                        T.C. Memo. 1999-393



                      UNITED STATES TAX COURT



              ELEAZAR C. FLORES, JR., Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No.   10176-98.            Filed December 3, 1999.



     Richard B. Gould, for petitioner.

     Gordon P. Sanz, for respondent.



                        MEMORANDUM OPINION


     JACOBS, Judge:   Respondent determined a $34,534 deficiency in

petitioner's 1993 Federal income tax and a $6,503 accuracy-related

penalty pursuant to section 6662(a).

     Following concessions, the issues remaining for decision are:

(1) Whether petitioner had $99,880 of unreported income for 1993;
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and if so, (2) whether petitioner is liable for the section 6662(a)

accuracy-related penalty.

       All section references are to the Internal Revenue Code as in

effect for the year under consideration.            All Rule references are

to the Tax Court Rules of Practice and Procedure.

                              Background1

       At the time he filed his petition, petitioner resided in

Brookshire, Texas.    Petitioner and his wife, Maria, filed separate

Federal income tax returns for 1993.

       Petitioner was born and raised in Mercedes, Texas, which is

located    between   Brownsville,    Texas,     and    the    Mexican   border.

Mercedes    is   approximately      320     miles     south   of   Brookshire.

Harlingen, Texas, a suburb of Mercedes, is located approximately 20

to 25 miles north of the Mexican border.

       During 1993, petitioner was a self-employed truck driver,

hauling rock, sand, and gravel for road building and housing sites.

Abel

       Petitioner testified that (approximately 12 years ago) he met

an individual he knew only as Abel at a "beer joint" in Mercedes;

they became friends and customarily (approximately once a week)

drank beer and played pool.         Petitioner did not know where Abel



       1
          Some of the facts have been stipulated and are found
accordingly. The stipulations of facts and the exhibits
submitted therewith are incorporated herein by this reference.
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lived. The last time petitioner and Abel had contact was on

November 9, 1993.

Receipt of the Cash

     According to petitioner, on November 9, 1993, Abel went to

petitioner’s     home    in     Brookshire      and   requested   petitioner     to

transport a significant amount of money for him to Mercedes.

Petitioner agreed to do so; he neither questioned Abel as to the

source    of   the   money      nor    asked    for   anything    in    return   for

transporting the money. Only Abel and petitioner were present when

this meeting took place.

     Abel told petitioner that he was going to Houston and in a

couple of days would pass through Mercedes, at which time he would

meet petitioner and retrieve the money.                 Abel gave no specific

details regarding the time or place where they would meet, other

than that he would locate petitioner by recognizing petitioner’s

truck outside the beer joint.            Petitioner agreed to transport the

money as a favor to Abel.

     Abel gave petitioner several tightly wrapped bundles of U.S.

currency, which in the aggregate totaled $99,880.                 Each bundle was

several    inches       thick    and     contained     currency        in   multiple

denominations.       Abel cautioned petitioner not to show the money to

anyone.    Accordingly, petitioner decided to place the money in a

spare tire that was mounted under the rear of his 1991 Chevy pickup

truck.
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       Petitioner took the spare tire to a local truck stop where he

had the rubber tire separated from the metal rim.                Upon his return

from the truck stop, petitioner placed the bundles of money inside

the spare tire and reattached the metal rim to the tire.                        Not

wanting to leave the money unattended, petitioner brought the

reassembled spare tire into his house.                  Prior to leaving for

Mercedes the next morning, petitioner remounted and padlocked the

reassembled spare tire under the frame of his truck.

Petitioner's Trip to Mercedes and Subsequent Events

       Petitioner left for Mercedes on the morning of November 10,

1993.    Petitioner's      friends,     Ronald    Waller   and   Marcia    Miller,

accompanied petitioner to Mercedes; they did not know of the

existence of the money hidden in the spare tire.

        That afternoon, petitioner was stopped near Harlingen by

Officer    Sergio    Ramirez,     Jr.    (Officer    Ramirez)     of   the    Texas

Department of Public Safety (DPS) for failing to drive in a single

marked lane. Upon approaching the vehicle, Officer Ramirez noticed

that petitioner appeared nervous; consequently, Officer Ramirez

asked petitioner to step out of the truck. Petitioner complied and

told Officer Ramirez that he was going to Mercedes to purchase

recapped tires for an 18-wheeler.                Petitioner later changed his

story, informing Officer Ramirez that the “real” purpose of his

trip    was   to   visit    his   sick    mother.    Officer     Ramirez     became
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suspicious    and    requested       petitioner's    consent    to    search     the

vehicle, a request agreed to by petitioner.

     A visual examination of petitioner's pickup truck led Officer

Ramirez to believe that the truck's spare tire had been altered.

As a result, Officer Ramirez asked petitioner to follow him to a

nearby DPS building so that a more intensive search could be

undertaken.     Again, petitioner complied.            At the DPS station, a

border patrol canine conducted a search of petitioner's truck and

“alerted”    the    officers    to    the   spare   tire.   After      petitioner

provided the key for the padlock, the officers removed the spare

tire from its bracket and discovered the money.                Petitioner told

Officer Ramirez that he did not know how the money got into the

spare tire.

     Before    leaving    the    DPS    station,    petitioner       and   his   two

passengers (Mr. Waller and Ms. Miller) each executed a Waiver of

Citation, Interest, and Release, disclaiming any interest in the

$99,880.     On November 14, 1993, petitioner again disavowed any

ownership interest in the $99,880, and provided a voluntary written

statement to investigators concerning the existence of Abel and the

circumstances surrounding the receipt of the money.                    Petitioner

was neither arrested nor charged in connection with possessing

stolen currency. Abel has never been located or identified by DPS

authorities.        No one has claimed the money.              The $99,880 was

eventually forfeited as contraband to the State of Texas.
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     Petitioner filed an income tax return for 1993; the $99,880

was not reported.

Notice of Deficiency

     In    the    notice    of     deficiency,       respondent   determined       that

petitioner       had   $99,880     of    unreported    income.    Respondent       also

determined that petitioner was liable for the section 6662(a)

accuracy-related penalty for 1993.

                                        Discussion

Issue 1:    Petitioner's Unreported Income

     The primary issue, i.e., whether petitioner had $99,880 of

unreported income in 1993, is a question of fact.                          Petitioner

claims that the $99,880 did not belong to him and therefore is not

includable in his gross income.               Respondent posits that because

petitioner had dominion and control over the forfeited funds and

could not prove that he held the funds merely as an agent or

conduit for Abel, the proceeds represent taxable income to him.

     Gross income, as used in section 61(a), means the accrual of

some gain, profit, or benefit to the taxpayer, over which the

taxpayer exercises dominion and control.                    See James v. United

States, 366 U.S. 213, 219 (1961); Arcia v. Commissioner, T.C. Memo.

1998-178; Liddy v. Commissioner, T.C. Memo. 1985-107, affd. 808

F.2d 312 (4th Cir. 1986).                 In this regard, the Supreme Court

explained    that      a   “gain    ‘constitutes       taxable    income    when    its

recipient has such control over it that, as a practical matter, he
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derives readily realizable economic value from it.’”                 James v.

United States, supra at 219 (quoting Rutkin v. United States, 343

U.S. 130, 137 (1952)).

     A taxpayer has dominion and control over cash when he or she

has the freedom to use it at will, even though that freedom may be

assailable by persons with better title.            See Rutkin v. United

States, supra.   This requires a court to look at all relevant facts

and circumstances. See Arcia v. Commissioner, supra; Liddy v.

Commissioner, supra.     For instance, the use of money for personal

purposes is an indication of dominion and control.            See Woods v.

Commissioner,    T.C.   Memo.   1989-611,   affd.    per    curiam    without

published opinion 929 F.2d 702 (6th Cir. 1991).            However, holding

money in a fiduciary capacity, such as an agent, generally will not

require inclusion of such cash in a taxpayer's gross income.              See

Diamond v. Commissioner, 56 T.C. 530, 541 (1971), affd. 492 F.2d

286 (7th Cir. 1974); Arcia v. Commissioner, supra.

     With respect to the $99,880 involved herein, petitioner has

the burden of proving he did not have dominion and control over the

money; i.e., he was holding the money as agent for another.               See

Rule 142(a); Erickson v. Commissioner, 937 F.2d 1548, 1551-1552

(10th Cir. 1991), affg. T.C. Memo. 1989-552; Schad v. Commissioner,

87 T.C. 609, 618-619 (1986), affd. without published opinion 827

F.2d 774 (11th Cir. 1987).       Resolution of the inquiry before us

depends upon our believing petitioner's explanation that he was
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merely transporting Abel's money to Mercedes and that no portion

thereof belonged to petitioner.           Thus, our primary task herein is

to distill truth from falsehood. See Diaz v. Commissioner, 58 T.C.

560, 564 (1972).      In doing so, we are aware that we must be careful

“to avoid making the courtroom a haven for the skillful liar”.             Id.

Accordingly,     we    look    for      objective   facts     to   corroborate

petitioner's account.

     There are no such facts in the record supporting petitioner's

testimony.    We do not find petitioner's story to be credible.             We

believe that petitioner’s story is but an attempt by petitioner to

disguise his duplicity in a questionable transaction from which he

derived his ownership interest in the currency, and that he signed

the waiver disclaiming such interest in order to avoid inquiry and

possible prosecution by local authorities.               Other than himself,

petitioner    failed    to    present    any   witness   or   other   evidence

corroborating his testimony.         Suffice it to say, we are satisfied

that the $99,880 was his; thus, he is required to include the

$99,880 in his gross income.         Accordingly, we sustain respondent's

determination that petitioner received $99,880 in unreported income

in 1993.

Issue 2:     Section 6662(a) Accuracy-Related Penalty

     Section 6662(a) imposes a penalty equal to 20 percent of the

amount of the underpayment attributable to negligence or disregard

of rules or regulations, or to a substantial understatement of
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income tax.   Section 6662(d) defines a substantial understatement

as an understatement of income tax for the taxable year that

exceeds the greater of 10 percent of the tax required to be shown

on the tax return or $5,000.      If, however, the taxpayer can show

that either substantial authority exists for the treatment of the

items at issue or the taxpayer has adequately disclosed such items,

and that there is a reasonable basis for petitioner’s tax treatment

of   the   item,   section   6662(a)   will   not   apply.    See   sec.

6662(d)(2)(B); Rule 142(a).

     Petitioner argues that the substantial understatement penalty

should not be imposed because (1) he believed in good faith that he

owed no obligation to either report or pay taxes on the $99,880,

and (2) substantial authority exists supporting the conclusion that

mere couriers are not the owners of property.         We do not believe

petitioner acted either reasonably or in good faith.         As stated

supra, we believe petitioner was the owner of the money and did not

act as a mere courier. Consequently, we sustain respondent's

imposition of the accuracy-related penalty.

     In reaching our conclusions herein, we have considered all

arguments presented and, to the extent not discussed above, find

them to be without merit.
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To reflect the foregoing and concessions by the parties,



                                           Decision will be

                                    entered under Rule 155.
