                  T.C. Summary Opinion 2002-48



                     UNITED STATES TAX COURT



              HERBERT DONALD SINGER, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11554-00S.            Filed May 7, 2002.


     Herbert Donald Singer, pro se.

     Michael W. Berwind, 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 in this case is not reviewable by any other court, and

this opinion should not be cited as authority.


     1
       All subsequent section references are to the Internal
Revenue Code in effect for 1996 and 1997, the taxable years in
issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
                                 - 2 -

     Respondent determined deficiencies in petitioner’s Federal

income taxes and accuracy-related penalties for 1996 and 1997 as

follows:

                                          Penalty
           Year     Deficiency           Sec. 6662
           1996      $11,370              $2,274
           1997       16,359               3,271


     After a concession by respondent,2 the issues remaining for

decision are as follows:

     (1) Whether petitioner engaged in his “health, wealth and

healing ministry” activity for profit within the meaning of

section 183 during each of the years in issue.       We hold that he

did not.

     (2) Whether petitioner is entitled to deductions for his

“health, wealth and healing ministry” activity for 1997.      We hold

that he is not.

     (3) Whether petitioner is entitled to a deduction for

charitable contributions for 1997 in an amount greater than that

conceded by respondent.    We hold that he is not.

     (4) Whether petitioner is liable for the accuracy-related

penalty under section 6662(a) for negligence or intentional

disregard of rules or regulations for each of the years in issue.


     2
       Respondent concedes that petitioner is entitled to a
deduction for charitable contributions in 1997 in the amount of
$1,500. The extent, if any, to which this concession may have a
tax effect will be determined by the parties in their Rule 155
computation. See sec. 63(c).
                                - 3 -

We hold that he is.

     Adjustments relating to the taxable portion of petitioner’s

Social Security benefits, miscellaneous itemized deductions, and

self-employment tax are purely mechanical matters, the resolution

of which is dependent on our disposition of the disputed issues.

                             Background

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

found.    Petitioner resided in Rancho Mirage, California, at the

time that his petition was filed with the Court.

     A.   Petitioner and His Background

     Petitioner was born in May 1929, and he turned 67 in 1996.

     Petitioner is a former account executive (stockbroker) for

E.F. Hutton Group, Inc.   Petitioner retired from E.F. Hutton

sometime prior to 1996.

     In 1989, petitioner acquired    the title of “bishop” from

Universal Life Church, Inc., of Modesto, California.    A few years

later, in 1994, petitioner purportedly completed a “non-secular

course of study” and became a “lymphologist”.    Petitioner’s

“certificate” from “The International Academy of Lymphology”

recites, in part, that “Based on the United States Supreme Court

and Federal District Court guidelines, the right to teach and

practice this Non-Secular Science anywhere in the United States

comes from God and is PROTECTED BY THE CONSTITUTION IN THE FIRST

AMENDMENT’S FREE EXERCISE CLAUSE.”
                                 - 4 -

     B.   The “Health, Wealth and Healing Ministry” Activity

     During the years in issue, petitioner was engaged in a self-

proclaimed “health, wealth and healing ministry” activity.     At

trial, petitioner described this activity as follows:

          Well, people need to be understood in terms of the
     fact that they have a body. They are a spirit, a
     speaking spirit, and they have a soul.

          And if you don’t account for the totality of the
     individual, then you really can’t do anything to be in
     a compassionate program with them, to help them go from
     where they are to where they want to be.

                     *   *   *    *      *   *   *

          But I have to be responsible for helping people in
     terms of health, and in terms of creating wealth. And
     that has to be done God’s way, because if we don’t do
     things God’s way and we do them the world’s way, we’re
     far behind what happens when we do it God’s way.

          And so you have to help people to get a picture of
     why it is so urgently important to do things God’s way,
     and not the world’s way. And that puts you far above
     anybody that’s doing everything the world’s way.

          And people have to understand that you can’t
     function in business, unless you’re healthy. And you
     certainly can’t make any money, unless you’re willing
     to learn how to make money.

          And my whole approach is based on that idea of
     helping people learn how to make money.


     It would appear that the approach taken by petitioner in

“helping people learn how to make money” was his sponsorship of,

or participation in, a broad range of multilevel marketing
                                        - 5 -

programs.3    At trial, petitioner described several of these

programs:

          And the first business I got into, in multi-level
     marketing, was marketing electricity. I paid $1,250
     for the worldwide rights for the Los Angeles--well, the
     United States rights. And * * * it all went down the
     drain. They could never deliver electricity.[4]

                          *     *   *    *      *   *   *

     I was in one that I’m still in, called Life Plus, which
     has every disease known to mankind, and what particular
     product in Life Plus to take for that.

                          *     *   *    *      *   *   *

          THE COURT: * * * So we take it then that just
     about anything and everything under the sun is part of
     your ministry?

             PETITIONER: No, no.

             THE COURT:       No?

          PETITIONER: Only the things that I’ve actually
     joined, Your Honor. And I gave you one of those, set
     up--


     3
        As we understand them, these multi-level marketing
programs were essentially pyramid arrangements characterized by
various tiers and chains of “distributors”, each of whom was
interested less in the selling of “product” and more in the
recruiting of “downline distributors”. See, e.g., Nissley v.
Commissioner, T.C. Memo. 2000-178, for a description of the
“pyramid” incentive system maintained by Amway Corp.
     4
         Petitioner’s testimony occasioned the following colloquy:

          THE COURT: You were going to be kind of like your
     own Enron Corporation?

          PETITIONER: Well, something like that. Anyone
     who came in, anyone in the United States was supposed
     to be under the people who originally got it started.
     Then they could never deliver electricity.
                                 - 6 -

          THE COURT: I mean, let’s put it this way,
     anything you get involved in, becomes part of your
     ministry. Is that what you're telling us?

          PETITIONER: Well, if I sign up for a multi-level
     marketing situation, then that’s part of what I am
     using in the overall picture to help people to make
     money.

     C.   Recordkeeping

     Petitioner did not maintain a separate bank account for his

“health, wealth and healing ministry” activity.    Rather, he

maintained a single checking account for all of his affairs.

     Of the hundreds of checks that he wrote during the years in

issue, petitioner categorized the vast majority, including all of

the checks written to grocery stores, as “unreimbursed employee

expenses”.    Indeed, petitioner categorized only a couple of

checks (in the aggregate amount of $40) as “household expenses”.

In this regard, petitioner testified at trial that he lived with

his mother who paid most, if not all, of his personal living

expenses.    Thus, for example, petitioner testified: “I

wasn’t buying any of the food.    My mother was buying it all.”

and that “I didn’t do any of my own shopping.”

     D.   Financial Track Record of Petitioner’s Activity

     As of the date of trial, petitioner had yet to make a profit

in his “health, wealth and healing ministry” activity.

     E.   Petitioner’s 1996 Income Tax Return

     Petitioner filed a Format U.S. Individual Income Tax Return,

Form 1040PC, for 1996, listing his occupation as “healing
                                - 7 -

ministry”.   On his return, petitioner reported passive income

from several sources in the aggregate amount of approximately

$65,000 (exclusive of tax-exempt interest and Social Security

benefits), and he claimed certain losses, including a “business

loss” in the amount of $38,923 from his “health, wealth and

healing ministry” activity.    Petitioner reported a total tax

liability of $441 on his return.

     In support of his claimed “business loss”, petitioner

attached to his return a Schedule C, Profit or Loss From

Business, for his “health, wealth and healing ministry” activity.

Petitioner reported no income on his Schedule C.    In contrast,

petitioner claimed expenses in the aggregate amount of $38,923,

consisting of the following:

     Car expenses                                    $4,403
     Legal & professional services                    4,851
     Supplies                                         1,487
     Meals and entertainment                            314
     Other expenses
          Business storage/rental       $12,000
          Postage                           291
          Printing/copies                    93
          Professional publications/
              books/tapes/seminars       15,021
          Telephone                         463      27,868
     Total expenses                                  38,923

     According to petitioner, the deduction for “Business

storage/rental” represented monthly rent of $1,000 paid to his

mother for a dwelling unit used to store his “ozone machines”,

“wigglers”, oriental “heat type things”, and other product and

material for his “health, wealth and healing ministry” activity.
                               - 8 -

     F.   Petitioner’s 1997 Income Tax Return

     Petitioner filed a U.S. Individual Income Tax Return, Form

1040, for 1997, listing his occupation as “healing ministry”.   On

his return, petitioner reported passive income from several

sources in the aggregate amount of approximately $68,000

(exclusive of tax-exempt interest and Social Security benefits),

and he claimed certain losses, including a “business loss” in the

amount of $46,851 for his “health, wealth and healing ministry”

activity.   Petitioner reported a total tax liability of $844 on

his return.

     In support of his claimed “business loss”, petitioner

attached to his return a Schedule C, Profit or Loss From

Business, for his “health, wealth and healing ministry” activity.

On his Schedule C, petitioner reported gross receipts, gross

profit, and gross income, all in the amount of $1,400.   In

contrast, petitioner claimed expenses in the aggregate amount of

$48,251, consisting of the following:
                                - 9 -

     Advertising                                           $237
     Car expenses                                         2,856
     Legal & professional services                        5,080
     Supplies                                             1,301
     Meals and entertainment                                255
     Other expenses
          Business storage/rental         $11,000
          Network fee                       2,895
          Network fee                         136
          Postage                             247
          Printing/copies                     868
          Professional publications/
              books/tapes/seminars         22,160
          Secretarial services                500
          Telephone                           716         38,522
     Total expenses                                       48,251

     According to petitioner, and as on his prior year’s return,

the deduction for “Business storage/rental” represented monthly

rent paid to his mother for a dwelling unit used to store product

and material for his “health, wealth and healing ministry”

activity.

     In computing taxable income on his 1997 return, petitioner

itemized his deductions using Schedule A.      Among the various

deductions claimed, petitioner listed gifts to charity as

follows:

            Gifts by cash or check               $4,435
            Other than by cash or check           5,340
            Carryover from prior year            66,214

Petitioner claimed a deduction in the amount of $9,497,

consisting of one-half of his reported adjusted gross income of

$18,994, and claimed $66,492 as a carryover to the following

taxable year.

     In support of his claim of gifts to charity “other than by
                              - 10 -

cash or check”, petitioner attached to his return Form 8283,

Noncash Charitable Contributions.    On that form, petitioner

identified United Cancer Research Society of Palm Springs,

California, as the donee and described the donated property as

“clothing, furniture, books, misc.” having a cost or adjusted

basis of $36,000.5

     G.   The Notice of Deficiency

     In the notice of deficiency, respondent determined that

petitioner’s “health, wealth and healing ministry” activity was

not an activity engaged in for profit.    Respondent also

determined that petitioner failed to substantiate the expenses

claimed on his Schedule C for 1997 and that such expenses were

personal and not ordinary and necessary business expenses.

     In addition, respondent determined that petitioner is not

entitled to a deduction for 1997 for charitable contributions.

However, at trial, respondent conceded that petitioner was

entitled to a $1,500 deduction for that year.

     Finally, respondent determined that petitioner is liable for

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

or intentional disregard of rules or regulations for each year.



     5
        On a Schedule A for 1996, petitioner also claimed noncash
gifts to United Cancer Research Society, describing the donated
property as “clothing, books, housewares, TV, misc.” having a
cost or adjusted basis of $12,000. Petitioner also claimed on
his 1996 Schedule A a carryover of charitable contributions “from
prior year” in the amount of $68,396.
                              - 11 -

                            Discussion

A.   Activity Not Engaged In For Profit Under Section 183(c)

      Under section 183(a), if an activity is not engaged in for

profit, then no deduction attributable to that activity is

allowable except to the extent provided by section 183(b).     In

essence, section 183(b) allows deductions to the extent of gross

income derived from such activity.

      Section 183(c) defines an activity not engaged in for profit

as “any activity other than one with respect to which deductions

are allowable for the taxable year under section 162 or under

paragraph (1) or (2) of section 212.”    Deductions are allowable

under section 162 or under section 212(1) or (2) only if the

taxpayer is engaged in the activity with the “actual and honest

objective of making a profit.”   Ronnen v. Commissioner, 90 T.C.

74, 91 (1988); Fuchs v. Commissioner, 83 T.C. 79, 97-98 (1984);

Dreicer v. Commissioner, 78 T.C. 642, 645 (1982), affd. without

opinion 702 F.2d 1205 (D.C. Cir. 1983); sec. 1.183-2(a), Income

Tax Regs.   Although a reasonable expectation of profit is not

required, the taxpayer’s profit objective must be bona fide.     See

Hulter v. Commissioner, 91 T.C. 371, 393 (1988); Beck v.

Commissioner, 85 T.C. 557, 569 (1985).

      Whether the requisite profit objective exists is determined

by evaluating all surrounding facts and circumstances.     Keanini

v. Commissioner, 94 T.C. 41, 46 (1990); sec. 1.183-2(b), Income
                                - 12 -

Tax Regs.   Greater weight is given to objective facts than to

taxpayers’ self-serving statements of intent.    Westbrook v.

Commissioner, 68 F.3d 868, 875-876 (5th Cir. 1995), affg. T.C.

Memo. 1993-634; sec. 1.183-2(a), Income Tax Regs.   Taxpayers bear

the burden of proving that they engaged in the activity with the

objective of making a profit.    Rule 142(a); INDOPCO, Inc. v.

Commissioner, 503 U.S. 79, 84 (1992); Welch v. Helvering, 290

U.S. 111, 115 (1933).6

     Based on all of the facts and circumstances of this case, we

are not convinced that petitioner engaged in his “health, wealth

and healing ministry” activity for profit.   Indeed, we are not

convinced that petitioner’s activity was much more than a

strategy that was designed generally to lower, if not to

virtually eliminate, petitioner’s Federal income tax liability by

converting personal living expenses into deductible business



     6
        Applicable to court proceedings arising in connection
with examinations commencing after July 22, 1998, sec. 7491(a)(1)
generally places on the Commissioner the burden of proof with
respect to factual issues relevant to ascertaining the taxpayer’s
liability for income tax. See Internal Revenue Service
Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-206,
sec. 3001(a), (c)(1), 112 Stat. 685, 726, 727. However, sec.
7491(a) only applies if, inter alia, the taxpayer first
introduces credible evidence with respect to such factual issues.
Higbee v. Commissioner, 116 T.C. 438, 442 (2001). We do not
regard petitioner’s conclusory, self-serving, and sometimes
fantastical statements as credible evidence within the meaning of
sec. 7491(a)(1). See Tokarski v. Commissioner, 87 T.C. 74, 77
(1986); see also Sykes v. Commissioner, T.C. Memo. 2001-169.
Accordingly, we decide the issue before us without regard to the
general burden-shifting rule of sec. 7491(a)(1).
                              - 13 -

expenses.   At best, petitioner’s activity was a fanciful attempt,

not grounded in reality, to reach some promised land.

Accordingly, we hold that petitioner did not engage in his

“health, wealth and healing ministry” activity for profit within

the meaning of section 183 in either of the years in issue.7

B.   Schedule C Deductions

     Although petitioner did not report any income from his

“health, wealth and healing ministry” activity in 1996, he did

report $1,400 from such activity in 1997.   This is relevant

because even if an activity is not engaged in for profit, section

183(b) allows deductions to the extent of gross income.   Of

course, deductions must still be substantiated.   See generally

secs. 162, 274; Hradesky v. Commissioner, 65 T.C. 87, 90 (1975),

affd. per curiam 540 F.2d 821 (5th Cir. 1976).    In this regard,

respondent contends that petitioner failed to substantiate any

deductions.

     At trial, petitioner introduced no substantiation that would

satisfy the stringent recordkeeping requirements of section

274(d).   See Sanford v. Commissioner, 50 T.C. 823, 827 (1968),

affd. per curiam 412 F.2d 201 (2d Cir. 1969); sec. 1.274-5T(a),

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



     7
        Our holding also serves to absolve petitioner from
liability for self-employment tax for 1997, see sec. 1402(a) and
(c), and to deny him any deduction under sec. 164(f) for that
year.
                               - 14 -

Moreover, petitioner’s monthly checking account statements, in

and of themselves, do not constitute adequate substantiation for

purposes of the general recordkeeping requirements of sections

162 and 212.   See generally sec. 6001 and sec. 6001-1, Income Tax

Regs., requiring a taxpayer to maintain records sufficient to

enable the Commissioner to determine the taxpayer’s correct tax

liability.

     We recognize that under certain circumstances, the Court may

estimate the amount of a deductible expense and allow the

deduction to that extent.   See Cohan v. Commissioner, 39 F.2d

540, 543-544 (2d Cir. 1930).   However, in order to estimate the

amount of an expense, we must have some basis upon which an

estimate may be made.   See Vanicek v. Commissioner, 85 T.C. 731,

743 (1985).    Without such a basis, any allowance would amount to

unguided largesse.   See Williams v. United States, 245 F.2d 559,

560 (5th Cir. 1957).

     In the present case, we need not decide whether it is

appropriate to exercise our discretion under the Cohan rationale

because the maximum deduction to which petitioner might be

entitled under section 183(b) for 1997; i.e., $1,400, would have

no tax effect.   This is the case because petitioner’s “health,

wealth and healing ministry” activity was not engaged in for

profit; thus, any section 183(b) deductions would not be

allowable from gross income, but rather it would only be

allowable from adjusted gross income as miscellaneous itemized
                                - 15 -

deductions.   See sec. 62(a); see also sec. 67(a), imposing a 2-

percent floor on miscellaneous itemized deductions.     And for

1997, petitioner’s allowable itemized deductions, including

potentially $1,400 of section 183(b) deductions, do not exceed

the standard deduction for that year.     See sec. 63(c).   See also

infra subdivision “C”     regarding charitable contributions

deductions.

C.   Charitable Contribution Deductions

     Respondent disallowed petitioner’s deduction for charitable

contributions for 1997.    However, at trial, respondent conceded

that petitioner is entitled to a deduction in the amount of

$1,500.   Petitioner bears the burden of proving that he is

entitled to a deduction in a greater amount.8

     At trial, petitioner failed to introduce any persuasive

evidence that would substantiate the making of charitable

contributions in an amount greater than that conceded by

respondent.   See Higbee v. Commissioner, 116 T.C. 438, 443-444

(2001); Jennings v. Commissioner, T.C. Memo. 2000-366, affd. 19


     8
        As previously noted, sec. 7491(a)(1) as a general rule
places on the Commissioner the burden of proof with respect to
factual issues relevant to ascertaining the taxpayer’s liability
for income tax. However, this burden-shifting rule applies only
if, inter alia, the taxpayer has complied with substantiation
requirements and has maintained all required records. Sec.
7491(a)(2)(A) and (B); see Higbee v. Commissioner, 116 T.C. 438,
441 (2001); Sykes v. Commissioner, T.C. Memo. 2001-169. Because
petitioner did not comply with sec. 7491(a)(2)(A) and (B), we
decide the issue before us without regard to the general burden-
shifting rule of sec. 7491(a)(1).
                                - 16 -

Fed. Appx. 351 (6th Cir. 2001); sec. 170(a)(1), (f)(8); sec.

1.170A-13, Income Tax Regs.; see also Estate of Wood v.

Commissioner, 39 T.C. 1, 6 (1962) (“not every payment to an

organization which qualifies as a charity is a charitable

contribution”); Saba v. Commissioner, T.C. Memo. 1980-199;

Arceneaux v. Commissioner, T.C. Memo. 1977-363; Nelson v.

Commissioner, T.C. Memo. 1974-239.

     In particular, petitioner introduced no meaningful evidence

that would substantiate the making of noncash charitable

contributions in any amount.9    Nor did petitioner introduce any

evidence whatsoever that would substantiate a charitable

contribution carryover from a prior taxable year(s).    The law is

clear:   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; Roberts v. Commissioner, supra; see Seaboard

Commercial Corp. v. Commissioner, 28 T.C. 1034, 1051 (1957) (a

     9
        At trial, the only evidence introduced by petitioner
regarding purported noncash contributions was a 3- by 5-inch
printed card from United Cancer Research Society that appears to
be designed principally to explain to prospective donors why
their “discards” cannot be accepted for donation, e.g., “articles
require too much repair” or “driver unable to determine what is
to go”. In any event, the card is undated and bears no
indication what property may have been offered for donation.
                                - 17 -

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).

D.   Accuracy-related Penalty

     Finally, we consider whether petitioner is liable for the

accuracy-related penalty under section 6662(a) for 1996 and 1997.

     Section 6662(a) and (b)(1) provides that if any portion of

an underpayment of tax is attributable to negligence or disregard

of rules or regulations, then there shall be added to the tax an

amount equal to 20 percent of the amount of the underpayment that

is so attributable.   The term “negligence” includes any failure

to make a reasonable attempt to comply with the statute, and any

failure to keep adequate books and records or to substantiate

items properly, and the term “disregard” includes any careless,

reckless, or intentional disregard.      Sec. 6662(c); sec. 1.6662-

3(b)(1), Income Tax Regs.   Petitioner bears the burden of proving

that the negligence penalty is inapplicable.     See Rule 142(a);

INDOPCO, Inc. v. Commissioner, 503 U.S. at 84; Welch v.

Helvering, 290 U.S. at 115.10

     10
        Applicable to court proceedings arising in connection
with examinations commencing after July 22, 1998, sec. 7491(c)
places on the Commissioner the burden of production with respect
to a taxpayer’s liability for any penalty. See RRA 1998 sec.
3001(a), (c)(1), 112 Stat. 726, 727. We hold that respondent
                                                   (continued...)
                             - 18 -

     At trial, petitioner argued that “there’s nothing in the IRS

Code that says that taxes are anything but voluntary.”

Apparently in petitioner’s view, respondent should be satisfied

with what petitioner has previously reported as his tax liability

on his returns and should not be dunning him for anything more.

     The short answer to petitioner’s argument is that it is

wrong, it is frivolous, and it deserves no further discussion.

See Crain v. Commissioner, 737 F.2d 1417 (5th Cir. 1984); see

also Wilcox v. Commissioner, 848 F.2d 1007, 1008 (9th Cir. 1988)

(rejecting taxpayer's claim that paying taxes is voluntary),

affg. T.C. Memo. 1987-225; Carter v. Commissioner, 784 F.2d 1006,

1009 (9th Cir. 1986) (same); Bland-Barclay v. Commissioner, T.C.

Memo. 2002-20 (“This Court and Federal courts across the nation

have repeatedly rejected the argument that * * * reporting and

paying income taxes is strictly voluntary.”).

     At trial, petitioner also professed to rely on various

“consultants” who advised him that there is no section in the

Internal Revenue Code that makes a taxpayer liable for the

Federal income tax.

     Under some circumstances, a taxpayer may avoid liability for


     10
      (...continued)
satisfied the burden of production with respect to petitioner’s
liability for the accuracy-related penalty under sec. 6662(a) and
(b)(1). See Lysek v. Commissioner, 583 F.2d 1088, 1094 (9th Cir.
1978) (the negligence penalty may be justified if the taxpayer
fails to maintain adequate records), affg. T.C. Memo. 1975-293;
Crocker v. Commissioner, 92 T.C. 899, 916-917 (1989) (same).
                               - 19 -

negligence if reasonable reliance on a competent professional

adviser is shown.    See United States v. Boyle, 469 U.S. 241, 250-

251 (1985); Freytag v. Commissioner, 89 T.C. 849, 888 (1987),

affd. 904 F.2d 1011 (5th Cir. 1990), affd. on another issue 501

U.S. 868 (1991).    However, in order for a taxpayer's reliance to

be reasonable, the taxpayer must show, inter alia, that the

adviser was a competent individual and that the taxpayer actually

relied in good faith on the advice.     E.g., Tietig v.

Commissioner, T.C. Memo. 2001-190, on appeal (11th Cir., Mar. 26,

2002).

     In the present case, petitioner has failed to show either

that his “consultants” were competent professionals or that he

relied on their advice in good faith.    Rather, it is clear that

the “advice” rendered was nothing more than the type of tax

protester rhetoric that has long been held to be frivolous and

groundless.   E.g., Rowlee v. Commissioner, 80 T.C. 1111, 1120

(1983) (rejecting taxpayer's argument that he is not a "person

liable" for tax); Ebert v. Commissioner, T.C. Memo. 1991-629

(rejecting taxpayer's argument that there is no section of the

Internal Revenue Code making a taxpayer liable for tax), affd.

without published opinion 986 F.2d 1427 (10th Cir. 1993).

Further, we are not convinced that petitioner relied on this

“advice” in good faith.11

     11
          See Diaz v. Commissioner, 58 T.C. 560, 564 (1972)
                                                     (continued...)
                             - 20 -

     In view of the foregoing, we hold that petitioner is liable

for the accuracy-related penalty under section 6662(a) for each

of the years in issue.

E.   Conclusion

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect our disposition of the disputed issues, as well

as respondent’s concession, see supra note 2,



                                        Decision will be entered

                                   under Rule 155.




     11
      (...continued)
(distilling truth from the testimony of witnesses, whose demeanor
we observe and whose credibility we evaluate, is “the daily grist
of judicial life”); Kropp v. Commissioner, T.C. Memo. 2000-148
(“As a trier of fact, it is our duty to listen to the testimony,
observe the demeanor of the witnesses, weigh the evidence, and
determine what we believe.”).
