                         T.C. Memo. 2010-229



                       UNITED STATES TAX COURT



                   THOMAS F. HALE, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 17754-08.               Filed October 20, 2010.



     Thomas F. Hale, pro se.

     R. Craig Schneider, for respondent.



                         MEMORANDUM OPINION


     HALPERN, Judge:    By notice of deficiency (the notice),

respondent has determined deficiencies in, and accuracy-related

penalties with respect to, petitioner’s Federal income tax as

follows:
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                                             Penalty
               Year       Deficiency      Sec. 6662(a)

               2003        $17,994           $3,599
               2004         19,240            3,848
               2005         23,216            3,568

     The issues for decision are whether, for those years,

petitioner:   (1) Underreported his gross income; (2) overstated

his deductions; and (3) is liable for the accuracy-related

penalties.

     Unless otherwise stated, section references are to the

Internal Revenue Code in effect for the years in issue, and Rule

references are to the Tax Court Rules of Practice and Procedure.

We round all amounts to the nearest dollar.    Petitioner bears the

burden of proof.   See Rule 142(a)(1).1

                            Background

     Some facts are stipulated and are so found.      The stipulation

of facts, with accompanying exhibits, is incorporated herein by

this reference.

     Petitioner resided in Idaho at the time he filed the

petition (and the amended petition) in this case.




     1
      Petitioner has not raised the issue of sec. 7491(a), which
shifts the burden of proof to the Commissioner in certain
situations. We conclude that sec. 7491(a) does not apply because
petitioner has not produced any evidence that he has satisfied
the preconditions for its application.
                               - 3 -

     During the years in issue, petitioner was a European history

professor at Idaho State University, from which he received

wages; was an attorney operating a legal clinic for low-income

clients, from whom he received fees; and he owned three rental

properties, for which he received rents.   During 2005, he

received interest income.

     Petitioner filed Federal income tax returns for the years in

issue, reporting tax liabilities of $76, zero, and zero for those

years, respectively.   Respondent examined those returns and

determined a deficiency in tax for each year principally on the

grounds that petitioner had underreported his taxable income by

omitting items of business and rental income and by claiming

deductions for business and rental expenses that he could not

substantiate.   Respondent also determined a section 6662(a)

accuracy-related penalty for each year, asserting that petitioner

had underpayments “attributable to substantial [understatements]

of income tax” and had shown neither reasonable cause for the

underpayments nor that he acted in good faith.

     Petitioner assigned error to respondent’s disallowance of

the claimed deductions, arguing that he had offered canceled

checks, receipts, and invoices in support of those deductions.

Although petitioner failed in the petition or the amended

petition (without distinction, petition) to assign error to

respondent’s adjustments increasing his gross income, he claimed
                               - 4 -

at trial that he accurately reported all of his income, and we

shall treat that issue as if raised in the petition.   See Rule

41(b)(1).   The section 6662(a) penalty is also before us.

      At trial, petitioner introduced into evidence approximately

317 pages of uncategorized photocopies of receipts, canceled

checks, invoices, and similar documents.   He also offered copies

of Federal and State tax returns that he had submitted to

respondent during respondent’s examination.   He made no attempt

to tie that evidence to respondent’s adjustments underlying the

deficiencies in question.   At the conclusion of the trial, we set

a schedule for briefing and provided petitioner with detailed

instructions as to the form and content of briefs, directing him

to Rule 151(e), which addresses that subject.   In particular, we

cautioned him to set forth in response to each adjustment made by

respondent the facts in evidence that he believed supported his

claim that respondent erred in making that adjustment.

Petitioner failed to file any brief.

                            Discussion

I.   Deficiencies in Tax

      We can dispose summarily of petitioner’s assignment of error

to respondent’s determinations of deficiencies in tax.   We have

no question of substantive tax law before us; we have only

factual questions of whether petitioner failed to report all of

his items of gross income and can substantiate his deductions.
                              - 5 -

As stated, petitioner bears the burden of proof, which he must

carry by a preponderance of the evidence.2   See Merkel v.



     2
      This case involves unreported income, and barring
stipulation to the contrary the venue for appeal is the Court of
Appeals for the Ninth Circuit. See sec. 7482(b)(1)(A), (2). We
are therefore bound by a line of cases of the Court of Appeals
for the Ninth Circuit beginning with Weimerskirch v.
Commissioner, 596 F.2d 358 (9th Cir. 1979), revg. 67 T.C. 672
(1977), to which we defer in accordance with the doctrine of
Golsen v. Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d 985
(10th Cir. 1971). E.g., Rodriguez v. Commissioner, T.C. Memo.
2009-92. The general rule established by that line of cases is
that, for the Commissioner to prevail in a case involving
unreported income, there must be some evidentiary foundation
linking the taxpayer with the alleged income-producing activity.
See Weimerskirch v. Commissioner, supra at 362. Although
Weimerskirch dealt specifically with illegal unreported income,
it is now well established that the Court of Appeals for the
Ninth Circuit applies the Weimerskirch rule in all cases of
unreported income where the taxpayer challenges the
Commissioner’s determination on the merits. E.g., Edwards v.
Commissioner, 680 F.2d 1268, 1270 (9th Cir. 1982) (stating, in a
case involving unreported income from an income-generating auto
repair business owned by the taxpayer: “We note, however, that
the Commissioner’s assertion of deficiencies are presumptively
correct once some substantive evidence is introduced
demonstrating that the taxpayer received unreported income.
Weimerskirch v. Commissioner, 596 F.2d 358, 360 (9th Cir.
1979).”); Petzoldt v. Commissioner, 92 T.C. 661, 689 (1989) (“the
Ninth Circuit requires that respondent come forward with
substantive evidence establishing a ‘minimal evidentiary
foundation’ in all cases involving the receipt of unreported
income to preserve the statutory notice’s presumption of
correctness”). At trial, petitioner testified that, for each
year in issue, he received wages from Idaho State University,
fees for his legal representation of low-income clients, and
rents from his rental properties. He reported some interest
income on his 2005 Federal income tax return. Receipts of the
types enumerated are items of gross income, see sec. 61(a), and
the omission of receipts of those types forms the basis for
respondent’s adjustments increasing petitioner’s gross income.
Respondent has, therefore, met his burden of showing sources for
his adjustments increasing petitioner’s gross income, and the
burden of proof is on petitioner.
                                - 6 -

Commissioner, 109 T.C. 463, 476 (1997), affd. 192 F.3d 844 (9th

Cir. 1999).    “A tax return is not evidence of the truth of the

facts stated in it.”    Taylor v. Commissioner, T.C. Memo. 2009-235

(citing Lawinger v. Commissioner, 103 T.C. 428, 438 (1994)).       In

support of his claim that his only income was what he reported on

his return and he has adequately substantiated all of his

deductions, petitioner offers us what amounts in effect to a

shoebox full of papers.   Petitioner has ignored our specific

instructions that he link his evidence to respondent’s

adjustments.   We need not (and shall not) undertake the task of

sorting through the voluminous evidence petitioner has provided

in an attempt to see what is, and what is not, adequate

substantiation of the items on petitioner’s returns.3    Petitioner

has failed to carry his burden of proving that respondent erred

in determining the deficiencies in issue.    See Patterson v.

Commissioner, T.C. Memo. 1979-362 (in determining that the

taxpayer failed to carry his burden of proving trade or business

items, we stated:    “Petitioner has chosen to rely on what may be

termed the ‘shoebox method’ of attaching photocopies of numerous

cash register tapes and of similar bits of paper to his returns,



     3
      Petitioner offered approximately 317 uncategorized and
unorganized pages of evidence, consisting of: 394 meal and
travel receipts; 51 invoices listing rental expenses; a 15-page
spreadsheet with 493 entries of advertising purchases; 59 pages
of respondent’s handwritten notes as to already allowed expenses;
and a Deed of Gift.
                                 - 7 -

without making any effort on the returns or on brief, and only a

slight effort in oral testimony, to link any item to a deductible

trade or business expense transaction.”).

II.   Accuracy-Related Penalty

      Section 6662 imposes a penalty equal to 20 percent of the

portion of any underpayment which is attributable to, among other

things, a substantial understatement of income tax.       Sec. 6662(a)

and (b)(2).   An understatement of income tax is deemed substantial

if it exceeds the greater of:    (1) 10 percent of the tax required

to be shown on the return for the taxable year, or (2) $5,000.

Sec. 6662(d)(1)(A).   For those purposes, the amount of an

understatement is reduced to the extent it is attributable to a

position:   (1) For which there is substantial authority, or (2)

which the taxpayer adequately disclosed on his return and for

which there is a reasonable basis.       Sec. 6662(d)(2)(B).   In

addition, the section 6662 penalty does not apply to the extent

the taxpayer can show that there was reasonable cause for the

underpayment and that he acted in good faith with respect thereto.

Sec. 6664(c)(1).

      Giving effect to respondent’s adjustments in the notice,

petitioner’s underpayments are $17,994, $19,240, and $17,841 for

2003, 2004, and 2005, respectively.4      The taxes required to be



      4
      Taking into account an understatement of prepayment credits
of $5,375 for 2005.
                                 - 8 -

shown on petitioner’s returns were $18,070, $19,240, and $23,216

for those years, respectively.    Since petitioner’s understatements

exceed 10 percent of the tax required to be shown on the returns--

$1,807 in 2003, $1,924 in 2004, and $2,322 in 2005--those

understatements are substantial within the meaning of section

6662(d)(1)(A).

     Respondent bears the burden of production with respect to the

section 6662(a) penalty.   See sec. 7491(c).     We have previously

stated that the “burden imposed by section 7491(c) is only to come

forward with evidence regarding the appropriateness of applying a

particular addition to tax or penalty to the taxpayer.”       Good v.

Commissioner, T.C. Memo. 2008-245.       Respondent has satisfied his

burden of production.   Nevertheless, the accuracy-related penalty

specified by section 6662(a) is not imposed with respect to any

portion of the underpayment as to which the taxpayer has acted

with reasonable cause and good faith.      Sec. 6664(c)(1).   The

taxpayer bears the burden of proving his entitlement to section

6664(c)(1) relief.   Higbee v. Commissioner, 116 T.C. 438, 446

(2001).   Petitioner did not at trial specifically address the

section 6662 penalty, and our examination of the evidence before

us fails to demonstrate that petitioner acted with reasonable

cause and good faith.   Petitioner has failed to carry his burden

of showing his entitlement to any relief from the penalty, and we

shall sustain it.
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III.   Conclusion

       For the foregoing reasons,


                                         Decision will be entered

                                    for respondent.
