                         T.C. Memo. 2000-295



                       UNITED STATES TAX COURT



                     SOLOMON MAYER, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 23357-96.              Filed September 20, 2000.

.


     Jerome Kamerman, for petitioner.

     Monica E. Koch, for respondent.



               MEMORANDUM FINDINGS OF FACT AND OPINION


     SWIFT, Judge:    For the years in issue, respondent determined

deficiencies in petitioner’s Federal income taxes and additions

to tax as follows:


                                       Additions to Tax
      Year       Deficiency     Sec. 6651(a)(1)      Sec. 6654
      1991        $34,838           $ 3,635           $ 706
      1993         75,020            11,650             1,819
      1994         83,520            13,775            2,677
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     Unless otherwise indicated, 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.

     After concessions, the primary issues for decision are:

(1) For 1991, whether $22,192 in interest income relating to a

bank certificate of deposit should be charged to petitioner;

(2) for 1994, the amount of gambling costs petitioner realized to

offset petitioner’s gambling income; and (3) whether petitioner

is liable for additions to tax under sections 6651(a)(1) and

6654.


                           FINDINGS OF FACT

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

     When the petition was filed, petitioner resided in Brooklyn,

New York.

     During the years in issue, petitioner was an officer and

shareholder of Delta Realty Development Corp. (Delta Realty).    In

1988, Delta Realty purchased a parcel of real estate located in

Newark, New Jersey, with the intention to renovate the building

located on the property.    In order to purchase the real estate,

Delta Realty obtained a $2.5-million loan from Bank Leumi Trust

Co. of New York (Bank Leumi).
                               - 3 -

     Also in 1988, another loan from Bank Leumi was obtained

apparently in the amount of $1.5 million.1   The evidence does not

establish whether Delta Realty or petitioner was the debtor on

this loan.   The proceeds from this loan were used to purchase a

Bank Leumi certificate of deposit (Bank Leumi CD).

     For 1988 and 1991, petitioner was issued by Bank Leumi

Forms 1099-INT, Interest Income, indicating that petitioner

received interest income due on the Bank Leumi CD.   On the

Form 1099-INT for 1991, it was indicated that petitioner received

$22,192 in interest income on the Bank Leumi CD.

     Prior to 1991, petitioner won a large cash prize in the

New York State Lottery with respect to which petitioner during

the years in issue received an annual payment of $101,500.

     In January of 1994, petitioner traveled to Las Vegas,

Nevada, and played the slot machines at Caesar’s Palace Casino.

     In 1994, petitioner was issued Forms 1099 from Caesar’s

Palace indicating that petitioner had winnings in 1994 of

$162,000 from playing the Caesar’s Palace slot machines.

Petitioner did not maintain any financial records relating to his

gambling winnings and costs.

     For 1991, 1993, and 1994, petitioner failed to file Federal

income tax returns.


1
     Petitioner claims the loan was for $4 million. However, a
letter from the attorneys who represented Delta Realty suggests
that the loan was in the amount of $1.5 million.
                               - 4 -

      On audit, respondent prepared and filed Federal income tax

returns for petitioner for 1991, 1993, and 1994.

      Among other adjustments, for 1991 respondent charged

petitioner with the $22,192 in interest income on the Bank Leumi

CD.   For 1994, respondent charged petitioner with the $162,000 in

gambling winnings from Caesar’s Palace and the $101,500 in

lottery winnings.   Due to lack of substantiation, respondent

allowed petitioner no gambling costs.   Respondent also did not

allow petitioner an exemption for his wife for any of the years

in dispute.

      In early 1995, in conjunction with a criminal investigation

of petitioner, the attorney general of New York was granted a

subpoena and seized many of petitioner’s business records.    The

indictment against petitioner was later dismissed.   In 1998, the

attorney general of New York returned to petitioner some of his

business records.


                              OPINION

      For the years in issue, respondent’s adjustments ordinarily

carry with them a presumption of correctness.   See Rule 142(a);

Welch v. Helvering, 290 U.S. 111 (1933).   However, with regard to

the $22,192 in interest income relating to the certificate of

deposit, petitioner contends that under section 6201(d) the

burden should be on respondent to prove that the interest income

should be charged to petitioner.
                               - 5 -

     Section 6201(d) provides that if a taxpayer, in a court

proceeding, asserts a reasonable dispute with respect to income

reported on an information return and has fully cooperated with

respondent, then the burden of producing reasonable and probative

information relating to the alleged income may shift to

respondent.   See Hardy v. Commissioner, 181 F.3d 1002 (9th Cir.

1999), affg. T.C. Memo. 1997-97; Dennis v. Commissioner,

T.C. Memo. 1997-275.   Section 6201(d) provides as follows:


     SEC. 6201(d). Required reasonable verification of
information returns.

          In any court proceeding, if a taxpayer asserts a
     reasonable dispute with respect to any item of income
     reported on an information return filed with the
     Secretary under subpart B or C of part III of
     subchapter A of chapter 61 by a third party and the
     taxpayer has fully cooperated with the Secretary
     (including providing, within a reasonable period of
     time, access to and inspection of all witnesses,
     information, and documents within the control of the
     taxpayer as reasonably requested by the Secretary), the
     Secretary shall have the burden of producing reasonable
     and probative information concerning such deficiency in
     addition to such information return.


     The evidence indicates that petitioner has not satisfied the

cooperation requirement of section 6201(d).   Petitioner failed to

file his Federal income tax returns for the years in issue.

Petitioner produced minimal records for respondent’s

representatives.   Petitioner is not entitled to the benefits of

section 6201(d).
                                 - 6 -

     Based on the evidence before us, we conclude that the

$22,192 in interest income received on the Bank Leumi CD should

be charged to petitioner.   We note particularly petitioner’s

failure to provide any personal bank records that would

substantiate that he did not receive this interest income and

petitioner’s failure to provide any bank records of Delta Realty

that would substantiate petitioner’s claim that Delta Realty

received this interest income.

     We are not persuaded that, in spite of the seizure of some

of petitioner’s records, petitioner could not have located and

produced for the Court documentation that would have

substantiated petitioner’s claim that the $22,192 in interest

income was not received by petitioner, if in fact that were true.

     Section 165(d) allows a deduction for losses from wagering

transactions to the extent of gains from such transactions.     See

sec. 1.165-10, Income Tax Regs.    Section 6001 and the

corresponding regulations require taxpayers to keep sufficient

records to substantiate the amount of gross income, deductions,

and credits claimed.   See sec. 1.6001-1(a), Income Tax Regs.

     Respondent has suggested that taxpayers who gamble regularly

maintain diaries of gambling winnings and costs supplemented by

verifiable documentation to comply with section 6001.     See Rev.

Proc. 77-29, 1977-2 C.B. 538.    Respondent suggests that the

documentation should contain information regarding the dates and
                               - 7 -

type of specific wagers, the names and addresses of the gambling

establishments, names of witnesses, and the amounts won or lost.

Generally, respondent considers verifiable documentation to

consist of the following:   Forms W-2G (Certain Gambling

Winnings), actual winnings slips given to taxpayers by casinos,

wagering tickets, credit records, and bank withdrawal forms.

     Where taxpayers fail to satisfy their burden of

demonstrating the amount of their gambling costs and fail to

provide documentation or other corroborating evidence, we may

disallow claimed gambling costs.   See Zielonka v. Commissioner,

T.C. Memo 1997-81; Klabacka v. Commissioner, T.C. Memo. 1987-77.

     The following schedule reflects petitioner’s and

respondent’s respective computations of petitioner’s claimed net

gambling winnings for 1994.


     Computations of Petitioner’s 1994 Net Gambling Winnings
                              Petitioner          Respondent
     Gross winnings            $837,570            $162,000
     Gambling costs            (898,050)              -0-
     Lottery winnings           101,500             101,500
        Net winnings           $ 41,020            $263,500


     At trial, petitioner submitted an unsigned letter from

Caesar’s Palace that indicated that for 1994 petitioner put an

estimated $898,050 into slot machines and had estimated slot

machine winnings of $837,570, for an estimated net gambling loss

(just from slot machines and before taking into account lottery

winnings) of $60,480.   The letter states:   "Please note the
                                - 8 -

tracking system used to arrive at estimated win or loss

information provides estimates only and does not constitute an

accurate accounting record. * * * This information should be used

as a supplement to your own records or information."      The

Caesar’s Palace letter we regard as highly suspect.      It is

unsigned.    By its terms, it is only an estimate and is to be

supplemented by petitioner’s own records.      We regard the letter

as unreliable evidence and give it no weight.

     Petitioner has presented no documentation of his gambling

costs.    Petitioner acknowledges that he maintained no records of

his gambling activities.    Petitioner has failed to satisfy his

burden of proof, and, on the evidence before us, we allow

petitioner no gambling costs for 1994.

     Under section 151(b), a taxpayer who does not file a joint

return with his or her spouse may not claim an exemption for the

spouse unless the spouse for the year had no gross income and is

a dependent of the taxpayer.    See sec. 1.151-1(b), Income Tax

Regs.    Petitioner has presented insufficient evidence regarding

his wife to qualify her as a dependent.      We disallow petitioner’s

claim of his wife as an exemption.

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

to file timely Federal income tax returns unless there is

reasonable cause for such failure.      Section 6654(a) generally
                                 - 9 -

imposes an addition to tax for failure to pay estimated income

taxes.

     For 1994 only, petitioner offers the excuse that the seizure

of his business records in 1995 and the return of only some of

those records by the attorney general of New York constitutes

reasonable cause for petitioner’s failure to file his 1994

Federal income tax return.   We disagree.      Petitioner had a

pattern of not filing his income tax returns.       We regard

petitioner’s argument that he would have filed for 1994 but for

the seizure of his records as not credible.

     We sustain respondent’s determination of all of the

additions to tax.

     To reflect the foregoing,

                                         Decision will be entered

                                 under Rule 155.
