T.C. Memo. 1996-345
UNITED STATES TAX COURT
KENNETH W. DIERCKS, Petitioner v. COMMISSIONER
OF INTERNAL REVENUE, Respondent
Docket No. 3568-95. Filed July 30, 1996.
Kenneth W. Diercks, pro se.
David W. Sorensen, for respondent.
MEMORANDUM OPINION
CHIECHI, Judge: Respondent determined the following
deficiencies in, and additions to, petitioner's Federal income
tax:
Additions to Tax
Year Deficiency Section 6651(a)(1)1 Section 6654(a)
1987 $10,493 $2,623 $566
1988 10,658 2,665 681
1
All section references are to the Internal Revenue Code in
effect for the years at issue. All Rule references are to the
Tax Court Rules of Practice and Procedure.
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1989 9,958 2,490 674
1990 9,665 2,416 636
1991 7,204 1,801 412
1992 5,674 1,419 247
The issues for decision are:
(1) Did petitioner have unreported income for each of the
years at issue? We hold that he did.
(2) Is petitioner liable for self-employment tax for each
of the years at issue? We hold that he is.
(3) Is petitioner liable for the addition to tax under
section 6651(a)(1) for each of the years at issue? We hold that
he is.
(4) Is petitioner liable for the addition to tax under
section 6654(a) for each of the years at issue? We hold that he
is.
Petitioner resided at Sparks, Nevada, at the time the
petition was filed.
Petitioner did not file a U.S. income tax return for any of
the years 1987 through 1992.
During the years 1987 through 1992, petitioner worked and
earned income. However, he failed to keep records of the type or
amount of work he performed, or of the amount of income he
received from his work, during those years.
During the years at issue, petitioner was married and had
three children who lived with him and his wife, Bonnie Diercks
(Ms. Diercks), at their residence (residence) and who attended
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school. During those years, petitioner owned an automobile, and
he, Ms. Diercks, and their three children sought medical treat-
ment as required. During the years at issue, rent paid on
petitioner's residence equaled at least $725 a month, and utili-
ties were paid at that residence. In an application to rent that
petitioner signed on March 13, 1989, petitioner indicated that
"current monthly income" was $3,000.
During 1988, 1989, 1990, and 1991, Ms. Diercks received
annual wages in the amounts of $2,725, $6,362, $12,748, and
$20,929, respectively.
Petitioner bears the burden of proving that respondent's
determinations in the notice of deficiency (notice) are errone-
ous. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).
Section 6001 requires all taxpayers to maintain sufficient
records to enable respondent to determine their correct tax lia-
bilities. In the absence of adequate books or records, "the com-
putation of taxable income shall be made under such method as, in
the opinion of the Secretary, does clearly reflect income." Sec.
446(b). The choice of method to be used in reconstructing income
lies with respondent. Estate of Rau v. Commissioner, 301 F.2d
51, 54 (9th Cir. 1962), affg. T.C. Memo. 1959-117; Schellenbarg
v. Commissioner, 31 T.C. 1269, 1277 (1959), affd. in part and
revd. in part on another issue 283 F.2d 871 (6th Cir. 1960).
In the notice, respondent used the Bureau of Labor Statis-
tics to reconstruct petitioner's income. This Court and other
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courts have approved the use of those statistics as an acceptable
and reasonable method of reconstructing income. E.g., Pollard v.
Commissioner, 786 F.2d 1063, 1066 (11th Cir. 1986), affg. T.C.
Memo. 1984-536; Giddio v. Commissioner, 54 T.C. 1530, 1532-1533
(1970).
Petitioner admitted at trial that he worked and earned
income during the years at issue, but he claimed that he earned
no more than $500 during each of those years. However, peti-
tioner acknowledged at trial that during the years at issue he
and his family lived at a residence for which the rent paid
equaled at least $725 a month. He also admitted that utilities
were paid at that residence. In addition, petitioner acknowl-
edged at trial that during the years at issue he owned an automo-
bile and that other normal living expenses were paid for him and
his family.
We found petitioner's testimony, which was at times vague
and evasive, to be suspect. We question petitioner's testimony
that he earned no more than $500 during each of the years at
issue.2
2
Indeed, petitioner's testimony that he earned no more than
$500 during each of the years at issue is inconsistent with other
evidence in the record. For example, the application to rent
dated Mar. 13, 1989, which he signed, indicated "current monthly
income" of $3,000. Even assuming arguendo that the "current
monthly income" of $3,000 that petitioner listed in the
application to rent dated Mar. 13, 1989, were the combined
"current monthly income" of Ms. Diercks and himself, the Internal
Revenue Service's information returns master file transcript for
(continued...)
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On the record before us, we find that petitioner failed to
prove error in respondent's determinations that he had income in
the amounts determined in the notice for each of the years 1987
through 1992. We further find on that record that petitioner
failed to show that he is not liable for each of the years at
issue for (1) the addition to tax under section 6651(a)(1),
(2) the addition to tax under section 6654(a), and (3) self-
employment tax, as determined in the notice. Accordingly, we
sustain respondent's determinations in the notice.
To reflect the foregoing,
Decision will be entered
for respondent.
2
(...continued)
Ms. Diercks shows that Ms. Diercks received wages of only $6,362
for 1989 or approximately $530 a month during that year.