STATE OF WISCONSIN
TAX APPEALS COMMISSION
MICHAEL D. & ARTHENA K. HAZA
309 Spring Street
Campbellsport, WI 53010,
WISCONSIN DEPARTMENT OF REVENUE,
P.O. Box 8933
Madison, WI 53708-8933,
|DOCKET NOS. 97-I-250 and 97-I-251
DECISION AND ORDER
DON M. MILLIS, COMMISSIONER:
This matter came before the Commission for a trial on January 21, 1998, in Fond du Lac. Petitioners were represented by petitioner Michael D. Haza.(1) Respondent was represented by Attorney John Cappellari. Respondent submitted a post-hearing brief; petitioners did not submit a brief.
Based upon the evidence received at trial, the representations and submissions of the parties, and the record in this matter, the Commission hereby finds, concludes, and orders as follows:
FINDINGS OF FACT
1. Petitioner Michael D. Haza and another lawyer, Mr. Arik J. Guenther, own Guenther & Haza, Ltd. ("the firm"), a Wisconsin corporation.
2. In essence, the firm serves as a flow-through entity by which Messrs. Haza and Guenther made expenditures necessary to their respective law practices.
3. Each month, Messrs. Haza and Guenther each pay one-half of certain operating expenses for the firm. These included supplies, staff salaries, utilities, and rent.
4. In addition, each month Messrs. Haza and Guenther pay 100 percent of the cost advances made by the firm for each of their respective clients.
5. All receipts were paid directly to the lawyer who performed the services, not to the firm.
6. For the years at issue, petitioners claimed Mr. Haza's payments to the firm as rent or lease of the other business property on line 20b of Schedule C. The amounts claimed were:
4. In March of 1996, respondent issued two separate income tax assessments against petitioners.
5. The first assessment concerned 1990 and was in the principal amount of $3,463.19, plus interest. The second assessment concerned 1991, 1992, and 1994 and was in the principal amount of $12,854.99, plus interest.(2)
6. The primary issue in both assessments was respondent's disallowance of all amounts claimed under rent or lease of other business property.
7. Petitioners filed a timely petition for redetermination objecting to each of the assessments.
8. On May 2, 1997, respondent denied the petition for redetermination as it pertained to 1990, 1991, and 1992. Respondent granted the petition for redetermination with regard to 1994. Thus, the only years at issue are 1990 through 1992.
9. Following trial, respondent conceded that petitioners should be allowed to deduct the following amounts for rent or lease of other business property:
CONCLUSION OF LAW
Petitioners should be allowed to deduct the following amounts under rent or lease of other business property on their Schedule C for the years indicated because these amounts were conceded by respondent: 1990--$38,689.08, 1991--$45,295.99, 1992--$41,886.85.
Petitioners bear the burden of showing that respondent's assessments are incorrect. Woller v. Dep't of Taxation, 35 Wis. 2d 227, 232 (1967). In this case, petitioners presented contradictory and inconsistent evidence that would make it difficult to meet this burden, in the absence of respondent's concession.
Petitioners presented three types of documentary evidence covering the three years at issue to support the amounts claimed as expenses for rent or lease of other business property: (1) copies of the firm's general account journal, (2) copies of checks Mr. Haza paid to the firm, and (3) copies of the firm's bank statements.
There are several problems with these three types of documentary evidence. First, it is not clear, based on the foundation provided at trial, how to interpret the general account ledger to arrive at Mr. Haza's contributions to the firm's expenses. Second, the amounts indicated by the copies of Mr. Haza's checks differed from amounts derived from the general account ledger. Finally, none of the amounts indicated by the documentary evidence matched the amounts claimed by petitioners on their tax returns.
Respondent performed its own analysis of the firm's general account ledger to determine the amount of Mr. Haza's contribution to the firm's operation for each year and then compared these amounts to the amounts indicated by copies of checks produced by Mr. Haza:
Year Ledger Amount Checks Amount
1990 $ 41,362.28 $ 38,689.08
1991 $ 48,414.41 $ 45,295.99
1992 $ 41,886.85 $ 49,203.42
Respondent concedes the lesser amount for each year as indicated in italic.
Given that petitioners have failed to present consistent documentary evidence to support the amounts claimed on their returns for the years at issue, the Commission is unable to find that they were entitled to claim any amounts in excess of the amounts conceded by respondent.
IT IS ORDERED
That respondent's assessments are modified to allow Schedule C deductions as set forth in Finding 12 and, as modified, are affirmed.
Dated at Madison, Wisconsin this 7th day of January, 1999.
WISCONSIN TAX APPPEALS COMMISSION
Mark E. Musolf, Chairperson
Don M. Millis, Commissioner
ATTACHMENT: "NOTICE OF APPEAL INFORMATION"
1 Respondent waived the personal appearance of petitioner Arthena K. Haza at trial.
2 This assessment was subsequently reissued in the principal amount of $6,167.75, plus interest.