Les Hicks, Petitioner

T .C . Summary Opinion 2009-6 8

UNITED STATES TAX ,COURT ,

LES HICKS, Petitioner v . COMMISSIONER OF INTERNAL REVENUE, Responden t Docket No . 7577-08S . Filed May 7, 2009 .

Les Hicks, pro se .

James E . Archie , for respondent .

LARO, Judge : This case was heard pursuant to the provisions of section 7463 of the Internal Revenue Code in effec t when the petition was filed .' Pursuant to section 7463 (b) , the decision to be entered is not reviewable by any other court, and this opinion shall not be treated as precedent for any other case .

'Unless otherwise indicated, section references are to the applicable versions of the Internal . Revenue Code, and Rule references are to the Tax Court Rules of Practice and Procedure .

SERVED May 07 2009 2 - Petitioner petitioned the Court to redetermine respondent's -determination of a $14,534 deficiency in petitioner's 200 5 ,Federal income tax and a $2,907 accuracy-related penalty unde r .section 6662( a) and ( b)(2) for a substantial understatement o f income tax . We first decide whether petitioner's gross income includes his distributive share of the income of Personal Hom e Healthcare Agency, L .L .C ., d .b .a . Crown Health Services (PHHA) .

We-hold it does . We decide second whether petitioner is liable for the accuracy-related penalty . We .hold .he is .

I .

Preliminarie s Background The parties submitted this case to the Court fully stipulated pursuant to Rule 122 . The stipulated facts and accompanying exhibits are incorporated herein by this reference .

Petitioner resided in Texas when his petition was filed .

II .

PHHA :1 PHHA is a Texas limited liability company . PHHA reports its operations for Federal income tax purposes as if it. were a partnership and on the basis of a calendar year . Petitioner owned a 10 - percent interest in PHHA . An unrelated individual owned the remaining 90-percent interest .

PHHA issued .petitioner a Schedule K-1, Partner ' s Share o f Income, Deductions, Credits, etc ., for 2005 . The Schedule K-1 reported that petitioner's share of PHHA's ordinary business income for 2005 was $54,819 . Petitioner did not receive any actual distributions .from PHHA during 2005 .

III .

2005 Tax Return Petitioner-filed a Form 1040 ; U. S . Individual Income Tax Return, for 2005 using the filing-status of "Single" Petitioner did not report on-that return, or otherwise include in his'gross'r income for 2005, any of the $54,819 PHHAwreported to him .

IV .

: Respondent's Determination " Respondent determined in the notice of deficiency that petitioner's gross income for 2005`included the $54,819 and-- increased petitioner's gross . income accordingly . That increas e also caused a $7,061 computational increase to petitioner's gross, income with'respect to Social Security benefits that he received .

,Respondent `also deter'mined'kin then notice, of deficiency 'that - petitioner was liable for an accuracy-related penalty for a' substantial understatement of income tax .

Discussio n I .

Income-Tax Deficienc y Burden _of Proo f Taxpayers` generally bear the burden'.of'proving that the Commissioner's : determinations . set'forth in°a notice-of deficienc y are incorrect : See Rule 1'42(a)(1°) Welch v : Helvering ; 290 U .S 111, 115 (1933) . -In certain cases, .however,, section 7491(a) shifts-the burden of-proof to the Commissioner . We need not' decide which party in -this case -bears 'the burden', of --proof - as to the income tax deficiency-because we decide that issue withou t regard forburden of proof .

B .

Distributive Share of .PHHA Income Petitioner argues : that the $54,819 is not taxable,to(cid:127)him in 2005 .because he did not receive :-any actual distributions from- PHHA-during that'.year . We disagree with petitioner's .argument that the $54,819 is not-taxable to him in .2005 . A partner"such as petitioner must take into account his distributive share of each item of,partnership income even if no partnership income i s actually distributed-to,him during the,year to which,-the distributive . share relates . See sec . 702(a), ; United States .-v .- Basye ,, 410 U .S 441, 454 (1973) ; Vecchio v .-Commissioner , l03- .(cid:127)T C . -170, 185 (1994)_ ; sec .:1' . .702-1 (a) ,,.,. Income Tax Regs, :

We sustain .,respondent'; s determination , as - to the (cid:127) income, tax- r deficiency .

II .

Accuracy-Related Penalt y Respondent determined that-petitioner is liable for an accuracy-related, penalty under section 6662(a)°,and (b)(2)(cid:127)for'a substantial understatement of income tax . Section 6662(a) and (b) (2) ,imposes al;120-percent)accuracy-related, penalty-for- any portionµof an underpayment that is attributable to-a substantial understatement of,income tax .. An understatement--,is the .excess o f the amount of tax-required to be,shown on the ;return_for the taxable year-over the amount, of tax(cid:127)imposed, .that .is-shown on . th e return,,reduced by (cid:127) any rebate .(cid:127) :; , See sec .

_(cid:127) 6662 (d) (2) (A) R .

understatement is substantial if it . exceeds . the greater of 10 percent of the tax required to be shown on-the return , for the - 5, - taxable year or, in the case of an individual, $5 ;000 . See'sec .

6662(d) (1) (A) .

The Commissioner bears a burden of production with respect to the applicability of an accuracy-related penalty . See sec .

7491(c) . That burden requires that the Commissioner produce sufficient evidence that it is appropriate-to impose an accuracy-related penalty . Once he has met his burden, the burden of proof is upon the taxpayer to prove that the accuracy-related penalty. does not apply because of reasonable cause, substantial authority, or the like . See secs . 6662(d)(2)(B), 6664(c)(1) ; Higbee v . Commissioner , 116 T .C . 438, 449 (2001) .

We discern from the record that petitioner's understatement exceeds the greater of $5,000 or 10 percent of the amount required to be shown on the return . Thus, we conclude that respondent has met his burden of production . Petitioner makes neither :. an argument nor an assertion that he is not liable for the accuracy-related penalty . We also .do'not find any facts tha t would lead us to conclude that petitioner is not so liable .

sustain respondent's determination as to the accuracy-relate d penalty .

III .

Conclusio n We have considered all of petitioner's . contentions and allegations, and we conclude that those contentions and allegations not discussed, herein are without merit or irrelevant .

To reflect the foregoing, Decision will be entere d for respondent .