Thomas J. Sweeney, Petitioner

T .C . Summary Opinion 2006-16 9

UNITED STATES TAX COURT

= Y"' i ~--~ 8_3!k- JUD~J THOMAS J . SWEENEY, Petitioner v .

TSSIONER OF INTERNAL REVENUE, Respondent 6331-05S . Filed October 19, 2006 .

Sweeney, pro se .

Robert W . Dillard, for respondent .

COUVILLION

Special Trial Judge : This case was hear d pursuant to sec ion 7463 in effect when the petition was filed .'

The decision to be entered is not reviewable by any other court, and this opinio should not be cited as authority .

'Unless otherwise indicated , subsequent section references are to the Internal Revenue Code in effect for the year at issue .

SERVED .OCT 1 9 2006

Responden determined a deficiency of $1,681 in petitioner's Federal income tax for 2002 .

The sole ssue for decision is whether petitioner, under section 1366 , is required to include as income on his 2002 Federal income tax return his proportionate share of undistributed ncome from an S corporation in which he was a shareholder with his former wife . 2 Some of t le facts were stipulated .

Those facts, with the exhibits annexed thereto, are so found and made part hereof .

Petitioner ' s legal residence was Seminole , Florida, at the time the petition w s filed . ' Petitione was married to Cheryl L . Sweeney during the year at issue . During the year 2000 , petitioner and his wife incorporated Lake Vista Billing Services , Inc . Petitioner was the registered agent for the corporation ; his wife was the president , and petitioner was vice president and a stockholder .

The stated purpose for the corporation was "medical billing fo r 2At trial, petitioner conceded the following adjustments in the notice of deficiency : exemption deduction for a child ; (2) disallowance of a child and dependent care credit under sec . 21(a)(1 ) ; ( 3) disallowance of the child tax c edit under sec . 24 ; and ( 4) a computational disallowance of miscellaneous itemized deductions .

(1) Disallowance of a dependency 3Under sec 7491( a), where a taxpayer introduces credible evidence with r spect to any factual issue relevant to ascertaining the liability of the taxpayer, the burden of proof shifts to the Commissioner . case . The sole ; issue is a question of law ; consequently, this case is decided without regard to the burden of proof .

There are no factual issues in this physicians' pr ctices" . Petitioner and his spouse each owned 50 percent of the corporation .

The activity of the corporation was simply collection of fees charged b doctors to their patients for medical services .

Petitioner's s ouse performed all the activities of the corporation by visiting doctors' offices weekly, picking up their billing invoic s, collecting payment of these invoices from primary and se ondary insurers, and collecting directly from each patient the po tions not covered by insurance . Petitioner was not involved i this activity . Petitioner was employed as an insurance inst uctor for an unrelated employer .

There is n evidence in the record as to the corporation's business activi y for the years 2000 and 2001 . However, for the year 2002 (the rear at issue in this case), a Form 1120S, U .S .

Income Tax Retu n for an S Corporation, was filed . On that return, the cor oration's taxable income was $18,627 . The return reflected issua ce to the shareholders of the corporation Schedules K-i, hareholder's Share of Income, Credits, Deductions, etc . Although a copy of the Schedule K-1 issued to petitioner was rot offered into evidence at trial, respondent' s official records were offered into evidence, which reflected a Schedule K-1 for petitioner in the amount of $9,314, which is one-half of the orporation's net income of $18,627, rounded . On 4 - his Federal in ome tax return for 2002, petitioner did not include any in ome from the corporation .

Petitione and his spouse each filed Federal income tax returns for 20 2 as married filing separately . Respondent's records reflec that petitioner's spouse . reported on her return $9,314, or one half of the taxable income of the S corporation .

In the notice f deficiency, respondent determined a deficiency against petiti ner for the unreported $9,314 in flow-through income from La e Vista Billing Services, Inc .

Petitions contends he never received any of the proceeds of the corporatio 's profitable activity for the year at issue . He and his wife ha serious problems between them during the year, which he descri ed at trial as follows :

This is my whole argument, Your Honor . During the second week of Ja uary 2002, my wife proceeded to throw me out of my home, w ich is where the business was located . Sh e changed th locks . She stripped our corporate bank accounts, ur personal bank accounts, charged up all the cash she c uld on my credit cards to over $50,000, $60,000, and she ph sically, lock, stock, and barrel, locked me out of the corporation .

Although p titioner engaged the services of an attorney in connection with his marital problems, no evidence was offered to show what was r solved between petitioner and his wife regarding the corporation . The notice of deficiency was ultimately issued to petitioner iniwhich a deficiency was determined based on the inclusion in incpme of petitioner's share of the S corporation's income for the year 2002, pursuant to the information return filed by the c rporation for that year .

Section 1 62(a) allows a small business corporation to elect to be governed by the provisions of subchapter S for its taxable years . Such a election allows the income, expenses, and credits of the corpora ion to flow through to the corporation' s shareholders . 'Sec . 1366(a) . As required by section 1362(a), the election must e made by all shareholders, and the election is effective and ontinues for all succeeding taxable years unless terminated and r section 1362(d) . Such an election was made in this case, and there was no termination of that election as to the year at iss e .

Petitioner did not include on his 2002 Federal income tax return his dist ibutive share of the taxable income reported by the corporation as an S corporation for that year . Although it is obvious to t e Court that petitioner and his spouse ha d serious differe ces between them, this Court is not the proper forum for the r solution of these differences . All formalities of the Internal Revenue Code were followed with respect to the S corporation for the year 2002, and the distributive share of that income to petiti ner constitutes taxable income to him . The Court, therefore, sustains respondent .

Reviewe d nd adopted as the report of the Small Tax Cas e Division .

Decision will be entere d for respondent .