                        T.C. Memo. 2001-146



                      UNITED STATES TAX COURT



               MICHAEL T. CHAPPELL, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 2875-99.               Filed June 20, 2001.


     Michael T. Chappell, pro se.

     Linda J. Wise, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     COLVIN, Judge:   Respondent determined deficiencies in

petitioner’s Federal income tax of $27,643 for 1994 and $27,024

for 1995, an addition to tax under section 6651(a)(1) of $6,897

for 1994, and accuracy-related penalties under section 6662(a) of

$5,529 for 1994 and $5,330 for 1995.
                                - 2 -

     After concessions, the issues for decision are:

     1.     Whether petitioner’s proper filing status is head of

household for 1994 and 1995, as petitioner contends, or married

filing separately, as respondent contends.      We hold that it is

married filing separately.

     2.     Whether petitioner is entitled to the earned income

credit for 1995.    We hold that he is not.

     3.     Whether petitioner had unreported income from his

Schedule C business for 1994 and 1995.1   We hold that he had

unreported income of $42,972 for 1994 and $12,068 for 1995.

     4.     Whether petitioner may deduct miscellaneous expenses

related to his income tax return preparation business for 1994

and 1995.    We hold that he may to the extent discussed below.

     5.     Whether petitioner is liable for the 10-percent

addition to tax under section 72(t) for 1995 for an early

distribution from a retirement account.       We hold that he is.




     1
        Respondent determined that petitioner had unreported
gross receipts for 1995 of $36,714, but now concedes that
$23,845.64 is nontaxable or was reported in income by petitioner
in that year: $3,759.27 (taxable distribution from retirement
money market account included in taxable distribution reported by
petitioner); $15,297 (Aug. 3, 1995, workers’ compensation
settlement payment); $180 of $1,363.42 deposit made on Oct. 3,
1995, and the $180 deposits made on Oct. 25, Nov. 17, and Nov.
28, 1995 (unemployment compensation included in income reported
by petitioner); $3,069.37 (nontaxable insurance recovery
payment); and a $1,000 debit on May 8, 1995 (adjustment for
returned check).
                                - 3 -

       6.   Whether petitioner is liable for the addition to tax

for failure to timely file under section 6651(a)(1) for 1994.      We

hold that he is.

       7.   Whether petitioner is liable for the accuracy-related

penalty under section 6662(a) for 1994 and 1995.    We hold that he

is.2

       Unless otherwise indicated, section references are to the

Internal Revenue Code.    Rule references are to the Tax Court

Rules of Practice and Procedure.

                          FINDINGS OF FACT

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

A.     Petitioner

       Michael T. Chappell (petitioner) lived in Montgomery,

Alabama, when he filed the petition in this case.

       Petitioner and Angela Denise McGraw Chappell (Mrs. Chappell)

have been married since 1978.    They have three children.   Lesley

Nicole (Nicole) Chappell was born November 22, 1977; Ashley

Brooke (Brooke) Chappell was born April 5, 1982; and Michael

Tyrone (Tye) Chappell was born January 12, 1986.    Nicole was

diagnosed with Hodgkins disease around July 1995.    Petitioner and

Mrs. Chappell lived apart in 1994 and 1995.



       2
        Petitioner’s liability for self-employment tax, the self-
employment tax deduction, the amount of petitioner’s standard
deduction, and whether petitioner’s dependency exemption in 1994
is limited by sec. 151(d)(3) are computational.
                               - 4 -

     Petitioner’s father, Charles Chappell, has been a public

accountant in Montgomery for more than 30 years.

B.   Petitioner’s Tax Preparation Business

     Petitioner has operated an unincorporated income tax

preparation business in Montgomery for 25 years.   He operated the

business from his home at 3314 Lower Wetumpka Road in Montgomery

in 1994 and 1995.

     Petitioner did not prepare or file any Forms W-2 (Wage and

Tax Statement) or Forms 1099-MISC (Miscellaneous Income) for his

tax preparation business in 1994 and 1995.

C.   Petitioner’s Houses

     1.    The Lower Wetumpka Road House

     On October 2, 1992, petitioner bought a house at 3314 Lower

Wetumpka Road (the Lower Wetumpka Road house) in Montgomery for

$30,000.   Petitioner financed $29,000 of the purchase price

through the sellers.   Petitioner made the monthly payments on the

mortgage (usually $279.42, including taxes and insurance) from

his Colonial Bank account.   He paid $3,258.33 in 1994 and

$2,235.36 in 1995.

     The Lower Wetumpka Road house has 918 square feet and

contains four rooms and a kitchen and bathroom.    Petitioner used

the large room in the front of the house as a waiting room during

tax filing season.   It was also used by the Freedom Quilting Bee,

a 150-year old quilting cooperative, on whose behalf petitioner
                                - 5 -

lobbied.    The room contained a copy machine, shelves, a couch,

and a large quilting frame.    The small room in the front of the

house was a year-round office for tax customers.    Petitioner kept

files and computer records in that room.

     During tax season, the medium-sized room adjoining the rear

of the large room usually contained three desks and a television.

After tax season, the quilters sometimes watched television in

the room.    Petitioner also used it as a map and meeting room for

his lobbying activities.

     There is a bedroom next to the room petitioner used as the

tax office.    The bedroom is about 100 square feet, and contains a

bed, a dresser, mirrors, shelves, closet, and a linen closet.

That is the only bed in the house.

     2.     The Creek Drive House

     On October 15, 1992, petitioner and Mrs. Chappell bought a

house at 118 Creek Drive (the Creek Drive house) in Montgomery

for $144,000.    The Creek Drive house was built in 1992 and has

2,505 square feet.    Petitioner paid the mortgage on this house.

Mrs. Chappell lived in this house in 1994 and 1995.

     One of the rooms in the Creek Drive house was used by

petitioner’s children to do their homework, by Nicole for

tutoring neighbor children in math, and to develop computer

software.    Petitioner called that room the “one-room

schoolhouse”.
                                - 6 -

     During the years in issue, Tye attended Flowers Elementary

School.   Mrs. Chappell’s house was in that school district;

petitioner’s house was not.   Tye’s school records stated that his

home address was 118 Creek Drive (i.e., Mrs. Chappell’s house).

D.   Petitioner’s Workers’ Compensation

     Petitioner worked for Unisys Corp. in 1993, 1994, and for

part of 1995.   He was injured on the job in January 1993, and

received weekly workers’ compensation of $400 from January 1993

to June or July 1995.   He settled his workers’ compensation claim

on August 3, 1995, for $15,297.

E.   Petitioner’s Car and Truck

     In June 1993, petitioner and Mrs. Chappell leased a 1993

Mazda 929 automobile.   Petitioner made the lease payments and

Mrs. Chappell drove this car.   Petitioner sometimes drove the

Mazda 929 in 1994.   During 1994, petitioner drove a 1994 Mazda

truck for business and personal purposes.

F.   Petitioner’s Pension Distribution From Unisys Corp.

     Petitioner was laid off by Unisys in 1995.    He applied for

unemployment compensation on September 10, 1995.

     Petitioner received a taxable distribution of $3,759.27 from

Fidelity Investments (his Unisys retirement account) in 1995.

Petitioner reported the distribution on his 1995 return.

Petitioner did not reach the age of 59-1/2 in 1995.
                                   - 7 -

G.     Petitioner’s Income Tax Returns

       Petitioner signed his 1994 Federal income tax return on

April 15, 1996, and filed it on or after that date.         He

timely filed his 1995 return.

       Petitioner reported gross receipts from his tax preparation

business of $32,400 for 1994 and $38,658 for 1995.         Petitioner

deducted car and truck expenses in the amount of his monthly

payments on the Mazda truck.       Petitioner deducted the following

amounts for business expenses for 1994 and 1995:

                                   1994                    1995
Advertising                    $    820                $    720
Car and Truck                      3,879                      --
expenses
Commissions and                    7,980                   8,950
fees
Insurance                          1,750                   1,800
Interest                           1,470                   1,578
Office expense                        –-                   1,821
Rent                               3,350                   3,360
Repairs and                          339                     350
maintenance
Supplies                           2,875                   2,718
Taxes and licenses                   285                     245
Utilities                          6,487                   6,987
Wages                              9,500                   9,879
                                 - 8 -

H.   Respondent’s Audit and Determination

     Respondent’s tax auditor, Shirley Todd (Todd), audited

petitioner’s 1994 and 1995 income tax returns.   Petitioner gave

Todd his Colonial Bank statements for January to November 1995.

He did not produce any other bank statements.    Petitioner did not

give complete records of his income and deductions for 1994 and

1995 to Todd.   Petitioner told Todd that he employed only one

individual in his tax preparation activity and that the

individual was an independent contractor.

     Petitioner deducted as rent on his 1994 and 1995 Schedules C

mortgage payments he made for the Lower Wetumpka Road house.

     Petitioner told Todd that he received no gifts or

inheritances in 1994 and 1995.    He also said that he calculated

gross receipts for his tax return activity based on deposits into

his Colonial Bank account.

     Respondent determined petitioner’s gross receipts from the

tax preparation business from deposits into petitioner’s Colonial

Bank account.   Respondent averaged petitioner’s deposits for

September, October, and November 1995 to estimate an amount for

December because petitioner did not give respondent his December

1995 bank statement.
                                - 9 -

                               OPINION

     Petitioner bears the burden of proof on all issues in this

case.    See Rule 142(a).3

A.   Petitioner’s Filing Status for 1994 and 1995

     Petitioner claimed head of household filing status for 1994

and 1995.    An individual will qualify as a head of household if

he or she is unmarried at the close of the taxable year and

maintains as his or her home a household which is the principal

place of abode for more than half of the taxable year of a child

of the taxpayer.    See sec. 2(b)(1).    A married taxpayer qualifies

as unmarried for head of household filing purposes if:     (1) The

taxpayer files a separate tax return; (2) the household is, for

more than one-half of the taxable year, the principal place of

abode of the taxpayer's child for whom the taxpayer would be

entitled to claim a dependency exemption; (3) the taxpayer pays

more than one-half of the cost of maintaining the household for

the tax year; and (4) the taxpayer's spouse is not a member of

the household during the last 6 months of the tax year.     See sec.

7703(b).    Petitioner contends that his son Tye lived with him at

the Lower Wetumpka Road house in 1994 and 1995, and that he




     3
        The burden of proof provisions of sec. 7491 do not apply
here because the examination in this case began before July 22,
1998. See Internal Revenue Service Restructuring & Reform Act of
1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727.
                                - 10 -

provided more than half of the cost of maintaining his household

in 1994 and 1995.

     We disagree.   Petitioner did not show that Tye lived with

him for more than half of the year in 1994 or 1995.      Petitioner’s

house had one bedroom which contained one bed.      There were no

other beds in the house and petitioner testified that no one

slept on the couch.   Petitioner’s claim that Tye lived with him

in 1994 and 1995 is improbable because Tye (who was 8 in 1994)

did not have a bed at petitioner’s house and apparently had no

place of his own to study or play.       We conclude that petitioner

is not entitled to head of household status for 1994 and 1995.

B.   The Earned Income Credit

     The next issue is whether petitioner is entitled to the

earned income credit for 1995.    A taxpayer who is married must

file a joint return with his or her spouse for the taxable year

in order for section 32 to apply.    See sec. 32(d).    Petitioner

was married in 1995, but he and Mrs. Chappell did not file a

joint return.   Thus, petitioner is not entitled to an earned

income credit for 1995.

C.   Unreported Income

     Respondent contends that petitioner understated gross

receipts from his tax preparation business by $42,972 for 1994

and $12,868 for 1995.
                                - 11 -

     1.     Workers’ Compensation

     Petitioner contends that weekly workers’ compensation of

$400 which he received from January 1994 to June or July 1995

should be excluded from respondent’s bank deposits analysis.       We

disagree for the most part.    Petitioner did not show that he

deposited all of the workers’ compensation payments in the

Colonial Bank account.    He did not provide bank records for 1994,

and his 1995 bank statements show only 3 deposits of $400 (2 in

January, 1 in October) and 1 deposit of $800 (in May).       We find

that petitioner’s deposits of $400 on January 6 and 18, 1995, are

workers’ compensation and therefore should be excluded from gross

receipts.    See sec. 104(a)(1).    However, the $400 deposit on

October 17, 1995, occurred after petitioner received his final

workers’ compensation settlement in August 1995 and is not

workers’ compensation.

     2.     Purported Loans to Petitioner

     Petitioner contends that an October 1995 deposit of $5,000

into his account was a loan from Mrs. Chappell that should be

excluded from gross receipts.      We disagree.   Petitioner’s

testimony about the alleged loan was vague.       He did not state who

lent the money to him.    Petitioner provided no evidence to

support his claim.    Petitioner offered Exhibit 20-P to show that

Mrs. Chappell had lent him money.      We did not admit Exhibit 20-P

into evidence because petitioner had not exchanged it before
                               - 12 -

trial as required by our Standing Pretrial Order.    See Rules

104(c)(2), 131(b).    However, even if we had admitted it, the

documents show only that Colonial Bank lent Mrs. Chappell $3,550,

not that Mrs. Chappell lent petitioner $5,000.

     Petitioner contends that, from May 1995 to December 1996,

his father lent him, and he deposited in his account, a total of

about $20,000 to help pay his daughter’s medical bills.    He

contends that this amount includes loans from his father of $500

a week from about October to December 1995.    Petitioner testified

that his father endorsed various checks to petitioner from his

father’s accounting clients that petitioner deposited into his

account beginning around May 1995 (when petitioner and Mrs.

Chappell lost their jobs).    Petitioner testified that his father

gave him client checks in the amounts of $1,050.46 and $500 in

June, $110 and $350 in July, $977.74, $513.07, and $100 in

September, and $610 and $280 in November 1995 that petitioner

deposited into his account.    Petitioner’s claim that his father

signed over client checks to him is unconvincing, absent

corroborating evidence such as testimony from his father or

copies of the checks.

     At trial, petitioner offered into evidence a purported

promissory note he signed on the day of trial which states that

petitioner agrees to pay $20,000 plus 5 percent simple interest

by January 1, 2025.    We did not admit the purported note into
                               - 13 -

evidence.    Even if we had, it would be unconvincing because the

note does not state to whom petitioner is to repay the money or

when the loan was made, and petitioner signed the note more than

4 years after his father allegedly lent him the money.

     3.     Petitioner’s Business Gross Receipts

     Petitioner contends that respondent’s use of the bank

deposits method overstated his income for 1994 and 1995.     He

contends that he correctly reported gross receipts from his tax

preparation business of $38,658 on his 1995 return.     He contends

that Joseph Goggans (Goggans), doing business as Rapid Refund,

issued a Form 1099-MISC, Miscellaneous Income, showing Goggans

paid petitioner nonemployee compensation of $38,658.19 in 1995.

At trial, petitioner offered into evidence Exhibit 16-P, the

purported Form 1099-MISC from Goggans.    We did not admit Exhibit

16-P into evidence because petitioner had not exchanged it before

trial as required by our Standing Pretrial Order.     We disagree

that petitioner correctly reported his gross receipts for 1995.

Although petitioner testified that he received about 10 checks

totaling about $38,000 in 1995 from Goggans, he did not produce

copies of any of those checks or show which deposits to his

account in 1995 were from Goggans.

     Petitioner contends that respondent overstated his gross

receipts for December 1995 by using his bank records for

September to November 1995.    We disagree.   Petitioner has not
                                - 14 -

suggested an alternative method to compute those gross receipts.

We find reasonable respondent’s method of reconstructing

petitioner’s December 1995 gross receipts.

     We conclude that petitioner had unreported gross receipts in

the amount determined by respondent for 1994.     Petitioner’s

unreported gross receipts for 1995 are adjusted to account for

respondent’s concessions for 1995 and for reasons stated above at

paragraph C-1.

D.   Miscellaneous Business Deductions

     Petitioner deducted car and truck, commission, rent,

utilities, and wage expenses for 1994 and 1995.

     1.      Whether Petitioner Was Engaged in a Trade or Business
             Other Than the Tax Preparation Business

     Petitioner deducted various expenses on his Schedules C for

1994 and 1995 for his tax preparation business, the so-called

one-room schoolhouse, and for his lobbying activity.

     Petitioner testified that in 1993 he started lobbying for

several groups, such as the Citizens Against Government Waste and

the Gun Owners of America, but it did not generate any income in

1993.     He also said he earned $200 per year lobbying for the Gun

Owners of America in 1994 and 1995.      He also claimed he used the

Lower Wetumpka Road house for a rebreeding activity, but he did

not describe what the activity was.

     Petitioner did not establish that the one-room schoolhouse,

the lobbying activity, or the rebreeding activity was an activity
                              - 15 -

conducted with the primary purpose of making a profit.

Petitioner did not report on his 1994 or 1995 returns that he

received $200 annually from lobbying; even if he had, this small

amount of income would not establish that the lobbying activity

was a trade or business in 1994 or 1995.

     2.   Car and Truck Expenses

     A taxpayer may not deduct car and truck expenses unless he

or she substantiates by adequate records or sufficient evidence

corroborating the taxpayer’s own statement the amount, time,

place, and business purpose of the car and truck use.    See sec.

274(d)(4).

     Petitioner testified and contends that, in 1994, he used the

1994 Mazda truck solely for his tax preparation business, for

example, to haul desks and file cabinets between the office at

his home and the one-room schoolhouse, and that 50 percent of the

use of a 1993 Mazda 929 was for his lobbying business.

     Petitioner’s claim that he used the truck 100 percent for

business is implausible.   We believe he used the truck for

personal purposes because his wife drove the Mazda 929 and he

owned no other cars.   He offered no evidence of the number or

length of trips or the total mileage of the truck for 1994.

Petitioner claims that he used the Mazda 929 in his lobbying

activity; however, as discussed above, he has not shown that the

lobbying activity was a trade or business.   In view of the fact
                                - 16 -

that the car was used by his wife, we do not find that 50 percent

of the use of the car was for petitioner’s business for lobbying.

     Petitioner did not have a log, records, or other

corroboration of his testimony relating to his business use of

the Mazda car and truck as required by section 274(d)(4).

Petitioner did not establish the percentages of business use of

the car and truck.    See Rutz v. Commissioner, 66 T.C. 879, 883-

886 (1976); Hradesky v. Commissioner, 65 T.C. 87, 90 (1975),

affd. per curiam 540 F.2d 821 (5th Cir. 1976).     Thus, petitioner

may not deduct car and truck expenses for 1994.

     At trial, petitioner sought to raise for the first time the

issue of his car and truck expenses for 1995.     We ruled that it

was then too late to raise that issue.     Even if we had allowed

petitioner to raise the issue, he did not show he was entitled to

deduct car and truck expenses for 1995.     At trial, he testified

that he had a mileage log that showed that he used the truck 100

percent for business in 1995.     However, he did not offer a copy

of the log into evidence and thus had no records or other

corroboration of his testimony relating to his business use of

the Mazda car and truck for 1995.

     3.   Commission and Wage Expenses

     Petitioner deducted commission expenses of $7,980 for 1994

and $8,950 for 1995 and wage expenses of $9,500 for 1994 and

$9,879 for 1995.     Respondent contends that petitioner may not
                             - 17 -

deduct commission expenses for 1994 and 1995 because he did not

establish the business purpose of the payments, he did not issue

Forms 1099 to the individuals he claims were independent

contractors for the tax preparation business in 1994 and 1995,

and his statement during the audit that he had only one

independent contractor conflicts with his testimony at trial that

he had 12-14 independent contractors in 1994 and 1995.

We disagree.

     At trial, petitioner credibly testified that he paid

commissions to 12 to 14 independent contractors to work in his

tax preparation business in 1994 and 1995.   At trial, he

introduced copies of canceled checks payable to the independent

contractors and testified about the work they performed.    We

conclude that petitioner may deduct commission expenses of $7,980

for 1994 and $7,076 for 1995.4

     Petitioner testified that he paid wages of $3,400 a year in

1994 and 1995 to each of his three children.   Petitioner’s

children were ages 16, 12, and 8 in 1994.    A taxpayer may deduct

payments for compensation if the amount paid is reasonable in

amount and for services actually rendered.   See sec. 162(a)(1);

Home Interiors & Gifts, Inc. v. Commissioner, 73 T.C. 1142, 1154



     4
        The checks submitted at trial for 1994 and 1995 are
substantially more than the amount of commissions petitioner
deducted for those years. Petitioner did not explain the
difference.
                                   - 18 -

(1980); sec. 1.162-7(a), Income Tax Regs.           Petitioner testified

that the payments to his children were based on their needs,

rather than the services they provided.         Petitioner wrote a check

to his wife for $3,300, dated February 6, 1994, and he testified

that it was payment to Nicole for running the one-room

schoolhouse and tutoring students there.            He later testified that

the $3,300 payment was for Nicole’s braces.           Petitioner did not

describe what services Brooke and Tye performed for the tax

preparation activity.     Petitioner has not shown that the

purported wages he paid his children were for services actually

rendered or were reasonable in amount.

     4.     Home Office Deduction

     Section 280A(c)(1)(A)5 allows a deduction for home office


     5
          Sec. 280A provides, in pertinent part:

     SEC. 280A. DISALLOWANCE OF CERTAIN EXPENSES IN
     CONNECTION WITH BUSINESS USE OF HOME, RENTAL OF
     VACATION HOMES, ETC.

          (a) General Rule.--Except as otherwise provided
     in this section, in the case of a taxpayer who is an
     individual or an S corporation, no deduction otherwise
     allowable under this chapter shall be allowed with
     respect to the use of a dwelling unit which is used by
     the taxpayer during the taxable year as a residence.

                      *    *   *     *      *   *     *

          (c) Exceptions for Certain Business or Rental Use;
     Limitation on Deductions for Such Use.--

                 (1) Certain business use.--Subsection (a)
            shall not apply to any item to the extent such
                                                     (continued...)
                                 - 19 -

expenses if the taxpayer exclusively and regularly uses the home

office as the principal place of a trade or business or to meet

with clients.

     Petitioner contends that he may deduct his rent and utility

expenses for home offices in the Lower Wetumpka Road and Creek

Drive houses.   He contends that he showed that he met the

requirements of section 280(c) for the Lower Wetumpka Road house

by his testimony and his receipts for mortgage and utility

payments.   He testified that he had a large office in the Lower

Wetumpka road house that he used as a tax office and which the

Freedom Quilting Bee used. He also had a second office in that

home that he uses during tax season for tax preparation, and as a

map room for the lobbying activity when it is not tax season;


     5
      (...continued)
          item is allocable to a portion of the dwelling
          unit which is exclusively used on a regular
          basis--

                     (A) [as] the principal place of business
                for any trade or business of the taxpayer,

                     (B) as a place of business which is used
                by patients, clients, or customers in meeting
                or dealing with the taxpayer in the normal
                course of his trade or business, or

                     *   *   *     *      *   *   *

     In the case of an employee, the preceding sentence
     shall apply only if the exclusive use referred to in
     the preceding sentence is for the convenience of his
     employer.
                              - 20 -

this office contains a television.     He testified that his

employees also used the kitchen and bathroom.

     Petitioner did not establish that he used any portion of the

Lower Wetumpka Road house exclusively as the principal place of

business for his tax return business or as a place to meet with

clients.   He used the bathroom and kitchen for personal purposes.

The television was in the second office.     We do not find that

petitioner used these rooms exclusively for the tax preparation

activity because the rooms were used for non-business purposes by

the quilting group and the lobbying activity.

     Petitioner contends that he is entitled to a home office

deduction for rent he paid to his estranged wife to use an office

at the Creek Drive house.   He testified that he used the

following rooms in the Creek Drive house: A room for the one-room

schoolhouse, the kitchen, bathroom (for clients), and the back of

the house for a “rebreeding” program, not otherwise described in

the record.

     Petitioner did not establish that he used any part of the

Creek Drive house as the principal place of business of a trade

or business.   As discussed at paragraph D-1 above, he did not

show that the activity conducted in the one-room schoolhouse was

a trade or business.   He did not use the kitchen and bathroom

exclusively for business, and he testified that his children did

their schoolwork in the room he called the one-room schoolhouse.
                              - 21 -

We conclude that petitioner may not deduct home office expenses

for the Lower Wetumpka Road or Creek Drive houses.

E.   The 10 Percent Tax for Early Distributions From a Retirement
     Plan

     A 10-percent additional tax is imposed on early

distributions from a qualified retirement plan which are

includable in the recipient's gross income unless one of the

exceptions listed in section 72(t)(2) applies.   See sec. 72(t)(1)

and (2).   In 1995, petitioner received a taxable distribution of

$3,759.27 from Fidelity Investments.   He did not attain age 59-

1/2 in 1995.   Petitioner contends that he paid the additional tax

with his 1995 return.   Petitioner reported the Fidelity

Investments distribution as income on his 1995 return.     However,

he did not pay a 10-percent additional tax for that distribution.

Thus, we sustain respondent’s determination that petitioner is

liable for a 10-percent additional tax on the distribution.

F.   Addition to Tax for Failure To Timely File Under Section
     6651(a)(1)

     Respondent determined and contends that petitioner is liable

for the addition to tax under section 6651(a) for failure to

timely file his income tax return for 1994.   A taxpayer is liable

for an addition to tax of up to 25 percent for failure to timely

file a Federal income tax return unless the failure was due to

reasonable cause and not willful neglect.   See sec. 6651(a)(1).

The addition to tax is imposed on the net amount due.    See sec.
                                - 22 -

6651(b).   The taxpayer bears the burden of proving that the

failure is due to reasonable cause and not willful neglect.      See

United States v. Boyle, 469 U.S. 241, 245 (1985).

     Petitioner filed his 1994 return 1 year late.      He contends

that he is not liable for the addition to tax for failure to

timely file because the amount of his withholdings for 1994

exceeded his tax liability, and he claims he does not owe any

additional tax for that year.    We disagree.    Petitioner is liable

for the addition to tax for failure to timely file the 1994

return because he is liable for additional tax for 1994

attributable to his change in filing status, the understatement

of gross receipts from the tax preparation business, and the

disallowance of various deductions.

G.   Accuracy-Related Penalty Under Section 6662(a)

     Respondent contends that petitioner is liable for the

accuracy-related penalty for negligence under section 6662 for

1994 and 1995.

     Taxpayers are liable for a penalty equal to 20 percent of

the part of the underpayment attributable to negligence or

disregard of rules or regulations.       See sec. 6662(a) and (b)(1).

     Petitioner contends that he is not liable for the negligence

penalty because he does not owe any additional tax for 1994 and

1995.   We disagree, based on our holdings above.     We hold that he

is liable for the negligence penalty for 1994 and 1995.
                                - 23 -

H.   Post-Trial Issues

     1.     Tort Claims for Alleged Violations of Federal Acts

     Petitioner asserted tort claims for alleged violations by

former and current IRS officials of the Privacy Act of 1974, 5

U.S.C. sec. 552a (1994), and other purported Federal statutes for

which he provided no citations.    This Court has only such

jurisdiction as provided by Congress.    See sec. 7442; see also

Estate of Meyer v. Commissioner, 84 T.C. 560, 562 (1985); Adams

v. Commissioner, 72 T.C. 81, 84 (1979), affd. without published

opinion 688 F.2d 815 (2d Cir. 1982).     Because petitioner has not

established that we have jurisdiction to review these claims, we

do not consider this issue.

     2.     Amendment of Petition To Raise Post-Trial Issues

     Petitioner sought to amend his petition to claim the

deductibility of mortgage interest for the Creek Drive house for

1994 and 1995 and an unspecified amount of medical expenses for

1995.

     Leave to amend a petition is freely granted when justice

requires.    See Rule 41(a).   However, where no justification for

delay exists or if the adverse party would be unfairly prejudiced

or substantially inconvenienced by the granting of leave to

amend, the request is denied.    See Evans v. Syracuse City Sch.

Dist., 704 F.2d 44, 46-47 (2d Cir. 1983); Shea v. Commissioner,

T.C. Memo. 1991-518; Kloppenberg & Co. v. Commissioner, T.C.
                               - 24 -

Memo. 1986-325.   Petitioner sought to raise this issue late in

the trial.    We ruled that the issue was not timely, and therefore

we would not consider it.   We affirm that ruling now. See Aero

Rental v. Commissioner, 64 T.C. 331, 338 (1975); Palmer v.

Commissioner, 62 T.C. 684, 698 (1974), affd. 523 F.2d 1308 (8th

Cir. 1975).

     To reflect concessions and the foregoing,



                                     Decision will be entered

                                under Rule 155.
