T.C. Summary Opinion 2008-71



                      UNITED STATES TAX COURT



               EDWIN F. THORNE, SR., Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 13047-07S.              Filed June 23, 2008.



     Edwin F. Thorne, Sr., pro se.

     Ronald S. Collins, Jr., for respondent.



     JACOBS, Judge:   This case was heard pursuant to the

provisions of section 7463 of the Internal Revenue Code in effect

at the time the petition was filed.1   Pursuant to section

7463(b), the decision to be entered is not reviewable by any




     1
      Subsequent section references are to the Internal Revenue
Code as amended, and all Rule references are to the Tax Court
Rules of Practice and Procedure.
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other court, and this opinion shall not be treated as precedent

for any other case.

       Respondent determined a $2,132 deficiency in petitioner’s

2004 income tax.    Respondent also determined that petitioner was

liable for a $479.70 addition to tax under section 6651(a)(1) for

failure to file a timely return and a $223.86 addition to tax

under section 6651(a)(2) for failing to timely pay the tax when

due.    The deficiency arose as a consequence of respondent’s

determination that petitioner earned but did not report income of

$12,500 for 2004.

                             Background

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

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.    Petitioner resided in

Pennsylvania when he filed his petition.

       Petitioner did not file a Federal income tax return, and

made no tax payments of any kind, with respect to 2004.    Using

information contained in a Form 1099-MISC, Miscellaneous Income,

submitted to respondent by Saraceni Brothers, a construction

company, respondent prepared, pursuant to section 6020(b), a

substitute for return for petitioner for 2004 which showed that

petitioner received self-employment income of $12,500.    After

adjusting petitioner’s gross income for a personal exemption and

the standard deduction, respondent determined that petitioner’s
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taxable income was $3,667, the income tax owed was $366, and the

tax owed with respect to self-employment income was $1,766, for a

total tax owed of $2,132.

     Petitioner timely filed a petition disputing respondent’s

determination with the single statement that petitioner “was not

employed on dates indicated.”

     In the years preceding 2004 petitioner engaged in various

building and construction activities, such as welding, truck

driving, and carpentry.   He began working for Saraceni Brothers

in the 1990s and worked for at least one other company.

     Petitioner initially denied that he received any amounts

from Saraceni Brothers during 2004, although he acknowledged that

he did not keep any records of his earnings.   Upon being shown

checks from Saraceni Brothers totaling $600 which he had cashed,

petitioner conceded that during 2004 he “maybe worked a couple of

weeks for Saraceni Brothers” as a carpenter.

     Later during cross-examination, petitioner conceded that in

addition to the $600 evidenced by the canceled checks, in 2004 he

received “maybe like $50, something like that.   I mean, it was

nothing over $100 in cash.”   As the briefing schedule was being

discussed, petitioner remarked to the Court:   “I’ll leave it in

your hands, but I did not receive any cash with that kind of

money.”   To the Court’s inquiry as to how much money petitioner
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thought he did receive in cash, petitioner replied:    “Probably

about like $1,000, something like that, $1,100.”

     We find petitioner’s belief that he did not receive the

entire $12,500 in compensation was sincere but that his

recollection of the events of 2004 relating to his employment was

faulty.

     Joseph Saraceni, who was a partner of Saraceni Brothers in

2004, testified that petitioner worked for Saraceni Brothers in

2004 as a carpenter and plumber and had been paid $12,500.     Mr.

Saraceni testified that he prepared a Form 1099 reporting

petitioner’s compensation to the Internal Revenue Service.     Mr.

Saraceni testified that:    (1) Petitioner requested to be paid,

and was paid   partly, in cash, (2) the company maintained a

ledger which reflected cash payments to petitioner and other

subcontractors, and (3) this ledger was the basis upon which Mr.

Saraceni prepared the Form 1099.    We found Mr. Saraceni’s

testimony to be credible.

                             Discussion

     The taxpayer ordinarily bears the burden of proving that the

Commissioner’s deficiency determinations are incorrect.    See Rule

142(a); Welch v. Helvering, 

, 115 (1933).     However,

the burden of proof may shift to the Commissioner if the taxpayer

has produced credible evidence relating to the tax liability at

issue and has met his substantiation requirements, maintained
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required records, and cooperated with the Secretary’s reasonable

requests for documents, witnesses, and meetings.     Sec. 7491(a).

Furthermore, section 6201(d), as pertinent here, provides that in

any court proceeding, if a taxpayer asserts a reasonable dispute

with respect to any item of income reported on an information

return (such as a Form 1099 filed by a third party) and the

taxpayer has fully cooperated with the Internal Revenue Service,

the Commissioner has the burden of producing reasonable and

probative information concerning the deficiency in addition to

the information return.   Finally, we are mindful that the Court

of Appeals for the Third Circuit, to which this case would be

appealable if it had not been heard pursuant to section 7463,

requires the Commissioner’s determination of unreported income to

be supported by some evidence linking the taxpayer to the tax-

generating activity in order for the determination to be entitled

to the presumption of correctness.      See, e.g., Basile v.

Commissioner, T.C. Memo. 2005-51 n.2.

     Petitioner did not argue that section 7491(a) operates to

shift to respondent the burden of proof regarding the unreported

income adjustments.   Nor did he introduce any evidence that he

satisfied the requirements of section 7491(a).     In fact,

petitioner admitted that he did not keep any record of his

earnings for 2004.    Even if we were to assume that petitioner has

asserted a reasonable dispute with respect to the unreported
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income reported on the Form 1099 submitted by Saraceni Brothers,

we find that respondent, through Mr. Saraceni’s testimony,

, has produced reasonable and probative

information concerning that information return and has linked

petitioner to the income-generating activity.   We conclude,

therefore, that petitioner has the burden of proof regarding

respondent’s determination that petitioner had unreported income.

     Section 61(a) defines gross income for purposes of

calculating taxable income as “all income from whatever source

derived”.   In addition to the income tax imposed by section 1,

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).   An

individual is subject to self-employment tax if his or her net

earnings from self-employment exceed $400 for the taxable year.

Sec. 1402(b)(2).

     Petitioner admitted at trial that he worked for Saraceni

Brothers during 2004 (although he asserted the opposite in his

petition) and that he received $600 in compensation from Saraceni

Brothers in the form of checks as well as additional cash.     In

contrast to petitioner’s contradictory testimony and lack of

substantiating evidence, respondent introduced credible

documentary evidence and testimony that petitioner earned $12,500

from Saraceni Brothers in 2004.   We hold that petitioner failed
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to carry his burden of proving that respondent’s determination

was incorrect.

     Under section 7491(c), the Commissioner bears the burden of

production with respect to a taxpayer’s liability for penalties

or additions to tax.   This means that the Commissioner must “come

forward with sufficient evidence indicating that it is

appropriate to impose the relevant penalty.”     Higbee v.

Commissioner, 

, 446 (2001).     In instances where an

exception to the penalty or addition to tax is afforded upon a

showing of reasonable cause, the taxpayer bears the burden of

demonstrating such cause.

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

file a timely return unless it is shown that the failure is due

to reasonable cause and not to willful neglect.    “[R]easonable

cause” is described by the applicable regulations as the exercise

of “ordinary business care and prudence”.     Sec. 301.6651-1(c)(1),

Proced. & Admin. Regs.; see also United States v. Boyle, 

, 246 (1985).   “[W]illful neglect” is interpreted as a

“conscious, intentional failure or reckless indifference.”

United States v. Boyle, supra at 245.     Moreover, “taxpayers who

deliberately omit to file returns must use reasonable care to

ascertain that no returns are necessary, and that in the absence

of obtaining competent advice, the mistaken belief on the part of

a taxpayer that no return was required under the statute does not
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constitute reasonable cause for noncompliance.”     Shomaker v.

Commissioner, 

, 202 (1962).

     Respondent has met his burden of production.    Petitioner

admitted that he failed to file a Federal income tax return for

2004.   Petitioner’s explanation is that he did not believe that

he earned enough income in 2004 to generate any tax liability.

This erroneous and unconfirmed belief does not amount to

reasonable cause for failing to file a tax return.    Even if we

accepted petitioner’s assertion that he earned no more than the

$600 that he admitted receiving, he would have been liable for

self-employment tax, as the threshold amount under section

1402(b)(2) is $400.   Consequently, we sustain respondent’s

imposition of an addition to tax pursuant to section 6651(a)(1).

     Section 6651(a)(2) imposes an addition to tax for failure to

pay the amount of tax shown on a return.   The addition to tax

applies only when an amount of tax is shown on a return.      Cabirac

v. Commissioner, 

, 170 (2003).   Under section 6651(g)

a return prepared by the Secretary pursuant to section 6020(b) is

treated as a return filed by the taxpayer for the purpose of

determining the amount of an addition to tax under section

6651(a)(2).

     Respondent prepared a return for petitioner that qualifies

as a return for purposes of section 6651(a)(2).   See Wheeler v.

Commissioner, 

, 208-210 (2006), affd. 

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(10th Cir. 2008).   This return is “prima facie good and

sufficient for all legal purposes.”      Sec. 6020(b)(2).   Petitioner

failed to pay his 2004 tax liability as shown on the return

prepared by the Secretary.    Accordingly, respondent has met his

burden of production with respect to the section 6651(a)(2)

addition to tax.    Because petitioner has not demonstrated

reasonable cause and has offered no reason for failing to pay the

amount of tax shown on the 2004 return other than that he did not

believe he had received payment from Saraceni Brothers (a belief

he later admitted was incorrect), he is liable for an addition to

tax pursuant to section 6651(a)(2).


                                             Decision will be entered

                                        for respondent.