BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 5901 Green Valley Circle, Room 207 Culver City, California REPORTER'S TRANSCRIPT JUNE 15, 2010 ITEM B9 FRANCHISE AND PERSONAL INCOME TAX HEARING APPEAL OF LA VONA D. SHELLMIRE (No. 510915) AGAINST PROPOSED ASSESSMENT OF ADDITIONAL TAX Reported by: Beverly D. Toms CSR No. 1662 1 1 2 P R E S E N T 3 For the Board Betty T. Yee of Equalization: Chair 4 Jerome E. Horton 5 Vice-Chair 6 Barbara Alby Acting Member 7 Michelle Steel 8 Member 9 Marcy Jo Mandel Appearing for John Chiang 10 State Controller (per Government Code 11 Section 7.9) 12 Diane Olson Chief, Board 13 Proceedings Division 14 For Board of Anthony Epolite 15 Equalization Staff: Tax Counsel 16 Amy Kelly Tax Counsel 17 18 For Franchise Tax Karen Smith Board: Tax Counsel 19 Jozel Brunett 20 Tax Counsel 21 For Appellant: LaVona Shellmire 22 Taxpayer 23 24 ---oOo--- 25 26 27 28 2 1 2 Culver City, California 3 June 15, 2010 4 ---oOo--- 5 MS. YEE: Okay, our next matter. 6 MS. OLSON: Our next matter is B9, La Vona D. 7 Shellmire. Ms. Shellmire has not shown. She had 8 requested a postponement which Board Proceedings denied 9 pending requesting information from her. 10 We just tried to contact her and her phone is 11 disconnected. 12 MS. YEE: Okay. Is this her first request for 13 postponement? 14 MS. OLSON: Yes, it is. 15 MS. YEE: I'm sorry, you just mentioned her 16 phone has been disconnected -- 17 MS. OLSON: Yes. 18 MS. YEE: -- so we don't have any way of 19 reaching her? 20 MS. OLSON: We don't -- no. 21 MS. YEE: Okay. Why don't we put this matter 22 over till October and let's see if we can resume contact 23 with her. But with the expectation that we would like 24 to see her in October. 25 MS. OLSON: Okay. 26 (Whereupon a short recess was taken.) 27 ---oOo--- 28 MS. YEE: Let me reconvene the meeting. Ms. 3 1 Olson, do we have another appeal before us? 2 MS. OLSON: Yes, we do. We have B9, La Vona D. 3 Shellmire. Please come forward. 4 MS. YEE: Okay. 5 Great. Thank you. Appeals. 6 MR. EPOLITE: The issue in this matter is 7 whether Appellant has demonstrated any error in 8 Respondent's assessment of tax based on a Federal 9 adjustment. 10 MS. YEE: Great. Thank you very much. Good 11 afternoon, Ms. Shellmire. 12 MS. SHELLMIRE: Good afternoon. 13 MS. YEE: If you'll pull your chair right up to 14 the microphone so we can hear you. Thank you. 15 Introduce yourself for the record and you have 16 ten minutes for your presentation. 17 MS. SHELLMIRE: My name is La Vona Jean Denise 18 Shellmire-Broyard-Sherrills. It's the complete full 19 name. And I'm -- I'm here for the 2004 appeal on the 20 State 540 that I file that they returned back on stating 21 that there was a deficiency in tax. And the reason that 22 they proposed that is because IRS and I had been going 23 back and forth for the last three years trying to 24 resolve an issue from an actual audit. And the process 25 had gone on for so long that IRS only corrected portions 26 of the audit and the main issue on the audit at hand is 27 actually the income. 28 I accepted the deductions that they accepted 4 1 and did not accept on the tax audit when I went to IRS, 2 but there was still an issue of the income, because when 3 I inputted using the new software that I was using, I 4 wasn't familiar with it. Some of the 1099s were 5 duplicated so it increased the income. 6 And so IRS was supposed to originally correct 7 it when I went on the first audit and the examiner 8 winded up being transferred to another person who didn't 9 know, and so what they did was they wind up keeping the 10 income the same but they corrected the adjustments. 11 So when they returned it I had still owe -- I 12 believe it was a deficiency of like 25,000 when they did 13 it. So upon going back and forth with them via fax and 14 mail to correct it, it never actually got resolved. And 15 I filed -- I was advised to file a 1040 once a lien was 16 actually -- they did a levy. And I wind up having to do 17 a due process hearing. 18 And the person that actually handled that, that 19 was back in March 2009, she advised me to go ahead and 20 accept -- accept it as is but file for an audit 21 reconsideration. And one of the correspondence in 22 there -- I believe it might be in Exhibit 4, I think it 23 might be, where it explains what she was doing and she 24 sent me the paperwork for the audit reconsideration. 25 Well, with IRS the audit reconsideration was 26 actually sent in three times. This time they finally 27 noted that they received it. The last time it was sent 28 was May 11th, and they received it. 5 1 I don't have the confirmation from them but I 2 have it from UP -- from the USPS, the confirmation that 3 it was actually delivered, and I have spoken with IRS. 4 They received it and they forward it to the Appeals 5 Department on May 27th. 6 And so that's where it's at now. We're waiting 7 for an actual appeals hearing on the audit 8 reconsideration. 9 MS. YEE: Okay. Ms. Shellmire, you've handed 10 us some exhibits today. Can you briefly walk us through 11 them? I just want to be sure we have all of the 12 correspondence straight in our head between you and the 13 Internal Revenue Service. 14 MS. SHELLMIRE: Okay, Exhibit 1 is the 540X 15 that I filed on May 11th. I had previously prepared it 16 back in March of '07 but it wasn't submitted because I 17 was waiting for IRS to correct their end so I would be 18 sending in a correct 540X to the State. 19 But I went ahead and did it on May 11th, sent 20 it in anyway as is per the 1040X that was filed. As of 21 this morning when I phoned the Franchise Tax Board they 22 still say they hadn't received it, but she says she 23 can't technically say that they don't have it, it just 24 hasn't been processed in the system yet. 25 So Exhibit 1 is the 540X that was filed. 26 Exhibit 2, those are the receipts from the postal office 27 showing that it was -- the 1040X was sent to the IRS 28 indicating the address it was sent to for the audit 6 1 reconsideration for their Appeals Department. 2 Exhibit 3 is the audit reconsideration 3 requesting documentation. That's the letters and my 4 request for the audit reconsideration. The 1040X that 5 was attached to it along with the actual 1099s. 6 And Exhibit 4 would indicate the actual income 7 reported against me to IRS. The 1099s, the 1098s, any 8 W-2s, all the income that was actually reported to IRS 9 against me for that year. 10 Exhibit 5 is all the correspondence I received 11 from IRS in regards to the initial audit. And the 12 correspondence for the due process hearing and you will 13 see a check mark by one of them. That's dated -- I 14 believe that's March 17th, it's dated for, indicating 15 where she and I had spoke and she is the person that did 16 the -- the hearing thing with me for the due process 17 hearing, where she indicated that she was enclosing the 18 information for me to actually do the audit 19 reconsideration. 20 And Exhibit 6 is the original tax return that I 21 had filed and it shows on the Schedule Cs which 22 income -- you'll see pencil notes that indicate which 23 income was actually duplicated and what the correct 24 amount should be. 25 MS. YEE: Okay. All right, did you have other 26 comments at this point? 27 MS. SHELLMIRE: Actually, I was told to -- 28 could I -- I requested a postponement of this hearing 7 1 because they needed verification that IRS actually did 2 receive the paperwork, and they wanted it from IRS. I 3 called IRS and I went -- they sent me to the Service 4 Center in Van Nuys to actually get the paper. They're 5 saying there's nothing that they can actually print 6 because it actually is in Appeals. I have to wait for 7 Appeals to send the paperwork for me. 8 MS. YEE: Okay, I guess -- 9 MS. SHELLMIRE: So I want to -- yeah. 10 MS. YEE: Okay, let me ask you a couple of 11 questions and then we'll go to the Franchise Tax Board. 12 The -- your -- your request -- your audit 13 reconsideration request was dated May 11th. 14 MS. SHELLMIRE: That was the last one, correct. 15 MS. YEE: The last one. 16 MS. SHELLMIRE: The last one. 17 MS. YEE: When was the initial one? 18 MS. SHELLMIRE: The initial one was back 19 March -- I want to say March of '09, but I know I did it 20 again in December, December of '09. And this last time 21 was May 11th. They kept saying they had not received 22 it. 23 MS. YEE: Okay. So -- okay, and then this 24 exhibit -- let me see, Exhibit 4 -- I'm sorry, could you 25 describe what that is again, the IRS correspondence 26 that's dated May 12th. 27 MS. SHELLMIRE: Let me go to it. 28 Exhibit 4 should actually be wage income 8 1 statement transcript from IRS. Is that what you're 2 talking about? And then the other one would be the 3 actual account transcript of what transpired on my 4 account for that year. 5 MS. YEE: Okay. I see. All right. So, at 6 this point we don't have any documentation indicating 7 that the IRS is actually reconsidering your case? 8 MS. SHELLMIRE: Not from IRS, no. I only have 9 the verbal confirmation. I do not have a written 10 confirmation. 11 MS. YEE: Okay. All right. Let us hear from 12 the Franchise Tax Board and then I just want to see what 13 it is that we specifically need -- 14 MS. SHELLMIRE: Okay. 15 MS. YEE: -- with respect to whether your issue 16 is still pending -- your matter is still pending before 17 the Internal Revenue Service. 18 Okay, Franchise Tax Board. 19 MS. SMITH: Thank you, Madam Chair, Members. 20 My name is Karen Smith. Sitting with me today is Jozel 21 Brunett, and we represent the Franchise Tax Board. 22 Ms. Shellmire and I have spoken several times 23 over the last few weeks trying to see if we could at 24 least get a partial substantiation of some of the 25 expenses and she's indicated to me that she doesn't 26 dispute the expenses that were disallowed and as she 27 said she only disputes the amount of income that was 28 reflected on her return. She said there was some double 9 1 counting. 2 She faxed me approximately 100 pages of 3 documents. I believe that what's here today was faxed 4 to me as well as some additional documents. We couldn't 5 reconcile it and determine whether or not it was double 6 counted with the information that we had. 7 As she indicated today, nothing from the IRS 8 shows that they are going to process the amended return 9 and reconsider the audit. If in fact that they do that 10 and your Board decides against her today she can always 11 file a claim for refund or if she hasn't fully paid the 12 amount of our proposed assessment then she -- if she 13 notifies us then we can adjust the amount and not 14 collect the full amount if the IRS does reduce the 15 amount of the assessment. 16 Or if she could give us information to show 17 that in fact the income that was reported on her return 18 was somehow double counted, but I don't have anything 19 that tells me that it was. 20 So without that there's no way to make any 21 adjustments to the proposed assessment that we have 22 done. 23 MS. YEE: Ms. Mandel. 24 MS. MANDEL: So what she's saying is when she 25 input she thinks she put the information from the 26 1099s -- 27 MS. SMITH: Some of them. 28 MS. MANDEL: -- in twice. Or some -- some of 10 1 them. 2 MS. SMITH: Yes. 3 MS. MANDEL: And -- and so with all the 1099 4 and W-2 information you just can't make the -- you 5 haven't been able to make the math work? 6 MS. SMITH: Because it appears there's maybe 7 some additional income in there. I mean, if you -- if 8 you look at it it's not exactly double what's on the 9 1099 in most instances. So, it's -- and even if it were 10 it's still kind of hard because it's not listed -- it's 11 listed on the -- on a Schedule C as receipts. And so 12 therefore it's a little hard to figure out what all of 13 those were. 14 MS. MANDEL: And -- and that's the -- the 15 income is as originally reported? 16 MS. SMITH: Yes. 17 MS. MANDEL: So the IRS made adjustments to the 18 expenses. 19 MS. SMITH: Expenses. Not to the income. 20 MS. MANDEL: And you did this on -- using 21 computer software. 22 MS. SHELLMIRE: Turbo Tax. 23 MS. MANDEL: Turbo Tax. I know it's a pretty 24 old -- relatively old year. Did you -- did you print 25 out the entire thing that Turbo Tax spits out or just 26 the returns when you did it? Do you have a copy or do 27 you still have it on your computer of the entire -- 28 MS. SHELLMIRE: All the forms in it -- yeah. 11 1 MS. MANDEL: Yeah. 2 MS. SHELLMIRE: I know what you're talking 3 about. It may still be on the computer, yes, because I 4 still have that computer. 5 MS. MANDEL: Because if you -- if you still 6 have it on your computer, it would -- if you didn't -- 7 because I see that you did your 540X by hand. 8 MS. SHELLMIRE: Uh-huh. 9 MS. MANDEL: If you still have it on your 10 computer the -- all of the entries that you make 11 would -- would still be in there, you'd be able -- at 12 least if they can't -- if -- you'd be able to see by 13 printing out every single worksheet and schedule or 14 going in and getting the -- excuse me, the part where 15 you -- you know, you input each one separately, might be 16 able to see what things were added in more than once or 17 what -- what the mistake was. 18 Because if you have -- if you have -- if you 19 didn't have anything besides 1099s and the W-2, some 20 combination presumably adds up to the number you put on 21 your return, but for you to know what you actually did 22 if you -- if you still had it accessible on your 23 computer you ought to be able to see those worksheets 24 and print them out, which would help then understanding 25 what -- what -- what's in the number. 26 MS. SHELLMIRE: I understand what you're 27 saying. 28 MS. MANDEL: Yeah. 12 1 MS. YEE: So, is that accessible? 2 MS. SHELLMIRE: Yes, I still have the computer 3 so I -- I'd have to go back back and go through 4 everything and print out every single page, the ones 5 that's not for filing but for your records, that's what 6 she's talking about -- 7 MS. MANDEL: Yeah, for your records. 8 MS. SHELLMIRE: -- where it has the worksheets 9 and stuff. 10 MS. YEE: Right. 11 MS. MANDEL: Yeah. Because you're only looking 12 at the one little part. 13 MS. YEE: Okay. 14 MS. MANDEL: The concept. 15 MS. YEE: That's a good thought. 16 Other questions, Members? 17 Ms. Shellmire, do you have anything else to add 18 at this point? 19 MS. SHELLMIRE: No, unless I can ask some 20 request for time to get the information that she needs. 21 MS. YEE: Okay. Actually, let me go back 22 just -- I'm sorry, let me -- I didn't mean -- to be on 23 the Franchise Tax Board, is -- so you've attempted to 24 reconcile kind of everything -- 25 MS. SMITH: We looked at the information she 26 sent and there just wasn't enough there. 27 MS. YEE: Okay. Okay, and would these 28 worksheets presumably help some? 13 1 MS. SMITH: They might. 2 MS. YEE: Okay. 3 MS. SMITH: Without looking at them I can't say 4 for sure but I'm happy to look at whatever she submits. 5 MS. YEE: Okay. Okay. Members, why don't we 6 look at Ms. Shellmire -- if we gave you some additional 7 time could you pull up whatever other worksheets -- 8 MS. SHELLMIRE: Yes. 9 MS. YEE: -- and documents you may have? 10 MS. SHELLMIRE: Yes. 11 MS. YEE: -- that may help the Franchise Tax 12 Board try to reconcile what you've got, and hopefully in 13 that intervening time you'll have some correspondence 14 back from the Internal Revenue Service. 15 MS. SHELLMIRE: Okay. 16 MS. YEE: Okay. Is there a motion? 17 MS. STEEL: 30-30-30. 18 MR. HORTON: Second. 19 MS. YEE: Okay. A motion by Ms. Steel to move 20 a 30-30-30 to allow Ms. Shellmire to provide additional 21 information and documentation. 22 Is there a second -- second by Mr. Horton, 23 excuse me. 24 Without objection, that motion carries. 25 Let me have the Appeals Division -- oh, I'm 26 sorry, Ms. Kelly, do you want to just outline the 27 schedule? 28 MS. KELLY: It just occurred to me, if the IRS 14 1 responds that they've opened the tax year, would the 2 Board be interested in deferring to wait and see what 3 the IRS does? 4 MS. YEE: I think that would be appropriate. 5 MS. KELLY: So I'm thinking how to combine the 6 30-30-30 with -- I think perhaps Appellant should be 7 asked when she -- if she receives something from the IRS 8 during the 30-30-30 process, which is basically in the 9 next three months -- 10 MS. SHELLMIRE: Okay. 11 MS. KELLY: -- that you should provide that to 12 both the Franchise Tax Board and to the Board of 13 Equalization. 14 MS. SHELLMIRE: Okay. 15 MS. KELLY: And we would postpone the 16 proceedings until we know what the IRS has decided. 17 MS. SHELLMIRE: Okay. 18 MS. YEE: Okay. So -- 19 MS. MANDEL: But if -- but if she has the other 20 material -- 21 MS. YEE: She can provide that in the meantime. 22 MS. MANDEL: -- from -- from the -- the 23 computer, she could provide that anyway because it 24 sounds like the fight with the IRS is going to be over 25 the same thing. And -- 26 MS. KELLY: So the process -- 27 MS. MANDEL: -- and it may be that -- it may be 28 possible that FTB is able to at least resolve some part 15 1 of it and maybe there's something else from IRS, but it 2 sounds like they're kind of looking at the same thing. 3 MS. YEE: So -- 4 MS. KELLY: Well, what I'm thinking is in the 5 next 30 days she may or may not hear from the Appeals 6 office -- 7 MS. YEE: Right. 8 MS. KELLY: -- the IRS, that would be rather 9 quick, I think -- 10 MS. YEE: Right. 11 MS. KELLY: -- within 30 days. But if within 12 the three-month period she hears from the IRS, and I 13 think she should, then she should notify both Franchise 14 Tax Board -- 15 MS. YEE: Right. 16 MS. KELLY: -- and the Board of Equalization, 17 and we can proceed accordingly. 18 MS. YEE: Right. Okay. 19 MR. HORTON: Right. 20 MS. YEE: Okay. So, Ms. Shellmire, that's 21 going to be very critical, once you hear from the 22 Internal Revenue Service to notify both the Franchise 23 Tax Board and our Appeals Division. 24 MS. SHELLMIRE: Yes. 25 MS. YEE: Okay. 26 MS. SMITH: May I clarify, but she's still 27 supposed to -- and within 30 days send both of us the 28 information -- 16 1 MS. YEE: Yes. 2 MS. SMITH: -- from her computer -- 3 MS. YEE: Yes. 4 MS. SMITH: Correct? 5 MS. YEE: Yes. 6 MS. KELLY: Exactly. 7 MS. SMITH: Okay. 8 MS. YEE: Okay. 9 So if you do hear from the Internal Revenue 10 Service that your matter is indeed open and pending then 11 we will look at postponing the proceeding here until we 12 find out what the IRS determination is. 13 MS. SHELLMIRE: Okay. 14 MS. YEE: Okay. But in the meantime please 15 provide the documentations we talked about off of your 16 computer. 17 MS. SHELLMIRE: Yes. 18 MS. YEE: Okay. Very well. 19 Any -- any other thoughts, clarification? 20 Ms. Kelly, do you want to go through that time 21 line of the 30-30-30 or -- 22 MS. KELLY: Certainly. You will receive a 23 letter from the Appeals Division laying out what you're 24 being asked to provide and the deadline. And then 25 you'll have 30 days to respond. 26 And after that Franchise Tax Board will have a 27 chance to review what you've submitted and provide their 28 response to us. 17 1 And then after that the Appeals Division has 30 2 days to prepare a recommendation for the Board. And 3 within that time you should notify us if you hear from 4 the IRS. 5 MS. SHELLMIRE: Along with the stuff from the 6 computer. 7 MS. KELLY: Right. But that will be first. 8 MS. SHELLMIRE: Okay. 9 MS. KELLY: That will be within 30 days. 10 MS. SHELLMIRE: Okay. 11 MS. YEE: Right. Okay. Very well. 12 Thank you very much. 13 MS. SHELLMIRE: Thank you. 14 ---oOo--- 15 16 17 18 19 20 21 22 23 24 25 26 27 28 18 1 REPORTER'S CERTIFICATE. 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, BEVERLY D. TOMS, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 June 15, 2010 I recorded verbatim, in shorthand, to the 10 best of my ability, the proceedings in the 11 above-entitled hearing; that I transcribed the shorthand 12 writing into typewriting; and that the preceding 18 13 pages constitute a complete and accurate transcription 14 of the shorthand writing. 15 16 Dated: July 21, 2010. 17 18 19 20 ____________________________ 21 BEVERLY D. TOMS 22 Hearing Reporter 23 24 25 26 27 28 19