                       T.C. Memo. 2008-199



                      UNITED STATES TAX COURT



              STEVEN EUGENE COBAUGH, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 2571-06.               Filed August 26, 2008.



     Steven Eugene Cobaugh, pro se.

     John T. Lortie, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     MARVEL, Judge:   In notices of deficiency dated November 16,

2005, respondent determined the following deficiencies and

additions to tax with respect to petitioner’s Federal income

taxes:
                                 - 2 -

                                        Additions to tax
Year          Deficiency       Sec. 6651(a)(1)       Sec. 6654(a)
1998           $43,888             $5,442                 $884
1999            45,326             10,043                1,916
2000            47,492             11,762                2,510
2001           120,611             30,153                4,820
2002            48,298             11,954                1,596
2003            38,948              9,003                  934

Petitioner timely filed a petition seeking a redetermination of

the deficiencies and additions to tax.

       In an amendment to answer, respondent asserts that

petitioner is liable for the additions to tax under section

6651(a)(1) and (2)1 as follows:

                               Additions to tax
       Year         Sec. 6651(a)(1)       Sec. 6651(a)(2)
       1998             $4,897                $5,442
       1999              9,038                10,043
       2000             10,585                11,762
       2001             27,137            To be determined
       2002             10,758            To be determined
       2003              8,467            To be determined

Respondent also asserts that petitioner is liable for the section

6651(a)(2) addition to tax for 2001-03,2 an additional deficiency

for 2003 of $1,622, and an additional section 6654(a) addition to

tax for 2003 of $42.


       1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure. Some monetary amounts have been rounded to the
nearest dollar.
       2
      In the amendment to answer, respondent did not calculate
the amounts of the sec. 6651(a)(2) addition to tax for 2001-03
because the time period necessary to support the assertion of the
maximum penalty amount under sec. 6651(a)(2) had not yet been
attained.
                                 - 3 -

     After concessions,3 the issues for decision are:   (1)

Whether petitioner is liable for the section 6651(a)(1) addition

to tax for 1998-2003; (2) whether petitioner is liable for the

section 6651(a)(2) addition to tax for 1998-2003; and (3) whether

petitioner is liable for the section 6654(a) addition to tax for

1998-2003.

                         FINDINGS OF FACT

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

The stipulation of facts and the supplemental stipulation of

facts are incorporated herein by this reference.   When the

petition was filed, petitioner resided in Florida.

     During the years at issue petitioner was an airline pilot

for U.S. Airways.   Because of a medical disability, petitioner no

longer works for U.S. Airways.    Petitioner attended college for 2

years but did not obtain a degree.

     Sometime before April 1999 a friend told petitioner about

Lee Scott Roberts (Roberts), who was affiliated with American Tax


     3
      The parties have stipulated the amounts of the tax
deficiencies for 1998 through 2003. The parties have also
stipulated that the agreed tax deficiencies for 1998 and 1999 do
not account for payments of $22,122 and $5,157 made on Apr. 15,
1999 and 2000, respectively, and that the agreed tax deficiencies
for 2000, 2002, and 2003 do not account for prepayment credits of
$447, $483, and $2,937 made on Apr. 15, 2001, 2003, and 2004,
respectively. As a result of the stipulations, including a
concession that petitioner is liable for a reduced deficiency for
each of the years 1998-2002, the amount of any addition to tax
will have to be recalculated in a Rule 155 proceeding. Any
issues regarding the correct calculation of the additions to tax
may be addressed therein.
                                - 4 -

Consultants (ATC).   Although petitioner testified that Roberts

was a certified public accountant (C.P.A.) who worked in an

office in Tampa, Florida, with a tax attorney, petitioner never

investigated Roberts’s background or verified his C.P.A. license.

     In March 1999 petitioner telephoned Roberts to discuss

petitioner’s tax returns.   During the conversation Roberts told

petitioner that the Federal Government had jurisdiction only

inside Washington, D.C., and the U.S. territories and that

petitioner did not owe tax unless he was, among other things, a

Government employee.   On March 24, 1999, petitioner signed an

agreement engaging ATC to provide tax advice and return

preparation for a fee.

     In a meeting sometime after March 24, 1999, Roberts gave

petitioner a bound compilation of documents titled “Associated

Tax Consultants Income Tax Seminar”.    The documents included,

among other things, copies of parts of the U.S. Constitution, the

Internal Revenue Code, a Treasury publication, and Treasury

regulations.

     Despite initial concerns about Roberts’s advice, petitioner

did not seek a second opinion or consult his father, a C.P.A.,

about the advice.    Petitioner did not consult his father because

he knew that his father would have disagreed with Roberts’s

advice.
                               - 5 -

     Although Roberts apparently prepared documents for

petitioner that he claimed were returns, petitioner did not

introduce any credible evidence to prove that proper returns for

1998-2003 were prepared and filed by their respective due dates.

The only documentary evidence that petitioner introduced

regarding the preparation of returns was copies of unsigned Forms

1040NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens

With No Dependents, for 1998 and 1999 showing only zeros on the

income lines and claiming a refund of the full amount of his

Federal income tax withholding reported on his Forms W-2, Wage

and Tax Statement.   The documents reported that petitioner was

not a U.S. citizen and that he had no income.4

     On or around April 14, 2003, Roberts was indicted on nine

counts of filing false income tax refund claims.    Petitioner

first learned of Roberts’s criminal prosecution from the Internal

Revenue Service (IRS), and sometime in 2002 or 2003 someone from

the IRS interviewed petitioner regarding Roberts.

     On December 8, 2003, a Federal jury found Roberts guilty on

one count of conspiracy to file false claims and 11 counts of

filing false claims for income tax refunds.   On or around

March 16, 2004, Roberts was sentenced to 51 months of

imprisonment.


     4
      Petitioner admitted at trial that the Forms 1040NR-EZ
contained false statements.
                               - 6 -

      Respondent prepared substitute returns for petitioner on

January 10, 2005, for 1998; on January 12, 2005, for 1999-2002;

and on January 18, 2005, for 2003.     On November 16, 2005,

respondent sent petitioner notices of deficiency for 1998-2003.

On February 6, 2006, petitioner petitioned this Court alleging

that the amounts of tax are incorrect, the additions to tax5 and

interest are in error, and the periods of limitations for

collection have expired for 1998 and 1999.

      In 2006 after petitioner filed his petition, he filed

Federal income tax returns for 1998-2003 that his father had

prepared.

      On May 14, 2007, a trial was held in Miami, Florida.

                              OPINION

I.   Respondent’s Burden of Production Under Section 7491(c)

      If a taxpayer assigns error to the Commissioner’s

determination that the taxpayer is liable for an addition to tax

or penalty, the Commissioner has the burden, under section

7491(c), of producing evidence that the addition to tax or

penalty applies.   See Swain v. Commissioner, 118 T.C. 358, 364-

365 (2002); Higbee v. Commissioner, 116 T.C. 438, 446 (2001).     In

order to meet his burden of production, the Commissioner must

come forward with sufficient evidence that it is appropriate to


      5
      In his petition petitioner uses the term “penalty” to
describe the additions to tax respondent determined.
                               - 7 -

impose the relevant addition to tax or penalty.      Higbee v.

Commissioner, supra at 446.   However, the Commissioner is not

required to introduce evidence regarding reasonable cause,

substantial authority, or similar defenses.    Id.    Once the

Commissioner meets his initial burden of production, the taxpayer

must come forward with persuasive evidence that the

Commissioner’s determination is incorrect.    Id. at 447.6

     In the petition, petitioner contested his liability for the

additions to tax.   We conclude, therefore, that petitioner

assigned error to the additions to tax, see Swain v.

Commissioner, supra at 364-365, and that respondent has the

burden under section 7491(c) to produce evidence that it is

appropriate to hold petitioner liable for the additions to tax.7


     6
      The taxpayer ordinarily has the burden of proof regarding
additions to tax under secs. 6651(a) and 6654. Rule 142(a)(1).
Respondent has the burden of proof with respect to the additions
to tax under sec. 6651(a)(2) for all years at issue and the
increased addition to tax under sec. 6654 for 2003 because he
asserted them in his amended answer. See Rule 142(a)(1). The
parties stipulated the 1998-2003 deficiencies and the certified
transcripts which show (1) IRS preparation of a substitute return
under sec. 6020(b) for each of the years at issue, (2) the
earliest dates on which petitioner filed documents that the IRS
processed as returns (2006), and (3) the dates and amounts of
relevant payments and credits for the years at issue. We hold
that the evidence described above is sufficient to satisfy
respondent’s burden of proof with respect to the additions to tax
under sec. 6651(a)(2) and the increased sec. 6654 addition to tax
for 2003. See Bhattacharyya v. Commissioner, T.C. Memo. 2007-19;
Howard v. Commissioner, T.C. Memo. 2005-144.
     7
      Because we decide that petitioner is liable for the
additions to tax, the amounts of the additions to tax will have
                                                   (continued...)
                                - 8 -

II.   Section 6651(a)(1) Addition to Tax

      Section 6651(a)(1) authorizes the imposition of an addition

to tax for failure to file a timely Federal income tax return,

unless it is shown that such a failure is due to reasonable cause

and not due to willful neglect.    See United States v. Boyle, 469

U.S. 241, 245 (1985).   A failure to file a timely return is due

to reasonable cause if the taxpayer exercised ordinary business

care and prudence but nevertheless was unable to file the return

within the prescribed time.    See sec. 301.6651-1(c)(1), Proced. &

Admin. Regs.   Willful neglect means a conscious, intentional

failure to file or reckless indifference toward filing.    See

United States v. Boyle, supra at 245.

      Respondent introduced into evidence certified copies of

Forms 4340, Certificate of Assessments, Payments, and Other

Specified Matters, with respect to petitioner’s 1998-2003 taxable

years, showing that petitioner did not file timely Federal income

tax returns for 1998-2003.    The Forms 4340 are sufficient to

satisfy respondent’s burden of production under section 7491(c)

with respect to the additions to tax under section 6651(a)(1).

      Petitioner, however, contends that Roberts filed

petitioner’s 1998-2003 returns.    His testimony was not supported

by any credible evidence showing that returns satisfying the



      7
      (...continued)
to be recalculated on the basis of the stipulated deficiencies.
                               - 9 -

requirements for a valid return were prepared or filed.    The only

documents petitioner introduced were unsigned copies of Form

1040NR-EZ for 1998 and 1999.   Although petitioner testified that

he signed forms and returned them to Roberts to file, the record

contains no evidence that petitioner or someone on his behalf

actually filed before 2006 forms that qualified as returns for

each of the years 1998-2003.   In addition, even if we were to

conclude that Roberts sent the 1998 and 1999 Forms 1040NR-EZ to

respondent, they were not valid returns for purposes of section

6651(a)(1) because they showed only zeros.     See Cabirac v.

Commissioner, 120 T.C. 163, 169 (2003).   The record does not

support a finding that petitioner filed valid and timely returns

for 1998-2003 before 2006.

     To avoid the section 6651(a)(1) addition to tax, petitioner

must prove that his failure to file valid and timely 1998-2003

returns was due to reasonable cause and not due to willful

neglect.   See sec. 6651(a)(1); Rule 142(a).   Petitioner argues

that his failure to file valid and timely 1998-2003 returns was

due to reasonable cause and not due to willful neglect because he

reasonably relied on professional advice that he did not have a

tax liability.   Petitioner cites two cases, United States v.

Boyle, supra at 250-251, and Freytag v. Commissioner, 89 T.C.

849, 888 (1987), affd. 904 F.2d 1011 (5th Cir. 1990), affd. 501

U.S. 868 (1991), in support of his argument.
                                  - 10 -

     In United States v. Boyle, supra at 252, the Supreme Court

held that a taxpayer may not avoid the section 6651(a)(1)

addition to tax for reasonable cause when the taxpayer relied on

his adviser to file his tax return.        The Court stated that “one

does not have to be a tax expert to know that tax returns have

fixed filing dates and that taxes must be paid when they are

due”.    Id. at 251.   The Court suggested, however, that reliance

on an adviser for a question of substantive law may constitute

reasonable cause.      Id.   In Freytag v. Commissioner, supra at 888-

889, we held that the taxpayers could not avoid the section

6653(a) addition to tax for negligence by relying on the advice

of their investment counselors where the taxpayers “had to know

that the investment was simply too good to be valid taxwise.”

     Although those cases suggest that under certain

circumstances a taxpayer may avoid additions to tax when a

taxpayer relied on the erroneous advice of a competent

professional adviser, neither case supports petitioner’s position

that his reliance on Roberts’s advice constitutes reasonable

cause.    We have held that a mistaken belief that no tax was due

is not sufficient to establish reasonable cause absent reliance

on a competent tax adviser or a good-faith effort to ascertain

the filing requirements.      See Shomaker v. Commissioner, 38 T.C.

192, 202 (1962); French v. Commissioner, T.C. Memo. 1991-196.

Petitioner did not prove that he reasonably relied on a
                               - 11 -

professional tax adviser or that he made a good-faith effort to

ascertain the filing requirements.      Petitioner offered no

credible evidence regarding Roberts’s professional credentials,

if any, and Roberts’s advice, to the extent reflected in the

record, consisted only of groundless and frivolous arguments.

The Forms 1040NR-EZ that Roberts allegedly prepared on

petitioner’s behalf, and that petitioner admitted he signed,

falsely stated that petitioner was not a U.S. citizen and

had no income.    The false statements on the Forms 1040NR-EZ

should have alerted petitioner that Roberts’s advice was faulty

and that it was not reasonable to rely on it.

     In addition, petitioner did not make a good-faith effort to

ascertain the validity of Roberts’s advice.      Despite having

initial concerns about the truth of the advice, petitioner did

not investigate Roberts’s background or consult another tax

professional.    Petitioner testified that he wanted to believe

that Roberts’s advice was valid and that he did not consult his

father, a C.P.A., because he knew that if the advice were true,

his father “wouldn’t have seen the truth in it”.      Even after

learning of Roberts’s criminal prosecution, petitioner did

nothing to investigate Roberts’s credentials.      During 2003

Roberts was indicted and convicted of filing false and fraudulent

claims for income tax refunds, yet petitioner testified that he

still allowed Roberts to prepare his 2003 return.
                                  - 12 -

       Petitioner’s failure to make a good-faith effort to verify

Roberts’s credentials or the legitimacy of his advice establishes

that petitioner’s reliance on Roberts was neither reasonable nor

in good faith.       We conclude, therefore, that petitioner did not

establish that he had reasonable cause for failing to timely file

valid 1998-2003 returns.8      Accordingly, we sustain respondent’s

determination that petitioner is liable for the section

6651(a)(1) addition to tax9 for each of the years at issue.

III.       Section 6651(a)(2) Addition to Tax

       Section 6651(a)(2) imposes an addition to tax for failure to

pay the amount of tax shown on a return.        The section 6651(a)(2)

addition to tax applies only when an amount of tax is shown on a

return.       Cabirac v. Commissioner, 120 T.C. at 170.   Petitioner

did not file valid and timely 1998-2003 returns; however,

respondent prepared substitute returns under section 6020(b) for

those years.       A return made by the Secretary under section

6020(b) is treated as the return filed by the taxpayer for


       8
      In view of our ruling regarding reasonable cause, we need
not consider whether petitioner’s failure to file was due to
willful neglect.
       9
      Petitioner alleged in his petition that the periods of
limitations have expired for 1998 and 1999 and that consequently
respondent cannot collect deficiencies and additions to tax for
those years. Sec. 6501(c)(3) provides that tax may be assessed
at any time in the case of a failure to file a return. Because
petitioner did not timely file valid returns for 1998-99 as he
was required to do, the periods of limitations on assessment had
not expired when respondent issued the notices of deficiency.
See sec. 6501(c)(3).
                              - 13 -

purposes of determining the amount of the section 6651(a)(2)

addition to tax.   Sec. 6651(g)(2).

     The Commissioner’s burden of production for the section

6651(a)(2) addition to tax requires that the Commissioner

introduce evidence that a return showing the taxpayer’s tax

liability was filed for the year in question.   Where the taxpayer

did not file a valid return, the Commissioner must introduce

evidence that he prepared a substitute return satisfying the

requirements under section 6020(b).    Wheeler v. Commissioner, 127

T.C. 200, 210 (2006), affd. 521 F.3d 1289 (10th Cir. 2008).

     Respondent introduced into evidence substitute returns that

satisfy the requirements of section 6020(b)10 and Forms 4340

establishing that petitioner failed to pay the tax shown on the

substitute returns.   Thus the evidence is sufficient to satisfy

respondent’s burden of production under section 7491(c).

     Petitioner argues, as he did for the section 6651(a)(1)

addition to tax, that his failure to pay the tax shown on his


     10
      In Millsap v. Commissioner, 91 T.C. 926, 930 (1988), the
Court held that unsubscribed Forms 1040, U.S. Individual Income
Tax Return, containing the taxpayer’s name, address, Social
Security number, and filing status, but no information regarding
income or tax, to which were attached subscribed revenue agent’s
reports containing sufficient information from which to compute
the taxpayer’s tax liability, qualified as returns under sec.
6020(b). Respondent introduced into evidence sec. 6020(b)
returns for 1998-2003, consisting of Forms 1040 with subscribed
Forms 4549, Income Tax Examination Changes, and Forms 886-A,
Explanation of Items, for 1998-2003 attached, which provided
sufficient information from which to compute petitioner’s tax
liabilities for 1998-2003.
                              - 14 -

returns was due to reasonable cause and not due to willful

neglect because he relied on professional advice that he did not

have a tax liability.   For the reasons stated above regarding the

section 6651(a)(1) addition to tax, we find that petitioner did

not offer sufficient evidence of reasonable cause for his failure

to pay his 1998-2003 Federal income tax liabilities.

Accordingly, we sustain respondent’s determination that

petitioner is liable for the additions to tax under section

6651(a)(2).

IV.   Section 6654(a) Addition to Tax

      Section 6654(a) imposes an addition to tax on an individual

taxpayer who underpays his estimated tax.   Unless a statutory

exception applies, the section 6654(a) addition to tax is

mandatory, see sec. 6654(a), (e); Recklitis v. Commissioner, 91

T.C. 874, 913 (1988), and section 6654 does not contain a general

exception for reasonable cause or absence of willful neglect, see

Wheeler v. Commissioner, supra at 212.   None of the statutory

exceptions under section 6654(e) applies.

      To satisfy his burden of production under section 7491(c),

respondent introduced evidence establishing that petitioner was

required to file Federal income tax returns for 1998-2003; that

petitioner did not file such returns; that, after taking into

account income tax withheld from petitioner’s salary, petitioner

did not make any other tax payments for 1998-2003; and that
                             - 15 -

petitioner had filed a 1997 Federal income tax return showing a

Federal income tax liability of $34,574.    This evidence is

sufficient to satisfy respondent’s burden of production

establishing that petitioner had required annual payments for

1998-2003 payable in installments under section 6654 and that

petitioner underpaid his estimated tax liabilities for 1998-2003.

See Wheeler v. Commissioner, supra.

     Petitioner offered no evidence that he made any payments

with respect to his 1998-2003 tax liabilities other than the

income tax withheld from his salary.   Consequently, we sustain

respondent’s determination that petitioner is liable for the

additions to tax under section 6654(a) for the years at issue.

     We have considered the remaining arguments of both parties

and to the extent not discussed above, conclude those arguments

are irrelevant, moot, or without merit.

     To reflect the foregoing,


                                           Decision will be entered

                                   under Rule 155.
