                        T.C. Memo. 2006-106



                      UNITED STATES TAX COURT



                  SUSAN F. MOSTAFA, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 12964-04.                Filed May 15, 2006.



     Susan F. Mostafa, pro se.

     Nhi T. Luu-Sanders and Thomas J. Travers, for respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION


     HAINES, Judge:   Respondent determined a deficiency in

petitioner’s 1996 Federal income tax of $1,377 and additions to

tax of $310 and $344 under section 6651(a)(1) and (2),

respectively.1


     1
         All section references are to the Internal Revenue Code,
                                                    (continued...)
                              - 2 -

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

Whether petitioner must include wages of $1,076 in her gross

income; (2) whether she must include individual retirement

account (IRA) distributions of $14,010 in her gross income; (3)

whether she is liable for an addition to tax under section

6651(a)(1) of $344; (4) whether section 6501(a) bars respondent

from assessing any tax due; and (5) whether petitioner is

entitled to reasonable litigation costs.

                        FINDINGS OF FACT

     Petitioner resided in a State within the jurisdiction of the

Court of Appeals for the Ninth Circuit when she filed her

petition.

     During 1996, petitioner worked for a public school district

and received wage income of $1,076.

     Petitioner had three IRAs during 1996, one account with T.

Rowe Price (the T. Rowe Price IRA) and two accounts with the

Lindner Growth Fund administered by Star Bank (the first Star

Bank IRA and the second Star Bank IRA, respectively).   On

February 26, 1996, petitioner received a $7,000 distribution from


     1
      (...continued)
as amended, and all Rule references are to the Tax Court Rules of
Practice and Procedure. Amounts are rounded to the nearest
dollar.
     2
        Respondent concedes that petitioner is not liable for an
addition to tax under sec. 6651(a)(2) and, as a result, seeks to
increase the addition to tax under sec. 6651(a)(1) to $344.
                                 - 3 -

the first Star Bank IRA.     On April 30, 1996, petitioner made a

$7,000 contribution to the second Star Bank IRA.     On June 17,

1996, petitioner received a $7,010 distribution from the second

Star Bank IRA.     Petitioner did not have any tax withheld from the

IRA distributions.

     Petitioner did not file a Federal income tax return for

1996.     On February 8, 1999, petitioner attempted to file a return

for 1996 and elected married filing jointly status.     However,

respondent did not process the return because it was not signed

by petitioner’s husband.

         On April 26, 2004, respondent sent petitioner a notice of

deficiency covering her 1996 taxable year.     Using information

received from third parties, respondent determined that

petitioner was required to include in gross income wages of

$1,076 from the public school district and IRA distributions of

$14,010 from Star Bank.     Respondent allowed petitioner a personal

exemption of $2,550 and a standard deduction of $3,350, and

determined a corresponding income tax deficiency of $1,377.

Respondent also determined that petitioner was liable for

additions to tax of $310 and $344 under section 6651(a)(1) and

(2), respectively.3

     On June 19, 2004, petitioner filed a petition with this



     3
        Respondent concedes petitioner is not liable for the sec.
6651(a)(2) addition to tax. See supra note 2.
                                - 4 -

Court.    Upon order of this Court, petitioner filed an amended

petition on September 3, 2004, contesting respondent’s

determinations.

                               OPINION

     Gross income means all income from whatever source derived,

including income from compensation for services.    Sec. 61(a)(1).

Petitioner admitted receiving wage income of $1,076 from the

public school district.    Therefore, we find petitioner must

include $1,076 in her gross income, as determined by respondent.

     Generally, distributions from an IRA are includable in the

distributee’s gross income as provided in section 72.    Sec.

408(d)(1); Lemishow v. Commissioner, 110 T.C. 110, 112 (1998).

However, “rollover contributions” are not includable in gross

income.    Sec. 408(d)(3); Lemishow v. Commissioner, supra at 112.

To qualify as a rollover contribution, the IRA distribution must

be rolled over into an IRA or other qualified plan within 60 days

of the distribution.    Sec. 408(d)(3); Lemishow v. Commissioner,

supra at 112; sec. 1.408-4(b)(1) and (2), Income Tax Regs.

     Petitioner argues that the $7,000 distribution from the

first Star Bank IRA is not included in her gross income because

the distribution was rolled over into her second Star Bank IRA

within 60 days.4   Petitioner received the distribution from the


     4
        On brief, petitioner argues that she rolled over an
additional $3,653 into her T. Rowe Price IRA on Mar. 26, 1996.
                                                   (continued...)
                               - 5 -

first Star Bank IRA on February 26, 1996, and did not make a

contribution to the second Star Bank IRA until April 30, 1996, 64

days later.   Petitioner offered inconsistent testimony and

explanations as to why the contribution was made 4 days after the

expiration of the rollover period.5    The only facts in the record

show that the contribution was made more than 60 days after the

date of distribution.   For this reason, the distribution does not

qualify as a rollover distribution, and it must be included in

petitioner’s gross income.   See sec. 408(d)(1), (3).

     Petitioner does not argue that the remaining $7,010

distribution was rolled over or is otherwise not includable in

her gross income.   Therefore, we find that petitioner must




     4
      (...continued)
Petitioner did not introduce any evidence to substantiate the
alleged rollover, nor is it consistent with the facts. The only
IRA distribution she received before the alleged rollover was
$7,000 on Feb. 26, 1996. Thus, she only had $7,000 available to
roll over (the amount of the alleged Star Bank rollover), and we
do not consider the alleged T. Rowe Price rollover further.
     5
        Petitioner testified that if the bank received an IRA
rollover request after 3 p.m. on a Friday, the rollover would not
be reflected in the account until the following Monday. Even if
such a situation could offer petitioner relief from the 60-day
requirement, it would not do so in this case. At times,
petitioner testified that she made the rollover request on Apr.
25, 1996 (a Thursday), and at other times, she testified that she
made the request on Apr. 26, 1996 (a Friday). To be consistent
with her explanation of the delay, the request would have been
made on Friday, Apr. 26, 1996. If that were the case, the
rollover would have been reflected in her account on the
following Monday, Apr. 29, 1996. It was not reflected in the
account until Tuesday, Apr. 30, 1996.
                               - 6 -

include IRA distributions of $14,010 in her gross income, as

determined by respondent.6

     Because petitioner was required to include $1,076 of wage

income and $14,010 of IRA distributions in her gross income, we

sustain respondent’s determination of a $1,377 deficiency in

petitioner’s 1996 Federal income tax.

     Section 6651(a)(1) imposes an addition to tax for failure to

file a return on the date prescribed (determined with regard to

any extension of time for filing), unless the taxpayer can

establish that such failure is due to reasonable cause and not

due to willful neglect.   The Commissioner bears the burden of

production with respect to the taxpayer’s liability for the

addition to tax.   Sec. 7491(c); Higbee v. Commissioner, 116 T.C.

438, 446-447 (2001).   To meet his burden of production, the

Commissioner must come forward with sufficient evidence

indicating that it is appropriate to impose the addition to tax.

Higbee v. Commissioner, supra at 446-447.

     Respondent introduced into evidence Form 4340, Certificate

of Assessments, Payments, and Other Specified Matters, which

shows petitioner failed to file a return for 1996.   We find that

respondent has met his burden of production.   To avoid the




     6
        Respondent does not argue that the IRA distributions are
subject to a 10-percent additional tax under sec. 72(t).
                               - 7 -

addition to tax, petitioner must show that her failure to file

was due to reasonable cause and not due to willful neglect.

     Petitioner testified that she did not file a return because

her gross income was less than the exemption amount.    See sec.

6012(a)(1)(A).   However, as found above, petitioner was required

to include $15,086 in gross income, which exceeds the exemption

amount for a married person filing separately as adjusted for

inflation, and she was thus required to file a return.    See id.;

Rev. Proc. 95-53, 1995-2 C.B. 445.     Petitioner’s mistake as to or

ignorance of the law does not amount to reasonable cause that

would relieve her from the addition to tax.    See Joyce v.

Commissioner, 25 T.C. 13, 15 (1955); Joye v. Commissioner, T.C.

Memo 2002-14; Guthrie v. Commissioner, T.C. Memo. 1989-168.

Petitioner has not shown that her failure to file was due to

reasonable cause and not due to willful neglect.    Therefore, we

hold that petitioner is liable for an addition to tax under

section 6651(a)(1) of $344.7

     Petitioner argues that respondent was barred from beginning

an audit because the 3-year period of limitations had expired.

Petitioner cites no authority for her proposition.    We assume

petitioner is arguing that respondent is barred from assessing



     7
        Because respondent conceded that petitioner is not liable
for an addition to tax under sec. 6651(a)(2), the sec. 6651(a)(1)
addition to tax is 25 percent of the amount required to be shown
on the return ($1,377 x .25 = $344.25). See also supra note 1.
                                 - 8 -

any tax due because the 3-year period of limitations under

section 6501(a) has expired.

     Section 6501(a) provides:    “Except as otherwise provided in

this section, the amount of any tax imposed by this title shall

be assessed within 3 years after the return was filed (whether or

not such return was filed on or after the date prescribed)”.

However, section 6501(c)(3) provides that, in the case of a

failure to file a return, the tax may be assessed at any time.

Petitioner argues that more than 3 years has passed from the time

she filed a return on February 8, 1999, and thus respondent is

barred from assessing the tax.    However, the return was never

filed because it was not signed by petitioner’s husband.     Because

petitioner did not file a return, the period of limitations on

assessment remained open indefinitely.     See sec. 6501(c)(3).

     On brief, petitioner argues that she is entitled to recover

reasonable litigation expenses from respondent.     Petitioner did

not raise the issue in a proper motion for reasonable litigation

costs.    See Rule 231(a)(2) and (b).    Even if petitioner were to

raise the issue at the proper time and in the proper manner, she

would not be entitled to reasonable litigation expenses because

she is not the prevailing party.    See sec. 7430(c)(4)(A); Rule

232(e).
                                 - 9 -

     In reaching our holdings, we have considered all arguments

made, and, to the extent not mentioned, we conclude that they are

moot, irrelevant, or without merit.

     To reflect the foregoing,

                                              Decision will be entered

                                         for respondent.
