Ahmad v. Commissioner

T.C. Memo. 1997-85

UNITED STATES TAX COURT

SALAHEDDIN AHMAD AHMAD, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 18260-94. Filed February 19, 1997.

Janice Burns King, for petitioner.

Lawrence B. Austin, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

PARR, Judge: Prior to issuing a notice of deficiency,

respondent made a jeopardy assessment against petitioner for

1991, 1992, and 1993, as follows:

Additions to Tax
Year Sec. 6651(a)(1) Sec. 6654
1991 $1,489 $342
1992 6,114 1,068
1993 2,842 1,191
 -2-

Within 60 days of making the jeopardy assessment, respondent

determined deficiencies in, and additions to, petitioner's

Federal income tax for 1991, 1992, and 1993 as follows:

Additions to Tax
Year Deficiency Sec. 6651(a)(1) Sec. 6654
1991 $5,957 $1,489 $344
1992 24,457 6,114 1,069
1993 28,416 7,104 1,191

The issues for decision are: (1) Whether respondent's notice

of deficiency was arbitrary. We hold it was not. (2) Whether

petitioner has unreported income for the tax years 1991, 1992,

and 1993. We hold he does, to the extent set out below. (3)

Whether petitioner is liable for self-employment tax for 1991,

1992, and 1993. We hold he is. (4) Whether petitioner is liable

for an addition to tax under section 6651(a)(1)1 for 1991, 1992,

and 1993 for failure to file Federal income tax returns. We hold

he is, to the extent set out below. (5) Whether petitioner is

liable for an addition to tax under section 6654 for 1991, 1992,

and 1993 for the failure to make estimated tax payments. We hold

he is, to the extent set out below.

1
All section references are to the Internal Revenue Code in
effect for the years in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure, unless otherwise
indicated. All dollar amounts are rounded to the nearest dollar,
unless otherwise indicated.
 -3-

FINDINGS OF FACT

Some of the facts have been stipulated and are so found.

The stipulated facts and the accompanying exhibits are

incorporated into our findings by this reference. At the time

the petition in this case was filed, petitioner resided in

Calhoun, Georgia (Calhoun).

I. General Background--Petitioner

In 1984, petitioner came to the United States from the

Kingdom of Jordan on a student visa to attend college. At the

time petitioner came to this country, his brother, Mr. Saleh

Rashid (Saleh),2 was already attending college at Kennesaw State

College, later transferring to a different university. On April

1, 1989, petitioner received a bachelor of science degree in

Computer Science from Kennesaw State College.

During 1991, 1992, and 1993, petitioner held checking

account No. 21-227-133 (checking account) and savings accounts

Nos. 05-258-873 (savings account #1), 21-227-144 (savings account

#2), 05-866-293 (savings account #3), and 05-866-304 (savings

account #4), with Wachovia Bank (Wachovia), 315 South Wall

2
In response to a query by the Court, petitioner explained
that four of his brothers have a surname that is different from
Ahmad, the one he shares with his parents, as a result of a
clerk's error in updating the Jordanian civil registration system
15 years ago. Petitioner testified that the family's correct
surname is Rashid. Petitioner noted however, that because "it
takes so much effort to go back and correct everything, * * * we
said, It is not a big deal. And that is why we have, you know,
two different last names."
 -4-

Street, Calhoun, Georgia. Petitioner made deposits in his

checking and savings accounts totaling $24,300 in 1991, $90,120

in 1992, and $126,141 in 1993.

Petitioner married Tonia Judd (Tonia) in April 1991, and

they were divorced on December 5, 1991.3 During the divorce

proceedings, petitioner withdrew $11,000 from his bank accounts,

including the proceeds of three certificates of deposit.4 He

transferred $6,000 to a cousin and $5,000 to a friend, because of

his fear that his wife "might get some of the money." Later that

year, after the divorce papers were signed, the transferees

returned the money, plus interest, by check, and petitioner

redeposited the funds in his checking account.

Petitioner became a resident alien in 1991. Prior to that

time, petitioner's immigration status did not permit him

employment. The terms of the visa notwithstanding, petitioner

3
The stipulated date of the divorce is Dec. 5, 1990; however,
the date on the divorce decree entered into evidence is Dec. 5,
1991. While stipulations are not set aside lightly, we have
broad discretion in determining whether to hold a party to a
stipulation. Blohm v. Commissioner, 994 F.2d 1542, 1553 (11th
Cir. 1993), affg. T.C. Memo. 1991-636. The evidence in the
record demonstrates the stipulated date is simply incorrect. We
are not bound by stipulations of fact that appear contrary to the
facts disclosed by the record. Rule 91(e); Blohm v. Commissioner,
supra (citing Mead's Bakery, Inc. v. Commissioner, 364 F.2d 101,
106 (5th Cir. 1966), revg. T.C. Memo. 1964-104). We, therefore,
find as fact that the date of petitioner's divorce is Dec. 5,
1991.
4
On Mar. 11, 1991, three 6-month certificates of deposit that
petitioner owned in the total amount of $4,000 matured, and
petitioner received $146 of interest.
 -5-

worked in several restaurants during 1991, quitting whenever his

employers pressed him for Social Security information.

Petitioner earned income from these jobs but does not remember

the amounts. Petitioner did not file an income tax return for

1991, because he was concerned about the consequences of working

in contravention of the immigration law. Despite his efforts to

avoid providing required information to his employers, petitioner

did receive one Form W-2 (Wage and Tax Statement) reporting wage

income of $585 for 1991.

During the years in issue, petitioner's brother, Saleh,

owned a restaurant. During 1992, petitioner worked at Saleh's

restaurant by covering for employees who would fail to come in.

He also took Saleh's wife to the market and their children to the

doctor. In exchange for his help, Saleh gave petitioner "some

spending money." Petitioner did not report this income on a

Federal income tax return for 1992. At the time of trial, Saleh

resided in Calhoun and owned a restaurant, the Atlanta Gate.

In September of 1992, petitioner began to cohabit with

Samantha Gibson (Gibson). Gibson was married but separated from

her husband and was employed as a waitress. In addition to wage

and tip income, Gibson received support payments for her two

children. At the time of trial, petitioner and Gibson were

married and living together in Calhoun.
 -6-

II. Bank Deposits and Withdrawals

A. 1991

Petitioner deposited a total of $24,300 into his checking

and savings accounts between June 13 and December 31, 1991. Some

of the deposits were combination deposits; that is, deposits of

both cash and checks. For example, on December 3, petitioner

deposited $1,600 in cash in his checking account along with a $30

third-party check payable to Tonia. For 1991, petitioner's

checking account deposits totaled $18,400; petitioner made eight

cash deposits, totaling $7,220, and three check deposits,

totaling $11,180.5

Petitioner made two deposits into savings account #1; he

deposited a check for $5,000 on December 10, and he deposited

$900 in cash on December 31. The $5,000 check deposit was a

transfer of funds by check from petitioner's checking account to

the savings account. Petitioner also received $1.95 interest on

this savings account.

5
Petitioner deposited checks in combination with cash. The
stipulations regarding the cash deposits do not correspond to the
record. For example, the parties stipulated that on July 30 and
Nov. 5, petitioner made cash deposits of $6,648 and $5,919,
respectively. The evidence entered into the record, however,
shows that on July 30 petitioner deposited a single check for
$6,031 and $617 in cash. The Nov. 5 deposit was a single check
for $5,119 and $800 in cash. As previously discussed, we are not
bound by stipulations of fact that appear contrary to facts
disclosed by the record. See supra note 3. We, therefore,
disregard the stipulations regarding these deposits and find they
were made according to the evidence entered in the record.
 -7-

B. 1992

Petitioner deposited a total of $90,120 in his checking and

savings accounts in 1992. Petitioner made 16 deposits into his

checking account, totaling $14,210. At least 12 of these

deposits, totaling $11,350, were cash deposits.6

Petitioner made 24 deposits, totaling $62,310, into savings

account #1. All of the deposits, except one, were cash deposits.

The sole noncash deposit of $50 was a refund petitioner received

from a dating service. On July 2, petitioner deposited $15,000

into this account, which was the proceeds of a loan he received

from Wachovia. On August 28, he withdrew $14,748 to repay the

balance remaining on this loan.

Between April 29 and November 4, petitioner made three

deposits, totaling $10,000, into his savings account #3. At

least one deposit, of $2,000, was in cash.7 On the same dates

that petitioner made deposits into savings account #3, he also

made deposits into savings account #4. The three deposits into

6
It is unclear from the record whether the deposits of $500,
$700, $860, and $800, made on June 24, Sept. 1, Nov. 4, and Dec.
8, respectively, were cash deposits. Due to the uncertain nature
of these deposits, these amounts are not included as cash
deposits.
7
Petitioner made deposits on Apr. 1, June 24, and Nov. 4.
It is unclear from the record whether the deposits made on Apr.
29 and Nov. 4, each for $4,000, were deposits of cash.
 -8-

savings account #4 totaled $3,600. At least two of the deposits,

in the amounts of $1,000 and $2,000, were deposits of cash.8

Petitioner received $23 interest on his checking account;

$486 on savings account #1; $128 on savings account #3; and $77

on savings account #4.

Petitioner wire transferred $2,750 sometime between January

15 and February 12;9 $1,000 on May 13; and $10,000 on November

13, 1992, from savings account #1 to his father, Ahmad Mohammed

Rashid Ahmad, in Jordan. On July 3, petitioner wire transferred

$15,000 from savings account #1 to Omaha, Nebraska.

C. 1993

Petitioner deposited a total of $126,141 in his checking and

savings accounts in 1993. Petitioner made 20 deposits, totaling

$75,478, in his checking account.10 At least 17 of the deposits,

totaling $29,881, were deposits of cash.11 Some of the deposits

were combination deposits. For example, on June 30, petitioner

8
It is unclear from the record whether the deposit on Apr. 29
was a deposit of cash.
9
We cannot determine the exact date of the $2,750 wire
transfer because the copy of petitioner's bank statement entered
in evidence is practically illegible in this detail. It is clear
from the statement, however, that the bank statement was for the
period of Jan. 15 to Feb. 12, 1992, the wire transfer was to
Ahmad Mohammed Rashid Ahmad, and the amount transferred was
$2,750.
10
The parties stipulated that a $40,544 deposit made on Nov.
16 was the transfer of the closing balance of savings account #1.
11
The record is unclear whether the deposit on Dec. 21 of
$1,250 was a cash deposit.
 -9-

withdrew $1,988 from his checking account, and a week later he

deposited a third-party check payable to Gibson in the same

amount, along with $1,030 in cash.12

Between January 6 and November 3, petitioner made 19

deposits, totaling $41,613, in savings account #1. At least 13

of the deposits, totaling $35,024, were deposits of cash.13 Two

of the deposits were combination deposits.14 Petitioner made one

deposit each to savings accounts #3 and #4. On April 15,

petitioner deposited $6,000 in cash into savings account #3, and

on April 14, he deposited $3,050 in cash into savings account #4.

Petitioner received $150 of interest on his checking

account; $600 on savings account #1; $162 on savings account #3;

and $87 on savings account #4.

Petitioner closed savings accounts #3 and #4 on July 12,

1993, by withdrawing the balances, $16,302 and $8,623,

respectively. Petitioner closed savings account #1 on November

16, 1993, by withdrawing the balance of $40,544 and depositing it

into his checking account.

12
Six of the deposits were combination deposits.
13
It is unclear from the record whether the deposits made on
Jan. 28, Mar. 10, Sept. 8, Oct. 5, Oct. 12, and Nov. 3, in the
respective amounts of $854, $1000, $900, $800, $800, and $1,600,
were deposits of cash.
14
The deposit on May 25 for the total amount of $6,115 was a
deposit of $6,000 cash and a check for $115. The deposit on Aug.
24 for the total amount of $3,320 was a deposit of $3,300 cash
and a check for $20.
 -10-

Petitioner transferred $2,200 by wire from savings account

#1 on September 15, to his father in Jordan. On November 30, he

transferred $15,000, and on December 28, $16,000, from his

checking account to an account in his name at the Cairo Bank in

Amman, Jordan.

Between April 16 and December 28, 1993, petitioner's bank,

Wachovia, filed nine Currency Transaction Reports (Form 4789)

detailing his cash transactions. In the identification section

of the form, Wachovia reported petitioner's occupation as "Cook

at Local Restaurant".

OPINION

Issue 1. Whether Respondent's Notice of Deficiency Was Arbitrary

Respondent determined that petitioner has a deficiency of

$5,957 for 1991, $24,457 for 1992, and $28,416 for 1993. These

deficiencies are based on income in the amounts of $24,592,

$74,634, and $86,464 for 1991, 1992, and 1993, respectively.

Petitioner asserts that because the Commissioner did not produce

evidence linking him to an income-producing activity, the

Commissioner was arbitrary and erroneous in her determination so

that she bears the burden of proof. Petitioner cites Portillo v.

Commissioner, 932 F.2d 1128 (5th Cir. 1991), affg. in part and

revg. in part T.C. Memo. 1990-68, and Senter v. Commissioner,

T.C. Memo. 1995-311, in support of his position. As discussed

below, petitioner's reliance on these cases is misplaced. We
 -11-

sustain respondent's determinations for the taxable years at

issue, except as set out below.

The first issue to be decided is who bears the burden of

proof in this case. A statutory notice of deficiency ordinarily

carries with it a presumption of correctness. Rule 142(a); Welch

v. Helvering, 290 U.S. 111 (1933). Due to this presumption,

taxpayers generally have both the burden of proof and the burden

of going forward with evidence. Dellacroce v. Commissioner, 83

T.C. 269, 280 (1984). However, if the taxpayer shows that the

statutory notice is arbitrary or without foundation, the burden

of going forward with the evidence shifts to the Commissioner.

Id.

In asking this Court to find that the notice of deficiency

is arbitrary, petitioner is asking us to explore the

underpinnings of that notice. As a general rule, we will not

look behind the statutory notice to examine the evidence used in

making the determination. Petzoldt v. Commissioner, 92 T.C. 661,

688 (1989); Llorente v. Commissioner, 74 T.C. 260, 264 (1980),

affd. in part and revd. and remanded in part 649 F.2d 152 (2d

Cir. 1981); Greenberg's Express, Inc. v. Commissioner, 62 T.C.

324, 327 (1974). The rare exception to this rule is where the

Commissioner, in a case involving unreported income, introduces

no direct evidence but rests on the presumption of correctness

and the taxpayer challenges the deficiency on the grounds that it

is arbitrary. Portillo v. Commissioner, supra at 1133; Schad v.
 -12-

Commissioner, 87 T.C. 609, 618 (1986), affd. without published

opinion 827 F.2d 774 (11th Cir. 1987); Llorente v. Commissioner,

supra at 264.

In Portillo v. Commissioner, supra, the taxpayer was a

painting contractor who received a Form 1099 (Miscellaneous

Income) that he claimed was not correct. Other than the

uncorroborated testimony of a witness who testified that he had

paid the taxpayer the disputed amount of income, there was no

evidence supporting the Commissioner's determination. The Court

of Appeals for the Fifth Circuit noted that, like this Court, it

is reluctant to look at the facts underlying the Commissioner's

notice of deficiency. The Court of Appeals also held, however,

that it will "not give effect to the presumption of correctness

in a case involving unreported income if the Commissioner cannot

present some predicate evidence supporting its determination."

Id. at 1133. More specifically, the Court of Appeals articulated

its rule as follows:

before we will give the Commissioner the benefit of the
presumption of correctness, he must engage in one final
foray for truth in order to provide the court with some
indicia that the taxpayer received unreported income. The
Commissioner would merely need to attempt to substantiate
the charge of unreported income by some other means, such as
by showing the taxpayer's net worth, bank deposits, cash
expenditures, or source and application of funds. * * *
[Id. at 1133-1134; emphasis added.]

In Senter v. Commissioner, supra, the Commissioner based her

determination solely on the assertion that the taxpayer filed no

returns for 1987 through 1991. The Commissioner reconstructed
 -13-

the taxpayer's income for those years based on income he reported

in 1984, increased by the consumer price index. There was no

evidence presented by either party regarding whether the taxpayer

had taxable income during the years in issue. Because the

Commissioner produced no predicate evidence supporting the

determination, we found respondent's determination arbitrary and

erroneous. Moreover, citing Portillo v. Commissioner, supra at

1133, we concluded that the rule in the Court of Appeals for the

Fifth Circuit, to which any appeal of Senter would lie, is that

once the presumption of correctness disappears, the Commissioner

bears the burden of proof.

We think the facts of the instant case are distinguishable

from those of Portillo v. Commissioner, supra, and Senter v.

Commissioner, supra. In both of those cases, the Commissioner

did not present predicate evidence in support of the

determination that the taxpayer had unreported income. In the

present case, however, the respondent substantiated the charge

with predicate evidence; she used the bank deposits and cash

expenditures method of income reconstruction. Portillo v.

Commissioner, supra at 1133-1134. Thus, respondent's deficiency

determination was not arbitrary. See also Blohm v. Commissioner,

994 F.2d 1542, 1549 (11th Cir. 1993), affg. T.C. Memo. 1991-636

(once the Tax Court has found the Commissioner has made a minimal

evidentiary showing, the deficiency determination is presumed

correct); Erickson v. Commissioner, 937 F.2d 1548, 1551 (10th
 -14-

Cir. 1991), affg. T.C. Memo. 1989-552 (the key is connecting

taxpayers to assets, not to a business).

Since respondent's deficiency notice was not arbitrary,

petitioner has the burden of going forward with the evidence as

well as the ultimate burden of persuasion. See Dellacroce v.

Commissioner, supra at 280.

Issue 2. Unreported Income for 1991, 1992, and 1993

Utilizing the bank deposits and cash expenditures method of

income reconstruction, respondent determined petitioner had

income in the amounts of $24,592, $74,634, and $86,464 for 1991,

1992, and 1993, respectively.

Every taxpayer is required to maintain adequate records of

taxable income. Sec. 6001. Petitioner did not file a Federal

income tax return or make any estimated Federal income tax

payments for any of the years in issue. Nor did he maintain

adequate records from which the amount of his income or Federal

income tax liability for any of the years in issue could be

computed. In the absence of such records, the Commissioner may

reconstruct the taxpayer's income by any method that, in her

opinion, clearly reflects income. Sec. 446(b); Parks v.

Commissioner, 94 T.C. 654, 658 (1990). The Commissioner's method

need not be exact but must be reasonable. Holland v. United

States, 348 U.S. 121 (1954).

The bank deposits method for computing unreported income has

long been sanctioned by the courts. DiLeo v. Commissioner, 96
 -15-

T.C. 858, 867 (1991), affd. 959 F.2d 16 (2d Cir. 1992). Though

not conclusive, bank deposits are prima facie evidence of income.

Price v. United States, 335 F.2d 671, 677 (5th Cir. 1964) (the

bank deposits method assumes that all money deposited in a

taxpayer's bank account during a given period constitutes taxable

income);15 Tokarski v. Commissioner, 87 T.C. 74, 77 (1986);

Estate of Mason v. Commissioner, 64 T.C. 651, 656-657 (1975),

affd. 566 F.2d 2 (6th Cir. 1977); Jones v. Commissioner, 29 T.C.

601 (1957). Where the taxpayer has failed to maintain adequate

records as to the amount and source of his income, and the

Commissioner has determined that the deposits are income, the

taxpayer has the burden of showing that the determination is

incorrect. Rule 142(a); Clayton v. Commissioner, 102 T.C. 632,

645 (1994); Parks v. Commissioner, supra; Estate of Mason v.

Commissioner, supra. Furthermore, in such cases the Commissioner

is not required to show a likely source of income. Clayton v.

Commissioner, supra; Parks v. Commissioner, supra; Estate of

Mason v. Commissioner, supra.

In challenging respondent's income reconstruction,

petitioner introduced evidence that was intended to corroborate

his claim that the deposits were due to nontaxable sources. This

15
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th
Cir. 1981) (en banc), the Court of Appeals for the Eleventh
Circuit adopted as binding precedent all of the decisions of the
former Court of Appeals for the Fifth Circuit handed down prior
to the close of business on Sept. 30, 1981.
 -16-

evidence primarily consists of his testimony, selected checking

and savings account statements, five canceled checks, and three

written statements by his friends. The written statements

constitute ex parte affidavits and are not treated as evidence

under Rule 143(b). Upon review of the evidence presented, we are

not persuaded that the source of the deposits was from nontaxable

income items, except to the extent as follows.

A. 1991

For 1991, petitioner deposited a total of $24,300 in his

checking and savings accounts. Except for the following amounts,

we find the deposits are income to petitioner that is subject to

tax pursuant to section 61(a). Based on the entire record, we

are persuaded that the deposits of the checks for $5,119 and

$6,031 are the return of funds, plus interest, that petitioner

transferred to associates with the intent to prevent his first

wife, Tonia, receiving any money in settlement of divorce.16 In

addition, we find the check for $30 payable to Tonia that

petitioner cashed for her by depositing it in his account is not

taxable income to him. Petitioner's testimony regarding the

source of these amounts is corroborated by the canceled checks

which correlate with petitioner's bank statements. Finally, the

parties stipulated that the $5,000 deposit in savings account #1

16
We find that petitioner has interest income to the extent
the total amount of these two deposits exceeds $11,000. See sec.
61(a)(4).
 -17-

on December 10 was a transfer of petitioner's funds from his

checking account. This amount is a redeposit; therefore, it is

not gross income.

B. 1992

Petitioner deposited a total of $90,120 in his checking and

savings accounts in 1992. Except for the two following amounts,

we find the deposits are income to petitioner that is subject to

tax pursuant to section 61(a). The parties stipulated the

$15,000 deposit made on July 2 was the deposit of loan proceeds

that petitioner received from Wachovia. It is well established

that gross income does not include loans. James v. United

States, 366 U.S. 213, 219 (1961); United States v. Rochelle, 384

F.2d 748, 751 (5th Cir. 1967).17 Petitioner submitted a bank

copy of the dating service's canceled $50 refund check. Thus,

petitioner provided evidence that corroborates his testimony

regarding the source of the sole noncash deposit for 1992 into

this savings account. The $50 deposit is the return of a

personal expenditure for which petitioner received no tax benefit

and is, therefore, not taxable income.

C. 1993

Petitioner deposited a total of $126,141 in his checking and

savings accounts in 1993. Except for the following amounts, we

find the deposits are income to petitioner that is subject to

17
See supra note 15.
 -18-

tax. The parties stipulated that the deposit of $40,544 into

petitioner's checking account was a transfer of the balance of

savings account #1. This amount is a redeposit; therefore, it is

not gross income. Based on the entire record, we find petitioner

has met his burden of proving the check for $1,988 payable to

Gibson, which petitioner cashed for her by depositing in his

account, is not taxable income to him.

Our finding that petitioner has met the burden of proof as

to the source of these deposits is not a grant of credence to

petitioner's claims regarding the source of his other deposits.

Nor does the evidence presented by petitioner, which showed that

some of the deposits were not income, establish that the use of

the bank deposits method was invalid or arbitrary. Estate of

Mason v. Commissioner, 64 T.C. at 656. Having reached that

conclusion, we will comment in more detail on petitioner's

evidence.

Petitioner testified that the sources of his other deposits

were family transfers, repayments of loans he earlier made to

friends and associates, and cash reimbursements for checks he

wrote to pay the bills of others. Petitioner provided scant

evidence to corroborate his claims. For example, to substantiate

his claim that family members transferred money to him,

petitioner submitted a copy of a wire transfer that originated in

Jordan and was sent to Saleh in Calhoun. The wire transfer is

for $15,000 and is dated April 12, 1990. We find, however, that
 -19-

this wire transfer does not support petitioner's testimony

because the transfer was sent to Saleh, not to petitioner.

Accordingly, without evidence corroborating petitioner's claim

that Saleh transferred the funds he received to petitioner, the

copy of this wire transfer does not show that petitioner received

any funds from his family.

Petitioner also introduced his check register into evidence

to corroborate his claim that he made many loans to friends.

Petitioner's reliance on his check register settles on a single

entry that verifies he issued a check on December 8, 1991, for

$1,000 to "Guss". This single entry is woefully inadequate to

perform the task petitioner would assign it. The entry does not

indicate the purpose of the amount paid, the intent of the

parties, or any of the other indicia necessary to substantiate

the existence of a loan.18 We find this entry in petitioner's

check register does not provide documentary evidence to establish

the existence of the claimed loans.

Petitioner's claim that he paid the bills of others by check

and received cash reimbursements which he deposited suffers from

18
Factors which have been considered by courts as relevant in
deciding whether a bona fide loan exists include among others:
(1) The existence or nonexistence of a debt instrument; (2)
provisions for security, interest payments, and a fixed repayment
date; (3) whether or not repayments of the loan were made; (4)
the taxpayer's ability to repay the loan; (5) the borrower's
receipt of compensation; and (6) the testimony of the taxpayer.
Frierdich v. Commissioner, T.C. Memo. 1989-393, affd. 925 F.2d
180 (7th Cir. 1991).
 -20-

similar deficiencies. For example, petitioner testified that

during 1992, he often paid Saleh's rent, utilities, and other

expenses by check, and Saleh reimbursed him in cash. This claim

is allegedly supported by a single check petitioner wrote to

Barnett Bank.19 Petitioner was unable to offer any evidence to

corroborate his claim of the purpose of the check, nor was he

able to produce evidence of a reimbursing cash deposit in the

amount of the check. We find, therefore, that this check does

not corroborate petitioner's claims with respect to the funds

that he claimed are cash reimbursements of checks he wrote on

behalf of others.

Petitioner relies on only his testimony to carry the burden

of proving the source of the balance of his deposits.20 Thus,

the issue is one of credibility wherein we must determine the

extent to which the proffered testimony is believable. See Schad

v. Commissioner, 87 T.C. at 620. It is well established that we

are not required to accept self-serving testimony in the absence

of corroborating evidence. Niedringhaus v. Commissioner, 99 T.C.

19
A check drawn on petitioner's checking account in the
amount of $2,328, made payable to Barnett Bank of Atlanta, was
entered into evidence. Petitioner asserts this check was issued
to pay the balance due on Saleh's automobile.
20
For example, petitioner testified he paid Gibson's
personal bills, as well as her share of the household expenses,
by check, and she reimbursed him in cash. Petitioner estimated
Gibson gave him $300 in cash each week for 17 weeks in 1992 and
for 52 weeks in 1993, all of which he deposited in his accounts.
This testimony is uncorroborated by any evidence.
 -21-

202, 212 (1992); Tokarski v. Commissioner, 87 T.C. at 77.

Petitioner failed to produce any corroborating evidence to

support his testimony. Although petitioner testified that his

wife, mother, and father, all of whom live in the same apartment

with petitioner, and Saleh, who also lives in Calhoun, are the

sources for his deposits, petitioner failed to call any family

members to testify in an effort to verify his stories.21 We

cannot assume the testimony of absent witnesses would have been

favorable to petitioner. Rather, the normal inference is that it

would have been unfavorable. Tokarski v. Commissioner, supra at

77; Pollack v. Commissioner, 47 T.C. 92, 108 (1966), affd. 392

F.2d 409 (5th Cir. 1968); Wichita Terminal Elevator Co. v.

Commissioner, 6 T.C. 1158, 1165 (1946), affd. 162 F.2d 513 (10th

Cir. 1947). Moreover, our analysis of petitioner's testimony

reveals inconsistencies that cast doubt upon his credibility.22

21
Petitioner's explanation for his failure to call any
family members to testify is not credible. Petitioner explained
that although he lives only 2 hours from the place of trial, he
did not call his parents because the weather was "nasty", his
parents do not speak English, and are "too old" (at 63 or 64
years of age) for him to put them through the ordeal of
testifying via an interpreter. Considering his parents traveled
from Jordan to Georgia only 2 weeks before the trial,
successfully navigating similar hazards of greater scale than
they would have encountered on a 2-hour journey from Calhoun to
Atlanta, we find petitioner's explanation to be both inventive
and implausible. Petitioner's explanation of why Gibson and
Saleh could not attend the trial and contribute corroborating
testimony shares an equally unreliable quality.
22
For example, petitioner testified that his parents are
very wealthy, at one time having enough money to "buy half of the
(continued...)
 -22-

Thus, there is no credible evidence that the deposits were from

nontaxable sources. Based on the entire record, we simply do not

believe that the money came from the sources petitioner claims.

We find, therefore, that petitioner has not met his burden of

proof with respect to the funds that he claims are family

transfers, cash repayments of loans he made earlier, or

reimbursements for checks he wrote on behalf of others.

Issue 3. Self-Employment Tax

Respondent determined that petitioner had income in the

amounts of $24,592, $74,634, and $86,464 for 1991, 1992, and

1993, respectively, and that he is liable for self-employment tax

of $3,351, $8,862, and $9,435 for those years.

Section 1401 imposes a tax on self-employment income. Self-

employment income consists of gross income from any trade or

business carried on by an individual less allowable deductions

attributable to the trade or business. Sec. 1402(a).

Respondent's determination that petitioner is liable for self-

22
(...continued)
capital of Amman"; however, because his father was frequently in
need of cash, petitioner had to wire him transfers of what were
often relatively modest amounts. In addition, petitioner
testified that many people owe him money, and that he carries the
balance of the loans in his head, yet he can only approximate the
amounts he has been repaid. Finally, petitioner testified that
he did not believe he owed taxes in 1991, 1992, and 1993 because
the terms of his immigration prevented his steady employment.
Petitioner testified that he actually did work in 1991, his legal
status notwithstanding. Petitioner also testified he became a
resident alien during 1991. Thus, petitioner's immigration
status was not a legal obstacle to his employment during the
latter part of and forever after 1991.
 -23-

employment tax is presumed to be correct, and petitioner bears

the burden of proving that it is erroneous. Rule 142(a); Kasey

v. Commissioner, 33 T.C. 656, 660 (1960).

At trial, petitioner testified that during 1991 and 1992 he

worked at several restaurants. Petitioner also testified,

however, that he made very little money working at these

restaurants, and the only Form W-2 petitioner received reported a

mere $585 of wage income, which gives credence to his claim. We

are persuaded that petitioner did not earn the unreported income

determined by respondent, except for the amount reported on the

Form W-2, as an employee.

Although petitioner has persuaded this Court that the source

of his unreported income was not wages, he has not met his burden

of proving that he did not receive such amounts from self-

employment. Thus, we find petitioner is liable for self-

employment tax on the unreported income as determined by

respondent for 1991, 1992, and 1993, except for the $585 of wage

income reported on the Form W-2 and the amounts that we have

found hereinbefore are not income.

Issue 4. Additions to Tax Under Section 6651(a)(1)

Respondent determined petitioner is liable for additions to

tax for failure to file income tax returns for 1991, 1992, and

1993 under section 6651.

Section 6651(a)(1) imposes an addition to tax for failure to

file a return on the date prescribed (determined with regard to
 -24-

any extension of time for filing), unless it is shown that such

failure is due to a reasonable cause and not due to willful

neglect. Sec. 6651(a)(1). The taxpayer has the burden of

proving the addition is improper. Rule 142(a); United States v.

Boyle, 469 U.S. 241, 245 (1985).

Petitioner did not file income tax returns for the years in

issue. There is no evidence in the record that suggests

petitioner's failure to file a Federal income tax return for any

year in issue was due to reasonable cause and not due to willful

neglect. Accordingly, we sustain respondent's determination with

respect to this issue.

Issue 5. Additions to Tax Under Section 6654

Respondent determined that petitioner is liable for the

addition to tax under section 6654(a) for his failure to make

estimated tax payments for 1991, 1992, and 1993.

Subject to exceptions provided by the statute, the

imposition of the addition to tax is otherwise automatic if the

amounts of the withholdings and estimated tax payments do not

equal statutorily designated amounts. Niedringhaus v.

Commissioner, supra at 222; Grosshandler v. Commissioner, 75 T.C.

1, 20-21 (1980). Petitioner bears the burden of showing that

respondent's determination that section 6654 applies to all 3

taxable years is in error. Rule 142(a); Niedringhaus v.

Commissioner, supra. Petitioner has made no such showing. For

the years in issue petitioner had substantial taxable income, yet
 -25-

he made no estimated tax payments. Therefore, we hold he is

liable for the additions to tax under section 6654(a) for those

years.

To reflect the foregoing,

Decision will be entered

under Rule 155.