                       T.C. Memo. 2003-291



                     UNITED STATES TAX COURT



               RICHARD A. BRUNSMAN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7662-02.            Filed October 16, 2003.



     Richard A. Brunsman, pro se.

     Lorianne D. Masano, for respondent.



                       MEMORANDUM OPINION


     POWELL, Special Trial Judge:   Respondent determined a

deficiency of $7,416 and an accuracy-related penalty under

section 6662(a)1 of $1,810 in petitioner’s 1999 Federal income



     1
        Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the year in issue, and Rule
references are to the Tax Court Rules of Practice and Procedure.
                                   - 2 -

tax.       After concessions,2 the issues are whether petitioner is

liable for the tax on $4,403 of unreported income and the

accuracy-related penalty under section 6662(a).       Petitioner

resided in Orlando, Florida, at the time the petition was filed.

                                Background

       Petitioner was employed with Sparks-Piper Exhibits &

Environments, Inc. (Sparks-Piper) until September of 1999 when he

started employment with Czarnowski Display Services, Inc.

(Czarnowski).       Petitioner remained an employee of Czarnowski for

the remainder of the 1999 taxable year.       Petitioner purchased

various business items for Czarnowski, and was reimbursed for

those amounts.       During 1999, Czarnowski issued 14 payments to

petitioner:       10 payments of $1,500 each and the remaining four

payments were in the amounts of $4,600, $2,500, $2,838.18, and

$1,875.95.

       Sparks-Piper reported petitioner’s wages of $51,217 on Form

W-2, Wage and Tax Statement.       Czarnowski reported nonemployee

compensation paid to petitioner of $26,814 on Form 1099-MISC,



       2
        In the notice of deficiency, respondent asserts that
petitioner received, but did not report, $26,814 of nonemployee
compensation and $550 of unemployment compensation. Petitioner
concedes that he is liable for the tax on $17,214 of
compensation, and the parties concede that petitioner is liable
for the tax on $100 of unemployment compensation. Respondent
concedes that petitioner was an employee of Czarnowski, and of
the $26,814 petitioner received, $5,197 represents reimbursement
for employee business expenses. Thus, the amount of compensation
in dispute is $4,403.
                                - 3 -

Miscellaneous Income.   Czarnowski submitted the Form 1099-MISC to

respondent; petitioner, however, alleges that he did not receive

the Form 1099-MISC.   Petitioner, in preparing his 1999 Federal

income tax return, reported the $51,217 of wages from Sparks-

Piper, but he failed to report the $26,814 of compensation

received from Czarnowski.

                              Discussion

Unreported Income

     Petitioner asserts that he is not liable for the tax on the

compensation received from Czarnowski because he did not receive

the Form 1099-MISC.   Section 61(a)(1) provides that “gross income

means all income from whatever source derived, including * * *

Compensation for services”.    Petitioner’s compensation from

Czarnowski falls within this category, regardless whether

petitioner received the Form 1099-MISC.

     Alternatively, petitioner argues that $4,403 of the

compensation represents the sale of assets to Czarnowski.     The

amount received less the adjusted bases in the assets would still

be income to petitioner.    See secs. 61(a)(3), 1001, 1011.

Petitioner has the burden to establish that he sold assets to

Czarnowski and to establish his bases in the assets sold.     See

Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 (1933).3



     3
        Sec. 7491(a) does not apply because petitioner failed to
maintain adequate records.
                                 - 4 -

While we are willing to assume that petitioner sold some assets

to Czarnowski, petitioner failed to provide any information

concerning the identity of the assets, the bases of the assets,

or when they were purchased.    Without this information, we can

only find that the entire amount received constituted taxable

income to him.    Respondent is sustained on this issue.

Accuracy-Related Penalty

     Section 6662 imposes an accuracy-related penalty “equal to

20 percent of the portion of the underpayment” of tax

attributable to “Any substantial understatement of income tax.”

Sec. 6662(a) and (b)(2).    A substantial understatement of income

tax exists if the amount of the understatement for the taxable

year exceeds the greater of 10 percent of the tax required to be

shown on the return for the taxable year, or $5,000.     Sec.

6662(d)(1)(A).4

     A taxpayer is relieved of the accuracy-related penalty “if

it is shown that there was a reasonable cause * * * and that the

taxpayer acted in good faith”.    Sec. 6664(c)(1).5   Whether the

taxpayer acted with reasonable cause and in good faith is

determined by the relevant facts and circumstances, and, most



     4
         It is unclear whether, after respondent’s concessions, a
substantial understatement of income remains. We leave this
issue for resolution in the Rule 155 computations.
     5
         Respondent has satisfied his burden of production under
sec. 7491(c).
                                - 5 -

importantly, the extent to which the taxpayer attempted to assess

the proper tax liability.    See Neely v. Commissioner, 85 T.C. 934

(1985); Stubblefield v. Commissioner, T.C. Memo. 1996-537; sec.

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

     Petitioner argues that he had reasonable cause for the

failure to report the compensation from Czarnowski because he did

not receive the Form 1099-MISC, the receipt of which would have

“notified him of the believed inaccuracy and afforded him the

opportunity to act in accordance with such.”   Petitioner held two

jobs in 1999, but he reported only the wages he received from

Sparks-Piper.   Petitioner did not need to receive a Form 1099-

MISC to be alerted to the fact that he received compensation from

Czarnowski for his services.

     Alternatively, petitioner claims there is substantial

authority that he was an employee, and not an independent

contractor, of Czarnowski.   Section 6662(d)(2)(B)(i) provides

that “The amount of the understatement * * * shall be reduced by

that portion of the understatement which is attributable to * * *

the tax treatment of any item by the taxpayer if there is or was

substantial authority for such treatment”.   Respondent has

conceded that petitioner was an employee of Czarnowski.
                              - 6 -

Nevertheless, this concession does not relieve petitioner of his

duty to report income correctly on his return.    See Grooms v.

Commissioner, T.C. Memo. 1992-291.    Accordingly, we sustain

respondent’s determination.

     To reflect the foregoing and the concessions of the parties,

                                      Decision will be entered

                              under Rule 155.
