                        T.C. Memo. 2006-130



                      UNITED STATES TAX COURT



                NORMAN W. KLOOTWYK, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7604-04.              Filed June 22, 2006.



     Philip A. Putman, for petitioner.

     Ron Chun and Loren B. Mark, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     LARO, Judge:   Respondent determined a deficiency in

petitioner’s Federal income tax of $8,455 for 2001 and additions

to tax of $2,659.54 for failure to file a return under section

6651(a)(1) and $334.58 for failure to pay estimated tax under
                                -2-

section 6654.1   After concessions by respondent, the issues for

decision are (1) whether petitioner had unreported income for

2001 in the amounts determined by respondent, (2) whether

petitioner is liable for the addition to tax under section

6651(a)(1), (3) whether petitioner is liable for the addition to

tax under section 6654, and (4) whether the Court should impose

on petitioner a penalty pursuant to section 6673.

                         FINDINGS OF FACT

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

petition was filed, petitioner resided in Cottonwood, Arizona.

     In 2001, petitioner received nonemployee compensation in the

total amount of $11,227.30 from Hy-Vee Inc., Carson Services,

Perkins Family Restaurants, American Home Shield Corp., and K-

Mart Corp.; wage income of $25,685 from Hoff Mechanical Inc.;

total interest income of $1,225 from Marshalltown Development

Corp., Prudential Insurance Company of America, Home Federal

Savings Bank, and an account maintained at Edward D. Jones & Co.;

and total dividend income of $3,398 from A.G. Edwards & Sons

Inc., an account maintained at Edward D. Jones & Co., and Cash

Management Trust of America-The American Funds Service Company.

     Petitioner failed to file a Federal income tax return for

2001 and did not make any estimated tax payments for the 2001 tax


     1
        Section references are to the applicable versions of the
Internal Revenue Code. Rule references are to the Tax Court
Rules of Practice and Procedure.
                                 -3-

year.    In a notice of deficiency dated January 28, 2004,

respondent determined the above-stated deficiency and additions

to tax.    Petitioner timely filed a petition disputing the

determinations.2

     Petitioner did not submit a pretrial memorandum as required

by the Court’s standing pretrial order.    At calendar call,

petitioner did not appear, but the Court had before it and

granted petitioner’s motion for a trial time and date certain.

At trial, petitioner did not personally appear but was

represented by counsel.    Petitioner’s counsel did not introduce

any evidence on petitioner’s behalf at trial and failed to file

an opening brief following the trial.

                               OPINION

1.   Unreported Income

     As a general rule, the Commissioner’s determinations of

deficiencies in tax set forth in a notice of deficiency are

presumed correct, and the taxpayer bears the burden of showing

that these determinations are in error.    Rule 142(a); Welch v.




     2
        On Apr. 30, 2004, the Court filed as a petition a letter
received from petitioner. By an order dated May 10, 2004, the
Court directed petitioner to file an amended petition complying
with the Rules of the Court as to form and content of a proper
petition by June 24, 2004. Despite issuance by the Court of
several orders to petitioner in the ensuing months, petitioner
did not submit an amended petition to the Court until Apr. 28,
2005.
                               -4-

Helvering, 290 U.S. 111, 115 (1933).3   In order for the

presumption of correctness to attach to the deficiency

determination in unreported income cases, the Commissioner must

establish “some evidentiary foundation” connecting the taxpayer

with the income-producing activity, Weimerskirch v. Commissioner,

596 F.2d 358, 361-362 (9th Cir. 1979), revg. 67 T.C. 672 (1977),

or demonstrate that the taxpayer received unreported income,

Edwards v. Commissioner, 680 F.2d 1268, 1270 (9th Cir. 1982) (the

Commissioner’s assertion of a deficiency is presumptively correct

once some substantive evidence is introduced demonstrating that

the taxpayer received unreported income).   McManus v.

Commissioner, T.C. Memo. 2006-57; see also Palmer v. United

States, 116 F.3d 1309, 1312 (9th Cir. 1997) (“The Commissioner’s

deficiency determinations and assessments for unpaid taxes are

normally entitled to a presumption of correctness so long as they

are supported by a minimal factual foundation.”).   If the

Commissioner introduces some evidence that the taxpayer received

unreported income, the burden shifts to the taxpayer to show by a

preponderance of the evidence that the deficiency was arbitrary



     3
        Pursuant to sec. 7491(a), the burden of proof as to
factual matters affecting liability for tax shifts to respondent
under certain circumstances. Petitioner has neither alleged that
sec. 7491(a) applies nor established his compliance with the
requirements of sec. 7491(a)(2)(A) and (B) to substantiate items,
maintain records, and cooperate fully with respondent’s
reasonable requests. Petitioner therefore bears the burden of
proof.
                                 -5-

or erroneous.    Hardy v. Commissioner, 181 F.3d 1002, 1004 (9th

Cir. 1999), affg. T.C. Memo. 1997-97.

     We conclude that respondent has met his burden of production

as to the unreported income determined in the notice of

deficiency.   Respondent introduced, and we admitted, into

evidence respondent’s worksheets listing the amounts of income

that third parties represented to respondent as having been paid

to petitioner, and petitioner has not challenged the accuracy of

these worksheets.   See Green v. Commissioner, T.C. Memo. 1996-

107, affd. without published opinion 113 F.3d 1251 (11th Cir.

1997).   In addition, petitioner stipulated having received $327

in interest income and $25,685 in wages.   Respondent also

introduced, and we admitted, into evidence the declarations of

records of the regularly conducted activity of Hy-Vee Inc.,

Carson Services Inc., Perkins Family Restaurants, K-Mart Corp.,

and Hoff Mechanical Inc., and business records affidavits from

Edward Jones, all of which support the determination made by

respondent.   We hold that respondent has sufficiently linked

petitioner to the unreported income.    See Hardy v. Commissioner,

supra at 1004.   Given petitioner’s failure to disprove

respondent’s determination of unreported income, as modified

through concessions, we sustain the determination as modified.
                                 -6-

2.   Addition to Tax Under Section 6651(a)(1)

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

file a return when due “unless it is shown that such failure is

due to reasonable cause and not due to willful neglect”.      The

addition equals 5 percent for each month that the return is late,

not to exceed 25 percent in total.      The Commissioner has the

burden of production with respect to the liability of an

individual for an addition to tax under section 6651(a)(1).        Sec.

7491(c).    The burden of showing reasonable cause under section

6651(a) remains on the taxpayer.       Higbee v. Commissioner, 116

T.C. 438, 446-448 (2001).    “Reasonable cause” requires petitioner

to demonstrate that he exercised ordinary business care and

prudence and nevertheless was unable to file the return by the

due date.    United States v. Boyle, 469 U.S. 241, 246 (1985); sec.

301.6651-1(c), Proced. & Admin. Regs.      Willful neglect is defined

as a “conscious, intentional failure or reckless indifference.”

United States v. Boyle, supra at 245.

     Petitioner stipulated that he never filed his 2001 tax

return.    Respondent has, accordingly, met his burden of

production with regard to the section 6651(a)(1) addition to tax.

See sec. 7491(c).    Petitioner has neither offered an explanation

for his failure to file nor produced evidence to establish any

reasonable cause for his failure to file the return.      We sustain

respondent’s determination of an addition to tax under section
                                    -7-

6651(a)(1) in the amount to be calculated by the parties in their

Rule 155 computation.4

3.     Addition to Tax Under Section 6654

       Section 6654(a) imposes an addition to tax on an

underpayment of a required installment of individual estimated

tax.       A taxpayer may avoid the addition to tax by establishing

that one of the exceptions listed in the section applies.

Petitioner stipulated that he did not make any estimated tax

payments for the 2001 taxable year, and he has not disputed the

imposition of the addition to tax.        Accordingly, respondent has

satisfied his burden of production under section 7491(c) with

regard to the section 6654 addition to tax, and we sustain its

applicability.

4.     Section 6673(a)(1)

       Section 6673(a)(1) provides that this Court may require a

taxpayer to pay to the United States a penalty not in excess of

$25,000 whenever it appears either that the taxpayer instituted

or maintained the proceedings primarily for delay or that the

taxpayer’s position in the proceeding is frivolous or groundless.

       On the basis of the record before us, we are convinced that

petitioner has instituted and maintained these proceedings

primarily for delay.       Petitioner failed to submit to the Court a


       4
        We note that the addition to tax under sec. 6651(a)(1)
may not exceed 25 percent of the amount required to be shown as
tax on the return. See sec. 6651(a)(1).
                                 -8-

pretrial memorandum as directed by the Court’s standing pretrial

order.   Petitioner also failed to appear for his case when it was

called for trial.   While petitioner was at that time represented

by counsel who did appear on petitioner’s behalf, petitioner’s

counsel neither presented a case nor offered any evidence on

petitioner’s behalf.   Moreover, following trial, neither

petitioner nor his counsel submitted a brief as we ordered.     In

light of the foregoing, we believe that sanctions are necessary

to deter petitioner and others similarly situated from comparable

dilatory conduct.   Pursuant to section 6673(a)(1), we impose

against petitioner a penalty in the amount of $1,000.

     To reflect the foregoing,


                                            Decision will be entered

                                       under Rule 155.
