De Shon v. C.I.R.

[David A. Szwak]

De Shon v. C.I.R.
T.C. Summ.Op. 2005-117, 2005 WL 2077747
U.S.Tax Ct.,2005.
August 08, 2005

ARMEN, J.
*1 This case was heard pursuant to the provisions of section 7463 of the Internal Revenue Code in effect at the time that the petition was filed. FN1 The decision to be entered is not reviewable by any other court, and this opinion should not be cited as authority.


FN1. Unless otherwise indicated, all subsequent section references are to the Internal Revenue Code in effect for 2001, the taxable year in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. All monetary amounts are rounded to the nearest dollar.


Respondent determined a deficiency in petitioners' Federal income tax for the taxable year 2001 of $5,101 and an accuracy-related penalty under section 6662(a) of $1,020.

After dismissal of petitioner Judith M. De Shon FN2 and after concessions,FN3 the issues for decision are:


FN2. Petitioner Judith M. De Shon (Mrs. De Shon) did not appear at trial and did not execute the stipulation of facts. Petitioner Michael J. De Shon (Mr. De Shon) is not admitted to practice before this Court and is therefore not authorized to represent Mrs. De Shon in this Court notwithstanding a purported durable power of attorney. See Rules 24, 200. Accordingly, the Court will dismiss this action as to Mrs. De Shon. Rule 123(b). Decision, however, will be entered against Mrs. De Shon consistent with the decision entered against Mr. De Shon as to the deficiency and the accuracy-related penalty.


FN3. Respondent concedes that petitioners did not receive Social Security benefits of $246. Petitioners concede that they received: (1) Social Security benefits of $6, (2) interest income of $58 from Catholic Aid Association (Catholic Aid), (3) a taxable distribution of $6,611 from Catholic Knights Insurance Society, and (4) a taxable distribution of $3,001 from Catholic Aid.


(1) Whether petitioners received unreported discharge of indebtedness income of $12,253 in taxable year 2001. We hold that they did to the extent provided herein.

(2) Whether petitioners are liable under section 6662(a) for an accuracy-related penalty. We hold that they are not.



Background

Some of the facts have been stipulated, and they are so found. We incorporate by reference the parties' stipulation of facts and accompanying exhibits.

At the time that the petition was filed, petitioners resided in Mount Prospect, Illinois. References to petitioners individually are to Mr. De Shon or Mrs. De Shon.

From as early as 1986 through May 1999, petitioners had a joint Discover credit card account ending with the numbers 790 (account 790). The credit card statement for this account as of July 26, 1998, indicated that petitioners made a payment of $130 and purchases of $192 and incurred finance charges of $128. The account balance was $7,427. In September 1998, Mr. De Shon filed by telephone with Discover a dispute concerning the balance due as reflected in the July 26, 1998 statement. Mr. De Shon did not dispute the purchases made but rather disputed the amount of the balance due.

The credit card statement as of August 26, 1998, indicated that petitioners made a purchase of $46 and incurred a late fee of $25 and finance charges of $134. The account balance was $7,631. The statement contained language indicating that the account was past due and demanded payment of such amount. In October 1998, Mr. De Shon filed by telephone with Discover a dispute concerning the balance due as reflected in the August 26, 1998 statement. Mr. De Shon again disputed the amount of the balance due.

The credit card statement as of September 26, 1998, indicated that petitioners incurred a late fee of $25, an overlimit fee of $25, and finance charges of $147. The account balance was $7,828. The statement contained language indicating that the account was past due and demanded payment of such amount.

The credit card statement as of October 26, 1998, indicated that petitioners incurred a late fee of $25, an overlimit fee of $25, and finance charges of $146. The account balance was $8,024. The statement contained language indicating that the account was past due and demanded payment of such amount.

In November 1998, Mr. De Shon submitted to Discover a written dispute. In response to Mr. De Shon's inquiry, petitioners received from Discover a collection letter dated December 12, 1998, concerning the delinquency of $8,229 in account 790. The letter stated in part as follows:

*2 As you know, your account is now four months past due.

We feel that we have been patient in handling your account, but you have not cooperated with us to take care of this serious matter. To protect Discover Card's interest, we must now take action.

We expect you to send a substantial payment immediately along with your plan for future monthly payments to clear this delinquency. Please contact us today so that we may discuss this matter.

If we do not hear from you, your account will be reviewed by our department manager. Your actions determine our handling of this account.

In response, Mr. De Shon faxed to Discover a letter again disputing the amount due. Mr. De Shon did not receive any communication or correspondence from Discover in response to his dispute, nor did he receive a replacement Discover card when his card expired in May 1999. Petitioners received their last statement pertaining to account 790 in May or June 1999. Petitioners did not remit any payments to this account after July 21, 1998.

Petitioners maintained another joint Discover credit card account ending with the numbers 879 (account 879). The address listed for this account was the same address that was listed for account 790, which is also petitioners' current mailing address. The credit card statement as of July 13, 2000, indicated a previous balance of $2,462, a purchase identified as “Bravo Reserve previous balanceâ€