                   T.C. Summary Opinion 2004-1



                     UNITED STATES TAX COURT



                 LAWRENCE K. MUDD, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 10230-01S.            Filed January 8, 2004.


     Lawrence K. Mudd, pro se.

     Jillena A. Warner, for respondent.



     GOLDBERG, Special Trial Judge:   This case was heard pursuant

to the provisions of section 7463 of the Internal Revenue Code in

effect at the time 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.   Unless otherwise indicated,

subsequent section references are to the Internal Revenue Code in

effect for the years in issue, and all Rule references are to the

Tax Court Rules of Practice and Procedure.
                               - 2 -

     For taxable years 1995 and 1996, respondent determined

deficiencies in petitioner’s Federal income taxes of $11,933 and

$26,947, additions to tax under section 6651(a)(1) of $2,927.50

and $5,347.57, and additions to tax under section 6654(a) of

$637.90 and $1,246.20.

     After concessions by both parties, the issues remaining for

decision are:   (1) Whether petitioner received a distribution of

$34,107 from The First National Bank of Ogden in 1995; (2)

whether petitioner is entitled to a dependency exemption

deduction for his daughter Amy Mudd in 1996; and (3) whether

petitioner is entitled to a charitable contribution deduction in

1996.1

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

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.   Petitioner resided in

Fort Mitchell, Kentucky, on the date the petition was filed in

this case.




     1
      In his petition, petitioner states that “penalties and
interest are overstated based on actual taxable income.” At
trial, petitioner did not make any further arguments or present
any evidence concerning the additions to tax for failure to file
a timely return under sec. 6651(a)(1), and for failure to make
estimated tax payments under sec. 6654(a). We conclude that
petitioner disputes only the underlying tax deficiencies, not the
applicability of the additions to tax. The correct amounts of
these additions to tax, therefore, will be calculated by the
parties in the Rule 155 computations required in this case.
                                - 3 -

     During 1995 and 1996, petitioner was married to Barbara J.

Mudd (Mrs. Mudd).   Mrs. Mudd filed a Federal income tax return in

each of the years, on which she claimed itemized deductions.

Petitioner did not file a Federal income tax return for either of

the years.   Respondent issued petitioner a separate notice of

deficiency for each year which determined deficiencies using

items reported on third-party information returns.   Respondent

determined that petitioner’s filing status was married filing

separately in each of the years.

     A taxpayer generally bears the burden of proving the

Commissioner’s determinations in a notice of deficiency to be in

error.   Rule 142(a).   While section 7491(a) shifts the burden of

proof to the Commissioner where the taxpayer presents credible

evidence with respect to a factual issue, the burden remains on

the taxpayer where the taxpayer failed to comply with all

statutory substantiation requirements.   Under certain

circumstances, section 6201(d) may place the burden of production

on the Commissioner with respect to disputes over items of income

shown on information returns.

     The first issue for decision is whether petitioner received

a distribution of $34,107 from The First National Bank of Ogden

(First National) in Ogden, Illinois, in 1995.

     At some time in or prior to December 1993, petitioner

established a self-directed IRA account at First National.   In
                               - 4 -

December 1993, petitioner authorized First National to transmit

$32,500 to a bank in Cincinnati, Ohio, so that a debenture could

be purchased to be held in the IRA account.     Petitioner informed

First National that the investment would yield semiannual

interest payments.   First National transmitted the funds

according to petitioner’s request.     First National then sent

petitioner a letter instructing petitioner to have the debenture

issued to “First National Bank of Ogden F/B/O Lawrence K. Mudd

Trust #65", and to have the debenture forwarded to First

National.   First National never received the debenture and never

received any interest payment therefrom.

     Throughout 1994, First National sent several letters

addressed to petitioner requesting information about the

debenture and informing him that the bank had never received the

debenture or any interest payment.     In January 1995, First

National sent a letter to petitioner informing him that the bank

would be resigning as the custodian of petitioner’s IRA account.

In February 1995, First National mailed petitioner a check in the

amount of $1,582.58, representing the balance remaining in

petitioner’s IRA account, less certain fees.     In December 1995,

after petitioner had failed to cash this check, First National

put a stop payment on the check and mailed in its place a

cashier’s check in the amount of $1,562.58, reflecting an

assessed fee of $20.   In 2001, after the cashier’s check still
                                - 5 -

had not been cashed, First National remitted the amount of the

cashier’s check to the State of Illinois Unclaimed Property

Division.

       Three of the letters that First National sent to petitioner,

detailed above, were mailed to petitioner by certified mail with

a return receipt.    One of these receipts was signed by

petitioner’s son, and two (including the receipt for the letter

with the $1,582.58 check) were signed by Mrs. Mudd.    Petitioner

never received either of the checks that First National mailed to

him.

       For the year 1995, First National issued petitioner a Form

1099-R, Distributions From Pensions, Annuities, Retirement or

Profit-Sharing Plans, IRAs, Insurance Contracts, etc.      This form

reflected a distribution to petitioner of $34,107.58.      The

distribution amount included the $32,500 which First National had

previously transferred at petitioner’s request, as well as the

$1,582.58 check which First National mailed to petitioner upon

closing his account.2

       As a general rule, amounts paid or distributed out of

individual retirement plans, including IRAs, are included in

gross income when received by the payee or distributee under the




       2
      The source of the $25 discrepancy between the sum of these
two amounts and the amount reported on the Form 1099 is not clear
from the record.
                               - 6 -

provisions of section 72.   Sec. 408(d)(1).   The regulations

provide in relevant part as follows:

     Except as otherwise provided in this section, any amount
     actually paid or distributed or deemed paid or distributed
     from an individual retirement account or individual
     retirement annuity shall be included in the gross income of
     the payee or distributee for the taxable year in which the
     payment or distribution is received.

Sec. 1.408-4(a)(1), Income Tax Regs.   There are no exceptions

applicable to the case at hand.

     Under certain circumstances, a cash basis taxpayer who does

not actually receive possession of income may nevertheless be

considered to have constructively received that income.    Sec.

451(a); sec. 1.451-2, Income Tax Regs.   The relevant regulations

provide that:

     Income although not actually reduced to a taxpayer’s
     possession is constructively received by him in the taxable
     year during which it is credited to his account, set apart
     for him, or otherwise made available so that he may draw
     upon it at any time, or so that he could have drawn upon it
     during the taxable year if notice of intention to withdraw
     had been given. * * *

Sec. 1.451-2(a), Income Tax Regs.   For income to be

constructively received, the taxpayer must have control over its

disposition, and the income must not be subject to substantial

limitations or restrictions.   Id.; Single v. Commissioner, T.C.

Memo. 1988-549.

     We first address the $32,500 which petitioner authorized

First National to transfer to the Cincinnati bank in 1993.

Respondent argues that this amount is includable in petitioner’s
                               - 7 -

income in 1995, the year in which First National issued the Form

1099.   Petitioner argues that the amount is includable in income

in 1993, a taxable year that is not before this Court.

     It is clear that petitioner ultimately received the $32,500

which was intended to be used for the purchase of the debenture.

Respondent has provided no evidence of when petitioner received

this money, relying solely on the Form 1099 issued by First

National.   Petitioner, on the other hand, testified that the

debenture for his IRA was never purchased, and that he personally

retained the $32,500 which was taken from his IRA account in

1993.   This testimony is supported by corroborating evidence

showing that First National never acquired the debenture.    Nor

did First National receive the anticipated interest payments,

which indicates that the debenture had never been issued in its

name.   We accordingly find that the $32,500 was, in fact,

distributed from the IRA and received by petitioner in 1993.

Because the $32,500 is included in petitioner’s income when it

was received in 1993, it is not included in income in 1995 as

determined by respondent.   Sec. 408(d)(1).

     We next address the $1,582.58 check mailed by First National

when it closed petitioner’s account in 1995.   We have found that

petitioner never received either of the checks that First

National mailed to him in 1995.   This finding is based upon the

fact that the return receipts--including the receipt for the
                               - 8 -

initial check--were not signed by petitioner, as well as

petitioner’s credible testimony that he and his wife were “having

some problems” at that time, and that if she had given petitioner

either of the checks, he would have cashed it.    We further find

that petitioner was not in constructive receipt of the income.

Because the checks were never delivered to petitioner, he was

deprived of the control over their disposition that would have

been necessary for constructive receipt.   Single v. Commissioner,

supra (taxpayer did not constructively receive income in the form

of State tax refund where the taxpayer’s spouse withheld the

refund check until after the taxable year); sec. 1.451-2(a),

Income Tax Regs.

     Because petitioner neither actually nor constructively

received the IRA distribution during 1995, the $1,582.58 is not

includable in petitioner’s income in that year.    Single v.

Commissioner, supra; sec. 408(d)(1); sec. 1.408-4(a)(1), Income

Tax Regs.

     The second issue for decision is whether petitioner is

entitled to a dependency exemption deduction for his daughter Amy

Mudd in 1996.   Although the notice of deficiency did not allow

petitioner any dependency exemption deductions, respondent has

conceded that petitioner is entitled to two such deductions for

1996, one for Robert Mudd and one for Mara Mudd.   Petitioner

argues that he is entitled to a third exemption deduction for
                                   - 9 -

Amy.       Amy was a full-time student at the University of Kentucky

during 1996, and during that year she turned 20 or 21 years old.

       Petitioner and respondent have framed this issue to be

whether Amy claimed a personal exemption deduction on her own

income tax return for 1996.       However, this fact is irrelevant in

ascertaining petitioner’s entitlement to the deduction.        Section

151 sets forth the requirements for a dependency exemption

deduction.       A taxpayer generally is entitled to the deduction for

a dependent who is a child of the taxpayer, who is under 24 years

old, and who is a full-time student at a certain type of

educational organization.       Sec. 151(a), (c)(1)(B)(ii), (c)(4)(A).

A child of a taxpayer is a dependent of the taxpayer if the

taxpayer provides over half of the child’s support.        Sec.

152(a)(1).       The dependency exemption deduction is not contingent

upon the dependent’s nonentitlement to a personal exemption

deduction on her own return.       Sec. 151.3   We therefore hold that

petitioner is entitled to the dependency exemption deduction for

Amy in 1996.




       3
      There does exist a converse restriction, inapplicable to
the case at hand, which provides that an individual is not
entitled to a personal exemption deduction where a dependency
exemption deduction with respect that individual is allowable to
another taxpayer. Sec. 151(d)(2).
                                - 10 -

     The third issue for decision is whether petitioner is

entitled to a charitable contribution deduction in 1996.4     A

deduction generally is allowed for any charitable contribution

made within the taxable year.    Sec. 170(a)(1).

     A taxpayer generally must keep records sufficient to

establish the amounts of the items required to be shown on his

Federal income tax return.   Sec. 6001; sec. 1.6001-1(a), (e),

Income Tax Regs.   In the event that a taxpayer establishes that a

deductible expense has been paid but is unable to substantiate

the precise amount, we generally may estimate the amount of the

deductible expense bearing heavily against the taxpayer whose

inexactitude in substantiating the amount of the expense is of

his own making.    Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d

Cir. 1930).   We cannot estimate a deductible expense, however,

unless the taxpayer presents evidence sufficient to provide some

basis upon which an estimate may be made.     Vanicek v.

Commissioner, 85 T.C. 731, 743 (1985).

     Deductions for charitable contributions are subject to

further substantiation requirements.     Sec. 170(a)(1).   Generally,



     4
      While the notices of deficiency determine that petitioner
is entitled to the standard deduction in each year, the parties
have stipulated that during the years in issue petitioner’s
spouse filed a separate income tax return with itemized
deductions, thereby causing the standard deduction to be zero for
petitioner in both years, see sec. 63(c)(6)(A), and allowing
petitioner to deduct any itemized deductions to which he may be
entitled.
                               - 11 -

such deductions must be substantiated with reliable written

records reflecting the name of the donee, the date of the

contribution, and either the amount of any cash contribution or a

description of any property contributed.    Sec. 1.170A-13(a) and

(b), Income Tax Regs.    Deductions for contributions of $250 or

more are disallowed in the absence of a contemporaneous written

acknowledgment of the contribution by the donee.    Sec. 170(f)(8);

sec. 1.170A-13(f), Income Tax Regs.

     Petitioner first argues that he is entitled to deduct

$3,685.64 for contributions of property made to a religious

children’s home.   Petitioner purchased a number of items which he

then gave directly to the home.    As substantiation for these

contributions, petitioner provided a list with the various items

along with the prices that he paid for them.    No individual item

cost more than $89.95.    Petitioner also provided a letter from

the charity acknowledging the receipt of “new gym shoes,

sweaters, boots, and food supplies”.    The items on petitioner’s

list, primarily consisting of children’s athletic shoes,

correspond to this description.

     At trial, respondent questioned petitioner concerning his

lack of receipts for the individual items donated to the

children’s home, but he did not directly challenge the

authenticity or accuracy of petitioner’s list of items or the

letter from the charity.    We conclude that the list provided by
                               - 12 -

petitioner and the written acknowledgment from the donee meet the

section 170 substantiation requirements, despite petitioner’s

failure to maintain the individual receipts.    Sec. 1.170A-13,

Income Tax Regs.

      Petitioner next argues that he is entitled to deduct two

amounts paid in connection with a religious organization’s

housing development project.   First, he made a $50 cash donation

to the organization.    Petitioner provided a handwritten receipt

from the charity acknowledging receipt of the $50.    We find that

this receipt is sufficient substantiation of the contribution.

Id.   Second, petitioner argues that he incurred mileage expenses

for driving to the housing project and working there.5

Petitioner did not provide substantiation of these expenses,

other than his testimony that he drove “approximately 600 miles”-

-he did not provide a mileage log or even any corroboration that

he participated in the program.    We find that petitioner has not

substantiated the mileage expenses.     Sec. 6001; sec. 1.6001-1(a),

(e), Income Tax Regs.

      We conclude that petitioner made deductible charitable

contributions of $3,735.64 during 1996.




      5
      Sec. 170(i) prescribes the standard mileage rate for
purposes of computing the amount of a sec. 170(a) charitable
contribution deduction.
                            - 13 -

    Reviewed and adopted as the report of the Small Tax Case

Division.

                                  Decision will be entered

                             under Rule 155.
