                       T.C. Memo. 1995-501



                     UNITED STATES TAX COURT



       JAMES E. COPLEY AND CYNTHIA R. COPLEY, Petitioners
         v. COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7345-93.                Filed October 17, 1995.


     James E. Copley, pro se.

     Stephen J. Neubeck, for respondent.


                       MEMORANDUM OPINION

     GOLDBERG, Special Trial Judge:   This case was heard pursuant

to section 7443A(b)(3) and Rules 180, 181, and 182.1

     Respondent determined deficiencies in petitioners' Federal

income taxes for 1989 and 1990 in the respective amounts of




1
     All section references are to the Internal Revenue Code in
effect for the years in issue. All Rule references are to the
Tax Court Rules of Practice and Procedure.
                                2

$5,952 and $6,471.50, and an accuracy-related penalty under

section 6662(b)(1) for 1990 in the amount of $1,294.30.

     After concessions,2 the issues for decision are:   (1)

Whether the distribution received by petitioners from an

individual retirement account (IRA) with Fidelity Magellan Fund

(Fidelity) in 1990 in the amount of $16,831.81 is taxable; (2)

whether petitioners are entitled to an adjustment to income in

the amount of $1,614.91 attributable to petitioners' IRA

distribution from Fidelity in 1990; (3) whether petitioners

failed to report a distribution from the Civil Service Retirement

System (CSRS) in 1990 in the amount of $464; (4) whether

petitioners failed to report a distribution from the U.S.

Department of Agriculture (DOA) National Finance Center in 1990

of $580; (5) whether petitioners are liable for a penalty

pursuant to section 72 for premature distributions in the

aggregate amount of $17,875.81 in 1990; (6) whether petitioners

are entitled to rental expense deductions for 1989 and 1990 in


2
     Petitioners concede that: (1) They overstated their rental
income for 1989 and 1990 by $400 and $898, respectively; (2) they
are not entitled to rental depreciation of $14,673 for 1989; (3)
they are not entitled to deduct capital losses of $3,000 for
1990; (4) they failed to report an individual retirement account
distribution of $16,831.81; (5) they are not entitled to Schedule
A deductions claimed in 1990 for job and miscellaneous expenses
of $4,785.95, and medical expenses of $1,744.27; and (6) they are
not entitled to itemize for 1990 because the standard deduction
exceeds the allowable itemized deductions. Respondent concedes
that petitioners repaid unemployment compensation in 1990 in the
amount of $1,715 and are entitled to rental depreciation of
$2,889 for 1990.
                                   3

excess of the expenses allowed by respondent; (7) whether

petitioners failed to report capital gain in the amount of

$17,826 for 1989; and (8) whether petitioners are liable for an

accuracy-related penalty under section 6662(b)(1) for 1990.     For

the purpose of clarity, the facts and legal analysis of each

issue will be combined.

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

The stipulation of facts and attached exhibits are incorporated

by this reference.    At the time the petition in this case was

filed, petitioner James E. Copley resided in Charleston, West

Virginia, and petitioner Cynthia R. Copley resided in Treasure

Island, Florida.   References to petitioner are to James E.

Copley.

Issue 1.   IRA Distribution

     During 1989 and 1990, petitioner was employed by the U.S.

Department of Energy (DOE) in Morgantown, West Virginia, as a

project manager.     In or around July 1990, petitioner left the DOE

allegedly on account of "whistle-blowing" activities.    At the

time of his departure, petitioner was entitled to a gross

distribution from the CSRS of $18,446.72.    On August 13, 1990,

petitioner directed that these funds be rolled over into a

Fidelity IRA.   For this transaction, Fidelity charged a

commission of 3 percent of the amount deposited.

     On August 20, 1990, the market value of the stock purchased

by Fidelity for petitioner's IRA account totaled $17,893.10.      On
                                  4

or about October 31, 1990, petitioner withdrew the entire balance

of his account ($16,831.81) and closed his Fidelity IRA.    On

October 31, 1990, petitioner deposited the funds withdrawn into a

personal checking account with City National Bank.   At the time

of the withdrawal, petitioner was 41 years old.

     Petitioner argues that the amount withdrawn from the

Fidelity IRA is not currently taxable because Fidelity withheld

the tax prior to disbursing the funds.   In support thereof,

petitioner points to the difference between the amount deposited

in the IRA ($18,446.72) and the balance of the account at the

time of the withdrawal ($16,831.81).   Petitioner claims that this

amount ($1,614.91) represents tax withheld.   Petitioner offers no

documentation to support his argument.

     Under section 402(a)(1), a distribution from a qualified

employee's trust is taxable to the distributee in the year of

distribution.    Section 402(a)(5)(A) provides an exception to the

general rule for certain "rollovers" by the employee; namely,

where the balance to the credit of the employee in a qualified

trust is paid to him, and the employee transfers any portion of

the distribution to "an eligible retirement plan" within 60 days

of receipt, then the amount so distributed shall not be included

in gross income.   Sec. 402(a)(5)(A), (C).

     Respondent does not dispute that the deposit of petitioner's

lump-sum distribution into the Fidelity IRA qualifies as a tax-

free rollover.   However, respondent contends that petitioner's
                                 5

withdrawal of the funds on or about October 31, 1990, and his

deposit of the same into a personal checking account qualifies as

a taxable distribution.   We agree.

     The distribution that petitioner received from the CSRS is

subject to taxation under section 72 pursuant to section 402(a).

CSRS is a plan that meets the requirements of section 401(a), and

the law is well established that section 72 is applicable to

distributions received pursuant to the CSRS.   Malbon v. United

States, 43 F.3d 466, 468 (9th Cir. 1994); Shimota v. United

States, 21 Cl. Ct. 510, 519-520 (1990), affd. 943 F.2d 1312 (Fed.

Cir. 1991); sec. 1.72-2(a)(3)(iii), Income Tax Regs.   A lump sum

payment from the CSRS is treated as a payment under an annuity

contract.   Roundy v. Commissioner, T.C. Memo. 1995-298; Kirkland

v. Commissioner, T.C. Memo. 1994-220.   Such payment is subject to

tax in the year in which it is received as a payment under an

annuity contract that is "not received as an annuity" under

section 72(e)(1)(A).   Guilzon v. Commissioner, 97 T.C. 237, 243

(1991), affd. 985 F.2d 819 (5th Cir. 1993).

     At the time petitioner withdrew the funds from the Fidelity

IRA and deposited them into his personal checking account, the

funds became taxable income.   Petitioner's argument that whatever

tax was due was withheld by Fidelity prior to his withdrawal of

the funds is unfounded.   First, it is not the responsibility of

financial institutions to withhold income taxes from savings

withdrawals, and petitioner presented no documentation that such
                                    6

withholding took place.    Second, it is more likely than not that

the difference between the amount distributed by CSRS and the

amount later withdrawn by petitioner represents a combination of

the 3-percent commission charged by Fidelity for establishing the

account and a decline in the fair market value of the stock

purchased with the IRA funds.      Accordingly, respondent is

sustained on this issue.

Issue 2.    Adjustment to Income

     On their 1990 Federal income tax return, petitioners claimed

an adjustment to income for a penalty on early withdrawal of

savings in the amount of $1,614.91.      Petitioner argues that this

amount, representing the difference between the amount deposited

in his Fidelity IRA and the amount later withdrawn, was tax

withheld by Fidelity.

     Petitioner confuses three separate and distinct concepts:

(1) The tax due on a lump-sum distribution from a qualified

benefit plan under section 402(a); (2) a penalty imposed by banks

on early withdrawal of savings from time savings accounts,

certificates of deposits, and similar classes of deposits, and

deductible under section 62(a)(9); and (3) a penalty imposed by

section 72(t) on premature distributions.      Petitioner appears to

argue that the $1,614.91 simultaneously represents all of the

above.     Petitioner presented no evidence that Fidelity imposed a

penalty for premature withdrawal of savings, and it is not the

responsibility of financial institutions to impose and collect
                                  7

the tax imposed under section 402(a) or the penalty imposed under

section 72(t).    As stated above, the amount simply represents a

commission charged by Fidelity and a decline in the market value

of the IRA stock.    Consequently, petitioners are not entitled to

an adjustment to income in the amount of $1,614.91.

Issue 3.    CSRS Distribution

       Prior to trial, petitioner stipulated that he received $464

from CSRS in 1990 and that he failed to report this distribution

as taxable income.    At trial, petitioner attempted to withdraw

this stipulation and argued that he did not receive $464 but,

instead, received $104.95 of nontaxable income.    In support of

his position, petitioner presented a statement from the Office of

Personnel Management (OPM) stating that petitioner's application

for refund of retirement deductions had been approved, and that a

check for $104.95 would be issued.    The statement indicated that

the refund, consisting entirely of funds petitioner had put into

the Civil Service Retirement and Disability Fund, was nontaxable.

       Respondent does not dispute that the $104.95 is exempt from

tax.    An Examination/Information Return Master File Transcript

For Tax Year 1990 (the transcript), which lists payee entities,

payer entities, information forms received (e.g., Form 1099), and

types and amounts of income, indicates that petitioner received a

gross distribution of $464 of taxable income from CSRS during

1990.    Although respondent did not present the Form 1099-R in

question, the absence of that document appears due to the fact
                                  8

that petitioner conceded this issue up until the day of trial,

and then sought to withdraw his concession.

     The determinations of respondent are presumed to be correct,

and petitioners bear the burden of proving otherwise.    Rule

142(a); Welch v. Helvering, 290 U.S. 111 (1933).    All taxpayers

are required to keep sufficient records to enable the

Commissioner to determine their correct tax liability.    Sec.

6001; Meneguzzo v. Commissioner, 43 T.C. 824, 831-832 (1965).

Petitioners offered no evidence to show that respondent's

determination was incorrect.    We conclude that petitioner failed

to report taxable income from CSRS in the amount of $464.

Respondent is sustained on this issue.

Issue 4.   DOA Distribution

     Prior to trial, petitioner stipulated that he received and

failed to report $580 of taxable income from DOA.    At trial,

petitioner attempted to withdraw his stipulation and argued that

the $580 represents moneys borrowed from DOA which he repaid

through payroll deductions.    In support of his argument,

petitioner presented an Earnings, Leave and Benefit Statement

issued on July 12, 1990, by DOA, indicating that $79.10 had been

withheld from his wages during 1990 for repayment of a thrift

savings plan loan.

     Petitioner offered no documentation to prove that the $580

reported by DOA to the Internal Revenue Service as taxable income
                                  9

represented loan proceeds.3    We find that petitioner failed to

report taxable income in the amount of $580 from DOA.    Respondent

is sustained on this issue.

Issue 5.   Penalty for Premature Distribution

     Respondent determined that petitioners were liable for a 10-

percent penalty in the amount of $1,787.58 under section 72(t) on

premature distributions of $16,831.81, $464, and $580 from

qualified plans.   Petitioners dispute this determination.

     Section 72(t) provides for a 10-percent additional tax on

distributions from qualified plans, unless the distributions come

within one of the statutory exceptions.    Sec. 72(t)(1) and (2).

The exceptions include certain distributions: (1) Made on or

after the date on which an employee attains the age of 59-1/2;

(2) made to an employee after separation from service and the

attainment of age 55; (3) to a beneficiary on or after the death

of an employee; (4) attributable to an employee's disability; and

(5) to an employee to the extent they do not exceed certain

deductible medical expenses.    Sec. 72(t)(2)(A) and (B).




3
     Because petitioner conceded this issue up until trial,
respondent was not prepared to refute petitioner's argument with
supporting documents. Nevertheless, respondent suggests that the
$580 may represent a forgiveness by DOA of an unpaid portion of a
loan taken by petitioner. As a general rule, a debtor excused
from an obligation to repay must include the amount forgiven in
his or her gross income. See sec. 108. Although we find
respondent's suggestion credible, without more, we are unable to
say with certainty that such a scenario is more likely than not.
                                 10

       Petitioner does not argue that he falls within the scope of

any of the above exceptions.    With respect to the distribution of

$16,831.81, however, petitioner argues that Fidelity withheld the

10-percent penalty prior to distributing the balance of the

account to him.    As noted above, petitioner confuses the penalty

for premature distribution with the penalty for early withdrawal

and the tax imposed on a distribution by section 402(a).    The

distribution of $16,831.81 stems from a lump sum distribution

from a qualified plan and a tax-free rollover into a qualified

IRA.    Because the distribution does not fall within the scope of

any of the exceptions under section 72(t), petitioner is liable

for the penalty imposed thereunder.

       The transcript identified above indicates that the payments

of $464 and $580 were reported to the Internal Revenue Service by

the payers on Forms 1099-R.    Petitioner stipulated that he

received these payments from qualified plans.    Thus, we conclude

that the payments of $464 and $580 were received by petitioner

from qualified plans.    Consequently, petitioner is liable for the

penalty imposed by section 72(t) on the premature distributions

in the aggregate amount of $17,875.81.

Issue 6.    Rental Expenses

       In 1985, petitioners purchased 24583 Sunny Ridge Drive,

Moreno Valley, California (the California property) and rented

the property through Inland Property Management Co. (Inland).      On

February 1, 1989, petitioners sold the California property.      On
                                 11

March 31, 1983, petitioners purchased 2001 West Washington

Street, Charleston, West Virginia (the Charleston property) as

rental property.    Petitioners maintained the house and obtained

tenants without the assistance of a management company.

       With their 1989 and 1990 joint Federal income tax returns,

petitioners filed Schedules E, Supplemental Income and Loss, to

report their rental income and expenses.    On May 9, 1994, after

respondent's notice of deficiency was issued, petitioners filed

amended returns for 1989 and 1990.     The following charts show the

expenses claimed by petitioners on their original and amended

returns, the expenses allowed by respondent, and the amounts

still in dispute after concessions.4

                    The California Property: 1989

                  Per Original Per Amended Allowed by    Still in
Item                 Return      Return    Respondent    Dispute

Advertising           -0-         $60.06      -0-          $60.06
Cleaning/maint.     $366.37       863.13     258.40        604.73
Commissions        6,600.00         -0-       -0-            -0-
Insurance             -0-         239.00      -0-          239.00
Legal & prof.      1,785.04       615.16      -0-          615.16
Mortg. interest    3,558.53     3,558.53   3,420.45        138.08
Repairs               -0-         138.40     -0-           138.40
Taxes                424.00       424.00     509.04        (85.04)
Utilities            107.97       310.05     107.97        202.08
Termite control      265.00         -0-       -0-            -0-
Home shield          450.00         -0-       -0-            -0-
Prop. mgt.           400.00         -0-       -0-            -0-
Federal Express       14.00         -0-       -0-            -0-
Miscellaneous         -0-          14.00      -0-           14.00
Pool service          -0-         629.50      -0-          629.50

4
     The information on these charts is largely derived from
respondent's Statement of Issues and Facts filed on the day of
trial.
                                  12

Depreciation       14,969.00       296.00     296.00           -0-

  Total            28,939.91     7,147.83   4,591.86       2,555.97


                     The Charleston Property: 1989

                  Per Original Per Amended Allowed by    Still in
Item                 Return      Return    Respondent    Dispute

Advertising          $55.00        $55.44      $55.00        -0-
Auto expense       3,327.07      5,854.92    5,854.92        -0-
Insurance            239.00        155.00      239.00        (84)
Legal & prof.      1,078.04      2,043.21    2,043.21        -0-
Mortg. interest    5,857.21      5,857.21    5,857.21        -0-
Repairs            2,782.94      7,084.75    7,084.75        -0-
Taxes                200.00        214.03      214.03        -0-
Utilities          2,461.25      4,188.37    4,188.37        -0-
Wages & salaries      -0-          216.00      215.00         1
Miscellaneous        748.23      9,821.24    6,931.24        890
Depreciation       2,248.00      2,889.00    2,889.00        -0-

  Total            18,996.74     38,379.17   35,571.73       807
                     The Charleston Property: 1990

                  Per Original Per Amended Allowed by    Still in
Item                 Return      Return    Respondent    Dispute

Advertising         -0-           $51.54      $26.84        $24.70
Auto expense    $2,507.67       5,503.09    2,690.69      2,812.40
Insurance          155.00         155.00      155.00        -0-
Legal & prof.      432.00       2,635.05    2,635.05        -0-
Mortg. interest 6,503.89        6,503.89    6,503.89        -0-
Repairs          4,112.10       5,487.10    5,487.10        -0-
Taxes              220.00         435.43      435.43        -0-
Utilities        3,837.35       5,503.09    5,503.09        -0-
Telephone          587.75          -0-      1,342.33     (1,342.33)
Miscellaneous       -0-         8,331.42       -0-        8,331.42
Meals               -0-            -0-        662.73       (662.73)
Depreciation     2,248.00       2,889.00    2,889.00        -0-

  Total            20,603.76    37,494.61   28,331.15      9,163.46

       Section 62(a)(4) allows the deduction of expenses

attributable to property held for the production of rents or

royalties.    Deductions are a matter of legislative grace, and the
                                 13

taxpayer bears the burden of proving that he or she is entitled

to any deduction claimed.   Rule 142(a); New Colonial Ice Co. v.

Helvering, 292 U.S. 435, 440 (1934).    This includes the burden of

substantiation.    Hradesky v. Commissioner, 65 T.C. 87, 90 (1975),

affd. per curiam 540 F.2d 821 (5th Cir. 1976).

     In support of the items remaining in dispute with respect to

the California property, petitioner introduced an invoice titled

"Trial Balance".   The invoice, dated January 27, 1989, and

created for petitioner by Inland, lists income and expenses

attributable to the California property.   Petitioner testified

that several of the items on the invoice are incorrect, and based

on the lack of available receipts or other supporting documents,

we are unable to determine whether the expenses were actually

paid, and, if so, in which year (1988 or 1989).

     With respect to the Charleston property, petitioner offered

no receipts, travel logs, or other documentation to substantiate

the items still in dispute, other than handwritten schedules and

lists of expenses prepared for trial.   Despite the fact that

petitioners filed amended returns as late as May 1994, 1 month

before trial, they were unable to provide any credible evidence

to support the deductions claimed.    Furthermore, several of the

items in dispute, if in fact purchased, would be in the nature of

improvements with an expected life greater than 1 year, and the

costs associated therewith must be capitalized and depreciated

pursuant to statutorily prescribed limits.   The testimony of
                                    14

petitioner regarding all of the expenses in dispute was for the

most part general, vague, conclusory, uncorroborated, and

questionable.    Under these circumstances, we are not required to,

and we do not, accept such testimony to support the positions of

petitioners herein.    Lerch v. Commissioner, 877 F.2d 624, 631-632

(7th Cir. 1989), affg. T.C. Memo. 1987-295; Geiger v.

Commissioner, 440 F.2d 688, 689-690 (9th Cir. 1971), affg. per

curiam T.C. Memo. 1969-159.    The determination of respondent is

sustained as to rental expenses claimed in 1989 and 1990.

Issue 7.    Capital Gain

     Petitioners sold the California property on February 1,

1989, for $110,000.    With their original 1989 Federal income tax

return, petitioners filed a Form 2119 with the following

information:

            Selling price of home               $110,000.00
            Expense of sale                        9,514.04
            Amount realized                      100,485.96
            Basis of home sold                   107,037.40
            Gain on sale                          (6,551.44)

In response to the query "If you haven't replaced your home, do

you plan to do so within the replacement period?" petitioners

answered in the affirmative.

     In the notice of deficiency, respondent determined that

petitioners miscalculated the gain on the sale of the California

property.    Respondent's computation is as follows:

     Selling price of home               $110,000
     Expense of sale                        9,514
     Amount realized                                   $100,486
                                  15


     Cost                             116,096
     Less depreciation                  36,536
     Adjusted basis                                  79,560
     Gain on sale                                    20,926
     Capital loss carryover (from 1987)               3,100
     Taxable gain                                    17,826

     After the notice of deficiency was issued, petitioners filed

an amended return for 1989 with an amended Form 2119, wherein

they recomputed their gain on the sale of the California property

as follows:

          Selling price of home              $110,000
          Expense of sale                       9,514
          Amount realized                     100,486
          Basis of home sold                   84,341
          Gain on sale                         16,145

Petitioners also reported that they had not replaced their home

and did not plan to do so within the replacement period.

     At trial, petitioner presented a more detailed calculation

of the gain realized, indicating that the difference between the

gain determined by respondent and that calculated by petitioners

results from (1) a difference of $549.09 in the original cost of

the property, (2) a difference of $1,212.75 in the depreciation

of the property, and (3) an alleged loan of $4,700 that

petitioner subtracted from the selling price to arrive at the

amount realized.

     Petitioner provided no evidence to explain the discrepancies

in cost or depreciation, other than his own testimony that he

claimed excess depreciation intentionally.   With respect to the

"loan" of $4,700, petitioner testified that he borrowed the money
                                 16

from Brenda Summers, a friend of the family.     He presented no

loan documents or credible proof of repayment.     Accordingly,

petitioners have failed to prove that respondent's determination

regarding the gain realized is incorrect.

     In the alternative, petitioner argues that the gain realized

on the sale of the California property should not be recognized

in 1989 pursuant to section 1034.     Respondent contends that

petitioners are not entitled to deferral because the California

property was rented out beginning in 1985, which was more than 3

years prior to the date on which the property was sold.

     Generally, sections 1001 and 61 require a taxpayer to

recognize in the year of the sale gain realized on the sale of

property.    Section 1034, however, allows a taxpayer, in certain

circumstances, to defer recognition of gain realized on the sale

of the taxpayer's principal residence.     Under section 1034, if

the taxpayer purchases a new principal residence within the

replacement period, the taxpayer will recognize gain on the sale

only to the extent that the taxpayer's adjusted sale price of the

old residence exceeds the taxpayer's cost of purchasing the new

residence.   Sec. 1034(a).

     As noted above, petitioner presented a statement at trial

which explains the process he used to arrive at the gain realized

on the California property.   In particular, he calculated a total

of $35,320 in depreciation as follows:
                                  17

             Year                Amount of Depreciation

            1985                        $2,906
            1986                        13,374
            1987                        12,225
            1988                         6,364
            1989                           451

              Total                      35,320

Such figures would seem to indicate that petitioners did, in

fact, rent out the California property beginning in 1985.

Petitioner's testimony that he resided at that address from 1985

through 1988 while working at General Dynamics was uncorroborated

and questionable.    Under such circumstances, petitioners have

failed to establish that the property was ever used as their

principal residence, or that even if it were, that such use was

not abandoned long before the property was sold.     See Stolk v.

Commissioner, 40 T.C. 345 (1963), affd. per curiam 326 F.2d 760

(2d Cir. 1964).     We are unable, moreover, to determine with any

degree of certainty the location of petitioners' new residence

after the sale of the California property in 1989.

     On their 1989 Federal income tax return, petitioners listed

their address as "P.O. Box 4353, Star City, West Virginia, 26504"

(the Star City address), and a Form 1099-INT attached to their

return listed petitioners' residence as "500-6 Village Park

Drive, Morgantown, West Virginia, 26505" (the Morgantown

address).   On their amended 1989 return, petitioners listed their

residence in 1989 as the Charleston property.     On their 1990

Federal income tax return, petitioners listed their home address
                                  18

as the Charleston property; however, the Form 4562, Depreciation

and Amortization, attached to their return, listed the Charleston

property as being used 100 percent for rental purposes.   On the

Form W-2, DOA lists petitioners' residence as the Star City

address.

     Even assuming, arguendo, that for purposes of section 1034

petitioners' old residence was the California property and their

new residence was the Charleston property, petitioners would not

qualify for a deferral under section 1034.   Petitioner testified

that he sold the California property on February 1, 1989, and

purchased the Charleston property on March 31, 1983.

Consequently, petitioners would not be permitted to defer the

gain because they did not purchase the Charleston property within

2 years before or after the date on which they sold the

California property.   The time requirement of section 1034(a)

must be strictly complied with.    Bayley v. Commissioner, 35 T.C.

288 (1960).   If the Morgantown property was petitioners' new

residence, petitioners are also not entitled to deferral under

section 1034 because they offered no evidence regarding the date

the Morgantown property was purchased or how much they paid.

Respondent is sustained on this issue.

Issue 8.   Addition to Tax

     The final issue for decision is whether petitioners are

liable for an accuracy-related penalty for the taxable year 1990.

Section 6662(a) and (b)(1) imposes an accuracy-related penalty
                                 19

equal to 20 percent of the portion of any underpayment of tax

that is due to negligence.    Under section 6662(c), negligence is

any failure to make a reasonable attempt to comply with the

provisions of the Code.

     Based on petitioners' amended returns filed after the notice

of deficiency was issued and immediately before trial, wherein

they adjusted the amount of nearly every item of expense claimed

on their original returns, and based on petitioners' failure to

provide credible substantiation or authority for any of the items

at issue in this case, we find that petitioners are liable for

the penalty under section 6662(b)(1) for 1990.     Respondent is

sustained on this issue.

     At trial, petitioner made an oral motion for discovery

requesting copies of the revenue agent's workpapers resulting

from the administrative examination of his 1988 and 1989 Federal

income tax returns.   Petitioner also sought an explanation as to

why his returns were selected for examination.     Under Rule

70(b)(1), information sought through discovery may concern any

matter not privileged and which is relevant to the subject matter

involved in the pending case.    However, discovery "shall be

completed, unless otherwise authorized by the Court, no later

than 45 days prior to the date set for call of the case from a

trial calendar."   Rule 70(a)(2).     This case was first called for

trial on May 12, 1994.    Petitioner did not move for discovery

until the case was recalled for trial at a special session held
                                  20

in Washington, D.C., on June 13, 1994.     Under our Rules,

petitioner's motion is untimely and will be denied.5

     Furthermore, we generally will not look behind a notice of

deficiency to examine it for the motives or methods which were

used by the Commissioner in arriving at the deficiency

determination.   Greenberg's Express, Inc. v. Commissioner, 62

T.C. 324 (1974); Senter v. Commissioner, T.C. Memo. 1995-311.

Petitioner has not made any showing that information concerning

the method by which respondent selected and examined petitioner's

returns for 1988 and 1989 is relevant to the subject matter of

this case, or is calculated to lead to discovery of admissible

evidence.

     To reflect the foregoing,

                                       An appropriate order denying

                                 petitioners' motion for discovery

                                 will be issued, and decision will

                                 be entered under Rule 155.




5
     Petitioner filed a Memo to the Court on May 23, 1994,
requesting that the Court order respondent to produce and turn
over to petitioner documents relating to the examination of
petitioners' returns. We do not recognize this Memo as a formal
discovery motion; however, had we done so, the request would also
have been untimely under Rule 70(a)(2).
