                        T.C. Memo. 2006-45



                      UNITED STATES TAX COURT



                  ROBERT B. KEENAN, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 12396-04.             Filed March 16, 2006.



     Robert B. Keenan, pro se.

     Linette B. Angelastro, for respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION


     HAINES, Judge:   Respondent determined a deficiency in

petitioner’s Federal income tax of $17,165 for the 2000 taxable

year.   Further, respondent determined that petitioner is liable

for additions to tax of $3,862, $2,661, and $923 under sections

6651(a)(1) and (2) and 6654, respectively, also relating to
                               - 2 -

2000.1   After concessions,2 the issues for decision are:   (1)

Whether respondent must prepare a substitute for return compliant

with section 6020(b) as a prerequisite to issuing a notice of

deficiency; (2) whether petitioner received Social Security

payments of $14,538; (3) whether petitioner is entitled to

certain deductions; and (4) whether petitioner is liable for

additions to tax under sections 6651(a)(1) and 6654(a).

                          FINDINGS OF FACT

     At the time the petition was filed, petitioner resided in

Camarillo, California.   Petitioner is a retired airline pilot.

     During 2000, petitioner received pension distributions of

$66,189 from the Northern Trust Co., Social Security payments of

at least $13,876, and interest income of $184 from Camarillo

Community Bank.

     Petitioner did not file a Federal income tax return for

2000, nor did he make estimated tax payments during the year.

Respondent reconstructed petitioner’s income for 2000 using



     1
        All section references are to the Internal Revenue Code
as amended, and all Rule references are to the Tax Court Rules of
Practice and Procedure. Amounts are rounded to the nearest
dollar.
     2
        Respondent concedes that: (1) Petitioner did not receive
interest income of $2,013 from the State Controller’s Office of
the State of California; and (2) petitioner is not liable for an
addition to tax under sec. 6651(a)(2). In his posttrial brief,
respondent also concedes that only $17.80 of $89 in royalties
petitioner received as executor of his father’s estate is taxable
to petitioner. Petitioner does not contest this amount.
                                - 3 -

third-party payor statements.   The third-party payor statements

reflect the pension distributions and interest income outlined

above.   However, the statement from the Social Security

Administration indicates that petitioner received $14,538 instead

of $13,876.   On November 3, 2003, respondent prepared a

substitute for return for petitioner.

     Respondent sent petitioner a notice of deficiency on April

19, 2004.   As reflected in the notice, respondent determined that

petitioner received total income of $80,832 during 2000.3

Allowing petitioner a personal exemption of $2,800 and a standard

deduction of $5,500, respondent determined that petitioner had

taxable income of $72,532 and an outstanding Federal income tax

liability of $17,165.   Further, respondent determined that

petitioner was liable for additions to tax of $3,862, $2,661, and

$923 under sections 6651(a)(1) and (2) and 6654, respectively.

Because respondent conceded that petitioner is not liable for the

section 6651(a)(2) addition to tax, respondent increased the

section 6651(a)(1) addition to tax to $4,291.

     In response to the notice of deficiency, petitioner filed a

petition with this Court on July 15, 2004.




     3
        This figure does not take into account respondent’s
concessions See supra note 2.
                                - 4 -

                               OPINION

A.   The Substitute for Return and the Notice of Deficiency

     Petitioner contends that this Court lacks jurisdiction

because the notice of deficiency is invalid.   It appears the

foundation of petitioner’s argument is that respondent’s

substitute for return does not meet requirements of section

6020(b),4 and therefore, the notice of deficiency cannot be based

on that return.

     We do not need to consider whether the substitute for return

meets the requirements of section 6020(b).   The preparation of a

return on a taxpayer’s behalf is not a prerequisite to the

Commissioner’s determining and issuing a notice of deficiency.

Roat v. Commissioner, 847 F.2d 1379, 1381-1382 (9th Cir. 1988);

Hartman v. Commissioner, 65 T.C. 542, 545-547 (1975); Stewart v.

Commissioner, T.C. Memo. 2005-212; Robinson v. Commissioner, T.C.

Memo. 2002-316, affd. 73 Fed. Appx. 624 (4th Cir. 2003); Burnett

v. Commissioner, T.C. Memo. 2002-181, affd. 67 Fed. Appx. 248

(5th Cir. 2003).    Therefore, we find that petitioner’s argument

is without merit.




     4
        Sec. 6020(b)(1) provides that “If any person fails to
make any return required by an internal revenue law or regulation
made thereunder at the time prescribed therefor * * * the
Secretary shall make such return from his own knowledge and from
such information as he can obtain through testimony or
otherwise.”
                                 - 5 -

B.   Social Security Payments

     Respondent determined that petitioner received Social

Security payments totaling $14,538 in 2000.    Petitioner contends

that he received only $13,876.    Petitioner bears the burden of

proving that respondent’s determination is incorrect.    See Rule

142(a).

     Respondent’s determination was based on a third-party payor

statement from the Social Security Administration indicating that

petitioner received payments totaling $14,538 in 2000.

Petitioner testified that his Social Security benefits increased

after the first quarter of 2000.    He claims that the $14,538 was

arrived at by multiplying the increased monthly benefit by 12,

which did not take into account the lower monthly benefit

received in the first 3 months of the year.    Petitioner did not

provide any bank statements, Social Security statements, or other

documentation to support his argument.    Accordingly, we find that

petitioner has not met his burden of proving respondent’s

determination is incorrect.   We hold that petitioner received

Social Security payments totaling $14,538 in 2000.

C.   Certain Deductions Claimed by Petitioner

     Next, we must consider whether petitioner is entitled to

certain deductions.   Deductions are a matter of legislative

grace, and the taxpayer bears the burden of proving he is

entitled to the deductions.     INDOPCO, Inc. v. Commissioner, 503
                                - 6 -

U.S. 79, 84 (1992); Deputy v. Du Pont, 308 U.S. 488, 493 (1940);

New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934); see

also Rule 142(a).   The taxpayer has the burden of substantiating

any deduction.   Hradesky v. Commissioner, 65 T.C. 87, 89-90

(1975), affd. per curiam 540 F.2d 821 (5th Cir. 1976); see also

Rule 142(a).

     At trial, petitioner introduced into evidence a one-page

handwritten “Check Record for Y2K”, listing a series of purported

deductions for charitable contributions, health care costs, State

and local taxes, and bad debts.    At trial, petitioner went

through the list, briefly explaining each item.    However,

petitioner did not present underlying checks, bank statements,

receipts, statements from third parties, or other documentation

to support the alleged expenses.

     Petitioner has failed to substantiate any of his purported

deductible expenses.    Therefore, we find that petitioner has not

met his burden of proving that he is entitled to deductions for

the claimed expenses.   However, petitioner argues that under

Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930), the Court

should approximate his allowable deductions.

     Under the Cohan rule, if a claimed expense is deductible,

but the taxpayer is unable to fully substantiate the amount, the

Court is permitted to make an approximation of an allowable

amount.   Id. at 543-544.   However, the taxpayer must provide at
                                - 7 -

least some reasonable evidence from which to estimate a

deductible amount.    Vanicek v. Commissioner, 85 T.C. 731, 743

(1985).

     Other than the handwritten check log and petitioner’s

unsupported testimony, there is nothing in the record to show

that the alleged expenses were actually incurred.   The record is

insufficient to provide the Court with a reasonable evidentiary

basis for estimating the deductible amount.   Therefore, we find

that we may not use the Cohan rule to estimate petitioner’s

allowable expenses.   We hold that petitioner is not entitled to

any deductions beyond the personal exemption and the standard

deduction already allowed by respondent.   As a result, except to

the extent conceded, respondent’s determination that petitioner

has a Federal income tax deficiency of $17,165 in 2000 is

sustained.

D.   Additions to Tax Under Sections 6651(a)(1) and 6654(a)

     Finally, we must determine whether petitioner is liable for

additions to tax under sections 6651(a)(1) and 6654(a).

Respondent bears the burden of production with respect to

petitioner’s liability for the additions to tax.    Sec. 7491(c);

Higbee v. Commissioner, 116 T.C. 438, 446-447 (2001).     To meet

his burden of production, respondent must come forward with

sufficient evidence indicating that it is appropriate to impose

the additions to tax.    Higbee v. Commissioner, supra at 446-447.
                                - 8 -

Once respondent meets his burden of production, petitioner must

come forward with evidence sufficient to persuade the Court that

respondent’s determination is incorrect.    Id.

     Section 6651(a)(1) imposes an addition to tax for failure to

file a return on the date prescribed (determined with regard to

any extension of time for filing), unless petitioner can

establish that his failure is due to reasonable cause and not due

to willful neglect.   The parties stipulated and petitioner

testified that he did not file a Federal income tax return for

2000.    We find that respondent has met his burden of production.

     To show reasonable cause, petitioner must demonstrate that

he “exercised ordinary business care and prudence and was

nevertheless unable to file the return within the prescribed

time”.    Sec. 301.6651-1(c)(1), Proced. & Admin. Regs.   Petitioner

argues that he had reasonable cause for failing to file because:

(1) The income tax system is “voluntary”; and (2) the self-

incrimination provision of the Fifth Amendment protects him from

being required to file a tax return.

     Arguments relating to the “voluntary” nature of the income

tax system have been repeatedly rejected as frivolous or without

merit.    See, e.g., Takaba v. Commissioner, 119 T.C. 285, 295-296

(2002); Rinn v. Commissioner, T.C. Memo. 2004-246; Hodge v.

Commissioner, T.C. Memo. 1998-242; Hicks v. Commissioner, T.C.

Memo. 1992-80.    Furthermore, petitioner was previously informed
                                 - 9 -

by this Court that he is required to file Federal income tax

returns and was found liable for additions to tax under section

6651(a)(1) for failure to file.    See Keenan v. Commissioner, T.C.

Memo. 1998-388 (“Petitioner was required to file Federal income

tax returns * * * He failed to do so and offered no satisfactory

explanation.”).    Therefore, we find    petitioner’s argument that

the income tax system is “voluntary” cannot serve as a reasonable

basis for his failure to file.

     Petitioner’s belief that the Fifth Amendment’s self-

incrimination provision protected him from filing a tax return is

not a reasonable basis for failure to file under section 6651(a).

See Woods v. Commissioner, 91 T.C. 88, 91-92 (1988); Thompson v.

Commissioner, 78 T.C. 558, 563 (1982).      Petitioner testified that

he is not currently under criminal investigation.     Nevertheless,

petitioner believes the Fifth Amendment protects him because

there is always the potential that he may be subject to a

criminal investigation at a later date.     We find that

petitioner’s belief cannot serve as a reasonable basis for

failure to file.    We hold that petitioner is liable for the

addition to tax under section 6651(a)(1).

     Section 6654(a) imposes an addition to tax on an

underpayment of estimated tax unless one of the statutory

exceptions applies.    Respondent’s Certificate of Official Record

indicates that petitioner did not make estimated tax payments in
                                 - 10 -

2000.    We find that respondent has met his burden of production.

     Section 6654(e) provides exceptions whereby no addition to

tax will be imposed under section 6654(a).       Petitioner did not

argue and we do not find that any of the exceptions applies.

Therefore, we hold that petitioner is liable for the addition to

tax under section 6654(a).

     Section 6673(a)(1) authorizes the Court to require a

taxpayer to pay the United States a penalty in an amount not to

exceed $25,000 whenever it appears to the Court the taxpayer’s

position is frivolous or groundless.       Sec. 6673(a)(1)(B).

Respondent has not asked the Court to impose a penalty under

section 6673(a) against petitioner.       The Court, however, may sua

sponte impose a penalty.     Pierson v. Commissioner, 115 T.C. 576,

580 (2000); Jensen v. Commissioner, T.C. Memo. 2004-120; Frey v.

Commissioner, T.C. Memo. 2004-87.

        Petitioner has previously been a litigant in this Court.

See Keenan v. Commissioner, supra.        While his previous case dealt

predominantly with issues different from those in the present

case, petitioner similarly failed to file tax returns for 1988

and 1990 through 1994.     Id.   Petitioner was not warned in the

previous opinion or during the course of the current litigation

that a penalty might be imposed under section 6673(a).       For this

reason only, we decline to impose a penalty under section

6673(a).    However, we strongly admonish petitioner that if he
                             - 11 -

persists in failing to file his tax returns and in pursuing tax

protester arguments, e.g., that the notice of deficiency is

invalid or that he need not file a return because of the Fifth

Amendment or the “voluntary” nature of the income tax system, we

may not be so favorably inclined in the future.

     In reaching our holdings, we have considered all arguments

made, and, to the extent not mentioned, we conclude that they are

moot, irrelevant, or without merit.

     To reflect the foregoing,



                                           Decision will be entered

                                      under Rule 155.
