Boxer Disputes Unreported Income from Fights

PETITION

Petitioner hereby petitions for re-determination of the deficiency set forth by the Commissioner of Internal Revenue in his Notice of Deficiency (Letter Number 894 (RO)-c; Service Symbols: AP:SB:LA:DJP), dated May 7, 2001, and as the basis for his case alleges as follows:

1. Petitioner's legal residence is Culiacan, Sinaloa, Mexico (Cerro De La Campana #362, Esquina Con Cerro De Las Siete Gotas, Colinas De San Miguel). Petitioner's mailing address is: c/o Mark Boyer, C.P.A., 111 Elm Street, #425, San Diego, CA 92101-2697. Petitioner's Taxpayer Identification Number is [TIN omitted]. The tax return for the period here involved was filed with the Office of Internal Revenue Service in Philadelphia, PA.

2. The Notice of Deficiency (a copy of which is attached as Exhibit "A") was mailed to the Petitioner on May 7, 2001, and was issued by the Appeals Office located at 300 North Los Angeles Street, MS LA-8000, Room 3054, Los Angeles, CA 90012.

3. The deficiency as determined by the Commissioner is in income taxes for the calendar year 1997, in the amount of $455,023.00, all of which is in dispute.

4. The determinations of tax set forth in the Notice of Deficiency are based upon the following errors:

(a) The Commissioner erred in determining that Petitioner under- reported income attributable to the performance of personal services in the United States and/or royalties for the use of property within the United States in the amount of $1,200,000.00 for the calendar tax year 1997.

(b) The Commissioner erred in determining a reduction to Petitioner's itemized deductions in the amount of $15,235 for the calendar tax year 1997.

5. The facts upon which Petitioner relies as the basis of his case are as follows:

(a) The amount determined by the Commissioner to represent U.S. personal service income and/or U.S. source royalty income constitutes consideration paid to Petitioner for the sale by Petitioner of intangible personal property rights associated with certain professional boxing matches in the United States in which Petitioner was a participant.

(b) Petitioner was the author and initial owner of such property rights.

(c) Petitioner contracted to sell such property rights.

(d) Petitioner was at all times relevant to the sale of such property rights an independent contractor and not an employee.

(e) Petitioner is and was at all times relevant hereto a non- resident alien of the United States.

(f) Such sales of property rights were not attributable to any office, fixed place of business or permanent establishment maintained in the United States by Petitioner; further, Petitioner at no time maintained any office, fixed place of business or permanent establishment in the United States; further, Petitioner has never retained a United States based agent who had authority to conclude contracts on Petitioner's behalf.

(g) The payments in consideration of such sales were not contingent on the productivity, use or disposition of the property sold.

(h) Such amounts were not otherwise effectively connected with the conduct of a trade or business in the United States.

(i) Petitioner is informed and believes, and thereupon alleges, that the consideration for such sales was attributable to property rights used, disposed of and/or consumed outside the United States.

(j) Based on the foregoing, such amounts constitute non-U.S. source income not effectively connected with the conduct of a trade or business in the United States, and are therefore not subject to U.S. taxation.

(k) Alternatively, such amounts constitute royalties paid to Petitioner for the license of such intangible personal property rights; Petitioner is informed and believes, and thereupon alleges, that such royalties relate to property used outside of the United States; further, such royalties were not attributable to any office, fixed place of business or permanent establishment maintained in the United States by Petitioner; further, any such royalties are subject to treatment under the U.S.-Mexico Income Tax Treaty.

6. The Commissioner erred in failing to mail the Statutory Notice of Deficiency for Petitioner's 1997 tax year to Petitioner's last known address. Petitioner is informed and believes, and thereupon alleges, that the Commissioner failed to mail the Statutory Notice of Deficiency for 1997 to Petitioner's known residence address in Culiacan, Mexico.

WHEREFORE, Petitioner prays as follows:

A. That the Court determine that there is no deficiency in income tax for Petitioner's calendar tax year 1997.

B. For such other and further relief as the Court deems just.

Dated: August 3, 2001

[Editor's Note: The attachment has been omitted. However, this document in its entirety can be obtained through our Tax Analysts' Access Service as Doc 2001-24584 (13 pages) [PDF].]