                        T.C. Memo. 1998-388



                     UNITED STATES TAX COURT



                 ROBERT B. KEENAN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 13925-95, 19874-96,         Filed November 2, 1998.
                 15455-97.1



    Robert B. Keenan, pro se.

    Mark A. Weiner, for respondent.



                        MEMORANDUM OPINION


     JACOBS,   Judge:   Respondent     determined    the   following

deficiencies in, and additions to, petitioner's Federal income

taxes:


     1
          These cases were consolidated for purposes of trial,
briefing, and opinion.
                                - 2 -


Docket No. 13925-95:

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

1992          $19,393             $4,848              $846


Docket No. 19874-96:

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

1988          $73,559             $16,120             $4,059
1990          141,784              33,176              8,670
1991           20,822               4,585              1,040


Docket No. 15455-97:

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

1989          $70,821           $13,734.00          $2,871.00
1993           16,114             4,028.50             675.11
1994           17,361             4,340.25             894.53

       Following concessions by the parties,2 the issues for decision

are: (1) Whether assessment of deficiencies and additions to tax

for petitioner's 1989 tax year is barred by the expiration of the

statutory period of limitations; (2) whether petitioner had taxable

income in 1988 in the amount of $205,000 as a result of a purported

distribution from his individual retirement account (IRA) at U.S.

       2
          On the basis of information from third parties
indicating that they had made payments of income to petitioner,
respondent determined that petitioner failed to report such
income. Petitioner conceded virtually all of the unreported
income adjustments relating to said payments.
     Respondent conceded petitioner's entitlement to certain
losses arising from forced Internal Revenue Service (IRS) tax
sales in 1993.
                                 - 3 -


Trust Co. of N.Y. (USTCNY); (3) whether petitioner had taxable

income in 1990 in the amount of $408,623 as a result of a purported

distribution from his IRA at USTCNY; (4) whether petitioner is

entitled to any losses or deductions in 1992 as a result of a

forced Internal Revenue Service (IRS) tax sale of his personal

residence;   (5)   whether   petitioner   is   entitled   to   $47,418   of

ordinary losses in 1993 as a result of forced IRS tax sales of

three of his New Mexico properties; (6) whether petitioner is

entitled to any other deductible losses during the years in issue;

and (7) whether petitioner is liable for the additions to tax

pursuant to sections 6651(a)(1) and 6654(a) for all the years in

issue.3

     All section references are to the Internal Revenue Code in

effect for the years in issue.     All Rule references are to the Tax

Court Rules of Practice and Procedure.

     Some of the facts have been stipulated, and the stipulations

of facts are incorporated in our findings by this reference.




     3
          In his posttrial brief, petitioner raised for the first
time: (1) That respondent's deficiency determination for 1988 is
arbitrary and capricious; and (2) that he is entitled to a
casualty loss for 1991 as a result of damage to his airplane
arising from a midair collision. Both of these matters were
untimely raised. Nevertheless, we conclude that respondent's
1988 deficiency determination is not arbitrary or capricious and
that there is nothing in the record to support petitioner's
entitlement to a casualty loss for 1991.
                                    - 4 -


Background

      Petitioner resided in Camarillo, California, at the time he

filed his petitions.

      Petitioner was born on August 25, 1923.            He attended college

in 1941 and 1942 but did not receive a degree.                Subsequently, he

worked as a ship fitter in the shipbuilding industry and then

enlisted in the Army Air Corps.             In 1951, he became a pilot for

United Airlines.       In 1987, he retired from the airline.           Between

1988 and 1993, petitioner flew airplanes for a worldwide delivery

firm.

      Petitioner failed to file Federal tax returns for 1988, 1990,

1991, 1992, 1993, and 1994.

        For convenience, we have combined our remaining findings of

fact and opinion with respect to each issue.

Issue 1.     Statutory Period of Limitations--1989

      Petitioner asserts that he timely filed a 1989 tax return and

therefore maintains that the period for assessing a deficiency and

additions to tax against him for 1989 expired before the date on

which respondent mailed the statutory notice of deficiency (May 12,

1997) with respect to that year.            Respondent maintains petitioner

did not file a 1989 return.

        In general, an income tax must be assessed within 3 years

after the return was filed.        Sec. 6501(a).     If no return is filed,

the   tax   may   be   assessed,   or   a   proceeding   in    court   for   the
                                - 5 -


collection of the tax may be begun without assessment, at any time.

Sec. 6501(c)(3).

     The only evidence to support petitioner's assertion that he

timely filed a 1989 return is his own testimony.          And in this

respect, petitioner's testimony was sketchy. Petitioner offered no

proof concerning the date of mailing, nor did he testify as to the

circumstances attending the purported mailing.      Petitioner did not

maintain a signed copy of the 1989 return allegedly filed. To

refute    petitioner's   assertion,   respondent   introduced   an   IRS

certificate of lack of record, dated January 8, 1998, to indicate

that petitioner did not file a return for 1989.

     The record reflects that petitioner wrote letters to the IRS

District Director of the Fresno Service Center and the IRS Director

of Foreign Operations in Washington, D.C., on December 2, 1991,

indicating that he is not a "taxpayer" and is not required to file

tax returns.    Additionally, on February 5, 1992, petitioner wrote

letters to these offices, stating: "Your office sent out a letter

requesting a tax return, I returned a letter to your office denying

that I was required to file a return, because I could not locate

any specific part of the revenue code that made me liable for

filing any sort of a return."

         On the basis of the implications which can be drawn from

petitioner's letters to the IRS, as well as the entire record

before us, we are unable to conclude that petitioner filed a return
                                   - 6 -


for 1989.      Accordingly, we hold that the period of limitations is

not a bar to the assessment of a deficiency or additions to tax

with regard to petitioner's 1989 tax year.

Issue 2.      1988 Distribution

        We next consider whether respondent erroneously determined

that petitioner had taxable income in 1988 in the amount of

$205,000 as a result of a purported distribution from his IRA at

USTCNY.

        By stipulation petitioner concedes that he failed to report as

income a      $205,000   distribution   from     his   USTCNY   IRA   in   1988.

Notwithstanding       the   stipulation,    petitioner      testified       that

sufficient funds were not available in the USTCNY IRA account to

make such a distribution, and in his brief, petitioner contends

that "such distribution did not occur".          Respondent maintains that

sufficient funds were available in the account to make a $205,000

withdrawal and that such a distribution in fact occurred in 1988.

        Rule 91(e) states that the Court will not allow a signatory to

a stipulation to qualify, change, or contradict the stipulation in

whole    or   part,   except   where   justice    otherwise     requires.      A

stipulation is treated as a conclusive admission by the parties,

and we do not permit a party to change or contradict a stipulation,

except in extraordinary circumstances. Jasionowski v. Commissioner,

66 T.C. 312, 318 (1976).
                                          - 7 -


       With    regard    to   the   instant       case,   we   are   satisfied     that

petitioner read and understood his concession in the stipulation at

the    time     the    stipulation        was   filed.    Petitioner      failed    to

satisfactorily explain why he should be allowed to contradict the

stipulation;4 thus, petitioner is bound by his own admission.5

Issue 3. 1990 Distribution

       The next issue is whether respondent erroneously determined

that petitioner had taxable income in 1990 in the amount of

$408,623 as a result of a distribution from his IRA at USTCNY.

Although petitioner conceded that $408,623 was withdrawn from his

USTCNY IRA in 1990, he testified that he timely rolled these funds

into another qualified retirement account. Respondent asserts that

petitioner failed to roll over the $408,623 into a qualified IRA.

           Distributions from qualified retirement plans are generally

includable in the distributee's income in the year of distribution

as    provided    in    section     72.    Secs.    402(a)(1),       408(d)(1).     An

exception exists if the distribution proceeds are rolled over into

an eligible retirement plan or an IRA within 60 days of the


       4
          Petitioner is not a stranger to this Court or the U.S.
District Court for the Central District of California. See
Keenan v. Commissioner, T.C. Memo. 1989-300; Keenan v. United
States, 77 AFTR 2d 96-2116 (D.C. Cal. 1996); Keenan v. IRS, 76
AFTR 2d 95-6624, 95-2 USTC par. 50,527 (D.C. Cal. 1995).
       5
          Moreover, the record is sufficient for the Court to
sustain respondent's determination that petitioner had $205,000
of taxable income as a result of a distribution from his USTCNY
IRA.
                                  - 8 -


distribution.    Secs.    402(a)(5), 408(d)(3).     We note that an IRA

includes only trusts created or organized in the United States.

Sec. 408(a).

     On February 27, 1989, petitioner directed that $250,000 be

transferred from his IRA account No. 435 to a new account, Cash

Reserve IRA,    account   No.   26000137860   (account   no.    860).    On

December 4, 1989, petitioner caused a distribution of $90,000 from

account No. 860.     (By stipulation, petitioner conceded that the

1989 distribution of $90,000 was taxable income to him during that

year.)      On December 31, 1989, petitioner's IRA's had values of

$227,906.56 in account No. 435 and $177,642.40 in account No. 860

(totaling    $405,548.96).      Petitioner    concedes   that   he   caused

distributions of $408,6236 from account Nos. 435 and 860 in 1990.

     At some point, petitioner established three foreign conduit

trusts to diversify his investments (Yankee Trust, Fir Trust in

Gibraltar, and France Trust with Sovereign Management Services,

N.V., in Luxembourg). Petitioner asserts that he transferred funds

into a Barclays Bank account in the Isle of Man, which renders his

1990 distribution tax free.

     We do not agree with petitioner that the 1990 distribution

from his IRA at USTCNY was a tax-free transaction.              Petitioner

failed to present any evidence that the $408,623 was transferred to


     6
          The record does not explain the discrepancy between the
$405,548.96 and $408,623 amounts.
                                        - 9 -


an eligible retirement plan or any other qualified retirement plan.

Apparently what he did was place the $408,623 into a series of

foreign trusts.        These actions (despite petitioner's assertions to

the contrary) do not qualify for any tax-free rollover treatment

pursuant to section 402(a)(5) or section 408(d)(3).                    Accordingly,

we hold that the $408,623 is includable in petitioner's 1990 gross

income as a taxable distribution.

Issue 4. Losses or Deductions From Forced IRS Tax Sale of Personal
Residence

      The next issue is whether petitioner is entitled to any losses

or deductions in 1992 as a result of an IRS forced tax sale of his

personal residence. Petitioner claims that he was entitled to such

a deduction or loss because he incurred interest expenses of

$15,096.76, and other costs of $38.60 paid to Herman Heilscher (who

is   not   described      in   the   record)      for    the   redemption       of   this

property.    Respondent argues that petitioner has failed to submit

evidence entitling him to any such deduction.

      We   agree     with      respondent.      Deductions      are    a    matter    of

legislative grace.          New Colonial Ice Co. v. Helvering, 292 U.S.

435, 440 (1934).          Because petitioner has failed to produce any

evidence    on     this     issue    (such   as    substantiation          of   payment

information or any details with regard to the amount, timing, or

purpose     of   the      alleged    payments),         we   sustain   respondent's

disallowance of any loss or deduction with regard to the sale of

petitioner's personal residence in 1992.
                                    - 10 -


Issue 5.    Characterization of New Mexico Losses

     The fifth issue is whether petitioner is entitled to a $47,418

ordinary loss in 1993 stemming from an IRS forced tax sale of three

New Mexico properties he owned.             Petitioner argues that he is

entitled to such a loss (arising from the difference between the

market value of the properties and the amount realized at auction).

On the other hand, respondent argues that petitioner is entitled to

a $47,418 capital loss.

     Petitioner owned four properties at the Mid-Valley Air Park in

Las Lunas, New Mexico (a residential airport).              In 1993, the IRS

seized these properties in order to satisfy petitioner's Federal

income tax obligation for years prior to those in issue.                 After

selling the four properties, respondent credited petitioner's tax

accounts    in   amounts   less    than    petitioner's     bases   in   these

properties.

     Respondent     conceded      that    petitioner   is   entitled     to   a

$19,424.25 ordinary loss in 1993 with respect to one of the

properties; namely, a rental property.          The character of the loss

with respect to the other properties, an airplane hangar and two

undeveloped 1-acre lots, is at issue.

     Section 1001(a) defines gain or loss from the sale or other

disposition of property as the difference between the "amount

realized" and the taxpayer's adjusted basis in the transferred

property.     The amount realized is the sum of any money received
                                 - 11 -


plus the fair market value of the property (other than money)

received.     Sec. 1001(b).    The amount realized from a sale or

disposition of property includes the amount of liabilities from

which the transferor is discharged as a result of the sale or

disposition, including a sale in foreclosure. Chilingirian v.

Commissioner, 918 F.2d 1251 (6th Cir. 1990), affg. T.C. Memo. 1986-

463.

       Section 1221(2) provides that real property used in a trade or

business is not a capital asset (and therefore a loss from the

disposition    of   such   property   would   be   an   ordinary   loss).

Accordingly, we must determine whether the two 1-acre lots and the

airplane hangar were used in petitioner's trade or business.

       The Supreme Court has stated that "to be engaged in a trade or

business, the taxpayer must be involved in the activity with

continuity and regularity and that the taxpayer's primary purpose

for engaging in the activity must be for income or profit."

Commissioner v. Groetzinger, 480 U.S. 23, 35 (1987).          Petitioner

contends that he acquired the 1-acre lots and the airplane hangar

for his trade or business, which involved renting space for parking

and storing aircraft.      We are not convinced that petitioner used

the airplane hangar or the two lots in any trade or business.

Petitioner failed to prove that he commenced a leasing or other

commercial endeavor with respect to the airplane hangar.           To the

contrary, petitioner admitted that he occasionally used the hangar
                                       - 12 -


to store his personal aircraft.                 Moreover, petitioner neither

developed the two 1-acre lots nor made any attempts to lease or

rent them.      Petitioner was not a real estate developer and had no

history of buying and selling real properties.                 Rather, he spent

the majority of his working life as a pilot for United Airlines.

We need not, and do not, accept petitioner's self-serving testimony

in the absence of corroborating evidence. See Niedringhaus v.

Commissioner,      99   T.C.    202,    212     (1992).    Thus,   we   hold    that

petitioner did not use the two 1-acre lots and the airplane hangar

in a trade or business. Accordingly, we sustain respondent on this

issue.

Issue 6.     Other Deductible Losses

      The sixth issue is whether petitioner is entitled to any

other deductible losses (namely, with respect to funds he invested

in   foreign    trusts)   for    1992.        Petitioner    believes    he     is   so

entitled.      Respondent disagrees.

      At trial, petitioner claimed that he incurred a $521,000 loss

in 1992 from his foreign trusts.                The only evidence petitioner

presented in this regard was an October 26, 1992, letter to him

from Bernard Putz (who is not described in the record), stating

that the account had "sustained a loss of US$521,000 and was

automatically liquidated".

      As stated earlier, deductions are a matter of legislative

grace.     New Colonial Ice Co. v. Helvering, supra.                We hold that
                                     - 13 -


petitioner is not entitled to 1992 deductible losses with respect

to his foreign trusts.           The letter petitioner presented at best

indicates that      there   was    an   unidentified      account    in   which    a

$521,000 loss was sustained, but there is no indication that the

account belonged to petitioner.             In fact, petitioner failed to

produce any statements indicating that he had the funds in any

account in 1992. The evidence petitioner presented is insufficient

to prove that he sustained the claimed losses.                   Accordingly, we

hold for respondent on this issue.

Issue 7.   Additions to Tax

     The   last    issue    is   whether    petitioner     is    liable   for    the

sections   6651(a)    and     6654(a)   additions    to    tax    determined      by

respondent.       Respondent contends that petitioner is liable for

these additions for the years in issue; petitioner, on the other

hand, disagrees.

     Section 6651(a)(1) imposes an addition to tax for failure to

timely file a return.       Petitioner can avoid the section 6651(a)(1)

additions to tax by proving that his failure to file was:                  (1) Due

to reasonable cause, and (2) not due to willful neglect.                        Sec.

6651(a)(1); Rule 142(a); United States v. Boyle, 469 U.S. 241, 245-

246 (1985); United States v. Nordbrock, 38 F.3d 440 (9th Cir.

1994).   "Reasonable cause" requires a taxpayer to demonstrate that

he   exercised     ordinary      business    care   and    prudence       and   was

nevertheless unable to file a return within the prescribed time.
                                         - 14 -


United States v.           Boyle, supra at 246; sec. 301.6651-1(c)(1),

Proced.      &   Admin.     Regs.      Willful    neglect      means    a    conscious,

intentional failure to file or reckless indifference.                            United

States v. Boyle, supra at 245.

       Petitioner was required to file Federal income tax returns for

1989-94. Sec. 6012. He failed to do so and offered no satisfactory

explanation. Nor has he presented any evidence to prove that his

failure to file was due to reasonable cause and not willful

neglect.         In fact, petitioner wrote several letters to the IRS

asserting that he was not a taxpayer and accordingly refused to

file       income    tax     returns.7    Thus,       we   sustain      respondent's

determination of the section 6651(a)(1) additions to tax for the

years in issue (1989-94).

       Respondent also determined an addition to tax pursuant to

section      6654(a)       for   the   years     in   issue,    on     the    basis   of

petitioner's failure to pay estimated tax.                 Where payments of tax,

either through withholding or by making estimated quarterly tax

payments during the course of the year, do not equal the percentage

of total liability required under the statute, imposition of the

section 6654(a) addition to tax is mandatory, unless the taxpayer

shows that one of several statutory exceptions applies.                           Sec.

6654(a); Niedringhaus v. Commissioner, supra at 222; Recklitis v.


       7
          At trial, petitioner testified that he wrote the
letters on the basis of "bad" advice he received.
                              - 15 -


Commissioner,   91   T.C.   874,   913   (1988);   Grosshandler   v.

Commissioner, 75 T.C. 1, 20-21 (1980). Petitioner bears the burden

of proving qualification for the exceptions.   See Habersham-Bey v.

Commissioner, 78 T.C. 304, 319-320 (1982).

     Because petitioner did not make any estimated tax payments for

the years in issue, introduced no evidence thereon, and has not

shown that any of the exceptions apply, we sustain respondent's

determination pursuant to section 6654(a) for the years in issue.

     We have considered all of petitioner's arguments and, to the

extent not discussed above, find them to be without merit.

     To reflect concessions of the parties,




                                          Decisions will be entered

                                    under Rule 155.
