                       T.C. Memo. 2001-131



                     UNITED STATES TAX COURT



DARLENE ROSE ESPOSITO a.k.a. AMNESTY INTERNATIONAL, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 4542-00.                       Filed June 6, 2001.


     Darlene Rose Esposito, pro se.

     Donald M. Brachfeld, for respondent.



                       MEMORANDUM OPINION

     DEAN, Special Trial Judge:   Respondent determined

deficiencies in Federal income tax, and accuracy-related

penalties under section 66621 for petitioner Darlene Esposito as

follows:




     1
      All section references are to the Internal Revenue Code in
effect for the years at issue.
                               - 2 -

                                       Accuracy-Related Penalty
     Year         Deficiency                Sec. 6662
     1996          $6,719                     $1,344
     1997           6,437                      1,287
     1998           8,635                      1,727

     Respondent determined deficiencies in Federal income tax for

petitioner Amnesty International as follows:

                  Year         Deficiency
                  1996           $5,200
                  1997            5,466
                  1998           10,173

     With respect to Darlene Esposito (petitioner) the issues for

decision are:   (1) Whether petitioner is entitled to a capital

loss deduction of $3,000 for 1996, 1997, and 1998; (2) whether

petitioner is entitled to deduct for 1998, business expenses of

$5,494 claimed on Schedule C, Profit or Loss From Business; (3)

whether petitioner is entitled to cost of goods sold of $10,685

for 1998; (4) whether petitioner is liable for self-employment

tax for 1998; (5) whether it was proper for petitioner to claim

the earned income credit for 1996 and 1997; (6) whether it was

proper for petitioner to claim prepayment credits from regulated

investment companies for 1996, 1997, and 1998; and (7) whether

petitioner underpaid her tax due to negligence or intentional

disregard of rules or regulations.

     The issue for decision as far as petitioner Amnesty

International (Amnesty) is concerned is whether Amnesty is

entitled to prepayment credits from regulated investment

companies in each of the years 1996, 1997, and 1998.
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                            Background

     The stipulation of facts and the accompanying exhibits are

incorporated herein by reference.    Petitioner resided in and

Amnesty was located at Rahway, New Jersey, at the time the

petition in this case was filed.

     Petitioner was involved in an automobile accident in which

she received several injuries.    As a result of her injuries

petitioner was unable to work.    She applied for and began

receiving in October of 1989 Social Security disability benefits

of $329 per month.

     At some point petitioner applied for and received an

employer identification number (EIN) under the name of "Amnesty

International".   Later, as a result of petitioner's filing a Form

5500-EZ, Annual Return of One-Participant (Owners and Their

Spouses) Retirement Plan, that had no EIN or an incorrect EIN,

the Internal Revenue Service assigned her an EIN in her name.

     For the year 1996, petitioner filed a Form 5500-EZ using her

EIN, listing herself as employer, listing "Name of plan" as

Social Security disability insurance, and on the attached

Schedule B, Actuarial Information, listing herself as "plan

sponsor" and actuary.   On the attached Schedule SSA, Annual

Registration Statement Identifying Separated Participants With

Deferred Vested Benefits, petitioner listed the "Name of plan

sponsor (employer if for a single employer plan)" as Amnesty
                               - 4 -

International, using the number previously assigned to it.     For

both 1997 and 1998, petitioner filed Forms 5500-EZ in the name of

Amnesty International, using her personal EIN and naming herself

as actuary.

     Amnesty is not incorporated in the State of New Jersey or in

any other State of the United States.   Petitioner is, as of

March 24, 1992, authorized to conduct a "communication service"

business in the State of New Jersey under the name "Amnesty

International".   Petitioner nevertheless filed Forms 1120, U.S.

Corporation Income Tax Return, for Amnesty for 1996, 1997, and

1998.   On Schedule K of the returns, it is represented that the

business activity of Amnesty is "Auditing, Bookkeeping" and the

product or service is "Research Service".   According to

petitioner, "Amnesty more or less is a business and it has to do

with paralegal work that I do for myself with regard to various

[personal] lawsuits that I have come across since my car

accident".

     The corporation return for Amnesty for 1996 reports as a tax

payment on line 32f, "credit from regulated investment companies"

of $5,200, and for 1997 and 1998, on line 32f, "credit for tax

paid on undistributed capital gains" in the respective amounts of

$5,840 and $10,173.   Attached to each of the corporation returns

are Forms 2439, Notice to Shareholder of Undistributed Long-Term

Capital Gains, naming as the "Regulated Investment Company"
                                - 5 -

(RIC), Amnesty International and as the shareholder, Darlene

Esposito.   According to the testimony by petitioner, "with the

refund that I get from my 1120, I reimburse myself from the

Social Security benefits that I have used".

     Attached to each of her Forms 1040 for the years at issue

are Schedules C for Amnesty International.    Amnesty is listed

variously as being in the "communication service" business or the

"community service" business.   Also attached to each individual

income tax return are two Forms 2439 ostensibly reporting

undistributed long-term capital gains and tax paid by the RIC,

Amnesty International, to "New Jersey Department of Labor"

(Labor), as "shareholder", and the RIC, "Juman and Juman, A

Professional Corporation" (Juman), to Darlene Esposito, as

"shareholder".   Petitioner was not a shareholder of Juman, but

had been employed by the firm for a short period of time.    For

each tax year, petitioner added the credit amounts shown on the

Amnesty and Juman Forms 2439 and deducted the total from her

income tax liability as "other payments" on Form 2439.

Petitioner deducted $6,000 in 1996, $6,114 in 1997, and $5,260 in

1998 from her current income tax liabilities.    According to the

testimony of petitioner, the amounts represent "my 401 early

distributions because of my disability".

     While she deducted the credits for tax paid, petitioner did

not report as income on her Forms 1040 any of the purported
                               - 6 -

undistributed long-term capital gains from RIC's shown on the

Forms 2439.   See sec. 852(b)(3)(D).   Instead, petitioner claimed

on Schedule D, Capital Gains and Losses, of each of her returns a

long-term capital loss of $3,000.    According to petitioner's

testimony, the capital loss deductions were taken because her

insurance company, Prudential, did not pay an automobile

insurance claim she had with them.

     Petitioner presented no evidence that the Juman professional

corporation was a RIC as described in section 851(a) and (b).     By

definition a RIC is a domestic corporation.    See sec. 851(a).   It

is clear that Amnesty could not be a RIC because it is not a

domestic corporation.   Petitioner was not a shareholder of Juman

or of Amnesty.   Petitioner has not shown that either of the

purported RIC's actually experienced any undistributed long-term

capital gains or paid any tax on such gains.    From petitioner's

testimony it appears that Juman is a law firm that once briefly

employed her and Amnesty International is the name petitioner

uses when involved in matters related to her automobile accident.

Neither petitioner nor Amnesty is entitled to credits for tax

paid on undistributed long-term capital gains from RIC's.

     Petitioner presented no documentary evidence or any

fathomable testimonial evidence on any other issue in the case.

The court has no evidence on which to base a finding that any of
                                 - 7 -

respondent's determinations are incorrect, including the

application of the section 6662 accuracy-related penalty.

     Respondent's determinations as to both petitioners are

sustained.

     To reflect the foregoing,

                                           Decision will be entered

                                      for respondent.
