This Court has found that the duty of consistency applies when:

"(1) the taxpayer has made a representation or reported an item for tax purposes in one year,

(2) the Commissioner has acquiesced in or relied on that act for that year, and

(3) the taxpayer desires to change the representation, previously made, in a later year after the statute1995 U.S. Tax Ct. LEXIS 57">*75 of limitations on assessments bars adjustments for the initial year." [103 T.C. 525">LeFever v. Commissioner, supra at 543 (quoting Beltzer v. United States, 495 F.2d 211">495 F.2d 211, 495 F.2d 211">212 (8th Cir. 1974)).]

Respondent argues that the foregoing triune standard has been satisfied. Specifically, respondent argues Elwood made 105 T.C. 324">*333 a representation in the stipulation of settled issues that the value of the Grapevine property for purposes of computing the Estate's Federal estate tax liability was $ 1,420,000. Respondent argues that, due to the relationship between Elwood and petitioner, petitioner was bound by this representation. Respondent relied on this representation, allowing such value to be used in computing the Estates's Federal estate tax liability. Finally, respondent argues that petitioner is now maintaining a position inconsistent with the prior representation, after the decision in the Estate case has become final, barring subsequent adjustments to the Estate. Accordingly, respondent argues that petitioner is estopped from arguing that Elwood's basis in the Grapevine property was higher than one-fourth of the agreed value of the Grapevine1995 U.S. Tax Ct. LEXIS 57">*76 property in the stipulation of settled issues.

Petitioner argues that the duty of consistency does not apply in this case, since she was not a party to the stipulation.

In analyzing whether the duty of consistency applies, we note that respondent's initial premise is that the duty of consistency would estop Elwood from arguing that his basis in the Grapevine property was greater than one-fourth of the amount agreed to in the stipulation of settled issues. We agree with respondent's threshold premise, as it comports with our decision in LeFever v. Commissioner, 103 T.C. 525">103 T.C. 525 (1994).

However, even assuming the application of the duty of consistency against Elwood, petitioner points out that Elwood is not the taxpayer in this case. Petitioner asserts that she was not a party to and did not enter into the stipulation of settled issues, and therefore the first prong of the duty of consistency test is not satisfied. Respondent argues that, due to the relationship between Elwood and petitioner, petitioner was bound by Elwood's representation.

Several courts have held that the duty of consistency doctrine prevents a beneficiary of an estate from repudiating1995 U.S. Tax Ct. LEXIS 57">*77 an estate tax value, where the beneficiary had been a fiduciary of the estate. Beltzer v. United States, 495 F.2d 211">495 F.2d 211 (8th Cir. 1974); Griffith v. United States, 27 AFTR 71-436, 71-1 USTC par. 9280 (N.D. Tex. 1971); McMillan v. United States, supra; accord Hess v. United States, 210 Ct. Cl. 483">210 Ct. Cl. 483, 537 F.2d 457">537 F.2d 457 (1976). But cf. Ford v. United States, 149 Ct. Cl. 558">149 Ct. Cl. 558, 276 F.2d 17">276 105 T.C. 324">*334 F.2d 17 (1960). In Beltzer, Griffith, and McMillan, the taxpayer beneficiary had been a coexecutor or administratrix of the estate. In Hess, the taxpayer was a testamentary trust whose trustees had been coadministrators of the estate. By contrast, in Ford, where the beneficiaries had not been estate fiduciaries, the quasi-estoppel doctrine was rejected by the court. This Court has not previously addressed this precise issue.

In 149 Ct. Cl. 558">Ford v. United States, supra, the decedent was a citizen of the United States and a resident of Brazil. At the time of his death, the decedent owned stock in a Brazilian1995 U.S. Tax Ct. LEXIS 57">*78 Corporation. Under Brazilian law, the stock passed from the decedent to his two minor children. The executor of the decedent's estate used the value established by Brazilian appraisers, after converting the amount into dollars, for Federal estate tax purposes. The Commissioner contested the method of computing the rate of exchange but not the actual value of the stock. The executor acquiesced on this issue, although other issues were litigated. Subsequently, after the children reached majority, they sold their stock and claimed a basis substantially in excess of that used for estate tax purposes. The U.S. Court of Claims held that the duty of consistency did not estop the taxpayers from asserting that the stock had a value in excess of that used for estate tax purposes. The court refused to bind the beneficiaries to the estate's valuation of the stock because the taxpayers were minors and had no knowledge of what was being written in their father's estate tax return in the United States. Id. at 22. ¹²

1995 U.S. Tax Ct. LEXIS 57">*79 A number of courts have distinguished Ford, finding that a taxpayer can, under appropriate circumstances, be estopped by a representation made by or on behalf of a related taxpayer. E.g., 210 Ct. Cl. 483">Hess v. United States, supra; 495 F.2d 211">Beltzer v. United States, supra; McMillan v. United States, supra. In 537 F.2d 457">Hess v. United States, supra at 464, the court distinguished its own decision in Ford, finding that the representation of an estate bound a testamentary trust created by the estate. In reaching this decision, the court found that, although the trust and the estate were separate legal entities, it was "fair 105 T.C. 324">*335 and in accord with the spirit of law, to require the trust to act in a manner consistent with the estate", because the two entities were "very closely related." Id.

In 495 F.2d 211">Beltzer v. United States, supra at 212-213, the U.S. Court of Appeals for the Eighth Circuit held that a beneficiary was bound by an estate's representation, distinguishing the Ford case. In Beltzer, the taxpayer was a coexecutor of his1995 U.S. Tax Ct. LEXIS 57">*80 father's estate. The taxpayer inherited stock which had been reported in the estate tax return as having a fair market value of $ 59,713 on the date of his father's death, September 22, 1959. The time for adjustments and assessments against the estate expired on December 23, 1963. On May 6, 1966, the taxpayer sold the shares for $ 140,000. For purposes of determining his gain on the sale of the stock, the taxpayer asserted that the stock actually had a fair market value of $ 118,020 on the date of his father's death, despite the fact that he had signed the estate tax return at the lesser figure and had received the benefit of the lower estate tax. The taxpayer argued that he should not be bound by the estate's representation of value, because he relied on his coexecutor to handle the estate tax return. Rejecting the taxpayer's nonparticipation argument, the Court of Appeals held that the taxpayer was bound by the lower stock value reported by the estate under the duty of consistency. 495 F.2d 211">Id. at 212.

The teaching from Hess, Beltzer, and the other cases which have found that a taxpayer may be estopped by a prior representation made by or on behalf1995 U.S. Tax Ct. LEXIS 57">*81 of another taxpayer is that there must be a sufficiently close relationship between the party making the prior representation and the party to be estopped. 537 F.2d 457">Hess v. United States, supra at 464; 495 F.2d 211">Beltzer v. United States, supra at 212. Whether there is sufficient identity between the parties will be dependent upon the facts and circumstances of the particular case. ¹³ In this case, we believe there is a sufficiently close relationship between the 105 T.C. 324">*336 parties, since petitioner and her husband have closely aligned legal and economic interests.

1995 U.S. Tax Ct. LEXIS 57">*82 Petitioner and Elwood filed a joint Federal income tax return for each of the tax years in issue and continued to do so for 1989, the year in which the stipulation of settled issues was executed by Elwood. We have previously noted that filing a joint Federal income tax return generally results in tax savings to the husband and wife. Benjamin v. Commissioner, 66 T.C. 1084">66 T.C. 1084, 66 T.C. 1084">1100 (1976), affd. 592 F.2d 1259">592 F.2d 1259 (5th Cir. 1979). However, in accepting the benefit of filing jointly, the spouses also assume joint and several liability for the payment of any tax due. Sec. 6013(d)(3). By filing a joint income tax return, petitioner and Elwood entered into a joint economic arrangement, whereby they shared the benefits and burdens associated with filing a joint return. In addition to their economic relationship, petitioner and Elwood were also in the legal relationship of marriage in 1989, when the stipulation was entered. Here we have two individuals who have elected to be treated as a single taxpaying unit. Petitioner elected to be taxed not on her individual earnings and deductions (a treatment she could have chosen) but on the income1995 U.S. Tax Ct. LEXIS 57">*83 and deductions of both spouses. Her tax liability is therefore directly affected by her husband's stipulation in the Estate case, agreeing to the value of the Grapevine property. Petitioner's husband (not she) was the one who allegedly incurred the loss. If the loss is unavailable to him as a carryforward, then it stands to reason that she is no more entitled to the loss than he is. Under these circumstances, we hold that petitioner is bound by the representations contained in that agreement.

The remaining two elements of the duty of consistency standard are met. Respondent was bound to follow the stipulation of settled issues, creating the necessary reliance by respondent. The third prong is met because petitioner is maintaining a position in this case which is inconsistent with the stipulation of settled issues, to respondent's detriment. Since all three elements of the duty of consistency are satisfied, we hold that petitioner is bound to use $ 355,000 as Elwood's basis in the Grapevine property for purposes of determining the amount of gain he realized on the sale of such property.

105 T.C. 324">*337 We decline petitioner's invitation to redetermine the fair market value of the Grapevine property1995 U.S. Tax Ct. LEXIS 57">*84 as of the date of Martha Cluck's death in 1983. We will not disturb the agreement between respondent and Elwood, and we will not reexamine the stale evidence regarding the 1983 value of the Grapevine property. See Bartel v. Commissioner, 54 T.C. 25">54 T.C. 25, 54 T.C. 25">32 (1970). We find that Elwood had unreported capital gain of $ 264,425 ($ 619,425 amount realized over $ 355,000 basis). The effect of this ruling is that the portion of petitioner's 1987 and 1988 NOL's attributable to the 1984 loss carryforwards will be eliminated.

B. Additional Depreciation Deductions

Petitioner asserts that she is entitled to increase her claimed 1987 and 1988 NOL's to reflect certain depreciation and amortization deductions that were not claimed during the tax years 1984 to 1988. Respondent contends that petitioner has not substantiated her entitlement to such deductions.

Deductions are strictly a matter of legislative grace, and petitioner bears the burden of proving she is entitled to any deductions claimed. Rule 142(a); New Colonial Ice Co. v. Helvering, 292 U.S. 435">292 U.S. 435, 78 L. Ed. 1348">78 L. Ed. 1348, 54 S. Ct. 788">54 S. Ct. 788 (1934). A taxpayer is required to substantiate claimed deductions by maintaining1995 U.S. Tax Ct. LEXIS 57">*85 the records needed to establish her entitlement to such deductions. Sec. 6001; sec. 1.6001-1(a), Income Tax Regs.

Section 167 provides, in part, for a depreciation deduction with respect to property used in a trade or business. Depreciation allows the taxpayer to recover the cost of the property used in a trade or business or for the production of income. United States v. Ludey, 274 U.S. 295">274 U.S. 295, 274 U.S. 295">300-301, 71 L. Ed. 1054">71 L. Ed. 1054, 47 S. Ct. 608">47 S. Ct. 608 (1927); Southeastern Bldg. Corp. v. Commissioner, 3 T.C. 381">3 T.C. 381, 3 T.C. 381">384 (1944), affd. 148 F.2d 879">148 F.2d 879 (5th Cir. 1945). To substantiate entitlement to a depreciation deduction, the taxpayer must show that the property was used in a trade or business (or other profit-oriented activity). In addition, the taxpayer must establish the property's depreciable basis, by showing the cost of the property, its useful life, and the previously allowable depreciation. E.g., Delsanter v. Commissioner, 28 T.C. 845">28 T.C. 845, 28 T.C. 845">863 (1957), affd. in part and remanded in part 267 F.2d 39">267 F.2d 39 (6th Cir. 1959).

105 T.C. 324">*338 To substantiate her entitlement to the additional amortization and depreciation1995 U.S. Tax Ct. LEXIS 57">*86 deductions, petitioner presented testimony of her husband, Elwood, and a number of summary schedules. According to petitioner, the summary schedules, which were purportedly prepared by petitioner's accountant, substantiate her entitlement to the claimed deductions. Although petitioner indicated that the original documentation supporting the schedules (canceled checks and receipts) was in the courtroom, she did not offer it as evidence. In regard to this documentation, the revenue agent that audited petitioner's returns for the years at issue testified that he had, in the company of petitioner's accountant, attempted to reconcile the summary schedules with the alleged original documentation. According to the agent, the original information could not be reconciled with the summary schedules. Furthermore, it appeared to the agent that a number of the claimed depreciation deductions arose from assets that belonged to another person or entity.

We are not required to accept the unsubstantiated testimony of petitioner's husband, and we decline to do so. Tokarski v. Commissioner, 87 T.C. 74">87 T.C. 74, 87 T.C. 74">77 (1986). The summary schedules provided by petitioner do not demonstrate1995 U.S. Tax Ct. LEXIS 57">*87 her entitlement to the claimed deductions. Petitioner neither called the accountant who allegedly prepared the schedules to testify, nor offered any documentation underlying the schedules. This dual failure gives rise to the presumption that the evidence, if produced, would be unfavorable. Wichita Terminal Elevator Co. v. Commissioner, 6 T.C. 1158">6 T.C. 1158 (1946), affd. 162 F.2d 513">162 F.2d 513 (10th Cir. 1947). Therefore, we hold that petitioner is not entitled to use the claimed depreciation and amortization deductions in the computation of her 1987 and 1988 NOL.

Issue 2. Addition to Tax -- Failure To Timely File

Section 6651(a)(1) provides for an addition to tax for failure to file a Federal income tax return by its due date determined with regard to any extension of time for filing, unless it is shown that such failure is due to reasonable cause and not due to willful neglect. Calendar year individual taxpayers must file their Federal income tax return by April 15 following 105 T.C. 324">*339 the close of the calendar year. Sec. 6072(a). The taxpayer bears the burden of proof on this issue. Rule 142(a).

To demonstrate that petitioner did not timely file1995 U.S. Tax Ct. LEXIS 57">*88 her 1987 and 1988 returns, respondent introduced a Form 4340, Certificate of Assessments and Payments, for both 1987 and 1988, indicating that petitioner filed her 1987 and 1988 tax returns on January 16 and September 7, 1990, respectively. Petitioner does not contend, at trial or on brief, that she timely filed her 1987 and 1988 Federal income tax return. Furthermore, she has not attempted to prove reasonable cause for her failure to file timely. Thus, we hold that petitioner is liable for the additions to tax under section 6651(a)(1).

Issue 3. Addition to Tax -- Negligence

In her notice of deficiency, respondent determined that petitioner was liable for additions to tax for negligence under section 6653(a)(1)(A) and (B) for 1987 and section 6653(a)(1) for 1988. Petitioner asserts that her actions were not negligent and, therefore, she is not liable for such additions.

For 1987, section 6653(a)(1)(A) provides that if any part of the underpayment is due to negligence or disregard of rules or regulations, there shall be added to the tax an amount equal to 5 percent of the underpayment. Also for 1987, section 6653(a)(1)(B) imposes an addition to tax equal to 50 percent of the1995 U.S. Tax Ct. LEXIS 57">*89 interest payable under section 6601 with respect to the portion of the underpayment attributable to negligence. For 1988, section 6653(a)(1) provides that if any part of the underpayment is due to negligence or disregard of rules or regulations, there shall be added to the tax an amount equal to 5 percent of the underpayment.

Negligence under section 6653(a) is defined as a "lack of due care or failure to do what a reasonable and ordinarily prudent person would do under the circumstances." Neely v. Commissioner, 85 T.C. 934">85 T.C. 934, 85 T.C. 934">947 (1985) (quoting Marcello v. Commissioner, 380 F.2d 499">380 F.2d 499, 380 F.2d 499">506 (5th Cir. 1967), affg. in part and remanding in part 43 T.C. 168">43 T.C. 168 (1964)). The Commissioner's determination that the taxpayer's underpayment was due to negligence is presumed correct, and the taxpayer has the burden of proving that the determination is erroneous. Rule 142(a); Bixby v. Commissioner, 58 T.C. 757">58 T.C. 757 (1972). Thus, petitioner must show that she acted reasonably and 105 T.C. 324">*340 prudently and exercised due care in reporting her taxes. 85 T.C. 934">Neely v. Commissioner, supra.1995 U.S. Tax Ct. LEXIS 57">*90

Here, petitioner has failed to present any evidence that she was not negligent in claiming the 1987 and 1988 NOL's. Accordingly, she has failed to meet her burden of proof; therefore, we affirm respondent's determination on this issue.

Issue 4. Addition to Tax -- Substantial Understatement

Respondent determined that petitioner was liable for additions to tax pursuant to section 6661 for tax years 1987 and 1988.

Section 6661 provides that if there is a substantial understatement of income tax, there shall be added to the tax an amount equal to 25 percent of the amount of any underpayment attributable to such understatement. Sec. 6661(a). The taxpayer bears the burden of proving that the Commissioner's determination as to the addition to tax under section 6661(a) is erroneous. Rule 142(a).

An understatement is the difference between the amount required to be shown on the return and the amount actually shown on the return. Sec. 6661(b)(2); Tweeddale v. Commissioner, 92 T.C. 501">92 T.C. 501 (1989); Woods v. Commissioner, 91 T.C. 88">91 T.C. 88 (1988). An understatement is substantial if it exceeds the greater of $ 5,000 or 10 percent of the1995 U.S. Tax Ct. LEXIS 57">*91 amount required to be shown on the return. Sec. 6661(b)(1). The understatement is reduced, however, to the extent it is: (1) Based on substantial authority, or (2) adequately disclosed in the return or in a statement attached to the return. Sec. 6661(b)(2)(B).

Petitioner made no arguments and presented no evidence regarding the substantial understatement additions to tax. Therefore, petitioner has failed to carry her burden of proof as to those items. Accordingly, if the recomputed deficiency under Rule 155 attributable to those items satisfies the statutory percentage or amount, petitioner will be liable for such additions to tax.

To reflect the foregoing opinion and the concessions of the parties,

Decision will be entered under Rule 155.