                         T.C. Memo. 2009-304



                      UNITED STATES TAX COURT



                   KHADIJA DUMA, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11042-07.              Filed December 23, 2009.



     Khadija Duma, petitioner.

     Anne W. Bryson, Douglas Dahl, and Scott Hovey, for

respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION


     GUSTAFSON, Judge:   This case is before the Court on

petitioner Khadija Duma’s petition, pursuant to section 6213(a),1



     1
      Except as otherwise noted, all section references are to
the Internal Revenue Code (26 U.S.C.), and all Rule references
are to the Tax Court Rules of Practice and Procedure.
                                    -2-

for redetermination of her Federal income tax deficiencies for

2003 and 2004, which the Internal Revenue Service (IRS)

determined to be as follows:

                                      Additions to Tax
 Year     Deficiency   Sec. 6651(a)(1) Sec. 6651(a)(2)   Sec. 6654(a)

 2003      $18,548         $2,852          $1,965            $310
 2004       11,953          2,507           1,059             317

     Respondent has conceded certain issues that contributed to

those deficiencies,2 and Ms. Duma has conceded others,3 so that

the remaining issues we must decide are:

     1.     Whether in 2003 Ms. Duma received wages from her

employer in the amount of $92,798 (rather than $66,000, as she

alleges).    We find that she received wages in the larger amount.



     2
      Respondent concedes that Ms. Duma is entitled to mortgage
interest deductions of $23,491 in 2003 and $18,043 in 2004; that
she is not liable for the section 6654 estimated tax addition to
tax for 2003; that she paid $450 in student loan interest for
2004; and that in 2004 she received Social Security benefits of
$16,288 (not the $27,020 determined in the notice of deficiency,
nor a larger amount of $50,564 which respondent’s records
allegedly stated).
     3
      Ms. Duma does not dispute: that in 2003 she received $12
in interest income from her credit union; that in 2004 she
received dividends of $45; that in 2004 she received
pension/annuity payments of $1,163 from Fidelity Investments;
that in 2004 she received wages of $9,693 from her employer; and
that in 2004 she received disability income of $16,288 from the
Social Security Administration. At one point during the pendency
of this case, Ms. Duma expressed an intention to prove medical
expenses (related to her disability) for which she would be
entitled to claim itemized deductions, but at trial she stated
that she would not attempt such proof.
                                -3-

     2.   Whether in 2004 Ms. Duma received $30,432 in proceeds

from sales of stock (rather than $11,000, as she alleges).    We

find that she received proceeds in the larger amount.

     3.   Whether Ms. Duma filed tax returns for 2003 and 2004,

as she alleges.   We find that she did not file returns and that

she is therefore liable for the failure-to-file addition to tax

under section 6651(a)(1) for both years.

     4.   Whether Ms. Duma is liable for the addition to tax for

failure to pay under section 6651(a)(2).    We find that she is

liable for both years.

     5.   Whether Ms. Duma is liable for the addition to tax for

failure to pay estimated tax under section 6654(a) for 2004.      We

find that she is.

                         FINDINGS OF FACT

     The parties have stipulated some of the facts, and we

incorporate by this reference the stipulation of facts filed

October 16, 2009, and the attached exhibits.    At the time

Ms. Duma filed her petition, she resided in Washington, D.C.

Ms. Duma’s Employment

     Before and during the years in issue (2003 and 2004),

Ms. Duma was employed by Federal National Mortgage Association

(FNMA, commonly called “Fannie Mae”).   At some point in the years

in issue she became disabled and stopped working.    She testified

about a particular date in 2003 being her last day, but she
                                 -4-

presented no corroborating evidence, and FNMA reported paying

wages to her in 2004.4    We are therefore unable to find precisely

when she stopped working.

Compensation Paid by FNMA

     FNMA paid Ms. Duma wages and other benefits for her work.

FNMA direct-deposited her wages into her account at the FNMA

employees’ credit union.

     Pursuant to her employment arrangement with FNMA, Ms. Duma

was entitled to, and eventually received, first short-term

disability (STD) and then long-term disability (LTD) benefits.

The record does not show the dates that she received such

payments.   Ms. Duma did not offer plan documents for either of

these benefits, but she testified that FNMA itself paid the STD

benefits and that a third party (UNUM) paid the long-term.    The

record does not include reliable information about the nature or

source of the payments.

     FNMA also had a program by which it lent money to employees

for home purchases and then forgave the loans.    Ms. Duma did not

present any documentation to describe the terms of this program.

She testified that FNMA made such a loan to her, that she had not

reported the loan proceeds as income, that FNMA had later


     4
      Ms. Duma testified that she received short-term disability
benefits from her last day at FNMA in 2003 through some time in
2004 and implied that the FNMA payments reported as wages in 2004
may have been disability payments, but she did not introduce any
further evidence to clarify this question.
                                 -5-

forgiven the loan pursuant to the program, and that she did not

report the forgiven amount as income.    She initially testified

that the forgiveness occurred in the years in issue, but then

testified that it must have been in a later year.    The record

does not show whether in 2003 or 2004 FNMA forgave loans it had

made to Ms. Duma.

     FNMA paid compensation to Ms. Duma in the amounts of $92,798

for 2003 and $9,693 for 2004.   Ms. Duma did not prove her FNMA

wage amount to be lower than $92,798 in 2003, and she did not

dispute the $9,693 amount in 2004.     FNMA reported those amounts

to the IRS, and the IRS used those figures in determining

Ms. Duma’s income tax liability.

Stock Benefit Payments From Equiserve

     Ms. Duma received an FNMA stock benefit through what was

apparently an employee stock option plan.    She presented no plan

documents or other written explanation of this benefit.    She

testified that shares awarded through this plan could be taken

either as stock or as cash.   At some point or points during 2003

and 2004, she received a stock benefit and elected the cash

option.    When an employee elected the cash option, payments were

made by Equiserve, Inc., which FNMA had retained to manage the

benefit.

     In 2004 Equiserve made four payments to Ms. Duma, in the

amounts of $1,619, $7,706, $9,507, and $11,600, which totaled
                                  -6-

$30,432.   Ms. Duma did not prove that her income in 2004 from

this stock benefit was lower than $30,432.      Equiserve reported

those payments to the IRS, and the IRS included that total in

income when determining Ms. Duma’s income tax liability.

Ms. Duma’s Filings With The IRS

     The record does not show whether Ms. Duma filed a return for

2002, the year immediately preceding the years in issue, and

there is some evidence that she did not do so:      The IRS’s

substitute for return for each of the years 2003 and 2004

contains an entry that reads:   “PRIOR YEAR RETURN: 1996”.

     On the due dates for the 2003 and 2004 returns at issue in

this case--i.e., on April 15, 2004 and 2005--Ms. Duma left her

home, boarded a bus, and rode to the local IRS office, where she

completed and filed a form to receive an automatic four-month

extension to file her tax return.       The IRS’s records show timely

filings of requests for extensions and thus corroborate

Ms. Duma’s testimony to this effect.

     However, Ms. Duma did not prove by a preponderance of the

evidence that she filed her tax return for 2003 or 2004.        The

IRS’s records reflect no such filings, and Ms. Duma has no copy

of the returns and no mailing receipt.      We find that she did not

file a tax return for 2003 or 2004.
                                -7-

IRS Action

     When the IRS did not receive returns for Ms. Duma, the IRS

prepared, pursuant to section 6020(b), a substitute for return

(SFR) for each of the years 2003 and 2004, using the information

provided to it by third-party payors.   The IRS then issued to

Ms. Duma, on February 20, 2007, two statutory notices of

deficiency--one each for the years 2003 and 2004--determining

deficiencies in her income tax for both those years and

determining additions to tax for failure to file (under

section 6651(a)(1)), for failure to pay tax (under

section 6651(a)(2)), and for failure to make estimated tax

payments (under section 6654(a)).

Pretrial Proceedings

     On May 18, 2007, Ms. Duma timely filed her petition

commencing this case.   The case was set for trial at the calendar

commencing eleven months later on April 21, 2008, in Washington,

D.C.; but when Ms. Duma appeared at that calendar call, she

requested a continuance so she could have more time to assemble

additional information.   The Court granted a continuance.

     On June 3, 2008, Ms. Duma filed a bankruptcy petition in the

U.S. Bankruptcy Court for the District of Columbia, and shortly

thereafter proceedings in this case were stayed pursuant to

11 U.S.C. section 362(a)(8).   On November 7, 2008, the bankruptcy

court granted Ms. Duma a discharge, and proceedings here resumed
                                -8-

on January 2, 2009.   On May 12, 2009, the Court issued its notice

that this case was set for trial at a calendar commencing five

months later on October 13, 2009--i.e., two years and five months

after Ms. Duma first filed her petition--and issued its standing

pretrial order, directing both parties to (among other things)

exchange exhibits and submit pretrial memoranda no later than

14 days before the calendar call.

     By October 1, 2009, the Court had received respondent’s

pretrial memorandum but none from Ms. Duma.   Respondent’s report

stated that Ms. Duma was not cooperating in providing to

respondent the information that she would rely on at trial.     On

that day the Court initiated a telephone conference with the

parties to discuss the case.   The Court told Ms. Duma that she

was overdue for exchanging exhibits and should do so immediately.

She responded that her disability made it difficult to do so, and

the Court ordered her to be sure to bring her exhibits to the

calendar call.   Ms. Duma spoke of the unavailability of some

documents that she might want to present, and the Court suggested

that she consider what alternative documents might serve,

mentioning in particular bank statements, credit card statements,

calendars, log books, or day books.

     Ms. Duma appeared at the calendar call on October 13, 2009,

apparently carrying with her some documents (which she showed to

respondent’s counsel), and she asked for more time to obtain
                                  -9-

information.   At her request, the Court scheduled her trial for

the afternoon of the last day of the calendar--Friday,

October 16, 2009.     When Ms. Duma appeared at that time, however,

she had no documents with her, neither the documents she had

brought to the calendar call nor the additional documents she had

hoped to obtain.     The only documents offered into evidence at the

trial were:

 Exhibit No.   Year                       Description

     1-J       2003     Notice of deficiency
     2-J       2004     Notice of deficiency
     3-R       2003     Form 4340, Certificate of Assessments,
                        Payments, and Other Specified Matters
     4-R       2004     Form 4340, Certificate of Assessments,
                        Payments, and Other Specified Matters
     5-R       2004     Proposed individual income tax assessment
                        (30-day letter) with attached sec. 6020(b)
                        certification and return
     6-R       2003     Proposed individual income tax assessment
                        (30-day letter) with attached sec. 6020(b)
                        certification and return

                                OPINION

I.   Income Issues

     A.    Burden of Proof

     The IRS’s deficiency determinations are generally presumed

correct; and Ms. Duma, as the petitioner in this case, has the

burden of establishing that the determinations in the notices of

deficiency are erroneous.    See Rule 142(a); Welch v. Helvering,

290 U.S. 111, 115 (1933).    Ms. Duma had two and a half years

(between petition and trial) to assemble her evidence.    In a
                                   -10-

pretrial telephone conference the Court reminded her of her

burden and suggested to her the types of information she might

consider bringing as proof of her contentions.     When, at the

calendar call, she requested additional time to find information,

the Court allowed her the latest trial time in the week-long

calendar.    Despite all that, she produced no documents whatsoever

to corroborate any aspect of her testimony on the disputed

issues.    She thus failed to carry her burden of proof.

     B.     Ms. Duma’s Liability

            1.   FNMA Compensation

     The IRS received information from FNMA showing wages of

$92,798.    Ms. Duma gave oral testimony that she received less

than that total, but she did not corroborate her recollection

with any statements from FNMA, any records from her credit union

account into which the amounts would have been deposited, or any

other records of any sort.    At a calendar call in this Court held

April 21, 2008, Ms. Duma stated:      “For 2003, my annual income was

over $92,000.”    By the time of the trial in October 2009,

however, Ms. Duma was disputing the figure for 2003 and said it

was not $92,798 but only approximately $66,000.     At some point

before trial she showed to respondent’s counsel several pay stubs

and a printout of some sort that showed the smaller figure, but

respondent’s counsel stated that he had not been able to identify

or authenticate the printout, and Ms. Duma did not offer the
                                -11-

printout or the pay stubs at trial.     She testified that she

probably had, somewhere amid voluminous records, her employee

copy of her Form W-2, Wage and Tax Statement, issued by FNMA for

2003, but she did not find it before trial.

     Ms. Duma’s testimony indicated two possible reasons that the

correct amount might be larger than she supposed:     It is possible

that the disputed income figure for 2003 includes STD payments

that she received but that were not on her printout that she

showed to respondent’s counsel, and it is also possible that some

of the income amounts reported by FNMA for 2003 or 2004 were for

loan forgiveness.   In any event, she did not prove that her

compensation was less than FNMA reported.

          2.    Stock Benefit

     The IRS received information from Equiserve showing stock

proceeds of $30,432.   Ms. Duma disputes the figure and says it

was instead approximately $11,000.     She presented no

documentation--neither statements from FNMA or Equiserve, nor

records from her account at the credit union--to corroborate the

lower amount.

     Ms. Duma speculates, and it is possible, that some of the

difference between Equiserve’s total and her lower figure is

accounted for by the stock’s being attributed to her on a date

when the value of the stock was higher, but then being sold (and

cash paid to her) on a later date when the value had fallen.
                                   -12-

Even if her uncorroborated explanation were correct and accounted

for the entire difference, it appears on the record before us

that the stock itself would have been income to her when it was

initially awarded (and in the amount of its then value), and she

neither argued for nor established any entitlement to a deduction

for any loss on the sales.     However, it seems more likely that

her impression of having received approximately $11,000 is the

result of her recalling the fourth Equiserve payment of $11,600

and forgetting the other three.      In any event, she did not prove

that she received less than $30,432 in stock proceeds from

Equiserve.

II.   Addition-to-Tax Issues

      A.    Burden of Production

      Section 7491(c) provides that the Commissioner “shall have

the burden of production * * * with respect to the liability of

any individual for any * * * addition to tax”.     “The

Commissioner’s burden of production under section 7491(c) is to

produce evidence that it is appropriate to impose the relevant

* * * addition to tax”.    Swain v. Commissioner, 118 T.C. 358, 363

(2002); see also Higbee v. Commissioner, 116 T.C. 438, 446

(2001).    If a taxpayer files a petition alleging some error in

the determination of an addition to tax, the taxpayer’s challenge

will succeed unless the Commissioner produces evidence that the
                                  -13-

addition to tax is appropriate.     Swain v. Commissioner, supra at

363-365.

     B.    Ms. Duma’s Liability

           1.   Additions to Tax for Failure To File

     Section 6651(a)(1) imposes an addition to tax “[i]n case of

failure * * * to file any return”.       We have found that Ms. Duma

failed to file her returns for 2003 and 2004.      She did file

requests for extensions, but her uncorroborated testimony that

she filed returns was not persuasive.

     Ms. Duma claims that late in the day on April 15, 2005,

after having made her first trip to the IRS to file the 2004

extension form, she finished filling out her tax returns for 2003

and 2004 (but made no copy of the returns for herself because she

had no spare blank forms).   She says that the returns she

prepared showed that she was entitled to small refunds.      She says

that she stapled together the two returns for 2003 and 2004 and

put them into a single envelope for mailing.      She testified that,

on April 15, 2005, she made a second bus trip to the same

neighborhood, where the IRS office is near the post office.       At

the post office there, last-minute filers of tax returns walk and

drive by and mail their returns by dropping them in a bucket that

a postal worker holds out for that purpose.      She testified that

she mailed her 2003 and 2004 returns in that fashion.
                               -14-

     Ms. Duma’s testimony is problematic.   Her disability (she

seems to say) made it difficult for her to run the errand of

photocopying the return or to obtain a second blank return she

could complete and keep as her copy; and yet she went to the

substantial trouble of making two separate bus trips to the same

neighborhood on the same day--the first in order to file the

request for an extension just in case she did not finish the 2004

return on time, and the second in order to file her returns for

both 2003 and 2004.   Given Ms. Duma’s condition, this elaborate

effort is unlikely.   And if she did make a first trip to file her

extension request, with an expectation of filing the returns that

day, then it would seem she could have obtained the spare blank

forms that she now claims she did not have.

     The IRS’s transcripts of Ms. Duma’s accounts for 2003 and

2004 do not show the filing of any returns.   She claims that when

she later made inquiries with the IRS, personnel told her that

her returns had been rejected because they had been stapled and

because she had used “white-out” fluid to make corrections on

them.   She says that those personnel told her to submit duplicate

originals, but that she did not do so.   It is difficult to

account for her refusal to file a duplicate original after that

alleged conversation.
                                 -15-

     It is not impossible that Ms. Duma’s account is true, but

she did not prove it by a preponderance of the evidence.     We

therefore find that she did not file her returns.

     Section 6651(a)(1) provides that the addition will not be

due if the failure to file “is due to reasonable cause and not

due to willful neglect”.    (The Commissioner does not have the

obligation to introduce evidence regarding reasonable cause or

substantial authority.     Higbee v. Commissioner, supra at 446-

447.)    Ms. Duma does not allege any “reasonable cause” excuse,

and we find here no circumstances that would constitute

reasonable cause.

     The amount of the failure-to-file addition is 5 percent of

“the amount required to be shown as tax” for each month of the

delinquency, “not exceeding 25 percent in the aggregate”.5    Sec.

6651(a)(1).    The specific amount of Ms. Duma’s failure-to-file

addition for each year will be calculated after the amount of her

tax liability has been redetermined, taking into account the

parties’ concessions, see supra notes 2 and 3, and our findings.




     5
      Section 6651(c)(1) limits the section 6651(a)(1) failure-
to-file addition to tax by subtracting the section 6651(a)(2)
failure-to-pay addition (0.5 percent), which is discussed below
in part II.B.2, from the section 6651(a)(1) failure-to-file
addition (5.0 percent) for any month that additions to tax apply
under both section 6651(a)(1) and (a)(2).
                                -16-

            2.   Additions to Tax for Failure To Pay

     Section 6651(a)(2) imposes an addition to tax “[i]n case of

failure * * * to pay the amount shown as tax on any return”,

including an income tax return.    This addition does not accrue

unless a tax amount is “shown on” a return, so the Commissioner

must introduce evidence that the tax was shown on a Federal

income tax return to satisfy his burden of production under

section 7491(c).    Cabirac v. Commissioner, 120 T.C. 163 (2003).

When a taxpayer has not filed a return, the section 6651(a)(2)

addition to tax may be imposed if the IRS prepared an SFR that

meets the requirements of section 6020(b).    Wheeler v.

Commissioner, 127 T.C. 200, 208-209 (2006), affd. 521 F.3d 1289

(10th Cir. 2008).   In this case the IRS satisfied its burden by

offering the SFR for each year (along with a signed “IRC

Section 6020(b) ASFR Certification”), and Ms. Duma suggests no

defect in the agency’s procedure.

     As with the failure-to-file addition, the statute provides

that the addition for failure to pay will not be due if the

failure “is due to reasonable cause and not due to willful

neglect”.   Sec. 6651(a)(2).   However, Ms. Duma has not alleged

any “reasonable cause” for her failure to pay, and we find none.

     The amount of the failure-to-pay addition is one-half of

1 percent of “the amount shown as tax” for each month of the

delinquency, “not exceeding 25 percent in the aggregate”.    The
                                -17-

specific amount of Ms. Duma’s failure-to-pay addition for each

year will be calculated, according to this formula, after the

amount of her tax liability has been redetermined, taking into

account the parties’ concessions, see supra notes 2 and 3, and

our findings.

            3.   Addition to Tax for Failure To Pay Estimated Tax

       Section 6654(a) imposes an addition to tax “in the case of

any underpayment of estimated tax by an individual”.    A taxpayer

has an obligation to pay estimated tax for a particular year if

she has a “required annual payment” for that year.    Sec. 6654(d).

A “required annual payment” is defined in section 6654(d)(1)(B)

as--

       the lesser of--

                 (i) 90 percent of the tax shown on the
            return for the taxable year (or, if no return is
            filed, 90 percent of the tax for such year), or
                               -18-

                (ii) 100 percent of the tax shown on the
           return of the individual[6] for the preceding
           taxable year.

     Clause (ii) shall not apply if * * * the individual did
     not file a return for such preceding taxable year.
      [Emphasis added.]

Thus, respondent’s burden of production under section 7491(c)

requires him to produce, for each year for which the addition is

asserted, evidence that the taxpayer had a required annual

payment under section 6654(d), and in order to do so he must

demonstrate the tax shown on the taxpayer’s return for the

preceding year, unless he can show that the taxpayer did not file

a return for that preceding year.     Wheeler v. Commissioner, supra

at 212.   For 2004 the record establishes that Ms. Duma “did not

file a return for such preceding taxable year”--i.e., 2003--so

respondent has shown a “required annual payment” for 2004 equal

to 90 percent of the liability for that year.



     6
      Notwithstanding section 6020(b)(2), which provides that an
SFR prepared and executed by the IRS pursuant to section 6020(b)
“shall be prima facie good and sufficient for all legal
purposes”, an SFR is not a “return of the individual” (emphasis
added) for purposes of section 6654(d)(1)(B)(ii). Cf. Swanson v.
Commissioner, 121 T.C. 111, 123-124 (2003) (“An SFR prepared
under section 6020(b) does not constitute a return of the
taxpayer for purposes of 11 U.S.C. sec. 523(a)(1)(B)” (citing
Bergstrom v. United States, 949 F.2d 341, 343 (10th Cir. 1991)));
Spurlock v. Commissioner, 118 T.C. 155 (2002) (a “return * * *
made by the taxpayer” under sec. 6211(a)(1)(A) does not include
an SFR executed under sec. 6020(b)); Millsap v. Commissioner,
91 T.C. 926, 937 (1988) (to give “a rational meaning for the word
‘individual’ in section 6013(b)”, an SFR prepared under
section 6020(b) is not a “separate return” under
sec. 6013(b)(1)).
                                 -19-

     At trial Ms. Duma indicated that she did not know about an

obligation to pay estimated tax.    However, the section 6654(a)

addition to tax is mandatory and must be imposed unless a

statutory exception applies, and there is no exception provided

for ignorance.   See Recklitis v. Commissioner, 91 T.C. 874, 913

(1988).   Reasonable cause is not an excuse for underpayment of

estimated tax.   Sec. 1.6654-1(a)(1), Income Tax Regs.     Section

6654(e)(3)(A) does provide that a taxpayer may avoid this

addition if she can show that “by reason of casualty, disaster,

or other unusual circumstances the imposition of such addition to

tax would be against equity and good conscience”, but Ms. Duma

made no such showing.

     Consequently, the addition to tax for failure to pay

estimated tax is sustained for 2004, in an amount yet to be

determined.

     To reflect the foregoing,


                                             Decision will be entered

                                        under Rule 155.
