                  T.C. Summary Opinion 2009-97



                      UNITED STATES TAX COURT



          ALEXANDER DOMINIC SENULIS, JR., Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11204-07S.               Filed June 22, 2009.



     Alexander Dominic Senulis, Jr., pro se.

     Benjamin J. Peeler, for respondent.



     GOLDBERG, 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.   Pursuant to section

7463(b), the decision to be entered is not reviewable by any

other court, and this opinion shall not be treated as precedent

for any other case.   Unless otherwise indicated, subsequent

section references are to the Internal Revenue Code in effect for
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the year in issue, and all Rule references are to the Tax Court

Rules of Practice and Procedure.

     Respondent determined a deficiency in petitioner’s Federal

income tax for 2002 of $4,462 together with additions to tax

under sections 6651(a)(1) and (2) and 6654(a) for failure to

file, failure to pay amount due, and failure to pay estimated

income tax of $910.35, $1,011.50, and $133.63, respectively.      The

issues for decision are:   (1) Whether petitioner was temporarily

away from home during 2002 and thus entitled to deduct expenses

for airfare, automobile, cellular telephone use, computer

supplies, Internet service, meals and incidentals (M&IE), and

postage; and (2) whether additions to tax are applicable for 2002

for failure to file, failure to pay amount due, and failure to

pay estimated income tax under sections 6651(a)(1) and (2) and

6654(a), respectively.

                             Background

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

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.    Petitioner resided in

Louisiana when the petition was filed.

     Petitioner has a long history of employment in and around

Destrehan, Louisiana.    He spent approximately 10 years, from 1989

through 1999, working as a self-employed automobile claims field

mechanical inspector and manager.   Petitioner ended this business
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because of physical injuries he had received in an automobile

accident.   Petitioner then started a business that provided

extended warranties for automobiles, where he administered

warranty claims.   This business terminated in 2001 because the

insurance company that petitioner was associated with went into

receivership.

     Petitioner was then introduced by an associate to Mr. Horn,

the owner of Managed Healthcare, Inc. (MHI), a medical insurance

administration company in Houston, Texas.   MHI had been using

multiple redundant systems for the processing of medical claims.

MHI wanted to merge these systems into a single coherent system

without going through the laborious process of reentering all of

the data.   Individuals whom Mr. Horn consulted regarding the

project advised him that the data had to be reentered, because

they questioned the feasibility of using available computer

technology to merge the various medical recordkeeping systems.

However, petitioner believed that he could merge the systems

without reentering the data.

     Petitioner was contracted by MHI on a month-to-month basis

as an independent contractor.   He began to merge the existing

systems in January 2002.   The project completion date was

unknown; however, petitioner estimated that it would take

approximately 9 to 10 months to complete.   It was understood

that, at the latest, petitioner’s services would be terminated
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when the project was completed; however, because petitioner was

contracted month to month, his services could be terminated

during any given month.   Petitioner was paid $2,000 per month for

his services.   MHI provided petitioner with a cubicle in which to

set up his own computer equipment and supplies.   Petitioner was

not reimbursed by MHI for any of his expenses.    In order to merge

the various medical recordkeeping systems into a single coherent

system petitioner used AT&T Worldnet Internet service to transfer

data between San Antonio, Austin, and Houston.

     While working at MHI, petitioner lived with his mother in

Pasadena, Texas, a suburb of Houston, to minimize his expenses.

Petitioner had his mail forwarded to his mother’s house by the

U.S. Postal Service because his mail was being returned to sender

from his post office box in Louisiana.   Petitioner had only a

bedroom at his mother’s residence and did not maintain any of his

computer equipment or business records there.

     During this time petitioner continued to maintain a leased

townhouse in Destrehan, Louisiana, with his companion, whose

surname is not in the record and who hereinafter will be referred

to as Ms. M.    The Destrehan townhouse was where he maintained his

home office, a separate computer, and certain business records.

Although the lease was in Ms. M’s name, petitioner was listed on

the lease as living there.   Petitioner has resided at these

premises for approximately 20 years, and they became his
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principal place of business beginning in 1989.   All of the

accounts for utility and home telephone services were in

petitioner’s name, and he paid for these services and all of the

rent while he was working.   Petitioner also maintained cellular

telephone service through Verizon Wireless and used the service

for both business and personal use.

     The distance from the shared townhouse in Destrehan,

Louisiana, to his mother’s house in Pasadena, Texas, is

approximately 320 miles.   During the 13 months that petitioner

worked at MHI, he made nine round trips to Destrehan, Louisiana,

to research new software and hardware technology, to maintain

business records related to his consulting business, to find new

clients that might need work similar to the work that petitioner

was performing at MHI, and for personal reasons.

     In January 2003 the project at MHI “fell apart”, and

petitioner’s employment at MHI terminated.   The record is silent

as to where petitioner worked and lived during the rest of 2003.

In years in which petitioner had income, he filed State of

Louisiana income tax returns and his Federal income tax returns

using the Destrehan, Louisiana, address.

     Because respondent had no record of petitioner’s filing a

Federal income tax return, respondent prepared a substitute for

return using third-party information reported to the IRS for

2002.   In computing the Federal income tax deficiency respondent
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allowed petitioner a standard deduction of $4,700, one personal

exemption of $3,000, and prepaid credits of $416.    The income

respondent determined is not in dispute.    However, petitioner

contests the deficiency, alleging that he incurred deductible

business expenses in 2002.

                              Discussion

     Deductions are a matter of legislative grace, and the

taxpayer bears the burden of proving his entitlement to a

deduction.    Rule 142(a)(1); INDOPCO, Inc. v. Commissioner, 503

U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S.

435, 440 (1934).    A taxpayer is required to maintain records

sufficient to establish the amounts of his or her income and

deductions.     Sec. 6001; sec. 1.6001-1(a), (e), Income Tax Regs.

Taxpayers may deduct only the business expenses that they can

substantiate.     Ronnen v. Commissioner, 90 T.C. 74, 102 (1988).

     Pursuant to section 7491(a), the burden of proof as to

factual matters shifts to the Commissioner under certain

circumstances.    Petitioner has neither alleged that section

7491(a) applies nor established his compliance with its

requirements.    Petitioner therefore bears the burden of proof.

As to the additions to tax, section 7491(c) places the burden of

production on respondent.    See Higbee v. Commissioner, 116 T.C.

438, 446 (2001).
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I.   Business Expenses

      A.   Meals and Incidental, Airfare, and Automobile Expenses

      Petitioner claims that he is entitled to deduct meals and

incidental, airfare, and automobile expenses, contending that

they were ordinary and necessary business expenses incurred while

away from home as a result of the project at MHI.    Respondent

contends that petitioner’s work outside the area of his Louisiana

residence was indefinite, as opposed to temporary.    Respondent

argues that petitioner’s tax home was in Texas, where he was

working indefinitely, and as a result all travel and meals and

incidental expenses are nondeductible personal expenses.

      In general, a taxpayer may deduct ordinary and necessary

expenses paid or incurred in connection with the operation of a

trade or business.    Sec. 162(a); Boyd v. Commissioner, 122 T.C.

305, 313 (2004).     However, section 262 disallows any deduction

for personal, living, or family expenses, including meals and

travel expenses.   Normally, transportation expenses incurred

between one’s residence and one’s principal place of business (a

job site) are referred to as commuting expenses and are

nondeductible personal expenses under section 262.     Fausner v.

Commissioner, 413 U.S. 838 (1973); Commissioner v. Flowers, 326

U.S. 465 (1946).

      Under an exception to this rule, a taxpayer may deduct meals

and travel expenses associated with employment that is temporary,
                                - 8 -

as opposed to indefinite, in duration when the taxpayer is away

from home.    Sec. 162(a)(2); Peurifoy v. Commissioner, 358 U.S. 59

(1958).   A taxpayer’s tax home is generally the area of the

taxpayer’s principal place of employment.   However, a taxpayer’s

tax home may be the taxpayer’s personal residence if the

taxpayer’s employment away from home is temporary, as opposed to

indefinite, and if the taxpayer has a principal place of business

in the vicinity of the taxpayer’s personal residence.      Farran v.

Commissioner, T.C. Memo. 2007-151.

     In 1992 Congress amended section 162(a) for costs paid or

incurred after December 31, 1992, as follows: “For purposes of

paragraph (2), the taxpayer shall not be treated as being

temporarily away from home during any period of employment if

such period exceeds 1 year.”   Energy Policy Act of 1992, Pub. L.

102-486, sec. 1938(a), 106 Stat. 3033.   However, if the

employment is initially expected to last for 1 year or less and

at some later point the employment is expected to exceed 1 year,

then the employment will be treated as temporary until the

earlier of when the taxpayer’s reasonable expectations change or

1 year.   Johnson v. Commissioner, T.C. Memo. 1999-153; Rev. Rul.

93-86, 1993-2 C.B. 71.

     To decide the primary issue we must flesh out the

definitions that have been assigned to temporary and indefinite

employment.   “A word is not a crystal, transparent and unchanged,
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it is the skin of a living thought and may vary greatly in color

and content according to the circumstances and the time in which

it is used.”     Towne v. Eisner, 245 U.S. 418, 425 (1918).

     Temporary employment has been defined as that which is

forseeably terminable or lasting for a relatively short, fixed

duration.    Boone v. United States, 482 F.2d 417, 419 (5th Cir.

1973).   When a taxpayer reasonably expects to be employed for a

short or temporary period and travels a long distance from his

personal residence to the place of employment, the reasonable

inference is that the taxpayer’s choice of residence is dictated

by business necessity.     Frederick v. United States, 603 F.2d

1292, 1295 (8th Cir. 1979).

     Indefinite employment is employment where the prospect is

that the work will continue for an indeterminate and

substantially long period.     Boone v. United States, supra at 419

(citing Cockrell v. Commissioner, 321 F.2d 504 (8th Cir. 1963),

affg. 38 T.C. 470 (1962), and Wright v. Hartsell, 305 F.2d 221

(9th Cir. 1962)).    When a taxpayer reasonably expects to be

employed in a location for a substantial or indefinite period of

time, the reasonable inference is that the taxpayer’s choice of

residence is a personal decision, unrelated to any business

necessity.     Frederick v. United States, supra at 1294-1295.

Another relevant consideration is the taxpayer’s prospects for
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continued employment away from the taxpayer’s personal residence.

Id. at 1295.

     We must examine the facts available to the taxpayer when he

began the project to determine whether the employment was for a

temporary or an indefinite period.       Id. at 1296 (citing Peurifoy

v. Commissioner, supra, and Tucker v. Commissioner, 55 T.C. 783,

786 (1971)).

     The following facts demonstrate that petitioner’s assignment

was temporary.    Before 2002 petitioner had maintained a personal

residence, the rented townhouse, in Louisiana for at least 20

years and had a lengthy history of employment in Louisiana.

Petitioner left Louisiana for the purpose of working on a project

in Houston, Texas, that no other party had been willing to

undertake.     Petitioner was contracted on a month-to-month basis

to perform services for MHI on a project that was estimated to

last less than a year, if technologically feasible.      Presumably,

the purpose of this arrangement was to allow MHI the flexibility

to abandon the project if it chose to do so, because the

technological feasibility of the project was questionable.

     When petitioner accepted the employment he expected the

project to last for approximately 9 to 10 months, but because of

technological delays the project ultimately lasted for 13 months.

Petitioner had no prospects for continued employment with MHI in

Texas, following the completion or termination of the project.
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Because of petitioner’s expectation that the project would last

for less than 12 months, and in an effort to reduce expenses, he

decided to live in a bedroom at his mother’s house in Texas.

     Petitioner continued to maintain his home office, computer,

and business records in Louisiana and periodically returned to

Louisiana for the purpose of researching new hardware and

software technology, maintaining business expense records, and

attempting to develop his client base and business contacts, as

well for as personal reasons.    Petitioner also paid many of the

bills relating to the Louisiana townhouse that he shared with Ms.

M.   When petitioner undertook the project he intended to return

to Louisiana after the completion of the project in order to

perform the same type of work for similarly situated clients.

     In summary, even though the project ultimately lasted for 13

months, we believe that at the time he undertook the project

petitioner had a reasonable expectation that the project would

last for less than 12 months and that the exigencies of business

necessitated that he maintain his personal residence in

Louisiana.   Therefore, on the basis of the relevant facts and

circumstances, we find that petitioner’s self-employment with MHI

was temporary for 12 months, January through December 2002, and

that during this period petitioner’s tax home remained in

Destrehan, Louisiana.
                              - 12 -

     We have determined that petitioner’s self-employment was

temporary and petitioner’s tax home was Destrehan, Louisiana.

Petitioner must also show that the expenses were reasonable and

necessary and incurred in the pursuit of a trade or business.

See sec. 162(a)(2); Commissioner v. Flowers, 326 U.S. at 470.      To

be “ordinary” the expense must be of a common or frequent

occurrence in the type of business involved.   Deputy v. du Pont,

308 U.S. 488, 495 (1940).   To be “necessary” an expense must be

“appropriate and helpful” to the taxpayer’s business.      Welch v.

Helvering, 290 U.S. 111, 113 (1933).   Additionally, the

expenditure must be “directly connected with or pertaining to the

taxpayer’s trade or business”.   Sec. 1.162-1(a), Income Tax Regs.

     Petitioner’s travel expenses were necessitated by the fact

that he continued to maintain his home office, computer, and

business records in Louisiana and periodically returned to

Louisiana, primarily for the purpose of researching new hardware

and software technology, performing administrative functions

relating to his business, and attempting to develop his client

base and business contacts.   Petitioner’s meals and incidental

expenses were necessitated by the fact that he was required to be

away from his tax home because of a period of temporary

employment.   On the basis of the relevant facts, we find that

petitioner’s expenses for travel and meals and incidentals were

ordinary and necessary and directly connected with his business.
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     However, petitioner must also adequately substantiate his

expenses.    See sec. 6001; sec. 1.6001-1(a), (e), Income Tax Regs.

If a taxpayer establishes that an expense is deductible but is

unable to substantiate the precise amount, we may estimate the

amount, bearing heavily against the taxpayer whose inexactitude

is of his own making.     Cohan v. Commissioner, 39 F.2d 540, 543-

544 (2d Cir. 1930).     The taxpayer must nonetheless present

sufficient evidence for the Court to form an estimate because

without such a basis, any allowance would amount to unguided

largesse.     Williams v. United States, 245 F.2d 559, 560-561 (5th

Cir. 1957); Vanicek v. Commissioner, 85 T.C. 731, 742-743 (1985).

     With respect to travel and M&IE, taxpayers must maintain an

account book, diary, log, statement of expenses, or other similar

record that provides the following information:     (1) The amount

of the expense; (2) the time and place that the expense was

incurred; and (3) the business purpose of the expense.     See sec.

274(d).     However, pursuant to Rev. Proc. 2001-47, 2001-2 C.B.

332, and Rev. Proc. 2002-63, 2002-2 C.B. 691, a self-employed

taxpayer may use a Federal per diem M&IE rate in lieu of

substantiation for purposes of section 1.274-5, Income Tax Regs.,

if the taxpayer substantiates the time, place, and business

purpose of each day or partial day of travel for which M&IE is

claimed.     A taxpayer who is unable to meet the adequate records

standard may be able to substantiate these expenses with his own
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statements containing specific details of each element in

conjunction with other corroborative evidence of each element.

Sec. 1.274-5T(c)(3), Temporary Income Tax Regs., 50 Fed. Reg.

46020 (Nov. 6, 1985).

     Additionally, pursuant to Rev. Proc. 2001-47, sec. 6.04,

2001-2 C.B. at 337, and Rev. Proc. 2002-63, sec. 6.04, 2002-2

C.B. at 698, for partial days of travel away from home, a

taxpayer is allowed to establish a plan such as claiming 75

percent of the Federal per diem M&IE rate, in accordance with the

Federal Travel Regulations.

     Many of petitioner’s tax records were lost or damaged as a

result of Hurricane Katrina and the aftermath.   Nevertheless,

petitioner provided a thorough and credible reconstruction of his

expenses and a calendar based on receipts.   These documents show

that petitioner was in Houston, Texas, for 313 days; traveling

between Houston, Texas, and Destrehan, Louisiana, for 18 days;

and in Destrehan, Louisiana, for 34 days during the 2002 tax

year.   Therefore, petitioner was away from his tax home primarily

for business purposes for a total of 331 days and is entitled to

a deduction for travel and meals and incidentals expenses.

     To reflect a change in the per diem rate during 2002 we

separate the year into two parts.   For January 1 through

September 30, 2002, petitioner was away from his tax home for 245

days:   231 full days and 14 partial days.   The Federal per diem
                                - 15 -

M&IE rate for Houston, Texas, during this period was $42.     See 41

C.F.R. ch. 301 app. A (2002).    Therefore, petitioner’s meals and

incidental expense for this period is $10,143.     For October 1

through December 31, 2002, petitioner was away from his tax home

for 86 days:   82 full days and 4 partial days.    The Federal per

diem M&IE rate for Houston, Texas, during this period was $46.

See 41 C.F.R. ch. 301 app. A (2003).     Therefore, petitioner’s

meals and incidental expense for this period is $3,910.

     In summary petitioner’s total meals and incidental expense

for 2002 was $14,053.   Petitioner is entitled to a deduction for

M&IE equal to 50 percent of the $14,053 or $7,026.50.     See sec.

274(n) (allowing a deduction of 50 percent for meal expenses).

     With respect to airfare expenses, petitioner traveled by

commercial aircraft to Destrehan, Louisiana, on February 2, March

8, May 31, and June 28, 2002.    Petitioner returned to Houston,

Texas, by airplane on February 11, March 12, June 4, and July 2,

2002.   Petitioner has substantiated this travel through the use

of a calendar and receipts totaling $607.     Therefore, petitioner

is entitled to a deduction for this air travel of $607.

     Regarding vehicle expenses petitioner traveled by automobile

to Destrehan, Louisiana, on April 19, August 1, September 13,

October 1, and November 2, 2002.    Petitioner returned to Houston,

Texas, by automobile on April 24, August 6, September 17, October

6, and November 4, 2002.   Petitioner has substantiated this
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travel through the use of credit card statements that show his

whereabouts during the applicable travel periods.     Petitioner

also provided a Mapquest map which shows a roundtrip distance of

657 miles and a Yahoo map which shows a roundtrip distance of 658

miles.    Petitioner has requested mileage based on a roundtrip

distance of 656 miles and is entitled to a deduction for mileage

based on this lesser amount.    The applicable Federal mileage rate

during the 2002 tax year was $0.365 per mile.     Petitioner made a

total of five trips, traveling 656 miles per trip, which yields a

total of 3,280 miles traveled.    Therefore, petitioner is entitled

to an automobile expense deduction of $1,197.20.

     B.   Cellular Telephone Expense

     Section 274(d) applies to the use of “listed property” as

defined in section 280F(d)(4), which includes cellular

telephones.    To deduct these types of expenses, the taxpayer must

provide evidence that through adequate records corroborates the

taxpayer’s testimony as to:    (1) The amount of the expenditure or

use; and (2) the business relationship of the taxpayer to each

expenditure or use.    Sec. 274(d).   To satisfy the adequate

records requirement of section 274, a taxpayer must maintain

records and documentary evidence that in combination are

sufficient to establish each element of an expenditure or use.

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

46017 (Nov. 6, 1985).    Although a contemporaneous log is not
                              - 17 -

required, corroborative evidence to support a taxpayer’s

reconstruction “of the elements * * * of the expenditure or use

must have a high degree of probative value to elevate such

statement” to the level of credibility of a contemporaneous

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

Reg. 46016 (Nov. 6, 1985).

     Petitioner produced billing statements from January through

September 2002 showing the amounts that he paid for the cellular

telephone service to substantiate this expense.    We find that

cellular telephone service would be an ordinary and necessary

business expense in petitioner’s line of work because petitioner

was essentially on call 24 hours per day, 7 days per week.

However, petitioner conceded that he also used the cellular

telephone to call Ms. M. when he was in Texas.    Petitioner has

failed to meet the strict substantiation requirements of section

274(d) in that he did not substantiate the business use of the

cellular telephone.   Therefore, petitioner is not entitled to a

deduction for cellular telephone expense.

     C.   Computer Supplies

     At the MHI locations in Texas petitioner maintained several

computers that he owned.   These computers were vital to

performing the work necessary to complete the project.     While

petitioner was contracted to work at MHI, he purchased

miscellaneous computer supplies.   We find that computer supplies
                              - 18 -

are an ordinary and necessary business expense in petitioner’s

line of work because he could not have successfully performed his

job without them.   Petitioner submitted receipts to substantiate

total computer supplies of $1,117.91, and therefore he is

entitled to a deduction for this amount.

     D.   Postage Expense

     Petitioner submitted a receipt to substantiate $6.80 in

postage expenses; however, petitioner has failed to establish why

this would be an ordinary and necessary business expense in his

line of work.   Therefore, petitioner is not entitled to a

deduction for postage expenses.

     E.   Internet Expense

     The goal of the project at MHI was to merge data from

multiple information systems into a single coherent database.

This necessitated that data be transferred by some means.

Petitioner used the Internet to transfer data between various

locations in Texas.   Petitioner originally obtained Internet

service through BellSouth, but because of a billing issue he

changed his service provider to AT&T Worldnet Service.    The

Internet service account was in petitioner’s name, and he

submitted billing and credit card statements to substantiate

total Internet expense of $256.40.     Petitioner is entitled to a

deduction of $256.40 for Internet expenses.
                               - 19 -

II.   Additions to Tax Under Sections 6651(a)(1) and (2) and
      6654(a)

      A.   Section 6651(a)(1)--Failure To File, and Section
            6651(a)(2)--Failure To Pay

      Petitioner requested an extension of time to file his 2002

Federal income tax return and submitted a payment of $387 with

his extension request on April 15, 2003; however, petitioner does

not know whether he filed a 2002 Federal income tax return.     At

trial petitioner failed to produce a copy of his Federal income

tax return for 2002.

      Certified transcripts of petitioner’s tax account show that

he did not file a 2002 Federal income tax return and that a

substitute for return was prepared by the IRS and processed on

September 12, 2005.    The substitute for return prepared under

section 6020(b) is disregarded for purposes of section 6651(a)(1)

but treated as a return for purposes of section 6651(a)(2).     See

sec. 6651(g).

      Respondent determined additions to tax under section

6651(a)(1) and (2).    Respondent bears the burden of production

under section 7491(c).    The certified official transcript for

2002 produced by respondent establishes that petitioner did not

file a return for 2002.    See Davis v. Commissioner, 115 T.C. 35,

40-41 (2000).    Furthermore, petitioner has not demonstrated

reasonable cause for failing to file his 2002 income tax return

and failing to pay his 2002 income tax liability in full by the
                              - 20 -

appropriate date.   Therefore, these additions to tax are

sustained.

     B.   Section 6654(a)--Failure To Pay Estimated Income Tax

     The IRS also determined an addition to tax under section

6654(a) for failure to pay estimated income tax.    The

Commissioner has the burden of production under section 7491(c)

to show, in accordance with section 6654(d), that the taxpayer

had a tax liability for the preceding taxable year.       Wheeler v.

Commissioner, 127 T.C. 200, 211 (2006), affd. 521 F.3d 1289 (10th

Cir. 2008).   Respondent failed to produce any evidence reflecting

that petitioner had an income tax liability in 2001.

Additionally, petitioner unequivocally stated that he did not

have any income in 2001.   Because petitioner did not have a tax

liability for 2001, he was not required to make estimated income

tax payments for 2002.   See sec. 6654(e)(2).   Therefore,

petitioner is not liable for the section 6654(a) addition to tax.

     To reflect the foregoing,


                                            Decision will be entered

                                       under Rule 155.
