                    T.C. Summary Opinion 2010-86



                        UNITED STATES TAX COURT



         TIMOTHY L. AND TIFFANY T. WILLIAMS, Petitioners v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 28603-08S.              Filed June 29, 2010.



     Timothy L. Williams, pro se.

     Angela J. Kennedy, for respondent.



     RUWE, Judge:     This case was heard pursuant to the provisions

of section 74631 of the Internal Revenue Code in effect when the

petition was filed.    Pursuant to section 7463(b), the decision to




     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code as amended, and all Rule references are
to the Tax Court Rules of Practice and Procedure.
                               - 2 -

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

shall not be treated as precedent for any other case.

     For 2005 and 2006 respondent determined deficiencies, an

addition to tax for failure to timely file, and an accuracy-

related penalty as follows:

                                              Accuracy-Related
                          Addition to Tax         Penalty
  Year     Deficiency     Sec. 6651(a)(1)       Sec. 6662(a)

  2005       $7,092           $1,014.75            $1,370
  2006        1,545               --                 --

     After concessions2 the issues to be decided are:   (1)

Whether petitioners received and failed to report $1,005 of

wages, salaries, and tips during 2005; (2) whether petitioners

received and failed to report $2,010 of unemployment compensation

during 2005 and 2006; (3) whether petitioners are entitled to

deduct $6,542 and $1,000 as charitable contributions for 2005 and

2006, respectively; (4) whether petitioners are entitled to

deduct $65,005 and $14,498 of unreimbursed employee business

expenses for 2005 and 2006, respectively; (5) whether petitioners

are entitled to a child tax credit for 2005; (6) whether, under

section 6651(a)(1), petitioners are liable for an addition to tax

for failure to timely file their 2005 Federal income tax return;



     2
      Petitioners have conceded the deductions claimed for
medical and dental expenses on their 2005 and 2006 Federal income
tax returns.
                                 - 3 -

and (7) whether, under section 6662(a), petitioners are liable

for an accuracy-related penalty for 2005.

                              Background

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the attached exhibits are

incorporated herein by reference.

     At the time the petition was filed, petitioners resided in

Indiana.

     During 2005 Timothy L. Williams (petitioner) was separately

employed by Delta Services, Inc. (Delta Services), and Byrider

Sales of Indiana (Byrider).    Petitioner’s last day of work for

Delta Services was January 7, 2005.      After terminating employment

with Delta Services petitioner applied for unemployment benefits

with the Indiana Department of Workforce Development (IDWD).

Although the date petitioner began work for Byrider is not

reflected in the record, petitioner was later employed by Byrider

in 2005.

     For 2005, Delta Services issued to petitioner a Form W-2,

Wage and Tax Statement, which shows that petitioner received

wages, tips, or other compensation of $1,005.     As is reflected on

a Form 1099-G, Certain Government Payments, the IDWD paid

petitioner $2,010 during 2005.    Byrider paid petitioner

$37,644.48 of wages during 2005.    The parties also stipulated

that during 2005, while employed by Byrider, petitioner drove
                               - 4 -

less than 5,000 miles for business and while he was traveling his

meals were paid for by the company.

     The IDWD later determined that petitioner was not eligible

for the $2,010 of unemployment compensation paid to him in 2005

and requested that he repay it.   Petitioner did not repay it.

     During 2005 petitioner Tiffany T. Williams was employed by

M.J. Schuetz Agency, Inc., and received wages of $29,351.16.

     On March 4, 2007, petitioners filed their 2005 Federal

income tax return, on which they reported $66,996 of wages,

salaries, tips, etc.   Petitioners did not report the $2,010 of

unemployment compensation or the $1,005 of wages from Delta

Services.   On the 2005 Schedule A, Itemized Deductions, attached

to their 2005 Federal income tax return, petitioners claimed

deductions for, among other things, $1,500 of cash contributions

to charity, $5,042 of noncash contributions to charity, and

$65,005 of unreimbursed employee business expenses.   Petitioners

concede that the amount deducted as unreimbursed employee

business expenses is overstated on their 2005 Schedule A;

however, petitioners have not indicated what amount, if any, was

overstated.

     During 2006 petitioner’s employment with Byrider was

terminated.   Petitioner applied for unemployment benefits with

the IDWD.   However, before petitioner began receiving any

unemployment compensation from the IDWD in 2006, the IDWD offset
                               - 5 -

the amount of unemployment compensation due to petitioner by the

$2,010 petitioner failed to repay to the IDWD in 2005.    For 2006

the IDWD issued to petitioner two Forms 1099-G.    One Form 1099-G

indicated that the IDWD paid petitioner $7,087 of unemployment

compensation in 2006, and the other Form 1099-G indicated that

petitioner repaid the IDWD $2,010 in 2006.

     Petitioners filed their 2006 Federal income tax return on

April 15, 2007.   On their 2006 Form 1040 petitioners reported

$46,395 of wages, salaries, tips, etc., and the $7,087 of

unemployment compensation received from the IDWD.    On the

Schedule A attached to their 2006 Federal income tax return,

petitioners claimed, among other things, $5,533 of medical and

dental expenses, $700 of cash contributions to charity, $300 of

noncash contributions to charity, and $14,498 of unreimbursed

employee business expenses.

     Respondent issued to petitioners a notice of deficiency,

dated August 20, 2008, which made the following income

adjustments:

         Adjustment                Tax Year 2005    Tax Year 2006

  Unemployment compensation            $2,010            --
                                       1
  Wages, salaries and tips, etc.        1,004            --
  Itemized deductions                  76,932         $18,592
                                    - 6 -

     Standard deduction                     (10,000)        (10,300)
     State refunds, credits,                   --             2,010
       or offsets
     Total                                   69,946          10,302
            1
              We   note that both the 2005 Form W-2 issued by Delta
       Services    to petitioner and the Delta Services 2005
       Earnings    and Deductions Report show petitioner’s gross
       earnings    as $1,005.

       Petitioners filed a timely petition generally contesting the

adjustments for 2005 and 2006.        Additionally, petitioners allege

in their petition that they are eligible for a child tax credit

for 2005.

                                  Discussion

A.    Burden of Proof

       In general, the Commissioner’s determinations in a notice of

deficiency are presumed correct, and the taxpayer bears the

burden of proving error in the Commissioner’s determinations.

Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).             Under

section 7491(a) the burden may shift to the Commissioner

regarding factual matters if the taxpayer produces credible

evidence and meets the other requirements of the section.

Petitioners do not argue that they satisfied the elements for a

burden shift, but even if they did advance this argument, they

did not produce sufficient evidence to support a burden shift.

Accordingly, the burden of proof remains on petitioners.

B.    Unreported Income/Omitted Items

       Gross income is defined as “all income from whatever source

derived, including * * * Compensation for services”.          Sec.
                                - 7 -

61(a)(1).   Gross income also includes unemployment compensation.

Sec. 85(a).    As a general rule any item of gross income must be

included in the gross income for the taxable year in which

received by the taxpayer.   Sec. 451(a).   The taxpayer bears the

burden of proving any amount excludable from gross income

pursuant to an applicable statutory exception or general

principle of tax law.   Rule 142(a); Bachmann v. Commissioner,

T.C. Memo. 2009-51 (citing Welch v. Helvering, supra at 115).

     During 2005 Delta Services issued to petitioner “two payroll

checks” totaling $1,005.    Delta Services subsequently issued to

petitioner a Form W-2 which shows that petitioner received wages,

tips, or other compensation of $1,005 during 2005.   Petitioners

did not report these wages on their 2005 Federal income tax

return.   Petitioners have not shown that the $1,005 is excludable

from gross income pursuant to a statutory exception or general

principle of tax law.   Accordingly, we sustain respondent’s

determination that petitioners must include the $1,005 received

from Delta Services in their 2005 income.

     With respect to the $2,010 of unemployment compensation,

petitioner admits that he received it in 2005.   A Form 1099-G

issued by the IDWD for 2005 corroborates his admission.    We,

therefore, sustain respondent’s determination that petitioners

must include the $2,010 of unemployment compensation in their

2005 income.
                                - 8 -

      For 2006 the parties stipulate that petitioners included in

income the $7,087 of unemployment compensation received in 2006

but did not include the additional $2,010 awarded as unemployment

compensation but not paid to petitioners during 2006 because of

petitioners’ failure to repay the same amount in 2005.   We

disagree with respondent’s determination that petitioners must

include in their 2006 income the same $2,010 of unemployment

compensation (identified in the notice of deficiency as a State

income tax refund).   Although the $2,010 of unemployment

compensation was not properly awarded to petitioner until 2006,

as has been established and as we have already found, petitioners

received the $2,010 of unemployment compensation during 2005.

Therefore, we hold that respondent’s determination to require

petitioners to include in their 2006 income the same $2,010 that

petitioners must include in their 2005 income is erroneous.

C.   Itemized Deductions

      The taxpayer bears the burden of proving that he has

complied with the specific requirements for any deduction

claimed.    INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992);

New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).     The

taxpayer must substantiate amounts claimed as deductions by

maintaining the records necessary to establish that he is

entitled to the deductions.   Sec. 6001; sec. 1.6001-1(a), Income

Tax Regs.
                                - 9 -

     1.   Charitable Contributions

     Section 170(a) generally allows as a deduction any

charitable contribution the payment of which is made within the

taxable year.   Deductions for charitable contributions are

allowable only if verified under regulations prescribed by the

Secretary.    Sec. 170(a)(1); Hewitt v. Commissioner, 109 T.C. 258,

261 (1997), affd. without published opinion 166 F.3d 332 (4th

Cir. 1998).

     A cash contribution to charity made on or before August 17,

2006, in an amount less than $250 may be substantiated with a

canceled check, a receipt, or other reliable evidence showing the

name of the donee, the date of the contribution, and the amount

of the contribution.    Alami El Moujahid v. Commissioner, T.C.

Memo. 2009-42; sec. 1.170A-13(a)(1), Income Tax Regs.     For cash

contributions made to charity after August 17, 2006, stricter

requirements now provide that no deduction shall be allowed for a

contribution of money in any amount unless the donor maintains a

bank record or written communication from the donee showing the

name of the donee organization, the date of the contribution, and

the amount of the contribution.      Sec. 170(f)(17); Pension

Protection Act of 2006, Pub. L. 109-280, sec. 1217, 120 Stat.

1080.

     Petitioners have failed to offer any documentary evidence of

cash contributions to charity for either 2005 or 2006.
                              - 10 -

Accordingly, we sustain respondent’s determination and hold that

petitioners are not entitled to the deductions claimed for cash

contributions to charity on their 2005 and 2006 Federal income

tax returns.

     For charitable contributions made in property other than

cash, the value of the contribution is generally the fair market

value at the time of contribution.     Hewitt v. Commissioner, supra

at 261; sec. 1.170A-1(c)(1), Income Tax Regs.    The fair market

value of the property contributed is the price at which the

property would change hands between a willing buyer and a willing

seller, neither being under any compulsion to buy or sell and

both having reasonable knowledge of relevant facts.    Sec. 1.170A-

1(c)(2), Income Tax Regs.   Generally, for noncash charitable

contributions, a taxpayer must maintain for each contribution a

receipt from the donee showing the name of the donee, the date

and location of the contribution, and a description of the

property in detail reasonably sufficient under the circumstance.

Sec. 1.170A-13(b)(1), Income Tax Regs.

     Petitioners have failed to offer any records establishing

that they made any noncash contributions to charity for either

2005 or 2006.   Accordingly, we sustain respondent’s determination

and hold that petitioners are not entitled to the deductions

claimed for noncash charitable contributions on their 2005 and

2006 Federal income tax returns.
                               - 11 -

      2.   Unreimbursed Employee Expenses

       Section 162(a) generally allows as a deduction all the

ordinary and necessary expenses paid or incurred during the

taxable year in carrying on any trade or business.    A taxpayer

may be in the trade or business of being an employee and, as

such, may deduct business expenses.     O’Malley v. Commissioner, 91

T.C. 352, 363-364 (1988); Lucas v. Commissioner, 79 T.C. 1, 6

(1982).    Section 262(a), however, prohibits deductions for

personal, living, or family expenses.

       Petitioners have failed to offer any documentary or

testimonial evidence establishing what payments were made, to

whom they were made, and any related business purpose.    See secs.

162, 274(d), 6001; sec. 1.6001-1(a), Income Tax Regs.

Accordingly, we sustain respondent’s determination and hold that

petitioners are not entitled to a deduction for unreimbursed

employee expenses for either year.

D.    Child Tax Credit

       Section 24(a) provides a credit (subject to certain income

limitations) against income tax for each qualifying child.      The

term “qualifying child” means a qualifying child of the taxpayer

(as defined in section 152(c)) who has not attained the age of

17.    Sec. 24(c)(1); Gessic v. Commissioner, T.C. Memo. 2010-88.

However, petitioners have failed to proffer any evidence of a
                               - 12 -

qualifying child.   Accordingly, petitioners are ineligible for a

child tax credit for 2005.

E.   Addition to Tax Under Section 6651(a)(1)

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

failure to file a return on the date prescribed therefor

(determined with regard to any extension of time for filing),

unless it is shown that such failure is due to reasonable cause

and not due to willful neglect.    Section 7491(c) generally

provides that the Commissioner bears the burden of production

with respect to the liability of an individual for any penalty or

addition to tax.    The Commissioner may meet his burden of

production by coming forward with sufficient evidence indicating

that it is appropriate to impose the relevant penalty.      Higbee v.

Commissioner, 116 T.C. 438, 446 (2001).

      Petitioners filed their 2005 Federal income tax return more

than 10 months after its due date.      Petitioners have neither

offered any explanation for the tardiness of their 2005 Federal

income tax return nor established that they had been granted an

extension of time to file.    Thus, not only has respondent met his

burden of production with respect to the addition to tax under

section 6651(a)(1), but also petitioners have failed to establish

that the late filing of their 2005 Federal income tax return was

due to reasonable cause and not due to willful neglect.
                                - 13 -

Accordingly, we sustain the imposition of the section 6651(a)(1)

addition to tax.

F.   Accuracy-Related Penalty Under Section 6662(a)

       Section 6662(a) and (b)(1) and (2) provides that a taxpayer

is liable for a 20-percent accuracy-related penalty on any

portion of an underpayment of tax required to be shown on a

return attributable to, inter alia, (1) negligence or disregard

of rules or regulations or (2) any substantial understatement of

income tax.    The Commissioner generally bears the burden of

production for any penalty, but the taxpayer bears the ultimate

burden of proof.    Sec. 7491(c); Higbee v. Commissioner, supra at

446.

       Negligence is defined as “any failure to make a reasonable

attempt to comply with the provisions of this title”, and

disregard includes “any careless, reckless, or intentional

disregard.”    Sec. 6662(c).   The regulations promulgated under

section 6662 provide that negligence “includes any failure by the

taxpayer to keep adequate books and records or to substantiate

items properly.”    Sec. 1.6662-3(b)(1), Income Tax Regs.

Negligence is strongly indicated where a taxpayer fails to

include on an income tax return an amount of income shown on an

information return, as defined in section 6724(d)(1).     See sec.

1.6662-3(b)(1)(i), Income Tax Regs.
                              - 14 -

     The accuracy-related penalty is not imposed with respect to

any portion of an underpayment as to which the taxpayer acted

with reasonable cause and in good faith.    See sec. 6664(c)(1).

The determination of whether a taxpayer acted with reasonable

cause and in good faith depends on the pertinent facts and

circumstances.   Sec. 1.6664-4(b)(1), Income Tax Regs.

     We find respondent has met his burden of production in that

the record establishes that petitioners failed to disclose income

reported to them on a Form W-2 and a Form 1099-G and had no

documentation to support the disallowed deductions.    See sec.

1.6662-3(b)(1), Income Tax Regs.   After considering the totality

of the facts and circumstances, we are satisfied that petitioners

were negligent and did not have reasonable cause to believe that

they were not required to report the $1,005 of wages and $2,010

of unemployment compensation on their 2005 Federal income tax

return and that they failed to keep adequate records or to

substantiate properly the disallowed deductions claimed on their

2005 return.   Accordingly, we sustain respondent’s determination

and hold that petitioners are liable for the accuracy-related

penalty under section 6662.

     To reflect the foregoing,


                                           Decision will be entered

                                    under Rule 155.
