                        T.C. Memo. 2003-300



                      UNITED STATES TAX COURT



                 JANET E. LANDERS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 3970-03.              Filed October 29, 2003.


     Janet E. Landers, 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 $2,183 for the

2000 taxable year.   Unless otherwise indicated, section

references are to the Internal Revenue Code in effect for the

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

of Practice and Procedure.
                               - 2 -

     The issue for decision is whether petitioner had unreported

interest income of $10,255 from the redemption of U.S. savings

bonds in taxable year 2000.

                         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 redeemed a number of

U.S. savings bonds, which had accrued interest of $10,255.

Petitioner and her deceased husband had purchased the bonds 20 to

25 years prior to the year in issue.   The record is devoid of any

evidence regarding (1) the type of U.S. savings bond, (2) whether

the bonds were issued at a discount, and (3) whether the bonds

were redeemed on their respective dates of maturity.

     Petitioner timely filed a Form 1040, U.S. Individual Income

Tax Return, for the 2000 taxable year (2000 tax return).    The

return was prepared by petitioner’s son.    Petitioner did not

report having received any Social Security benefits during the

2000 taxable year.   Nor did she report any of the $10,255 in

interest income resulting from bond redemption.

     Respondent issued petitioner a notice of deficiency dated

December 23, 2002, determining a deficiency in Federal income tax

of $2,183 for the 2000 taxable year.   The adjustments in the
                                 - 3 -

notice stem primarily from the unreported bond interest of

$10,255.1

     Petitioner admits that the bond interest of $10,255 was not

reported in her 2000 tax return but contends that such interest

could have been reported in tax returns for prior taxable years

prepared by either her deceased husband or her son. Petitioner

did not produce copies of such returns.    Petitioner’s tax returns

for the 1998 through 2000 taxable years did not include any of

the $10,255 bond interest.

                             OPINION

     As a general rule, interest received by or credited to the

taxpayer constitutes gross income and is fully taxable.    Sec.

61(a)(4); sec. 1.61-7(a), Income Tax Regs.    In particular,

interest on United States obligations–-such as U.S. savings

bonds--issued on or after March 1, 1941, is fully taxable.     Sec.

1.61-7(b)(3), Income Tax Regs.    “A taxpayer using the cash

receipts and disbursements method of accounting who owns United


     1
        The notice of deficiency also contains an adjustment to
income of $4,281 with respect to taxable Social Security
benefits. The adjustment results from an increase in
petitioner’s “modified adjusted gross income” under sec. 86 due
to the inclusion of unreported bond interest of $10,255. The
adjustment also relies upon a Form 1099-SSA to assume that
petitioner received Social Security benefits of “$14,130” during
the 2000 taxable year. However, petitioner disputed this amount
by submitting to the Court a revised tax return for the 2000
taxable year which reflected Social Security benefits of
“$14,103”. We conclude that the amount of Social Security
benefits received by petitioner in 2000 was $14,103.
                                  - 4 -

States savings bonds issued at a discount has an election as to

when he will report the interest” pursuant to section 454 and the

regulations thereunder.2    Id.

     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

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

records, and fully cooperate with the Commissioner’s reasonable

requests.    Section 7491 is applicable in the present case.3

Nevertheless, petitioner has neither taken a position as to

whether the burden of proof should be placed on respondent nor

established that she complied with the requirements of section

7491(a).     We conclude that the burden remains on petitioner to

prove that she did not have unreported interest income of $10,255

during the 2000 taxable year.

     The record is clear that petitioner redeemed U.S. savings

bonds in 2000 and did not report interest income from the bond

redemption in that year.     Petitioner simply contends, without any


     2
       Sec. 454(c) deals with series E U.S. savings bonds held at
the date of maturity.
     3
       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 of the
Internal Revenue Service Restructuring and Reform Act of 1998,
Pub. L. 105-206, sec. 3001(a), 112 Stat. 726.
                              - 5 -

substantiation, that such interest could have been reported in

tax returns for prior taxable years.    She did not produce any

evidence that her U.S. savings bonds were issued at a discount or

any evidence of an election under section 454.    Petitioner’s son

indicated that, in preparing petitioner’s tax returns for the

1998 through 2000 taxable years, he did not report on her behalf

any of the $10,255 bond interest.    Petitioner’s son also

acknowledged that he was uncertain about the reporting of

interest income on returns for years prior to 1998, which were

prepared by petitioner’s deceased husband.

     Thus, even if it were appropriate to consider the reporting

of bond interest in prior years as an offset to the amount

required to be reported in 2000, there is nothing in this record

to support such a factual finding.    Accordingly, we sustain

respondent’s determination that petitioner had unreported

interest income of $10,255 during the 2000 taxable year from the

redemption of U.S. savings bonds.

     To reflect the foregoing, and as a result of our conclusion

that Social Security benefits received were $14,103, an amount

less than that determined by respondent,

                                           Decision will be entered

                                      under Rule 155.
