                      T.C. Memo. 1999-176



                  UNITED STATES TAX COURT



                VERNON W. HARTMAN, JR. AND
           VIRGINIA M. HARTMAN, Petitioners v.
       COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 23228-95.                   Filed May 25, 1999.



     Kenneth E. Ahl, for petitioners.

     Keith L. Gorman and Michael D. Baker, for respondent.



                      MEMORANDUM OPINION

     WHALEN, Judge:   Respondent determined the following

deficiencies, additions, and penalty with respect to

petitioners' Federal income tax:
                             - 2 -


                           Penalty and Additions to Tax
Year   Deficiency   Sec. 6651(a)(1) Sec. 6661(a)   Sec. 6662(a)

1986    $14,882           $2,853         $2,442            --
1987     13,971            2,811          2,811            --
1988      3,527              882           --              --
1989      3,825              956           --              --
1990     10,182            2,546           --           $2,036


Unless stated otherwise, all section references are to the

Internal Revenue Code as in effect for the years in issue,

and all Rule references are to the Tax Court Rules of

Practice and Procedure.

       The parties have stipulated some of the facts.

The stipulation of facts filed by the parties and the

accompanying exhibits are incorporated herein by this

reference.    Petitioners resided in the Commonwealth of

Pennsylvania at the time they filed the instant petition.

       Petitioners did not file income tax returns for the

years in issue, 1986 through 1990, until 1992.    At the time

of trial, petitioners had not filed returns for the years

1993 through and including 1996.

       Respondent concedes that petitioners are not liable

for a small portion of the above deficiencies determined in

the notice of deficiency for 1989 and 1990.    The issue for

decision is whether petitioners are liable for the subject

tax deficiencies, penalty, and additions to tax, other than

the portion of the deficiencies for 1989 and 1990 conceded
                                       - 3 -


by respondent.          Resolution of this issue requires a

detailed review of the pleadings and other papers filed by

the parties.

       In determining the above deficiencies in petitioners'

tax, respondent disallowed the following deductions claimed

on the subject returns:
                               1986            1987     1988       1989      1990
Schedule C
 Travel and
  entertainment               $8,176           $7,839   $12,843   $15,878   $25,217
 Depreciation expense          1,545             -0-       -0-       -0-       -0-
 Meals and
  entertainment                -0-             2,328     3,961     7,490     4,422
 Bad debts                     -0-               -0-      -0-      5,500      -0-
 Advertising                    207              738      -0-       -0-       -0-
 Commissions                  2,171            3,246     4,899     5,537     7,101
 Insurance                      575            1,899     2,045     1,310     1,598

Employee business
 expense                      29,943             -0-    19,896      -0-       -0-

Itemized deductions           2,500            2,530    (1,278)     (734)    2,580

Miscellaneous
 deductions                     -0-            22,088      -0-      -0-     13,300
Total adjustments             45,117           40,668   42,366    34,981    54,218




Respondent disallowed the above deductions principally because

petitioners had failed to substantiate their eligibility for

the deductions.

       The initial petition in this case was in the form

of a typed letter to the Court, which states as follows:


       TO WHOM IT MAY CONCERN:

       In re my telephone conversation with your office
       today, please accept this letter as my petition
       for redetermination of the deficiency shown on
       the attached copy of notice. Please send me the
       pertinent petition forms, as well as available
       information, to the address shown below:
                             - 4 -


          *    *    *    *     *      *      *

     Since I have been traveling pursuant to my
     occupation continuously from mid-June until this
     week, I have been unable to procure the necessary
     forms.

     Thank you for your kind assistance in this
     matter.


     After the Court informed petitioners that the above

petition did not comply with the Tax Court Rules of

Practice and Procedure as to form and content, the Court

received an amended petition, which states as follows:


     I disagree with all the changes in the Notice
     of Deficiency. Due to the recurring scheduling
     difficulties with the local examiner, I was
     unable to properly establish the validity of
     the disputed deductions. This was partly due
     to the examiner's unavailability and partly to
     my extensive travel schedule as a professional
     singer. Thus the findings were arbitrary and
     incorrect.


     By notice dated August 23, 1996, the Court set this

case for trial on January 27, 1997.       A few weeks before

trial, petitioners sent a letter to the Court in which they

requested continuance of the case because of Mr. Hartman's

travel schedule and the fact that Mr. Hartman was working

with representatives of the Appeals Office "with the aim of

reaching a settlement in this case."       The Court granted the

continuance with no objection by respondent.
                              - 5 -


     By notice dated May 7, 1997, the Court set the case

for trial on October 14, 1997.    When the case was called

for trial on October 14, 1997, respondent and Mr. Hartman

appeared before the Court and represented that they were

going to meet with a revenue agent to review Mr. Hartman's

records.   Mr. Hartman represented to the Court that he had

all of his "documentation".    In response, the Court

directed as follows:   "All right.      I'll recall the case on

Thursday [October 16, 1997], and at that point, I expect

everything to be taken care of.       If not, we'll be ready to

go to trial."

     When the parties appeared before the Court on

October 16, 1997, respondent's attorney advised the Court

that the parties had made progress, but they had not

finished reviewing petitioners' documentation.

Respondent's attorney further represented that they needed

3 or 4 days to complete their review.       On the basis of

these representations, the Court continued the case and

directed the parties to file a joint status report in 30

days with the expectation that the case would be resolved

in that period.   The Court made the following comment to

Mr. Hartman:
                            - 6 -


     THE COURT:     * * * [I]t's also your responsibility,
                    Mr. Hartman, to have--have all that
                    documentation readily avail-able, and
                    I don't want long delays in terms
                    of providing the Respondent with the
                    necessary information because we've
                    already delayed long enough.

     MR. HARTMAN:   It's all sitting in my car, Your Honor,
                    so we're going through it.


     Subsequently, an attorney entered his appearance on

behalf of Mr. Hartman.   Inexplicably, the attorney did not

enter his appearance on behalf of Mrs. Hartman.    The

parties filed status reports pursuant to the Court's order

in which they stated that little progress had been made.

Mr. Hartman's attorney filed petitioners' status report,

in which he detailed Mr. Hartman's professional engage-

ments that required cancellation of an appointment with

respondent and would make Mr. Hartman unavailable for

approximately 30 days.

     Shortly thereafter, respondent filed a motion to

dismiss for lack of prosecution.    Respondent's motion sets

forth the following summary of petitioners' failure to

prosecute this case from the time of the first continuance:
                       - 7 -


4.   A subsequent Branerton letter [informal
request for information] to petitioners sent
certified mail was returned with the hand-written
notation: "out of country for the next three
months--will be back August 5, 1997."

5.   In August, the aforementioned letter was
resent, again certified mail, with three
suggested dates to meet and go over documents
and prepare a stipulation for trial. The letter
was not returned, but no one called or appeared
on any of the three dates.

6.   On September 12, 1997, respondent mailed
a proposed Joint Stipulation of Facts to
petitioners by certified mail, including copies
of all the tax returns and the statutory notice
of deficiency. This mailing was received.

7.    In a conference call with the Court on
October 7, 1997, petitioner Vernon W. Hartman
was ordered to meet with respondent and a Revenue
Agent, with his documents, on Friday, October 10,
1997.

8.   Petitioner and respondent met for the
first time on that date, but Mr. Hartman did
not produce any documentation. He stated that
his diaries were being sent to Pennsylvania.
Mrs. Hartman did not appear for this conference.

         *    *    *    *      *   *   *

20. * * * [R]espondent and the revenue agent
have offered and been scheduled to meet with
petitioner on nine separate occasions.
Petitioner has cancelled every one of these
dates, often with less than 24 hours' notice.

21. Petitioners still have not provided any of
the documentation for 1986, 1987, and 1988 needed
to verify the expenses deducted.

         *    *    *    *      *   *   *

24. This Court has given petitioners more than
adequate time to complete this process.
                             - 8 -


In response, Mr. Hartman's attorney stated as follows:


     5)   Once the undersigned has an understanding
     as to what is included in Petitioner Vernon W.
     Hartman, Jr.'s, documents, he will then proceed
     to meet with Respondent's counsel whenever
     necessary to fully and timely prosecute
     Petitioner's case.

               *    *    *    *      *     *    *

     8)   While Petitioner, Vernon W. Hartman, Jr.,
     regrets not being able to spend as much time
     as he would wish on this matter, he has now
     retained the services of the undersigned who
     is familiar with the United States Tax Court
     Rules and will assist Petitioner in diligently
     prosecuting this case and/or attempting to
     settle same.

               *    *    *    *      *     *    *

     10) The undersigned believes that the time
     table represented in Petitioners' Status Report
     submitted to the Court will allow the parties
     to hopefully settle this case and/or prepare it
     for trial within 45 to 60 days from today's date.


Mrs. Hartman did not file a response.      On the basis of the

representations of Mr. Hartman's attorney, the Court denied

respondent's motion to dismiss for lack of prosecution.

     By notice dated December 18, 1997, the Court set

the case for trial on May 18, 1998.      On March 9, 1998,

Mr. Hartman's attorney asked the Court for leave to

withdraw.   The attorney's motion states as follows:
                            - 9 -


     2.   Based upon Mr. Hartman's representations, I
     requested the Court to continue this matter and
     also filed a reply to the Government's Motion to
     Dismiss his case for failure to properly
     prosecute.

              *    *    *    *      *    *   *

     4.   Based upon Petitioner Vernon W. Hartman,
     Jr.'s, representations, I scheduled several
     meetings with Respondent's counsel, Joellyn R.
     Cattell, Esquire.

     5.   On each occasion, I was forced to cancel
     such meetings because of my inability to get any
     information from Petitioner Vernon W. Hartman,
     Jr.

     6.   I have made myself available at all times,
     both day and night, to meet with Petitioner
     Vernon W. Hartman, Jr., including offering to
     meet him at my home because of his "busy"
     schedule.

     7.   Notwithstanding my flexibility and willing-
     ness to meet, I have been unable to have any
     meaningful meetings and/or discussions with
     Petitioner Vernon W. Hartman, Jr., to properly
     prosecute his case.


     After granting the motion of Mr. Hartman's attorney to

withdraw, the Court issued an order directing petitioners

to file a status report setting forth:


     (a)   Each and every issue presented in the
           case;

     (b)   as to each such issue, what efforts
           peti-tioners have made to meet with
           respondent's counsel and to exchange
           documents and other information
           necessary to agree upon and submit
           the comprehensive stipulations for
           trial required by Rule 91, Tax Court
           Rules of Practice and Procedure; and
                             - 10 -



     (c)     whether petitioners intend to retain a
             new attorney.


The order further states as follows:


          The Court calls petitioners' attention to
     the Standing Pre-Trial Order dated December 18,
     1997, especially to the following policy of the
     Court:

             Continuances will be granted only in
             exceptional circumstances. See Rule
             134, Tax Court Rules of Practice and
             Procedure. Even joint motions for
             continuance will not be routinely
             granted.

     In this connection petitioners should be warned
     that the Court will not normally grant a con-
     tinuance in order to allow a party to retain a
     new attorney.


     Contrary to the above order, Mr. Hartman filed a

status report in which he failed to provide any of the

information requested by the Court, and he requested a

continuance "to allow time to retain new counsel".

Mrs. Hartman did not file a status report.

     The Court denied Mr. Hartman's request for a contin-

uance.     In the order denying the continuance request,

dated April 1, 1998, the Court notes that Mr. Hartman's

status report:


     Fails to set forth "each and every issue pre-
     sented in the case". Mr. Hartman's response
     also fails to detail "as to each such issue,
     what efforts petitioners have made to meet with
                           - 11 -


     respondent's counsel and to exchange documents
     and other information necessary to agree upon
     and submit the comprehensive stipulations
     required by Rule 91, Tax Court Rules of
     Practice and Procedure".


The order further provides as follows:


          ORDERED that on or before April 28, 1998,
     each petitioner shall file a separate statement
     setting forth each and every issue presented in
     this case for decision. Petitioners are warned
     that the Court may refuse to consider any issue
     that is not identified in their statements.


Neither petitioner responded to the Court's order of

April 1, 1998, and both petitioners again failed to pro-

vide the Court with a statement of the issues for decision.

     Subsequently, when this case was called for trial,

a new attorney entered his appearance on behalf of both

petitioners.   Respondent also filed a second motion to

dismiss for lack of prosecution.    The motion states as

follows:


          31. Due to petitioner's lack of cooperation
     with his counsel, petitioner's counsel cancelled
     several scheduled meetings with respondent that
     he had promised to attend in his Status Report
     and Response to Respondent's Motion to Dismiss.

          32. On or about March 5, 1998, petitioner's
     counsel sought to withdraw from this case due to
     petitioner's lack of cooperation with him.
                     - 12 -


     33. By Order dated March 12, 1998, the
Court directed petitioners to file a Status
Report with the Court by March 27, 1998, stating
each issue in the case and the steps they had
taken to exchange information.

     34. On March 30, 1998, petitioner filed
a Status Report that was generally non-responsive
to the Court's Order. Petitioner's report
inferred [sic] he wanted a continuance.

     35. By Order dated March 12, 1998 [sic],
the Court directed petitioners to file a list
of every issue in dispute by April 28, 1998,
warning petitioner that the Court might refuse
to consider any issues not raised therein.
The Court denied the request for a continuance.
The Court directed the parties to file a com-
prehensive stipulation of facts by April 28,
1998, warning that sanctions may result to
an uncooperative party. Both parties were
directed to identify proposed witnesses and
a summary of their anticipated testimony by
April 28, 1998.

     36. Respondent sent petitioners a letter on
April 7, 1998, asking that they call to schedule
a meeting on or before April 20, 1998, so that
there would be sufficient time to prepare the
stipulation.

     37. On April 20, 1998, Mr. Hartman called
respondent and stated that he was unavailable
until April 27, 1998. Respondent advised
petitioner that this was not enough time to
ensure that a stipulation of facts could be
filed in accordance with the Court's Order.

     38. On April 27, 1998, Mr. Hartman advised
respondent that he could not meet until April 28,
1998. Mr. Hartman appeared on April 28, 1998, at
2:00 P.M. but was totally unprepared to discuss
the stipulation and did not present any
additional records.

     39. Due to petitioners' lack of coopera-
tion, the parties could not file a stipulation
                            - 13 -


     of facts as directed by the Court. Petitioners
     never responded to the stipulation sent by
     respondent on September 12, 1997 and November 10,
     1997.


Because both petitioners appeared for trial through their

attorney, the Court denied respondent's motion to dismiss

for lack of prosecution, and the case went to trial.

Petitioners failed to submit a trial memorandum as directed

by the Court's standing pretrial order issued in this case,

and petitioners' attorney made no opening statement.

     At trial, Mr. Hartman was the only witness called to

testify.    Petitioners submitted a handwritten summary of

Mr. Hartman's travel schedule during the years in issue,

two contracts with the Metropolitan Opera Association, Inc.

(Met), and a letter from the Met itemizing Mr. Hartman's

"performance and coverage schedule for the 1987/88 season".

Mr. Hartman's testimony and the other evidence presented by

petitioners failed to substantiate any of the deductions

disallowed in the notice of deficiency.

     At the conclusion of the trial, the Court directed the

parties to file simultaneous posttrial opening and reply

briefs.    This was to allow the parties the opportunity to

explain their positions regarding the documents and the

testimony presented at trial.    Petitioners failed to file a

posttrial brief.
                           - 14 -


     The issue for decision is whether respondent properly

determined the subject tax deficiencies, penalties, and

additions to tax.   Petitioners bear the burden of proof as

to this issue.   See Rule 142(a); New Colonial Ice Co. v.

Helvering, 292 U.S. 435 (1934).

     Although petitioners bear the burden of proof, they

have failed or refused to provide the Court with a state-

ment of the issues for decision in this case or their

position regarding any such issues for decision.    In fact,

as mentioned above, on two occasions prior to trial, the

Court ordered petitioners to submit a statement of "each

and every issue presented in this case" for decision and,

on both occasions, petitioners failed to respond.

Petitioners also disregarded orders of the Court to file

a trial memorandum and posttrial briefs.

     The only basis for petitioners' disagreement with the

adjustments in the notice of deficiency that is contained

in the record of this case is the statement in the amended

petition that Mr. Hartman had "scheduling difficulties

with the local examiner" and was not able "to properly

establish the validity of the disputed deductions."    That

statement is legally insufficient to overturn respondent's

determination in the notice of deficiency.
                             - 15 -


     In this case, we could hold petitioners in default,

pursuant to Rule 123(a) and dismiss the case for their

failure to respond to orders of the Court and for their

failure to file briefs under Rule 151.   See Stringer v.

Commissioner, 84 T.C. 693 706-708 (1985), affd. without

published opinion 789 F.2d 917 (4th Cir. 1986).   We could

also assume that, after trial, petitioners concluded that

their petition was not meritorious and they abandoned their

claims.   See Calcutt v. Commissioner, 84 T.C. 716, 721-722

(1985).   In that event, we would not dismiss the case by

reason of petitioners' failure to comply with the Court's

orders and Rules, but we would decide the case against

petitioners by reason of their failure to satisfy their

burden of proof.   See id.   On either theory the result is

the same.   We must sustain the adjustments determined in

the notice of deficiency.

     On the basis of the history of this case, including

petitioners' failure or refusal to provide the Court with

a statement of the issues for decision, we find that the

proceedings have been instituted or maintained by

petitioners primarily for delay and that petitioners'

position in the proceeding is frivolous or groundless.

Accordingly, we will require petitioners to pay to the
                          - 16 -


United States a penalty pursuant to section 6673(a) in

the amount of $15,000.

     To reflect the foregoing,


                                     Decision will be entered

                                 under Rule 155.
