                          T.C. Memo. 2001-204



                        UNITED STATES TAX COURT



           JIMMY A. AND CINDY R. LOBE, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 19157-99.                       Filed August 6, 2001.



     Jimmy Lobe and Cindy Lobe, pro sese.

     Robert S. Scarbrough, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     LARO, Judge:   Petitioners petitioned the Court to

redetermine respondent’s determinations as to their 1995 and 1996

Federal income taxes.    As to the respective years, respondent

determined in a notice of deficiency issued to Jimmy A. Lobe (Mr.

Lobe) that he was liable for deficiencies of $47,563 and $29,296,

failure to file additions to tax of $11,879 and $6,592 under
                                - 2 -

section 6651(a), and additions to tax of $2,576 and $1,559 under

section 6654.   As to the same years, respondent determined in a

notice of deficiency issued to Cindy R. Lobe (Ms. Lobe) that she

was liable for deficiencies of $15,062 and $7,761, failure to

file additions to tax of $3,754 and $1,746 under section 6651(a),

and additions to tax of $814 and $413 under section 6654.

     Following a trial at which petitioners choose neither to

testify nor to present any exhibits (with the exception of the

subject notices of deficiency which were attached to the

stipulation of facts), we must decide whether respondent’s

determinations are correct.   We hold they are to the extent

described herein.    Section references are to the Internal Revenue

Code in effect for the years in issue.   Rule references are to

the Tax Court Rules of Practice and Procedure.   Dollar amounts

have been rounded to the nearest dollar.

                          FINDINGS OF FACT

     Some facts have been stipulated and are so found.   The 16

stipulated facts and two exhibits submitted therewith are

incorporated herein by this reference.   Petitioners are husband

and wife who resided together in Omak, Washington, during all

relevant years.   Neither of them has filed a 1995 or 1996 Federal

income tax return.

     During 1995, petitioners earned interest income of $367 from

a credit union (CU) account in which both petitioners had
                                - 3 -

signatory authority, and they received nonemployee compensation

of $2,319 from a State bank (Bank).     Ms. Lobe received during

that year $1,544 in wages.   Mr. Lobe received during 1996 $700 in

nonemployee compensation from the CU.

     During 1995 and 1996, petitioners conducted a business known

as Jim Lobe Construction (JLC).   They reported to the State of

Washington that JLC’s gross receipts in the respective years were

$128,464 and $85,184.    They have not provided to respondent or to

the Court any documentation to substantiate any costs of goods

sold or business expenses which they may have incurred during

those years in JLC’s operation.   Nor have they provided any

documentation to substantiate their entitlement to any other

deduction for those years.

     Respondent determined that Mr. Lobe had failed to report

taxable income of $122,251 and $74,946 during the respective

years.   Respondent determined this income as follows, noting that

because Washington is a community property State, respondent was

treating Mr. Lobe as realizing all of his income and 50 percent

of Ms. Lobe’s income:1




     1
       Respondent concedes on brief that each spouse should be
taxed on only 50 percent of the income that he or she earned and
that a computation under Rule 155 will be necessary to effect
this result. Respondent determined in the notices of deficiency
as a protective measure that each spouse was taxable on 100
percent of the income that he or she earned.
                               - 4 -

                                                  1995        1996

     Community income–-wife’s wages              $772        -0-
     Exemptions                                  (850)    ($2,550)
     Interest income from CU                      367        -0-
     Nonemployee compensation--JLC/CU/Bank    130,783      85,884
     Self-employment AGI adjustment            (5,546)     (5,038)
     Standard deduction                        (3,275)     (3,350)
                                              122,251      74,946

Respondent determined Mr. Lobe’s tax liability by using the

married filing separate return tax rates and by imposing upon Mr.

Lobe self-employment taxes of $11,091 and $10,075 for the

respective years as to the nonemployee compensation.     Respondent

also gave Mr. Lobe credit for 50 percent of the $94 withheld from

Ms. Lobe’s wages.

     Respondent determined that Ms. Lobe had failed to report

taxable income of $61,343 and $37,042 during the respective

years.   Respondent determined this income as follows, noting that

because Washington is a community property State, respondent was

treating Ms. Lobe as realizing all of her income and 50 percent

of Mr. Lobe’s income:

                                                  1995        1996

     Community income-JLC/CU/Bank             $65,391     $42,942
     Community income/interest from CU            183        -0-
     Exemptions                                (2,500)     (2,550)
     Wife’s wages                               1,544        -0-
     Standard deduction                        (3,275)     (3,350)
                                               61,343      37,042

Respondent determined Ms. Lobe’s tax liability by using the

married filing separate return tax rates and by giving her credit

for 50 percent of the $94 withheld from her wages.
                               - 5 -

                              OPINION

      Petitioners must prove that respondent's determinations set

forth in the notices of deficiency are incorrect.    Rule 142(a);

Welch v. Helvering, 290 U.S. 111, 115 (1933).    Petitioners also

must prove their entitlement to any deduction; e.g., by

maintaining sufficient records to substantiate a deduction.      New

Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934); see also

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

burden of proof requires that they introduce sufficient evidence

to:   (1) Make a prima facie case establishing that respondent

committed the errors alleged in the petition and (2) overcome the

evidence favorable to respondent.    See Lyon v. Commissioner, 1

B.T.A. 378, 379 (1925); see also Lawler v. Commissioner, T.C.

Memo. 1995-26.

      Petitioners did not produce any evidence rebutting

respondent's determinations, and the record is devoid of evidence

disproving those determinations.    Accordingly, we sustain

respondent in full subject to the concession mentioned above.

See Reichenbach v. Commissioner, T.C. Memo. 1995-369, affd.

without published opinion 99 F.3d 1139 (6th Cir. 1996); Finesod

v. Commissioner, T.C. Memo. 1994-66; see also Simpson v.

Commissioner, T.C. Memo. 1999-274; Sims v. Commissioner, T.C.

Memo. 1997-197; Taub v. Commissioner, T.C. Memo. 1996-61.
               - 6 -

Accordingly,

                            Decision will be entered

                       under Rule 155.
