                     T.C. Summary Opinion 2010-82



                       UNITED STATES TAX COURT



        NATARAJAN PALANIAPPAN AND S. DANDAMUDI, Petitioners v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 24802-08S.               Filed June 23, 2010.



     Natarajan Palaniappan and S. Dandamudi, pro sese.

     Alicia E. Elliott, for respondent.



     DEAN, Special Trial Judge:    This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect when 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 the year at issue,
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and Rule references are to the Tax Court Rules of Practice and

Procedure.

     Respondent determined for 2005 a deficiency in petitioners’

Federal income tax of $3,440, an addition to tax of $847 under

section 6651(a)(1) for failure to file timely, and an accuracy-

related penalty of $688 under section 6662(a).

     Petitioner S. Dandamudi did not sign the stipulation of

facts, nor did she appear for trial.   Respondent orally moved to

dismiss her for failure to properly prosecute her case.     An

appropriate order granting respondent’s motion will be issued.1

Respondent concedes that petitioners are entitled to a moving

expense deduction of $6,144 and a home mortgage interest

deduction of $2,839.   Petitioner Natarajan Palaniappan

(petitioner) concedes that his joint Federal income tax return

was not timely filed within the filing period as extended by

respondent.   Respondent concedes that petitioners are not liable

for the accuracy-related penalty under section 6662(a).     The

items remaining for decision are whether petitioners:     (1)    Are

entitled to itemized deductions in an amount in excess of the

standard deduction, and (2) failed to file timely due to

reasonable cause and not due to willful neglect.




     1
      The Court will dismiss S. Dandamudi for failure to properly
prosecute and will enter a decision against her consistent with
the decision entered against Natarajan Palaniappan.
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                             Background

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

The stipulation of facts and the exhibits received in evidence

are incorporated herein by reference.     Petitioner resided in

Alaska2 when the petition was filed.

     Petitioner was employed as a finance director during the

year at issue, and Ms. Dandamudi was not employed outside of the

home.    Among the items claimed on petitioners’ Schedule A,

Itemized Deductions, were medical and dental expenses of $14,859

in excess of the 7.5-percent floor and home mortgage interest of

$11,5013 that included $8,651 paid to a Mr. Chandrasekhar in

India.    Respondent disallowed both itemized deductions in their

entirety.

                             Discussion

     Generally, the Commissioner’s determinations in a notice of

deficiency are presumed correct, and the taxpayer has the burden

of proving that those determinations are erroneous.     See Rule

142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).     In some

cases the burden of proof with respect to relevant factual issues

may shift to the Commissioner under section 7491(a).     Petitioner


     2
      Petitioner filed an amended return while residing in
Arizona.
     3
      The Schedule A lists home mortgage interest reported on
Form 1098, Mortgage Interest Statement, of $3,030 and $8,651 paid
to Mr. Chandrasekhar, a total of $11,681. There is no
explanation for the discrepancy.
                                - 4 -

did not argue or present evidence that he satisfied the

requirements of section 7491(a).    Therefore, the burden of proof

does not shift to respondent.

Medical Expenses

     Under section 213, individuals are allowed to deduct the

expenses paid for the “medical care” of the taxpayer, the

taxpayer’s spouse, or a dependent, to the extent the expenses

exceed 7.5 percent of adjusted gross income and are not

compensated for by insurance or otherwise.

     The term “medical care” includes amounts paid for the

diagnosis, cure, mitigation, treatment, or prevention of disease,

or for insurance covering the diagnosis, cure, mitigation,

treatment, or prevention of disease.    Sec. 213(d)(1).

     A taxpayer must substantiate claims for deductible medical

expenses by furnishing “the name and address of each person to

whom payment for medical expenses was made and the amount and

date of the payment”.    Sec. 1.213-1(h), Income Tax Regs.   When

the Commissioner so requests, claims must be substantiated by a

statement or invoice from the service provider showing the

service provided, to or for whom rendered, and the amount and

date of payment.   Id.   Where a taxpayer fails to provide adequate

substantiation, the Court may uphold the Commissioner’s

determination denying a deduction for medical and dental

expenses.   See Davis v. Commissioner, T.C. Memo. 2006-272; Hunter
                               - 5 -

v. Commissioner, T.C. Memo. 2000-249; Nwachukwu v. Commissioner,

T.C. Memo. 2000-27.

     Petitioner offered as evidence of medical expenses a

handwritten list prepared by Ms. Dandamudi for each month of 2005

showing items of the most general description.   Some of the

entries included:   Medical test, hospital room, hospital tips,

home health, medicine, injection, dental, lab test, and similar

items.   Beside each item is an amount in Indian rupees.

Petitioner also presented a faxed copy of a January 2010 computer

printed letter purporting to be from Ms. Dandamudi’s attending

physician in India.   In the letter the doctor gives a general

description of Ms. Dandamudi’s medical condition in 2005 and an

overall estimate of what she must have paid in 2005 for treatment

from himself, a private duty nurse and home healthcare service,

acute care, rehabilitation, diagnostic imaging, lab work,

medicines, and the services of several other attending

physicians.   The letter represents that everything was paid for

in cash for which no records were retained.   The overall cost

estimate is alleged to be based on his “decades of experience” in

diagnosing her illness.

     Petitioner was unable to produce a single receipt,

statement, invoice, canceled check, or other item of documentary

evidence for the payment of any medical expense.   Aside from the

hospital and physician’s name on the letter offered by
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petitioner, the name of no service provider, pharmacy,

laboratory, or hospital was provided.

     Because petitioners have failed to provide any proper

substantiation to support their claimed deduction for medical and

dental expenses, the Court finds that no estimate of any amounts

of petitioners’ deduction can be made under Cohan v.

Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930).    In order for

the Court to estimate the amount of an expense there must be some

basis upon which an estimate may be made.    Vanicek v.

Commissioner, 85 T.C. 731, 742-743 (1985).    Without such a basis,

an allowance would amount to unguided largesse.     Williams v.

United States, 245 F.2d 559, 560 (5th Cir. 1957).

     The Court sustains respondent’s disallowance of petitioners’

claimed deduction for medical and dental expenses.    See sec.

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

Home Mortgage Interest

     Section 163(a) allows a deduction for interest paid or

accrued within the taxable year on indebtedness.     Individuals are

allowed a deduction for “qualified residence interest”.    Sec.

163(h)(3).   Qualified residence interest includes interest paid

on indebtedness incurred to acquire a qualified residence of the

taxpayer that is secured by the qualified residence, or on “home

equity indebtedness”, certain indebtedness secured by a qualified

residence.   Id.   Debt is secured by a qualified residence if
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there is an instrument that in the event of default subjects the

residence to satisfaction of the debt in the same way as would a

mortgage or deed of trust.   Sec. 1.163-10T(o)(1), Temporary

Income Tax Regs., 52 Fed. Reg. 48417 (Dec. 22, 1987).

     Home equity indebtedness is limited in amount to the fair

market value of the qualified residence reduced by any

“acquisition indebtedness” and may not exceed $100,000.   Sec.

163(h)(3)(C).   Respondent argues that petitioners have failed to

provide adequate substantiation for their claimed home mortgage

interest deduction.

     Petitioner attempted to prove his claim with a copy of a

document purporting to be a promissory note in favor of I.K.

Chandrasekhar for 45 lakhs4 of Indian rupees with an attached

payment schedule.   By the terms of the note, principal and

interest are guaranteed by petitioner’s father.   Petitioner also

produced a copy of a letter ostensibly from Mr. Chandrasekhar’s

India-based attorney stating that “Mr. Palaniappian Natarajan has

met his [sic] all his obligations Principal and Interest per

Mortgage Amortization Schedule attached to the Loan Document for

all these years.”

     Petitioner produced no evidence of the fair market value of

his house or the amount, if any, of acquisition indebtedness to



     4
      A lakh is equal to 100,000.   Webster’s 10th New Collegiate
Dictionary (1996).
                               - 8 -

which it may be subject.   Petitioner produced no evidence of the

actual payment of any interest on the note.    No notice of a

security interest was filed in the United States with respect to

the loan to petitioner by Mr. Chandrasekhar.    Because the loan

from Mr. Chandrasekhar was not a debt secured by an instrument

that in the event of default subjected the property to

satisfaction of the debt in the same way as would a mortgage or

deed of trust, it was not a debt secured by a qualified

residence.   Therefore, the debt was not acquisition or home

equity indebtedness for which petitioner may deduct interest.

Respondent’s determination that petitioners are not entitled to

deduct home mortgage interest with respect to the loan from Mr.

Chandrasekhar is sustained.

Addition to Tax Under Section 6651(a)(1)

     Respondent bears the burden of production with respect to

the addition to tax.   See sec. 7491(c).   To meet this burden,

respondent must produce evidence sufficient to establish that it

is appropriate to impose the addition to tax.    See Higbee v.

Commissioner, 116 T.C. 438, 446-447 (2001).    Petitioner agrees

that petitioners requested and were granted an extension of time

to file their 2005 Federal income tax return until October 15,

2006.   Petitioner agrees that petitioners failed to file their

Federal income tax return until February 20, 2007.   Respondent

has met his burden of production under section 7491(c) with
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respect to imposing the addition to tax under section 6651(a)(1).

     It is petitioners’ burden to prove that they had reasonable

cause and lacked willful neglect in not filing the return timely.

See United States v. Boyle, 469 U.S. 241, 245 (1985); Higbee v.

Commissioner, supra at 446; sec. 301.6651-1(a)(2), Proced. &

Admin. Regs.   Because petitioners failed to offer any evidence of

reasonable cause and lack of willful neglect for their failure to

file timely, respondent’s determination that they are liable for

the addition to tax under section 6651(a)(1) is sustained.

     To reflect the foregoing,


                                          An appropriate order

                                     will be issued, and decision

                                     will be entered under

                                     Rule 155.
