                        T.C. Memo. 2010-78



                      UNITED STATES TAX COURT



                 DONALD WM. TRASK, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 25469-06, 6105-07.    Filed April 15, 2010.



     Donald W. Trask, pro se.

     Steven M. Roth, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     GOEKE, Judge:   Respondent determined the following income

tax deficiencies and additions to tax and penalties:1




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



                                 Additions to Tax     Penalties
     Year         Deficiency      Sec. 6651(a)(1)     Sec. 6662

     2001         $138,491       $34,621.75           $27,698.20
     2002          110,939        27,734.75            22,187.80

     The issues for decision are:

     1.   Whether this Court has jurisdiction to redetermine

petitioner’s 2002 tax year liability.     We hold that we do not;

     2.   whether petitioner was a real estate professional, and

if so, whether he elected to treat his rental real estate

activities as a single activity pursuant to section 469(c)(7)(A)

for 2001.     We hold that petitioner was a real estate professional

but did not properly elect his rental real estate activities as a

single activity;

     3.   whether petitioner is entitled to a net operating loss

(NOL) carryover of $49,958 for 2001.     We hold that he is not;

     4.     whether petitioner is entitled to a property tax

deduction of $14,829 in 2001 with respect to a parcel of land in

San Bernardino, California.     We hold that he is;

     5.   whether petitioner is entitled to a deduction for

“Repairs” claimed on his Schedule E, Supplemental Income and

Loss, for 2001.     We hold that petitioner is entitled to 78

percent of the deductions claimed;
                               - 3 -

     6.   whether petitioner is entitled to amortization

deductions on his 2001 tax return.     We hold that he is not;

     7.   whether petitioner is liable for an accuracy-related

penalty under section 6662 for 2001.     We hold that he is; and

     8.   whether petitioner is liable for an addition to tax

under section 6651(a)(1) for 2001.     We hold that he is.

                         FINDINGS OF FACT

     The stipulation of facts and the attached exhibits are

incorporated herein by this reference.     Petitioner resided in

California at the time he filed his petitions.

     Petitioner owned more than 30 rental properties during 2001.

Petitioner had acquired these properties over the preceding 25

years.

     Petitioner filed Forms 1040, U.S. Individual Income Tax

Return, for 1994 through 1999 and 2001.     Petitioner aggregated

his rental properties and reported his profits and losses on an

aggregated basis.   Respondent has no record of petitioner’s

filing a Federal income tax return for 2000.

     Petitioner’s 1995 return was examined, and a notice of

deficiency was issued.   Petitioner timely petitioned this Court

for redetermination.   On March 26, 2001, a stipulated decision

was entered in docket No. 15363-97 in which petitioner agreed to

an adjustment in income tax due for taxable year 1995 of $793

with no accuracy–related penalty.    The stipulated decision
                                 - 4 -

reflected respondent’s disallowance of Schedule E losses in

excess of the $25,000 passive activity loss limitation.     This led

to a decrease of $102,879 in the claimed passive loss.      At trial

petitioner claimed that he filed an amended 1996 return with a

single activity election, but he failed to provide evidence that

a 1996 amended return was filed.    Respondent maintains there is

no record of such a return being filed.

     Petitioner filed a Schedule E with his 2001 Federal income

tax return.    Petitioner claimed a net loss of $27,340 for 2001

from his rental real estate activities.    Respondent has

stipulated that petitioner incurred expenses and depreciation of

at least $395,165 for 2001.    Petitioner aggregated his rental

income and expenses as a single activity.    Petitioner

consistently followed this practice on the Schedules E attached

to his 1995, 1998, 1999, 2001, 2002, and 2003 Federal income tax

returns.   Petitioner’s 1996 and 1997 returns are not a part of

this record; however, there is no evidence to suggest that

petitioner calculated his losses and profits differently during

those years.

     Before 2001 petitioner held a mortgage on real property

owned by Occidental Financial Group, Inc. (Occidental), in San

Bernardino, California.    Petitioner did not own shares in

Occidental but lent $400,000 to the company in exchange for a

deed of trust on the property.    Petitioner lent the money to
                                  - 5 -

guarantee an interest income stream for himself.    As owner of the

property, Occidental was liable to pay the property tax but went

bankrupt.   The bankruptcy court revised the terms of petitioner’s

note, and Occidental made a few payments; but the payments

eventually ceased.   To avoid the county’s seizure of the

property, petitioner paid $14,829 of real estate property tax in

2001.

      On September 12, 2006, respondent mailed petitioner a notice

of deficiency for 2001 disallowing all claimed expenses from his

rental real estate activities.     On December 1, 2006, respondent

mailed petitioner a notice of deficiency for 2002.    On December

11, 2006, petitioner timely filed a petition with this Court for

redetermination of the deficiency for 2001.    On March 13, 2007,

petitioner filed a petition with this Court for redetermination

of the deficiency for 2002.   Petitioner’s petition was received

by the Court on March 13, 2007, in an envelope bearing a U.S.

Postal Service postmark dated March 6, 2007, 95 days after

respondent mailed petitioner the notice of deficiency for 2002.

A trial was held on May 7, 2009, in Los Angeles, California.

                              OPINION

I.   Petitioner’s 2002 Tax Year

      This Court’s jurisdiction to redetermine a deficiency

depends on the issuance of a valid notice of deficiency and a

timely filed petition.   Rule 13(a), (c); Levitt v. Commissioner,
                                - 6 -

97 T.C. 437, 441 (1991).    Section 6213(a) provides that a

petition for redetermination of a deficiency determined by the

Commissioner is timely filed if it is filed within 90 days after

the notice of deficiency is mailed (or 150 days if the notice is

mailed outside the United States).      Petitioner’s petition was

received by the Court on March 13, 2007.      The petition arrived at

the Court in an envelope bearing a U.S. Postal Service postmark

dated March 6, 2007--95 days after the notice of deficiency was

mailed to petitioner.    The 90-day period had expired on March 1,

2007.    A petition received and filed by the Court after the

expiration of the 90-day period may be deemed timely filed if it

was timely mailed, as evidenced by the postmark date in

conformity with section 7502 and the regulations promulgated

thereunder.

        We hold that the petition was not timely filed and thus

this Court does not have jurisdiction to redetermine petitioner’s

2002 tax liability, pursuant to either section 6213(a) or section

7502.    Accordingly, we shall dismiss petitioner’s petition in

docket No. 6105-07 for 2002 for lack of jurisdiction on the

ground that the petition was untimely.

II.   Petitioner’s 2001 Tax Year

      As a general rule, the Commissioner’s determinations in a

notice of deficiency are presumed correct, and the taxpayer bears
                                 - 7 -

the burden of proving that the determinations are in error.     Rule

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

     Deductions are a matter of legislative grace, and the

taxpayer bears the burden of proving that he is entitled to any

claimed deductions.   Rule 142(a)(1); INDOPCO, Inc. v.

Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v.

Helvering, 292 U.S. 435, 440 (1934).     The burden of proof on a

factual issue that affects a taxpayer’s liability for tax may be

shifted to the Commissioner where the “taxpayer introduces

credible evidence with respect to * * * such issue.”     Sec.

7491(a)(1).   Petitioner has neither claimed nor shown that he

complied with the substantiation requirements of section 7491(a).

Therefore, the burden of proof remains on petitioner.     See Rule

142(a).

     A.   Real Estate Professional

     First we must decide whether petitioner elected for 2001 to

treat his rental real estate activities as one activity under

section 469(c)(7).

     Petitioner claimed a loss of $27,340 from his rental real

estate activities for 2001.     Generally, section 469(a) disallows

any passive activity loss.    A passive activity loss is defined as

the excess of the aggregate losses from all passive activities

for the taxable year over the aggregate income from all passive

activities.   Sec. 469(d)(1).   Section 469(i) provides an
                                - 8 -

exception to the general rule that passive activity losses are

disallowed.    A taxpayer who “actively [participates]” in a rental

real estate activity can deduct a maximum loss of up to $25,000

per year (subject to phaseout limitations) related to the

activity.    Sec. 469(i)(1), (2), and (3).

     A passive activity includes the conduct of any trade or

business in which the taxpayer does not materially participate.

Sec. 469(c)(1).    A rental activity generally is treated as a per

se passive activity regardless of whether the taxpayer materially

participates.    Sec. 469(c)(2), (4).   In establishing whether a

taxpayer’s real property activities result in passive activity

losses, each interest in rental real estate is treated as a

separate rental real estate activity unless the qualifying

taxpayer makes an election to treat all interests in rental real

estate as a single rental real estate activity.     See sec.

469(c)(7)(A).

     Petitioner on his 2001 income tax return claimed expenses of

$356,119 and reported gross rental receipts on his Schedule C,

Profit or Loss From Business, of $328,779, yielding a loss of

$27,340.    Petitioner claims he is entitled to deduct more than

$25,000 from his Schedule E rental real estate activities for

2001.   In order to receive this deduction, petitioner must

satisfy three requirements:    (1) He must establish that he

qualifies as a real estate professional pursuant to section
                               - 9 -

469(c)(7)(B) for 2001; (2) he has elected under section

469(c)(7)(A) to treat his rental real estate activities as a

single rental real estate activity at some point since 1994; and

(3) he materially participated in the combined rental real estate

activity.   Respondent contends that petitioner failed to satisfy

these requirements.

     Under section 469(c)(7)(B), a taxpayer may qualify as a real

estate professional and the rental real estate activity of the

taxpayer is not a per se passive activity if:

          (i) More than one-half of the personal services
     performed in trades or businesses by the taxpayer
     during such taxable year are performed in real property
     trades or businesses in which the taxpayer materially
     participates, and

          (ii) such taxpayer performs more than 750 hours
     of services during the taxable year in real property
     trades or businesses in which the taxpayer materially
     participates.

See Fowler v. Commissioner, T.C. Memo. 2002-223; sec. 1.469-

9(e)(1), Income Tax Regs.

     Petitioner owned 33 properties in Southern California

throughout 2001.   Respondent argues that petitioner failed to

prove that he performed more than 750 hours of service in real

estate property trades or businesses in 2001.

     “The extent of an individual’s participation in an activity

may be established by any reasonable means.”    Sec.

1.469-5T(f)(4), Temporary Income Tax Regs., 53 Fed. Reg. 5727

(Feb. 25, 1988).   This Court has acknowledged that although
                                - 10 -

“reasonable means” is interpreted broadly, a postevent “ballpark

guesstimate” will not suffice.    See Lee v. Commissioner, T.C.

Memo. 2006-193; Goshorn v. Commissioner, T.C. Memo. 1993-578.      In

addition, the Court recognizes that the temporary regulations

cited above can be somewhat ambiguous concerning the records that

a taxpayer needs to maintain.    Goshorn v. Commissioner, supra.

     On the basis of the record and testimony provided at trial,

we find that petitioner has established that he spent more than

750 hours performing significant work on his rental properties

and that this was his sole business during 2001.   Petitioner

provided evidence to support that he handled over 80 issues for

11 pieces of property.   Respondent concedes that petitioner

performed repairs for larger projects himself and also hired

contractors.   Petitioner presented work logs for his properties

identifying the portions of the properties being repaired and

whether a specific contractor was hired.   Thus, we find that

petitioner is a qualified real estate professional within the

meaning of section 469(c)(7)(B).

     Next, we must determine whether petitioner elected to treat

his rental real estate activities as a single activity pursuant

to section 469(c)(7)(A).   The taxpayer must clearly notify the

Commissioner of his intent to make an election to treat various

rental real estate activities as a single activity.   See

Knight-Ridder Newspapers, Inc. v. United States, 743 F.2d 781,
                               - 11 -

795 (11th Cir. 1984).    To make an election “the taxpayer must

exhibit in some manner * * * his unequivocal agreement to accept

both the benefits and burdens of the tax treatment afforded” by

the governing statute.    Young v. Commissioner, 83 T.C. 831, 839

(1984), affd. 783 F.2d 1201 (5th Cir. 1986).

     At trial petitioner claimed that during discussions with

respondent about the calculations which ultimately led to a

stipulated decision for the 1995 taxable year in 2001, he wrote

on a piece of paper that he wanted to aggregate his rental real

estate and tried handing it over to respondent.    Petitioner

argues that by giving respondent this note, he was electing to

aggregate his rental real estate activities.    Section 1.469-

9(g)(3), Proposed Income Tax Regs., 60 Fed. Reg. 2561 (Jan. 10,

1995), requires a taxpayer wishing to make such an election to

file a statement with the taxpayer’s original return declaring

that the election is under section 469(c)(7)(A).    The final

regulation, which is substantially the same as the proposed

regulation, became final on December 22, 1995, and is generally

effective for taxable years beginning on or after January 1,

1995, and to elections made under section 1.469-9(g), Income Tax

Regs., with returns filed on or after January 1, 1995.    See sec.

1.469-11(a)(3), Income Tax Regs.    Therefore, to satisfy the

requirements to make an election to treat all rental real estate

activities as a single activity under section 469(c)(7)(A), a
                              - 12 -

taxpayer must make an explicit election with his or her original

return.

     Since 1994 petitioner has aggregated his rental income and

expenses as if the rental real estate activities were a single

activity.   Petitioner did not attach to any return a statement

electing to treat his rental real estate activities as a single

activity.   The fact that petitioner consistently aggregated the

rental income and expenses from the rental properties on his

Schedules E is not a deemed election under the requirements of

section 469(c)(7)(A).

     In Kosonen v. Commissioner, T.C. Memo. 2000-107, the

taxpayer aggregated his rental income and expenses in one column

on the Schedules E attached to his 1994, 1995, and 1996 returns.

The taxpayer in Kosonen argued that aggregating his rental

activity losses on his returns showed that he had elected to

treat his rental real estate activities as a single activity

under section 469(c)(7).   This Court held that the fact that the

taxpayer aggregated his losses was not clear notice that he

intended to elect under section 469(c)(7).   Kosonen v.

Commissioner, supra (citing Knight-Ridder Newspapers, Inc. v.

United States, supra at 795)).   Accordingly, petitioner did not

elect to treat his rental real estate activities as a single

activity under section 469(c)(7)(A).   Moreover, petitioner does
                                - 13 -

not contend that he materially participated in each of his rental

activities when viewed separately.

     On the record before us, we find petitioner was a real

estate professional during the years at issue but conclude that

petitioner does not satisfy the exception set forth in section

469(c)(7).    Therefore he is not entitled to deduct real estate

losses in excess of $25,000 for 2001.

     B.    NOL Carryover

     Section 172 allows a taxpayer to deduct an NOL for a taxable

year.     A taxpayer’s NOL, with certain adjustments, generally

consists of the excess of deductions allowed over gross income.

Sec. 172(c).     Section 172(a) allows an NOL deduction for the

aggregate NOL carrybacks and carryovers to the taxable year.

Section 172(b) provides for the manner in which an NOL is to be

carried back and carried forward.

     Petitioner claimed NOL carryovers of $49,958 from 2000 into

2001.     In the notice of deficiency respondent disallowed the 2001

NOL carryovers.

     Generally, the period for an NOL carryback is 2 years and

the period for an NOL carryover is 20 years.     Sec. 172(b)(1)(A).

However, a taxpayer may elect to waive or relinquish the 2-year

carryback period with respect to an NOL from a tax year.     Sec.

172(b)(3).     To make this election, a taxpayer is required to file

an election relinquishing the carryback period by the return due
                               - 14 -

date for the year the NOL was incurred.    Id.   Once made, the

election is irrevocable; it waives the opportunity to carry back

the NOL.    Plumb v. Commissioner, 97 T.C. 632, 636 (1991).

     Petitioner is not entitled to any NOL carryover for 2001

because he has not shown that he elected to relinquish his

carryback period as required by section 172(b)(3).    There is no

evidence that petitioner filed a 2000 return.    Further, there is

no evidence to suggest that petitioner had excess losses in 2000

had he filed a proper election to relinquish the carryback

period.    Because petitioner has not shown that he had excess

losses in 2000 and that he properly elected to carry them

forward, petitioner’s claimed NOL carryovers for 2001 are

disallowed.

     C.    Property Tax Deduction

     During 2001 petitioner held a mortgage and deed of trust in

a parcel of land owned by Occidental.    The deed of trust is the

collateral for a promissory note given by Occidental, as owner of

the property, to petitioner.    As owner, Occidental was liable to

pay the property tax.    Occidental filed for bankruptcy, and the

bankruptcy court revised the note; but payments on the mortgage

stopped.    Petitioner paid $14,829 of property tax in 2001 to

forestall seizure of the property by the county in satisfaction

of Occidental’s tax liability.

     Section 162 allows a deduction for all ordinary and
                               - 15 -

necessary expenses paid or incurred by a taxpayer in carrying on

a trade or business, including rentals or other payments

required to be made as a condition to the continued use or

possession of property.   Sec. 162(a)(3).   Petitioner was a real

estate professional, and in order to keep possession of the

Occidental property, he was required to pay the property tax to

prevent the county from seizing it to collect for nonpayment.

     Section 164(a) provides a deduction for the payment of real

property taxes and other specified taxes paid or accrued by the

taxpayer during the taxable year.    In addition to specific taxes

deductible under section 164(a), the taxpayer may deduct State,

local, and foreign taxes paid or accrued in carrying on a trade

or business or in an investment-related activity.    Sec. 164(a).

     We hold petitioner is entitled to a property tax deduction

of $14,829.

     D.   Repairs

     Petitioner claimed deductions for repairs on his 33 rental

real estate properties for 2001.    Petitioner asserts that

beginning in 1996 he planned to capitalize all repair expenses

over $5,000 and increase that threshold 5 percent each year.

Respondent maintains that 78 percent of the amount claimed for

these repairs should be immediately deductible and 22 percent

should be capitalized.    The parties have stipulated that

petitioner incurred $134,863 for repairs in 2001.    As stated,
                                - 16 -

respondent agrees that 78 percent of this amount, or $105,193, is

currently deductible in 2001.    We are left to decide whether the

remaining 22 percent is currently deductible.

     Section 263 generally prohibits deductions for capital

expenditures.   Nondeductible capital expenditures include “Any

amount paid out * * * for permanent improvements or betterments

made to increase the value of any property”.    Sec. 263(a)(1).

     In contrast, deductible repair expenditures include those

made merely to maintain property in operating condition.    See

Ill. Merchs. Trust Co. v. Commissioner, 4 B.T.A. 103, 106 (1926)

(“A repair is an expenditure for the purpose of keeping the

property in an ordinarily efficient operating condition.”).    The

distinction between a nondeductible capital expenditure and a

deductible repair is summarized in section 1.162-4, Income Tax

Regs.:

     The cost of incidental repairs which neither materially add
     to the value of the property nor appreciably prolong its
     life, but keep it in an ordinarily efficient operating
     condition, may be deducted as an expense, provided the cost
     of acquisition or production or the gain or loss basis of
     the taxpayer’s plant, equipment, or other property, as the
     case may be, is not increased by the amount of such
     expenditures. Repairs in the nature of replacements, to the
     extent that they arrest deterioration and appreciably
     prolong the life of the property, shall either be
     capitalized and depreciated in accordance with section 167
     or charged against the depreciation reserve if such an
     account is kept.

     The deductibility of repair expenses also depends upon the

context in which the repairs are made.   Courts have held that
                              - 17 -

expenses incurred as part of a general plan of rehabilitation

must be capitalized even if they would have been deductible as

ordinary and necessary business expenses if separately incurred.

See United States v. Wehrli, 400 F.2d 686, 689 (10th Cir. 1968);

Norwest Corp. & Subs. v. Commissioner, 108 T.C. 265, 280 (1997).

     In June 2008 petitioner met with respondent and agreed that

$30,107 of the claimed $134,863 of repair expenses (22 percent)

for 2001 was for capital expenditures.

     Petitioner now claims that he should be allowed to deduct

the remaining 22 percent of the amounts spent in 2001 to make up

for amounts that he was not permitted to deduct before 1995.

Petitioner has not substantiated this claim with any evidence,

and it is unclear how events before 1995 affect the years in

issue in any event.   Consequently, petitioner is not entitled to

deduct 22 percent of the repair expenses he incurred during 2001.

     E.   Amortization

     Section 167(a) allows as a depreciation deduction a

reasonable allowance for the wear and tear, exhaustion, and

obsolescence of:   (1) Property used in the trade or business, or

(2) property held for the production of income.

     Section 168(e)(1) classifies property as 5-year property if

it has a class life of more than 4 years but less than 10 years.

Section 168(c) provides that the applicable recovery period of

the 5-year property is 5 years.   Petitioner claims that he is
                                  - 18 -

entitled to an NOL for 2001 attributable to unused depreciation

deductions for the years 1996 through 1999 for property used in

his rentals.    Petitioner claims the 5-year property was used for

the properties he owned in Ardmore and Newport.     He claims

$98,860 was included for these properties, but the record

indicates that petitioner incurred a total of $33,126 on Ardmore

and $9,503 on Newport.    In any event, petitioner cannot

substantiate that these expenditures generated NOL carryovers

that were available to reduce his tax liability for 2001.

Petitioner is not entitled to an additional amortization

deduction in 2001 for his claimed additional amounts from 1996,

1997, 1998, and 1999.

     F.    Section 6662 Penalty

     Respondent determined that petitioner is liable for an

accuracy-related penalty under section 6662(a) and (b)(1) for

2001.     Section 6662(a) and (b)(1) imposes a 20-percent penalty on

the portion of an underpayment of tax attributable to negligence

or disregard of rules or regulations.      Negligence is defined as

any failure to make a reasonable attempt to comply with the

provisions of the Internal Revenue Code.     Sec. 6662(c); see Allen

v. Commissioner, 92 T.C. 1, 12 (1989), affd. 925 F.2d 348 (9th

Cir. 1991).     The section 6662(a) penalty is not imposed with

respect to any portion of an underpayment to the extent that it
                                - 19 -

is shown that the taxpayer acted with reasonable cause and good

faith.   Sec. 6664(c)(1).

     Section 7491(c) provides that the Commissioner bears the

burden of production with respect to a taxpayer’s liability for a

penalty, addition to tax, or additional amount.     See Higbee v.

Commissioner, 116 T.C. 438, 446 (2001), with respect to the

applicability of an accuracy-related penalty.     Once this burden

has been met, the burden of proof then falls on the taxpayer.

See id. at 447.   A taxpayer may carry the burden by proving that

he was not negligent; i.e., a reasonable attempt to comply with

the provisions of the Code was made and the taxpayer’s actions

were not careless, reckless, or an intentional disregard of rules

or regulations.    Sec. 6662(c).   Alternatively, a taxpayer can

demonstrate that his underpayment was attributable to reasonable

cause and he acted in good faith.     Sec. 6664(c)(1).

     On the record before us, we conclude that petitioner failed

to carry his burden of showing that there was reasonable cause

for the underpayment of tax for 2001.     To the contrary, the

record establishes that some of petitioner’s practices were

negligent.    Petitioner knew that he was not following the law

when he tried to deduct 100 percent of his repairs as ordinary

and necessary expenses.     Petitioner planned to capitalize all

expenses over $5,000 and increase that threshold 5 percent each

year.    This is not the proper standard for determining whether
                               - 20 -

the amounts incurred for repairs should be capitalized.    The

proper standard is whether the expenditures extended the life of

the properties, increased their value, or changed their

character.    Petitioner admits that he replaced the roofs on his

properties.    These expenditures extended the life of the rental

properties and therefore were not ordinary and necessary business

expenses.

     Accordingly, we hold that petitioner is liable for the

accuracy-related penalty under section 6662(a) for the 2001 year

to the extent there is a deficiency after the parties’ Rule 155

computation.

     G.   Section 6651 Addition to Tax

     Respondent determined that petitioner is liable for an

addition to tax under section 6651(a)(1).    Section 6651(a)(1)

imposes an addition to tax for failure to timely file a Federal

income tax return by its due date with extensions.    The addition

equals 5 percent of the tax required to be shown on the return

for each month, or fraction thereof, that the return is late, not

to exceed 25 percent.    The addition to tax does not apply if the

failure was due to reasonable cause and not willful neglect.      To

prove reasonable cause for a failure to file a timely return, the

taxpayer must demonstrate that he exercised ordinary business

care and prudence in filing the return, but was nevertheless

unable to file it on time.    Sec. 301.6651-1(c)(1), Proced. &
                               - 21 -

Admin. Regs.   Factors that constitute “reasonable cause” include

unavoidable postal delays, death or serious illness of the

taxpayer or an immediate family member, or reliance on a

competent tax professional in a question of law of whether it is

necessary to file a return.    McMahan v. Commissioner, 114 F.3d

366, 369 (2d Cir. 1997), affg. T.C. Memo. 1995-547.

     Initially, the Commissioner bears the burden of producing

evidence that the return was filed late and that it was

appropriate to impose the addition to tax.   Sec. 7491(c).

Thereafter, the taxpayer bears the burden of proving that the

late filing was due to reasonable cause and not willful neglect.

Rule 142(a); Higbee v. Commissioner, supra at 447.

     Respondent determined an addition to tax under section

6651(a)(1) against petitioner for 2001 for failure to timely file

his individual income tax return.   Petitioner signed the 2001

return on April 7, 2005.

     Petitioner contends that he believed he was able to file his

2001 return late because he assumed that his NOLs would make his

liability zero.   Petitioner’s argument that he thought his

liability was zero does not excuse the late filing.   Petitioner

presented no evidence of reasonable cause for his failure to

timely file his return.    Accordingly, we hold that petitioner is

liable for the section 6651(a)(1) addition to tax for 2001.
                        - 22 -

To reflect the foregoing,


                                  Decision will be entered

                             under Rule 155 in docket No.

                             25469-06.

                                  An order of dismissal for

                             lack of jurisdiction will be

                             entered in docket No. 6105-07.
