                        T.C. Memo. 2007-10



                      UNITED STATES TAX COURT



                 RAYMOND A. HEERS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 22338-03.              Filed January 16, 2007.



     George E. Harp, for petitioner.

     William F. Castor, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION

     MARVEL, Judge:   Respondent determined a deficiency in

petitioner’s Federal income tax of $86,858 and additions to tax

under sections 6651(a)(1)1 and 6654 of $11,616.75 and $3,085.41,


     1
      Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the taxable year in issue,
and Rule references are to the Tax Court Rules of Practice and
                                                   (continued...)
                                - 2 -

respectively, for 2000.    Respondent also determined that

petitioner was liable for an addition to tax under section

6651(a)(2) in an amount to be determined.    Petitioner seeks a

redetermination of the deficiency and additions to tax.      After

concessions,2 the issues for decision are:

      (1)   Whether petitioner received unreported income in the

form of nonemployee compensation and an early individual

retirement account (IRA) distribution;

      (2)   whether petitioner is liable for an addition to tax

under section 6651(a)(1) for failing to file his 2000 tax return;

and

      1
      (...continued)
Procedure.
      2
      Respondent concedes that petitioner is not liable for the
addition to tax under sec. 6651(a)(2) and is liable for an
addition to tax under sec. 6654 in the reduced amount of
$2,538.56. Petitioner concedes that he received unreported wage
income of approximately $23,000 and that he did not file a
Federal income tax return for 2000.

     Petitioner argued in his petition that the notice of
deficiency did not sufficiently describe the basis of the tax
deficiency as required by sec. 7522. However, he did not raise
this argument on brief, and, therefore, we deem it conceded. See
Rule 151(e)(4) and (5); Petzoldt v. Commissioner, 92 T.C. 661,
683 (1989). Petitioner also argued in his petition that he is
not liable for self-employment tax because he did not receive
self-employment income and that he is not liable for the
additional tax under sec. 72(t) on the early withdrawal of an
individual retirement account (IRA) distribution because he did
not have an IRA account nor did he receive an IRA distribution.
Because petitioner similarly failed to raise these issues on
brief, we also deem them conceded to the extent we decide
petitioner had unreported income in the form of nonemployee
compensation and an early IRA distribution during 2000. See Rule
151(e)(4) and (5); Petzoldt v. Commissioner, supra at 683.
                               - 3 -

     (3)   whether petitioner is liable for an addition to tax

under section 6654 for failing to make estimated payments with

respect to his 2000 tax liability.

                          FINDINGS OF FACT

     Petitioner resided in Longwood, Florida, when his petition

in this case was filed.

     During 2000, petitioner, a certified registered nurse

anesthetist, contracted with and provided services as an

independent contractor for Nationwide Anesthesia Services, Inc.

(Nationwide).   Petitioner submitted invoices for his services,

which showed the date and hours worked as well as related

expenses and the total amount due to him under his contract with

Nationwide.   During 2000, petitioner also worked as an employee

for Wellmont Health System for which he was paid wages totaling

$23,012.95, and he requested and received an early withdrawal of

$50,000 from an employer-sponsored retirement account at the

Variable Annuity Life Insurance Company (VALIC) from which

Federal income tax of $10,000 was withheld.

     Petitioner did not file a Federal income tax return or make

any estimated tax payments for 2000.   On September 26, 2003,

respondent issued a notice of deficiency for 2000 determining

that petitioner received wage income of $23,012, nonemployee

compensation of $171,069, and an early IRA distribution of

$50,000.   In the notice of deficiency, respondent also determined
                               - 4 -

that petitioner was liable for self-employment tax on the

nonemployee compensation, was liable for additional tax under

section 72(t) on the early IRA distribution, and was entitled to

a self-employment tax deduction.   Respondent also determined that

petitioner was liable for additions to tax under sections

6651(a)(1) and (2) and 6654.

     On December 24, 2003, petitioner’s imperfect petition was

filed.   By order dated January 5, 2004, we ordered petitioner to

file a proper amended petition and pay the filing fee on or

before February 19, 2004.   No response to the Court’s order was

received, and on April 26, 2004, we dismissed petitioner’s case

for lack of jurisdiction.

     On July 29, 2004, we received and filed petitioner’s motion

for leave to file a motion to vacate the dismissal order out of

time and lodged his motion to vacate the order of dismissal.3    We

also received petitioner’s motion for leave to file an amended

petition out of time and petitioner’s amended petition.   By order

dated August 16, 2004, we granted petitioner’s motion for leave

to file the motion to vacate, directed that the motion to vacate

be filed on that date, granted the motion to vacate, and vacated

our April 26, 2004, order of dismissal.   In the August 16, 2004,


     3
      Petitioner’s motion for leave to file a motion to vacate
the dismissal order was mailed to the Court in an envelope
bearing a postmark of July 26, 2004, and was therefore timely
filed. See Stewart v. Commissioner, 127 T.C. 109, 116-117
(2006).
                                   - 5 -

order, we also granted petitioner’s motion for leave to file an

amended petition out of time, and we directed that petitioner’s

amended petition be filed as of August 16, 2004.

     A notice setting case for trial during the Court’s Oklahoma

City, Oklahoma, trial session beginning March 6, 2006, was served

on petitioner on October 4, 2005.          On March 6, 2006, we called

petitioner’s case to determine the status of the case and to set a

trial date.    Neither petitioner nor a representative appeared.     We

scheduled trial in petitioner’s case for March 7, 2006.

     When petitioner’s case was called for trial on March 7,

2006, petitioner’s attorney appeared, but petitioner did not.

Although petitioner’s attorney offered no evidence at trial, he

objected to three of respondent’s exhibits.       After hearing

argument on the objections, we overruled petitioner’s objections

and admitted the exhibits.

                                OPINION

I.   Unreported Income

     A.     Burden of Production

     Section 61(a) defines gross income for purposes of

calculating taxable income as “all income from whatever source

derived”.     Respondent determined that petitioner received gross

income from VALIC and Nationwide, which petitioner failed to

report on a Federal income tax return for 2000.
                               - 6 -

     The Commissioner’s deficiency determination is normally

entitled to a presumption of correctness, Bone v. Commissioner,

324 F.3d 1289, 1293 (11th Cir. 2003), affg. T.C. Memo. 2001-43,

and the burden of proving the determination incorrect generally

rests with the taxpayer, Rule 142(a).    However, when a case

involves unreported income and that case is appealable to the

Court of Appeals for the Eleventh Circuit, as this case appears

to be absent a stipulation to the contrary, the Commissioner’s

determination of unreported income is entitled to a presumption

of correctness only if the determination is supported by a

minimal evidentiary foundation linking the taxpayer to an income-

producing activity.   Blohm v. Commissioner, 994 F.2d 1542, 1549

(11th Cir. 1993), affg. T.C. Memo. 1991-636; see also Golsen v.

Commissioner, 54 T.C. 742, 756 (1970) (Tax Court is bound to

apply the law of the circuit to which the case is appealable),

affd. 445 F.2d 985 (10th Cir. 1971).    Once the Commissioner

produces evidence linking the taxpayer to an income-producing

activity, the burden shifts to the taxpayer to rebut the

presumption by establishing that the Commissioner’s determination

is arbitrary or erroneous.   Blohm v. Commissioner, supra at 1549;

see also United States v. Janis, 428 U.S. 433, 441-442 (1976).

     To satisfy his initial burden of production, respondent

introduced into evidence Form 1099-R, Distributions From

Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs,
                               - 7 -

Insurance Contracts, etc., and other business records obtained

from and certified by VALIC and business records obtained from

and certified by Nationwide, including the contract for services

between petitioner and Nationwide and copies of petitioner’s

invoices for services rendered during 2000.    Respondent

introduced the business records through written declarations

under rules 803(6) and 902(11) of the Federal Rules of Evidence.4

     The business records that respondent introduced at trial

establish that petitioner received nonemployee compensation

during 2000.   The business records include a contract between

petitioner and Nationwide in which Nationwide agreed to solicit

work for petitioner for a fee, invoices for service that show the

time expended by petitioner and petitioner’s earnings for such

work, and agency fee checks for petitioner’s work as an

independent contractor during 2000.    The invoices support




     4
      Petitioner argued on brief that respondent had the burden
of proof regarding the unreported income adjustments and that
respondent did not satisfy that burden because the business
records offered at trial were inadmissible. As we discuss
elsewhere in this opinion, petitioner, not respondent, had the
burden of proof regarding the unreported income. Moreover, even
though respondent had an initial burden of producing evidence
connecting petitioner to the unreported income, respondent
satisfied his burden by introducing the VALIC and Nationwide
business records. The business records in question were kept in
the regular course of business and were properly authenticated in
certifications submitted under Fed. R. Evid. 803(6) and 902(11).
Therefore, the records were properly admitted into evidence at
trial, and we do not consider petitioner’s arguments further.
                                - 8 -

respondent’s calculation that petitioner earned $171,069 for his

services during 2000.

     The business records also establish that petitioner received

an early IRA distribution in 2000.      Respondent introduced both a

Form 1099 and the distribution form submitted by petitioner

requesting the distribution.   The distribution form bears

signatures of petitioner and his wife, and the form is notarized.

The notarized form contains a request for a partial account

distribution of $50,000 and Federal income tax withholding of 20

percent of the distribution.

     Based on the above, we conclude that respondent laid the

requisite foundation for the contested unreported income

adjustments and that respondent’s determinations are entitled to

the presumption of correctness.

     B.   Burden of Proof

     Once the Commissioner has satisfied his initial burden of

production with respect to the unreported income adjustments, the

taxpayer ordinarily has the burden of proving by a preponderance

of the evidence that the adjustments are erroneous or arbitrary.

Blohm v. Commissioner, supra at 1549; Lundgren v. Commissioner,

T.C. Memo. 2006-177.    However, the burden of proof may shift to

the Commissioner under section 7491(a) if the taxpayer has

produced credible evidence relating to the tax liability at issue

and has met his substantiation requirements, maintained required
                                - 9 -

records, and cooperated with the Secretary’s reasonable requests

for documents, witnesses, and meetings.

      In this case, petitioner did not argue that section 7491(a)

operates to shift the burden of proof regarding the unreported

income adjustments to respondent, and he did not introduce any

evidence that he satisfied the requirements of section 7491(a).

In fact, petitioner did not attend the trial, and he did not

attempt, through his counsel, to introduce any evidence at all.

We conclude, therefore, that petitioner has the burden of proof

regarding the unreported income items and that he failed to carry

his burden.   Respondent’s unreported income adjustments are

sustained.

II.   Addition to Tax Under Section 6651(a)(1)

      Section 6651(a)(1) authorizes the imposition of an addition

to tax for failure to file a timely return, unless it is shown

that such a failure is due to reasonable cause and not due to

willful neglect.   See sec. 6651(a)(1); United States v. Boyle,

469 U.S. 241, 245 (1985); United States v. Nordbrock, 38 F.3d

440, 444 (9th Cir. 1994); Harris v. Commissioner, T.C. Memo.

1998-332.    A failure to file a timely Federal income tax return

is due to reasonable cause if the taxpayer exercised ordinary

business care and prudence but nevertheless was unable to file

the return within the prescribed time.    See sec. 301.6651-

1(c)(1), Proced. & Admin. Regs.   Willful neglect means a
                               - 10 -

conscious, intentional failure to file or reckless indifference

toward filing.    See United States v. Boyle, supra at 245.

     If the taxpayer assigns error to the Commissioner’s

determination that the taxpayer is liable for the addition to

tax, the Commissioner has the burden, under section 7491(c), of

producing evidence to show that the section 6651(a) addition to

tax applies.    See Swain v. Commissioner, 118 T.C. 358, 364-365

(2002); Higbee v. Commissioner, 116 T.C. 438, 446 (2001).     In

order to meet his burden of production, the Commissioner must

come forward with sufficient evidence to show that it is

appropriate to impose the relevant penalty or addition to tax.

Higbee v. Commissioner, supra at 446.    However, the Commissioner

is not required to introduce evidence regarding reasonable cause,

substantial authority, or similar defenses.    Id.

     Petitioner concedes he did not file a Federal income tax

return or application for extension of time to file for 2000.

That concession is sufficient to satisfy respondent’s burden of

producing evidence that the section 6651(a)(1) addition to tax

applies.   Petitioner did not introduce any evidence to prove that

he had reasonable cause for his failure to file his 2000 income

tax return.    Consequently, we sustain respondent’s

determination.5


     5
      Petitioner contended in his posttrial brief (but did not
offer any testimony at trial to support his contention) that he
                                                   (continued...)
                                  - 11 -

III.       Addition to Tax Under Section 6654

       Section 6654(a) imposes an addition to tax in the case of

any underpayment of estimated tax by an individual.          If the

taxpayer assigns error to the Commissioner’s determination that

the taxpayer is liable for the addition to tax, the Commissioner

has the burden, under section 7491(c), of producing evidence to

show that the addition to tax applies.        See Swain v.

Commissioner, supra at 364-365; Higbee v. Commissioner, supra at

446.

       Under section 6654(d), the addition to tax is calculated

with reference to four required installment payments of the

taxpayer’s estimated tax liability.        Sec. 6654(c).   Each required

installment of estimated tax is equal to 25 percent of the

“required annual payment”.       Sec. 6654(d).   The “required annual

payment” is equal to the lesser of (1) 90 percent of the tax

shown on the individual’s return for that year (or, if no return

is filed, 90 percent of his or her tax for such year), or (2) if

the individual filed a return for the immediately preceding




       5
      (...continued)
did not file a return because, after taking into account withheld
tax, he did not owe any unpaid tax for 2000. We have held,
however, that a mistaken belief that no tax was due is not
sufficient to establish reasonable cause absent competent tax
advice or a good faith effort to ascertain the filing
requirements. See Shomaker v. Commissioner, 38 T.C. 192, 202
(1962); French v. Commissioner, T.C. Memo. 1991-196.
                               - 12 -

taxable year, 100 percent of the tax shown on that return.6    Sec.

6654(d)(1)(A), (B), and (C).   A taxpayer has an obligation to pay

estimated tax for a particular year only if he has a “required

annual payment” for that year.   Sec. 6654(d); Wheeler v.

Commissioner, 127 T.C. ___, ___ (2006) (slip op. at 20-21).

     To satisfy his burden of production, respondent introduced

evidence establishing that 90 percent of petitioner’s $86,858

income tax liability for 2000 was $78,172, that petitioner had

withholding tax credits of $14,628 for 2000, that petitioner made

no estimated tax payments for 2000, and that petitioner had filed

a Federal income tax return for 1999 showing a Federal income tax

liability of $52,589.   This evidence is sufficient to satisfy

respondent’s initial burden of providing evidence that petitioner

had a required annual payment for 2000 payable in installments

under section 6654 and that petitioner underpaid his estimated

tax liability for 2000.   Petitioner offered no evidence

whatsoever to refute respondent’s evidence or to establish a

defense to respondent’s determination that petitioner is liable

for the section 6654 addition to tax.   Consequently, we conclude

that respondent’s determination that petitioner is liable for the

section 6654 addition to tax must be sustained.




     6
      If an individual’s adjusted gross income shown on the
previous year’s return exceeds $150,000, a higher percentage may
apply. See sec. 6654(d)(1)(C).
                        - 13 -

To reflect the foregoing,


                                  Decision will be entered

                             under Rule 155.
