                        T.C. Memo. 1997-197



                      UNITED STATES TAX COURT



               GREGORY HARRIS SIMS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No.   14600-95.                   Filed April 29, 1997.



     Gregory Harris Sims, pro se.

     Daniel M. Whitley, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     LARO, Judge:   Gregory Harris Sims petitions the Court to

redetermine respondent's determination of a $14,506 deficiency in

his 1989 Federal income tax, a $3,764 addition thereto under

section 6651(a)(1), and a $2,871 penalty under section 6662(a).
                               - 2 -

     We must decide the following issues with respect to 1989:

     1.   Whether petitioner failed to report $66,851 of wages

paid to him by his wholly owned corporation.

     2.   Whether petitioner may deduct mortgage interest in an

amount greater than allowed by respondent in the notice of

deficiency.

     3.   Whether petitioner is liable for the addition to tax for

late filing determined by respondent under section 6651(a)(1).

     4.   Whether petitioner is liable for the accuracy-related

penalty determined by respondent under section 6662(a).

     We hold for respondent on all issues.   Section references

are to the Internal Revenue Code in effect for the year in issue.

Rule references are to the Tax Court Rules of Practice and

Procedure.

                         FINDINGS OF FACT

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

The stipulated facts and exhibits submitted therewith are

incorporated herein by this reference.   Petitioner resided in

Los Angeles, California, when he petitioned the Court.

     Petitioner did not file a 1989 Federal income tax return

until August 2, 1993.   Petitioner's 1989 tax return (Form 1040,

U.S. Individual Income Tax Return), which was prepared by

Nugit & Licker, C.P.A.'s on July 7, 1993, reported that

petitioner received $54,250 of gross receipts from his sole
                               - 3 -

proprietorship   named "Gregory Sims".   The return reported that

petitioner received no wage or salary income.

     Petitioner worked in the entertainment industry throughout

1989.   He provided managerial services personally and through his

wholly owned corporation, The Greg Sims Co., Inc., which changed

its name to Arrowhead Entertainment, Inc., in 1989 or 1990

(hereinafter, The Greg Sims Co., and Arrowhead Entertainment,

Inc. are collectively referred to as Arrowhead). Petitioner was

the only person who provided services for Arrowhead during the

relevant year, and he was its only officer. Arrowhead issued

petitioner a 1989 Form W-2, Wage and Tax Statement, reporting

that it paid him wages of $66,851 during the 1989 calendar year.

Arrowhead issued petitioner a 1988 Form W-2 reporting that it

paid him $88,901 in wages during the 1988 calendar year.

     On Arrowhead's 1989 Form 1120, U.S. Corporation Income Tax

Return, filed for its taxable year ended March 31, 1990,

Arrowhead reported a $45,980 deduction for salaries and wages and

a $66,851 deduction for officer's compensation.   Arrowhead's 1989

Form 1120 was prepared by Neal Levin and Co. (the Company), and

the Company used Arrowhead's corporate records to prepare that

return.   Arrowhead's corporate records were unavailable when

petitioner's 1989 Form 1040 was prepared in 1993.   Petitioner's

1989 Form 1040, as it related to his income from Arrowhead, was

based on his estimates derived from memory.   Petitioner's memory

is not accurate.
                               - 4 -

     Petitioner wrote all checks to pay the expenses of

Arrowhead, and he determined the amounts of the salaries and

officer's compensation that it paid in 1989.    Petitioner had

complete control over Arrowhead's records.   Petitioner did not

produce any of Arrowhead's records at the time of trial, and he

did not produce any probative records to support his personal

income tax return.

     Respondent determined, and reflected in the notice of

deficiency, that petitioner failed to report $66,851 of wages

that Arrowhead paid him.   Petitioner's 1989 Form 1040 reported a

$16,101 deduction for mortgage interest.   Respondent determined,

and reflected in the notice of deficiency, that petitioner paid

only $11,033 of mortgage interest in 1989.

                              OPINION

     Petitioner must prove that respondent's determinations set

forth in the notice of deficiency are incorrect.    Rule 142(a);

Welch v. Helvering, 290 U.S. 111, 115 (1933).    Petitioner also

must prove his entitlement to any deduction.    Deductions are

strictly a matter of legislative grace, and petitioner must show

that his claimed deductions are allowed by the Code.    Petitioner

must also keep sufficient records to substantiate any deduction

that would otherwise be allowed by the Code.    Sec. 6001;

New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).
                               - 5 -

     In order to meet his burden of proof, petitioner must

introduce sufficient evidence to:   (1) Make a prima facie case

establishing that respondent committed the errors alleged in the

petition, and (2) overcome the evidence favorable to respondent.

Lyon v. Commissioner, 1 B.T.A. 378, 379 (1925).     Petitioner

relies mainly on his testimony and certain bank statements to

disprove respondent's determinations.     We find this evidence

unpersuasive and incomplete.   We find that petitioner failed to

produce any persuasive evidence rebutting respondent's

determinations, and that the record is devoid of evidence

otherwise disproving these determinations.1     Accordingly, we

sustain respondent's determination in full.     See Finesod v.

Commissioner, T.C. Memo. 1994-66.

     For the foregoing reasons,

                                            Decision will be entered

                                       for respondent.




     1
      We note that petitioner has also failed to address any of
these determinations on brief. Petitioner was directed to file
his brief with the Court in accordance with Rule 151, and he has
failed to do so.
