                  T.C. Memo. 2002-222



                UNITED STATES TAX COURT



      KEVIN AND BRIDGET NAUGHTON, Petitioners v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 10731-00.             Filed September 4, 2002.


     For 1996 and 1997, Ps K and B filed with their
joint tax returns Schedules C, Profit or Loss From
Business, on which they reported income and deducted
claimed expenses related to K’s rendering of medical
services for DWP.

     Held: During 1996 and 1997, K was an employee of
DWP and not an independent contractor. Ps therefore
are not entitled to report K’s income and expenses on
Schedules C.

     Held, further, Ps are not entitled to deduct
business expenses claimed on their 1996 and 1997
returns.

Kevin and Bridget Naughton, pro sese.

Michael S. Hensley, for respondent.
                                - 2 -

                          MEMORANDUM OPINION


     NIMS, Judge:    Respondent determined Federal income tax

deficiencies for petitioners’ 1996 and 1997 taxable years in the

amounts of $7,637 and $4,237, respectively.    This case is

presently before the Court on respondent’s motion for summary

judgment.   The principal, and to a significant degree

interrelated, issues for decision involve whether petitioner

Kevin Naughton was an employee or an independent contractor

during 1996 and 1997 and whether he is entitled to deduct

business expenses claimed on Schedules C, Profit or Loss From

Business.   Additional adjustments either have been conceded or

are computational in nature.

     Unless otherwise indicated, all section references are to

sections of the Internal Revenue Code in effect for the years at

issue, and all Rule references are to the Tax Court Rules of

Practice and Procedure.

                              Background

     Petitioners signed their joint 1996 Form 1040, U.S.

Individual Income Tax Return, on July 29, 1997, and their joint

1997 Form 1040 on March 13, 1998.    Both returns were also signed

by John E. Judge as preparer and were filed with the Internal

Revenue Service.    Attached to each return was a letter stating

that Kevin Naughton (petitioner) was a physician
                              - 3 -

rendering professional services to the City of Los Angeles

Department of Water and Power (DWP) and that DWP reported income

of physicians on Forms W-2, Wage and Tax Statement, and withheld

taxes and contributions, over physician objections.   The letters

were evidently intended to explain petitioner’s reporting of his

professional income, and deducting of expenses, on Schedules C.

     By late 1997, petitioners and respondent were engaged in

correspondence regarding changes to petitioners’ return for 1996.

By late 1998, copies of letters and other materials between the

parties indicate that both 1996 and 1997 were under

consideration.

     In July of 1999, petitioners filed a Form 4506 with

respondent requesting copies of their 1996 and 1997 tax returns.

By a letter dated October 18, 1999, they were informed that “At

this time we are unable to secure a copy of your form(s) 1040 for

tax year(s) 1996 & 1997.”

     Subsequently, a notice of deficiency was issued to

petitioners for the 1996 and 1997 taxable years, and a petition

in response thereto was filed with this Court.   Petitioners at

that time resided in Laguna Beach, California.   Respondent

answered the petition, and the case was duly calendared for

trial.
                               - 4 -

     Thereafter, respondent sent to petitioners a letter in

accordance with Branerton Corp. v. Commissioner, 61 T.C. 691, 692

(1974) (Branerton letter), suggesting a conference between the

parties and requesting information and documentation in support

of the positions taken by petitioners on their return.    With

respect to petitioners’ claim that petitioner should be

classified as an independent contractor, respondent identified as

possible supporting materials billing records for patients

treated outside of DWP, employment contracts, business licenses,

business cards, advertising, yellow pages listings, accounting

records, and so forth.   As regards the claimed expenses,

requested items included receipts, invoices, ledgers, journals,

etc., showing that the amounts were actually paid or incurred and

were ordinary and necessary business expenses.   Respondent in the

Branerton letter also conceded certain adjustments reflected for

1997 in the notice of deficiency, primarily related to self-

employment income and taxes.

     Petitioners neither attended the proposed meeting nor

contacted respondent prior to the suggested date.   A letter from

Mr. Judge was apparently thereafter sent to the Internal Revenue

Service and indicated that petitioners were in Ireland and were

suffering from medical difficulties.   Petitioners did not at that

juncture, nor at any time since, produce the corroborating

materials suggested by respondent.
                                 - 5 -

     Respondent subsequently served on petitioners requests for

admission pursuant to Rule 90.    Having received no response after

more than 2 months, respondent then filed a motion for summary

judgment and included with the motion revised computations of the

deficiency for 1997, in conformity with the above-mentioned

concessions.   The Court in due course ordered petitioners to

respond to respondent’s motion.

     Petitioners timely submitted their opposition to the motion

for summary judgment.   The Court at the same time also received

from petitioners a response to respondent’s requests for

admission.   By order, the Court declared withdrawn and set aside

any deemed admissions made by petitioners by reason of Rule 90(c)

and granted leave for the filing of petitioners’ response.    In

their response, petitioners admitted certain items primarily of a

formal or administrative nature, denied several other points with

very brief explanations, and denied the remainder (constituting

the majority of the requested admissions) with no explanation.

     Petitioners failed to attend a hearing thereafter scheduled

by the Court, and, although Mr. Judge attempted to participate,

his appearance was not permitted since he had been suspended from

practice before this Court.

     The Court and counsel for respondent addressed the status of

the pending motion for summary judgment.   The Court observed that

petitioners had not “done anything like cooperating * * * or
                                 - 6 -

getting competent counsel to represent them.”      Given these

circumstances, the Court at that time ordered all requested

admissions that had been denied by petitioners without any

explanation to be deemed admitted.       In this posture, respondent’s

motion for summary judgment was taken under advisement.

                             Discussion

I.   Standard for Summary Judgment

     Rule 121(a) allows a party to move “for a summary

adjudication in the moving party’s favor upon all or any part of

the legal issues in controversy.”    Rule 121(b) directs that a

decision on such a motion shall be rendered “if the pleadings,

answers to interrogatories, depositions, admissions, and any

other acceptable materials, together with the affidavits, if any,

show that there is no genuine issue as to any material fact and

that a decision may be rendered as a matter of law.”      The moving

party bears the burden of demonstrating that no genuine issue of

material fact exists and that he or she is entitled to judgment

as a matter of law.    Estate of Chenoweth v. Commissioner, 88 T.C.

1577, 1578 (1987).    Facts are viewed in the light most favorable

to the nonmoving party.    Id.   However, where a motion for summary

judgment has been properly made and supported by the moving
                                - 7 -

party, the opposing party may not rest upon mere allegations or

denials contained in that party’s pleadings but must, by

affidavits or otherwise, set forth specific facts showing that

there is a genuine issue for trial.     Rule 121(d).

      Furthermore, it is well established in this Court that

summary judgment is appropriate where facts deemed admitted

pursuant to Rule 90, for failure properly to respond to requests

for admission, support a finding that there is no genuine issue

of material fact.   Morrison v. Commissioner, 81 T.C. 644, 651

(1983); Shepherd v. Commissioner, T.C. Memo. 1997-555; Parker v.

Commissioner, T.C. Memo. 1989-196.      We are satisfied that the

foregoing situation exists here and, for the reasons detailed

below, will grant respondent’s motion for summary judgment.

II.   Validity of the Deficiency Notice

      As a threshold matter, we briefly address a procedural

contention raised in petitioners’ opposition.     Petitioners argue

that the notice of deficiency issued in this case is legally

defective and fatally flawed.   In support of this position,

petitioners rely principally on Scar v. Commissioner, 814 F.2d

1363 (9th Cir. 1987), revg. 81 T.C. 855 (1983).     Although their

argument is less than entirely clear from their submissions,

petitioners apparently are of the opinion that the circumstances

of this case show a failure by respondent to examine the returns

and thereby determine a deficiency as required by Scar v.
                               - 8 -

Commissioner, supra.   In this connection, petitioners point to

respondent’s letter of October 18, 1999, indicating an inability

at that time to secure and supply copies of petitioners’ 1996 and

1997 Forms 1040, and to correspondence between the parties which

reflected amounts due differing from those stated in the notice

of deficiency.

     Subsequent caselaw, however, has limited application of the

theory espoused in Scar v. Commissioner, supra, to those

instances “‘where the notice of deficiency reveals on its face

that the Commissioner failed to make a determination.’”     Kantor

v. Commissioner, 998 F.2d 1514, 1521-1522 (9th Cir. 1993)

(quoting Clapp v. Commissioner, 875 F.2d 1396, 1402 (9th Cir.

1989)), affg. in part and revg. in part on other grounds T.C.

Memo. 1990-380.   Conversely, validity is established where the

“notices of deficiency in the record make absolutely clear that

the Commissioner did examine * * * [the taxpayers’] returns, and

did at least consider * * * [the taxpayers’] deductions.”     Clapp

v. Commissioner, supra at 1402.   It is the latter situation which

is present with respect to the case at bar.

     The notice of deficiency references numerous amounts that

correspond directly to figures reported on petitioners’ returns.

The document also makes adjustments to specific items shown in

the Forms 1040 and states reasons therefor.   Consequently, the

notice of deficiency is valid under Scar v. Commissioner, supra.
                                - 9 -

III.    Employment Status

       The parties in this case focus their dispute on whether

petitioner is to be considered an employee or an independent

contractor for Federal income tax purposes.    In general, business

expenses of an independent contractor, if otherwise allowable,

are deductible in full pursuant to section 62(a)(1) and are

reported on Schedules C.    Unreimbursed business expenditures of

an employee, on the other hand, are typically permitted only as

miscellaneous itemized deductions under section 67, to the extent

in excess of 2 percent of adjusted gross income, and are reported

on Schedules A, Itemized Deductions.    Petitioners maintain that

petitioner is an independent contractor; respondent characterizes

petitioner as an employee.

       Neither “independent contractor” nor “employee” is expressly

defined in the Internal Revenue Code for purposes of Schedule C

versus Schedule A deductions.    Alford v. United States, 116 F.3d

334, 335-336 (8th Cir. 1997); Weber v. Commissioner, 103 T.C.

378, 386 (1994), affd. 60 F.3d 1104 (4th Cir. 1995).    The Supreme

Court, however, has established that “‘when Congress has used the

term “employee” without defining it, we have concluded that

Congress intended to describe the conventional master-servant

relationship as understood by common-law agency doctrine.’”

Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 322-323 (1992)

(quoting Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730,
                              - 10 -

739-740 (1989)).   Hence, absent an overriding statutory

definition, common law agency principles apply in determining the

existence of an employment relationship.   Adcock v. Chrysler

Corp., 166 F.3d 1290, 1292 n.3 (9th Cir. 1999); see also Alford

v. United States, supra at 336; Beech Trucking Co. v.

Commissioner, 118 T.C. 428, 440 (2002); Weber v. Commissioner,

supra at 386.

     General guidance addressing common law precepts can be found

in the explanation set forth in section 31.3121(d)-1(c),

Employment Tax Regs.:

          Common Law Employees.--(1) Every individual is an
     employee if under the usual common law rules the
     relationship between him and the person for whom he
     performs services is the legal relationship of employer
     and employee.

          (2) Generally such relationship exists when the
     person for whom services are performed has the right to
     control and direct the individual who performs the
     services, not only as to the result to be accomplished
     by the work but also as to the details and means by
     which that result is accomplished. That is, an
     employee is subject to the will and control of the
     employer not only as to what shall be done but how it
     shall be done. In this connection, it is not necessary
     that the employer actually direct or control the manner
     in which the services are performed; it is sufficient
     if he has the right to do so. The right to discharge
     is also an important factor indicating that the person
     possessing that right is an employer. Other factors
     characteristic of an employer, but not necessarily
     present in every case, are the furnishing of tools and
     the furnishing of a place to work, to the individual
     who performs the services. In general, if an
     individual is subject to the control or direction of
     another merely as to the result to be accomplished by
     the work and not as to the means and methods for
     accomplishing the result, he is an independent
                                - 11 -

     contractor. An individual performing services as an
     independent contractor is not as to such services an
     employee under the usual common law rules. Individuals
     such as physicians, lawyers, dentists, veterinarians,
     construction contractors, public stenographers, and
     auctioneers, engaged in the pursuit of an independent
     trade, business, or profession, in which they offer
     their services to the public, are independent
     contractors and not employees. [Emphasis added.]

     From such general principles, courts have identified a

number of factors relevant in evaluating common law employment

status, including the following:    (1) The right of the hiring

party to exercise control over the manner and means, i.e., the

details, of the work; (2) the discretion of the hiring party over

the time and duration of the work; (3) the permanency of the

relationship; (4) the right of the hiring party to discharge; (5)

the source of and investment in the instrumentalities, tools, and

facilities of the work; (6) the method of payment; (7) the

provision of employee benefits; (8) the opportunity of the hired

party for profit or loss; (9) the right of the hiring party to

assign additional projects; (10) the offering by the hired party

of services to the general public; (11) the skill required for

the work; (12) whether the type of work is part of the hiring

party’s regular business; and (13) the relationship the parties

believe they are creating.     Nationwide Mut. Ins. Co. v. Darden,

supra at 323; Beech Trucking Co. v. Commissioner, supra at 440;

Weber v. Commissioner, supra at 387; Kiddie v. Commissioner, 69

T.C. 1055, 1057-1058 (1978).
                              - 12 -

     In evaluating these factors, an additional axiom which has

become firmly entrenched in caselaw is that the extent of control

necessary to find employment status is less for a professional,

as opposed to a nonprofessional, worker.   Azad v. United States,

388 F.2d 74, 77 (8th Cir. 1968); Weber v. Commissioner, supra at

388; Profl. & Executive Leasing, Inc. v. Commissioner, 89 T.C.

225, 234 (1987), affd. 862 F.2d 751 (9th Cir. 1988); James v.

Commissioner, 25 T.C. 1296, 1301 (1956).   This Court, for

instance, in a case involving a physician, early characterized

the requisite control as “more tenuous and general” and observed

that “despite this absence of direct control over the manner in

which professional men shall conduct their professional

activities, it cannot be doubted that many professional men are

employees.”   James v. Commissioner, supra at 1301.

     As regards the instant case, we are satisfied that the

foregoing criteria, in conjunction with the facts admitted and

deemed admitted, show as a matter of law that petitioner must be

treated as an employee.   Pursuant to Rule 90 and other materials

in the record, it has been established that DWP had sufficient

right to control the manner in which work was performed by

petitioner during 1996 and 1997.   Petitioner was directly

supervised by Dr. Miller, another individual hired by DWP.    DWP

scheduled all of petitioner’s appointments, Dr. Miller controlled

which patients petitioner saw, and all patients seen by
                              - 13 -

petitioner during the years at issue were DWP employees.

Petitioner was employed on a full-time basis and worked weekly,

Mondays through Fridays, from 7:30 a.m. until 4:15 p.m., for DWP

during 1996 and 1997.   His hours were controlled by Dr. Miller.

Petitioner’s relationship with DWP had been ongoing since 1990.

All medical services performed by petitioner for remuneration

during the years at issue were performed at DWP facilities.     DWP

provided petitioner with medical office space, and petitioner did

not pay rent for medical office space.   All supplies used by

petitioner in providing medical services were furnished by DWP.

     Petitioner was paid a salary by DWP during 1996 and 1997.

He did not bill patients for the medical services he performed.

Petitioner did not make his services as a physician available to

the general public during the years at issue, and he performed no

services as a physician for remuneration during that period

outside of his relationship with DWP.    He did not have a business

license to perform medical services as a sole proprietor in 1996

or 1997.

     DWP issued to petitioner Forms W-2 for both 1996 and 1997,

and withheld Federal income tax, State income tax, Social

Security tax, and Medicare tax.   DWP also paid the employer’s

share of Social Security and Medicare taxes with respect to

petitioner’s compensation during those years.
                              - 14 -

     In the aggregate, then, the admitted facts and circumstances

detailed above are more than sufficient to establish an employer-

employee relationship between petitioner and DWP during 1996 and

1997.   Furthermore, neither the additional requested admissions

denied by petitioners with cursory explanations nor certain other

points raised by petitioners in their opposition to respondent’s

motion require a different conclusion.

     As to the substance of petitioner’s relationship with DWP,

petitioners made superficial attempts to address several of the

factors cited by the courts as pertinent to the employment

inquiry.   For example, petitioners denied that DWP had the right

to discharge petitioner, explaining rather that DWP “did have the

right, with Petitioner Kevin Naughton’s consent, to terminate

their contractual relationship.”   We, however, find it difficult

to imagine or accept such a relationship where the hiring party

would literally be required to obtain the permission of the

worker to fire him or her.   We also note that petitioners stated

in their opposition to respondent’s motion that the relationship

“could be terminated at will by either party”.   Accordingly,

petitioners’ descriptions are at minimum akin to a concession

that DWP could wield significant control over the duration of the

work arrangement.   That, in turn, would be tantamount to a right

to discharge.
                              - 15 -

     Petitioners in their opposition further averred that

petitioner was given no instruction from DWP as to how to

discharge his professional responsibilities; was provided no

professional training by DWP; did not receive employee benefits

such as health insurance, vacation pay, or pension participation;

was not reimbursed for the expenses reflected on Schedules C; and

could have incurred a loss, “though unlikely”.   Petitioners also

emphasized that the medical services performed by petitioner were

not a key factor in the power generation business of DWP.   In

addition, petitioners attached to their opposition a photocopy of

petitioner’s DWP identification badge, which states “CONTRACTOR

MEDICAL”, and a Form 1099-MISC, Miscellaneous Income, which

reports nonemployee compensation from DWP for 1990.    Petitioners

contend that both show DWP considered petitioner an independent

contractor.

     Nonetheless, even if we were to accept petitioners’ above-

recited factual allegations as accurate, they would fall far

short of overcoming the conclusion compelled by the totality of

the admitted facts.   We particularly note that the two

documentary items offered are at most a reflection of how the

parties thereto viewed the relationship and even on that score

are outweighed by the more contemporaneous and probative Forms W-

2.   We also observe that petitioner apparently acquiesced in

DWP’s use of Forms W-2 despite purported objections.
                             - 16 -

Consequently, petitioners have failed the charge of Rule 121(d)

to set forth specific facts showing there is a genuine issue for

trial.

     We likewise give little import to petitioners’ denials of

certain more overarching requests for admission.    Petitioners

refused to admit that petitioner did not perform medical services

as a sole proprietor on grounds that “Kevin Naughton, M.D. did

perform medical services as a sole proprietor/practitioner under

contract to the Los Angeles Department of Water and Power”.    They

similarly denied that petitioner was employed as a physician by

DWP on grounds that “he provided services as a sole practitioner

physician to the Department of Water and Power”.    To reiterate a

point made previously, such conclusory assertions are hardly

sufficient to override what can be drawn from evaluating the full

circumstances of the case and certainly fail to set forth

specific facts showing there is a genuine issue for trial.

     As a final matter relating to petitioner’s employment

status, we make brief mention of section 530 of the Revenue Act

of 1978, Pub. L. 95-600, 92 Stat. 2763, 2885 (Section 530).

Petitioners devote a significant portion of their opposition to

this statute, asserting that DWP had a “reasonable basis” for

treating petitioner as an independent contractor.    Section 530,

however, has no applicability to any issue we consider here.      As
                             - 17 -

the Court of Appeals for the Eighth Circuit has explained in a

scenario where medical residents sought refund of employment

taxes withheld from their stipends:

     section 530 allows employers to avoid liability for
     past-due employment taxes when the employer erroneously
     but reasonably classified employees as independent
     contractors rather than employees.

          By its very terms, section 530 is a relief
     provision available only to employers who erroneously
     classify their employees. Section 530 applies if (1)
     the taxpayer does not treat a worker as an employee for
     employment tax purpose during a particular period; (2)
     the taxpayer files all required federal employment tax
     returns on a basis consistent with this treatment; and
     (3) the taxpayer has a reasonable basis for not
     treating the worker as an employee. If these
     requirements are satisfied, tax liability is terminated
     “for purposes of applying such taxes for such period
     with respect to the taxpayer.” Notwithstanding the
     clarity of the statute, the residents contend that a
     broad interpretation of the term “taxpayer” is
     appropriate because they are, at least in a general
     sense, “taxpayers.” We do not agree, for the focus of
     section 530 is on the taxpayer’s treatment of the
     taxpayer’s employees. In this context, it is clear
     that the term “taxpayer” refers only to employers and
     not to employees. [Ahmed v. United States, 147 F.3d
     791, 797 (8th Cir. 1998); citations omitted.]

     Moreover, the view of this Court is in accord with that

recounted above, and we have expressly held that “‘Taxpayer’ as

used in the context of Section 530 refers to an employer”.

Pariani v. Commissioner, T.C. Memo. 1997-427.   Accordingly,

petitioners’ contentions in this regard are not germane and

warrant no further discussion.   We hold that petitioner was an

employee of DWP and not an independent contractor for Federal tax

purposes.
                               - 18 -

IV.   Claimed Business Expenses

      From our holding above, it follows that petitioners would

not be entitled to deduct claimed business expenses on Schedules

C by reason of petitioner’s status as an employee of DWP.      In

addition, any deduction of the claimed business expenses, even on

Schedules A, is precluded on account of petitioners’ failure

properly to substantiate the expenditures.

      The business expenditures potentially deductible in

accordance with sections 62(a) and/or 67 are described in section

162(a) as “all the ordinary and necessary expenses paid or

incurred during the taxable year in carrying on any trade or

business”.   For purposes of this section, an individual may

engage in the trade or business of rendering services as an

employee.    Johnson v. Commissioner, 115 T.C. 210, 217 (2000);

O’Malley v. Commissioner, 91 T.C. 352, 363-364 (1988).

      The breadth of section 162(a) is tempered by the requirement

that any amount claimed as a business expense must be

substantiated, and taxpayers are required to maintain records

sufficient therefor.   Sec. 6001; Hradesky v. Commissioner, 65

T.C. 87, 89-90 (1975), affd. 540 F.2d 821 (5th Cir. 1976); sec.

1.6001-1(a), Income Tax Regs.1    When a taxpayer adequately


      1
       Sec. 7491, effective for court proceedings which arise in
connection with examinations commencing after July 22, 1998, can
operate in specified circumstances to place the burden of proof
on the Commissioner if the taxpayer introduces credible evidence
                                                   (continued...)
                               - 19 -

establishes that he or she paid or incurred a deductible expense

but does not establish the precise amount, we may in some

circumstances estimate the allowable deduction, bearing heavily

against the taxpayer whose inexactitude is of his or her own

making.   Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir.

1930).    There must, however, be sufficient evidence in the record

to provide a basis upon which an estimate may be made and to

permit us to conclude that a deductible expense was incurred in

at least the amount allowed.    Williams v. United States, 245 F.2d

559, 560 (5th Cir. 1957); Vanicek v. Commissioner, 85 T.C. 731,

742-743 (1985).

     Furthermore, business expenses described in section 274 are

subject to rules of substantiation which supersede the doctrine

of Cohan v. Commissioner, supra.    Sanford v. Commissioner, 50

T.C. 823, 827-828 (1968), affd. 412 F.2d 201 (2d Cir. 1969); sec.

1.274-5T(a), Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov.

6, 1985).   Section 274 provides that no deduction shall be



     1
      (...continued)
with respect to any relevant factual issue. The provisions of
the section are not invoked, however, where there is a failure by
the taxpayer to substantiate items, maintain required records, or
cooperate with reasonable requests by the Commissioner for
information. Sec. 7491(a)(2); Higbee v. Commissioner, 116 T.C.
438, 440-441 (2001). Here, neither party contends that sec. 7491
is applicable, and the record indicates that at least the
examination for 1996 began before July 22, 1998. Moreover,
petitioners in any event have not satisfied the aforementioned
prerequisites. Sec. 7491 thus has no bearing on our analysis in
this case.
                             - 20 -

allowed for, among other things, traveling expenses,

entertainment expenses, meal expenses, and expenses with respect

to listed property (as defined in section 280F(d)(4) and

including passenger automobiles) “unless the taxpayer

substantiates by adequate records or by sufficient evidence

corroborating the taxpayer’s own statement”:   (1) The amount of

the expenditure or use; (2) the time and place of the expenditure

or use; (3) the business purpose of the expenditure or use; and

(4) in the case of entertainment, the business relationship to

the taxpayer of the persons entertained.   Sec. 274(d).

     On their Schedules C, petitioners claimed amounts for car

and truck expenses, depreciation and section 179 expense,

insurance, legal and professional services, office expenses,

rent, repairs and maintenance, taxes and licenses, and other

expenses (including continuing education, professional dues,

parking, telephone, group insurance, books and periodicals, drugs

and medications, and supplies).   Respondent’s requests for

admission contained the following paragraphs on this issue:

“Petitioners have presented no evidence to substantiate any of

their claimed deductions on their 1996 Schedule C”; “Petitioners

have presented no evidence that any of their claimed deductions

on their 1996 Schedule C were ordinary and necessary business
                              - 21 -

expenses”; “Petitioners have presented no evidence that any of

their claimed deductions on their 1996 Schedule C were ever paid

or incurred”; “Petitioners have presented no evidence that any of

their claimed deductions on their 1996 Schedule C were paid or

incurred in taxable year 1996”; “Petitioners have presented no

evidence that their claimed deductions on their 1996 Schedule C

were other than personal expenses”.    An identical series of

statements was enumerated with respect to 1997.

     Petitioners deny the foregoing requested admissions in their

response and explain that “Petitioners’ denial is based on the

fact that their Income Tax Returns for both years were signed

under penalty of perjury.   This constitutes evidence of the

deductibility of the expenses claimed.”    They do not further

address these deductions in their opposition to respondent’s

motion for summary judgment, and they have at no time stated that

they possess and will present to respondent and/or the Court

documentary or other supporting evidence with respect to the

claimed expenditures.

     Contrary to petitioners’ suggestion, it is axiomatic that

neither tax returns themselves, nor the execution of such forms

under penalty of perjury, establishes the truth of items recited

therein.   Lawinger v. Commissioner, 103 T.C. 428, 438 (1994);

Wilkinson v. Commissioner, 71 T.C. 633, 639 (1979); Roberts v.

Commissioner, 62 T.C. 834, 837 (1974).    Because petitioners have
                             - 22 -

not shown that a genuine issue for trial exists as to their

entitlement to business expense deductions for 1996 and 1997, we

will grant respondent’s motion for summary judgment.

     To reflect the foregoing,



                                      An appropriate order and

                                 decision will be entered granting

                                 respondent’s motion for summary

                                 judgment.
