                          T.C. Memo. 1998-224



                      UNITED STATES TAX COURT



                RAYMOND O. WRIGHT, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 273-96.                         Filed June 24, 1998.



     Raymond O. Wright, pro se.

     Kevin M. Curran, for respondent.



                          MEMORANDUM OPINION

     GALE, Judge:   Respondent determined deficiencies in

petitioner's 1987 and 1989 Federal income taxes in the amounts of

$3,777 and $6,500, respectively, and additions to tax under
                               - 2 -


section 6651(a)(1)1 for 1987 and 1989 in the amounts of $358 and

$1,556, respectively.

     After concessions, the issues for decision are as follows:

(1) Whether petitioner has been denied due process by

respondent's actions such that petitioner is entitled to a

decision in his favor on all contested issues.    We hold that

petitioner has not been denied due process.    (2) Whether

petitioner is liable for self-employment taxes on income received

in 1987 and 1989.2   We hold that he is.   (3) Whether petitioner

is liable for additions to tax for 1987 and 1989 under section

6651(a)(1).   We hold that he is.   (4) Whether petitioner is

liable for a penalty under section 6673.    We hold that he is not.

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

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.


     1
        All section references are to the Internal Revenue Code
in effect for the years in issue, and all Rule references are to
the Tax Court Rules of Practice and Procedure.
     2
        Although petitioner failed to assign error to
respondent's determinations of liability for self-employment tax,
petitioner did raise this issue in his trial memorandum and at
trial. Respondent has objected to our consideration of this
issue on the grounds that it was untimely raised and
consideration of it would prejudice respondent. Respondent
received notice that petitioner intended to dispute his liability
for self-employment tax at least as early as the service of
petitioner's trial memorandum, which respondent received 16 days
before the first day of trial and 23 days prior to the second day
of trial held 1 week later. We shall accordingly consider this
issue as if properly raised by petitioner.
                               - 3 -


     At the time the petition was filed, petitioner resided in

New York, New York.   Petitioner's taxable year was the calendar

year.   Petitioner did not file returns for 1987 and 1989.   On

September 27, 1995, respondent issued a notice of deficiency to

petitioner in which it was determined that petitioner had (i)

taxable income of $22,535 in 1987, of which $7,900 was determined

to be self-employment income, and (ii) taxable income of $31,270

in 1989, of which $12,150 was determined to be self-employment

income.   The notice also determined that petitioner was liable

for additions to tax under section 6651(a)(1) for failure to file

for both years.

     Petitioner admits that he received taxable income in the

amounts determined, but disputes that any portion of such income

in either year was self-employment income.   Petitioner also

disputes his liability for the additions to tax determined by

respondent.   Petitioner further contends that, in addition to

relief from the additions to tax, he should be relieved of

liability for some or all interest and should have all issues in

the case resolved in his favor because of errors, omissions, and

delays by respondent that have deprived him of due process.

Denial of Due Process

     Petitioner's due process complaint concerns his inability to

obtain redress in these proceedings for what he contends are

various errors, omissions, and delays on the part of respondent,
                               - 4 -


primarily during the administrative stage of this case but also

to some extent after the filing of the petition.   Specifically,

petitioner faults respondent's failure at any time to explain to

petitioner's satisfaction the grounds for the denial of

petitioner's claims of reasonable cause for his failure to file

in 1987 and 1989; he further cites errors and delays in

respondent's handling of his case from the time he contacted

respondent in 1991 to ascertain what he owed until the issuance

of a notice of deficiency in 1995; he contends that respondent

withheld evidence; and finally petitioner alleges that

respondent's "decision-making process" with respect to him "was

(racially) biased and arbitrary".

     As to respondent's actions prior to the issuance of the

notice of deficiency, it is well settled that this Court

generally will not look behind the notice of deficiency to

examine the evidence or the propriety of the motives,

administrative policies, or procedures utilized by respondent in

making a determination.   Proesel v. Commissioner, 73 T.C. 600,

605 (1979); Greenberg's Express, Inc. v. Commissioner, 62 T.C.

324, 327 (1974); Human Engg. Inst. v. Commissioner, 61 T.C. 61,

66 (1973).   The rationale for this stance is that a trial before

this Court is a proceeding de novo, and our determination must be

based upon the merits of the case as presented here and not upon

a record developed at the administrative level.    Greenberg's
                                - 5 -


Express, Inc. v. Commissioner, supra at 328.    However, one

recognized exception to this general rule occurs when there is

substantial evidence of unconstitutional conduct by respondent in

determining the deficiency.    Church of Scientology v.

Commissioner, 83 T.C. 381, 447-48 (1984), affd. 823 F.2d 1310

(9th Cir. 1987); Riland v. Commissioner, 79 T.C. 185, 207 (1982);

Greenberg's Express, Inc. v. Commissioner, supra at 328.

Petitioner contends that respondent's decisions with respect to

him were racially motivated.   While decisions by a government

official based on impermissible considerations such as race may

constitute a violation of equal protection, see, e.g., Oyler v.

Boles, 368 U.S. 448 (1962), petitioner has presented no evidence

to substantiate his claim, and our review of the entire record in

this case gives us no reason to suspect it may be true.

Essentially, respondent's decisions in this case were to audit

petitioner, to reject his claim of reasonable cause for failure

to file, and to oppose his claim that he was not liable for self-

employment tax.3   A decision to audit a nonfiler seems to us

unexceptional, and since we sustain the other positions taken by

respondent, we fail to discern bias in respondent's reaching

them.    Thus, we decline to further examine respondent's actions

preceding the notice of deficiency on this basis.

     3
        It should be noted that respondent disputes whether
petitioner in fact contested his self-employment tax liability
prior to submitting his trial memorandum in this case.
                               - 6 -


     We note, however, that petitioner also makes a claim for

relief from penalties and interest on the grounds of "errors and

delays" by respondent during the period between petitioner's

contact with respondent to ascertain his liabilities in 1991 and

the issuance of the statutory notice in 1995.    Petitioner's

liability for the additions to tax for failure to file are

unaffected by any actions taken by respondent in 1991 or

thereafter because, as discussed more fully below, petitioner had

accrued more than 5 months of unexcused delay in filing his 1987

and 1989 returns by the time of any contact with respondent in

1991, thus subjecting him to the maximum 25-percent addition to

tax for failure to file in each year.    With respect to interest,

petitioner cites the same errors and delays by respondent between

1991 and 1995 as grounds for an abatement of interest.

Consideration of petitioner's request for abatement of interest

is premature, as there has been neither an assessment of such

interest or a final determination by respondent not to abate

interest.   See sec. 6404(e), (g), as currently in effect.

     Finally, with respect to postpetition proceedings,

petitioner alleges that respondent withheld evidence.    Petitioner

is referring to respondent's refusal to produce certain documents

from petitioner's administrative file on the grounds of executive

or deliberative process privilege.     In connection with the trial

of this case, the Court conducted an in camera inspection of the
                                - 7 -


documents withheld on privilege grounds and concluded that the

documents contained both mental impressions, legal analysis, and

recommendations protected by the deliberative process privilege

as well as factual statements not so protected.    We ordered

respondent to produce the nonprivileged portions of these

documents to petitioner.4   Petitioner now contends that his

failure to obtain the privileged portions of the documents is a

denial of due process.   We reject that claim.

Self-Employment Income

     Section 1401 imposes a tax on "self-employment income",

which is generally defined as the gross income, less allowable

deductions, derived by an individual from any trade or business

carried on by him during the taxable year.    Sec. 1402(a) and (b).

The term "trade or business" for these purposes, however, does

not include the performance of services by an individual as an

employee.   Sec. 1402(c)(3).   "Employee" for this purpose is

defined in section 3121(d)(2) as, inter alia,

           (2) any individual who, under the usual common
     law rules applicable in determining the employer-
     employee relationship, has the status of an employee;
     * * *




     4
        Although the previously withheld information was, at
best, of marginal significance to petitioner's case, to avoid any
prejudice to petitioner the Court ordered a 1-week recess in the
trial proceedings to afford petitioner additional time to prepare
with respect to the newly disclosed information.
                                - 8 -


The regulations promulgated under section 3121(d) provide that an

employer-employee relationship exists--

     when the person for whom services are performed has
     the right to control and direct the individual who
     performs the services, not only as to the result to
     be accomplished by the work but also as to the details
     and means by which that result is accomplished. That
     is, an employee is subject to the will and control of
     the employer not only as to what shall be done but how
     it shall be done. * * * [Sec. 31.3121(d)-1(c)(2),
     Employment Tax Regs.]

     Petitioner argues that he performed services only in the

capacity of an employee during the years in issue and therefore

is not liable for any self-employment tax.   The $7,900 determined

by respondent to be self-employment income in 1987 was

remuneration for petitioner's services paid by American Aerospace

Industries, Inc. (Aerospace).   Petitioner testified that his

services for Aerospace were related to telephone marketing and

consisted in reviewing past promotional materials and suggesting

changes, editing telephone solicitation scripts and followup

brochures, supervising telephone staff to insure that

solicitations were being made correctly, and drafting press

releases.   Petitioner further emphasized that all of his work had

to be performed on Aerospace's premises, that he was required to

work specific hours, including a designated lunch hour, that he

could not delegate any of his responsibilities or choose

personnel, and that he had no discretion as to goals or

timetables.   The foregoing testimony was uncorroborated.
                               - 9 -


Aerospace paid petitioner by means of checks at 2-week intervals

in the amount of $2,000,5 which carried the notation "consulting

fees".

     The $12,150 in self-employment income determined by

respondent for 1989 consists of $6,150 in remuneration for

petitioner's services paid by Charles River Computers (Charles

River) and $6,000 from Solutions Plus, Inc.6   A Confidentiality

Agreement entered into by petitioner and Charles River provided

that petitioner would receive $750 per week for "½ time" and

makes reference to petitioner's performance of "consulting and

other services".   A provision in the agreement prohibiting

petitioner from engaging in any other business during the term of

the agreement was lined through.   Petitioner did not provide

specific descriptions of his work in 1989 except to claim that,

as in 1987, such work was always performed on the purported

employer's premises, was subject to established working hours,

and was nondelegable.




     5
        One such check was for $1,900 instead of $2,000, which
petitioner testified was due to the fact that he was "docked"
one-half day's pay ($100) when he was absent from work one
morning.
     6
        The only identification of the source of the 1989 amounts
determined to be self-employment income was in petitioner's trial
memorandum, where he appears to acknowledge that $6,150 of such
amounts was from "Charles River Computers" and $6,000 was from
"Solutions Plus". Petitioner does not, in any event, dispute
that taxable income in these amounts was received.
                               - 10 -


     Petitioner claims that he was classified as an employee for

unemployment insurance purposes by the New York State Department

of Labor with respect to all work that he performed in 1987 and

1989 and also points to the fact that respondent determined that

he received taxable unemployment compensation in 1989.     The

documentary evidence submitted by petitioner to corroborate his

claim regarding the New York State Department of Labor falls far

short of doing so.    Nothing in these materials indicates what

determination, if any, was made by the Department with respect to

any given employer.   Since the parties have agreed that

petitioner worked in part as an employee in 1987 and 1989, and

that petitioner had income in 1988, the fact that petitioner

received unemployment compensation in 1989 is not probative with

respect to whether he rendered some services as an independent

contractor in 1987 and 1989.

     With respect to 1987, even if we accept petitioner's

uncorroborated testimony concerning his responsibilities at

Aerospace, we do not believe that he has shown that Aerospace had

control over the "details and means by which * * * [the] result

is [to be] accomplished", sec. 31.3121(d)-1(c)(2), Employment Tax

Regs., such that petitioner was an employee under common-law

principles, particularly given the temporary nature of the

assignment and Aerospace's characterization of the arrangement as

"consulting".   With respect to 1989, petitioner's testimony is
                                - 11 -


vague and conclusory and does not even address the specifics of

his duties in that year.     We conclude that he has failed to

demonstrate error in respondent's determinations of liability for

self-employment tax in 1987 and 1989 and accordingly sustain

them.

Additions to Tax Under Section 6651(a)(1)

        Respondent determined additions to tax for failure to timely

file returns under section 6651(a)(1) with respect to both years

in issue.     Petitioner claims that his failure to file for these

years was due to reasonable cause.

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

timely file a return unless it is shown that such failure is due

to reasonable cause and not due to willful neglect.     The amount

of the addition to tax is determined on a graduated basis,

beginning at the rate of 5 percent of the amount required to be

shown on the return if the failure is not more than 1 month, with

an additional 5 percent for each additional month or fraction

thereof that such failure continues, not exceeding 25 percent in

the aggregate.     Sec. 6651(a)(1).

        To prove reasonable cause, a taxpayer must show that he

exercised ordinary business care and prudence but nevertheless

was unable to file the return when it was due.     Crocker v.

Commissioner, 92 T.C. 899, 913 (1989); sec. 301.6651-1(c)(1),

Proced. & Admin. Regs.     Petitioner argues that he had reasonable
                              - 12 -


cause for his failure to file his 1987 return because he was

preoccupied, beginning sometime in March 1988 and continuing

through August 1988, with the disappearance of his mother while

in the custody of a New York City homeless shelter or hospital,

his subsequent search for her with inadequate assistance from the

authorities or other family members, and his ultimate discovery

in August 1988 that she had died and been buried unclaimed.

Further, arrangements were protracted for her exhumation,

funeral, and reburial, which did not occur until October 1988 due

to demands of other family members.    Even if we accept

petitioner's chronology, the foregoing events do not constitute

reasonable cause for his failure to file, because the failure

continued well after the traumatic events which he cites.    The

incapacity of a taxpayer due to his illness or the illness of an

immediate family member may constitute reasonable cause for a

delay in filing a return.   Williams v. Commissioner, 16 T.C. 893,

906 (1951); Tabbi v. Commissioner, T.C. Memo. 1995-463; Hayes v.

Commissioner, T.C. Memo. 1967-80.     However, the duration of the

incapacity must approximate that of the failure to file.    See,

e.g., Tabbi v. Commissioner, supra (reasonable cause where late

return not filed until 2 months after taxpayers' child's death);

Hayes v. Commissioner, supra (taxpayers' and their children's

illnesses during first half of year was reasonable cause for late

return not filed until August of that year); see also Barber v.
                                - 13 -


Commissioner, T.C. Memo. 1997-206.       In the instant case, any

incapacity petitioner experienced as a result of the traumatic

events surrounding his mother's disappearance and death had

ceased by sometime in 1989; in that year he obtained a filing

extension with respect to his 1988 return and timely filed it in

August.   Thus, there has been an unexcused delay of more than 5

months with respect to petitioner's 1987 return, which has never

been filed, and we accordingly sustain respondent's determination

of the addition to tax for 1987.

     With respect to his failure to file for 1989, petitioner

claims reasonable cause because at the time the return was due in

April 1990, the statutory period of limitations was about to

expire on any claim he might file against the City of New York

with respect to the events surrounding the disappearance and

death of his mother.   According to petitioner, he was preoccupied

at this time with investigating his mother's treatment at the

homeless shelter and with potential legal recourse against the

City.   In light of petitioner's admitted capacity to attend to

other matters, we conclude that he has failed to show reasonable

cause for his failure to file for 1989.      Reasonable cause

requires a showing of incapacity; "selective inability" to file

tax returns while attending to other responsibilities does not

demonstrate reasonable cause.    Tabbi v. Commissioner, supra;

Kemmerer v. Commissioner, T.C. Memo. 1993-394; Bear v.
                               - 14 -


Commissioner, T.C. Memo. 1992-690, affd. without published

opinion 19 F.3d 26 (9th Cir. 1994); Fambrough v. Commissioner,

T.C. Memo. 1990-104.    Accordingly, we sustain respondent's

determination of the addition to tax for 1989.

Section 6673 Penalty

     At trial, respondent filed a motion for a penalty under

section 6673 on the grounds that (i) petitioner's position in

these proceedings is frivolous or groundless; or (ii) petitioner

instituted or maintained the proceedings primarily for delay.

Though ultimately unavailing, we do not believe that petitioner's

position regarding his liability for self-employment taxes was

frivolous.   Some of the delay in these proceedings was due to

respondent's attempt to withhold documents from petitioner, a pro

se litigant, on privilege grounds where the Court's in camera

inspection revealed that the documents clearly contained

nonprivileged matter.    This necessitated a delay in the

proceedings to protect petitioner's rights.    Accordingly,

respondent's motion is denied.

     To reflect the foregoing and concessions,

                                      An appropriate order will

                                 be issued denying respondent's

                                 motion for a penalty, and decision

                                 will be entered for respondent.
- 15 -
