T.C. Memo. 2003-314
UNITED STATES TAX COURT
HERBERT C. BUCK, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 12203-01. Filed November 12, 2003.
Herbert C. Buck, pro se.
John C. Schmittdiel, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
CHIECHI, Judge: Respondent determined the following defi-
ciencies in, and accuracy-related penalties under section
6662(a)1 on, petitioner’s Federal income tax:
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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Year Deficiency Accuracy-Related Penalty
1997 $32,989 $6,597.80
1998 29,274 5,854.80
The issues remaining for decision are:2
(1) Is petitioner entitled to deduct for each of the years
at issue claimed Schedule C expenses in excess of the amount
conceded by respondent? We hold that he is not.
(2) Is petitioner liable for each of the years at issue for
the accuracy-related penalty under section 6662(a)? We hold that
he is.
FINDINGS OF FACT
Most of the facts have been deemed admitted pursuant to Rule
90(c). Certain other facts have been stipulated and are so
found.
Petitioner resided in Deer Park, Wisconsin, at the time he
filed the petition in this case.
During each of the years at issue, Minnesota Mining &
Manufacturing in St. Paul, Minnesota, employed petitioner.
During each of those years, petitioner also operated a sole
proprietorship in Hudson, Wisconsin, under the name Buck Kennel,
2
In addition to the issues remaining for decision listed
below, there are other questions relating to certain determina-
tions in the notice of deficiency (notice) issued to petitioner
with respect to his taxable years 1997 and 1998 that are computa-
tional in that their resolution flows automatically from our
resolution of the remaining issues that we address herein and the
concessions of the parties.
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a dog-racing kennel. Buck Kennel was located between peti-
tioner’s home and his place of employment at Minnesota Mining &
Manufacturing.
On July 15, 1998, petitioner filed Form 1040, U.S. Individ-
ual Income Tax Return (Form 1040), for his taxable year 1997
(1997 return). Petitioner included Schedule C, Profit or Loss
From Business (Schedule C), as part of his 1997 return (1997
Schedule C). Petitioner’s 1997 Schedule C claimed various
expenses totaling $66,432.
On May 24, 1999, petitioner filed Form 1040 for his taxable
year 1998 (1998 return). Petitioner included Schedule C as part
of his 1998 return (1998 Schedule C). Petitioner’s 1998 Schedule
C claimed various expenses totaling $70,271.
Around August or September 2000, petitioner filed Form
1040X, Amended U.S. Individual Income Tax Return (Form 1040X),
with respect to his taxable year 1997 (1997 amended return).
Petitioner included Schedule C as part of his 1997 amended return
(1997 amended Schedule C). Petitioner’s 1997 amended Schedule C
claimed various expenses totaling $87,242.63.
Around August or September 2000, petitioner filed Form 1040X
with respect to his taxable year 1998 (1998 amended return).
Petitioner included Schedule C as part of his 1998 amended return
(1998 amended Schedule C). Petitioner’s 1998 amended Schedule C
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claimed various expenses totaling $86,249.07.3
On June 29, 2001, respondent issued to petitioner the notice
with respect to his taxable years 1997 and 1998. In that notice,
respondent, inter alia, determined to disallow for each of the
years at issue the Schedule C deductions that petitioner claimed
in his 1997 Schedule C and in his 1998 Schedule C. Respondent
further determined in the notice that petitioner is liable for
each of the years at issue for the accuracy-related penalty under
section 6662(a).
OPINION
The parties do not address section 7491. Petitioner filed
his 1997 return on July 15, 1998, and his 1998 return on May 24,
1999. We presume that respondent’s examination of those returns
began after July 22, 1998, and that section 7491(a) is applicable
in the instant case. On the record before us, we find that
petitioner’s burden of proof relating to the deficiency determi-
nations does not shift to respondent under section 7491(a). That
is because petitioner has not complied with the substantiation
and recordkeeping requirements of section 7491(a)(2)(A) and (B).
Accordingly, we find that petitioner has the burden of proving
that respondent’s deficiency determinations are wrong. Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). With
3
Petitioner made a computational error when he added the
total expenses claimed in petitioner’s 1998 amended Schedule C.
The correct total of such expenses is $86,249.07.
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respect to any deductions that petitioner is claiming for each of
the years at issue, deductions are strictly a matter of legisla-
tive grace, and petitioner bears the burden of proving that he is
entitled to any deductions claimed. INDOPCO, Inc. v. Commis-
sioner, 503 U.S. 79, 84 (1992).
In support of his position that he is entitled to deduct for
each of the years at issue claimed Schedule C expenses in excess
of the amount conceded by respondent, petitioner relies on his
testimony. We found petitioner’s testimony to be general,
conclusory, vague, self-serving, and uncorroborated in material
respects. We shall not rely on petitioner’s testimony to support
his position with respect to the claimed deductions at issue. On
the record before us, we find that petitioner has failed to carry
his burden of showing that he is entitled to deduct for each of
the years at issue claimed Schedule C expenses in excess of the
amount conceded by respondent.
We now turn to the determination in the notice that peti-
tioner is liable for each of the years at issue for the accuracy-
related penalty under section 6662(a). According to respondent,
petitioner is liable for that penalty because of negligence or
disregard of rules or regulations under section 6662(b)(1). On
the record before us, we find that respondent has carried respon-
dent’s burden of production under section 7491(c) with respect to
the accuracy-related penalty under section 6662(a) for each of
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the years at issue. On that record, we further find that peti-
tioner has failed to carry his burden of showing that he was not
negligent and did not disregard rules or regulations within the
meaning of section 6662(b)(1), or otherwise did what a reasonable
person would do, with respect to the underpayment for each of
those years.4 On the record before us, we also find that peti-
tioner has failed to carry his burden of establishing that he
acted with reasonable care and in good faith with respect to the
underpayment for each of the years at issue.5 See sec.
6664(c)(1). On that record, we further find that petitioner has
failed to carry his burden of showing that he is not liable for
each of the years at issue for the accuracy-related penalty under
section 6662(a).
We have considered all of the contentions and arguments of
petitioner that are not discussed herein, and we find them to be
without merit and/or irrelevant.
To reflect the foregoing and the concessions of the parties,
Decision will be entered
under Rule 155.
4
Petitioner did not maintain any records to substantiate
that he is entitled to deduct for each of the years at issue
claimed Schedule C expenses in excess of the amount conceded by
respondent. See sec. 1.6662-3(b)(1), Income Tax Regs.
5
See supra note 4.