                         T.C. Memo. 2009-302



                      UNITED STATES TAX COURT



             GREGORY JAMES ROBERTSON, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 15372-08.               Filed December 23, 2009.



     Gregory James Robertson, pro se.

     Fred E. Green, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     COHEN, Judge:    Respondent determined deficiencies of $12,701

and $23,306 in petitioner’s Federal income taxes for 2005 and

2006, respectively.   Respondent also determined that petitioner

is liable for an accuracy-related penalty of $4,154.20 for 2006

under section 6662(a).   All section references are to the

Internal Revenue Code, and all Rule references are to the Tax
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Court Rules of Practice and Procedure.    After concessions, the

issues for decision are whether petitioner had unreported gross

receipts, whether he is entitled to business deductions and

capital losses not allowed by respondent, and whether he is

liable for the section 6662(a) penalty.

                           FINDINGS OF FACT

     Petitioner is a Canadian citizen who resided in Nevada at

the time he filed his petition.    During 2005 and 2006, he was

employed as an electrician for Wynn Resorts.

     On his Federal income tax returns for 2005 and 2006,

petitioner claimed on Schedules C, Profit or Loss From Business,

losses from advertising businesses that offset his wages and

other items of reported income.    The largest items of expense

included in the claimed losses were “commissions and fees” of

$64,111 for 2005 and $92,166 for 2006.    Petitioner also claimed a

$25,000 capital loss in 2005, deducting $3,000 relating to that

loss in 2005 and a carryover loss to 2006.

     The business losses petitioner claimed related to three

activities.   Two of the activities, Universal Advertising Network

and Motor Zoo, Inc., were engaged in telemarketing.    The third,

West Coast Motoring, was primarily engaged in the business of

selling automobile rims.    Petitioner’s involvement with the
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businesses lasted for less than 2 months in 2005 with respect to

Universal Advertising Network and West Coast Motoring and for

approximately 5 months from November 2005 to April 2006 with

respect to Motor Zoo, Inc.

     The Internal Revenue Service conducted a bank deposits

analysis of various bank accounts maintained by petitioner and

determined that petitioner had unreported gross receipts from his

business activities.   Certain expenses substantiated by

petitioner were allowed, but unsubstantiated expenses were

disallowed.   Although petitioner claimed to have documentary

evidence substantiating the expenses and losses, he failed to

produce any such evidence before or during trial.

                                OPINION

     Petitioner testified at trial about his business activities

during late 2005 and early 2006.    He claims that he was forced to

abandon them and that he lost his investments in them (allegedly

$25,000 in West Coast Motoring and $10,000 in Motor Zoo, Inc.)

because of various misrepresentations and misconduct by his

associates in the businesses.    He testified that most of the

expenditures were in cash, but some were “probably” checks.      He

acknowledged that he had not shown the Internal Revenue Service

any records related to the commissions claimed on his tax

returns.
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     Petitioner’s testimony was rambling and did not address

specific bank deposits or explain the disallowed expenses.

Although he called a witness with respect to the West Coast

Motoring activity, that witness did not provide any evidence that

would help determine petitioner’s taxable income or deductible

expenses.    The examining revenue agent testified that petitioner

failed to produce any substantiation for the disallowed

deductions.

     At the conclusion of trial, the Court ordered seriatim

briefs, with respondent filing the first brief, in the hope that

petitioner would focus on the issues in this case.   Petitioner

failed to file an answering brief or to respond to an order to

show cause as to why the Court should not conclude that he has

abandoned this case.    It appears that he may have returned to his

native Canada, and he has not notified the Court of his current

address.    See Rule 21(b)(4).

     The principles applicable to this case are well established

and are set out in respondent’s brief.   They are:

     1.    The bank deposits method is appropriate to reconstruct

income when a taxpayer fails to maintain or produce adequate

records, and the taxpayer has the burden of showing that the

reconstruction of his income is incorrect.    DiLeo v.

Commissioner, 96 T.C. 858, 881 (1991), affd. 959 F.2d 16 (2d Cir.

1992), and cases cited therein.
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     2.   The taxpayer has the burden of proving that he is

entitled to deductions.   Rule 142(a); INDOPCO, Inc. v.

Commissioner, 503 U.S. 79, 84 (1992).

     3.   Although respondent has the burden of production with

respect to the penalty under section 6662(a), petitioner has the

ultimate burden of proof that he is not liable for the penalty.

Sec. 7491(c); Higbee v. Commissioner, 116 T.C. 438, 449 (2001).

The evidence that petitioner claimed commissions and fees of

$92,166 without any substantiation satisfies respondent’s burden

of production.

     Petitioner’s failure to file a brief and his apparent

abandonment of his case may indicate that he recognizes that his

failure to present reliable evidence is fatal and that respondent

will prevail under the applicable law.    See Calcutt v.

Commissioner, 84 T.C. 716, 721-722 (1985).    Under the

circumstances, we do not believe that any further elaboration is

necessary.


                                        Decision will be entered

                                 for respondent.
