                           T.C. Memo. 1996-345



                         UNITED STATES TAX COURT


           KENNETH W. DIERCKS, Petitioner v. COMMISSIONER
                   OF INTERNAL REVENUE, Respondent


       Docket No. 3568-95.                         Filed July 30, 1996.


       Kenneth W. Diercks, pro se.

       David W. Sorensen, for respondent.


                           MEMORANDUM OPINION

       CHIECHI, Judge:    Respondent determined the following

deficiencies in, and additions to, petitioner's Federal income

tax:

                                      Additions to Tax
    Year    Deficiency       Section 6651(a)(1)1   Section 6654(a)

    1987     $10,493               $2,623              $566
    1988      10,658                2,665               681

1
   All section references are to the Internal Revenue Code in
effect for the years at issue. All Rule references are to the
Tax Court Rules of Practice and Procedure.
                                - 2 -

  1989         9,958             2,490               674
  1990         9,665             2,416               636
  1991         7,204             1,801               412
  1992         5,674             1,419               247

      The issues for decision are:

      (1)   Did petitioner have unreported income for each of the

years at issue?    We hold that he did.

      (2)   Is petitioner liable for self-employment tax for each

of the years at issue?    We hold that he is.

      (3)   Is petitioner liable for the addition to tax under

section 6651(a)(1) for each of the years at issue?    We hold that

he is.

      (4)   Is petitioner liable for the addition to tax under

section 6654(a) for each of the years at issue?    We hold that he

is.

      Petitioner resided at Sparks, Nevada, at the time the

petition was filed.

      Petitioner did not file a U.S. income tax return for any of

the years 1987 through 1992.

      During the years 1987 through 1992, petitioner worked and

earned income.    However, he failed to keep records of the type or

amount of work he performed, or of the amount of income he

received from his work, during those years.

      During the years at issue, petitioner was married and had

three children who lived with him and his wife, Bonnie Diercks

(Ms. Diercks), at their residence (residence) and who attended
                                 - 3 -

school.     During those years, petitioner owned an automobile, and

he, Ms. Diercks, and their three children sought medical treat-

ment as required.    During the years at issue, rent paid on

petitioner's residence equaled at least $725 a month, and utili-

ties were paid at that residence.    In an application to rent that

petitioner signed on March 13, 1989, petitioner indicated that

"current monthly income" was $3,000.

       During 1988, 1989, 1990, and 1991, Ms. Diercks received

annual wages in the amounts of $2,725, $6,362, $12,748, and

$20,929, respectively.

       Petitioner bears the burden of proving that respondent's

determinations in the notice of deficiency (notice) are errone-

ous.    Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).

       Section 6001 requires all taxpayers to maintain sufficient

records to enable respondent to determine their correct tax lia-

bilities.    In the absence of adequate books or records, "the com-

putation of taxable income shall be made under such method as, in

the opinion of the Secretary, does clearly reflect income."      Sec.

446(b).    The choice of method to be used in reconstructing income

lies with respondent.     Estate of Rau v. Commissioner, 301 F.2d

51, 54 (9th Cir. 1962), affg. T.C. Memo. 1959-117; Schellenbarg

v. Commissioner, 31 T.C. 1269, 1277 (1959), affd. in part and

revd. in part on another issue 283 F.2d 871 (6th Cir. 1960).

       In the notice, respondent used the Bureau of Labor Statis-

tics to reconstruct petitioner's income.    This Court and other
                                 - 4 -

courts have approved the use of those statistics as an acceptable

and reasonable method of reconstructing income.   E.g., Pollard v.

Commissioner, 786 F.2d 1063, 1066 (11th Cir. 1986), affg. T.C.

Memo. 1984-536; Giddio v. Commissioner, 54 T.C. 1530, 1532-1533

(1970).

     Petitioner admitted at trial that he worked and earned

income during the years at issue, but he claimed that he earned

no more than $500 during each of those years.   However, peti-

tioner acknowledged at trial that during the years at issue he

and his family lived at a residence for which the rent paid

equaled at least $725 a month.    He also admitted that utilities

were paid at that residence.   In addition, petitioner acknowl-

edged at trial that during the years at issue he owned an automo-

bile and that other normal living expenses were paid for him and

his family.

     We found petitioner's testimony, which was at times vague

and evasive, to be suspect.    We question petitioner's testimony

that he earned no more than $500 during each of the years at

issue.2

2
   Indeed, petitioner's testimony that he earned no more than
$500 during each of the years at issue is inconsistent with other
evidence in the record. For example, the application to rent
dated Mar. 13, 1989, which he signed, indicated "current monthly
income" of $3,000. Even assuming arguendo that the "current
monthly income" of $3,000 that petitioner listed in the
application to rent dated Mar. 13, 1989, were the combined
"current monthly income" of Ms. Diercks and himself, the Internal
Revenue Service's information returns master file transcript for
                                                   (continued...)
                                 - 5 -

     On the record before us, we find that petitioner failed to

prove error in respondent's determinations that he had income in

the amounts determined in the notice for each of the years 1987

through 1992.   We further find on that record that petitioner

failed to show that he is not liable for each of the years at

issue for (1) the addition to tax under section 6651(a)(1),

(2) the addition to tax under section 6654(a), and (3) self-

employment tax, as determined in the notice.       Accordingly, we

sustain respondent's determinations in the notice.

     To reflect the foregoing,


                                         Decision will be entered

                                 for respondent.




2
 (...continued)
Ms. Diercks shows that Ms. Diercks received wages of only $6,362
for 1989 or approximately $530 a month during that year.
