                          T.C. Memo. 2004-246



                     UNITED STATES TAX COURT



         JOHN R. RINN AND DONNIE J. RINN, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 120-03.               Filed October 27, 2004.


     John R. Rinn and Donnie J. Rinn, pro sese.

     Gerald L. Brantley, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     THORNTON, Judge:     Respondent determined the following

deficiencies and additions to tax with respect to petitioner

John R. Rinn’s Federal income taxes:
                                - 2 -

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

         1995       $53,053              $11,888.25     $1,176.73
         1996        46,471               11,617.75      2,473.43
         1997        47,946               11,986.50      2,565.14
         1998        65,711               16,427.75      3,006.82
         1999        45,918               11,479.50      2,222.26
         2000        30,873                7,718.25      1,649.08

Respondent determined the following deficiencies and additions to

tax with respect to petitioner Donnie J. Rinn’s Federal income

taxes:

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

         1995       $16,752               $2,813.00      $538.13
         1996        14,176                3,544.00       754.53
         1997        14,622                3,655.50       782.30
         1998        21,235                5,308.75       971.68
         1999        13,443                3,360.75       650.60
         2000         7,671                1,917.75       409.72

     The issue for decision is whether petitioners are liable for

the deficiencies and additions to tax that respondent

determined.1

     Unless otherwise indicated, section references are to the

Internal Revenue Code (Code), as amended, and Rule references are

to the Tax Court Rules of Practice and Procedure.




     1
       Respondent also determined additions to tax pursuant to
sec. 6651(a)(2) for petitioners’ 1996 through 2000 tax years for
failure to timely pay tax shown on a return. Respondent has
conceded these additions to tax. Cf. Spurlock v. Commissioner,
T.C. Memo. 2003-124.
                                   - 3 -

                             FINDINGS OF FACT2

       The parties have stipulated some facts, which we incorporate

herein.       When they filed their petition, petitioners resided in

Rockdale, Texas.

       Petitioner John R. Rinn (Mr. Rinn) is a dentist.        During

1995 through 2000, he owned a dental practice.          Petitioner

Donnie J. Rinn (Mrs. Rinn) was office manager and primary

bookkeeper for Mr. Rinn’s dental practice.

       During 1995 through 2000, Mr. Rinn earned substantial income

from his dental practice, as shown below:

                              Allowable
                Gross         Business       Allowable           Net
Year           Receipts       Expenses      Depreciation       Profit

1995           $303,125      $157,438            $630         $145,057
1996            344,113       214,045             630          129,438
1997            335,592       206,944             630          128,018
1998            343,081       155,382             630          187,069
1999            397,578       267,672             630          129,276
2000            261,346       170,149             630           90,567


           For tax years 1995 through 2000, petitioners filed no

Federal income tax returns and paid no taxes on any income from




       2
       Petitioners failed to file any posttrial brief and
consequently failed to set forth any objections to respondent’s
proposed findings of fact. We consider petitioners to have
waived any objections to respondent’s proposed findings of fact.
See Rule 151(e)(3) (“In an answering or reply brief, the party
shall set forth any objections, together with the reasons
therefor, to any proposed findings of any other party”). We have
adopted respondent’s proposed findings of fact, insofar as they
are supported by the record.
                                - 4 -

Mr. Rinn’s dental practice.3    At some point, respondent commenced

an examination of these tax years.      Revenue Agent Greg Hutchinson

(RA Hutchinson) was assigned to this examination.

     RA Hutchinson made numerous requests to petitioners for

information and records relating to Mr. Rinn’s dental practice,

including any journals, ledgers, expense receipts, credit card

receipts, bank statements, canceled checks, deposit slips, and

other items.   On several occasions RA Hutchinson also requested

that petitioners schedule an appointment to discuss these

matters.   Petitioners provided no records and failed to schedule

an appointment; they responded to RA Hutchinson’s requests with

frivolous arguments.

     Eventually, RA Hutchinson issued a summons directing

petitioners to appear and produce certain requested records.

Petitioners failed to comply with this summons, and enforcement

of the summons was sought in a Federal District Court.     In the

enforcement proceedings, Mr. Rinn still failed to produce the

requested records.   The District Court held Mr. Rinn in contempt

of court and put him in jail.

     After Mr. Rinn spent several days in jail, Mrs. Rinn

provided records relating to Mr. Rinn’s dental practice which she


     3
       Petitioners filed Federal income tax returns for tax years
preceding 1995. For example, petitioners filed Forms 1040, U.S.
Individual Income Tax Return, for tax years 1993 and 1994,
reporting net profits of $157,510 and $163,876, respectively,
from Mr. Rinn’s dental practice.
                               - 5 -

had kept as the practice’s primary bookkeeper.   Using these

records, Mrs. Rinn identified for RA Hutchinson items of income

and expense from the dental practice.   RA Hutchinson then

prepared written summaries of the income, expenses, and net

profits from the dental practice, allowing all the expenses that

Mrs. Rinn had identified.4

     On the basis of the records that Mrs. Rinn had provided and

the written summaries that RA Hutchinson had prepared, respondent

determined deficiencies in Mr. Rinn’s 1995 through 2000 Federal

income taxes.5   On the basis of this information, respondent

separately determined deficiencies in Mrs. Rinn’s 1995 through

2000 Federal income taxes, treating the dental practice income as

community property income, half of which was allocable to her.6


     4
       RA Hutchinson entered into a computer database
petitioners’ canceled checks for 2000. To test the accuracy of
the records that Mrs. Rinn provided, RA Hutchinson compared them
to this database, matching the payees, dates, and amounts on the
checks to the entries in Mrs. Rinn’s records. In addition, RA
Hutchinson matched the records to bank statements, canceled
checks, and receipts and also matched the records to a deposit
analysis of petitioners’ accounts.
     5
       RA Hutchinson failed to include an allowable expense of
$14,895.79 and made a $36 computational error in adding the
allowable expenses. The notices of deficiency corrected these
errors.
     6
       Ostensibly in an effort to avoid any whipsaw effect,
respondent made superficially inconsistent determinations with
respect to Mr. and Mrs. Rinn: he determined Mr. Rinn’s
deficiencies on the basis that he was taxable on all his 1995
through 2000 dental practice income, while also counting 50
percent of the 1995 through 2000 dental practice income as
                                                   (continued...)
                                - 6 -

                               OPINION

I.   Burden of Proof

     Generally, the Commissioner’s determinations of unreported

income in a notice of deficiency are presumed correct, and the

taxpayer has the burden of proving that those determinations are

erroneous.    See Rule 142(a); Welch v. Helvering, 290 U.S. 111,

115 (1933).   In certain circumstances, however, section

7491(a)(1) places the burden of proof on the Commissioner as to

any factual issue relating to the taxpayer’s liability for tax if

in the court proceeding the taxpayer introduces credible evidence

with respect to that issue.7   This rule applies only if the

taxpayer has complied with applicable substantiation

requirements, has maintained all records required under the Code,

and has cooperated with the Commissioner’s reasonable requests

for witnesses, information, documents, meetings, and interviews.

Sec. 7491(a)(2).


     6
      (...continued)
Mrs. Rinn’s separate community property income. Respondent
concedes that Mr. and Mrs. Rinn’s respective deficiencies should
be computed to eliminate any double counting of the dental
practice income and that petitioners should be treated as if they
filed separate returns as married persons.
     7
       Sec. 7491 was added to the Code by the Internal Revenue
Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L.
105-206, sec. 3001, 112 Stat. 726. Sec. 7491(a) applies with
respect to examinations that are commenced after July 22, 1998.
RRA 1998 sec. 3001(c), 112 Stat. 727. The record does not
disclose when the examinations commenced in this case; however,
with respect to at least some of the tax years in issue, we
assume that examinations commenced after July 22, 1998.
                               - 7 -

     Section 7491 does not place the burden of proof on

respondent in this proceeding for at least two reasons.    First,

petitioners did not testify, call any witnesses, or otherwise

introduce any evidence–-much less credible evidence--to show

error in respondent’s determinations of their proper income tax

liability.8   Second, petitioners obdurately refused to cooperate

with respondent’s numerous requests for records, information,

documents, and interviews.   Ultimately, in a summons enforcement

proceeding, a Federal District Court put Mr. Rinn in jail for his

noncompliance.   Only then did Mrs. Rinn finally produce the

records that respondent had requested.

     At trial, petitioners submitted a document wherein they

contend that the Fifth Amendment privilege against self-

incrimination relieves them of any duty to cooperate with

respondent’s requests for information.   Apart from submitting

this document, however, petitioners have not expressly invoked

any Fifth Amendment privilege against testifying in this

proceeding, nor have they alleged any reasonable expectation that

testifying in this proceeding or cooperating with respondent’s



     8
       The parties stipulated some facts, including certain joint
exhibits, consisting primarily of the notices of deficiency (to
which are appended extensive workpapers upon which the deficiency
determinations were based) and petitioners’ 1993 and 1994 joint
Federal income tax returns. None of the stipulations or
associated exhibits tend to show any error in respondent’s
determinations, apart from those respondent has conceded in this
proceeding.
                               - 8 -

requests for information would tend to subject them to criminal

prosecution.9   Cf. Kastigar v. United States, 406 U.S. 441, 444

(1972); Moore v. Commissioner, 722 F.2d 193, 195 (5th Cir. 1984),

affg. T.C. Memo. 1983-20.   More fundamentally, however, even if

petitioners had validly asserted a privilege against self-

incrimination in this proceeding, such an assertion would not

substitute for relevant evidence, see United States v. Rylander,

460 U.S. 752, 758 (1983); Petzoldt v. Commissioner, 92 T.C. 661,

684-685 (1989); Traficant v. Commissioner, 89 T.C. 501, 504

(1987), affd. 884 F.2d 258 (6th Cir. 1989), and consequently

would not relieve petitioners of the section 7491(a)(1)

requirement that they introduce relevant credible evidence as a

precondition of our placing the burden of proof on respondent.




     9
       Respondent obtained critical evidence against petitioners
pursuant to a summons issued under sec. 7602, which was enforced
in a Federal District Court under sec. 7604. Petitioners do not
question, in this proceeding, whether the District Court properly
ordered them to produce records in the prior summons enforcement
proceeding, and they do not request that we exclude on Fifth
Amendment grounds evidence obtained in that proceeding. See,
e.g., United States v. Powell, 379 U.S. 48 (1964) (specifying the
requirements for enforcing an Internal Revenue Service summons).
Petitioners make no allegation that respondent violated sec.
7602(d), which provides rules regarding the issuance of a summons
in the case of a Department of Justice referral for grand jury
investigation or criminal prosecution.
                               - 9 -

      Accordingly, the burden of proof remains on petitioners to

show error in respondent’s determinations.10   As explained below,

petitioners have failed to carry their burden.

II.   Respondent’s Determinations of Petitioners’ Income

      The evidence in the record shows that petitioners failed to

report substantial amounts of income from Mr. Rinn’s dental

practice for their 1995 through 2000 tax years.   RA Hutchinson

properly reconstructed the income, expenses, and net profits from

Mr. Rinn’s dental practice using records that Mrs. Rinn had

prepared in her capacity as primary bookkeeper of that business.

RA Hutchinson reviewed the records with Mrs. Rinn; she explained

the various transactions that were listed; and RA Hutchinson

prepared written summaries on the basis of Mrs. Rinn’s

explanations allowing all the expenses that she had identified.

The notices of deficiency issued to petitioners were prepared on

the basis of the records that Mrs. Rinn provided and RA

Hutchinson’s written summaries.



      10
       In certain circumstances, courts have required a minimal
factual foundation for the Commissioner’s determinations of
unreported income before the presumption of correctness attaches
to the Commissioner’s determinations in a notice of deficiency.
See, e.g., Portillo v. Commissioner, 932 F.2d 1128 (5th Cir.
1991), affg. in part, revg. in part, and remanding T.C. Memo.
1990-68; Spurlock v. Commissioner, T.C. Memo. 2003-124.
Respondent’s determinations in this case were based on business
records that Mrs. Rinn maintained and provided. These records
provide at least a minimal evidentiary foundation for
respondent’s determinations of unreported income in the notices
of deficiency.
                              - 10 -

     At trial, petitioners called no witnesses and introduced no

evidence germane to Mr. Rinn’s receipt of income from his dental

practice during the years 1995 through 2000.   Petitioners did not

testify, but merely raised unmeritorious objections to

respondent’s introduction into evidence of the records that

Mrs. Rinn had previously provided respondent and the written

summaries that RA Hutchinson had prepared.11

     Petitioners filed no brief in this case; however, in a

number of documents submitted to respondent and this Court,

including their petition, petitioners have raised frivolous

arguments relating to the definition of income, the voluntary

nature of the income tax, and their liability for payment of



     11
       Petitioners objected to these documents on the basis of
authenticity and hearsay. We overruled petitioners’ objections.
First, with regard to petitioners’ authentication objection, the
records and the written summaries were properly authenticated by
RA Hutchinson’s testimony pursuant to Fed. R. Evid. 901(a).
Second, with regard to petitioners’ hearsay objection, the
records that Mrs. Rinn provided are admissible nonhearsay under
Fed. R. Evid. 801(d)(2) as an admission by a party-opponent, and
the written summaries that RA Hutchinson prepared are admissible
under the business records exception to the hearsay rule under
Fed. R. Evid. 803(6).

     At trial, petitioners suggested that they were prejudiced by
respondent’s indication in his pretrial memorandum that he might
submit the aforementioned records and written summaries through
self-authenticating sworn affidavits under Fed. R. Evid. 902(11).
This rule provides one option for authenticating evidence;
however, respondent chose the more salient option of
authenticating the records and summaries through the testimony of
RA Hutchinson. Petitioners were given the opportunity to cross-
examine RA Hutchinson regarding his testimony. Consequently, we
find no prejudice to petitioners in this regard.
                               - 11 -

income tax.    We see no need to address these frivolous arguments,

the likes of which have been addressed and uniformly rejected in

many precedents.    See, e.g., Takaba v. Commissioner, 119 T.C. 285

(2002); Nestor v. Commissioner, 118 T.C. 162, 167 (2002).

       On the basis of the evidence in the record and petitioners’

failure to present any relevant evidence, we hold that

petitioners received taxable income from Mr. Rinn’s dental

practice in the amounts that respondent determined in the notices

of deficiency, with proper adjustments to eliminate any double

counting of the dental practice income in the computations of

petitioners’ separate deficiencies.12

III.    Additions to Tax and Penalty

       Under section 7491(c), the Secretary has the burden of

production in any court proceeding with respect to the liability

of any individual for any penalty, addition to tax, or additional

amount imposed by the Code.    Section 7491(c) applies with respect



       12
       Petitioners have not alleged that respondent erred in
treating Mr. Rinn’s dental practice income as community property
income or in allocating half of it to Mrs. Rinn. We therefore
consider petitioners to have conceded these issues. See Vincent
v. Commissioner, T.C. Memo. 1994-345. Nor has Mrs. Rinn sought
relief from liability pursuant to sec. 66; accordingly, we deem
her to have waived any such claim. As previously noted,
respondent concedes that the dental practice income should not be
double counted in Mr. and Mrs. Rinn’s taxable incomes and that
deficiencies in petitioners’ taxes should be computed as if
petitioners had filed separate returns as married persons. We
expect the resulting downward adjustments to Mr. Rinn’s
deficiencies to be reflected in the Rule 155 computations.
                              - 12 -

to examinations that are commenced after July 22, 1998.      Internal

Revenue Service Restructuring and Reform Act of 1998, Pub. L.

105-206, sec. 3001(c), 112 Stat. 727.     Section 7491(c) applies to

petitioners’ 1998 through 2000 tax years, since these tax years

ended after July 22, 1998.   In the absence of any evidence

indicating when the examinations of the other tax years

commenced, we shall assume that section 7491(c) applies to all

tax years at issue.

     A.   Section 6651(a)(1) Additions to Tax

     Section 6651(a)(1) provides an addition to tax for failure

to file a return on or before the specified filing date unless it

is shown that this failure is due to reasonable cause and not due

to willful neglect.   Pursuant to section 7491(c), respondent must

show that the addition to tax is appropriate; however,

petitioners bear the burden of proving that their failure to file

was due to reasonable cause and not due to willful neglect.     See

Higbee v. Commissioner, 116 T.C. 438 (2001).

     Petitioners failed to file Federal income tax returns for

their 1995 through 2000 tax years, even though Mr. Rinn’s dental

practice produced substantial income.13    In prior years,

petitioners filed Federal income tax returns and included



     13
       As previously noted, we consider petitioners to have
conceded or waived any issue as to whether respondent properly
allocated to Mrs. Rinn a share of Mr. Rinn’s dental practice
income, as community property income.
                              - 13 -

Mr. Rinn’s income from his dental practice.    Petitioners

introduced no evidence establishing reasonable cause for their

failures to file; indeed, the record demonstrates that their

failures to file were attributable to their taking frivolous

positions regarding their obligation to report and pay Federal

income taxes.   We hold that respondent has met his burden of

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

additions to tax for petitioners’ 1995 through 2000 tax years.14

     B.   Section 6654 Additions to Tax

     Section 6654 provides for an addition to tax in the case of

any underpayment of estimated tax by an individual.    Except in

very limited circumstances not applicable in this case, see sec.

6654(e)(3)(B), section 6654 provides no exception for reasonable

cause, Mendes v. Commissioner, 121 T.C. 308, 323 (2003).

Instead, the section 6654 addition to tax is mandatory unless one

of the limited statutory exceptions applies.    Sec. 6654(e);

Recklitis v. Commissioner, 91 T.C. 874, 913 (1988).

     We conclude that respondent has met his burden of production

under section 6654.   It is clear from the record that petitioners


     14
       In the Rule 155 computation, we anticipate that the
parties will make appropriate adjustments to the sec. 6651(a)(1)
additions to tax to account for respondent’s concessions,
including respondent’s concession that Mr. and Mrs. Rinn should
be treated as married persons filing separate returns, with no
double counting in Mr. Rinn’s taxable income of community-
property items included in the computation of Mrs. Rinn’s taxable
income, and respondent’s concessions of the sec. 6651(a)(2)
additions to tax. See sec. 6651(c)(1).
                               - 14 -

were required to make estimated tax payments for their 1995

through 2000 tax years.15   Petitioners do not dispute that they

made no estimated tax payments for these years.   Further,

petitioners do not fall within any of the statutory exceptions to

the section 6654 addition to tax.   Consequently, we sustain the

imposition of section 6654 additions to tax for petitioners’ 1995

through 2000 tax years.16

     C.   Section 6673(a)(1) Penalty

     Respondent has not asked that we impose a section 6673(a)(1)

penalty, even though petitioners’ filings in this case and their

submissions to respondent have included numerous frivolous

arguments.    At trial, we warned petitioners that we might impose

a section 6673(a)(1) penalty if they continued to raise these

arguments.    After trial, petitioners filed no brief and have not

otherwise continued to pursue frivolous arguments in this

proceeding.   On the assumption that petitioners have heeded our

warning, we shall not impose a section 6673(a)(1) penalty.    We



     15
       As previously noted, we consider petitioners to have
conceded or waived any issue as to whether respondent properly
allocated to Mrs. Rinn a share of Mr. Rinn’s dental practice
income, as community property income.
     16
       In the Rule 155 computation, we anticipate that the
parties will make appropriate adjustments to the sec. 6654
additions to tax to account for respondent’s concession that
Mr. and Mrs. Rinn should be treated as married persons filing
separate returns, with no double counting in Mr. Rinn’s taxable
income of community-property items included in the computation of
Mrs. Rinn’s taxable income.
                               - 15 -

strongly caution petitioners, however, that section 6673(a)(1)

penalties may be imposed if they relapse into making frivolous

arguments before this Court.


                                         Decision will be

                                    entered under Rule 155.
