                        T.C. Memo. 2001-239



                       UNITED STATES TAX COURT



   ESTATE OF HAINES B. GAFFNER, DECEASED, MARY ELLEN GAFFNER,
     PERSONAL REPRESENTATIVE, Petitioner v. COMMISSIONER OF
                   INTERNAL REVENUE, Respondent

        MARY ELLEN GAFFNER, Petitioner v. COMMISSIONER OF
                   INTERNAL REVENUE, Respondent



     Docket Nos. 5522-00, 5523-00.    Filed September 14, 2001.



     Mary Ellen Gaffner, personal representative at docket No.

5522-00 and pro se at docket No. 5523-00.

     Robert S. Scarbrough, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     CHIECHI, Judge:    Respondent determined deficiencies in, and

additions to, Federal income tax (tax), as follows:
                                  - 2 -

                       Haines B. Gaffner, Deceased

                                  Addition to Tax Under
 Year     Deficiency    Sec. 6651(a)(1)1 Sec.6651(a)(2) Sec. 6654
 1992     $75,428.00       $15,797.25          –-       $3,289.81
 1993      94,418.00        18,622.00          --        3,028.21
 1994      99,382.00        19,624.25          --        3,952.91
 1995     110,823.00        22,236.50          --        4,691.07
 1996     146,782.00        31,279.73          *         7,353.55

     *The addition to tax under sec. 6651(a)(2) is calculated as .5
percent of the amount shown as tax in the tax return if the failure
to pay such tax on or before the date prescribed for payment of such
tax is not for more than 1 month, with an additional .5 percent for
each additional month or fraction thereof during which such failure
continues, not exceeding 25 percent in the aggregate.

                           Mary Ellen Gaffner

                                  Addition to Tax Under
 Year     Deficiency    Sec. 6651(a)(1) Sec. 6651(a)(2) Sec. 6654
 1992     $38,043.00       $6,451.00           –-       $1,659.25
 1993      44,705.00        6,194.00           –-          945.31
 1994      48,761.00        6,968.75           –-        1,326.05
 1995      49,707.00        6,957.75           –-        1,377.26
 1996     190,063.00       41,017.73           *         9,657.13

     *The addition to tax under sec. 6651(a)(2) is calculated as .5
percent of the amount shown as tax in the tax return if the failure
to pay such tax on or before the date prescribed for payment of such
tax is not for more than 1 month, with an additional .5 percent for
each additional month or fraction thereof during which such failure
continues, not exceeding 25 percent in the aggregate.

     The issues remaining for decision are:

     1.   Do petitioners2 have rental income for 1996 in an amount

that is less than the amount determined by respondent?      We hold

that they do not.



     1
      All section references are to the Internal Revenue Code
(Code) in effect for the years at issue. All Rule references are
to the Tax Court Rules of Practice and Procedure.
     2
      We shall refer collectively to the petitioner in each of
these consolidated cases as petitioners.
                                 - 3 -

       2.    Are petitioners entitled to deduct for 1996 claimed

rental expenses of $98,103.07?     We hold that they are not.

       3.    Are petitioners entitled to deduct for 1992, 1993,

1994, 1995, and 1996 claimed legal, interest, and/or other

expenditures totaling $59,130.12, $64,014.86, $105,679.24,

$123,232.28, and $131,633, respectively?      We hold that they are

not.

       4.    Are petitioners entitled to deduct for 1996 deprecia-

tion in excess of the amount conceded by respondent?     We hold

that they are not.

       5.   Do petitioners have for each of the years at issue a

total amount of credits for withholding and estimated tax pay-

ments in excess of the total amount of such credits determined by

respondent for each such year?     We hold that they do not.

       6.   Are petitioners liable for each of the years at issue

for the addition to tax under section 6651(a)(1) and for 1996 for

the addition to tax under section 6651(a)(2)?     We hold that they

are.

       7.    Are petitioners liable for each of the years at issue

for the addition to tax under section 6654?     We hold that they

are.

                           FINDINGS OF FACT

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

Certain other facts are deemed admitted pursuant to Rule 90(c).
                                  - 4 -

     At the time the respective petitions in these cases were

filed, Mary Ellen Gaffner (Ms. Gaffner), the personal representa-

tive of the Estate of Haines B. Gaffner, Deceased (Mr. Gaffner),

in the case at docket No. 5522-00, and the petitioner in the case

at docket No. 5523-00, resided in Seattle, Washington.

     During the years at issue, Mr. Gaffner (until his death in

1996) and Ms. Gaffner, who were married, owned an 18-unit apart-

ment complex located at 900 Warren Avenue North, Seattle, Wash-

ington (Warren Avenue rental property).        During 1996, petitioners

received rent from the Warren Avenue rental property totaling

$108,000.

     During 1996, Ms. Gaffner, either in her individual capacity

or in her capacity as executrix of the estate of Mr. Gaffner,

paid the following attorneys the amounts shown:

                Attorney                    Amount Paid
          Donald A. Bailey                   $12,116.59
          Hillis, Clark, Martin               12,367.50
            & Peterson
          Shafer & Bailey                      8,426.00
          Wilton S. Viall III                  4,000.00

     On February 2, 1996, First Interstate Bank of Washington,

N.A. (First Interstate Bank) paid a $10,000 check to Continental

Mortgage Company that was signed by Mr. Gaffner and that was

drawn on his account at that bank.        A notation on that check

stated:    “DEPOSIT ON HIGHLAND HOUSE MORTGAGE APPLICATION”.

     On April 19, 1996, Mr. Gaffner and Ms. Gaffner requested
                                - 5 -

First Interstate Bank to wire $50,000 to J.D.I. Realty, L.L.C.

(J.D.I. Realty).   First Interstate Bank complied with that

request and wired that amount to that company, for which it

charged them a $15 wire-transfer fee.

     On February 10, 2000, respondent mailed to “HAINES B.

GAFFNER (DECD)” a notice of deficiency (notice) for taxable years

1992 through 1994 and a separate notice for taxable years 1995

and 1996.   On the same date, respondent mailed to Ms. Gaffner a

notice for taxable years 1992 through 1994 and a separate notice

for taxable years 1995 and 1996.

                               OPINION

     Petitioners bear the burden of proving that the determina-

tions in the respective notices issued to them are erroneous.

See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).

With respect to the deductions claimed by petitioners, deductions

are strictly a matter of legislative grace, and petitioners bear

the burden of proving that they are entitled to any deductions

claimed.    INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992).

     In support of their respective positions on all the issues

in these cases except the additions to tax, petitioners rely on

the testimony of Ms. Gaffner’s son, Gary Gaffner, and on a

document (petitioners’ document) that the Court allowed petition-

ers to introduce into the record at the trial in these cases

solely as a document representing petitioners’ claims with
                               - 6 -

respect to those issues.   Petitioners introduced no evidence into

the record with respect to the additions to tax under sections

6651(a) and 6654.

     With respect to the testimony of Gary Gaffner, we found his

testimony to be general, vague, conclusory, and/or confusing in

certain material respects.   We are not required to, and we shall

not, rely on Gary Gaffner’s testimony to establish petitioners’

respective positions on the issues that remain in these cases.

See 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;

Tokarski v. Commissioner, 87 T.C. 74, 77 (1986).

     With respect to petitioners’ document, we found that docu-

ment to be for the most part nothing more than a conclusory

document reflecting the respective positions of petitioners on

the various issues (except for the additions to tax) that remain

in these cases.   Although petitioners’ document establishes that

during 1996 Mr. Gaffner and/or Ms. Gaffner paid certain amounts

that petitioners are claiming as deductions for that year, that

document does not establish the respective purposes of those

payments.3   We are not required to, and we shall not, rely on


     3
      In this regard, Ms. Gaffner made some of those payments
during 1996 to certain attorneys. However, neither petitioners’
document nor the testimony of Gary Gaffner establishes the nature
of the legal services performed and/or the nature of the expendi-
                                                   (continued...)
                                 - 7 -

petitioners’ document to establish petitioners’ respective

positions on the various issues that remain in these cases.

Claimed Rental Income for 1996

     Petitioners contend that they have rental income for 1996

from the Warren Avenue rental property of $88,744.73, and not

$108,000 as determined by respondent.      On the record before us,

we reject petitioners’ contention.       We find on that record that

petitioners have failed to carry their burden of showing that

during 1996 they received only $88,744.73 of rental income from

the Warren Avenue rental property.4

Claimed Rental Deductions for 1996

     Petitioners contend that they are entitled to deduct for

1996 rental expenses totaling $98,103.07.      On the record before

us, we reject petitioners’ contention.      We find on that record

that petitioners have failed to carry their burden of showing

that they are entitled to deduct for 1996 a total of $98,103.07

as rental expenses.

Other Deductions Claimed for the Years at Issue

     Petitioners contend that they are entitled to deduct for

each of the years at issue the following amounts which they



     3
      (...continued)
tures incurred by those attorneys.
     4
      We note that, pursuant to Rule 90(c), petitioners are
deemed to have admitted that during 1996 they received $108,000
of rental income from the Warren Avenue rental property.
                                 - 8 -

contend are interest payments:

                                             Alleged
                   Year                  Interest Payment
                   1992                     $59,130.12
                   1993                      64,014.86
                   1994                     105,679.24
                   1995                     123,232.28
                   1996                      34,707.91

Petitioners also contend that they are entitled to deduct for

1996 (1) $36,910.09 that Ms. Gaffner paid to certain attorneys,

(2) $10,000 that Mr. Gaffner paid to Continental Mortgage Com-

pany, and (3) $50,015, $50,000 of which they paid, via a bank

wire of their funds, to J.D.I. Realty, and $15 of which they paid

to First Interstate Bank as a fee for that wire transfer.     On the

record before us, we reject petitioners’ contentions.

     We turn first to the amounts totaling $36,910.09 that we

have found Ms. Gaffner paid during 1996 to certain attorneys.      On

the instant record, we find that petitioners have failed to

establish the nature of the services performed and/or the nature

of the expenditures incurred by those attorneys.      On the record

before us, we find that petitioners have failed to carry their

burden of showing that the amounts totaling $36,910.09 that Ms.

Gaffner paid to various attorneys during 1996 constitute expenses

deductible for that year under section 162(a), section 212, or

any other section of the Code.

     We turn next to the $10,000 that we have found Mr. Gaffner

paid during 1996 to Continental Mortgage Company and the $50,015
                                 - 9 -

that we have found Mr. Gaffner and Ms. Gaffner paid during that

year, $50,000 of which they wired to J.D.I. Realty and $15 of

which they paid to First Interstate Bank as a wire-transfer fee.

On the instant record, we find that petitioners have failed to

establish the purposes for which the respective payments were

made to Continental Mortgage Company and to J.D.I. Realty.5    On

the record before us, we find that petitioners have failed to

carry their burden of showing that the respective amounts of

$10,000, $50,000, and $15 paid during 1996 to Continental Mort-

gage Company, J.D.I. Realty, and First Interstate Bank are

deductible for that year under section 162(a), section 212, or

any other section of the Code.

     We turn now to the respective amounts of $59,130.12,

$64,014.86, $105,679.24, $123,232.28, and $34,707.91 that peti-

tioners contend are interest payments that they made to Commer-

cial Bank during 1992, 1993, 1994, 1995, and 1996.6   On the

instant record, we find that petitioners have failed to carry

their burden of establishing (1) that during each of the years at



     5
      The purpose of the $50,000 payment during 1996 that Mr.
Gaffner and Ms. Gaffner made, via a bank wire of their funds, to
J.D.I. Realty governs the deductibility of the $15 fee that they
paid to First Interstate Bank for that wire transfer.
     6
      At trial, respondent conceded that petitioners are entitled
for 1996 to interest deductions of $36,547.14 and $77,747.58 with
respect to mortgage interest that they paid during that year to
Lornty Investment Co. and SFG Data Mortgage Servicing, Inc.,
respectively.
                              - 10 -

issue they had a loan outstanding from Commercial Bank and

(2) that during each such year they made an interest payment on

any such alleged loan.7   On the record before us, we find that

petitioners have failed to carry their burden of showing that

they are entitled for the years at issue to the respective

interest deductions that they are claiming for such years for

alleged interest payments to Commercial Bank.

Claimed Depreciation Deduction for 1996

     Petitioners contend that they are entitled to deduct for

1996 depreciation of $22,403.18.   Respondent concedes on brief

they are entitled to deduct for that year $5,295 of depreciation.

On the instant record, we reject petitioners’ contention that

they are entitled to deduct for 1996 depreciation in excess of

the amount conceded by respondent.     On the record before us, we

find that petitioners have failed to carry their burden of

showing that they are entitled to deduct for 1996 $17,108.18 of

depreciation in addition to the $5,295 of depreciation for that

year to which respondent conceded they are entitled.

Claimed Credits for Withholding and Estimated Tax Payments

     Petitioners contend that they are entitled to the following


     7
      Assuming arguendo that petitioners had established that
during each of the years at issue they paid the amount they are
claiming as interest on a loan from Commercial Bank, on the
instant record, we find that petitioners have failed to establish
that any such interest is deductible for each such year. For
example, any such interest could have been personal interest that
is not deductible under sec. 163(h).
                             - 11 -

total amounts of credits for withholding and estimated tax

payments:

                                      Total Amount of
                 Year                 Credits Claimed
                 1992                   $60,798.52
                 1993                    74,603.50
                 1994                    76,693.55
                 1995                    43,755.09
                 1996                    15,524.82


On the record before us, we reject petitioners’ contention.   We

find on that record that petitioners have failed to carry their

burden of showing that they are entitled for each of the years at

issue to a total amount of credits for withholding and estimated

tax payments in excess of the total amount of such credits

determined by respondent for each such year.

Additions to Tax Under Sections 6651(a) and 6654

     Petitioners presented no evidence, and advance no argument,

with respect to the additions to tax under sections 6651(a) and

6654 that respondent determined.   On the record before us, we

find that petitioners have failed to show that they are not

liable for each of the years at issue for the additions to tax

under sections 6651(a)(1) and 6654.   On that record, we further

find that petitioners have failed to show that they are not

liable for 1996 for the addition to tax under section
                             - 12 -

6651(a)(2)8.

     We have considered all of the contentions and arguments of

petitioners that are not discussed herein, and we find them to be

without merit and/or irrelevant.

     To reflect the foregoing and the concessions of the parties,



                                   Decisions will be entered

                              under Rule 155.




     8
      The calculation for 1996 of the additions to tax under sec.
6651(a)(1) and (2) is subject to sec. 6651(c)(1).
