                        T.C. Memo. 2000-326



                      UNITED STATES TAX COURT



                      GARY BLORE, Petitioner v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 19662-98, 19882-98, Filed October 20, 2000.
                 19884-98.



     Frederick J. O’Laughlin, for petitioner.

     Brian A. Smith, for respondent.



                         MEMORANDUM OPINION

     DINAN, Special Trial Judge:   Respondent determined

deficiencies in petitioner’s Federal income taxes in the amounts

of $3,465, $4,112, and $4,651 for the taxable years 1995, 1996,

and 1997.   Unless otherwise indicated, section references are to

the Internal Revenue Code in effect for the years in issue, and
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all Rule references are to the Tax Court Rules of Practice and Procedure.

     The issues for decision are:   (1) Whether there are

deficiencies at issue in these cases within the meaning of

section 6211; and (2) whether petitioner had earned income during

the years in issue, entitling him to a section 32 earned income

credit for each year.

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

The stipulations of fact and the attached exhibits are

incorporated herein by this reference.   Petitioner resided in

Oklahoma City, Oklahoma, on the dates the petitions were filed in

these cases.

     Petitioner reported the following amounts of income and

claimed the following amounts of withholding and earned income

credits in the respective taxable years:

                                1995        1996      1997

     Wages                     $5,260      $6,236    $7,398
     Interest income             -0-          120      -0-
     Standard deduction        (5,750)     (5,900)   (6,050)
     Personal exemptions       (5,000)     (5,100)   (5,300)
     Taxable income              -0-         -0-       -0-
     Tax                         -0-         -0-       -0-
     Federal tax withholding   (1,671)     (1,995)   (2,441)
     Earned income credit      (1,794)     (2,117)   (2,210)
     Overpayment               (3,465)     (4,112)   (4,651)

In the statutory notices of deficiency, respondent disallowed the

amounts of wages reported by petitioner for each of the taxable
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years 1995, 1996, and 1997.   The notices reflected the following

basis for the disallowance:

     The income on the W2s on your 1995, 1996, and 1997 returns
     was never reported to the Internal Revenue Service by any of
     the employers listed. You failed to produce any
     documentation to support the W2 income claimed. We are
     disallowing the income claimed attached to the W2s filed
     with your 1995, 1996, and 1997 tax returns.

Based upon the disallowance of the income, respondent also

disallowed the earned income credits claimed by petitioner in

each year.   The first pages of the notices of deficiency

reflected the following total deficiency amounts, calculated

using the respective credit adjustments:

                                         1995     1996      1997

     Earned Income Credit Adjustment    $1,794   $2,117   $2,210
     Withholding Credit Adjustment       1,671    1,995    2,441
     Deficiency                          3,465    4,112    4,651

Pursuant to Orders of this Court, these cases were dismissed for

lack of jurisdiction insofar as they related to the withholding

tax credits.   See generally sec. 6211(a) and (b)(1); Redcay v.

Commissioner, 12 T.C. 806 (1949).   These dismissals reduced the

amounts of the deficiencies at issue in these cases to $1,794,

$2,117, and $2,210 for each respective year.

     The first issue for decision is whether there are

deficiencies at issue in these cases.   Petitioner argues that

there are no deficiencies in these cases within the meaning of

such under sections 6211, et seq.
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     As is relevant here, a deficiency is defined in section

6211(a) to be “the amount by which the tax imposed by subtitle A

[relating to income taxes] * * * exceeds * * * the amount shown

as the tax by the taxpayer upon his return”.      The treatment of

section 32 earned income credits with respect to this definition

is as follows:

          SEC. 6211(b). Rules for Application of Subsection
     (a).--For purposes of this section--

                *      *      *       *       *      *      *

          (4)    For purposes of subsection (a)--

               (A) any excess of the sum of the credits
          allowable under sections 32 and 34 over the tax
          imposed by subtitle A (determined without regard
          to such credits), and

               (B) any excess of the sum of such credits as
          shown by the taxpayer on his return over the
          amount shown as the tax by the taxpayer on such
          return (determined without regard to such
          credits),

     shall be taken into account as negative amounts of tax.

Section 6211(b)(4) was enacted by section 1015(r) of the

Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647,

102 Stat. 3572, which relates to certain refundable credits to be

assessed under deficiency procedures.      House Report 100-795

contains the following explanation of section 6211(b)(4):

                             Present Law

          Under present law, the deficiency procedures
     allowing taxpayers to litigate issues in the Tax Court
     relating to the earned income credit (sec. 32) and the
                               - 5 -

     credit for the certain payments of the gasoline and
     special fuels tax (sec. 34) may not apply.

                    Explanation of Provision

          The bill provides that the Tax Court deficiency
     procedures apply to the credits allowable under
     sections 32 and 34, notwithstanding that the credits
     reduce the net tax to less than zero.
          The provision applies to notices of deficiencies
     mailed after the date of enactment of this bill.

H. Rept. 100-795, at 366 (1988).

     Although respondent determined petitioner was liable for a

zero tax liability in each taxable year, these amounts

nevertheless exceed the negative tax liability amounts shown by

petitioner on his return for each such year.   Respondent has

therefore determined deficiencies within the meaning of section

6211, and the redetermination of such deficiencies is within the

jurisdiction of this Court.   See sec. 6213(a).

     The second issue for decision is whether petitioner had

earned income during the years in issue, entitling him to a

section 32 earned income credit for each year.

     An earned income credit is allowed to eligible taxpayers

under section 32(a) in an amount based upon a percentage of the

taxpayer’s earned income.   Earned income is defined under section

32(c)(2) to include wages and other employee compensation.

Petitioner argues that he earned compensation in the amounts

indicated on the Forms W-2, Wage and Tax Statement, filed with
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his tax returns for the years in issue, thereby entitling him to

an earned income credit for each such year.

     Petitioner bears the burden of proving the determinations

set forth by respondent in the statutory notices of deficiency to

be in error.   See Rule 142(a); Welch v. Helvering, 290 U.S. 111

(1933).

     Petitioner’s testimony concerning his purported income can

be summarized as follows.    During the years in issue, petitioner

performed services for Jerry Tomlin, who at some point in time

changed his name to Jerry Wilson (hereinafter referred to only as

Mr. Tomlin).   Mr. Tomlin in turn worked for a business or

businesses known as Johnson, Inc., and Quantum Consultants, Inc.

It was from these corporations that petitioner received the Forms

W-2 which he attached to his income tax returns for the years in

issue.    The 1995 Form W-2 listed the employer as Johnson, Inc.,

while the 1996 and 1997 Forms W-2 listed the employer as Quantum

Consultants, Inc.    Petitioner was initially contacted by Mr.

Tomlin after petitioner had been recommended by a friend.    Mr.

Tomlin would meet petitioner at petitioner’s home, provide him

with architectural plans, and explain the work which needed to be

completed.    Petitioner served as a draftsman, drawing cabinet

plans for houses which were under construction in Oklahoma,

Texas, Arizona, Colorado, and California.    Petitioner never knew

the exact locations of the houses for which he was making the
                                 - 7 -

drawings.   Petitioner was paid $25 an hour for his work, less

amounts Mr. Tomlin would withhold for taxes.    Petitioner was

typically paid in cash because he refused Mr. Tomlin’s checks

after having several returned for insufficient funds.

     Petitioner produced copies of several receipts written by

him purportedly evidencing a portion of the cash payments made to

him by Mr. Tomlin.    The receipts each named Mr. Tomlin and/or

Johnson, Inc., or Quantum Consultants, Inc.    The receipts dated

1995 were in the amounts of $950, $700, and $550.    The receipts

dated 1996 were in the amounts of $1,000, $2,100, $600, and $500.

The receipts dated 1997 were in the amounts of $800, $1,500,

$1,000, and $1,300.    These amounts do not correspond to the

amounts which were reflected on the Forms W-2 and which

petitioner reported as income.    Although petitioner testified

that he did not attempt to match these receipts to the Forms W-2,

there is a notation on a statement presented as evidence which

states:   “Jerry you still owe me $1500.00 on my last pay * * *

you also included this on the W-2 but you did not pay.”

     Two witnesses testified on petitioner’s behalf.    The first

witness, Michael Blore, is petitioner’s son.    Petitioner

testified that Michael was present “almost every time the man

[Mr. Tomlin] came by, especially whenever he would pay me.”

Michael, on the other hand, testified concerning only one meeting

between Mr. Tomlin and petitioner at which he was present.      He
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testified that he did “remember the meeting * * * I was only

there for a brief moment.”   He also stated that the “only thing I

observed of him [Mr. Tomlin], that he was a tall man, and that’s

about all I caught.”

     The second witness, James Ryan, was petitioner’s neighbor.

Petitioner testified that Mr. Ryan met Mr. Tomlin on several

occasions, and that Mr. Ryan accompanied petitioner to a bank at

which petitioner cashed a check from Mr. Tomlin.   Mr. Ryan

testified that, while at the bank several years prior to his

testimony, he waited in the truck while petitioner cashed a

check.   He did not know any details regarding the check or the

purpose of petitioner’s visit to the bank.   He also testified

that he did not recall meeting Mr. Tomlin at any time.

     Although petitioner produced some evidence tending to show

that he received wages for services rendered in 1995 through

1997, viewing the record as a whole we find that this evidence is

outweighed both by the inconsistencies in the testimony of the

witnesses, noted above, and by the dearth of evidence in several

key areas.   Petitioner failed to produce Mr. Tomlin as a witness

or adequately explain his whereabouts, and failed to produce any

corroborating evidence which would establish that Mr. Tomlin in

fact existed and that he paid petitioner for services rendered.

Petitioner failed to establish the existence or location of

either of the two corporations named on the Forms W-2, and failed
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to adequately explain why he either did not visit them in the 3

years he was allegedly receiving income from them through Mr.

Tomlin, or why he was unconcerned that he was unable to locate

these corporations.   Finally, petitioner did not present evidence

of any services which he had performed, such as the architectural

drawings involved.

     Because petitioner has failed to establish he had earned

income in any of the years in issue, we uphold respondent’s

determination that petitioner is not entitled to the earned

income credit for each year.

     To reflect the foregoing,

                                         Decisions will be entered

                                 for respondent in the amounts of

                                 the reduced deficiencies.
