Tax Type
Individual Income Tax
Description
Gambling income; Estimated tax liability
Topic
Collection of Delinquent Tax
Date Issued
06-20-1988
June 20, 1988
Re: §58.1-1821 Application; Individual Income Tax
§58.1-111 Estimated Tax Liability
§58.1-105 Offer in Compromise
Dear***************
This is in response to your letter of May 30, 1985, as well as several follow-up letters and conferences, in which you applied for correction of an assessment of individual income tax.
Facts
The taxpayer was convicted of operating a gambling enterprise involving bets on sporting events. The department reviewed the taxpayer's 1983 return and determined that income from the gambling enterprise was not reported. Additional income tax and penalty were assessed based on estimates of income after reviewing evidence seized by police.
You have generally protested the assessment on the grounds that it is excessive and because you claim that the taxpayer was out of the state for three months of the year. Although requested by the department, you have not provided any evidence as to the actual amount of income earned from the gambling operation nor have you substantiated the taxpayer's absence for any portion of the taxable year. In view of the length of time that has passed, and the fact that the taxpayer was again indicted for gambling offenses while this application was under review, it appears that this application has been abandoned. Therefore, we are responding to your initial application based on a review of the information we possess.
Discussion
The department has evidence that the taxpayer had a substantial amount of unreported income. The only issue is whether the department's estimate of the amount of income is reasonable under the circumstances. We have reviewed the evidence and concluded that the estimate was overstated because it was based on including the gross wagers in income without allowing for payments to winners. We have recomputed the unreported income as shown on the attached sheet. In the absence of evidence as, to the actual gross wagers, layoff wagers, payoffs and expenses the computation attached makes no allowance for expenses other than payoffs.
Offer
In the course of a conference held on April 30, 1986, you orally offered********to compromise and settle this assessment. The department cannot accept your offer (assuming that it has not been withdrawn or abandoned) because we find no evidence that there exists doubtful liability or doubtful collectibility as required by Va. Code §58.1-105.
Doubtful liability does not exist because the taxpayer's history of gambling convictions and the gambling records seized by police is persuasive evidence that the taxpayer had income from gambling. The return filed by the taxpayer does not report any gambling income. The assessment, as adjusted, is a reasonable estimate pursuant to §58.1-111 based on the best evidence available to the department, and is presumed correct under §58.1-205.
Doubtful collectibility has not been demonstrated because you have provided no information on the total assets and liabilities of the taxpayer. Without adequate financial information to enable the department to verify the taxpayer's financial condition, an offer cannot be accepted on the basis of doubtful collectibility.
Determination
Accordingly, the assessment will be revised. You will shortly receive an updated bill with interest accrued to date. The bill should be paid within thirty days to avoid the accrual of additional interest.
In the course of reviewing the taxpayer's returns in connection with this application, it was noted that the taxpayer has not filed any Virginia income tax return for 1985, 1986, and 1987. These returns are now delinquent and should be filed immediately.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner