                        T.C. Memo. 2001-275



                      UNITED STATES TAX COURT



                CRISTEEN B. COMEY, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent

                 DAVID L. COMEY, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 5201-96, 19836-96.   Filed October 10, 2001.



     Cristeen B. Comey and David L. Comey, pro sese.

     Mark J. Miller and Frederic J. Fernandez, for respondent.



                        MEMORANDUM OPINION


     BEGHE, Judge:   Respondent determined the following

deficiencies in and additions to petitioner Cristeen B. Comey’s
                                - 2 -


Federal income tax for 1991 and 1992:1

                                      Sec. 6662        Sec. 6662
                                     Substantial     Negligence or
                                   Understatement      Disregard
         Year     Deficiency           Penalty          Penalty
         1991       $25,679             $5,136            --
         1992           281               -–              $56

     Respondent also determined the following deficiencies in and

additions to the 1991 and 1992 Federal income tax of Mrs. Comey’s

son, petitioner David L. Comey:

                                                       Sec. 6662
                                   Sec. 6651(a)(1)   Negligence or
                                   Failure to File     Disregard
         Year     Deficiency           Addition         Penalty
         1991        $7,834             $1,889          $1,567
         1992       118,430             23,338          23,686

     In the notice to Mrs. Comey, respondent determined that the

gain realized on the sale of certain mutual fund shares in 1991

was the income of Mrs. Comey.     Similarly, in the notice to Mr.

Comey, respondent determined that the interest, dividends, and

capital gains paid or realized in 1991 and 1992 with respect to

the shares of certain publicly traded corporations (and a

debenture and bank account) were the income of Mr. Comey.


     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, unless otherwise
specified.
                                - 3 -


     These cases having been consolidated for the purposes of

trial, briefing, and opinion, petitioners assert that the

foregoing items were instead the income of Landtrak Development

Ltd. (Landtrak), a C corporation related to petitioners.

     We hold for respondent, for the reasons set forth below.2

For convenience, we combine our findings and opinion with respect

to each petitioner and issue.

Procedural Background

     Before we set forth our findings and our discussion of the

substantive issues, we note that petitioners have repeatedly

failed to comply with the deadlines set by this Court.   This

conduct has led to a lengthy delay in the resolution of these

cases.



     2
       In the notice to petitioner Cristeen B. Comey, respondent
also determined that Mrs. Comey received taxable Social Security
income in the amounts of $2,831 and $1 for 1991 and 1992,
respectively. Petitioners have stipulated, and we find, that Mrs.
Comey received this income.

     Respondent also determined that Mrs. Comey was not entitled
to a $2,071 real estate tax deduction claimed for 1992, for lack
of substantiation. Petitioners did not address this issue at
trial or offer any evidence relating to it. Accordingly,
petitioners have failed to meet their burden of proof, and we
find that Mrs. Comey is not entitled to the claimed deduction.
See Rule 142(a) (burden of proof generally on taxpayer); Rule
149(b) (party’s failure to produce evidence, in support of issue
of fact as to which party has burden of proof, may be ground for
determination of issue against party); Interstate Transit Lines
v. Commissioner, 319 U.S. 590, 593 (1943) (burden of clearly
showing right to claimed deduction is on taxpayer).
                               - 4 -


     When trial of these consolidated cases began on March 25,

1999, at the Court’s Milwaukee, Wisconsin, trial session,

petitioners had not signed a stipulation of facts.   During the

trial, petitioners did sign a stipulation of facts and agreed to

other stipulations on the record.   Petitioners indicated,

however, that if given more time, they could discover additional

evidence.   Therefore, at the close of trial, the Court held the

record open until April 26, 1999, for receipt of additional

stipulations, information, documents, or evidence.   The Court

also set a seriatim briefing schedule, under which petitioners’

opening brief was due on or before June 23, 1999.

     During the more than 2 years that have passed since these

deadlines were first set, the Court has extended them numerous

times.   Petitioners requested some of these extensions, because

Mr. Comey claimed to have had health problems, or was

incarcerated.   Other extensions, occasioned by Mr. Comey’s

incarcerations, were granted on the Court’s own motion.

     On September 11, 2000, the Court ordered Mr. Comey to file a

status report by the earlier of December 14, 2000, or Mr. Comey’s

release from jail.   On December 21, 2000, not having received

anything from Mr. Comey, the Court investigated and learned that

Mr. Comey had been released from jail on October 6, 2000.     As a

result of Mr. Comey’s failure to comply with the Court’s order,

during a long period when he was not incarcerated, the Court
                               - 5 -


ordered the record closed as of December 26, 2000, without having

received any additional materials from petitioners.

     In its December 26, 2000, order, the Court also modified the

briefing schedule to provide that respondent (and not

petitioners) would file the opening brief.   The Court further

ordered that respondent’s opening brief was due on February 28,

2001, and that petitioners’ answering brief was due on April 30,

2001.   Respondent’s brief was served on February 28, 2001, and

was filed by the Court on March 5, 2001.

     After Mr. Comey had once again failed to notify the Court of

his current address, and after the Court had learned, through its

own inquiries, that Mr. Comey would be under house arrest

beginning May 17, 2001, the Court extended the due date of

petitioners’ brief to July 9, 2001.

     By order dated July 24, 2001, the Court further extended the

due date for petitioners’ brief until August 24, 2001.   In the

teleconference that led to this order, the Court clearly informed

Mr. Comey that no further delay would be tolerated, and that no

further extension would be granted.

     Petitioners did not send the Court a brief on or before the

August 24, 2001, due date, nor did they inform the Court that

they would not be filing a brief or offer any excuse for their

failure to file a brief.
                               - 6 -


     On September 7, 2001, in light of the more than 2 years that

had passed since trial and petitioners’ repeated failures to file

a brief on or before the deadlines set by the Court or to comply

with the other conditions of the orders of this Court, the Court

ordered that no further extensions would be granted and that

petitioners would not be allowed to file a brief.    See Rule

151(c) (delinquent briefs will not be accepted unless accompanied

by a motion setting forth reasons deemed sufficient by the Court

to account for the delay).

     Although we could declare petitioners in default and dismiss

their cases, see Rule 123, Stringer v. Commissioner, 84 T.C. 693

(1985), affd. without published opinion 789 F.2d 917 (4th Cir.

1986), we choose instead to decide these cases on the merits.

See Furniss v. Commissioner, T.C. Memo. 2001-137.

1.   Mrs. Comey’s Income for 1991

     Mrs. Comey resided in Elm Grove, Wisconsin, when her

petition was filed.   Mrs. Comey timely filed her Forms 1040, U.S.

Individual Income Tax Return, for 1991 and 1992.

     Sales Proceeds Received by Mrs. Comey in 1991

     In 1991, an “Individual Investor Account”, number 663 16E23,

was maintained with a Milwaukee, Wisconsin, office of Merrill

Lynch Pierce, Fenner & Smith, Inc. (Merrill Lynch).    The name on

this Merrill Lynch account was “MRS CRISTEEN COMEY”.    The address

on the account was Mrs. Comey’s residence and the taxpayer
                                - 7 -


identification number on the account was Mrs. Comey’s Social

Security number.

     In early 1991, 4,710 shares of the Merrill Lynch Capital

Fund Class A (Capital Fund shares) were held in the Merrill Lynch

account.    On February 5, 1991, pursuant to Mrs. Comey’s orders,

Merrill Lynch sold (or redeemed) the Capital Fund shares for

$110,416.   There was no indication on the Merrill Lynch account

statements relating to this transaction that Mrs. Comey was

holding the Capital Fund shares as an agent or nominee for

Landtrak or for any other person or entity.

     Beginning February 7, 1991, the $110,416 sales (or

redemption) proceeds were briefly reinvested in shares of the

Merrill Lynch Ready Assets Trust.   The Ready Assets Trust account

was also held in Mrs. Comey’s name; the address on the account

was Mrs. Comey’s residence; and the taxpayer identification

number was Mrs. Comey’s Social Security number.   There was also

no indication on the Ready Assets Trust account statement

relating to this transaction that Mrs. Comey was acting as agent

or nominee for Landtrak or for any other person or entity.

     On February 14, 1991, a Ready Assets Trust check for the

$110,416 proceeds was deposited in a checking account maintained

in Landtrak’s name with M&I Bank of Menomonee Falls, Wisconsin.

Approximately 1 week later, the proceeds were transferred to
                               - 8 -


another account maintained in Landtrak’s name with Swiss Bank

Corp. in Switzerland.

     In the notice to Mrs. Comey, respondent determined that the

gain realized on the sale of the Capital Fund shares should be

included in Mrs. Comey’s income for 1991.   Respondent further

determined that Mrs. Comey’s basis in the Capital Fund shares was

$19,628.   Accordingly, respondent determined that Mrs. Comey

realized $90,788 in unreported capital gain for 1991 (i.e.,

$110,416 proceeds less $19,628 basis equals $90,788 gain) from

the sale of the Capital Fund shares.

     During the conduct of the cases at hand, petitioners have

not contested that Mrs. Comey received $110,416 in net proceeds

from the sale of the Capital Fund shares in 1991.   Although

petitioners contend that Mrs. Comey had transferred ownership of

the Capital Fund shares to Landtrak on January 1, 1987, they

nevertheless admitted at trial that the Capital Fund shares were

held in Mrs. Comey’s name when sold.

     We find that Mrs. Comey received $110,416 in net proceeds

from the sale of the Capital Fund shares in 1991.

     With respect to the basis in the Capital Fund shares, Mrs.

Comey’s petition did not assert that respondent’s determination

of basis was erroneous.   At trial, however, petitioners offered a

document prepared by Mr. Comey, which purported to show that Mrs.

Comey’s basis in the Capital Fund shares was higher than that
                               - 9 -


determined by respondent.   Respondent did not agree that this

document was accurate, and Mr. Comey neither explained how the

document was prepared nor offered any evidence that it was

reliable.3   In light of petitioners’ failures to allege error in

the petition and to offer reliable, credible evidence at trial,

we find that respondent’s calculation of basis was correct and

that a capital gain of $90,788 was realized on the sale of the

Capital Fund shares in 1991.   See Rule 34(b)(4) (petition shall

contain clear and concise assignments of each and every error

taxpayer alleges Commissioner committed, and any issue not raised

in assignments of error shall be deemed to be conceded); Rule

142(a) (taxpayers generally have burden of proof); Rule 149(b)

(party’s failure to produce evidence, in support of issue of fact

as to which party has burden of proof, may be ground for

determination of issue against party).

     The only error alleged by Mrs. Comey’s petition is that the

gain realized on the sale of the Capital Fund shares should be

included in Landtrak’s income rather than Mrs. Comey’s income.

More particularly, petitioners assert that on January 1, 1987,

approximately 4 years before the Capital Fund shares were sold,

     3
       For example, although the document prepared by Mr. Comey
appears to be based in part on the history of Capital Fund
distributions from 1974-87, petitioners did not offer any
evidence concerning how and when Mrs. Comey originally acquired
Capital Fund shares, what Mrs. Comey’s basis was in the shares
first acquired, or whether Mrs. Comey reported reinvested Capital
Fund distributions as income on her Federal income tax returns.
                               - 10 -


Mrs. Comey acquired all of Landtrak’s stock and transferred

ownership of the Capital Fund shares to Landtrak as a

contribution to its capital.   Although petitioners admitted that

the Capital Fund shares were held in Mrs. Comey’s name when sold,

petitioners claim that Mrs. Comey held the shares (and received

the sales proceeds) as Landtrak’s agent or nominee.

     For the reasons set forth below, we conclude that Mrs. Comey

neither acquired Landtrak’s stock, nor transferred ownership of

her Capital Fund shares to Landtrak, on January 1, 1987.   To the

contrary, we find that Landtrak’s incorporator, Robert Riopelle,

remained the sole owner of Landtrak’s stock until February 1988,

more than 1 year after the date identified by petitioners.

Moreover, although Landtrak’s stock ultimately was issued to Mrs.

Comey after Mr. Riopelle’s ownership ended, we find that Mrs.

Comey never transferred ownership of her Capital Fund shares to

Landtrak and did not act as Landtrak’s agent or nominee.

Finally, we hold that even if Mrs. Comey had, in form,

transferred her Capital Fund shares to Landtrak at some time

before their sale in 1991, Landtrak would not be recognized as

the owner of the shares for tax purposes, because Landtrak had no

business purpose and engaged in no business activity after Mr.

Riopelle’s ownership ended.
                               - 11 -


     Purported Acquisition of Landtrak by Mrs. Comey

     Landtrak is a Wisconsin corporation incorporated on January

23, 1985, by Mr. Riopelle; he originally owned all 500 shares of

Landtrak’s stock.

     Petitioners assert that Mrs. Comey became the new owner of

Landtrak on January 1, 1987.    According to petitioners, on that

date Landtrak redeemed the stock held by Mr. Riopelle, and Mrs.

Comey acquired all 50 newly issued shares of Landtrak’s stock.

     Aspects of the record appear to support petitioners’

assertions.   The record contains a copy of Mr. Riopelle’s

Landtrak stock certificate.    The front of that certificate bears

a handwritten notation that the certificate was canceled on

January 1, 1987.    The reverse bears an assignment of the

certificate to Landtrak; that assignment was signed by Mr.

Riopelle and is also dated January 1, 1987.    The record also

contains a copy of a Landtrak stock certificate bearing Mrs.

Comey’s name, which is also dated January 1, 1987.     Moreover, in

the written stipulation of facts, the parties stipulated that Mr.

Riopelle’s Landtrak stock was canceled and all new Landtrak stock

was issued to Mrs. Comey on January 1, 1987.

     Notwithstanding these aspects of the record, the record as a

whole establishes that Mrs. Comey did not acquire Landtrak’s

stock on January 1, 1987.    Mr. Riopelle testified that he

remained the sole owner of Landtrak until February 1988.      Mr.
                               - 12 -


Riopelle also testified that he backdated documents at Mr.

Comey’s request.   We found Mr. Riopelle’s testimony to be

forthright and credible.    Moreover, it is supported by other

evidence in the record.    It is clear that Mr. Riopelle wrote

checks on Landtrak’s checking account, as part of the liquidation

of his investment in Landtrak, in 1988.    In addition, documents

sent to the State of Wisconsin and to Swiss Bank Corp. indicate,

consistently with Mr. Riopelle’s testimony, that Mr. Riopelle

controlled Landtrak until 1988.

     We also note that the parties orally stipulated at trial

that Mr. Riopelle may not have executed the writings on his

Landtrak stock certificate, i.e., the writings assertedly

canceling Mr. Riopelle’s certificate and assigning his stock to

Landtrak, until March 1988, notwithstanding the written

stipulations that Mr. Riopelle’s stock was redeemed on January 1,

1987.   Moreover, Mrs. Comey admitted during respondent’s cross-

examination that she did not remember acquiring Landtrak stock on

January 1, 1987.

     For all these reasons, we find that Mrs. Comey did not

acquire Landtrak’s stock on January 1, 1987.    To the contrary, we

find that Mr. Riopelle remained Landtrak’s sole owner until at

least February 1988.   The documents indicating that a change of

ownership occurred on January 1, 1987, are unreliable.    In

addition, the parties’ written stipulations that a change of
                               - 13 -


ownership occurred on January 1, 1987, are also contrary to fact,

having been vitiated by their later oral stipulation concerning

the backdating of the writing on Mr. Riopelle’s stock

certificate.    See Cal-Me. Foods, Inc. v. Commissioner, 93 T.C.

181, 195 (1989); Jasionowski v. Commissioner, 66 T.C. 312, 318

(1976) (Tax Court may disregard stipulation clearly contrary to

evidence in record).

     Purported Transfer of Capital Fund Shares to Landtrak

     Petitioners further contend that when Mrs. Comey acquired

Landtrak’s stock on January 1, 1987, she also transferred her

Capital Fund shares to Landtrak as a contribution to capital.

     Once again, aspects of the record appear to support

petitioners’ contentions.    The record contains a copy of a

document titled “Assignment Separate from Certificate” signed by

Mrs. Comey.    This document purports to transfer 2,919 Capital

Fund shares to Landtrak and is dated January 1, 1987.4 The record

also contains copies of some notations, in Mrs.    Comey’s

handwriting, that refer to Capital Fund shares and to the date

January 1, 1987.




     4
       We note that 4,710 Capital Fund shares were sold in 1991.
Although petitioners did not specifically address the issue, we
understand them to argue that reinvested dividends account for
the difference between the 2,919 shares purportedly transferred
to Landtrak in 1987 and the 4,710 shares sold in 1991.
                              - 14 -


     Notwithstanding these documents, we find that Mrs. Comey did

not transfer the Capital Fund shares to Landtrak on January 1,

1987, or at any other time.   Although respondent did stipulate

the admission into evidence of the Assignment Separate from

Certificate, which petitioners offered as evidence of the

purported contribution of the Capital Fund shares to Landtrak on

January 1, 1987, respondent challenged the notations in Mrs.

Comey’s handwriting, which petitioners offered as evidence of the

same purported transaction.

     More importantly, during respondent’s cross-examination of

Mrs. Comey, it became clear that Mrs. Comey did not recall

preparing the documents challenged by respondent.   It also became

clear that Mrs. Comey neither remembered buying Landtrak stock on

January 1, 1987, nor remembered what, if anything, she paid for

those shares.   In short, as Mrs. Comey admitted, she did not

remember assigning any of her Capital Fund shares to Landtrak.

     We also note that the documents and testimony offered by

petitioners do not consistently describe the asserted transfer of

the Capital Fund shares.   One of the documents in Mrs. Comey’s

handwriting describes the purported transfer of the Capital Fund

shares as having occurred on April 15, 1988 “retroactive to”

January 1, 1987.   Another document titled “SPECIAL MEETING OF THE

BOARD OF DIRECTORS” of Landtrak states that it confirms

“Capitalization of the corporation by Cristeen B. Comey on
                                  - 15 -


January 1, 1987, who at the time was the sole shareholder of the

corporation.”       However, the “7" of the “1987" in this document is

handwritten and appears to have been written over a typewritten

“8".5       Moreover, in a 1990 letter written to the Commissioner on

Mrs. Comey’s behalf, Mr. Comey stated that the transfer of

Capital Fund shares occurred on or about January 1, 1988, not on

January 1, 1987.       Finally, at trial, Mr. Comey variously stated

that Mrs. Comey capitalized Landtrak in 1988, in 1987 or 1988, or

in “1988-–1987 and 1988".

        The objective facts support a finding that Mrs. Comey did

not transfer her Capital Fund shares to Landtrak on January 1,

1987, or at any other time.       We have found that, contrary to

petitioners’ contentions, Mr. Riopelle remained the sole owner of

Landtrak throughout 1987.       It does not make sense that Mrs. Comey

would have transferred valuable property--the Capital Fund

shares-–to a corporation in which she had no interest.       In

addition, when the Capital Fund shares were sold in 1991--more

than 4 years after their purported transfer to Landtrak--they

were held in an “Individual Investor Account”, not in a corporate

account.       The name, address, and taxpayer identification number


        5
       We also note that the document was signed only by Mr.
Comey (purportedly on behalf of Mr. Comey individually and as
sole director and secretary of Landtrak) and refers to a board
meeting supposedly held on Apr. 12, 1988, more than 1 year after
the purported transfer of the Capital Fund shares to Landtrak on
Jan. 1, 1987.
                                - 16 -


on that account were Mrs. Comey’s name, residence, and Social

Security number, respectively; there was no indication on the

account that Mrs. Comey held the Capital Fund shares as agent or

nominee for anyone.    Although the sales proceeds were

subsequently deposited in a checking account maintained in

Landtrak’s name, this was part of a plan to send the proceeds to

Switzerland.

     We conclude that the Assignment Separate From Certificate

and the various notations in Mrs. Comey’s handwriting are not

reliable evidence of any transfer of the Capital Fund shares.

Other than these documents, and the testimony of (and a few

documents prepared by) Mr. Comey, which we find incredible, there

is no evidence of any transfer of the Capital Fund shares to

Landtrak.

     For all these reasons, we conclude that Mrs. Comey did not

transfer her Capital Fund shares to Landtrak on January 1, 1987,

or at any later time.    To the contrary, we conclude that Mrs.

Comey owned the Capital Fund shares when they were sold.

     Mrs. Comey’s Nominee Assertions

     Although Mrs. Comey admits that she was the registered owner

of the Capital Fund shares at the time of their sale, she asserts

that she had transferred beneficial ownership of the shares to

Landtrak in 1987.     In essence, Mrs. Comey claims that she held
                               - 17 -


the Capital Fund shares (and received the sales proceeds) as

Landtrak’s “nominee” or other agent.

     Of course, there may be an agency relationship between a

corporation and its sole shareholder, and the tax consequences of

property held by a genuine agent are attributed to the principal.

See Commissioner v. Bollinger, 485 U.S. 340, 349 (1988)

(corporation was agent of its shareholders); Montgomery v.

Commissioner, T.C. Memo. 1989-295 (shareholder/president was

agent of corporation).   However, as the Supreme Court stated in

Bollinger, the Commissioner is entitled to demand unequivocal

evidence of the genuineness of the agency relationship, in the

corporation-shareholder context, in order to prevent avoidance of

the principle that a corporation and its shareholders are

separate taxable entities.    Moline Props., Inc. v. Commissioner,

319 U.S. 436 (1943).   There is no such evidence in the cases at

hand.

     As we have explained, the record establishes that, contrary

to petitioners’ claims, Mrs. Comey neither acquired Landtrak’s

stock nor transferred the Capital Fund shares to Landtrak’s

capital on January 1, 1987.   Moreover, there is no credible, much

less any unequivocal, evidence that Mrs. Comey transferred

beneficial ownership of the Capital Fund shares to Landtrak at

any later time and then acted as Landtrak’s agent.   There is no

evidence that Landtrak or Mrs. Comey informed any third party
                              - 18 -


that Mrs. Comey was acting as Landtrak’s agent with respect to

the Capital Fund shares.6   There is also no evidence that any

written agency agreement was entered into between Landtrak and

Mrs. Comey.

     These considerations further support our conclusion that

Mrs. Comey was not acting as Landtrak’s nominee or other agent

and owned the Capital Fund shares when they were sold.

     Landtrak’s Lack of Business Purpose or Activity

     We further conclude, even if Mrs. Comey had in form

transferred her Capital Fund shares to Landtrak at some time

before their sale, that Landtrak would not be recognized as the

owner of the shares for tax purposes.   This is because Landtrak

had no business purpose and engaged in no business activity after

Mr. Riopelle’s ownership ended.

     A corporation is usually recognized as a taxpayer separate

from its shareholders.   However, the corporate form may be

disregarded where the corporation is “a sham or unreal”.      Moline

Props., Inc. v. Commissioner, supra at 438-439 (citing Higgins v.

Smith, 308 U.S. 473, 477-478 (1940) and Gregory v. Helvering, 293

U.S. 465 (1935)).   More particularly, the corporate form may be

disregarded where the corporation’s purpose is not the equivalent


     6
       Although, as noted supra p. 15, in a 1990 letter to the
Commissioner written on Mrs. Comey’s behalf, Mr. Comey stated
that the Capital Fund shares were transferred to Landtrak on or
about Jan. 1, 1988.
                              - 19 -


of business activity and the corporation carries on no business

activity.   Id.; Shaw Constr. Co. v. Commissioner, 35 T.C. 1102,

1113-1114 (1961), affd. 323 F.2d 316 (9th Cir. 1963).    A

corporation that originally had a business purpose or that once

engaged in business activity may also be disregarded, if the

corporation subsequently becomes inactive and no longer has a

business purpose.   See Owens v. Commissioner, 568 F.2d 1233, 1239

(6th Cir. 1977), affg. in part and revg. in part on another

ground 64 T.C. 1 (1975); Lowndes v. United States, 384 F.2d 635

(4th Cir. 1967).

     When Mr. Riopelle owned the shares of Landtrak, Landtrak

provided engineering consulting services and filed Forms 1120,

U.S. Corporation Income Tax Return.    It therefore appears that

Landtrak had a business purpose and engaged in business activity

during Mr. Riopelle’s ownership.

     Petitioners claim that Landtrak also had a business purpose

and engaged in business activity after Mr. Riopelle’s ownership

ended.   According to Mr. Comey, after Landtrak’s stock had been

issued to Mrs. Comey, Landtrak financed the development of, and

attempted to obtain intellectual property protection for, certain

devices that Mr. Comey claims to have invented.    Mr. Comey

further claims that Landtrak used the proceeds of sale of the

Capital Fund shares for this purpose.
                              - 20 -


     Mr. Comey admitted at trial that he had no receipts or

similar evidence relating to Landtrak’s purported activities.     At

one moment, Mr. Comey testified that all documents were lost in a

flood or had been destroyed deliberately to preserve the secrecy

of his inventions.   At another moment, Mr. Comey testified that

there were no receipts or other documents because all

transactions had been done in cash or in Switzerland (once again

to preserve the secrecy of his inventions).   All these

explanations for the absence of documentary evidence of

Landtrak’s purported activities we find incredible.

     Other than Mr. Comey’s testimony (and a few documents

prepared and signed solely by Mr. Comey), which we find

incredible, there is no evidence that Landtrak had any business

purpose or conducted any business activity, once Mr. Riopelle’s

ownership ended in February 1988.   We also note that as of the

time of trial Landtrak had not filed any Forms 1120, U.S.

Corporation Income Tax Return, for any year after 1987.

Moreover, in 1999 Landtrak informed the State of Wisconsin that

it was an inactive corporation.

     In short, petitioners have failed to prove that Landtrak had

any business purpose or engaged in any business activity after

Mr. Riopelle’s ownership ended in February 1988.   Accordingly, we

also conclude that even if Mrs. Comey had, in form, transferred

her Capital Fund shares to Landtrak before their sale, the gain
                              - 21 -


on the sale of the shares would still be included in Mrs. Comey’s

income, because Landtrak is disregarded for tax purposes.

      For all the foregoing reasons, we hold that Mrs. Comey’s

1991 income includes the $90,788 capital gain realized on the

sale of the Capital Fund shares, as determined by respondent.

2.   Mr. Comey’s Income for 1991 and 1992

      Mr. Comey’s address was in Winnetka, Illinois, when his

petition was filed.   Mr. Comey filed his Federal income tax

return (Form 1040) for 1991 on June 28, 1993.   He filed his

return for 1992 on August 4, 1993.

      Amounts Received by Mr. Comey in 1991

      On a Schedule B, Interest and Dividend Income, attached to

his Form 1040 for 1991, Mr. Comey reported receiving $438 of

interest paid with respect to an AT&T debenture.   Mr. Comey also

reported receiving $28,056 of dividends paid with respect to the

stock of 21 corporations.7   Mr. Comey had inherited much of this

stock upon the death of his father, Aubrey Comey, in 1967.

     On a Schedule D, Capital Gains and Losses, attached to his

Form 1040 for 1991, Mr. Comey reported receiving proceeds of

$9,596 on the sale of stock in two corporations.


      7
       The corporations were American Express, Ameritech, Asarco,
AT&T, Bell Atlantic, Bellsouth, Bethlehem Steel, Comsat, DQE,
Exxon, GTE, Illinois Power, Northern States Power, Nynex,
Oklahoma Gas & Electric, Outboard Marine, Pacific Gas & Electric,
Pacific Telesis, Robbins & Meyers, Southwestern Bell, and US
West.
                                - 22 -


     Although Mr. Comey reported the interest, dividends, and

proceeds on the Schedules to his 1991 return, he did not include

them in his income on the Form 1040.     Instead, he described these

amounts as “nominee distribution[s]”.     Mr. Comey reported a total

income of only $5,101 on his Form 1040 for 1991.

     In the notice to Mr. Comey for 1991, respondent determined

that the $438 of interest and the $28,056 of dividends were Mr.

Comey’s income.   Respondent also determined that $9,396 of the

$9,596 in proceeds was capital gain taxable to Mr. Comey;

respondent allowed Mr. Comey a basis of $200 in one of the stocks

sold.

     Mr. Comey admits that he received the dividends described on

his return and in the notice.    Moreover, during the course of

this litigation Mr. Comey has neither contested that he received

the interest and proceeds nor asserted that he is entitled to

additional basis in the stock sold.      Accordingly, on the basis of

the information set forth on Mr. Comey’s return, Mr. Comey’s

admission, and Mr. Comey’s failure to contest (or to introduce

evidence relating to) these issues, we find that Mr. Comey

received the interest, dividends, and proceeds determined in the

notice, and that capital gains of $9,396 were realized on the

sale of the stock by Mr. Comey in 1991.     See Rules 34(b)(4),

142(a), 149(b).
                              - 23 -


     Mr. Comey’s only argument is that these amounts are not his

income, because he received them as Landtrak’s nominee.

     Amounts Received by Mr. Comey in 1992

     On a Schedule B, Interest and Dividend Income, attached to

his Form 1040 for 1992, Mr. Comey reported receiving $75 of

interest and $16,024 of dividends.     The dividends were paid by 18

of the 21 corporations that had paid dividends to Mr. Comey in

1991.

     On a Schedule D, Capital Gains and Losses, attached to his

Form 1040 for 1992, Mr. Comey reported that he had received

proceeds of $5,070 on the sale of the AT&T debenture.

     Although Mr. Comey reported the interest, dividends, and

sale proceeds on the Schedules to his 1992 return, he did not

include them in his income on the Form 1040.    As he had done for

1991, Mr. Comey described these amounts as “nominee

distribution[s]”.   Mr. Comey reported total income of only $5,103

on his Form 1040 for 1992.

     In the notice to Mr. Comey for 1992, respondent determined

that the $75 of interest and the $16,024 of dividends were Mr.

Comey’s income.   Respondent also determined that the $5,070 sale

proceeds were taxable to Mr. Comey as capital gain.

     Mr. Comey admits that he received the $16,024 of dividends.

He also has neither contested that he received the $75 of

interest and the $5,070 proceeds, nor asserted that he is
                              - 24 -


entitled to basis in the debenture.     Accordingly, on the basis of

the information contained in Mr. Comey’s return, Mr. Comey’s

admission, and Mr. Comey’s failure to contest (or to introduce

evidence relating to) these issues, we find that Mr. Comey

received the interest, dividends, and proceeds described on his

return and in the notice for 1992.     We also find that

respondent’s determination of basis was correct and that a $5,070

capital gain was realized on the sale of the debenture in 1992.

     Once again, Mr. Comey’s only argument is that these amounts

are not his income, because he received them as Landtrak’s

nominee.

     Dividends Received by Landtrak in 1992

     As explained in more detail below, Mr. Comey claims that in

1978 he relinquished ownership of the securities giving rise to

the income items in issue.   Nevertheless, Mr. Comey admitted at

trial (and we find) that until mid-1992, the stock with respect

to which the dividends were paid (and sales proceeds received)

was registered in Mr. Comey’s name, with no legend or other

indication on the certificates that the shares were held by Mr.

Comey as nominee.

     In mid-1992, Mr. Comey tendered the stock certificates to

their issuers (or to the relevant transfer agents) and instructed

them to reissue the certificates registered in Landtrak’s name.
                              - 25 -


The parties have stipulated that during 1992, $3,400 in dividends

was paid on stock registered in Landtrak’s name.

     The notice to Mr. Comey for 1992 included in Mr. Comey’s

income $2,919 of the $3,400 in dividends paid on stock registered

in Landtrak’s name.   Respondent is aware of the discrepancy

between the $2,919 in dividends determined in the notice and the

$3,400 in dividends described in the stipulation, but has decided

not to seek an increased deficiency.

     In light of the parties’ stipulation and respondent’s

decision, we find that $2,919 of dividends was paid in 1992 on

stock registered in Landtrak’s name.

     Mr. Comey’s only argument is that these dividends are

Landtrak’s income, because Landtrak owned the stock registered in

its name.

     Sales Proceeds Received by Landtrak in 1992

     In August 1992, shares of stock in 15 companies, which had

been registered in Mr. Comey’s name, but were recently

reregistered in Landtrak’s name, were transferred to an account

maintained with PaineWebber and held in Landtrak’s name.     On

August 19, 1992, the stock in the PaineWebber account was sold

for aggregate proceeds of $591,438.

     On August 21, 1992, a PaineWebber check for the proceeds was

deposited in a checking account maintained in Landtrak’s name

with the M&I Bank of Menomonee Falls, Wisconsin.   On August 26 or
                                - 26 -


27, 1992, the proceeds were transferred to an account maintained

in Landtrak’s name with Swiss Bank Corp. in Switzerland.

     The notice to Mr. Comey included in Mr. Comey’s income for

1992 the net capital gain realized on the sales of stock held in

the PaineWebber account.     Using calculations prepared by

respondent’s personnel, the notice determined that Mr. Comey’s

aggregate basis in the stock was $184,132, and that Mr. Comey’s

net capital gain was therefore $407,306 (i.e., $591,438 aggregate

proceeds, less $184,132 aggregate basis, equals $407,306 net

capital gain).

     Mr. Comey has not disputed that Landtrak received proceeds

from the stock sales by PaineWebber in amounts at least equal to

the amounts determined by respondent.     Moreover, Mr. Comey has

not alleged that the basis in the stock sold was higher than that

determined by respondent.     To the contrary, on a Wisconsin Form

5, Corporation Franchise or Income Tax Return, for 1992, Mr.

Comey reported that Landtrak received proceeds and realized gain

from the sales by PaineWebber in amounts exceeding the amounts

determined by respondent.8

     Accordingly, we find that $407,306 of net capital gain was

realized in 1992 on the sales of stock Mr. Comey had reregistered



     8
       The Wisconsin Form 5, Corporation Franchise or Income Tax
Return, filed by Mr. Comey claimed that the capital gains were
exempt from Wisconsin tax.
                                - 27 -


in Landtrak’s name and then placed in the PaineWebber account, as

determined by respondent.     Mr. Comey’s only argument is that this

gain is Landtrak’s income, because Landtrak was the owner for tax

purposes of the stock registered in its name.

     Mr. Comey’s Assertions

     Mr. Comey claims that his income does not include the $513

in interest and $44,530 in dividends he personally received

during 1991-92.   Mr. Comey similarly claims that his income does

not include the $14,466 in capital gains (corresponding to the

$14,666 sales proceeds) he personally received during those

years.   According to Mr. Comey, although the relevant securities

were registered in his name at the time of payment or sale:    (1)

Landtrak owned the securities; (2) Mr. Comey received the

interest, dividends, and sales proceeds as Landtrak’s nominee;

and (3) these items are includable in Landtrak’s income, not Mr.

Comey’s income.

     Mr. Comey further claims that his income does not include

either the $2,919 in dividends paid in 1992 on the stock

registered in Landtrak’s name or the $407,306 in net capital gain

realized in August 1992 on the sales of that stock by

PaineWebber.   According to Mr. Comey, these items were Landtrak’s
                               - 28 -


income because Landtrak owned the stock Mr. Comey had

reregistered in its name.9

     In short, Mr. Comey, like Mrs. Comey, claims that Landtrak

was the owner for tax purposes of securities giving rise to the

items of income in question.   However, Mr. Comey’s explanation of

how Landtrak became the owner of his securities (sometimes

referred to hereinafter as Mr. Comey’s portfolio) is more

complicated than Mrs. Comey’s explanation of how Landtrak became

the owner of her Capital Fund shares.

     Mr. Comey claims that he originally transferred ownership of

his stock portfolio to Lumatron Corporation in 1978.    Mr. Comey

further claims that ownership of his portfolio then effectively

passed to Landtrak in 1987 or 1988, when he assertedly sold his

Lumatron stock to Landtrak.

     For the reasons set forth below, we conclude that Mr. Comey

never transferred ownership of his portfolio to Lumatron.



     9
       We note that respondent also issued a statutory notice to
Landtrak for 1991 and 1992. That notice included in Landtrak’s
income all items respondent now asserts are Mr. Comey’s income in
the cases at hand.

     Petitioners have not asserted that respondent’s issuance of
the notice to Landtrak should have any effect on the outcome of
the cases at hand, such as attributing all the income items in
controversy to Landtrak, rather than to Mr. Comey. See Clapp v.
Commissioner, 875 F.2d 1396, 1401-1402 (9th Cir. 1989)
(alternative notices attributing same items of income to
individuals and related trusts were proper where Commissioner
contended trusts were shams).
                              - 29 -


Accordingly, we also conclude that Landtrak did not become the

direct or indirect owner of Mr. Comey’s portfolio in 1987 or

1988, whether or not Mr. Comey sold Lumatron stock to Landtrak as

he claims.   To the contrary, we conclude that Mr. Comey remained

the title owner as well as the owner for tax purposes of his

portfolio, until Mr. Comey had the stock in his portfolio

reregistered in Landtrak’s name in mid-1992.

     Moreover, for the reasons also set forth below, we hold that

although Landtrak became the title owner of Mr. Comey’s portfolio

in mid-1992, it did not become the tax owner.    Landtrak (and

Landtrak’s purported ownership of Mr. Comey’s portfolio) are

disregarded for tax purposes, because Landtrak did not have a

business purpose or engage in business activity after Mr.

Riopelle’s ownership ended in 1988.    In addition, there is no

evidence that Landtrak had any beneficial interest in, or

dominion or control over, the stock registered in its name.

     Purported Transfer of Mr. Comey’s Portfolio to
     Lumatron in 1978 and Landtrak in 1987 or 1988

     Mr. Comey contends that he transferred his stock portfolio

to Lumatron in 1978.   He further contends that ownership of that

portfolio effectively passed to Landtrak in 1987 or 1988, when he

assertedly sold his Lumatron stock to Landtrak.

     Mr. Comey specifically contends that his 1978 transfer to

Lumatron was made pursuant to an “Inventor’s Agreement” between
                              - 30 -


Lumatron and Mr. Comey dated January 15, 1978.   According to Mr.

Comey, under the terms of the Inventor’s Agreement, Lumatron

agreed to sponsor Mr. Comey’s research and development in

exchange for Mr. Comey’s contribution of his portfolio to

Lumatron’s capital.

     First, we note that the copy of the “Inventor’s Agreement”

contained in the record was signed solely by Mr. Comey,

purportedly on behalf of Lumatron and on behalf of Mr. Comey

individually.   Other than this document and the self-serving

testimony of Mr. Comey, which we have found incredible, there is

no evidence of any transfer of Mr. Comey’s portfolio to Lumatron.

     Second, it appears that Lumatron had been dissolved, and

therefore lacked legal capacity, when Mr. Comey assertedly

transferred his portfolio to it.   Therefore, even if Mr. Comey

had attempted to transfer his portfolio to Lumatron via an

“Inventor’s Agreement” in 1978 as he claims, it appears that the

transfer would have been ineffective under relevant State

(Illinois) law.

     The record shows that an Illinois corporation named Lumatron

Corporation (Lumatron) was incorporated on February 13, 1968.

Mr. Comey has offered copies of stock certificates which purport

to show that Mr. Comey acquired some Lumatron stock in February

1968 and January 1971.
                             - 31 -


     The record also shows, however, that on December 1, 1975,

more than 2 years before Lumatron purportedly contracted to

acquire Mr. Comey’s portfolio, the State of Illinois had

administratively dissolved Lumatron for failure to file annual

reports and pay franchise taxes.

     Illinois law provides that an administratively dissolved

corporation ceases to exist as of the date of dissolution.    The

dissolved corporation is not permitted to carry on any business,

except as necessary to wind up and liquidate its affairs.    See

805 Ill. Comp. Stat. Ann. 5/12-40(c) (West 2000); Regal Package

Liquor, Inc. v. J.R.D., Inc., 466 N.E.2d 409, 411 (Ill. App. Ct.

1984).

     An administratively dissolved Illinois corporation may be

reinstated if certain statutory requirements are met.     Moreover,

under the “relation back” doctrine of Illinois law, once the

corporation has been reinstated its corporate existence is deemed

to have continued without interruption; all acts of its officers,

directors, and shareholders that would have been valid but for

the dissolution are ratified and confirmed.   See 805 Ill. Comp.

Stat. Ann. 5/12-45 (West 2000); Regal Package Liquor, Inc. v.

J.R.D., Inc., supra.

     Mr. Comey is now aware that Lumatron had been

administratively dissolved in 1975 and was still dissolved when

it purportedly agreed to acquire his portfolio in 1978.    However,
                              - 32 -


Mr. Comey claims that Lumatron was later reinstated and that the

reinstatement retroactively validated the purported Inventor’s

Agreement between Lumatron and Mr. Comey.

     At trial, Mr. Comey offered a copy of a document he claimed

to have filed to effect Lumatron’s reinstatement.    This document

was filed with the State of Illinois on October 20, 1992, almost

17 years after Lumatron’s dissolution.

     Illinois law provides that an administratively dissolved

corporation may be reinstated within 5 years following the date

of issuance of the certificate of dissolution.    See 805 Ill.

Comp. Stat. Ann. 5/12-45 (2000).   To be reinstated, the dissolved

corporation must file an application for reinstatement containing

certain information concerning the dissolution.     Id.   It must

also pay all back taxes and file all back annual reports.      Id.

     The document offered by Mr. Comey was not filed within 5

years of Lumatron’s dissolution; it was filed almost 17 years

after that dissolution.   In addition, the document is an Illinois

Form BCA-2.10, Articles of Incorporation, not an Illinois Form

BCA-12.45/13.60, Application for Reinstatement of Domestic or

Foreign Corporation.   Moreover, the document does not mention

either Lumatron’s dissolution or any demand for reinstatement.

Finally, there is no evidence that Mr. Comey filed any back

annual reports or paid any back franchise taxes for Lumatron.

     For all these reasons, we find that the document offered by

Mr. Comey evidences Mr. Comey’s incorporation of a new Lumatron
                              - 33 -


Corporation rather than the reinstatement of the old Lumatron

Corporation.   We therefore conclude that the Lumatron

Corporation, which purportedly acquired Mr. Comey’s portfolio in

1978, was never reinstated.   We therefore also conclude that even

if Mr. Comey had attempted to transfer his portfolio to Lumatron

in 1978, via the purported Inventor’s Agreement, Lumatron would

have lacked legal capacity, and the transfer would have been

ineffective under Illinois law.

     Equally importantly, the record as a whole establishes that

Mr. Comey, and not Lumatron or Landtrak, was the beneficial owner

of the securities in Mr. Comey’s portfolio, at least until those

securities were reregistered in Landtrak’s name in mid-1992.

     Although Mr. Comey claims that he transferred his portfolio

to Lumatron in 1978 and sold his Lumatron stock to Landtrak in

1987 or 1988, he also admitted at trial that until mid-1992:

(1) The stock in the portfolio was registered in Mr. Comey’s

name, (2) the dividend checks were payable to Mr. Comey, (3) Mr.

Comey personally cashed the dividend checks, and (4) the cash was

placed in a bank account in Mr. Comey’s name, not in a corporate

account.   Mr. Comey therefore had dominion and control of both

the securities in his portfolio and the income generated by those

securities, during the years in issue.

     Mr. Comey claims that Lumatron and Landtrak used the

dividends, interest, and capital gains generated by his portfolio
                              - 34 -


to support the research and development of his claimed

inventions.   There is no credible evidence in the record to that

effect, however, and we have concluded that Landtrak had no

business purpose and engaged in no business activity, during the

years in issue.   See supra pp. 19-20.   We also note that on his

Forms 1040 for the years 1985 through 1992, Mr. Comey reported

that his total income varied from approximately $3,400 to

approximately $5,100 per year.   Although Mr. Comey claims that he

was able to live on approximately $100 per week, the record

supports the inference that Mr. Comey was using the amounts

claimed to be Landtrak’s income to meet his personal needs.

     For all these reasons, we conclude that Mr. Comey was not

acting as Landtrak’s nominee or other agent; he was both the

title owner and the owner for tax purposes of the securities in

his portfolio, at least until the stock in the portfolio was

reregistered in Landtrak’s name in mid-1992.   Accordingly, we

also conclude that the $513 in interest and $44,080 in dividends

received directly by Mr. Comey during 1991-92, and the $14,466 in

capital gains realized directly by Mr. Comey during 1991-92, are

Mr. Comey’s income, as determined by respondent.   See Corliss v.

Bowers, 281 U.S. 376, 378 (1930), where the Supreme Court stated:

     taxation is not so much concerned with the refinements
     of title as it is with actual command over the property
     taxed–-the actual benefit for which the tax is paid.
     * * * The income that is subject to a man’s unfettered
     command and that he is free to enjoy at his own option
                              - 35 -


     may be taxed to him as his income, whether he sees fit
     to enjoy it or not. * * *

     Effect of 1992 Transfer of Title to Landtrak

In mid-1992, Mr. Comey caused the stock in his portfolio to be

reregistered in Landtrak’s name.   Following this transfer of

title, $2,919 in dividends was paid on stock registered in

Landtrak’s name, and the $591,438 proceeds of the sales of that

stock by PaineWebber were paid to accounts maintained in

Landtrak’s name.

     We consider whether this transfer of title to Landtrak

sufficed to make Landtrak, rather than Mr. Comey, the party

taxable on these dividends and net capital gain.    We conclude it

did not so suffice, and that Mr. Comey’s income includes the

dividends and net capital gain as determined by respondent.

     First, as we have just explained, Mr. Comey personally

received the income generated by his portfolio and appears to

have used it for his personal benefit, while the portfolio was

registered in his name.   There is no evidence that Mr. Comey’s

dominion or control over, or his beneficial enjoyment of the

fruits of, his portfolio was diminished by its brief

reregistration in Landtrak’s name.

     Second, as explained supra pp. 18-21, a corporation may be

disregarded for tax purposes if it has no business purpose and

engages in no business activity.   Petitioners have failed to show
                              - 36 -


that Landtrak had any business purpose or engaged in any business

activity after Mr. Riopelle’s ownership ended in 1988.    Id.

Accordingly, Landtrak’s formal ownership of Mr. Comey’s

portfolio, following Mr. Comey’s transfer of title to Landtrak in

mid-1992, is disregarded for tax purposes.   See Moline Props.,

Inc. v. Commissioner, 319 U.S. at 438-439 (citing Higgins v.

Smith, 308 U.S. at 477-478 and Gregory v. Helvering, 293 U.S. 465

(1935)); Shaw Constr. Co. v. Commissioner, 35 T.C. at 1113-1114.

     Third, we have found that Mr. Comey did not transfer even

title ownership of his portfolio to Landtrak until mid-1992.     A

short time later, in August 1992, the portfolio was sold by

PaineWebber, and the sales proceeds were transferred to

Switzerland.   There is no evidence that Landtrak, which engaged

in no business, ever had dominion and control or beneficial

ownership of the sales proceeds.   Under these circumstances,

Landtrak served as a mere “conduit”, and its purported transitory

ownership of Mr. Comey’s portfolio must be disregarded for tax

purposes, even if Landtrak’s existence as a separate taxpayer

should not be disregarded.   See Commissioner v. Court Holding

Co., 324 U.S. 331, 334 (1945) (sale by one person cannot be

transformed for tax purposes into sale by another by using the

latter as a conduit through which to pass title); Aiken Indus.,

Inc. v. Commissioner, 56 T.C. 925 (1971) (even a valid
                              - 37 -


corporation’s receipt of funds will be disregarded where it has

no dominion and control over, or beneficial interest in, the

funds; temporary physical possession of funds is not enough);

Hallowell v. Commissioner, 56 T.C. 600 (1971) (shareholder

transferred greatly appreciated marketable securities to close

corporation, which sold the securities shortly thereafter and

then made distributions to or for benefit of shareholder in

amounts roughly corresponding to realized gain; held,

notwithstanding their form, transactions were in substance sales

of securities by shareholder rather than by corporation).

      We hold that Mr. Comey’s 1992 income includes the $2,919 in

dividends paid on stock registered in Landtrak’s name and the

$407,306 in net capital gain realized in 1992 on the sales of

stock in the PaineWebber account, as determined by respondent.

3.   Penalties Determined Against Mrs. Comey

      Respondent determined that Mrs. Comey is liable for the

following accuracy-related penalties under section 6662:    A

$5,136 penalty for 1991, attributable to a substantial

understatement of income tax (see sec. 6662(a) and (b)(2)); and a

$56 penalty for 1992, attributable to negligence or disregard of

rules or regulations (see sec. 6662(a) and (b)(1)).   Mrs. Comey

bears the burden of proving that respondent’s determinations of

these penalties are erroneous.   See Rule 142(a); Monahan v.
                              - 38 -


Commissioner, 109 T.C. 235, 257 (1997) (taxpayers have burden of

proof with respect to sec. 6662(b)(2) substantial understatement

penalties); ASAT, Inc. v. Commissioner, 108 T.C. 147, 175 (1997)

(taxpayers have burden of proof with respect to sec. 6662(b)(1)

negligence or disregard penalties).10

      We have sustained respondent’s determinations concerning

Mrs. Comey’s taxable income for 1991 and 1992.   At trial,

petitioners neither argued nor introduced evidence suggesting

that any exception to the section 6662 additions applied.

      In short, petitioners have not shown that any exception

applies or that respondent’s determination is otherwise

erroneous; respondent’s determination of additions to Mrs.

Comey’s tax is sustained.

4.   Additions and Penalties Determined Against Mr. Comey

      Respondent has determined that Mr. Comey is liable for

failure to file additions under section 6651(a)(1) in the amounts

of $1,889 and $23,338 for 1991 and 1992, respectively.

Respondent has also determined that Mr. Comey is liable for

accuracy-related penalties under section 6662(a) attributable to



      10
       Sec. 7491(c) places the burden of production on the
Secretary with respect to the liability of any individual for any
penalty, addition to tax, or additional amount, in court
proceedings arising in connection with examinations commencing
after July 22, 1998. The petitions in the cases at hand were
filed in 1996.
                             - 39 -


negligence or disregard of rules or regulations in the amounts of

$1,567 and $23,686 also for 1991 and 1992, respectively.    We have

sustained respondent’s determinations concerning the amounts of

Mr. Comey’s taxable income for both years.

     Section 6651

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

taxpayer’s failure to file a required return on or before the

specified filing date unless the failure is due to reasonable

cause and not to willful neglect.   Mr. Comey bears the burden of

proving that the reasonable cause exception applies or that

respondent’s determination is otherwise erroneous.11   See Rule

142(a); United States v. Boyle, 469 U.S. 241, 245 (1985).

     The parties have stipulated that Mr. Comey filed his Form

1040, Individual Income Tax Return, for 1991 on June 28, 1993.

They have also stipulated that Mr. Comey filed his return for

1992 on August 4, 1993.

     Petitioners have neither argued nor introduced any evidence

suggesting that Mr. Comey applied for an extension of time to

file or had reasonable cause for his failure to file on time.

Accordingly, petitioners have failed to show that the section




     11
       As explained supra note 10, the petitions in the cases at
hand were filed before the effective date of the burden-shifting
provisions of sec. 7491(c).
                               - 40 -


6651(a)(1) additions do not apply; respondent’s determination

with respect to those additions is sustained.

     Section 6662

     Respondent has determined that Mr. Comey is liable for

accuracy-related penalties to tax for 1991 and 1992 attributable

to negligence or disregard of rules or regulations, see sec.

6662(a) and (b)(1).    Mr. Comey bears the burden of proving that

an exception applies or that respondent’s determination is

otherwise erroneous.   See Rule 142(a); ASAT, Inc. v.

Commissioner, supra.

     Petitioners have neither argued nor introduced evidence

suggesting that an exception to the accuracy-related penalties

applies.   Accordingly, petitioners have failed to show that the

section 6662 penalties do not apply; respondent’s determination

with respect to those penalties is sustained.

     To reflect all the foregoing,

                                          Decisions will be entered

                                     for respondent.12



     12
       As explained supra note 9, respondent has also issued a
notice to Landtrak for 1991 and 1992. That notice included in
Landtrak’s income the items we have concluded were Mr. Comey’s
income. The Court expects, notwithstanding the obstacles that
respondent may encounter in attempting to collect from
petitioners, that in any calculations of the amounts owed by
petitioners, respondent will treat any amounts collected from
Landtrak in accordance with this opinion.
