                        T.C. Memo. 2003-344



                     UNITED STATES TAX COURT



                 BILL MAX OVERTON, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 2566-01.           Filed December 22, 2003.


     Bill Max Overton, pro se.

     Donald E. Edwards and Ann O’Blenes, for respondent.



                        MEMORANDUM OPINION


     THORNTON, Judge:   Respondent determined the following

deficiencies and additions to tax in petitioner’s Federal income

taxes:1


     1
       All section references are to the Internal Revenue Code in
effect for the years at issue (except that references to sec.
7491 are to that section as added to the Internal Revenue Code by
the Internal Revenue Service Restructuring and Reform Act of 1998
                                                   (continued...)
                                - 2 -

                                       Additions to Tax
     Year        Deficiency     Sec. 6651(a)(1)     Sec. 6654

     1996          $4,195           $1,009              $214
     1997           4,377              993               210
     1998           3,908              977               179


The issues for decision are:    (1) Whether petitioner received

unreported interest income as determined in the notices of

deficiency, and (2) whether petitioner is liable for additions to

tax pursuant to sections 6651(a)(1) and 6654 for the years at

issue.

                              Background

     When he petitioned this Court, petitioner resided in

Oklahoma City, Oklahoma.

     For each year at issue, petitioner received interest income

from numerous financial institutions.      The interest income

totaled $39,648, $36,859, and $32,683 for 1996, 1997, and 1998,

respectively.2

     Petitioner filed no Federal income tax return for 1996 or

1997.    On May 7, 1999, the Internal Revenue Service received from

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

his 1998 tax year.   This document (the purported 1998 return)



     1
      (...continued)
(RRA 1998), Pub. L. 105-206, sec. 3001, 112 Stat. 726). Rule
references are to the Tax Court Rules of Practice and Procedure.
     2
       Petitioner admits in his petition that he received those
amounts of interest income.
                               - 3 -

lists on Schedule E, Supplemental Income and Loss, $32,683 of

“Royalties received & interest”, offset by $81,556 of claimed

expenses.   On the 1998 purported return, petitioner lists no

earned income but claims a “1997 loss carry over” of $407,246, a

$3,783,344 earned income credit, and a refund of the same amount.

In the jurat above his signature, petitioner scratched out the

words “Under penalty of perjury.”3

     With respect to each of petitioner’s 1996, 1997, and 1998

tax years, respondent prepared a “substitute for return” (SFR).4


     3
       Petitioner claims to have filed with the Internal Revenue
Service (IRS) similar purported returns for his tax years 1996
and 1997. The 1996 purported return, which is in evidence, lists
on Schedule E, Supplemental Income and Loss, $39,648 of
“Royalties received & interest”, offset by $78,915 of claimed
expenses. On the 1996 purported return, petitioner lists no
earned income and claims a “1995 loss carry over” of $325,372, a
$517,146 earned income credit, and a $517,305 refund. Similarly,
the 1997 purported return, which is also in evidence, lists on
Schedule E $36,859 of “Royalties received & interest”, offset by
$79,466 of claimed expenses. On the 1997 purported return,
petitioner lists no earned income and claims a “1996 loss carry
over” of $364,639, a $1,833,156 earned income credit, and a
$1,833,719 refund.

     On each of these purported 1996 and 1997 returns, as on his
purported 1998 return, petitioner scratched out the words “Under
penalty of perjury” in the jurat above his signature. There is
no evidence in the record that petitioner ever submitted the
purported 1996 and 1997 returns to the IRS.

     Pursuant to sec. 6702, respondent assessed a frivolous
return penalty with respect to petitioner’s purported 1998
return. The frivolous return penalty is not at issue here.
     4
       The term “substitute for return” (SFR) has been used to
describe a return prepared by the Commissioner pursuant to sec.
6020(b) where the taxpayer did not file a return. It is
                                                   (continued...)
                               - 4 -

On December 22, 2000, respondent issued notices of deficiency

based on the SFRs.   In the notices of deficiency, respondent

determined that petitioner received unreported interest income in

the following amounts, on the basis of information reports from

financial institutions:5

                  Year         Unreported Interest Income

                  1996                   $32,668
                  1997                    33,895
                  1998                    32,678

     On June 2, 2003, this case was called for trial in Lubbock,

Texas.   Petitioner failed to appear, and no appearance was made

on his behalf.

                            Discussion

     Although petitioner failed to appear at trial and to

prosecute his case, respondent’s counsel chose to proceed with




     4
      (...continued)
unnecessary to decide whether the returns that respondent
prepared in this case meet the requirements of sec. 6020(b). For
convenience, we refer to these returns as SFRs. See Swanson v.
Commissioner, 121 T.C. 111, 112-113 n.1 (2003).
     5
       On Forms 1099-INT, Interest Income, the financial
institutions reported interest income paid to petitioner totaling
at least $32,668, $33,895, and $32,678 for 1996, 1997, and 1998,
respectively. Most if not all of these Forms 1099-INT listed
incorrect taxpayer identification numbers. Using an automated
system, the IRS matched the Forms 1099-INT to petitioner’s
correct taxpayer identification number.
                                   - 5 -

trial.     Accordingly, we regard this case as submitted by the

parties.     See Rule 149(a).6

A.   Unreported Interest Income

      The evidence shows that petitioner received interest income

in amounts at least as great as determined in the notices of

deficiency.     In fact, by his own admissions in his petition,

petitioner received more interest income than was determined in

the notices of deficiency.       Respondent has not sought increased

deficiencies based on these admissions.      Therefore, we sustain

respondent’s deficiency determinations.7


      6
          RULE 149.   FAILURE TO APPEAR OR TO ADDUCE EVIDENCE

           (a) Attendance at Trials: The unexcused absence
      of a party or a party’s counsel when a case is called
      for trial will not be ground for delay. The case may
      be dismissed for failure properly to prosecute, or the
      trial may proceed and the case be regarded as submitted
      on the part of the absent party or parties.

     The parties have not addressed the application of sec. 7491
or whether the examination of petitioner’s 1996 or 1997 tax year
commenced after July 22, 1998, the effective date of sec. 7491.
See RRA 1998 sec. 3001(c), 112 Stat. 727. (Because petitioner’s
1998 return was due after July 22, 1998, presumably, the
examination of petitioner’s 1998 tax year commenced after July
22, 1998.) Nevertheless, sec. 7491 does not affect our analysis
for any of the years at issue because, with the one exception
discussed infra note 7, our holdings do not depend upon which
party has the burden of proof or production.
      7
       In his petition, petitioner claims entitlement to all the
deductions listed on his purported returns. Petitioner has not
substantiated any of these deductions and accordingly is not
entitled to them. See Rule 142(a); New Colonial Ice Co. v.
Helvering, 292 U.S. 435, 440 (1934). Because petitioner failed
to comply with the substantiation and record-keeping requirements
                                                   (continued...)
                                - 6 -

B.   Additions to Tax

      1.   Failure To File Timely Returns

      For each year at issue, respondent determined that

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

for failing to file a timely Federal income tax return.    Section

6651(a)(1) imposes an addition to tax for failing to file a tax

return on or before the specified filing date unless the taxpayer

establishes that the failure “is due to reasonable cause and not

due to willful neglect”.    Sec. 6651(a)(1); see United States v.

Boyle, 469 U.S. 241, 245 (1985).

      Respondent offered into evidence Form 3050, Certificate of

Lack of Record, which indicates that no income tax return for

petitioner is on file with the Internal Revenue Service for any

year at issue.    In his petition, petitioner alleges that he filed

a Federal income tax return for each year at issue.   On each of

these purported returns, petitioner crossed out the words “Under

penalty of perjury” from the jurat above his signature.    For this

reason, if for no other, the purported returns do not constitute

valid returns.    See, e.g., Cupp v. Commissioner, 65 T.C. 68, 78-

79 (1975), affd. without published opinion 559 F.2d 1207 (3d Cir.

1977); Sochia v. Commissioner, T.C. Memo. 1998-294; see also



      7
      (...continued)
of sec. 7491(a)(2) and to introduce credible evidence within the
meaning of sec. 7491(a)(1), sec. 7491 does not place the burden
of proof on respondent with respect to the claimed deductions.
                                 - 7 -

Williams v. Commissioner, 114 T.C. 136, 140 (2000); Jenkins v.

Commissioner, T.C. Memo. 1989-618; Jenkins v. Commissioner, T.C.

Memo. 1989-617.

     Petitioner has not shown that his failure to file valid

returns was due to reasonable cause.     To the contrary, his

purported returns convince us that his failure to file valid

returns resulted from his deliberate attempt to subvert the tax

laws.     Accordingly, we sustain respondent’s determination of

section 6651(a)(1) additions to tax as set forth in the notices

of deficiency.

     2.      Failure To Pay Estimated Tax

     For each year at issue, respondent determined that

petitioner is liable for the section 6654 addition to tax for

underpaying required installments of individual estimated tax.

     In his petition, the only argument that petitioner raises

that arguably pertains to the section 6654 addition to tax is

that “Since there is no additional income, it follows that the

additional claims for penalties are also in error.”     Contrary to

petitioner’s argument, however, we have sustained respondent’s

deficiency determinations as to the amount of petitioner’s

unreported income for each year at issue.     Petitioner does not

allege, and the evidence does not suggest, that any exception in
                                 - 8 -

section 6654(e) applies.8    Accordingly, we sustain respondent’s

determination of section 6654 additions to tax as set forth in

the notices of deficiency.

     In reaching our holding, we have considered all arguments

that petitioner raised in his petition.      Arguments not addressed

herein are irrelevant or without merit.9

     To reflect the foregoing,


                                             Decision will be entered

                                         for respondent.




     8
       The evidence shows that petitioner had Federal income
taxes withheld of $158 and $404 for 1996 and 1997, respectively.
In the notices of deficiency for these years, respondent
appropriately gave petitioner credit for these amounts of
withholding.
     9
       For example, in his petition, petitioner contends that the
limitations period for assessing his 1996 tax has expired.
Assessments must be made within 3 years after a return is filed.
Sec. 6501(a). Because petitioner filed no 1996 return, the
limitations period for assessing his 1996 tax remains open
indefinitely. See sec. 6501(c)(3).
