T.C. Memo. 1998-189



                      UNITED STATES TAX COURT



                  MUNG THI HUYNH, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 2613-97.                        Filed May 26, 1998.



     Mung Thi Huynh, pro se.

     Jack H. Klinghoffer, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION

     GERBER, Judge:   Respondent determined a $147,920 deficiency

in petitioner’s 1992 Federal income tax and an addition to tax

under section 6651(a)(1)1 and   a penalty under section 6662(a) in

the amounts of $37,004 and $29,584, respectively.   The issues for

     1
        Section references are to a Internal Revenue Code in
effect for the period under consideration. Rule references are
to this Court’s Rules of Practice and Procedure.
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our consideration are:    (1) Whether petitioner has shown that she

is entitled to deduct any part of the $459,650 that she claimed

as commissions and fees, and (2) whether petitioner is liable for

the penalty and addition to tax determined by respondent.

                          FINDINGS OF FACT

     Petitioner resided in Pomona, California, at the time her

petition was filed in this case.    Her 1992 Federal income tax

return was filed on April 18, 1994.     On Schedule C, petitioner

reported gross receipts of $1,014,498.29 from her business as a

“Dress Maker” operating under the name “California Fashion”.

After accounting for returns and allowances and cost of goods

sold, a gross income of $534,009.26 was reported.     Among other

expenses, petitioner claimed commissions and fees in the amount

of $459,650.   The sole adjustment by respondent to petitioner’s

Schedule C reporting was the disallowance of the entire amount

claimed for commissions and fees.

     Petitioner’s business involved the manufacture of dresses on

a piecework basis.   Jose Antonio Garcia Juarez2 was employed by

petitioner during 1992.   He was paid approximately $200 to $220

per week, he worked long hours, and he knew how to perform all

tasks involved in the operation of the business.     Mr. Juarez did

not share in petitioner’s business profits for 1992.     At some


     2
        Mr. Juarez has also been known as Mr. Garcia in portions
of the record.
                               - 3 -


time late in 1992 or early in 1993, Mr. Juarez left petitioner’s

employ, and he became associated with her again in approximately

March 1993.

     When Mr. Juarez became reassociated with petitioner, they

entered into an arrangement under which Mr. Juarez would act as

some form of intermediary between petitioner and the customer or

consumer of the manufactured piecework.   Mr. Juarez operated

under this arrangement beginning around March 22, 1993, using the

name “Lemarant Fashion’s”.   The documents offered by petitioner

in an attempt to show that this type of arrangement existed in

1992, had been falsified by changing the year from 1993 to 1992.

                     ULTIMATE FINDING OF FACT

     Petitioner failed to show that she is entitled to deduct any

part of the $459,650 that she claimed as commissions and fees,

which were disallowed by respondent.

                              OPINION

     This case presents a clearly defined factual question.

Respondent disallowed $459,650 that petitioner had claimed as

commissions and fees on her 1992 Schedule C.    Petitioner, in

support of her position that she is entitled to deduct the

questioned amount, testified that Mr. Juarez was paid the amount

as an intermediary between herself and the customer.    Petitioner

also offered a purchase order book reflecting 1992 transactions

with Mr. Juarez.
                                - 4 -


     Mr. Juarez testified that he had signed the purchase orders

that were offered into evidence by petitioner during 1993.

Further, he testified that the purchase order forms were blank

when he had signed them.    Petitioner admitted that the forms were

signed by Mr. Juarez during 1993.    In addition, respondent

produced evidence supporting Mr. Juarez’ testimony that his

business activity with petitioner (other than in the relationship

of employer-employee) began during 1993.

        Petitioner also produced a Form 1099-MISC in Mr. Juarez’

name reflecting nonemployee compensation for 1992.    Respondent,

to counter petitioner’s production of this evidence, provided

credible evidence that no such Form 1099-MISC was received by the

Internal Revenue Service for the 1992 tax year.    It also appears

that the last two digits had been altered from some other year to

1992 on the Form 1099-MISC that was offered by petitioner.

     We hold that petitioner’s position is without merit and that

her evidence and testimony are not believable.

     Respondent determined an accuracy-related penalty due to

negligence under section 6662(a) for petitioner’s 1992 taxable

year.    The accuracy-related penalty is equal to 20 percent of any

portion of an underpayment attributable to a taxpayer’s

negligence or disregard of rules or regulations.    Sec. 6662(a)

and (b)(1).    The term “negligence” includes any failure to do

what a reasonable and ordinarily prudent person would do under
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the same circumstances.    Neely v. Commissioner, 

, 947

(1985).   The term “disregard” includes any careless, reckless, or

intentional disregard.    Sec. 6662(c).    The penalty does not apply

to any portion of an underpayment for which there was reasonable

cause and with respect to which the taxpayer acted in good faith.

Sec. 6664(c)(1).

      Petitioner has failed to show reasonable cause and/or that

she acted in good faith.    Under the circumstances of this case,

respondent’s determination of a penalty pursuant to section

6662(a) is sustained with respect to the entire underpayment.

     Respondent also determined that petitioner’s 1992 income tax

return was not timely filed within the meaning of section

6651(a)(1).   That section provides for a 5-percent per month (up

to a 25-percent maximum) addition to tax with respect to a late-

filed return, unless it is shown that the late filing was due to

reasonable cause and not to willful neglect.      Petitioner’s 1992

Federal income tax return was due April 15, 1993.      The return was

not signed until April 13, 1994, or filed until April 18, 1994.

Petitioner stated that she filed late because she did not have

the funds with which to pay the tax.      In that regard,

petitioner’s 1992 return reflected no estimated payments and a

balance due of $880.52.    This is in contrast to $1,014,498.29

reported as gross receipts on the Schedule C of the same return.
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Under these circumstances, we hold that petitioner is liable for

this addition to tax, as determined by respondent.

     To reflect the foregoing,

                                         Decision will be entered for

                                 respondent.