                  T.C. Summary Opinion 2001-147



                     UNITED STATES TAX COURT



                  ALAN L. LEVITT, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 15055-99S.                Filed September 20, 2001.


     Alan L. Levitt, pro se.

     Ross M. Greenberg, for respondent.



     PANUTHOS, Chief Special Trial Judge:    This case was heard

pursuant to the provisions of section 7463 of the Internal

Revenue Code in effect at the time 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.    Unless otherwise

indicated, subsequent section references are to the Internal

Revenue Code in effect for the year in issue, and all Rule

references are to the Tax Court Rules of Practice and Procedure.
                               - 2 -

     Respondent determined a deficiency in petitioner’s Federal

income tax of $15,695, an addition to tax under section

6651(a)(1) of $3,105, and an accuracy-related penalty under

section 6662(a) of $3,139 for tax year 1994.   After concessions,1

the issues for decision are:   (1) Whether petitioner is entitled

to a deduction on Schedule A, Itemized Deductions, for employee

business expenses; (2) whether petitioner is entitled to various

deductions on Schedule C, Profit or Loss From Business, in excess

of the amounts allowed by respondent; (3) whether petitioner is

liable for an addition to tax under section 6651(a)(1); and (4)

whether petitioner is liable for an accuracy-related penalty

under section 6662(a).

Background

     Some of the facts have been stipulated, and they are so

found.   The stipulation of facts and the attached exhibits are

incorporated herein by this reference.   At the time of filing his

petition, petitioner resided in Clearwater Beach, Florida.



     1
          Respondent determined that petitioner failed to include
Social Security income of $23,489. The increase of taxable
Social Security benefits resulted from a change in petitioner’s
adjusted gross income. This is a computational adjustment that
will be determined by the outcome of this case.

     Respondent also determined that petitioner was not entitled
to a deduction of $41 for the rent or lease of vehicles,
machinery, and equipment. Petitioner did not present evidence as
to this issue. As a result, petitioner is deemed to have
conceded this issue. Rules 142(a), 149(b); Burris v.
Commissioner, T.C. Memo. 2001-49.
                               - 3 -

     Petitioner received a bachelor’s degree in business

administration from the University of Miami in 1973.   Petitioner

holds himself out as a “degreed accountant”.   Petitioner was an

Internal Revenue Service agent for less than a year in the late

1970s or early 1980s.

     At the beginning of 1994, petitioner was employed by Circus

Circus in Reno, Nevada, as a casino dealer.    Petitioner separated

from his wife and moved to Las Vegas, Nevada, by the end of

January 1994.   Petitioner was then employed by MGM Grand Hotel,

Inc. (MGM), where he worked as a casino dealer.   Petitioner dealt

blackjack and operated roulette, and he was promoted to a casino

table games supervisor by the end of 1994.

     Petitioner was also the sole proprietor of two activities

during the year at issue:   Beverly Hills Tax Consulting/Levitt

Tax (BHTC) and Beverly Hills Sportscards & Movie Memorabilia

(BHSMM).   BHTC and BHSMM shared an office on South Robertson

Boulevard in Beverly Hills, California.   BHTC also had an office

in Las Vegas.   Petitioner maintained a separate checking account

for each activity.   During the tax filing season, petitioner

prepared returns during the day and worked the swing shift at the

casino.

     In 1995, petitioner applied for a mortgage with Countrywide

Mortgage Company (Countrywide).   Petitioner submitted to
                               - 4 -

Countrywide a copy of what he claimed was his 1994 Federal income

tax return (unfiled return).

     Petitioner is a calendar year taxpayer who employed the cash

method of accounting.   Petitioner filed his 1994 Federal income

tax return on October 18, 1996.   Petitioner itemized his

deductions on Schedule A, Itemized Deductions, and as relevant to

this case, he deducted $2,667 for attorney’s and accounting fees.

On Schedule C, Profit or Loss From Business, for BHTC, petitioner

reported gross income of $17,475.   Petitioner also claimed

deductions for expenses relating to BHTC as follows:

                     Expense                       Amount

     Advertising                                   $4,441
     Car and truck                                  6,965
     Commissions and fees                           1,194
     Depreciation                                   2,403
     Legal and professional                           425
     Office                                         2,014
     Rent or lease (other business property)        4,320
     Repairs and maintenance                          431
     Supplies                                         306
     Taxes and licenses                               167
     Travel, meals and entertainment                3,608
     Utilities                                      5,206
     Wages                                            250
     Bank service charge                              288
     Newspaper and magazine subscription              137
                                                   32,155

Petitioner did not attach a depreciation schedule to his return.

     On Schedule C for BHSMM, petitioner reported gross receipts

of $16,820.   Petitioner also reported cost of goods sold of

$11,204 and claimed deductions of $4,606 for various expenses.
                                 - 5 -

     Respondent mailed a notice of deficiency to petitioner on

June 18, 1999.    Respondent disallowed the attorney’s and

accounting fees deduction claimed on Schedule A and also

disallowed all of the claimed deductions on Schedule C for BHTC,

on the basis that petitioner failed to establish that he paid or

incurred the expenses, and that the expenses were not ordinary

and necessary to his business.    Respondent also determined that

petitioner was liable for the addition to tax under section

6651(a)(1) and the accuracy-related penalty under section

6662(a).

Discussion

     A. General

     At the time of filing the petition, petitioner filed a

Designation of Place of Trial, designating Tampa, Florida.    By

notice dated February 3, 2000, this case was set for trial at a

Tampa, Florida, trial session of this Court scheduled to commence

on April 24, 2000.    On March 31, 2000, petitioner filed a Motion

to Continue Trial Generally, which was granted.    By notice dated

December 8, 2000, this case was again set for trial at a Tampa,

Florida, trial session scheduled to commence February 26, 2001.

A few days before the February 26, 2001, trial calendar, the

Court held a teleconference with petitioner and respondent.

Petitioner requested that the trial be continued.    Petitioner

asserted that he had moved to Las Vegas and was unable to appear
                                 - 6 -

at trial due to a disability.    The Court did not grant

petitioner’s request for a continuance.    The Court indicated that

the case would be called at the calendar call and that the Court

expected petitioner to appear.    When the case was called at the

calendar call, petitioner did not appear.    Counsel for respondent

appeared and reported that petitioner was seen by a third party

in the Tampa, Florida, area the Friday before the Monday calendar

call.   The Court set the case for recall at a date later in the

calendar.   Petitioner was advised by telephone on the afternoon

of the calendar call of the date and time of the recall.   During

the telephone conversation, petitioner again suggested that he

was located in Las Vegas prior to and on the date of the call of

the calendar.   The Court suggested to petitioner that his case

might be dismissed if he failed to appear and prosecute the

matter.   When petitioner later appeared at the trial session, he

did not refute respondent’s claim as to his presence in the

Tampa, Florida, area.

     During the aforementioned conference call, petitioner also

requested a continuance claiming that he did not receive any of

the notices from respondent and the Court regarding the trial.

Petitioner claimed that he resided in Nevada and not Florida

during 1999 and 2000, despite the fact that he filed a petition

in 1999 with the Clearwater, Florida, address.    Further, in his

motion to continue dated March 31, 2000, petitioner used a
                                - 7 -

Florida, address in his correspondence with the Court.

Petitioner did not notify the Court of a change of address.

     At trial, the Court received a copy of the unfiled 1994

return which had been submitted to Countrywide.    Petitioner

prepared and signed under penalty of perjury the unfiled return,

and he used it in support of a mortgage application with

Countrywide Mortgage Company.   On the unfiled return, petitioner

reported gross income of $46,850 on the Schedule C for BHTC, as

opposed to gross income of $17,475 as reported on the return

filed with the Internal Revenue Service.    Petitioner also

reported a profit of $11,687 for BHTC on the unfiled return, as

opposed to a loss of $14,721 as reported on the filed return.

     We find that many of petitioner’s representations and his

uncorroborated testimony are patently unreliable.2   The Court is

not persuaded by petitioner’s belated rationalizations in

explaining his conduct and claimed deductions.    Based on

petitioner’s misrepresentations, the Court had some difficulty

discerning the truth of petitioner’s assertions or accuracy as to

the claimed deductions for expenses.    It appears likely that

petitioner underreported income and overstated deductions.      As

respondent has neither alleged that petitioner omitted income nor




     2
        Sec. 7491 does not affect the burden of proof where the
taxpayer fails to produce credible evidence or substantiate
deductions. Higbee v. Commissioner, 116 T.C. 438 (2001).
                                - 8 -

asserted an increased deficiency, we do not address this issue.

Sec. 6214(a); Rule 142(a).

     B. Schedule A Deductions

     Petitioner deducted legal and accounting expenses of $2,667.

At trial, petitioner testified that the amount relates to

clothing he purchased for work at MGM.

     Work clothing may be deductible under section 162 if a

taxpayer can establish the following:    (1) The clothing was

required or essential in the taxpayer’s employment; (2) the

clothing was not suitable for general or personal wear; (3) and

the clothing was not so worn.    Yeomans v. Commissioner, 30 T.C.

757, 767-769 (1958); Kozera v. Commissioner, T.C. Memo. 1986-604.

     Petitioner testified that MGM required petitioner to

purchase black shoes.   Petitioner purchased Dr. Scholl’s shoes.

The record does not indicate that the shoes were not suitable for

general or personal wear.    Therefore, petitioner is not entitled

to a deduction for the cost of shoes.

     Petitioner testified that he was required to purchase and

maintain tuxedo shirts with MGM’s logo.    Petitioner provided

receipts totaling $253.08 for 13 shirts.    Petitioner has

satisfied the elements under Yeomans v. Commissioner, supra;

therefore, he is entitled to a deduction for the costs of the 13

shirts.
                                - 9 -

     Petitioner testified that he had his shirts and the vests

provided by MGM dry cleaned.    He claimed that he paid $22 per

week to maintain the tuxedo shirts and $25 per week to clean the

vests.   However, petitioner provided one receipt of $3.85 for dry

cleaning.    We may estimate the amount of expenses, so long as

petitioner provides evidence upon which we can base an estimate.

Rodman v. Commissioner, 542 F.2d 845, 853 (2d Cir. 1976), affg.

T.C. Memo. 1973-277; Cohan v. Commissioner, 39 F.2d 540 (2d Cir.

1930).   Petitioner provided little evidence other than his vague,

undocumented testimony.    Nevertheless, we have no doubt he must

have incurred some expenses for cleaning the vests and shirts.

Using our best estimate, we allow $250 for dry cleaning.

     We find that petitioner is entitled to deduct $503.08 for

his uniform and dry cleaning expenses.   However, after

concessions and our findings, petitioner’s itemized deductions

for 1994 do not exceed the standard deduction.    Sec. 63(c);

Cotton v. Commissioner, T.C. Memo. 2000-333.     Therefore, it is

more advantageous for petitioner to claim the standard deduction

as allowed by respondent in the notice of deficiency.

respondent’s determination is sustained.

     C. Schedule C Deductions

            1. Sections 162 and 274

     Section 162(a) permits a deduction for the ordinary and

necessary expenses paid or incurred during the taxable year in
                                - 10 -

carrying on a trade or business.    Expenses that are personal in

nature are generally not allowed as deductions.   Sec. 262(a).

A taxpayer is required to maintain records sufficient to

establish the amount of his income and deductions.   Sec. 6001;

sec. 1.6001-1(a), (e), Income Tax Regs.   A taxpayer must

substantiate his deductions by maintaining sufficient books and

records to be entitled to a deduction under section 162(a).

     When a taxpayer establishes that he has incurred a

deductible expense but is unable to substantiate the exact

amount, we are permitted to estimate the deductible amount.

Cohan v. Commissioner, supra.    We can estimate the amount of the

deductible expense only when the taxpayer provides evidence

sufficient to establish a rational basis upon which the estimate

can be made.   Vanicek v. Commissioner, 85 T.C. 731, 743 (1985).

     Section 274(d) supersedes the general rule of Cohan v.

Commissioner, supra, and prohibits the Court from estimating the

taxpayer’s expenses with respect to certain items.    Sanford v.

Commissioner, 50 T.C. 823, 827 (1968), affd. per curiam 412 F.2d

201 (2d Cir. 1969).   Section 274(d) imposes strict substantiation

requirements for listed property as defined in section

280F(d)(4), gifts, travel, entertainment, and meal expenses.

Sec. 1.274-5T(a), Temporary Income Tax Regs., 50 Fed. Reg. 46014

(Nov. 6, 1985).   To obtain a deduction for a listed property,

travel, meal, or entertainment expense, a taxpayer must
                               - 11 -

substantiate by adequate records or sufficient evidence to

corroborate the taxpayer’s own testimony the amount of the

expense, the time and place of the use, the business purpose of

the use and, in the case of entertainment, the business

relationship to the taxpayer of each person entertained.    Sec.

274(d); sec. 1.274-5T(b), Temporary Income Tax Regs., 50 Fed.

Reg. 46014 (Nov. 6, 1985).   Section 274 requires that expenses

be recorded at or near the time when the expense is incurred.

Sec. 1.274-5T(c)(1), Temporary Income Tax Regs., 50 Fed. Reg.

46016 (Nov. 6, 1985).   Canceled checks will not ordinarily

constitute adequate documentary evidence because they do not

contain sufficient detail regarding the specific items

constituting the expenditures.    Rice v. Commissioner, T.C. Memo.

1994-204.    If a taxpayer is unable to fulfill the requirements of

section 274(d), he is not entitled to the deduction.

            2. Advertising

     Petitioner deducted $4,441 for advertising.   Respondent

concedes that petitioner substantiated $201.87 for advertising.

At trial, petitioner testified that he sent Christmas cards to

his clients.   Petitioner also testified that he included postage

in his computation of advertising expenses, such as amounts

arising from mailing his clients’ tax returns via Federal

Express.    In addition, petitioner claims he purchased

personalized pens.
                               - 12 -

     A taxpayer may deduct ordinary and necessary advertising

expenses related to the taxpayer’s trade or business.     RJR

Nabisco, Inc. v. Commissioner, T.C. Memo. 1998-252.     Other than

petitioner’s general testimony regarding advertising, petitioner

failed to provide a rational basis upon which we can base an

estimate as to the amount petitioner paid for advertising.

Petitioner submitted a Christmas card and a past due invoice for

the pens.    The record does not indicate that petitioner in fact

paid the delinquent amount.    Therefore, petitioner is entitled to

deduct $201.87 for advertising.

            3. Car and Truck Expenses

     Petitioner deducted $6,965 for car and truck expenses.

Petitioner owned a Mercedes, and he testified that he drove it

between Reno, Las Vegas, and Beverly Hills.    Petitioner claimed

that he maintained a travel diary, but he did not present it at

trial.   Petitioner did not present any receipts at trial

regarding his car and truck expenses.

     Listed property includes passenger automobiles.    Sec.

280F(f)(4)(A)(i).    Petitioner therefore must meet the strict

requirements of section 274 to be entitled to a deduction related

to car expenses.    Petitioner failed to establish the amount of

the expense, the time and place of each use, and the business

purpose of the use of the Mercedes.     Petitioner did not provide
                                - 13 -

any documents to support his vague and illusory testimony.       We

sustain respondent’s determination.

          4. Commissions and Fees

     Petitioner deducted $1,194 for commissions and fees.       At

trial, petitioner testified that he paid clients referral fees

for new clients.    Petitioner did not present any documents or

other evidence as to this deduction.     Petitioner failed to

provide the Court with evidence sufficient to establish a

rational basis upon which an estimate can be made.     We sustain

respondent’s determination.

          5. Depreciation

     Petitioner deducted $2,403 for depreciation.     Petitioner did

not attach a Form 4562, Depreciation and Amortization, to his

Federal income tax return.     At trial, petitioner submitted a list

entitled “Schedule C Depreciation”.      Petitioner depreciated two

computers, a laser printer, a calculator, a fax machine, various

pieces of furniture, and a Mercedes.     For the reasons previously

stated, petitioner is not entitled to a depreciation deduction

for his Mercedes.

     Of the items listed on the schedule, only some of the

furniture and one of the computers, an Apple Macintosh LC III,

were purchased in 1994.     A computer is a listed property under

section 280F(d)(4)(iv), and a taxpayer must meet the strict

substantiation requirements of section 274(d).     Petitioner
                               - 14 -

produced a receipt for the computer evidencing the amount and

date of purchase.    However, petitioner did not establish the

extent of the personal versus business use of the computer.      Sec.

1.274-5T(c)(2)(ii)(C), Temporary Income Tax Regs., 50 Fed. Reg.

46014 (Nov. 6, 1985).3   Therefore, petitioner is not entitled to

depreciate the Apple Macintosh LC III computer.

     Petitioner provided canceled checks and a receipt for

furniture purchased in 1994.    Petitioner testified that he

purchased the furniture for use in his waiting room.    Petitioner

purchased an armoire for $106.99 and chairs for $240.74.

Petitioner is entitled to a depreciation deduction for these

expenses.

     As to the items purchased prior to 1994, petitioner did not

produce documents or other evidence.    We do not find petitioner’s

unsupported self-serving testimony and document to be credible.

Niedringhaus v. Commissioner, 99 T.C. 202, 219-220 (1992);

Tokarski v. Commissioner, 87 T.C. 74, 77 (1986).    We sustain

respondent’s determination as to the items purchased prior to

petitioner’s 1994 tax year.

            6. Legal and Professional Expenses

     Petitioner deducted $425 for legal expenses.    Petitioner did

not have any records regarding this deduction.    Petitioner



     3
        In addition, petitioner failed to establish that the use
of the computer was related to his trade or business.
                                - 15 -

testified that the expenses may have related to the collection of

fees from clients.   Petitioner did not present any documents or

other evidence as to this deduction.     Petitioner failed to

provide the Court with evidence sufficient to establish a

rational basis upon which an estimate can be made.     We sustain

respondent’s determination.

          7. Office Expense

     Petitioner deducted $2,014 for office expenses.     At trial,

petitioner produced numerous receipts for items such as frames,

video repair, bottled water, flowers, books purchased at

Waldenbooks, videos, candy, and numerous purchases from Kinko’s.

The record is silent as to whether these expenses are related to

petitioner’s trade or business, and we sustain respondent’s

determination as to these items.

     Petitioner submitted a receipt of $177.83 for business cards

and $19.25 for an address stamp.    We hold that petitioner is

entitled to deduct these amounts.

     Petitioner produced receipts of $26.45 and $157.23 for the

purchase of Macintax software manufactured by Chipsoft.

Petitioner also purchased Turbotax software for $69.85.     Computer

software (software) is generally not currently deductible.       Rev.

Proc. 69-21, 1969-2 C.B. 303.    Section 197 provides that software

purchased by a taxpayer is amortizable over 15 years.     Sec.

197(d).   However, software that is readily available for purchase
                                    - 16 -

by the general public, is subject to a nonexclusive license, has

not been substantially modified, and is not part of the

acquisition of a trade or business (canned software), is not a

section 197 asset and is not subject to the lengthy amortization

requirement.      Sec. 197(e)(3).    A taxpayer may depreciate canned

software by employing the straight-line method with a useful life

of 3 years.      Sec. 167(f)(1)(A).    Therefore, petitioner is

entitled to a depreciation deduction for the three items of

software.

     Otherwise, we sustain respondent’s determination as to the

remaining amount for office expenses.

            8.    Rent

     Petitioner deducted $4,320 for rent of an office and storage

space for records.       Respondent concedes that petitioner

substantiated $1,387 for office rent.        Petitioner provided

canceled checks of $3,070 for office rent.        Petitioner is

entitled to a deduction of $3,070 for office rent.

     Petitioner presented canceled checks payable to Public

Storage.    The first check of January 10, 1994, was drawn from

BHSMM’s checking account.        The remaining checks were from BHTC’s

checking account.        Petitioner testified that he rented a public

storage lot to store documents related to BHTC.        The Court is

unable to determine whether the storage unit was related to

BHTC’s trade or business.        We do not find petitioner’s
                                    - 17 -

unsupported, self-serving testimony to be credible.         Niedringhaus

v. Commissioner, supra; Tokarski v. Commissioner, supra.

Therefore, petitioner is not entitled to a deduction for the

storage unit.

            9.    Repairs

     Petitioner deducted $431 for repairs and maintenance.

Respondent conceded that petitioner is entitled to deduct $110.

The repairs relate to petitioner’s printer.        Petitioner

substantiated $270.31 for repairs, and he is entitled to a

deduction in that amount.

     One of the repair receipts relates to “Clickart Company”

software.    The record does not indicate how this software is

related to petitioner’s trade or business.        Therefore, petitioner

is not entitled to a deduction for the software.4

            10.    Supplies

     Petitioner deducted $306 for supplies.        At trial, petitioner

testified as follows: “Office supplies would have been fax paper,

basically the--maybe the toner for the fax machine.        Things like

that.”   Petitioner did not provide documents or other evidence

regarding supplies.         Petitioner failed to provide the Court with

evidence sufficient to establish a rational basis upon which an

estimate can be made.        We sustain respondent’s determination.


     4
        Even if the software related to petitioner’s trade or
business, he would not be entitled to a current deduction for the
full amount. Secs. 167(f)(1), 197(d).
                               - 18 -

          11.   Taxes and Licenses

          Petitioner deducted $167 for a City of Beverly Hills

business license.    Petitioner provided documents establishing

that he paid $156 for the business license.     Petitioner did not

provide additional evidence or testimony to establish that he was

entitled to deduct additional amounts for taxes and licenses.

Therefore, petitioner is entitled to a deduction of $156.

          12.   Travel, Meals, and Entertainment

     Petitioner deducted $2,361 for travel and $1,247 for meals

and entertainment.    Petitioner provided numerous receipts for

concerts, movies, and sporting events.     For example, petitioner

deducted season tickets for a college basketball team.     However,

only some of the receipts contained the handwritten name of an

individual.

     Travel, meals, and entertainment expenses are subject to the

strict substantiation requirements of section 274(d).     None of

the receipts contain a description of the business purpose of the

expense or the business relationship of petitioner to the

individual listed on the receipts.      As such, these expenses are

personal in nature and therefore not deductible.     Sec. 262(a).
                                  - 19 -

          13.    Utilities

     Petitioner deducted $5,206 for utilities.     At trial,

petitioner testified that the expense relates to power and

telephone expenses.      Some of the telephone expenses relate to

petitioner’s use of a cellular phone.      A cellular phone is a

listed property, and expenses related to a cellular phone are

subject to the strict substantiation requirements of section

274(d).

     Petitioner did not provide any evidence to establish that

the utility expenses related to either BHTC or BHSMM.        As to the

cellular phone expenses, petitioner failed to meet the

requirements of section 274(d).      Therefore, we sustain

respondent’s determination.

          14.    Wages

     Petitioner deducted $250 for wages.     Petitioner testified

that he paid his former wife for typing services.      However,

petitioner did not provide documents or other evidence to

corroborate his testimony.      Petitioner failed to provide the

Court with evidence sufficient to establish a rational basis upon

which an estimate can be made.      We sustain respondent’s

determination.

          15.    Other Expenses

     Petitioner deducted other expenses of $137 for newspapers

and professional magazines and $288 for bank service charges.
                              - 20 -

Respondent conceded that petitioner substantiated the full

subscription expense.

     Petitioner provided vague testimony as to the bank service

charge, and he did not submit any other evidence regarding the

deduction.   Petitioner failed to provide the Court with evidence

sufficient to establish a rational basis upon which an estimate

can be made.   Petitioner is entitled to deduct other expenses of

$137.

     D.   Addition to Tax

     Respondent determined that petitioner is liable for the

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

timely return for the 1994 taxable year.

     Section 6651(a)(1) provides for an addition to tax for

failure to file a timely return.   The addition to tax is equal to

5 percent of the amount required to be shown as tax on the

return, with an additional 5 percent for each additional month or

fraction thereof that the return is filed late, not exceeding 25

percent in the aggregate.

     A taxpayer may avoid the addition to tax by establishing

that the failure to file a timely return was due to reasonable

cause and not willful neglect.   Rule 142(a); United States v.

Boyle, 469 U.S. 241, 245-246 (1985); Higbee v. Commissioner, 116

T.C. 438 (2001).   A failure to file is due to "reasonable cause"

if the taxpayer exercised ordinary business care and prudence and
                               - 21 -

was, nevertheless, unable to file his return within the date

prescribed by law.    Crocker v. Commissioner, 92 T.C. 899, 913

(1989); Estate of Vriniotis v. Commissioner, 79 T.C. 298, 310

(1982); sec. 301.6651-1(c)(1), Proced. & Admin. Regs.      Willful

neglect is viewed as a conscious, intentional failure or reckless

indifference to the obligation to file.       United States v. Boyle,

supra.

     Petitioner filed his 1994 tax return on October 18, 1996.

Petitioner has not provided any explanation for the late filing

of the return.    Petitioner did not address the issue in his

pleadings or his testimony.    Petitioner has not established his

late filing of his 1994 Federal income tax return was due to

reasonable cause and not willful neglect.      Accordingly, we hold

petitioner is liable for the addition to tax under section

6651(a).

     E.    Accuracy-Related Penalty

     Respondent determined petitioner is liable for the accuracy-

related penalty under section 6662(a) for 1996.      The accuracy-

related penalty is equal to 20 percent of any portion of an

underpayment of tax required to be shown on the return that is

attributable to the taxpayer’s negligence or disregard of rules

or regulations.    Sec. 6662(a) and (b)(1).    “Negligence” consists

of any failure to make a reasonable attempt to comply with the

provisions of the Internal Revenue Code and also includes any
                                - 22 -

failure to keep adequate books and records or to substantiate

items properly.   Sec. 6662(c); 1.6662-3(b)(1), Income Tax Regs.

“Disregard” consists of any careless, reckless, or intentional

disregard.   Sec. 6662(c).

     An exception applies to the accuracy-related penalty when

the taxpayer demonstrates (1) there was reasonable cause for the

underpayment, and (2) he acted in good faith with respect to such

underpayment.   Sec. 6664(c).   Whether the taxpayer acted with

reasonable cause and in good faith is determined by the relevant

facts and circumstances.     The most important factor is the extent

of the taxpayer’s effort to assess his proper tax liability.

Stubblefield v. Commissioner, T.C. Memo. 1996-537; sec. 1.6664-

4(b)(1), Income Tax Regs.     Section 1.6664-4(b)(1), Income Tax

Regs., specifically provides:     “Circumstances that may indicate

reasonable cause and good faith include an honest

misunderstanding of fact or law that is reasonable in light of

* * * the experience, knowledge, and education of the taxpayer.”

Neely v. Commissioner, 85 T.C. 934 (1985).

     It is the taxpayer’s responsibility to establish that he is

not liable for the accuracy-related penalty imposed by section

6662(a).   Rule 142(a); Higbee v. Commissioner, supra; Tweeddale

v. Commissioner, 92 T.C. 501, 505 (1989).     Petitioner did not

address this issue at trial or in any pleadings.    Petitioner

claimed deductions that he failed to explain or substantiate.
                               - 23 -

Further, petitioner attempted to deduct numerous personal

expenses as business expenses without any basis in fact or law.

Petitioner is an accountant who presumably is familiar with the

provisions of the Internal Revenue Code applicable to his case,

particularly the recordkeeping requirements; yet he disregarded

the applicable law in preparing his Federal income tax return.

On the basis of the entire record, we conclude petitioner has not

established that the underpayment was due to reasonable cause or

that he acted in good faith.   Accordingly, we hold petitioner is

liable for the accuracy-related penalty.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect the foregoing,

                                                Decision will be

                                           entered under Rule 155.
