T.C. Summary Opinion 2010-99



                        UNITED STATES TAX COURT



               CURTIS AND ANNIE RIGGINS, Petitioners v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



        Docket No. 19321-08S.              Filed July 26, 2010.



        Curtis and Annie Riggins, pro sese.

        Patsy A. Clarke, for respondent.



     DEAN, Special Trial Judge:     This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect when the petition was filed.     Pursuant to section 7463(b),

the decision to be entered is not reviewable by any other court,

and this opinion shall not be treated as precedent for any other

case.     Unless otherwise indicated, subsequent section references

are to the Internal Revenue Code in effect for the year at issue,
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and all Rule references are to the Tax Court Rules of Practice

and Procedure.

     Respondent determined for 2005 a deficiency in petitioners’

Federal income tax of $2,795 and an accuracy-related penalty

under section 6662(a) of $559.    Petitioner Annie Riggins did not

sign the stipulation of facts, nor did she appear for trial.       The

Court will dismiss her for failure to properly prosecute her

case.    An appropriate order will be issued.1

        The issues for decision are whether petitioners:    (1) Had

unreported income from an S corporation of $17,301, and (2) are

liable for the accuracy-related penalty under section 6662(a).

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

The stipulation of facts and the exhibits received in evidence

are incorporated herein by reference.      Petitioners resided in the

State of Washington when the petition was filed.

                              Background

     Petitioners reported on Schedule E, Supplemental Income and

Loss, of their Federal income tax return for 2005 a $15,371

“flow-through” loss from Evergreen Construction (Evergreen).       In

2005 Curtis Riggins (petitioner) was president and owner of one-

third of the shares of Evergreen, an S corporation under section

1361.    Evergreen was a drywall contractor.     Respondent examined


     1
      The Court will dismiss Annie Riggins for failure to
properly prosecute and will enter a decision against her
consistent with the decision entered against Curtis Riggins.
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petitioners’ return and Evergreen’s Form 1120S, U.S. Income Tax

Return for an S Corporation.    The examination resulted in a

determination that Evergreen did not suffer a loss of $46,111 for

2005 but instead earned income of $51,901, of which petitioner’s

one-third share was $17,301.

                           Discussion

     Generally, the Commissioner’s determinations in a notice of

deficiency are presumed correct, and the taxpayer has the burden

of proving that those determinations are erroneous.    See Rule

142(a); Welch v. Helvering, 

, 115 (1933).     In some

cases the burden of proof with respect to relevant factual issues

may shift to the Commissioner under section 7491(a).    Petitioner

did not argue or present evidence that he satisfied the

requirements of section 7491(a).    Therefore, the burden of proof

does not shift to respondent.

     Petitioner’s evidence at trial was his testimony that the

“loss was around about $40,000”.    He added that “The proof for

that is hard because we didn’t keep good records”.    Petitioner

offered no relevant documentation to dispute respondent’s

determination, which the Court sustains.

     Section 7491(c) imposes on the Commissioner the burden of

production in any court proceeding with respect to the liability

of any individual for penalties and additions to tax.     Higbee v.

Commissioner, 

, 446 (2001); Trowbridge v.
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Commissioner, T.C. Memo. 2003-164.      In order to meet the burden

of production under section 7491(c), the Commissioner need only

make a prima facie case that imposition of the penalty or

addition to tax is appropriate.      Higbee v. Commissioner, supra at

446.

       Respondent determined that for 2005 petitioners underpaid a

portion of their income tax on account of negligence or

intentional disregard of rules and regulations.     Section 6662(a)

and (b)(1) imposes a penalty equal to 20 percent of the portion

of the underpayment attributable to negligence or disregard of

rules or regulations.

       Negligence is defined as any failure to make a reasonable

attempt to comply with the provisions of the Internal Revenue

Code, and the term “disregard” includes any careless, reckless,

or intentional disregard.    See sec. 6662(c).   Negligence also

includes any failure by the taxpayer to keep adequate books and

records or to substantiate items properly.     Sec. 1.6662-3(b)(1),

Income Tax Regs.

       The accuracy-related penalty will apply unless petitioner

has demonstrated that there was reasonable cause for the

underpayment and that he acted in good faith with respect to the

underpayment.    See sec. 6664(c).   Section 1.6664-4(b)(1), Income

Tax Regs., specifically provides:     “Circumstances that may
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indicate reasonable cause and good faith include an honest

misunderstanding of fact or law that is reasonable in light of

* * * the experience, knowledge, and education of the taxpayer.”

     Petitioner has not demonstrated that there was reasonable

cause for the underpayment and that he acted in good faith with

respect to the underpayment.   Respondent’s determination of the

accuracy-related penalty under section 6662(a) and (b)(1) for

2005 is sustained.

     To reflect the foregoing,


                                              An appropriate order

                                         will be issued, and decision

                                         will be entered for

                                         respondent.