                  T.C. Summary Opinion 2001-177



                     UNITED STATES TAX COURT



             CRAIG D. HOLLINGSWORTH, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 2003-01S.                 Filed November 26, 2001.


     Craig D. Hollingsworth, pro se.

     Trent D. Usitalo, for respondent.



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

the provisions of section 7463 of the Internal Revenue Code in

effect at the time that the petition was filed.1   The decision to

be entered is not reviewable by any other court, and this opinion

should not be cited as authority.


     1
       Unless otherwise indicated, all subsequent section
references are to the Internal Revenue Code in effect for 1998,
the taxable year in issue, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
                               - 2 -

      Respondent determined a deficiency in, and an addition to

tax under section 6651(a)(1) to, petitioner's Federal income tax

for 1998 in the amounts of $5,505 and $273, respectively.

      The issues for decision are as follows:

      (1) Whether petitioner is entitled to the deductions claimed

by him on his Schedule C.   We hold that he is not.

      (2) Whether petitioner is liable for an addition to tax

under section 6651(a)(1).   The resolution of this issue turns on

whether petitioner timely filed his income tax return for the

year in issue.   We hold that he did; accordingly, he is not

liable for the addition to tax.

      The amount of petitioner’s liability for self-employment tax

and the amount of the deduction under section 164(f) to which

petitioner is entitled are computational matters, the resolution

of which will depend on our disposition of the first of the two

issues enumerated above.

Background

     Some of the facts have been stipulated, and they are so

found.

     At the time that the petition was filed, petitioner resided

in Ceres, California.

A.   Petitioner’s 1998 Income Tax Return

     Petitioner filed Form 1040, U.S. Individual Income Tax

Return, for 1998.   Petitioner attached to his return Schedule C,
                                  - 3 -

Profit or Loss From Business.      Petitioner described his business

on his Schedule C as a part-time real estate loan officer.

Petitioner reported income and claimed expenses on his Schedule C

as follows:

      Income
         Gross receipts                            $22,331
         Less: Cost of Goods Sold                      ---
         Gross profit/gross income                  22,331
      Expenses
         Advertising                      $3,538
         Car & truck expenses              4,614
         Insurance                           928
         Legal & professional services     3,540
         Office expense                    3,654
         Repairs & maintenance               678
         Supplies                            593
         Taxes & licenses                    472
         Utilities & telephone             1,669   19,686
      Net profit                                    2,645


     Petitioner also attached to his 1998 income tax return

Schedule SE, Self-Employment Tax, and reported self-employment

tax in the amount of $374.     Petitioner claimed a deduction for

one-half of this amount, or $187, on page 1 of his Form 1040.

See sec. 164(f).

     Petitioner dated his 1998 income tax return “8/14/99" and

mailed it to respondent’s service center in Fresno, California.

The envelope in which petitioner mailed his return bears a U.S.

Postal Service postmark date of August 16, 1999.       Petitioner’s

return was received by respondent’s service center 2 days later,

on August 18, 1999.

     Petitioner filed his 1998 income tax return pursuant to Form

4868, Application for Automatic Extension of Time To File U.S.
                                - 4 -

Individual Income Tax Return.    This form served to extend by 4

months the time within which petitioner was obliged to file his

1998 income tax return.

     B.   Examination of Petitioner’s 1998 Income Tax Return

     In due course, petitioner’s 1998 income tax return was

selected for examination.    The focus of the examination was the

deductions claimed by petitioner on his Schedule C.    However,

petitioner “declined to open [his] books and records” or

otherwise provide substantiation for any of the deductions in

question.    Thereafter, respondent disallowed petitioner’s

Schedule C deductions for lack of substantiation.    Respondent

also determined that petitioner failed to timely file his 1998

return.

Discussion

     A.   Petitioner’s Schedule C Deductions

     We begin with several fundamental principles that serve to

guide the decisional process.

     First, deductions are a matter of legislative grace.      Deputy

v. duPont, 308 U.S. 488, 493 (1940); New Colonial Ice Co. v.

Helvering, 292 U.S. 435, 440 (1934).

     Second, a taxpayer bears the burden of proving that the

taxpayer is entitled to any deduction claimed.   Rule 142(a);

INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); Welch v.
                                - 5 -

Helvering, 290 U.S. 111, 115 (1933).2

     Third, a taxpayer is required to maintain records sufficient

to substantiate deductions claimed by the taxpayer on his or her

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

     Fourth, the fact that a taxpayer reports a deduction on the

taxpayer’s income tax return is not sufficient to substantiate

the deduction claimed on the return.    Wilkinson v. Commissioner,

71 T.C. 633, 639 (1979); Roberts v. Commissioner, 62 T.C. 834,

837 (1974).   A tax return is merely a statement of the taxpayer’s

claim; the return is not presumed to be correct.    Wilkinson v.

Commissioner, supra at 639; Roberts v. Commissioner, supra at

837; see also Seaboard Commercial Corp. v. Commissioner, 28 T.C.

1034, 1051 (1957) (a taxpayer's income tax return is a

self-serving declaration that may not be accepted as proof for

the deduction or exclusion claimed by the taxpayer); Halle v.

Commissioner, 7 T.C. 245 (1946) (a taxpayer’s return is not self-

proving as to the truth of its contents), affd. 175 F.2d 500 (2d

Cir. 1949).

     At trial, petitioner did not introduce a single piece of

documentary evidence in support of any of the deductions in

issue.    Likewise, petitioner did not offer testimony in support



     2
        We note that sec. 7491(a) does not affect the burden of
proof where a taxpayer fails to substantiate a deduction. Higbee
v. Commissioner, 116 T.C. 438 (2001); Caralan Trust v.
Commissioner, T.C. Memo. 2001-241.
                               - 6 -

of any of those deductions.   Therefore, even if petitioner may

have incurred some deductible expense in pursuing his Schedule C

activity, we have no basis whatsoever on which to approximate an

allowance.   See Williams v. United States, 245 F.2d 559, 560 (5th

Cir. 1957); Vanicek v. Commissioner, 85 T.C. 731, 743 (1985); see

also Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930);

cf. sec. 274(d)(4), providing that no deduction is allowable with

respect to any “listed property”, such as a passenger automobile

or other property used as a means of transportation, on the basis

of any approximation or the unsupported testimony of the

taxpayer; Sanford v. Commissioner, 50 T.C. 823, 827 (1968), affd.

per curiam 412 F.2d 201 (2d Cir. 1969); Golden v. Commissioner,

T.C. Memo. 1993-602; sec. 1.274-5T(a), Temporary Income Tax

Regs., 50 Fed. Reg. 46014 (Nov. 6, 1985).

     Rather, at trial, petitioner, while admitting that he was

obliged to file an income tax return, argued that respondent had

no right to examine it.   The sheer folly of this assertion

requires no response.   See Crain v. Commissioner, 737 F.2d 1417

(5th Cir. 1984); see also sec. 7602(a).3


     3
        To the extent that any of petitioner’s musings at trial
may imply reliance on the Fifth Amendment privilege against self-
incrimination, we note: (1) The deductions in issue were claimed
by petitioner on his return, and (2) a claim based on the
privilege, even if well founded, is not a substitute for relevant
evidence. United States v. Rylander, 460 U.S. 752, 758 (1983);
Petzoldt v. Commissioner, 92 T.C. 661, 684-685 (1989); Tinsman v.
Commissioner, T.C. Memo. 2000-55, affd. without published opinion
                                                   (continued...)
                                     - 7 -

     In view of his failure to substantiate, we hold that

petitioner is not entitled to the deductions claimed by him on

his Schedule C.

     B.       Addition To Tax Under Section 6651(a)(1)

     Section 6651(a)(1) imposes an addition to tax for failure to

timely file a return.        Whether petitioner is liable for this

addition turns on whether he timely filed his 1998 income tax

return.

     Absent an extension of time to file, petitioner’s 1998

income tax return was required to be filed by Thursday, April 15,

1999.        See sec. 6072(a).   Because petitioner filed Form 4868,

Application for Automatic Extension of Time To File U.S.

Individual Income Tax Return, the time within which petitioner

was required to file his return was extended by 4 months.4        Thus,

the filing deadline became August 15, 1999.        But because that


     3
     (...continued)
    F.3d      (8th Cir. 2001). In other words, petitioner may not
avoid meeting his burden of proof by asserting that he has a
right not to testify. United States v. Rylander, supra at 761;
Traficant v. Commissioner, 89 T.C. 501, 504 (1987), affd. 884
F.2d 258 (6th Cir. 1989). Indeed, in a civil case, “the Court
may draw a negative inference from facts over which petitioner
has asserted his Fifth Amendment privilege against self-
incrimination.” Traficant v. Commissioner, supra, citing Baxter
v. Palmigiano, 425 U.S. 308 (1976). The negative inference that
we would draw in this case is that petitioner lacks
substantiation for the deductions that he claimed on his return.
         4
       At trial, respondent raised no issue regarding the
timeliness of Form 4868 or whether petitioner properly estimated
his tax liability thereon. See Crocker v. Commissioner, 92 T.C.
899, 910 (1989). Accordingly, we proceed on the basis that Form
4868 was both timely filed and valid.
                                - 8 -

date was a Sunday, the filing deadline was extended to Monday,

August 16, 1999.    See sec. 7503.

     The envelope in which petitioner mailed his 1998 income tax

return bears a U.S. Postal Service postmark date of August 16,

1999, and petitioner’s return was received by respondent’s

service center 2 days later.    Accordingly, because petitioner’s

return was timely mailed, it is treated as having been timely

filed.    See sec. 7502(a).

     Because petitioner timely filed his 1998 income tax return,

we hold that he is not liable for the addition to tax under

section 6651(a)(1).

     C.    Conclusion

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect our disposition of the disputed issues,



                                     Decision will be entered for

                                respondent as to the deficiency in

                                income tax and for petitioner as to

                                the addition to tax.
