                  T.C. Summary Opinion 2006-149



                     UNITED STATES TAX COURT



              CHARLES H. LITTLE III, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 14304-04S.              Filed September 14, 2006.



     Charles H. Little III, pro se.

     Ilesa McAuliffe, for respondent.



     COUVILLION, Special Trial Judge:    This case was heard

pursuant to section 7463 in effect when the petition was filed.1

The decision to be entered is not reviewable by any other court,

and this opinion should not be cited as authority.



     1
      Unless otherwise indicated, subsequent section references
are to the Internal Revenue Code in effect for the year at issue.
All Rule references are to the Tax Court Rules of Practice and
Procedure.
                               - 2 -

     Respondent determined a deficiency of $34,496 in

petitioner’s Federal income tax for the year 2002 and the

additions to tax under sections 6651(a)(1) and 6654(a) in the

amounts of $10,003 and $1,152.75, respectively.

     Prior to trial, the parties agreed to a deficiency in the

amount of $12,642.2   The remaining issues for decision are

whether petitioner is liable for the additions to tax under

sections 6651(a)(1) and 6654(a).

     Some of the facts were stipulated.   Those facts, with the

exhibits annexed thereto, are so found and made part hereof.

Petitioner’s legal residence at the time the petition was filed

was Mountlake Terrace, Washington.

     Petitioner is a real estate agent who specialized in what he

described as “manufactured home parks and RV parks”.    More

specifically, this is a phase or aspect of commercial real estate

in which the agent specializes in real estate transactions

representing either buyers or sellers of parks or tracts of land

that are adapted as a location for manufactured homes and/or

recreational vehicles (RVs).   The customary practice is that the

entire park is owned by a landlord and lots or spaces in the park

are designated and leased for manufactured homes or RVs.      Each

lot is provided with the necessary utilities.   The individual


     2
      The settlement is based upon petitioner’s concession that
he earned $103,827 in nonemployee compensation during the year
and $104 in taxable interest income.
                               - 3 -

lots are not sold.   The entire park constitutes an economic unit.

Thus, if an investor is interested in purchasing a park, or if

the owner of an existing park desires to sell, real estate agents

such as petitioner typically would be used because of their

experience in this segment of real estate.    Petitioner did not

own, develop, or manage such parks.    He was simply an agent in

what appears to be a niche in the field of real estate.

     A notice of deficiency was issued to petitioner for the year

2002.   At the time the notice of deficiency was issued, on June

8, 2004, petitioner had not filed a Federal income tax return for

the year 2002 (the year at issue).     Petitioner acknowledged that,

for several years during the 1990s, he had filed protester

Federal income tax returns.   During these years, he was following

the advice of a lady who apparently specialized in filing

protester returns and in handling correspondence received by her

clients (including petitioner) from the IRS regarding such

returns.   Some of the returns filed by petitioner were “zero”

returns, on which each line on the return was filled in with a

zero.

     Petitioner and his wife were also “devastated”, as he

explained, over the loss of their daughter, who died unexpectedly

and for no known reason in 1994.   The daughter was not married

and had two young girls.   Prior to her death, she had placed one

of the girls for adoption, and, at her death, petitioner and his
                               - 4 -

wife assumed custody of the other girl, whom they later adopted.

That child was born in 1992 and for several years had serious

medical problems, all of which were costly to petitioner and his

wife.   Petitioner contends that these events had a severe impact

on him and his wife.   The Court understands that to mean that

petitioner and his wife essentially lost focus on their lives.

At some point, petitioner heeded the advice of a lady who

encouraged people not to pay Federal income taxes, and he filed

protester income tax returns based on that advice.   As an

example, for the 1997 tax year, petitioner and his wife filed a

joint Federal income tax return on which they reported their

income, expenses, and a tax liability of $6,395.   Based on the

advice of the return preparer, petitioner thereafter filed three

amended returns claiming an overpayment on each amended return.

The claimed overpayment on the third return constituted the

balance of tax reported on the original return.    During all this

time, petitioner continued in his regular employment.    Petitioner

was also courted during this time by other professional tax

protesters who charged for their advice on how to beat the tax

system.   At some point, some of petitioner’s peers in the real

estate business counseled him that professional protesters were

“crooks” who would take his money, and, ultimately, he

(petitioner) would be held liable for his taxes.   Petitioner

accepted this advice and decided to thereafter file Federal
                                - 5 -

income tax returns, utilizing the services of a responsible

certified public accountant.   It appears that, for 1 or more

years prior to the year at issue, petitioner had to file returns

or amended returns to correctly report his income for those

years.    Petitioner contends that, for these prior years, he was

not required by the IRS to pay any penalties.      At trial, counsel

for respondent agreed that, for these prior years, additions to

tax against petitioner were abated.      On this history, petitioner

contends he should not be held liable for the sections 6651(a)(1)

and 6654(a) additions to tax that are before the Court for the

2002 tax year.3

     Section 7491(c) imposes upon the Commissioner the “burden of

production” with respect to the liability of any person “for any

penalty, addition to tax, or additional amount imposed by this

title”.    In Higbee v. Commissioner, 116 T.C. 438, 446 (2001),

this Court held that the phrase “burden of production” does not

mean that the burden of proof is on the Commissioner with respect

to penalties and additions to tax.      The burden of production

under Higbee is satisfied where respondent shows, in the case of

the section 6651(a)(1) addition to tax, that no income tax return

has been filed or, if filed, was not filed timely and, with

respect to section 6654, that estimated taxes have not been paid.

     3
      For the year at issue, 2002, the income tax return was
filed in August 2004 and was accepted and processed by the IRS.
A copy of that return was not offered into evidence at trial.
                               - 6 -

     As noted earlier, petitioner had not filed a Federal income

tax return at the time the notice of deficiency was issued.

Therefore, respondent’s burden of production was met as to the

section 6651(a)(1) addition to tax.

     Section 6651(a)(1) provides for an addition to tax for

failure to file a Federal income tax return.     This addition to

tax is not imposed if the failure to file is not due to “willful

neglect” and is “due to reasonable cause”.     The term “willful

neglect” has been interpreted to mean a conscious, intentional

failure or reckless indifference.      United States v. Boyle, 469

U.S. 241, 245 (1985).   “Reasonable cause” requires the taxpayer

to demonstrate that he exercised ordinary business care and

prudence and was nonetheless unable to file the return timely.

Fambrough v. Commissioner, T.C. Memo. 1990-104.     Petitioner’s

situation here, at best, can be considered reckless indifference.

Even though petitioner and his wife were experiencing a stressful

situation lingering from the untimely death of their daughter and

the illness of their granddaughter, petitioner nonetheless

pursued gainful employment during the tax year at issue.     These

personal problems, although serious, did not prevent petitioner

from engaging in his business activity and in earning substantial

income.   Since these personal problems did not impair

petitioner’s ability to pursue gainful employment, they likewise

should not have impaired petitioner’s duty to file a timely
                                - 7 -

return for the year at issue.   Although additions to tax were

abated for petitioner’s prior years, the Court sees no basis for

an abatement for the year at issue.     The Court, moreover, has no

obligation to abate the additions to tax simply because they were

abated for prior years.   Respondent is sustained on this issue.

     The final issue is respondent’s determination that

petitioner is liable for the addition to tax under section

6654(a) for failure to pay estimated tax.    This addition to tax

is applicable where there is an underpayment of estimated tax,

subject to exceptions or waivers that are not applicable here.

Sec. 6654(e).   The provisions of this section are mandatory where

there is an underpayment of tax as determined under section 6654.

This section contains no exonerating provisions, such as

reasonable cause or lack of willful neglect.     Estate of Ruben v.

Commissioner, 33 T.C. 1071, 1072 (1960).     In general, estimated

income tax payments are used to provide for payment of income

taxes not collected through withholding.    Section 6654(c)

provides for quarterly installments.    Income taxes withheld from

salaries or wages apply toward the amount of each required

quarterly installment; however, to the extent withholdings do not

satisfy the required quarterly installments, the taxpayer is

required to make supplemental quarterly payments of estimated

taxes.   Sec. 6654(f).   Since petitioner was self-employed, he was

required to make estimated payments.    He did not make estimated
                                - 8 -

payments of his taxes for the year at issue.      Under section

6654(d), the amount of the four quarterly installments (including

taxes withheld) generally must equal 90 percent of the tax for

the year, or 100 percent of the tax for the preceding taxable

year, whichever is less.    The Court, therefore, sustains

respondent on this issue.

     Reviewed and adopted as the report of the Small Tax Case

Division.   Due to the agreed reduced deficiency, the additions to

tax must be recalculated.    Accordingly,



                                        Decision will be entered

                                under Rule 155.
