                     T.C. Summary Opinion 2008-88



                       UNITED STATES TAX COURT



         DOUGLAS K. AND GAYLE L. BARRETT, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7917-07S.               Filed July 21, 2008.



     Douglas K. Barrett, pro se.

     Brooke S. Laurie, for respondent.




     GOEKE, Judge:    This case was heard pursuant to the

provisions of section 7463 of the Internal Revenue Code in effect

when the petition was filed.1    Pursuant to section 7463(b), the

decision to be entered is not reviewable by any other court, and



     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
                                - 2 -

this opinion shall not be treated as precedent for any other

case.

     This case arises from a petition filed in response to a

notice of deficiency.

     Respondent determined that petitioners failed to report

income of $28,239 on Schedule C, Profit or Loss From Business, of

their joint 2003 Federal income tax return.   Respondent further

disallowed petitioners’ deductions claimed on Schedule A,

Itemized Deductions, and business expense deductions claimed on

Schedule C.

     Respondent conceded the issue of Schedule C unreported

income.   Therefore, we must decide whether: (1) Petitioners are

entitled to the claimed Schedule A deductions, (2) petitioners

are entitled to the claimed Schedule C deductions, and (3)

respondent’s determination of an accuracy-related penalty under

section 6662 was appropriate.

                            Background

     At the time the petition was filed petitioners were

residents of California.

     Petitioners claimed Schedule A deductions of $5,629, a

$9,540 adjustment for cost of goods sold, and Schedule C

deductions of $33,719 which included car and truck expense

deductions for a 2003 Chevrolet truck reportedly used in

conjunction with Mr. Barrett’s contracting business, purchases of
                                - 3 -

small tools, and various other expenses.   Respondent disallowed

these deductions in the notice of deficiency.   Respondent also

determined an accuracy-related penalty pursuant to section

6662(a).

                             Discussion

     Generally, taxpayers bear the burden of proving the

Commissioner’s determinations are erroneous.    Rule 142(a); Welch

v. Helvering, 290 U.S. 111, 115 (1933).    Section 162(a) allows

deductions for ordinary and necessary expenses of carrying on a

trade or business.    Section 7491 regarding the burden of proof is

not applicable in this case because petitioners have failed to

meet the requirements of section 7491(a)(1) and (2).   These

deductions are strictly a matter of legislative grace, and

taxpayers bear the burden of proving they are entitled to any

claimed deductions.    INDOPCO, Inc. v. Commissioner, 503 U.S. 79,

84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440

(1934).

     Section 6001 requires taxpayers to maintain adequate books

and records sufficient to substantiate all costs of goods sold

and all deductions claimed on tax returns.   Petitioners have not

provided any documentation to substantiate the cost of goods sold

reported on their tax return.   Respondent’s examination agent

allowed petitioners a portion of their claimed cost of goods

sold; in view of petitioners’ lack of any substantiating
                                - 4 -

documentation, we find petitioners are not entitled to a greater

amount than that which respondent has already allowed.

     Section 274(d) requires taxpayers to substantiate any

claimed deductions of listed property by adequate records or

sufficient evidence and bars any deduction for an expenditure

governed by section 274 on the basis of unsupported testimony of

the taxpayers or on the basis of the taxpayers’ approximation.2

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

46016 (Nov. 6, 1985).    We have held that where taxpayers’

testimony is general, conclusory, or uncorroborated, the Court is

not required to accept such testimony as sustaining taxpayers’

burden of proof.   See Lerch v. Commissioner, T.C. Memo. 1987-295,

affd. 877 F.2d 624 (7th Cir. 1989); Geiger v. Commissioner, T.C.

Memo. 1969-159, affd. 440 F.2d 688 (9th Cir. 1971).

     At his meeting with respondent’s examination agent, Mr.

Barrett submitted only a purchase agreement for the 2003

Chevrolet truck and one vehicle insurance invoice to substantiate

the depreciation and vehicle expenses, and he provided no

documents to substantiate his claim that the truck had been used

for business purposes.




     2
      Pursuant to sec. 280F(d)(4)(A), “listed property” includes
a passenger automobile, a computer or peripheral equipment, and
any cellular telephone or other similar telecommunications
equipment.
                                 - 5 -

     Mr. Barrett produced no documentation to substantiate the

other claimed Schedule A or C deductions.    His testimony on the

matters was brief and conclusory, offering only statements that

respondent had not produced adequate records to demonstrate his

deficiency and that the claimed business expenses were not

“unusual or alarming for a small business.”    In addition, he

called no witnesses to corroborate his testimony.     Accordingly,

we find petitioners have failed to establish entitlement to the

cost of goods sold and deductions claimed on their Schedules A

and C.

     Respondent determined petitioners are liable for an

accuracy-related penalty under section 6662(a).     Section 6662(a)

and (b)(1) imposes a 20-percent penalty on the portion of an

underpayment attributable to negligence.    Negligence includes any

failure to keep adequate books and records or to substantiate

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

     The Commissioner has the burden of production with respect

to accuracy-related penalties.    Sec. 7491(c).   To meet that

burden, the Commissioner must produce sufficient evidence

indicating that it is appropriate to impose the penalty.     See

Higbee v. Commissioner, 116 T.C. 438, 446 (2001).     Once the

Commissioner meets his burden of production, the taxpayer must

come forward with persuasive evidence that the Commissioner’s

determination is incorrect.   Rule 142(a); Higbee v. Commissioner,
                                 - 6 -

supra at 446-447.   The taxpayer may meet this burden by proving

that he or she acted with reasonable cause and in good faith.

See sec. 6664(c)(1); sec. 1.6664-4(a) and (b)(1), Income Tax

Regs.

     We conclude that respondent has met his burden of production

under section 7491(c).   The record shows that petitioners failed

to keep adequate books and records or to substantiate the claimed

cost of goods sold and deductions properly.       As discussed above,

Mr. Barrett offered no testimony or documentation to establish

reasonable cause for failing to substantiate petitioners’ claimed

cost of goods sold and deductions.       On the basis of our

examination of the entire record before us, we find petitioners

have failed to carry their burden of establishing that they are

not liable for the 2003 accuracy-related penalty under section

6662(a).

     To reflect the foregoing,


                                              Decision will be entered

                                         under Rule 155.
