                  T.C. Summary Opinion 2001-58



                      UNITED STATES TAX COURT



                ROBERT D. ARONFELD, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent


     Docket Nos. 6195-99S, 13337-99S.        Filed April 17, 2001.


     Robert D. Aronfeld, pro se.

     Paul K. Voelker, for respondent.



     COUVILLION, Special Trial Judge:   These consolidated cases

were heard pursuant to section 7463 in effect at the time the

petitions were filed.1   The decisions to be entered are not

reviewable by any other court, and this opinion should not be

cited as authority.



     1
          Unless otherwise indicated, subsequent section
references are to the Internal Revenue Code in effect for the
years at issue. All Rule references are to the Tax Court Rules
of Practice and Procedure.
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     Respondent determined deficiencies of $4,859, $279, and

$3,812 in petitioner's Federal income taxes for 1995, 1996, and

1997, respectively, and accuracy-related penalties under section

6662(a) of $46.20 and $756.46, respectively, for 1995 and 1997.

     After concessions by respondent,2 the issues for decision

are: (1) Whether the statute of limitations under section 6501(a)

bars respondent from making assessments against petitioner for

the 3 years at issue; (2) whether certain adjustments to

petitioner's income for the 3 years at issue are correct; (3)

whether petitioner is entitled to itemized deductions for 1995

and for Schedule C trade or business expense deductions for 1996

in excess of amounts allowed by respondent; and (4) whether

petitioner is liable for the section 6662(a) penalty for the year

1997.3


     2
          On brief, respondent conceded that the disallowed
itemized deductions of $9,770 for 1995 should be reduced to
$4,142, that the disallowed Schedule C car and truck expenses of
$14,141 for 1996 should be reduced to $11,831, and that
petitioner was not liable for the sec. 6662(a) penalty for 1995.
     3
          Prior to trial, petitioner filed motions for entry of
decision in both docketed cases based on a letter from
respondent's Memphis, Tennessee, office that stated that, for
petitioner's 1995 and 1996 tax years, there was no tax, interest,
or penalties due. Respondent filed objections, which the Court
sustained. On brief, petitioner reasserted his claim. Although
that issue was resolved by the Court prior to trial, the Court
notes that petitioner's claim has no merit. The letter
petitioner relies on does not relate to the 1997 tax year, and,
moreover, with respect to the 1995 and 1996 tax years,
petitioner's account would not show any amount owing because the
                                                   (continued...)
                                 - 3 -


     Rule 91(a) requires the parties to stipulate all evidence

that fairly should not be in dispute.    Petitioner refused to

execute a written stipulation prepared by respondent that would

have placed into evidence copies of petitioner's Federal income

tax returns for the years at issue and copies of the notices of

deficiency for those years.   These documents were admitted into

evidence over petitioner's objection.    At the time the petitions

were filed, petitioner's legal residence was Las Vegas, Nevada.

     Petitioner is a retired attorney.    He was not engaged in the

practice of law during the years at issue.    On his 1995 and 1996

Federal income tax returns, he reported wage and salary income as

well as income from a trade or business activity described as

insurance sales.   The wage and salary income reported on the 1995

return came from two family and medical health plans for which

the employers issued Internal Revenue Service (IRS) Forms W-2,

Wage and Tax Statement.   The wage and salary income reported on

the 1996 return was from an employer named IMC Trading, Inc.,

also based on an IRS Form W-2.




     3
      (...continued)
deficiencies at issue in this case cannot be assessed until the
Court issues a decision. A "no change" letter issued by
respondent does not generally preclude respondent from
subsequently issuing a notice of deficiency. Opine Timber Co. v.
Commissioner, 64 T.C. 700, 712 (1975), affd. without published
opinion 552 F.2d 368 (5th Cir. 1977).
                               - 4 -


     For 1997, petitioner filed what respondent referred to as a

zero return for the reason that petitioner listed on the IRS Form

1040 a zero amount for income, adjustments to income, and taxes

due but claimed an overpayment of $29.70 in taxes.   Petitioner

did, however, attach to his return copies of various information

returns of amounts paid to him by various payers that included

Social Security retirement benefits, nonemployee compensation,

and IRS Forms W-2 from several employers.   The 1997 return also

included a two-page typewritten statement by petitioner extolling

the reasons why he was not liable for Federal income taxes.

Those reasons can best be described as tax protester arguments.4

     In the notices of deficiency, respondent made certain

adjustments on petitioner's 1995 tax return recategorizing

petitioner's reported income and disallowed certain itemized

deductions and certain trade or business expenses, including a

net operating loss carryover deduction, all for lack of

substantiation.   The adjustments for 1996 also involved a

recategorizing of income and the disallowance of various trade or

business expenses.

     It does not appear that petitioner was engaged in any trade

or business activity during 1997.   Respondent determined the



     4
          Although the record is not clear, it appears that
respondent did not accept petitioner's purported return as a
return, and, therefore, it was not filed.
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deficiency for that year solely from the payer information forms

that petitioner included with the zero return he submitted for

1997.

     The first issue is petitioner's claim that respondent is

barred by expiration of the period of limitations for assessment

under section 6501(a).    Petitioner's 1995 return was filed

timely.    His 1996 return was filed on October 22, 1997, and the

return for 1997 was received by respondent on October 16, 1998.

Respondent mailed the notice of deficiency for the years 1995 and

1996 on January 27, 1999.    The notice of deficiency for 1997 was

mailed on June 18, 1999.

     Section 6501(a) provides generally that taxes imposed by the

Internal Revenue Code shall be assessed within 3 years after the

return is filed, whether or not such return was filed on or after

the date prescribed.    Section 6501(c)(3) provides that, in the

case of failure to file a return, the tax may be assessed, or a

proceeding in Court for the collection of such tax may be begun

without assessment, at any time.    Calendar year taxpayers are,

under section 6072(a), required to file their income tax returns

and pay the taxes thereon on or before April 15 following the

close of the taxable year.

     The Court holds that the notices of deficiency were mailed

by respondent well within the time periods provided by section

6501(a).    Respondent, therefore, is not barred from the
                               - 6 -


assessment and collection of taxes against petitioner for the 3

years at issue.

     With respect to the adjustments in the notices of

deficiency, petitioner neither presented evidence nor provided

any testimony relating to respondent's adjustments for the 3

years in question.   Petitioner's testimony dwelled on the letter

he received from respondent's Memphis, Tennessee, office stating

that he owed no taxes for 1995 and 1996.   See supra note 3.    In

addition, petitioner testified that he had "a lot of

constitutional questions that I can't raise here, which I've

asked to be raised in a District Court, which I've already filed

suit."5   However, petitioner did not deny receiving the amounts

paid to him that various payers reported to respondent.

Petitioner presented no testimony or documentary evidence to

substantiate the various itemized deductions and trade or

business expenses respondent disallowed for lack of

substantiation.   Petitioner concluded his testimony with the

statement that his case rested on "constitutional questions I

want to raise up in the Federal District Court, and that will,

hopefully, include taxes that I may or may not owe."   On brief,

petitioner argued the same constitutional objections, all of


     5
          In his brief, petitioner identified the case as docket
No. CV-S-00-535-LDG (RLH), Federal District Court, District of
Nevada, 9th District, in which he is claiming the U.S. Tax Court
has no jurisdiction over him.
                               - 7 -


which relate to arguments generally raised by protesters, the

merits of which need not be addressed here.   Suffice it to say

that petitioner has not established that respondent's adjustments

are in error.   Therefore, the adjustments referred to and

described as issues 2 and 3 are sustained.

     The final issue is whether petitioner is liable for the

accuracy-related penalty under section 6662(a) for negligence or

disregard of rules or regulations for the year 1997.    Section

6662(a) provides that, if it is applicable to any portion of an

underpayment in taxes, there shall be added to the tax an amount

equal to 20 percent of the portion of the underpayment to which

section 6662 applies.   Section 6662(b)(1) provides that section

6662 shall apply to any underpayment attributable to negligence

or disregard of rules or regulations.

     Section 6662(c) provides that the term "negligence" includes

any failure to make a reasonable attempt to comply with the

provisions of the Internal Revenue laws, and the term "disregard"

includes any careless, reckless, or intentional disregard of

rules or regulations.   Negligence is the lack of due care or

failure to do what a reasonable and ordinarily prudent person

would do under the circumstances.   See Neely v. Commissioner, 85

T.C. 934, 947 (1985).   Negligence also includes any failure by

the taxpayer to keep adequate books and records or to

substantiate items properly.   See sec. 1.6662-3(b)(1), Income Tax
                                - 8 -


Regs.   Under section 6664(c), no penalty shall be imposed under

section 6662(a) with respect to any portion of an underpayment if

it is shown that there was a reasonable cause for such portion

and that the taxpayer acted in good faith with respect to such

portion.    The determination of whether a taxpayer acted with

reasonable cause and in good faith depends upon the facts and

circumstances of each particular case.    See sec. 1.6664-4(b)(1),

Income Tax Regs.    Relevant factors include the taxpayer's efforts

to assess his or her proper tax liability, the knowledge and

experience of the taxpayer, and reliance on the advice of a

professional, such as an accountant.    See Drummond v.

Commissioner, T.C. Memo. 1997-71.    However, the most important

factor is the extent of the taxpayer's effort to determine the

taxpayer's proper tax liability.    See sec. 1.6664-4(b)(1), Income

Tax Regs.    An honest misunderstanding of fact or law that is

reasonable in light of the experience, knowledge, and education

of the taxpayer may indicate reasonable cause and good faith.

See Remy v. Commissioner, T.C. Memo. 1997-72.

     Petitioner made an insufficient effort to determine his

proper tax liability for 1997 by submitting to respondent a

return that disavowed any income or any tax liability in spite of

the receipt by petitioner during the years of income payments

that, in previous years, petitioner had reported.    There was no

reasonable or honest misunderstanding of fact or law by
                               - 9 -


petitioner.   Imposition of the section 6662(a) penalty in this

case is amply justified and, therefore, is sustained.

     Reviewed and adopted as the report of the Small Tax Case

Division.



                               Decisions will be entered under

                          Rule 155 in docket No. 6195-99S and

                          for respondent in docket No. 13337-99S.
