Vogt v. Comm'r

T.C. Memo. 2007-209

UNITED STATES TAX COURT

RAYMOND E. VOGT, JR., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 3037-06. Filed August 1, 2007.

Raymond E. Vogt, Jr., pro se.

John W. Strate, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

HAINES, Judge: Respondent determined deficiencies,

penalties, and additions to tax with respect to petitioner’s

Federal income tax as follows:1

1
Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended. All Rule references are
to the Tax Court Rules of Practice and Procedure, unless
(continued...)
 -2-

Additions to Tax/Penalties
Sec. Sec. Sec. Sec.
1 2
Year Deficiency 6651(a)(1) 6663 6654 6651(f)

2000 $13,513 $3,479 $5,076 -- --
2001 22,722 4,876 15,317 -- --
2002 5,644 1,564 3,980 -- --
2003 23,585 -- -- $617 $17,688
1
In the alternative to fraud penalties under sec. 6663,
respondent determined accuracy-related penalties under sec. 6662
of $1,354, $4,085, and $1,061 for the years 2000, 2001, and 2002,
respectively.
2
In the alternative to a sec. 6651(f) addition to tax for
the year 2003, respondent determined an addition to tax under
sec. 6651(a)(1) in the amount of $5,307.

After concessions,2 the issues for decision are: (1)

Whether petitioner received unreported income for 2000, 2001,

2002, and 2003 (years at issue); (2) whether petitioner is

entitled to certain itemized deductions for the years at issue;

(3) whether petitioner is entitled to a claimed Schedule E,

Supplemental Income and Loss, rental expense deduction for 2001;

(4) whether petitioner is liable for self-employment tax under

section 1401 for 2001, 2002, and 2003; (5) whether petitioner is

liable for fraud penalties under section 6663 for 2000, 2001, and

2002, or alternatively, accuracy-related penalties under section

1
(...continued)
otherwise indicated. Amounts are rounded to the nearest dollar.
2
In his amendment to answer, respondent conceded income
adjustments related to certain partnership distributions. On
brief, respondent conceded income adjustments related to
Peninsula Communications of $13,376 and $48,001 for tax years
2000 and 2001, respectively. In addition, respondent conceded
adjustments based on bank deposits into California Federal Bank
of $18,527 for tax year 2002.
 -3-

6662; (6) whether petitioner is liable for the fraudulent failure

to file addition to tax under section 6651(f) for 2003, or

alternatively an addition to tax under section 6651(a)(1); (7)

whether petitioner is liable for additions to tax under section

6651(a)(1) for 2000, 2001, and 2002; and (8) whether petitioner

is liable for an addition tax under section 6654(a) for 2003.

FINDINGS OF FACT

Petitioner resided in Vacaville, California, at the time he

filed the petition. In his answer, respondent alleged the facts

on which he relied to support his determination of the

deficiencies, penalties, and additions to tax for the years at

issue. Petitioner did not file a reply to respondent’s answer.

On July 19, 2006, respondent filed a motion under Rule 37(c) for

an order that undenied allegations in the answer be deemed

admitted. In petitioner’s response to the motion, he refused to

respond to the affirmative allegations based on his assertion of

the Fifth Amendment privilege against self-incrimination.3 The

Court found this argument meritless. Petitioner did not respond

to the substance of the affirmative allegations. On September 1,

2006, the Court granted respondent’s motion and deemed admitted

the undenied affirmative allegations of fact contained in

3
Petitioner attempted to use a generalized fear of self-
incrimination to avoid responding to respondent’s affirmative
allegations. “A taxpayer cannot base his failure either to
cooperate with the IRS or to produce records on a generalized
fear of self-incrimination.” Edelson v. Commissioner, 829 F.2d
828, 832 (9th Cir. 1987), affg. T.C. Memo. 1986-223.
 -4-

paragraphs 6, 7, 8, and 9 of respondent’s answer. Rule 37(c);

see Doncaster v. Commissioner, 77 T.C. 334, 336 (1981); Gilday v.

Commissioner, 62 T.C. 260, 261 (1974). The deemed admissions

procured by respondent under Rule 37(c) are conclusively

established. Petitioner did not move to withdraw the deemed

admissions at any time during the proceeding, nor did he present

any evidence that would tend to refute the admissions. Except

where we indicate otherwise, we adopt those admissions as our own

findings and incorporate them herein by this reference.

Petitioner was uncooperative with respondent in respondent’s

attempts to create a stipulation of facts.4 On November 3, 2006,

the Court deemed stipulated respondent’s proposed stipulation of

facts for purposes of this case pursuant to Rule 91(f)(3). The

stipulation of facts and the attached exhibits are incorporated

herein by this reference.

On November 13, 2006, respondent filed an amendment to his

answer, which alleged that petitioner received additional

unreported income based on respondent’s bank deposits analysis

4
On Sept. 29, 2006, respondent filed a motion to show cause
why respondent’s proposed stipulation of facts should not be
accepted as established under Rule 91(f). The Court granted the
motion to show cause, ordering petitioner to file a response on
or before Oct. 23, 2006. Petitioner filed both a response and a
supplemental response to the order to show cause. In his
responses, petitioner objected to nearly all of the stipulations
and proposed exhibits, asserting the Fifth Amendment privilege
against self-incrimination. The Court again found this argument
meritless. Petitioner did not respond to the substance of the
proposed stipulations or exhibits.
 -5-

for 2001 and 2002, and therefore was liable for increased

deficiencies, increased penalties under section 6663, and

increased additions to tax under section 6651(a)(1).5 On

November 15, 2006, trial was held in San Francisco, California.

During the years at issue, petitioner was an employee of

Linotext America, Inc., and self-employed as a printing salesman

doing business as Ray Vogt Enterprises and Springboard Ltd.

Trust. Petitioner created Springboard Ltd. Trust during 2002 to

operate his printing business and to pay certain personal

expenses.

On February 1, 1999, and January 1, 2003, petitioner filed

Forms W-4, Employee’s Withholding Allowance Certificate, falsely

stating, under penalty of perjury, he was exempt from withholding

taxes. On January 20, 2004, respondent advised petitioner that

respondent had received information that he might be involved

with American Rights Litigators (ARL), an abusive tax avoidance

scheme. On February 4, 2004, petitioner mailed respondent a

letter in which he falsely denied involvement with ARL. On May

11, 2004, respondent served a summons on petitioner requesting

that he appear on June 2, 2004, to answer certain questions and

provide records regarding his income taxes. Petitioner did not

comply with the summons. On November 30, 2004, the U.S. District

Court, Northern District of California ordered petitioner to

5
On brief, respondent conceded the additional unreported
income for 2002.
 -6-

appear before respondent’s revenue agent on December 7, 2004. On

December 7, 2004, petitioner filed a Form 1040, U.S. Individual

Income Tax Return, for 2000, on which he reported adjusted gross

income of $99,795 and tax due of $12,724. Petitioner also filed

his 2001 return on December 7, 2004, on which he reported

adjusted gross income of $53,582 and tax due of $1,279.

Petitioner filed his 2002 return on February 11, 2005, on which

he reported adjusted gross income of $63,564 and tax due of

$3,319.

Petitioner was not only uncooperative with respondent during

the examination of the years at issue, but he actively attempted

to prevent respondent from reconstructing his income using the

bank deposits method. On March 2, 2005, petitioner sent a letter

to Eureka Bank advising the bank not to comply with a summons

issued by respondent seeking petitioner’s financial records.

Petitioner falsely told respondent’s revenue agent that his only

bank account was with Bank of America. In a letter sent to

respondent on April 15, 2005, petitioner falsely stated that he

was not the owner of any partnership interests or rental property

during the years at issue. Furthermore, petitioner did not

maintain any books or records with respect to his income and

deductions for the years at issue.

For the year 2000, respondent determined that petitioner

received but did not report a taxable distribution from the
 -7-

Section 28 Limited Partnership in the amount of $214. Respondent

also disallowed $28,048 of petitioner’s itemized deductions.6

For the year 2001, respondent determined that petitioner

received but did not report a partnership distribution from the

Section 28 Limited Partnership in the amount of $683.

Respondent’s bank deposits analysis showed that petitioner

received $19,233 of additional unreported income.7 Respondent

also disallowed $14,963 of petitioner’s itemized deductions and a

Schedule E rental expense deduction of $810.8

For the year 2002, respondent determined that petitioner

failed to report the following specific items of income: (1) A

partnership distribution of $951 from the Section 28 Limited

Partnership; (2) Social Security benefits of $1,571; and (3) a

gross dividend from Cetus Healthcare Limited Partnership II of

$124. Respondent determined that petitioner had additional

income based on bank deposits of 11,491,9 and increased

6
Respondent denied or reduced petitioner’s claimed home
mortgage interest deduction under sec. 163, charitable
contribution deduction under sec. 170, deduction for taxes paid
under sec. 164, and deductions for unreimbursed employee expenses
for vehicle, travel, and other employee business expenses.
7
During the year 2001, petitioner made net deposits of
$75,496 into his bank accounts, while he reported only $56,262 of
income on his return.
8
The disallowed deductions included deductions for State and
local taxes, interest expense, charitable contributions, and
employee business expenses.
9
The deposits were of cash and a certified check drawn on
(continued...)
 -8-

petitioner’s capital gain by $1,928. Respondent also disallowed

certain itemized deductions totaling $604.10

Petitioner did not file a return for 2003. He did not make

estimated tax payments for 2003. Respondent determined that

during 2003 petitioner received the following specific items of

income totaling $47,092: (1) A partnership distribution from

Cetus Healthcare Limited Partnership II of $242; (2) a

distribution from a Schwab Individual Retirement Account of

$3,092; (3) wages from Linotext America, Inc. of $19,970; (4)

Social Security benefits of $19,248; (5) nonemployee compensation

from Linotext America, Inc., and Applied Materials of $1,722 and

$1,933, respectively; and (6) capital gain from the sale of Cisco

stock of $885. Respondent’s bank deposits analysis showed that

petitioner received $54,832 of additional unreported income.

OPINION

A. Unreported Income

Generally, a taxpayer bears the burden of proving the

Commissioner’s determinations incorrect. Rule 142(a); Welch v.

Helvering, 290 U.S. 111, 115 (1933). However, the U.S. Court of

Appeals for the Ninth Circuit, the court to which appeal in this

case would lie, has held that the Commissioner must establish

9
(...continued)
Master Printers Credit Union.
10
The disallowed deductions included charitable
contributions and miscellaneous employee business expenses.
 -9-

“some evidentiary foundation” connecting the taxpayer with the

income-producing activity, or otherwise demonstrate that the

taxpayer received unreported income, for the presumption of

correctness to attach to the deficiency determination in

unreported income cases. Weimerskirch v. Commissioner, 596 F.2d

358, 361-362 (9th Cir. 1979), revg. 67 T.C. 672 (1977). If the

Commissioner introduces such evidence demonstrating that the

taxpayer received unreported income, the burden shifts to the

taxpayer to show by a preponderance of the evidence that the

deficiency was arbitrary or erroneous. See Hardy v.

Commissioner, 181 F.3d 1002, 1004 (9th Cir. 1999), affg. T.C.

Memo. 1997-97.

2000

It was deemed admitted under Rule 37(c) that petitioner

received but did not report a taxable partnership distribution

for the year 2000. Petitioner did not move to have the deemed

admissions withdrawn with respect to any of the years at issue,

nor did he present any evidence that would tend to refute those

admissions. We therefore hold that petitioner received

unreported income in the above amount.

2001

It was deemed admitted under Rule 37(c) that petitioner

received a taxable partnership distribution for the year 2001.

Respondent’s bank deposits analysis for 2001 showed petitioner
 -10-

also had unreported income of $19,233.11 The bank deposits

analysis was properly conducted, and represents prima facie

evidence of income. See Tokarski v. Commissioner, 87 T.C. 74, 77

(1986) (citing Estate of Mason v. Commissioner, 64 T.C. 651, 656-

657 (1975) affd. 566 F.2d 2 (6th Cir. 1977)). Respondent

provided petitioner with ample opportunity to present evidence

disputing this income. Petitioner presented no evidence, nor did

he make any credible statements, disputing his receipt of this

income. Furthermore, petitioner testified that he received no

loans, bequests, inheritances, gifts, or other nontaxable amounts

during 2001. We therefore hold that petitioner received

unreported income in the above amounts.

2002

It was deemed admitted under Rule 37(c) that petitioner

understated taxable income by $14,142 and underpaid income tax by

$5,307 for 2002.12 We therefore hold that petitioner received

unreported income in the above amount.

2003

Petitioner failed to file a Federal income tax return for

11
The unreported income shown by respondent’s bank deposits
analysis was not deemed admitted under Rule 37(c), nor was it
deemed stipulated under Rule 91(f). This amount, alleged in the
amended answer, increased petitioner’s deficiency from $22,722 to
$28,036; therefore, respondent bears the burden of proof with
respect to this amount. Rule 142(a).
12
The amount by which petitioner underpaid his income tax
takes into account disallowed deductions.
 -11-

2003. It was deemed admitted under Rule 37(c) that petitioner

received income in the amount of $95,382, incurring an income tax

liability of $23,585 for 2003.13 We therefore hold that

petitioner received unreported income in the above amount.

B. Disallowed Deductions

In addition to the receipt of unreported income, respondent

determined that petitioner overstated deductions. Section 161

provides for itemized deductions in computing taxable income.

However, deductions are a matter of legislative grace, and a

taxpayer bears the burden of proving that he has complied with

the specific requirements for any deduction he claims. See

INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New

Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). The

taxpayer has the burden of substantiating any deduction.

Hradesky v. Commissioner, 65 T.C. 87, 89-90 (1975), affd. per

curiam 540 F.2d 821 (5th Cir. 1976); see also Rule 142(a).

Respondent denied or reduced petitioner’s claimed deductions

for the years 2000, 2001 and 2002, including a Schedule E expense

for 2001. Petitioner presented no evidence to substantiate any

of these deductions. Furthermore, at trial petitioner refused to

answer questions about his deductions for the years at issue,

asserting meritless arguments. Therefore, petitioner has failed

to meet his burden with respect to the disallowed deductions.

13
Respondent allowed petitioner certain itemized deductions
totaling $13,142.
 -12-

C. Liability for Self-Employment Taxes for 2001, 2002, and 2003

Respondent determined that petitioner is liable for self-

employment tax under section 1401 for the years 2001, 2002, and

2003. Section 1401 imposes a tax on the self-employment income

of individuals. Self-employment income means the net earnings

from self-employment derived by an individual. Sec. 1402(b).

Petitioner bears the burden of proving respondent’s determination

incorrect. See Rule 142(a); Welch v. Helvering, 290 U.S. at 115.

It was deemed admitted under Rule 37(c) that petitioner was self-

employed as a printing salesman doing business as Ray Vogt

Enterprises and Springboard Trust. Therefore, we hold that, with

respect to his income from that business, petitioner is liable

for self-employment tax under section 1401 for the years 2001,

2002, and 2003.

D. Fraud Penalties and Additions to Tax Under Sections 6663 and
6651(f)

Section 6663 imposes a 75-percent penalty on the portion of

any underpayment due to fraud. Section 6651(f) imposes an

addition to tax of up to 75 percent of the amount of tax required

to be shown on the return where the failure to file a Federal

income tax return is due to fraud. Because these sections are

construed similarly as to a determination of fraudulent intent,

we consolidate our discussion of respondent’s fraud

determinations. See Clayton v. Commissioner, 102 T.C. 632, 653

(1994).
 -13-

Fraud is defined as an intentional wrongdoing designed to

evade tax believed to be owing. Powell v. Granquist, 252 F.2d 56

(9th Cir. 1958); Miller v. Commissioner, 94 T.C. 316, 332 (1990).

Fraud is a question of fact that must be considered based on an

examination of the entire record and petitioner's entire course

of conduct. Petzoldt v. Commissioner, 92 T.C. 661, 699 (1989).

Fraud is never presumed and must be established by independent

evidence of fraudulent intent. Id. The Commissioner bears the

burden of demonstrating fraud by clear and convincing evidence.

Sec. 7454(a); Rule 142(b). To carry the burden of proof on the

issue of fraud, the Commissioner must show, for each year at

issue, that (1) an underpayment of tax exists and (2) some

portion of the underpayment is due to fraud. Petzoldt v.

Commissioner, supra at 699. Respondent’s burden of proving fraud

can be met by facts deemed admitted pursuant to Rule 37(c).

Doncaster v. Commissioner, 77 T.C. at 337 (1981); see Marshall v.

Commissioner, 85 T.C. 267, 272-273 (1985). Fraud may also be

proven by circumstantial evidence, and reasonable inferences may

be drawn from the facts because direct evidence is rarely

available. Delvecchio v. Commissioner, T.C. Memo. 2001-130,

affd. 37 Fed. Appx. 979 (11th Cir. 2002).

Circumstantial evidence that may give rise to a finding of

fraud includes: (1) Understatement of income; (2) inadequate

records; (3) failure to file tax returns; (4) providing

implausible or inconsistent explanations of behavior; (5)
 -14-

concealment of assets; (6) failure to cooperate with taxing

authorities; (7) filing false Forms W-4; (8) failure to make

estimated tax payments; (9) dealing in cash; (10) engaging in a

pattern of behavior that indicates an intent to mislead; and (11)

filing false documents. See Bradford v. Commissioner, 796 F.2d

303, 307 (9th Cir. 1986), affg. T.C. Memo. 1984-601; Cooley v.

Commissioner, T.C. Memo. 2004-49. Although no single factor is

necessarily sufficient to establish fraud, a combination of

several of these factors may be persuasive evidence of fraud.

Solomon v. Commissioner, 732 F.2d 1459, 1461 (6th Cir. 1984),

affg. per curiam T.C. Memo. 1982-603.

2000

Respondent determined that petitioner is liable for a fraud

penalty under section 6663 for 2000. It was deemed admitted

under Rule 37(c) that petitioner fraudulently, knowingly,

intentionally, and willfully understated his income in the amount

of $14,050. However, after concessions, respondent asserts that

petitioner understated his year 2000 income by failing to report

a partnership distribution of $214. In comparison, petitioner

listed on his return, filed approximately 43 months late, $99,795

of adjusted gross income. Petitioner’s entire course of action

demonstrates many of the badges of fraud listed above, notably

failure to file returns promptly, keeping inadequate records,

filing false W-4 Forms, and failing to cooperate with taxing

authorities. However, petitioner’s failure to include the
 -15-

partnership distribution on his return was not due to these

badges of fraud. During 2000, petitioner also overstated

itemized deductions, but respondent does not contend, nor would

we find based on the record, such overstatement was due to

fraud.14 Therefore, petitioner is not liable for a penalty under

section 6663 for the year 2000.

2001

Respondent determined that petitioner is liable for a fraud

penalty under section 6663 for the year 2001. It was deemed

admitted under Rule 37(c) that petitioner fraudulently,

knowingly, intentionally, and willfully received $49,101 of

unreported taxable income for the year 2001. However, $48,419 of

that amount was conceded by respondent. In addition to the

remaining $683 taxable partnership distribution, respondent

alleged in his amended answer that petitioner received, but

fraudulently did not report, $19,233 of taxable income. Fraud

was not deemed admitted with respect to this amount. We now must

decide whether respondent has met his burden.

Petitioner’s conduct exhibits many of the badges of fraud

listed above. He understated his income. He not only kept

inadequate records; he kept no records. He filed his tax return

for the year 2001 approximately 31 months late. He concealed

14
Respondent does not seek fraud penalties under sec. 6663
for the portion of the underpayments attributable to petitioner’s
unsubstantiated deductions for any of the years at issue.
 -16-

income using the name Ray Vogt Enterprises. He failed to

cooperate with taxing authorities, including in the conduct of

this proceeding. He gave false information to taxing authorities

stating that he owned no partnership interests or rental property

during the years at issue. He refused to provide answers, or

gave evasive and irrelevant answers citing frivolous arguments on

numerous occasions. He attempted to prevent a financial

institution from complying with a notice of summons sent to it.

He filed two false Forms W-4, stating that he was exempt from

withholding taxes. Lastly, he had significant cash deposits for

the years at issue. For these reasons, we hold that petitioner

is liable for a penalty under section 6663 with respect to the

portion of the underpayment attributable to unreported income of

$19,916 for the year 2001.

2002

Respondent determined that petitioner is liable for a fraud

penalty under section 6663 for 2002. It was deemed admitted

under Rule 37(c) that petitioner fraudulently, intentionally,

knowingly, and willfully understated his taxable income by

$14,142 for the year 2002.15 In addition to the badges of fraud

listed for the year 2001, which are equally applicable to the

year 2002, petitioner used the name Springboard Ltd. Trust to

15
Respondent alleged in his amended answer that petitioner
received additional amounts of unreported income, but he conceded
those amounts on brief.
 -17-

conceal income during 2002, and he filed his 2002 return

approximately 22 months late. For these reasons, we hold that

petitioner is liable for a penalty under section 6663 with

respect to the portion of the underpayment attributable to

unreported income of $14,141 for the year 2002.

2003

Respondent determined that petitioner is liable for a

fraudulent failure to file addition to tax for the year 2003. We

consider the same factors under section 6651(f) that are

considered in imposing the fraud penalty under section 6663.

Clayton v. Commissioner, 102 T.C. at 653. In addition to the

factors indicating fraud for the years 2001 and 2002 listed

above, we note that respondent began examination of petitioner’s

tax liabilities as early as January 2004, before a return for the

year 2003 was due. Still, petitioner failed to file a return for

the year 2003. It was deemed admitted that petitioner Raymond E.

Vogt fraudulently, intentionally, knowingly, and willfully

underpaid income tax for 2003 in the amount of $23,585. It was

further admitted that petitioner’s failure to file a Federal

income tax return for the year 2003 was fraudulent with intent to

evade tax. For these reasons, we hold that petitioner is liable

for a fraudulent failure to file penalty under section 6651(f)

for 2003.
 -18-

E. Penalty Under Section 6662 and Additions to Tax Under
Sections 6651(a)(1) and 6654

1. Burden of Proof

The Commissioner bears the initial burden of production with

respect to petitioner’s liability for additions to tax under

sections 6651(a)(1) and 6654(a) and penalties under section

6662(a). Sec. 7491(c); Rule 142(a); Higbee v. Commissioner, 116

T.C. 438, 446-447 (2001). To meet this burden, respondent must

come forward with sufficient evidence indicating it is

appropriate to impose the additions to tax and penalties. Higbee

v. Commissioner, supra at 446-447. Respondent’s burden may be

met by facts deemed admitted pursuant to Rule 37(c). Doncaster

v. Commissioner, 77 T.C. at 337; see Marshall v. Commissioner, 85

T.C. at 272-273. The taxpayer bears the burden of proof as to

any exception to the additions to tax or penalties. See sec.

7491(c); Rule 142(a); Higbee v. Commissioner, supra at 446-447.

2. Section 6662(a) Penalty for 2000

Having found that petitioner is not liable for a fraud

penalty for the year 2000, we consider respondent’s argument in

the alternative that petitioner is liable for an accuracy-related

penalty under section 6662. Section 6662(a) imposes a 20-percent

penalty on the portion of an underpayment attributable to, inter

alia, negligence or disregard of rules or regulations.

It was deemed admitted under Rule 37(c) that petitioner was

negligent and reckless in the preparation of his Form 1040, for
 -19-

the year 2000. It was further admitted that petitioner did not

have reasonable cause for the underpayment of his Federal income

tax liability. We therefore hold that petitioner is liable for

an accuracy-related penalty under section 6662(a) for the year

2000 with respect to the portion of the underpayment attributable

to unreported income of $214.16

3. Section 6651(a)(1) Additions to Tax for 2000, 2001, and
2002

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

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

any extension of time for filing) unless the taxpayer can

establish that such failure is because of reasonable cause and

not because of willful neglect.

Petitioner’s Forms 1040, U.S. Individual Income Tax Return,

for 2000, 2001, and 2002 were due to be filed on or before April

15, 2001, 2002, and 2003, respectively. Petitioner’s 2000 and

2001 returns were filed on December 7, 2004, approximately 43 and

31 months late, respectively. Petitioner’s 2002 return was filed

on February 11, 2005, approximately 22 months late. No

extensions were sought from, nor granted, by respondent. It was

deemed admitted under Rule 37(c) that petitioner’s failure to

file his Forms 1040 was due to willful neglect. Furthermore,

petitioner did not have reasonable cause for his failure to file

16
Respondent does not seek an accuracy-related penalty under
sec. 6662 for the portion of the underpayment attributable to
petitioner’s unsubstantiated deductions.
 -20-

his returns timely. We therefore hold that petitioner is liable

for additions to tax under section 6651(a)(1) for 2000, 2001, and

2002.

4. Section 6654 Addition to Tax for 2003

Section 6654(a) imposes an addition to tax on an

underpayment of estimated tax unless one of the statutory

exceptions applies. See sec. 6654(e). The addition to tax is

calculated with reference to four required installment payments

of the taxpayer’s estimated tax liability. Sec. 6654(c)(1);

Wheeler v. Commissioner, 127 T.C. 200, 210 (2006). Each required

installment of estimated tax is equal to 25 percent of the

“required annual payment.” Sec. 6654(d)(1)(A). The required

annual payment is generally equal to the lesser of (1) 90 percent

of the tax shown on the individual’s return for that year (or, if

no return is filed, 90 percent of his or her tax for such year),

or (2) if the individual filed a return for the immediately

preceding taxable year, 100 percent of the tax shown on that

return. Sec. 6654(d)(1)(B); Wheeler v. Commissioner, supra at

210-211. A taxpayer has an obligation to pay estimated taxes for

a particular year only if he has a “required annual payment” for

that year. Wheeler v. Commissioner, supra at 211. The required

annual payment is determined with respect to the tax liability

shown on the taxpayer’s return for the preceding year even when

the return for the previous year fraudulently understates income,
 -21-

or was filed late. Mendes v. Commissioner, 121 T.C. 308, 324

(2003).

It was deemed admitted under Rule 37(c) that petitioner

failed to file a Federal income tax return for 2003. It was

further admitted that petitioner failed to make required

estimated Federal income tax payments for 2003. Petitioner did

not qualify for an exception to application of section 6654. We

therefore hold that petitioner is liable for an addition to tax

under section 6654 for 2003 determined with respect to the tax

shown on his 2002 return, $3,319.

In reaching our holdings, we have considered all arguments

made, and, to the extent not mentioned, we conclude that they are

moot, irrelevant, or without merit.

To reflect the foregoing,

Decision will be

entered under Rule 155.