Full Opinion

United States Tax Court T.C. Memo. 2026-114 ANTHONY J. MOISESHYN AND MAI MOISESHYN, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent __________ Docket No. 6587-24. Filed November 4, 2026. __________ Anthony J. Moiseshyn and Mai Moiseshyn, pro sese. Carlos S. Abarca Rodriguez, Krystle J. Andujar Garcia, Kimberly A. Santos, and Christine A. Fukushima, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION FUNG, Judge: Petitioners seek redetermination of adjustments in a Notice of Deficiency issued by the Internal Revenue Service (IRS or respondent) for tax year 2021. Respondent determined that petitioners failed to report capital gain, dividend, and interest income on their 2021 joint tax return and are therefore liable for a tax deficiency of $7,295 and a section 6662(a) 1 accuracy-related penalty of $2,129. Respondent conceded the section 6662(a) penalty. 2 For the reasons set forth below, we hold for respondent. 1 Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C. (I.R.C.), in effect at all relevant times, regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and Rule references are to the Tax Court Rules of Practice and Procedure. 2 On February 20, 2026, respondent conceded the section 6662(a) accuracy- related penalty in his Pretrial Memorandum. Served 11/04/26 2 [*2] FINDINGS OF FACT We draw the following facts from the Stipulation of Facts and attached Exhibits, which were admitted at trial, and the testimony of Mr. Moiseshyn. Petitioners resided in California when the Petition was filed. 3 We held a trial in this case during the Court’s Los Angeles, California, session. I. Mr. Moiseshyn’s Employment From 1999 until his retirement in 2025, petitioner Anthony J. Moiseshyn worked as a sales representative for Medtronic PLC (Medtronic). 4 As a benefit of his employment, Mr. Moiseshyn was eligible to participate in the Medtronic Employee Stock Purchase Plan (ESPP), a program open to all full-time employees and designed to encourage stock ownership and retention. The Medtronic ESPP was administered through Fidelity Brokerage Services LLC (Fidelity). 5 Eligible employees enrolled online and could elect to contribute between 2% and 10% of their eligible compensation toward the purchase of Medtronic stock. Participants could acquire Medtronic stock quarterly at 85% of its fair market value during the applicable purchase period. Participants could also adjust their contribution percentages from year to year depending on their financial circumstances. The Medtronic ESPP summary materials 6 described the tax consequences associated with the acquisition and subsequent 3 Absent any stipulation to the contrary, our decision in this case is appealable to the U.S. Court of Appeals for the Ninth Circuit. See I.R.C. § 7482(b). 4 Mr. Moiseshyn had retired from Medtronic as the principal sales representative at the time of trial. 5 Fidelity was the brokerage company facilitating the Medtronic ESPP purchases and sales. At trial the parties referred to Fidelity when discussing the reporting of the securities sale. 6 We admitted Exhibit 9-P over respondent’s relevance objection that any information in the document would have no bearing on the treatment of petitioners’ income for 2021. Exhibit 9-P, titled “2024 Employee Stock Purchase Plan Summary,” for Medtronic, is dated December 2023. Mr. Moiseshyn stated that he did not think the wording changed from 2021 to 2024 because when he asked Medtronic for the wording for 2021, they had provided this document to him. Although we admitted Exhibit 9-P as a document reflecting the Medtronic ESPP for 2024, we note that our general description of the Medtronic ESPP is based on this document. However, we draw no conclusions from Exhibit 9-P regarding petitioners’ proper tax reporting for 2021. 3 [*3] disposition of ESPP shares. Depending on the applicable holding period, some or all of the discount received upon purchase could be treated as ordinary income reportable on the participant’s Form W–2, Wage and Tax Statement. If a participant made a “disqualifying disposition” by selling shares before completing the two-year holding period, then ordinary income generally equaled the difference between the stock’s fair market value on the purchase date and the participant’s purchase price. Any additional gain in excess of the amount treated as ordinary income generally constituted capital gain. Mr. Moiseshyn regularly acquired and disposed of stock through the Medtronic ESPP. From March 31, 2015, through March 31, 2020, as relevant to the tax year at issue, he acquired numerous shares of Medtronic stock through Fidelity, accumulating an aggregate cost basis of $57,498.37. On June 2, 2021, Mr. Moiseshyn sold those shares for aggregate proceeds of $99,805.16, generating gain of $42,306.79. National Financial Services, LLC (National Financial Services), reported the transaction on Forms 1099–B, Proceeds From Broker and Barter Exchange Transactions. II. Tax Year 2021 During 2021 petitioners received dividend income totaling $1,345 from Charles Schwab & Co., Inc. (Charles Schwab), and National Financial Services, and interest income of $146 from a tax refund issued by the U.S. Department of the Treasury (U.S. Treasury). That same year, Medtronic issued Mr. Moiseshyn Form W–2, reporting wages and other compensation of $272,568 in Box 1. Petitioners’ principal sources of income during 2021 were Medtronic, Stunning Wellness and Laser, and Moiseshyn Inc. Mr. Moiseshyn’s compensation from Medtronic consisted of a bimonthly salary and quarterly sales commissions paid under a term agreement, the amount of which fluctuated from quarter to quarter. Petitioners hired a tax return preparer to file their joint tax return for 2021. According to petitioners, their tax preparer believed that all income attributable to Medtronic, including compensation and income related to the stock sale, had already been reflected in the $272,568 figure reported on Mr. Moiseshyn’s Form W–2. Consistent with that understanding, petitioners neither reported the sale of the Medtronic stock on their 2021 joint tax return nor attached Schedule D, Capital Gains and Losses, reporting capital gain from the stock sale. 4 [*4] Respondent examined petitioners’ 2021 joint tax return. Relying on Forms 1099–DIV, Dividends and Distributions; Forms 1099–B; Form 1099–INT, Interest Income; and Forms W–2, respondent determined that petitioners had unreported income totaling $43,800, consisting of $42,309 in gain from the sale of securities, $1,345 in dividends, and $146 in interest. On January 22, 2024, respondent issued the Notice of Deficiency. On March 4, 2026, the parties filed a Stipulation of Facts, in which respondent agreed to increase petitioners’ basis in the Medtronic stock from $57,498.37 to $67,658.42. As a result of that adjustment, the remaining amount in dispute attributable to the stock sale is $32,146.74. OPINION I. Burden of Proof The Commissioner’s determinations in a Notice of Deficiency are generally presumed correct, and the taxpayer bears the burden of proving them erroneous. See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). In the context of unreported income, the Ninth Circuit has held that before the Notice of Deficiency is entitled to a presumption of correctness, such determinations must be supported by substantive evidence to connect the taxpayer with the income-producing activity, Weimerskirch v. Commissioner, 596 F.2d 358, 361–62 (9th Cir. 1979), rev’g 67 T.C. 672 (1977), or must demonstrate that the taxpayer actually received income, Edwards v. Commissioner, 680 F.2d 1268, 1270–71 (9th Cir. 1982) (per curiam). Respondent produced the following substantive evidence establishing the requisite link between petitioners and each source of income at issue: (1) Forms 1099–B reflecting gain from sales of securities from National Financial Services; (2) Forms 1099–DIV reflecting dividends received from Charles Schwab and National Financial Services; and (3) Form 1099–INT reflecting interest received from the U.S. Treasury. The Commissioner may not rely solely on third-party information reporting if the taxpayer raises a reasonable dispute as to the accuracy of the third-party reporting. See I.R.C. § 6201(d). Petitioners did not challenge or address the accuracy of the Forms 1099–B, 1099–DIV, or 1099–INT, so we conclude that respondent has established the required minimal evidentiary foundation with respect to the income. 5 [*5] Once the Commissioner establishes the requisite evidentiary foundation, the burden shifts to the taxpayer to prove by a preponderance of the evidence that the Commissioner’s determination of income is arbitrary or erroneous. Delaney v. Commissioner, 743 F.2d 670, 671 (9th Cir. 1984), aff’g T.C. Memo. 1982-666. Mr. Moiseshyn credibly testified to his understanding of the reporting of the Medtronic ESPP stock sales and offered Exhibits to support that understanding; however, for the reasons below, the Court is not persuaded that petitioners have shown that respondent’s determination was incorrect. II. Unreported Income “[G]ross income means all income from whatever source derived,” including, as relevant here, gains derived from dealings in property, interest, and dividends. See I.R.C. § 61(a)(3), (4), (7). Petitioners had three types of unreported income for tax year 2021. We address each in turn. A. Securities Income from the Medtronic ESPP Section 423 allows for the favorable tax treatment of transfers of stock for the exercise of options granted by an employee stock purchase plan as defined in section 423(b). See I.R.C. § 421. Section 423(c) determines the amount of compensation recognized when the option price is between 85% and 100% of the value of the stock. As relevant here, Mr. Moiseshyn would receive favorable treatment on a portion of the gain if he satisfied the holding period requirements of section 423(a)(1) before his disposition of the Medtronic ESPP stock. 7 Mr. Moiseshyn contends that petitioners are not liable for tax on the gain from the disposition of the Medtronic ESPP stock solely because that income was already included in the $272,568 in Box 1 of his Form W–2 from Medtronic. He testified that Medtronic did not provide him with any information about how to report the sale of the Medtronic ESPP shares and that his only guidance was to direct any questions concerning the equities to Fidelity, which he described as acting “as a 7 Section 423 provides favorable tax treatment only for stock acquired pursuant to a qualified employee stock purchase plan. See also I.R.C. § 421. The parties did not meaningfully dispute whether the Medtronic ESPP satisfied the requirements of a qualified plan, and neither party developed the issue at trial. See Leahy v. Commissioner, 87 T.C. 56, 73–74 (1986) (finding that arguments not advanced are treated as abandoned). Accordingly, we assume that the Medtronic ESPP qualified for treatment under sections 421 and 423 and analyze the parties’ arguments on that basis. 6 [*6] fiduciary” over the shares. He stated that he felt “kind of caught in the middle” between Medtronic and Fidelity, each company pointing him to the other for the information he sought. Mr. Moiseshyn further testified that nothing Medtronic gave him affirmatively stated that the ESPP proceeds were included, in whole or in part, within the wages reported in Box 1 of his Form W–2. His position rests primarily on the wording in Fidelity’s tax reporting materials, specifically the document titled “Employee Stock Purchase Plan (Qualified)” admitted at trial as Exhibit 8-P. Exhibit 8-P states that “ESPP income will usually be included with . . . other compensation in [B]ox 1.” (Emphasis added.) But Exhibit 8-P also explains that employees may be required to report ordinary income upon disposition of ESPP shares and remain responsible for reporting such income even if it is not reflected on a Form W–2. Thus, Exhibit 8-P neither establishes that the gain from Mr. Moiseshyn’s stock disposition was included in Box 1 of his Form W–2 nor otherwise indicates how Mr. Moiseshyn’s stock disposition was reported. Given the disclaimers in Exhibit 8-P, Mr. Moiseshyn should have understood that Medtronic was not providing any certainty regarding the reporting of income on his Form W–2, and more importantly, that it was petitioners’ responsibility to report and pay any tax related to a stock sale. Mr. Moiseshyn did not provide a pay statement from Medtronic for tax year 2021, any documents from Medtronic describing how the Medtronic ESPP proceeds were reported in 2021, or any contact information for a Medtronic employee who could confirm his claim. He testified that he reached out to Medtronic to request a 2021 pay statement but was unable to obtain one and did not have a copy in his possession. To support his position, Mr. Moiseshyn requested that the Court admit Exhibit 9-P, “2024 Employee Stock Purchase Plan Summary,” and Exhibit 10-P, “2024 Employee Stock Purchase Plan.” At his request, we admitted both Exhibits; however, these documents discuss the purpose of the Medtronic ESPP and provide guidance on purchasing ESPP stock. The documents do not clarify whether the gain from the sale of the Medtronic ESPP stock was included on Mr. Moiseshyn’s 2021 Form W–2. Even if they did, they do not pertain to the tax year at issue. We are not convinced that the gain from the disposition of Mr. Moiseshyn’s Medtronic ESPP stock was included in the wages reported on his 2021 Form W–2. A taxpayer bears the burden of substantiating factual claims supporting a challenge to a deficiency determination. See 7 [*7] generally Hradesky v. Commissioner, 65 T.C. 87, 89–90 (1975), aff’d per curiam, 540 F.2d 821 (5th Cir. 1976). Petitioners rely on their interpretation of generalized statements in Fidelity’s tax-reporting materials rather than on evidence showing how Medtronic actually reported Mr. Moiseshyn’s compensation. See Tokarski v. Commissioner, 87 T.C. 74, 77 (1986) (finding that the Court is not required to accept self-serving testimony without any evidence provided to support it). The materials petitioners rely upon expressly state that ESPP income is “usually” included in Box 1 wages and caution that employees remain responsible for reporting ordinary income if their employer does not include it on a Form W–2. The Exhibits petitioners submitted likewise do not address the reporting of the stock disposition at issue and, in any event, relate to a different tax year. Accordingly, petitioners have not proved that they are not liable for tax on $32,146.74 in unreported securities income. B. Dividends from Charles Schwab and National Financial Services Section 61(a)(7) provides that gross income includes dividends. Respondent determined that petitioners failed to report dividend income from Charles Schwab and National Financial Services totaling $1,345, as reflected on Forms 1099–DIV. Petitioners stipulated that they received taxable dividend income of $1,345 and did not offer any argument or evidence to dispute respondent’s determinations. We therefore sustain respondent’s determinations with respect to dividend income from Charles Schwab and National Financial Services. C. Interest from the U.S. Treasury Section 61(a)(4) provides that interest credited to a taxpayer constitutes gross income and is fully taxable. See Treas. Reg. § 1.61-7. Respondent determined that petitioners failed to report $146 of interest credited to them from the U.S. Treasury. Petitioners stipulated that they received interest income from the IRS of $146.14 and did not offer any argument or evidence to dispute respondent’s determination. Neither party addressed the $0.14 difference. Acknowledging the stipulated amount, we sustain respondent’s determination with respect to interest income from the U.S. Treasury. 8 [*8] III. Conclusion For the foregoing reasons, we hold that petitioners are liable for tax on unreported securities income of $32,146.74, dividend income of $1,345, and interest income of $146. We have considered all of the arguments made by the parties and, to the extent not mentioned above, we conclude that they are moot, irrelevant, or without merit. To reflect the foregoing, Decision will be entered under Rule 155.