                           T.C. Memo. 2002-211



                         UNITED STATES TAX COURT



                 DONNIE F. SCHROEDER, Petitioner v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



       Docket Nos. 7704-99, 5443-00.        Filed August 20, 2002.


       Donnie F. Schroeder, pro se.

       Paul K. Voelker, for respondent.



                           MEMORANDUM OPINION


       PAJAK, Special Trial Judge:     In these consolidated cases,

respondent determined the following deficiencies, addition to

tax, and penalties in petitioner’s Federal income taxes:

                                                   Accuracy-related
                             Addition to tax           penalty
Year        Deficiency       Sec. 6651(a)(1)         Sec. 6662(a)

1995        $5,479.00            $194.75              $1,095.80
1996        $1,168.70              -0-                  $233.74
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     Unless otherwise indicated, 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.

     In an amendment to answer with respect to petitioner’s 1996

taxable year, respondent asserted an increased tax deficiency of

$13,531 and accuracy-related penalty of $2,706.20.   This results

in a total deficiency of $14,699.70 and an accuracy-related

penalty of $2,939.94 for petitioner’s 1996 taxable year.

     After deemed concessions by petitioner, the issues the Court

must decide are:   (1) Whether petitioner had unreported gross

income in 1996; and (2) whether petitioner is liable for the

accuracy-related penalty under section 6662(a) with respect to

the 1996 taxable year.

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

Petitioner resided in Elverta, California, at the time he filed

his petitions.

     We first review petitioner’s 1995 taxable year.   Petitioner

filed a Form 1040, U.S. Individual Income Tax Return, for the

1995 taxable year.   On his 1995 return, petitioner reported

“wages, salaries, tips, etc.” of zero.   Petitioner also reported

adjusted gross income and total tax of zero.   In a two-page

document attached to his 1995 return, petitioner stated in part:

     It should also be noted that I had “zero” income
     according to the Supreme Court’s definition of income
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     (See note#1), since in Merchant’s Loan & Trust Co.v.
     Smietanka, 225 U.S. 509, (at pages 518&519) that Court
     held that “The word (income) must be given the same
     meaning in all of the income tax acts of Congress that
     was given to it in the Corporation Excise Tax Act
     (1909).“Therefore, since I had no earnings in any year
     that would have been taxable under the Corporation
     Excise Tax Act of 1909 as “income,” I can only swear to
     having “zero” income in 1995.* * *

     Respondent issued a notice of deficiency for the 1995

taxable year and petitioner filed a petition with this Court.    On

August 14, 2000, this Court ordered that, with the exception of

an issue relating to the period of limitations, petitioner was

deemed to have conceded any issue that could arise from any of

the determinations in the notice of deficiency for the 1995

taxable year.

     At trial, the Court ruled that the notice of deficiency for

the 1995 taxable year was issued timely for the reasons set forth

below.   Petitioner had averred generally that the notice of

deficiency was not issued within the 3-year period set forth in

section 6501(a).   Even if we take the filing date to be April 15,

1996, as petitioner claims, rather than the received date of

March 12, 1997, the notice of deficiency was issued on May 10,

2000, well within the 6-year period which is applicable when

there is an omission from gross income of more than 25 percent.

Sec. 6501(e).   Here, the deemed deficiency obviously resulted in

an omission of more than 25 percent of gross income over the zero

amount reported in petitioner’s 1995 return.   Therefore, the
                                - 4 -

notice of deficiency was issued timely for the 1995 taxable year.

Because of this Court’s order as to the deemed admissions and our

ruling that the notice of deficiency was timely, respondent’s

determinations as to the 1995 taxable year are sustained.

     We turn to petitioner’s 1996 taxable year.      On April 15,

1997, petitioner filed his 1996 individual Federal tax return.

Petitioner reported “wages, salaries, tips, etc.” of zero.

Petitioner also reported adjusted gross income, taxable income,

and total tax of zero.    Petitioner attached a two-page document

to his 1996 return, which was essentially identical to the two-

page document attached to his 1995 return.

     In the notice of deficiency for the 1996 taxable year,

respondent determined that petitioner had total unreported gross

income in the amount of $9,051 from various specific sources.

This included the following items:      (1) Interest income in the

amounts of $108 and $11 from Mather Federal Credit Union and

Countrywide, respectively; (2) early distribution from an

individual retirement account in the amount of $7,017 from First

National Bank; (3) nonemployee compensation in the amount of $690

from Nader Afrooz; and (4) rental income in the amount of $1,225

from Coldwell Banker.    Respondent adjusted petitioner’s self-

employment tax and allowed him a corresponding deduction.

     A Form 1065, U.S. Partnership Return of Income, was timely

filed for Quality Sweeping & Steam Cleaning (Quality) for the
                               - 5 -

1996 taxable year.   A Schedule K-1 was attached to Quality’s 1996

return.   The Schedule K-1 listed petitioner as a general partner

of Quality with a 50-percent interest in profit sharing, loss

sharing, and ownership of capital.     The Schedule K-1 listed

petitioner’s distributive share of Quality’s ordinary income,

interest income, and section 1231 gain for the 1996 taxable year

as $40,697, $1,411, and $311, respectively.     The Schedule K-1

also listed petitioner’s distributive share of Quality’s section

179 expense deduction and other deductions as $644 and $800,

respectively.

     During the course of trial preparation, respondent

discovered that petitioner had additional income from Quality.

In the amendment to answer, respondent asserted that petitioner

had the following additional amounts of unreported gross income

in 1996 with respect to his partnership interest in Quality:       (1)

Ordinary income in the amount of $40,697; (2) section 1231 gain

in the amount of $311; and (3) interest income in the amount of

$1,411.   With respect to petitioner’s partnership interest in

Quality, respondent allowed petitioner a section 179 expense

deduction and other deductions in the amounts of $644 and $800,

respectively.   Respondent also increased petitioner’s self-

employment tax and allowed a corresponding deduction.     Petitioner

has not specifically contested the applicability of the

employment tax and related deductions, and we deem that he has
                                 - 6 -

conceded these issues.

     We must decide whether petitioner had unreported gross

income in 1996.    Respondent’s determinations in the notice of

deficiency are presumptively correct.      Rule 142(a); Welch v.

Helvering, 290 U.S. 111, 115 (1933).      Respondent has the burden

of proof for the increased deficiency and penalty asserted in the

amendment to answer.    Rule 142(a).     Because petitioner failed to

comply with the requirements to substantiate any item, section

7491 is not applicable except that under section 7491(c),

respondent has the burden of production with respect to

petitioner’s liability for a penalty.

     In his petition and memorandum, petitioner makes tax

protester arguments that have been repeatedly rejected by this

Court and others, including the Court of Appeals for the Ninth

Circuit (to which this case may be appealed), as inapplicable or

without merit.     Rowlee v. Commissioner, 80 T.C. 1111 (1983);

McCoy v. Commissioner, 76 T.C. 1027 (1981), affd. 696 F.2d 1234

(9th Cir. 1983).    We see no need to repeat these discussions

here.

     Section 1 imposes a tax on the taxable income of

individuals.   Section 63(b) defines “taxable income”, as

applicable to petitioner, as gross income less the standard

deduction and one personal exemption.      Section 61(a) defines

gross income to mean “all income from whatever source derived,
                               - 7 -

including (but not limited to) the following items:   (1)

Compensation for services * * * (4) Interest; (5) Rents; * * *

(11) Pensions; * * * [and] (13) Distributive share of partnership

gross income”.

     At trial petitioner did not dispute any of the unreported

gross income amounts determined by respondent in the 1996 notice

and the amendment to answer.   In fact, in his Reply To Amendment

To Answer and at trial, in response to questions concerning items

of income, petitioner admitted he received:   The nonemployee

compensation in the amount of $690 from Nader Afrooz, the rental

income from Coldwell Banker in the amount of $1,225, money from

First Nationwide Bank, and the distribution of profits from

Quality.   Petitioner did not raise any argument at trial as to

the assertion of respondent that petitioner had $108 interest

income from Mather Federal Credit Union and $11 of interest

income from Countrywide.   We deem these amounts conceded.

     At trial, petitioner claimed the $1,225 of rental income

belonged to another individual.   However, petitioner admitted he

“rented the house” and someone paid him rent.   Petitioner offered

no corroborative testimony or documentary evidence that the

rental income in fact belonged to someone else.   We are not

required to accept petitioner’s generalized statements and

decline to do so here without further supporting evidence.

Geiger v. Commissioner, 440 F.2d 688 (9th Cir. 1971), affg. T.C.
                               - 8 -

Memo. 1969-159; Tokarski v. Commissioner, 87 T.C. 74, 77 (1986).

We are not required to accept the self-serving statements of

petitioner as the truth.

     On this record, we hold that petitioner had unreported items

of gross income in the taxable year 1996 as determined by

respondent.   Accordingly, we sustain respondent’s determination

of petitioner’s income tax deficiency with respect to the 1996

taxable year.

     Finally, we must decide whether petitioner is liable for the

section 6662(a) accuracy-related penalty for the 1996 taxable

year.   Taxpayers are liable for an accuracy-related penalty in

the amount of 20 percent of the portion of an underpayment of tax

attributable to any substantial understatement of income tax.

Sec. 6662(a) and (b)(2).   A “substantial understatement” is an

understatement for the taxable year exceeding the greater of 10

percent of the proper tax or $5,000.   Sec. 6662(d)(1)(A).   No

penalty will be imposed with respect to any portion of any

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.   Sec. 6664(c).   This determination is

based on all the facts and circumstances.    Sec. 1.6664-4(b)(1),

Income Tax Regs.

     As mentioned, section 7491(c) imposes on respondent the

burden of production of evidence that the section 6662(a) penalty
                                - 9 -

is appropriate, but respondent need not produce evidence

regarding reasonable cause.     Higbee v. Commissioner, 116 T.C.

438, 446-447 (2001).

     Petitioner substantially understated his income tax

liability for the 1996 taxable year because he reported a income

tax liability of zero.    Respondent provided the amount and

sources of the unreported gross income determined in the 1996

notice of deficiency and the amendment to answer.         Petitioner’s

income tax liability substantially exceeds the amount shown on

his 1996 return.   On the record before the Court, we find that

respondent has satisfied the burden of production with respect to

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

presented no evidence indicating reasonable cause for the

understated income.    Accordingly, we sustain the imposition of

the accuracy-related penalty.



                                             Decisions will be entered

                                        for respondent.
