                    T.C. Summary Opinion 2006-145



                       UNITED STATES TAX COURT



         DARIN WARFIELD AND SHARON HARDIN, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 16306-05S.            Filed September 13, 2006.



     Darin Warfield and Sharon Hardin, pro se.

     James H. Harris, Jr., for respondent.



     RUWE, Judge:   This case was heard pursuant to section 74631

in effect when the petition was filed.   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, section references are to the
Internal Revenue Code in effect for the years in issue. Rule
references are to the Tax Court Rules of Practice and Procedure.
                               - 2 -

     Respondent determined deficiencies of $2,772 for 2002 and

$4,499 for 2003, and an accuracy-related penalty under section

6662(a) of $899.80 for 2003.   After concessions by the parties,2

the issues for decision are:   (1) Whether petitioners are

entitled to deduct $1,790 and $9,040 in cash charitable

contributions on their 2002 and 2003 returns, respectively;3 (2)

whether petitioners are entitled to deduct a $500 noncash

charitable contribution on each of their 2002 and 2003 returns;

and (3) whether petitioners are liable for the section 6662(a)

accuracy-related penalty for 2003.

     Some facts have been stipulated and are so found.    The

stipulation of facts and the attached exhibits are incorporated

by this reference.   When the petition was filed, petitioners

resided in Coatesville, Pennsylvania.




     2
       Respondent disallowed deductions for student loan interest
in 2002 and 2003 but has since conceded those deductions.
Respondent disallowed an education credit of $1,500 for 2002 and
$1,164 for 2003. Petitioners stipulated that they did not have
any qualified higher education expenses in 2002 or 2003.
Respondent determined unreported pension or annuity income of
$2,015 for 2003 but was unable to verify these amounts from the
third parties and conceded that issue.
     3
       Respondent originally disallowed petitioner’s entire
deductions for cash charitable contributions of $7,100 in 2002
and $15,000 for 2003, but respondent and Sharon Hardin have
stipulated that Ms. Hardin made $5,310 and $5,960 in charitable
contributions to Hutchinson Memorial U.A.M.E. Church in 2002 and
2003, respectively.
                                 - 3 -

     Petitioners timely filed returns for the taxable years 2002

and 2003.   Petitioners’ returns were prepared by Chester

Muhammad.

     During the examination, petitioners provided respondent’s

agent with computerized lists showing contributions allegedly

made to the Calvary Bible Church (the church) by Darin Warfield

and by Sharon Hardin during 2002 and 2003.       The lists for Darin

Warfield show cash contributions of $103 on January 6, 2002, and

$97 every week thereafter (totaling $5,050) in 2002, and cash

contributions of $135 on January 5, 2003, and $126 every week

thereafter (totaling $6,561) in 2003.       The lists for Sharon

Hardin show the same amounts contributed in both 2002 and 2003 as

the lists for Darin Warfield.    None of the lists provided by

petitioners are dated or signed by a member of the church.

Petitioners provided to respondent’s counsel identical lists for

2002 and 2003 except for the fact that the caption “Calvary Bible

Church” had been eliminated.    Subsequently, Sharon Hardin

provided substantiation for contributions that she made to

Hutchinson Memorial U.A.M.E. Church.     See supra note 3.

                               Discussion

     As a general rule, the Commissioner’s determinations set

forth in a notice of deficiency are presumed correct, and the

taxpayer bears the burden of proving that these determinations

are in error.   Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115
                                - 4 -

(1933).   Pursuant to section 7491(a), the burden of proof as to

factual issues may shift to the Commissioner where the taxpayer

introduces credible evidence and complies with substantiation

requirements, maintains records, and cooperates fully with

reasonable requests for witnesses, documents, and other

information.    Petitioners have not met the requirements of

section 7491(a) because they have not met the substantiation

requirements or introduced credible evidence regarding the

deductions at issue.

1.   Charitable Deductions

     Deductions are strictly a matter of legislative grace and

the taxpayer bears the burden of proving entitlement to the

claimed deduction.    Rule 142(a); INDOPCO, Inc. v. Commissioner,

503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292

U.S. 435, 440 (1934).    Section 170(a) allows as a deduction any

charitable contribution the payment of which is made within the

taxable year.    Deductions for charitable contributions are

allowable only if verified under regulations prescribed by the

Secretary.   Sec. 170(a)(1).   In general, the regulations require

a taxpayer to maintain for each contribution of money one of the

following:   (1) A canceled check; (2) a receipt from the donee;4




     4
       A receipt is required to contain the name of the donee,
the date of the contribution, and the amount of the contribution.
Sec. 1.170A-13(a)(1), Income Tax Regs.
                                - 5 -

or, in the absence of a check or receipt; (3) other reliable

written records.    Sec. 1.170A-13(a)(1), Income Tax Regs.

     For a contribution of property other than money, taxpayers

must maintain, for each contribution, a receipt showing the name

of the donee, the date and location of the contribution, and a

description of the property.    Sec. 1.170A-13(b)(1), Income Tax

Regs.    Where it is impractical to obtain a receipt, taxpayers

must maintain other written records indicating the name and

address of the donee, the date and location of the donation, a

description of the property, and its fair market value at the

time the contribution was made.    Id.; sec. 1.170A-13(b)(2)(ii),

Income Tax Regs.

     Section 1.170A-13(a)(2)(i), Income Tax Regs., which applies

to both money and property contributions, provides special rules

to determine the reliability of records on the basis of all the

facts and circumstances of the particular case and further

provides factors to consider in making this determination,

including:    (1) Whether the writing that evidences the

contribution was written contemporaneously and (2) whether the

taxpayer keeps regular records of the contributions.5

     Petitioners produced no canceled checks or receipts of their

cash contributions that are still at issue.    The only records


     5
       Sec. 1.170A-13(b)(2)(i), Income Tax Regs., provides that
the reliability rules for records of money contributions also
apply to records of property contributions.
                                - 6 -

petitioners provided for the cash contributions still at issue

were the lists, which were created by their tax accountant,

showing weekly payments to the church.    Sharon Hardin admitted

that these were prepared because she did not have any other proof

at the time.    Petitioners provided no testimony or documentation

regarding their deductions for noncash contributions.

     We find that petitioners failed to provide reliable evidence

to prove that they made the charitable contributions still in

dispute.    We hold that petitioners are not entitled to any

deductions for charitable contributions in excess of the amounts

conceded by respondent.

2.   Section 6662(a)

     With respect to the accuracy-related penalty under section

6662(a), the Commissioner has the burden of production.    Sec.

7491(c).    To prevail, the Commissioner must produce sufficient

evidence that it is appropriate to apply the penalty to the

taxpayer.    Higbee v. Commissioner, 116 T.C. 438, 446 (2001).

Once the Commissioner meets his burden of production, the

taxpayer bears the burden of supplying sufficient evidence to

persuade the Court that the Commissioner’s determination is

incorrect.     Id. at 447.

     Section 6662(a) provides an accuracy-related penalty equal

to 20 percent of the underpayment required to be shown on a

return due to negligence or disregard of rules or regulations.
                                 - 7 -

Sec. 6662(b)(1).    For purposes of section 6662, the term

“negligence” includes “any failure to make a reasonable attempt

to comply with the provisions of * * * [the Code], and the term

‘disregard’ includes any careless, reckless, or intentional

disregard.”    Sec. 6662(c).   “Negligence” also includes any

failure by a taxpayer to keep adequate books and records or to

substantiate items properly.     Sec. 1.6662-3(b), Income Tax Regs.

     An accuracy-related penalty is not imposed with respect to

any portion of the underpayment as to which the taxpayer acted

with reasonable cause and in good faith.     Sec. 6664(c)(1); see

Higbee v. Commissioner, supra at 448.     This determination is made

based on all the relevant facts and circumstances.     Higbee v.

Commissioner, supra at 448; sec. 1.6664-4(b)(1), Income Tax Regs.

“Relevant factors include the taxpayer’s efforts to assess his

proper tax liability, including the taxpayer’s reasonable and

good faith reliance on the advice of a professional such as an

accountant.”    Higbee v. Commissioner, supra at 448-449.

     Petitioners have failed to keep adequate records or to

substantiate properly the items in question.     Respondent has

provided sufficient evidence to meet his burden of production.

Petitioners have not produced evidence to prove that respondent’s

determination of negligence is incorrect.     We hold that
                                 - 8 -

petitioners are liable for the accuracy-related penalty under

section 6662.

     To reflect the foregoing,

                                              Decision will be entered

                                         under Rule 155.
