In fact, th e promoters had no ownership interest in the landfills, .and alternative fuels within the meaning of former-section 29, now .
section 45K, were not produced .
Anderson received a percentage of the proceeds paid to .the promoters of the FNS program. Mrs . Finney gave Anderson cashier's checks-for $3,566 in 2005 and $3,587 in 2006 . . There is no explanation in the'record for the earlier check . The latter check was the amount Anderson requested in relation t o petitioners' 2005 return .
On April'2,P2009, the U .S . Department of Justice issued a press release announcing the filing of a civil injunction lawsuit against 32 individuals, including Anderson, "seeking to bar them from promoting an alleged tax seam involving bogus income tax credits claimed for sham sales of"methane from landfills" .
OPINION
Subject to various limitations, former section 29, redesignated section 45K .for years ending after December 31, 2b05, provided a credit for producing fuel from a nonconventional source . The credit is based on the fuel produced and attributable to the taxpayer . Because neither petitioners nor the persons they dealt with had an interest in a fuel=producin g source and no fuel was produced, ; we need not explore the ILI 4 - r complexities of the credit provision . See generally S/V Drilling Partners v . Commissioner , 114 T .C . 83 (2000) ; Nielson-True Pship .
v . Commissioner , 109 T .C . 112 (1997), affd . sub nom . True Oil Co .
v . Commissioner ,' 170 F .3d 1294 (10th Cir . 1999) .
Petitioners stipulated that the promoter or-promoters that they dealt with did not own landfills and that the landfills that they allegedly invested in did not produce any alternative fuels entitling them to the FNS credit . By the time of trial, .they-did not dispute respondent's determination ; but they wanted to confront Anderson in Court .
Petitioners and Anderson testified at trial . Mrs . Finney testified that the checks given to Anderson were for taxes and his services, that she did not intend to,go into any business at the time that she delivered the cashier's checks to Anderson, and that she did not sign any papers relating to any business . Mr .
Finney testified that he had formerly prepared tax returns for petitioners, but that Mrs . Finney wanted to use Anderson's services ; Mr . Finney claimed that he had not participated in the preparation of the 2005 return .
Anderson testified that he met with both of the Finneys and that they executed all relevant documents for the alleged business activities referred to on the 2005 return and that he was only a "facilitator" who received,a small commission on the amounts paid for the FNS credit . He testified that the checks were paid over to an entity known as Gas Recovery Partners 2 GP .
Because of the concessions!in the stipulation, we do not have to resolve the disputes among the witnesses . There is no penalty in issue, so we do not decide whether it . was reasonable for petitioners to sign the tax return Anderson prepared if the y had no knowledge of .the alleged alternative energy business reported on Schedule C or did not understand that they were claiming a tax credit in order to secure a refund of prepayments ' on their taxes . We do not decide whether they were innocent victims or collaborators in a "tax scam" identified by the Department of Justice . The stipulated facts establish that they were not entitled to the credit 'and that the related adjustments in~the notice of deficiency are correct . To reflect the.
foregoing, Decision will be entere d for respondent .
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