T.C. Summary Opinion 2006-157



                       UNITED STATES TAX COURT



               DEBO JOEL OGUNGBADE, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 3587-05S.                Filed September 26, 2006.



     Debo Joel Ogungbade, pro se.

     Kathleen K. Raup, for respondent.



     RUWE, Judge:   This case was heard pursuant to section 74631

in effect when the petition was filed.   The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority.




     1
       Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the year in issue. Rule
references are to the Tax Court Rules of Practice and Procedure.
                                - 2 -

     Respondent determined a deficiency of $6,225 and an

accuracy-related penalty of $1,245 under section 6662(a) for

2002.    After concessions by petitioner,2 the issues for decision

are whether petitioner is:    (1) Entitled to claim a $2,606

deduction for cash charitable contributions; (2) entitled to

claim a $1,500 education credit; and (3) liable for the section

6662(a) accuracy-related penalty.

     There are no written stipulations.    The parties orally

stipulate some exhibits, and those exhibits are incorporated

herein by this reference.    Petitioner timely electronically filed

a 2002 tax return.    On January 25, 2005, respondent mailed a

statutory notice of deficiency to petitioner with respect to the

taxable year 2002.




     2
       Petitioner does not contest the following determinations
by respondent: (1) That petitioner is not entitled to claim
unreimbursed medical and dental expenses on Schedule A, Itemized
Deductions, of $6,232, before application of the 7.5-percent
adjusted gross income limit; (2) that petitioner is not entitled
to claim Schedule A education expenses of $3,532, before
application of the 2-percent adjusted gross income limit; (3)
that petitioner did not engage in a business or receive self-
employment income of $3,187; (4) that petitioner is not entitled
to claim meals and entertainment expenses on Schedule C, Profit
or Loss From Business, of $788, before application of the 50-
percent reduction; (5) that petitioner is not entitled to claim
Schedule C car or truck expenses of $8,592; (6) that petitioner
is not entitled to claim Schedule C insurance (other than health)
of $2,354; (7) that petitioner is not entitled to claim Schedule
C travel expenses of $1,354; (8) that petitioner is not entitled
to claim Schedule C utilities expenses of $3,142; and (9) that
petitioner is not entitled to claim Schedule C other expenses of
$2,165.
                                - 3 -

                             Discussion

     As a general rule, the Commissioner’s determinations set

forth in a notice of deficiency are presumed correct, and the

taxpayer bears the burden of proving that these determinations

are in error.   Rule 142(a); Welch v. Helvering, 

, 115

(1933).   Pursuant to section 7491(a), the burden of proof as to

factual issues may shift to the Commissioner where the taxpayer

introduces credible evidence and complies with substantiation

requirements, maintains records, and cooperates fully with

reasonable requests for witnesses, documents, and other

information.    Petitioner has not met the requirements of section

7491(a) because he has not met the substantiation requirements or

introduced credible evidence regarding the deductions and credits

at issue.

1.   Charitable Contributions

     Section 6001 and section 1.6001-1(a), Income Tax Regs.,

require that any person subject to tax or any person required to

file a return of information with respect to income, shall keep

such permanent books of account or records, as are sufficient to

establish the amount of gross income, deductions, credits, or

other matter required to be shown by such person in any return of

such tax or information.   Deductions are strictly a matter of

legislative grace and the taxpayer bears the burden of proving

entitlement to the claimed deduction.     Rule 142(a); INDOPCO, Inc.
                                - 4 -

v. Commissioner, 

, 84 (1992); New Colonial Ice Co. v.

Helvering, 

, 440 (1934).

     Section 170(a) allows as a deduction any charitable

contribution the payment of which is made within the taxable

year.    Deductions for charitable contributions are allowable only

if verified under regulations prescribed by the Secretary.    Sec.

170(a)(1).   In general, the regulations require a taxpayer to

maintain for each contribution of money one of the following:

(1) A canceled check; (2) a receipt from the donee;3 or, in the

absence of a check or receipt, (3) other reliable written

records.   Sec. 1.170A-13(a)(1), Income Tax Regs.   Section 1.170A-

13(a)(2)(i), Income Tax Regs., provides special rules to

determine the reliability of records on the basis of all the

facts and circumstances of the particular case and further

provides factors to consider in making this determination,

including:   (1) Whether the writing that evidences the

contribution was written contemporaneously and (2) whether the

taxpayer keeps regular records of the contributions.

     At trial, petitioner produced a document titled “Rosicrucian

Statement” dated September 12, 2001, which reflects that his

AMORC membership was paid up to the end of August 2002.    The

statement shows quarterly and annual membership rates of $59 and


     3
       A receipt is required to contain the name of the donee,
the date of the contribution, and the amount of the contribution.
Sec. 1.170A-13(a)(1), Income Tax Regs.
                               - 5 -

$212, respectively.   Petitioner produced a similar document

titled “AMORC Statement” dated March 15, 2002, which also

reflects that his AMORC membership was paid up to the end of

August 2002.   The latter statement shows quarterly and annual

membership rates of $61 and $215, respectively.    Petitioner

testified that these rates represent dues that he paid to the

Rosicrucian Order AMORC and that the Order is “more or less a

philosophical organization.   Religion, yes.”   Petitioner also

testified that he made the payments listed on the statements, but

he could not recall when or, more specifically, in which year

they were made.   Since both of the introduced statements indicate

payments of dues to the Rosicrucian Order through August 2002 and

the first statement is dated September 12, 2001, it would appear

that the dues were paid in 2001.

     Petitioner also offered a checking account statement and two

canceled checks; one payable to “H. Spencer Lewis Chapter” for

$120 and the other payable to “PSE&G” for $23.43.    Petitioner

claimed that the statement and checks represented payments made

to a local temple.

     Petitioner offered no other evidence to support the $2,606

in charitable contributions that he deducted.    We find that

petitioner failed to produce reliable evidence of his purported

contributions or to meet his burden of proof.    We hold that
                                  - 6 -

respondent’s determination disallowing petitioner’s claimed

charitable contribution deductions is sustained.

2.    Education Credit

      An individual taxpayer may claim the Hope Scholarship Credit

for payments made to an eligible educational institution for

qualified tuition and related expenses of an eligible student

during the first two years of that student's post secondary

education.   Sec. 25A(b)(2)(C).    For taxable years beginning in

2002, 100 percent of qualified tuition and related expenses not

in excess of $1,000 and 50 percent of the next $1,000 of such

expenses are taken into account in determining the amount of the

Hope Scholarship Credit under section 25A(b)(1) and (4).     Rev.

Proc. 2001-59, sec. 3.04, 2001-2 C.B. 623, 625.     For tax years

beginning in 2002, a taxpayer's modified adjusted gross income in

excess of $41,000 is taken into account in determining the

reduction under section 25A(d)(2)(A)(ii) in the amount of the

Hope Scholarship Credit otherwise allowable under section 25A(a).

Id.   Thus, in 2002, the allowable amount of the credit is reduced

for taxpayers who have a modified adjusted gross income over

$41,000 and is completely phased out when the modified adjusted

gross income reaches $51,000.     See sec. 25A(d)(2).

      The notice of deficiency indicates that, absent a phaseout

reduction, petitioner established sufficient education expenses

to qualify for the maximum $1,500 Hope Scholarship Credit.     As
                                - 7 -

per the notice of deficiency, petitioner’s modified adjusted

gross income in 2002 was $49,184.    Nevertheless, petitioner

claimed the maximum $1,500 Hope Scholarship Credit on his 2002

return.    Respondent does not challenge petitioner’s eligibility

for the Hope Scholarship Credit.    Rather, respondent argues that

since petitioner’s modified adjusted gross income exceeds

$41,000, the allowable credit must be reduced in accordance with

the provisions of section 25A(d).    Petitioner produced no

evidence or argument to refute this.    We find that respondent

properly adjusted petitioner’s claimed education credit, allowing

petitioner a credit of $273.

3.     Section 6662(a)

       Respondent determined that petitioner is liable for an

accuracy-related penalty under section 6662.    Section 6662(a)

provides an accuracy-related penalty equal to 20 percent of the

underpayment required to be shown on a return in certain

circumstances.    Those circumstances include whether the

underpayment, or a portion thereof, is:    (1) Due to negligence or

disregard of rules or regulations, or (2) attributable to any

substantial understatement of income tax.    Sec. 6662(b)(1) and

(2).

       For purposes of section 6662, the term “negligence” includes

“any failure to make a reasonable attempt to comply with the

provisions of * * * [the Code], and the term ‘disregard’ includes
                               - 8 -

any careless, reckless, or intentional disregard.”     Sec. 6662(c).

“Negligence” also includes any failure by a taxpayer to keep

adequate books and records or to substantiate items properly.

Sec. 1.6662-3(b), Income Tax Regs.

      Section 6662(d)(1)(A) provides that there is a substantial

understatement of income tax for any taxable year if the amount

of the understatement for the taxable year exceeds the greater

of:   (1) 10 percent of the tax required to be shown on the return

for the taxable year, or (2) $5,000.    The term “understatement”

means the amount of tax required to be shown on the return for

the taxable year, over the amount of tax imposed which is shown

on the return, reduced by any rebate.    Sec. 6662(d)(2)(A).   All

of the adjustments determined in the notice of deficiency have

been conceded or sustained.   Petitioner’s return reported a tax

of $1,046.   The amount of the deficiency is $6,225.

      An accuracy-related penalty is not imposed with respect to

any portion of the underpayment as to which the taxpayer acted

with reasonable cause and in good faith.    Sec. 6664(c)(1); see

Higbee v. Commissioner, 

, 448 (2001).      This

determination is made based on all the relevant facts and

circumstances.   Higbee v. Commissioner, supra at 448; sec.

1.6664-4(b)(1), Income Tax Regs.     “Relevant factors include the
                               - 9 -

taxpayer’s efforts to assess his proper tax liability, including

the taxpayer’s reasonable and good faith reliance on the advice

of a professional such as an accountant.”     Higbee v.

Commissioner, supra at 448-449.     Other circumstances that may

indicate reasonable cause and good faith include an honest

misunderstanding of fact or law that is reasonable in light of

all the facts and circumstances, including the experience,

knowledge, and education of the taxpayer.    Sec. 1.6664-4(b)(1),

Income Tax Regs.

     To prevail, the Commissioner must produce sufficient

evidence that it is appropriate to apply the penalty to the

taxpayer.   Higbee v. Commissioner, supra at 446.    Once the

Commissioner meets his burden of production, the taxpayer bears

the burden of supplying sufficient evidence to persuade the Court

that the Commissioner’s determination is incorrect.       Id. at 447.

     Petitioner has failed to keep adequate records or to

substantiate properly the items in question.    The record

indicates that there is a substantial understatement of tax on

petitioner’s return.   Respondent has provided sufficient evidence

to meet his burden of production.    Petitioner has not produced

evidence to prove that respondent’s determination of either

negligence or, alternatively, a substantial understatement is
                              - 10 -

incorrect.   We hold that petitioner is liable for the accuracy-

related penalty under section 6662.

     To reflect the foregoing,

                                           Decision will be entered

                                      for respondent.