                   T.C. Summary Opinion 2001-3



                     UNITED STATES TAX COURT



                 BRUCE L. HELMICH, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 12596-99S.                   Filed January 5, 2001.



     Bruce L. Helmich, pro se.

     Ross M. Greenberg, for respondent.



     PAJAK, 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 year in issue.
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     Respondent determined a deficiency of $1,643 in petitioner's

1996 Federal income tax.   Petitioner concedes that he received

interest in the amount of $290 which is includable in his income.

We must decide whether petitioner received $10,638 which should

be included in his income.

     Some of the facts in this case have been stipulated and are

so found.   Petitioner resided in Madeira Beach, Florida, at the

time he filed his petition.

     Petitioner worked part time as a legal clerk for Byron

Vaughan (Vaughan), Esquire, an attorney at law with an office in

Sarasota, Florida.   Respondent received a Form 1099-MISC stating

that petitioner received nonemployee compensation from Vaughan in

the amount of $10,638 for the 1996 taxable year.   Petitioner did

not report this amount on his 1996 return.

     In reply to correspondence from respondent, petitioner, in a

letter received by the Internal Revenue Service on August 4,

1998, stated that:

     Although I did receive the amounts claimed on pages two
     and four of your letter, these pages misidentify the
     $10,638 received from Byron Vaughan, Esquire, EIN 65-
     0087578. This amount was a bonus paid to me by Mr.
     Vaughan, my employer, and was not money received as
     non-employee compensation, nor was it money received by
     a self-employed individual.
          As such, I believe that Mr. Vaughan had an
     obligation to withhold both social security taxes and
     withholding taxes on that amount.

     On October 7, 1998, petitioner wrote to the Internal Revenue

Service and stated that:
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          The 1099 that I received from Mr. Vaughan was a
     bonus for that year. As your records indicate, I was
     an employee of Mr. Vaughan for several years prior to
     this time. I realize that the 1099 may have been
     completed with the notation as non-employee
     compensation, but that would have been an error on the
     part of Mr. Vaughan, and not my error. Mr. Vaughan
     stated to me that the taxes were taken care of. I do
     not feel that I should be held responsible for errors
     committed by Mr. Vaughan. I realize that Mr. Vaughan
     is now deceased, and I believe that the reason that the
     IRS is attempting to get this from me since [sic] they
     cannot get it from him.

     On December 15, 1998, petitioner responded to proposed

changes by the Internal Revenue Service and stated that:

     as I have explained, the bonus was employee compensation,
     regardless of how it was reported to your office. As I have
     explained to your office on several occasions, this income
     was a bonus from my employer and he informed me that he
     would be taking care of the taxes. * * * I do know that my
     records for 1995 will reflect that I received a bonus that
     year and that bonus reflected the pay was for employee
     compensation.

     Respondent determined that the $10,638 should be included in

petitioner's income.   The notice of deficiency contains the

following statement:   “A bonus is considered taxable income and

must be included on the tax return.    It is not subject to self-

employment taxes nor FICA taxes.   We have deleted the self-

employment tax and your share of the FICA tax."



     Petitioner stated in his petition that he disagreed with the

adjustments in the notice of deficiency because the $10,638 "was

erroneously marked on 1099 as non-employee compensation when it

should have been marked as employee compensation."
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     At trial, petitioner changed his story and claimed that he

never received the $10,638.    We summarize petitioner's testimony

and the sequence of events which he alleges occurred, as follows.

     As noted, petitioner worked part-time for Vaughan as a legal

clerk.    He received his W-2 and dated his Federal income tax

return on January 27, 1997.    After petitioner filed his return,

Vaughan gave petitioner the Form 1099-MISC which reported the

amount of $10,638 as nonemployee compensation.    Vaughan explained

to petitioner that he needed to report this amount to reduce his

taxes.    Petitioner protested that he did not receive the money.

Vaughan said not to worry because he would pay the tax when it

came due.

     Petitioner was applying for admission to the Florida Bar at

the time these events allegedly occurred.    Petitioner had been

convicted for the felony of extortion.    His bar application had

been pending before the Florida Supreme Court for 4 months.

Petitioner claims that Vaughan knew this, and when petitioner

questioned Vaughan about the Form 1099-MISC, Vaughan let him

"know in a very unsettled way" that if petitioner had any

problems with accepting the Form 1099-MISC, then Vaughan would

"probably have trouble" with petitioner's employment and would

have to notify the Bar about it.

     Petitioner considered himself between "a rock and a hard

place."    Petitioner never reported the alleged blackmail.   He
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claims he did not feel compelled to alert the authorities that he

was being extorted because Mr. Vaughan had told him, "don't worry

about it.   I'll pay [the tax] when it comes due."   Petitioner

claimed he did not amend his return to reflect the income because

he did not want to state under the penalty of perjury that he had

received the money.

     At trial, petitioner claimed that the reason he initially

told the Internal Revenue Service that he received the money as a

bonus was because he had spoken with someone in the Internal

Revenue Service who had led him to believe that the Form 1099-

MISC was "all the proof the IRS needed", and that petitioner had

to explain why he did not pay the taxes on it.   Petitioner

testified that the only explanation he could come up with as to

why he should not have to pay taxes on the money was that it was

employee compensation, not nonemployee compensation, and that

Vaughan should have paid the taxes on it.   Petitioner admitted

that he sent respondent the three letters stating that he had

received the $10,638 as a bonus.

     After he wrote the letters, petitioner was told by an

accountant that if petitioner had said from the beginning that he

did not receive the money, then the Form 1099-MISC would not be

proof in and of itself that he received the money, and the burden

of persuasion as to the payment of the money would be on

respondent.   After he heard this, petitioner informed respondent
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that he had never really received the money and told respondent

the same story he reiterated in court.   At trial, petitioner

claimed that he erred in writing the three letters to the

Internal Revenue service.

     In addition to his testimony, petitioner provided 4 months

of bank records to support his position that he did not receive

the $10,638.   Petitioner's bank records show that $10,638 was not

deposited into his bank account in a 4-month period.   They do not

establish that petitioner did not receive the money.   At trial,

petitioner contended that he never received the $10,638.

Respondent contended that the letters written by petitioner are

proof that he received the income and that the $10,638 must be

included in petitioner's gross income under section 61(a)(1).

     A statutory notice of deficiency ordinarily carries with it

a presumption of correctness.   Rule 142(a); Welch v. Helvering,

290 U.S. 111 (1933).   Because of this presumption, taxpayers

generally, at least initially, have the burden of proof and the

burden of going forward with the evidence.   Cebollero v.

Commissioner, 967 F.2d 986, 991 (4th Cir. 1992), affg. T.C. Memo.

1990-618; see also sec. 7491.

     Under section 6201(d), if the taxpayer in a court proceeding

asserts a reasonable dispute with respect to the income reported

on an information return, and fully cooperates with the

Commissioner, then the Commissioner shall have the burden of
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producing reasonable and probative information in addition to the

information return.    McQuatters v. Commissioner, T.C. Memo. 1998-

88; Dennis v. Commissioner, T.C. Memo. 1997-275; Hardy v.

Commissioner, T.C. Memo. 1997-97, affd. 181 F.3d 1002 (9th Cir.

1999).   The taxpayer must have fully cooperated with the

Commissioner before the burden of production would shift to the

Commissioner.    “Fully cooperating with the IRS includes (but is

not limited to) the following: bringing the reasonable dispute

over the item of income to the attention of the IRS within a

reasonable period of time, and providing (within a reasonable

period of time) access to and inspection of all witnesses,

information, and documents within the control of the taxpayer (as

reasonably requested by the Secretary).”    H. Rept. 104-506, at 36

(1996), 1996-3 C.B. 49, 84.   Petitioner did not fully cooperate

with the Commissioner and is not entitled to the benefit of

section 6201.    Even assuming arguendo that he is entitled to the

benefit of section 6201, the Commissioner has presented

sufficient information to sustain the determination in the notice

of deficiency.

     Petitioner has put himself between a rock and a hard place.

On the one hand, if petitioner did not receive the money, then he

agreed to assist Vaughan in defrauding the Government, he failed

to report extortion, he lied in three letters written to the

Internal Revenue Service, and he lied in his petition filed with
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this Court.     If, on the other hand, petitioner did receive the

money, then he failed to properly amend his 1996 tax return, he

lied to the Internal Revenue Service, he accused an innocent man

of committing a crime, and he committed perjury when he testified

before the Court.     Fortunately, it is not necessary to decide

which of these scenarios actually occurred.

        Respondent introduced into evidence three letters from

petitioner stating that petitioner received $10,638 as a bonus

during his employment with Mr. Vaughan.      Petitioner admitted

writing these letters.     In contradiction to these letters, we are

faced with petitioner’s testimony.       We are not required to accept

a taxpayer’s self-serving and uncorroborated testimony.       Wood v.

Commissioner, 338 F.2d 602, 605 (9th Cir. 1964), affg. 41 TC 593

(1964); Tokarski v. Commissioner, 87 T.C. 74, 77 (1986).        In this

case, we find that petitioner's testimony carries no weight due

to his lack of credibility.     Petitioner did not meet his burden

of proof.     The letters, which are admissions against interest,

are convincing.

     Under section 61(a)(1), gross income includes all income

from whatever source derived, including compensation for

services.     We note that this includes employee compensation as

well as nonemployee compensation.     We find that petitioner

received $10,638 as employee compensation for his services in

1996.     Accordingly, we sustain respondent's determination.
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    Reviewed and adopted as the report of the Small Tax Case

Division.



                                     Decision will be entered

                             for respondent.
