                        T.C. Memo. 2003-311



                      UNITED STATES TAX COURT



                  VIVIAN C. KERR, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 15930-02.              Filed November 7, 2003.


     Vivian C. Kerr, pro se.

     C. Teddy Li, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     PANUTHOS, Chief Special Trial Judge:     Respondent determined

a deficiency in petitioner’s Federal income tax of $6,243 and an

accuracy-related penalty under section 6662(a) of $1,249 for the

2000 taxable year.   Unless otherwise indicated, section

references are to the Internal Revenue Code in effect for the
                                 - 2 -

year in issue, and all Rule references are to the Tax Court Rules

of Practice and Procedure.

     The issues for decision are:    (1) Whether petitioner failed

to report nonemployee compensation of $21,552 for the 2000

taxable year and (2) whether petitioner is liable for the

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

                         FINDINGS OF FACT

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

The stipulated facts and the related exhibits are incorporated

herein by this reference.    At the time of filing the petition,

petitioner resided in Baltimore, Maryland.

     During the year in issue, petitioner was a heavy collision

technician at Automotive Emporium.       He brought his own toolbox

and used his own tools to “rebuild wrecks” and to perform

automobile bodywork.   Automotive Emporium issued petitioner a

Form 1099-MISC, Miscellaneous Income, reporting nonemployee

compensation of $21,552 for the 2000 taxable year.       The record

includes 48 checks totaling $20,167.55 that were issued by

Automotive Emporium, made payable to petitioner, and dated from

February 3 to October 5, 2000.

     JJ Auto Body and Clarksville Auto Center each issued

petitioner a Form W-2, Wage and Tax Statement, reflecting wages

totaling $6,494 for the 2000 taxable year.
                                - 3 -

      Petitioner filed a Federal income tax return for the 2000

taxable year.    He reported $6,495 of gross income from wages.

Petitioner, however, did not include in his gross income for the

year in issue any of the $21,552 reported by Automotive Emporium

on Form 1099-MISC.

      Respondent contends that, during the year in issue,

petitioner was an independent contractor for Automotive Emporium

and that he failed to report nonemployee compensation of $21,552.

Petitioner contends that he did not have the requisite license to

perform automobile bodywork as an independent contractor, and

thus he was a common law employee of Automotive Emporium.

Petitioner further contends that, although employed by Automotive

Emporium, he did not receive any compensation for his automobile

bodywork.    Instead, he testified that, with respect to the 48

checks made payable to petitioner by Automotive Emporium, he

simply cashed the checks and returned the proceeds to Automotive

Emporium.

                               OPINION

A.   Employment Status and Compensation

      Generally, the burden of proof is on the taxpayer.    Rule

142(a)(1).    The burden of proof respecting a factual issue may be

placed on the Commissioner under section 7491(a) if the taxpayer

introduces credible evidence regarding that issue and establishes

that the taxpayer complied with the requirements of section
                                 - 4 -

7491(a)(2)(A) and (B) to substantiate items, maintain required

records, and fully cooperate with the Commissioner’s reasonable

requests.   Section 7491 does not require the burden of proof to

be placed on respondent in the present case.1    Petitioner has

neither taken a position as to whether the burden of proof should

be placed on respondent nor established that he complied with the

requirements of section 7491(a).    We therefore conclude that the

burden remains on petitioner to prove that respondent’s

determination that petitioner received unreported nonemployee

compensation of $21,552 for the 2000 taxable year is erroneous.

     Gross income includes “Compensation for services, including

fees, commissions, fringe benefits, and similar items”.    Sec.

61(a)(1).   In the present case, petitioner performed automobile

bodywork at the Automotive Emporium.     Gross income includes the

$21,552 paid by Automotive Emporium to petitioner.    The record

includes 48 checks totaling $20,167.55 that were issued by

Automotive Emporium, made payable to petitioner, and dated from

February 3 to October 5, 2000.    Petitioner has not presented any

credible evidence that the $21,552 reported on Form 1099-MISC

does not represent income for services performed.    We do not

accept petitioner’s testimony that he cashed checks and



     1
       Sec. 7491 is effective with respect to court proceedings
arising in connection with examinations by the Commissioner
commencing after July 22, 1998, the date of enactment by the
Internal Revenue Service Restructuring and Reform Act of 1998,
Pub. L. 105-206, sec. 3001(a), 112 Stat. 726.
                              - 5 -

returned the proceeds to Automotive Emporium as an

accommodation.2

     The classification of the amount reported by Automotive

Emporium as nonemployee compensation depends upon whether

petitioner is a common law employee or an independent contractor

for Federal income tax purposes.   See Weber v. Commissioner, 103

T.C. 378, 386-387 (1994), affd. 60 F.3d 1104 (4th Cir. 1995).

Courts have identified a number of factors relevant in evaluating

common law employment status, including the following:   (1) The

right of the hiring party to exercise control over the manner and

means of the work; (2) the discretion of the hiring party over

the time and duration of the work; (3) the permanency of the

relationship; (4) the right of the hiring party to discharge; (5)

the source of and investment in the instrumentalities, tools, and

facilities of the work; (6) the method of payment; (7) the

provision of employee benefits; (8) the opportunity of the hired

party for profit or loss; (9) the right of the hiring party to

assign additional projects; (10) the offering by the hired party

of services to the general public; (11) the skill required for

the work; (12) whether the type of work is part of the hiring


     2
        We note the discrepancy between the amounts reflected in
the Form 1099-MISC, Miscellaneous Income, $21,552, and the checks
totaling $20,167.55. Petitioner has not “asserted a reasonable
dispute” with respect to the income reported on an information
return, nor fully cooperated with respondent, so as to place on
respondent the burden of producing reasonable and probative
information in addition to the Form 1099-MISC. See sec. 6201(d);
McQuatters v. Commissioner, T.C. Memo. 1998-88. Given the nature
of petitioner’s incredible testimony, we accept the $21,552 as
the amount paid to petitioner.
                                  - 6 -

party’s regular business; and (13) the relationship the parties

believe they are creating.      Nationwide Mut. Ins. Co. v. Darden,

503 U.S. 318, 323 (1992); Beech Trucking Co. v. Commissioner, 118

T.C. 428, 440 (2002); Weber v. Commissioner, supra at 387; Kiddie

v. Commissioner, 69 T.C. 1055, 1057-1058 (1978).

      Given petitioner’s testimony that he did not get paid for

the work he performed at Automotive Emporium, it is somewhat

difficult to apply the aforementioned factors.       Doing our best

with a meager record, we conclude that petitioner has failed to

prove that respondent’s determination that petitioner failed to

report nonemployee compensation of $21,552 for the 2000 taxable

year should not be sustained.     The only information provided is

that petitioner provided his own tools to perform automobile

bodywork as a heavy collision technician at the Automotive

Emporium.   Petitioner has failed in his burden of proof to

establish that he was a common law employee, and not an

independent contractor, of Automotive Emporium.       Accordingly,

respondent’s determination that petitioner received $21,552 of

nonemployee compensation is sustained.

B.   Accuracy-Related Penalty

      The Commissioner has the “burden of production in any court

proceeding with respect to the liability of any individual for

any penalty” under section 6662(a).       Sec. 7491(c).   To meet this

burden, the Commissioner must come forward with sufficient
                                 - 7 -

evidence indicating that it is appropriate to impose the relevant

penalty or addition to tax.     Higbee v. Commissioner, 116 T.C.

438, 446 (2001).    Once the Commissioner meets his burden of

production, the taxpayer must come forward with evidence

sufficient to persuade a court that the Commissioner’s

determination is incorrect.     Id. at 447.   The taxpayer also bears

the burden of proof with regard to issues of reasonable cause,

substantial authority, or similar provisions.      Id. at 446.

     Respondent determined that petitioner is liable for the

accuracy-related penalty under section 6662(a) for 2000.     The

accuracy-related penalty is equal to 20 percent of any portion of

an underpayment of tax required to be shown on the return that is

attributable to the taxpayer’s negligence or disregard of rules

or regulations.    See sec. 6662(a) and (b)(1).   “Negligence”

consists of any failure to make a reasonable attempt to comply

with the provisions of the Internal Revenue Code.     Sec. 6662(c).

“Disregard” consists of any careless, reckless, or intentional

disregard.   Id.

     An exception applies to the accuracy-related penalty when

the taxpayer demonstrates (1) there was reasonable cause for the

underpayment, and (2) the taxpayer acted in good faith with

respect to such underpayment.    See sec. 6664(c).   Whether the

taxpayer acted with reasonable cause and in good faith is

determined by the relevant facts and circumstances.     The most
                                 - 8 -

important factor is the extent of the taxpayer’s efforts to

assess the proper tax liability.    See Stubblefield v.

Commissioner, T.C. Memo. 1996-537; sec. 1.6664-4(b)(1), Income

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

provides:    “Circumstances that may indicate reasonable cause and

good faith include an honest misunderstanding of fact or law that

is reasonable in light of all of the facts and circumstances,

including the experience, knowledge, and education of the

taxpayer.”

     On the basis of the record, we conclude that petitioner is

liable for the accuracy-related penalty under section 6662(a).

Respondent has met his burden of production under section 7491(c)

with the Form 1099-MISC and various checks made by Automotive

Emporium during the 2000 taxable year.       We are satisfied that

petitioner omitted income from his return for the taxable year

2000.    Petitioner failed to provide a reasonable or credible

explanation as to why the income was not reported on his income

tax return.    Petitioner has not established that the underpayment

was due to reasonable cause or that petitioner acted in good

faith.    Accordingly, we sustain respondent on this adjustment.

     To reflect the foregoing,

                                              Decision will be entered

                                         for respondent.
