                  T.C. Summary Opinion 2003-139



                     UNITED STATES TAX COURT



            ALAN AND ESTHER SCHWEMMER, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7617-02S.              Filed September 30, 2003.


     Alan and Esther Schwemmer, pro sese.

     Huong T. Duong, 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.   Unless otherwise

indicated, section references are to the Internal Revenue Code in

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

Tax Court Rules of Practice and Procedure.   The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority.
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     Respondent determined a deficiency in petitioners’ 1998

Federal income tax in the amount of $16,353, together with a

penalty under section 6662(a) in the amount of $3,271.      After

concessions by respondent, the issues this Court must decide are

whether petitioners proved that respondent’s determination was

incorrect, and whether petitioners are liable for the accuracy-

related penalty under section 6662(a).

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

so found.   Petitioners resided in Fresno, California, at the time

they filed their petition.   Their petition is replete with tax

protester type arguments.    Petitioners filed a statement, which

has as its core thesis that this case should be:

     dismissed for lack of Subject Matter Jurisdiction on the
     grounds that the Notice of Deficiency issued by respondent
     was issued on hearsay facts and evidence. Petitioner
     demands that respondent provide certified facts or evidence
     of a statutory correct assessment or tax liability to
     support any claimed deficiency. Lacking a statutory correct
     assessment or tax liability the notice of deficiency is null
     and void and this court does not have Subject Mater
     Jurisdiction.

     Respondent made a number of determinations which are

described in pertinent part below.      Respondent determined that

the BVE and Sweetbush Business Trusts, purportedly created by

petitioners, are shams with no economic substance and increased

petitioners’ business income by the gross receipts of the trusts,

less ordinary and necessary business expenses.      Respondent also

determined gross income from Sweetbush Trust bank deposits (the
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amounts of which respondent conceded at trial), other unexplained

bank deposits, flowthrough losses from the disregarded Sweetbush

Trust, and increased Social Security benefits.   Respondent

further determined that petitioners were subject to self-

employment tax, with a deduction for one-half of the self-

employment tax.   Lastly, respondent determined that petitioners

were liable for the accuracy-related penalty under section

6662(a).

     Petitioners have the burden of proving that respondent’s

determination is incorrect.   Rule 142(a); Welch v. Helvering, 290

U.S. 111, 115 (1933).   Section 7491 does not apply in this case

because petitioners did not cooperate with respondent during the

audit.

     At trial, petitioners did not introduce any credible

evidence.   Based on this record, we find that petitioners have

failed to meet their burden of proof.

     At trial, respondent did not carry his burden of production

with respect to the section 6662(a) penalty.   Sec. 7491(c).

Therefore, we do not sustain respondent’s determination that

petitioners were liable for a penalty under section 6662(a).

     All of the arguments and contentions that have not been

analyzed herein have been considered, but do not require any

further discussion.

     Reviewed and adopted as the report of the Small Tax Case
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Division.

                         Decision will be entered

                    under Rule 155.
