                        T.C. Memo. 2005-145



                      UNITED STATES TAX COURT



                  DALE J. KROHN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7412-04.                 Filed June 20, 2005.


     Dale J. Krohn, pro se.

     Chris J. Sheldon, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     COLVIN, Judge:   Respondent determined a deficiency in

petitioner’s Federal income tax of $4,695 for 2001 and additions

to tax of $1,056.38 for failure to file under section 6651(a)(1),

$422.55 for failure to pay under section 6651(a)(2), and $185.80

for failure to pay estimated tax under section 6654.    In the

answer, respondent conceded that petitioner is not liable for the
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addition to tax under section 6651(a)(2) for 2001.     Respondent

now contends that the correct amount of the addition to tax under

section 6651(a)(1) for 2001 is $1,173.75.

     The issues for decision are:

     1.    Whether petitioner is liable for a $4,695 deficiency in

Federal income tax for 2001.     We hold that he is.

     2.    Whether petitioner is liable for the addition to tax for

failure to file under section 6651(a)(1) of $1,173.75 for 2001.

We hold that he is.

     3.    Whether petitioner is liable for the addition to tax for

failure to pay estimated tax under section 6654(a) of $185.79 for

2001.     We hold that he is.

                           FINDINGS OF FACT

     Petitioner resided in Arizona when he filed his petition.

     In 2001, petitioner received Social Security benefits in the

amounts of $13,572, and compensation in the amounts of $10,269

from Paul Development, Inc., $1,962 from Wendell Builders, Inc.,

and $1,222 from Walker Custom Homes, Inc.     None of these payors

withheld Federal income tax for petitioner in 2001.

     Petitioner did not file a Federal income tax return for

2001.     He did not make estimated tax payments for 2001.

     Respondent determined that petitioner received taxable

income based on documents provided by third-party payors and sent

a notice of deficiency to petitioner.     Petitioner timely filed a
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petition with this Court.    Petitioner did not cooperate with

respondent in preparing for trial.

     Before trial, petitioner asserted that he had a right not to

testify because to do so would have required him to waive his

Fifth Amendment privilege against self-incrimination.       Petitioner

did not identify or exchange any documents, identify witnesses,

or file a pretrial memorandum as required by the standing

pretrial order.    Respondent complied with these requirements.

                                OPINION

A.   Burdens of Production and Proof

     1.   Burden of Production

          a.      Section 6201(d)

     If a taxpayer asserts a reasonable dispute with respect to

any item of income reported on a third-party information return

and the taxpayer has fully cooperated with the Secretary, the

Secretary has the burden of producing reasonable and probative

information concerning that deficiency in addition to the

information return.    Sec. 6201(d).

     Petitioner did not introduce any evidence to refute

respondent’s evidence or show that respondent’s determination of

petitioner’s income is in error.       We conclude that respondent

does not have the burden of production under section 6201(d)

because petitioner did not assert a reasonable dispute with

respect to any item of income reported on an information return
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and petitioner has not fully cooperated with respondent.    Even if

respondent had the burden of proceeding under section 6201(d),

respondent met that burden by producing information returns with

certified transcripts from respondent’s administrative files and

from Social Security Administration files and declarations and

supporting records from Robert Curtis Pankow, president of

Wendell Builders, Inc., Craig Douglas Walker, president of Walker

Custom Homes, Inc., and Paul Brian Walker, president of Paul

Development, Inc.    The declarations were made under penalties of

perjury and are governed by 28 U.S.C. section 1746 (2000).      The

declarations at issue are in the form required by 28 U.S.C.

section 1746 (2000).

     The declarations are admissible under rules 803(6) and

902(11) of the Federal Rules of Evidence.    Rule 803(6) of the

Federal Rules of Evidence provides an exception to the hearsay

rule for records that are kept in the course of a regularly

conducted activity and made at or near the time of the event by a

person with knowledge.    Rule 902(11) of the Federal Rules of

Evidence states the requirements for self-authentication of a

business record.    To qualify under Rule 902(11), a domestic

record of a regularly conducted business activity must be

accompanied by a declaration certifying that the record (1) was

made at or near the time of the occurrence of the matters set

forth by, or from information transmitted by, a person with
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knowledge of those matters; (2) was kept in the course of the

regularly conducted activity; and (3) was made by the regularly

conducted activity as a regular practice.   All of the underlying

documents were kept in the regular course of business, and the

related declarations of the validity of these documents were made

by people familiar with them.

     We conclude that section 6201(d) does not apply in this

case.

          b.   Determination in Unreported Income Cases

     The U.S. Court of Appeals for the Ninth Circuit (to which an

appeal of this case would lie) has held that in order for the

presumption of correctness to attach to the notice of deficiency

in unreported income cases, the Commissioner must establish “some

evidentiary foundation linking the taxpayer” to the income-

producing activity, Weimerskirch v. Commissioner, 596 F.2d 358,

361-362 (9th Cir. 1979), revg. 67 T.C. 672 (1977), or some

substantive evidence “demonstrating that the taxpayer received

unreported income”, Edwards v. Commissioner, 680 F.2d 1268, 1270

(9th Cir. 1982); see also Rapp v. Commissioner, 774 F.2d 932, 935

(9th Cir. 1985).   Once there is evidence of actual receipt of

funds by the taxpayer, the taxpayer has the burden of proving

that all or part of those funds is not taxable.   Tokarski v.

Commissioner, 87 T.C. 74, 76-77 (1986).
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     There is ample evidence linking petitioner to income-

producing activities.   He received nonemployee compensation from

Wendell Builders, Inc., Walker Custom Homes, and Paul

Development, Inc., and Social Security benefits.    At trial,

respondent submitted Forms 1099-MISC, Miscellaneous Income, a

certified transcript from the Social Security Administration,

nonemployee compensation payor records, and declarations under

penalties of perjury of those payors as to the validity of these

underlying documents.   The transcripts, declarations, and

supporting documents show that petitioner received income during

the years in issue.   Thus, petitioner bears the burden of proving

respondent’s determinations are in error.    See Edwards v.

Commissioner, supra; Weimerskirch v. Commissioner, supra.

     2.   Burden of Proof

     Respondent bears the burden of proving the increased

addition to tax raised in the pleadings.    See Rule 142(a).    This

increase is computational.

     Petitioner contends that respondent generally bears the

burden of proof.   We disagree.    The burden of proof for a factual

issue relating to liability for tax may shift to the Commissioner

under certain circumstances.   Sec. 7491(a).   Under section

7491(a), the burden of proof with respect to a factual issue

relevant to a taxpayer’s liability for tax shifts from the

taxpayer to the Commissioner if, inter alia, the taxpayer has:
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(a) Complied with substantiation requirements under the Internal

Revenue Code, sec. 7491(a)(2)(A); (b) maintained all records

required by the Internal Revenue Code, sec. 7491(a)(2)(B); and

(c) cooperated with reasonable requests by the Secretary for

information, documents, and meetings, id.     A taxpayer bears the

burden of proving that he or she has met the requirements of

section 7491(a).   See H. Conf. Rept. 105-599, at 239 (1998),

1998-3 C.B. 747, 993; S. Rept. 105-174, at 45 (1998), 1998-3 C.B.

537, 581.   Petitioner does not contend that he meets the

requirements of section 7491(a), and the record shows that he did

not meet those requirements because he did not cooperate with

respondent.   Thus, petitioner bears the burden of proof except as

to the increased addition to tax.   See Rule 142(a); Welch v.

Helvering, 290 U.S. 111, 115 (1933).

     3.     Whether Petitioner’s Fifth Amendment Claims Affect the
            Burden of Proof

     Before trial, petitioner asserted Fifth Amendment rights

against self-incrimination.   However, even if petitioner’s claim

was bona fide (which we need not decide), it would have no effect

on petitioner’s burden of proof.    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).
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B.     Petitioner’s Income in 2001

       Petitioner has not shown that respondent’s determination

relating to the amount of his income for 2001 is incorrect.

We conclude that petitioner received income as described in the

findings of fact.

C.     Petitioner’s Deductions

       A taxpayer must keep records that are sufficient to enable

the Commissioner to determine his or her tax liability.     Sec.

6001; sec. 1.6001-1(a), Income Tax Regs.     Deductions are a matter

of legislative grace.     INDOPCO, Inc. v. Commissioner, 503 U.S.

79, 84 (1992).    A taxpayer must substantiate the payments which

give rise to claimed deductions.     Hradesky v. Commissioner, 65

T.C. 87, 90 (1975), affd. per curiam 540 F.2d 821 (5th Cir.

1976); see sec. 6001.

       Petitioner alleged in the petition that he is entitled to

claim deductions.    However, petitioner has not identified the

items that he contends are deductible or offered any evidence

supporting his claim.     Thus, he may not deduct any amount for

2001.    We conclude that petitioner’s deficiency in income tax for

2001 was $4,695.

D.     Additions to Tax

       Section 7491(c) places on the Commissioner the burden of

producing evidence that it is appropriate to impose additions to

tax.    To meet the burden of production under section 7491(c), the
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Commissioner must produce evidence showing that it is appropriate

to impose the particular addition to tax but need not produce

evidence relating to defenses such as reasonable cause or

substantial authority.    Higbee v. Commissioner, 116 T.C. 438, 446

(2001); H. Conf. Rept. 105-599, supra at 241, 1998-3 C.B. at 995.

     Petitioner is required to file a return for 2001 but has not

done so.    He did not make estimated tax payments with respect to

his tax liability for 2001.   Thus, respondent has met the burden

of production.

     Respondent conceded that petitioner is not liable for the

addition to tax under section 6651(a)(2) for 2001.   Thus, section

6651(c)(1) (reducing the amount imposed by section 6651(a)(1) to

4.5 percent for any month in which both section 6651(a)(1) and

(2) additions are imposed) does not apply and the 5-percent rate

does.   Respondent has established that petitioner is liable for

the addition to tax under section 6651(a)(1) for 2001 in an

amount greater than respondent determined in the notice of

deficiency.   We conclude that petitioner is liable for additions

to tax for failure to file under section 6651(a)(1) of $1,173.75

and failure to pay estimated tax under section 6654 of $185.79

for 2001.

     To reflect the foregoing,


                                               Decision will be

                                          entered for respondent.
