                          T.C. Memo. 2008-92



                        UNITED STATES TAX COURT



               CHUKWUMA I. ODELUGO, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 13408-04.                Filed April 10, 2008.



     G. Emeka Obinna Onwezi, for petitioner.

     Paul T. Butler, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     CHIECHI, Judge:1    Respondent determined the following defi-

ciencies in, and additions to, petitioner’s Federal income tax


     1
      Special Trial Judge Carleton D. Powell conducted the trial
in this case. He died after the case was submitted. The parties
have declined the opportunity for a new trial or for supplementa-
tion of the record and have expressly consented to the reassign-
ment of this case for opinion and decision based on the record of
the trial held in this case.
                                 - 2 -

(tax):

                                        Additions to Tax
  Year    Deficiency   Sec. 6651(a)(1)2 Sec. 6651(a)(2)    Sec. 6654(a)
  1998    $30,228.40     $6,173.19             *             $1,371.98
  1999     20,760.00      4,671.00             *                996.98

           *Amount to be determined at a later date pursuant to sec.
     6651(a)(2) and (c).

     In the answer, respondent alleged certain increases in the

deficiencies and the additions to tax under sections 6651(a)(1)

and (2) and 6654(a) for petitioner’s respective taxable years

1998 and 1999 that respondent had determined in the notices of

deficiency with respect to those respective years (notices).

     The issues remaining for decision are:

     (1) Does petitioner have unreported income for each of his

taxable years 1998 and 1999 in excess of the amount determined in

the notice of deficiency with respect to each of those years?               We

hold that he does not.

     (2) Is petitioner entitled for each of his taxable years

1998 and 1999 to deduct certain expenses that petitioner claims

with respect to his law practice?      We hold that he is not.

     (3) Is petitioner liable for each of his taxable years 1998

and 1999 for the addition to tax under section 6651(a)(1)?             We

hold that he is to the extent stated herein.



     2
      All section references are to the Internal Revenue Code
(Code) in effect for the years at issue. All Rule references are
to the Tax Court Rules of Practice and Procedure.
                               - 3 -

     (4) Is petitioner liable for each of his taxable years 1998

and 1999 for the addition to tax under section 6651(a)(2)?   We

hold that he is to the extent stated herein.

     (5) Is petitioner liable for each of his taxable years 1998

and 1999 for the addition to tax under section 6654?   We hold

that he is to the extent stated herein.

                          FINDINGS OF FACT

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

     Petitioner’s address shown in the petition in this case was

in Baltimore, Maryland.

     At an undisclosed time before 1998, the Internal Revenue

Service employed petitioner in an undisclosed capacity.    At all

relevant times, including during 1998 and 1999, the years at

issue, petitioner was licensed to practice law in Maryland and in

the District of Columbia.   On an undisclosed date, petitioner was

admitted to practice before the United States Tax Court.

     During 1998 and 1999, petitioner resided at 1516 U Street,

NW, Washington, D.C.   The property located at that address (U

Street property) consisted of three floors.

     During 1998 and 1999, petitioner, who practiced law as a

sole practitioner, represented various clients, at least some of

whom were assigned to him under the Criminal Justice Act (CJA).3



     3
      The Court takes judicial notice that Congress codified the
CJA in 18 U.S.C. sec. 3006A (1994).
                                - 4 -

     Starting on an undisclosed date in August 1999 through at

least the end of that year, petitioner employed Anitha Johnson

(Ms. Johnson) as a paralegal and office manager.   Ms. Johnson

continued to work for petitioner in an undisclosed capacity at

least through 2004.   By Ms. Johnson’s own admission, she did not

perform well the administrative tasks that she was expected to

undertake as part of her employment by petitioner.   Throughout

her employment, neither petitioner nor Ms. Johnson maintained

adequate records (e.g., receipts, invoices, billing statements)

with respect to petitioner’s law practice.

     During 1998, petitioner received (1) nonemployee compensa-

tion of $44,424 from the General Services Administration KC

Federal Building Fund (GSA) and $29,415 from the District of

Columbia and (2) an early distribution of $13,964 from the

National Finance Center Thrift Savings Plan.   During that year,

petitioner also earned interest of $265 with respect to the

checking and savings accounts (petitioner’s IRFCU checking and

savings accounts) that he maintained at the Internal Revenue

Federal Credit Union (IRFCU).

     During 1998, petitioner made deposits totaling $42,145 into

a checking account (petitioner’s Chevy Chase checking account)

that he maintained at Chevy Chase Bank.4   During that year,


     4
      We shall sometimes refer collectively to petitioner’s Chevy
Chase checking account and petitioner’s IRFCU checking and
                                                   (continued...)
                               - 5 -

petitioner also made deposits totaling $124,513 into petitioner’s

IRFCU checking and savings accounts, of which at least

$10,463.685 was made by direct deposit from GSA.

     During 1999, petitioner received nonemployee compensation of

$64,944 from GSA.   During that year, petitioner earned interest

of $39 with respect to petitioner’s IRFCU checking and savings

accounts.

     During 1999, petitioner made deposits totaling $35,195 into

petitioner’s Chevy Chase checking account.   During that year,

petitioner also made deposits totaling $71,556 into petitioner’s

IRFCU checking and savings accounts, of which at least

$64,944.236 was made by direct deposit from GSA.

     Around August 21, 1998, petitioner filed a tax return

(return) for his taxable year 1997 that showed tax due of $20,084



     4
      (...continued)
savings accounts as petitioner’s bank accounts.
     5
      For convenience, we shall round up to the nearest dollar
the $10,463.68 of direct deposits that GSA made into petitioner’s
IRFCU checking account during 1998.
     6
      The total amount of direct deposits that GSA made into
petitioner’s IRFCU checking account during 1999 rounded down to
the nearest dollar equals the amount of nonemployee compensation
from GSA that, as discussed below, was shown in the substitute
for return that respondent prepared for petitioner’s taxable year
1999 and the notice of deficiency that respondent issued to
petitioner with respect to that year. We presume that respondent
rounded down to the nearest dollar the $64,944.23 of nonemployee
compensation that petitioner received from GSA during 1999. For
convenience, we shall round down to the nearest dollar that total
amount of direct deposits.
                               - 6 -

and that the Internal Revenue Service accepted as filed.   Peti-

tioner did not file a return for his taxable year 1998 or his

taxable year 1999.   Nor did he make any estimated tax payments

with respect to either of those two years.

     Respondent prepared substitutes for return for petitioner’s

respective taxable years 1998 (substitute for return for 1998)

and 1999 (substitute for return for 1999).   Each of those substi-

tutes for return consisted of the following documents:    (1) IRC

Section 6020(b) Certification (section 6020(b) certification),

(2) Form 1040, U.S. Individual Income Tax Return, for the taxable

year for which respondent prepared that substitute, (3) a tran-

script of petitioner’s account for that year, (4) Form 4549,

Income Tax Examination Changes, and (5) Form 886-A, Explanation

of Items.   Each section 6020(b) certification certified that the

pages attached thereto constituted a valid substitute for return

under section 6020(b).   The substitute for return for 1998

showed, inter alia, (1) nonemployee compensation of $73,839

consisting of $44,424 from GSA and $29,415 from the District of

Columbia, (2) interest of $265, (3) a taxable distribution from

the National Finance Center Thrift Savings Plan of $13,964, and

(4) total tax of $30,228.40.   The substitute for return for 1999

showed, inter alia, (1) nonemployee compensation of $64,944 from

GSA, (2) interest of $39, and (3) total tax of $20,760.
                               - 7 -

     Respondent issued to petitioner separate notices with

respect to his taxable years 1998 (notice for 1998) and 1999

(notice for 1999).   In the notice for 1998, respondent deter-

mined, inter alia, that petitioner has (1) nonemployee compensa-

tion of $73,839,7 (2) interest of $265, and (3) a taxable distri-

bution from the National Finance Center Thrift Savings Plan of

$13,964.   In that notice, respondent also determined that peti-

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

and (2) and 6654(a) of $6,173.19, an amount to be computed at a

later date, and $1,371.98, respectively.

     In the notice for 1999, respondent determined, inter alia,

that petitioner has nonemployee compensation of $64,9448 and

interest of $39.   In that notice, respondent also determined that

petitioner is liable for additions to tax under sections

6651(a)(1) and (2) and 6654(a) of $4,671, an amount to be com-

puted at a later date, and $996.98, respectively.




     7
      The $73,839 of nonemployee compensation that respondent
determined in the notice for 1998 was based upon the nonemployee
compensation shown in the substitute for return for 1998. As
discussed above, of that total amount of nonemployee compensation
for 1998, $44,424 was from GSA and $29,415 was from the District
of Columbia.
     8
      The $64,944 of nonemployee compensation that respondent
determined in the notice for 1999 was based upon the nonemployee
compensation shown in the substitute for return for 1999. As
discussed above, the entire amount of that nonemployee compensa-
tion for 1999 was from GSA.
                                - 8 -

     In the answer, respondent alleged that respondent conducted

a deposit analysis and reconciliation of petitioner’s bank

accounts for each of petitioner’s taxable years 1998 (1998 bank

deposits analysis) and 1999 (1999 bank deposits analysis).     In

the answer, respondent further alleged (1) that the 1998 bank

deposits analysis showed that during 1998 petitioner made total

deposits of at least $166,658 into petitioner’s bank accounts, of

which $136,362 is taxable income,9 and (2) that the 1999 bank

deposits analysis showed that during 1999 petitioner made total

deposits of at least $106,751 into those accounts, of which

$101,179 is taxable income.10   Respondent did not allege in the

answer that respondent reduced the total deposits that respondent

alleged for petitioner’s respective taxable years 1998 and 1999

by the amounts of total unreported income that respondent had

determined in the respective notices and that respondent should

have reasonably known had been deposited into petitioner’s bank

accounts during those respective years.   Nor did respondent

allege in the answer that respondent reduced the amounts of total

unreported income that respondent alleged in the answer for

petitioner’s respective taxable years 1998 and 1999 by any


     9
      In effect, respondent alleged in the answer that for 1998
$30,296 of petitioner’s total deposits during that year are not
taxable.
     10
      In effect, respondent alleged in the answer that for 1999
$5,572 of petitioner’s total deposits during that year are not
taxable.
                               - 9 -

portion of the amounts of unreported income that respondent had

determined in the respective notices.   In the answer, respondent

also alleged that petitioner’s total tax for petitioner’s taxable

year 1998 is $46,762 and that the increase in the deficiency that

respondent had determined in the notice for 1998 is $16,534.   In

the answer, respondent further alleged that petitioner’s total

tax for petitioner’s taxable year 1999 is $33,856 and that the

increase in the deficiency that respondent had determined in the

notice for 1999 is $13,096.   In the answer, respondent further

alleged certain increases in the additions to tax under sections

6651(a)(1) and (2) and 6654(a) that respondent had determined in

the respective notices.11

     At an undisclosed time after petitioner commenced the

instant case, Ms. Johnson signed petitioner’s name on, and

submitted to respondent on petitioner’s behalf, returns for

petitioner’s respective taxable years 1998 (purported 1998

return) and 1999 (purported 1999 return).   In the purported 1998

return, petitioner showed on page 1, inter alia, “Taxable inter-

est” of $266, “Business income” from Schedule C, Profit or Loss

From Business (Schedule C), of $16,051, and “Total pensions and



     11
      In the answer, respondent alleged that the amounts of the
increases in the additions to tax under secs. 6651(a)(1) and (2)
and 6654(a) for petitioner’s respective taxable years 1998 and
1999 that respondent had determined in the notices are to be
determined based upon the “increases in the underlying deficien-
cies” for those respective years.
                                - 10 -

annuities” of $13,965.    In the purported 1999 return, petitioner

showed on page 1, inter alia, “Business income” from Schedule C

of $10,251.

     Petitioner included Schedule C as part of the purported 1998

return (purported 1998 Schedule C) and the purported 1999 return

(purported 1999 Schedule C).    In those purported Schedules C,

petitioner showed the “Principal business or profession” as

“Lawyer” and “Attorney”, respectively.

     In the purported 1998 Schedule C, petitioner showed “Gross

income” of $73,840.12    In that purported schedule, petitioner

claimed “Total expenses before expenses for business use of home”

of $55,135 consisting of $1,856 for “Advertising”, $6,150 for

“Car and truck expenses” (vehicle expenses), $3,601 for “Depreci-

ation”, $2,394 for “Insurance (other than health)” (insurance

premiums), $11,538 for “Mortgage” interest, $1,835 for “Other”

interest, $8,300 for “Office expense”, $3,374 for “Repairs and

maintenance”, $3,125 for “Supplies”, $10,716 for “Taxes and

licenses”, $586 for “Meals and entertainment”, $1,100 for “Utili-

ties” (utility expenses), and $560 for “Other expenses”.    In the

purported 1998 Schedule C, petitioner also claimed “Expenses for

business use of your home” of $2,654.    In that purported sched-


     12
      The amount of “Gross income” shown in the purported 1998
Schedule C is $1 more than the total nonemployee compensation
that respondent showed in the substitute for return for 1998 and
that respondent determined in the notice for 1998.
                               - 11 -

ule, petitioner showed “Net profit” of $16,051, which, as stated

above, petitioner reported in petitioner’s purported 1998 return

on page 1 as “Business income” from Schedule C.

     In the purported 1999 Schedule C, petitioner showed “Gross

income” of $19,03313 and total expenses of $8,782 for “Deprecia-

tion”.    In that purported schedule, petitioner showed “Net

profit” of $10,251, which, as stated above, petitioner reported

in petitioner’s purported 1999 return on page 1 as “Business

income” from Schedule C.

                               OPINION

     Petitioner bears the burden of proving error in the determi-

nations in the notices for petitioner’s respective taxable years

1998 and 1999 that remain at issue, see Rule 142(a); Welch v.

Helvering, 290 U.S. 111, 115 (1933), unless that burden shifts to

respondent under section 7491(a).   The parties disagree over

whether the burden of proof with respect to the deficiency

determinations in the respective notices shifts to respondent

under that section.14   On the record before us, we find that


     13
      Respondent showed in the substitute for return for 1999
and determined in the notice for 1999 that petitioner has total
nonemployee compensation of $64,944 for that year.
     14
      Respondent submitted to the Court a pretrial memorandum;
petitioner did not. In respondent’s pretrial memorandum, respon-
dent argues that the burden of proof with respect to the defi-
ciency determinations in the respective notices does not shift to
respondent under sec. 7491(a). At the end of the trial in this
case, Special Trial Judge Powell ordered the parties to file
                                                   (continued...)
                                - 12 -

petitioner has failed to carry his burden of establishing that he

complied with the requirements of section 7491(a)(2)(A) and (B).

On that record, we hold that the burden of proof with respect to

the deficiency determinations in the respective notices does not

shift to respondent under section 7491(a).    Respondent, however,

bears the burden of proof with respect to the allegations in the

answer to increase the deficiencies and the additions to tax

under sections 6651(a)(1) and (2) and 6654(a) that respondent had

determined in the respective notices.    See Rule 142(a).

     Before turning to the issues presented, we shall summarize

certain principles applicable to the Schedule C deductions that

petitioner is claiming and evaluate certain evidence on which

petitioner relies.

Certain Applicable Principles

     Deductions are strictly a matter of legislative grace, and

the taxpayer bears the burden of proving entitlement to any

deduction claimed.   INDOPCO, Inc. v. Commissioner, 503 U.S. 79,

84 (1992).   A taxpayer is required to maintain records sufficient

to establish the amount of any deduction claimed.    Sec. 6001;



     14
      (...continued)
posttrial memoranda. He specifically ordered the parties to
limit the content of their memoranda to proposed findings of
fact. Respondent complied with that order; petitioner did not.
In violation of Special Trial Judge Powell’s order, petitioner
advances in petitioner’s posttrial memorandum various arguments
with respect to the burden of proof in this case and the issues
presented.
                               - 13 -

sec. 1.6001-1(a), Income Tax Regs.

     Section 162(a) generally allows a deduction for ordinary and

necessary expenses paid or incurred during the taxable year in

carrying on any trade or business.      The determination of whether

an expenditure satisfies the requirements for deductibility under

section 162 is a question of fact.      See Commissioner v.

Heininger, 320 U.S. 467, 475 (1943).     In general, an expense is

ordinary if it is considered normal, usual, or customary in the

context of the particular business out of which it arose.     See

Deputy v. du Pont, 308 U.S. 488, 495 (1940).      Ordinarily, an

expense is necessary if it is appropriate and helpful to the

operation of the taxpayer’s trade or business.     See Commissioner

v. Tellier, 383 U.S. 687 (1966); Carbine v. Commissioner, 83 T.C.

356, 363 (1984), affd. 777 F.2d 662 (11th Cir. 1985).     Section

262(a) generally disallows a deduction for personal, living, or

family expenses.

     For certain kinds of expenses otherwise deductible under

section 162(a), such as business expenses relating to “listed

property”, as defined in section 280F(d)(4), a taxpayer must

satisfy substantiation requirements set forth in section 274(d)

before such expenses will be allowed as deductions.     See sec.

1.274-5T(b)(6), Temporary Income Tax Regs., 50 Fed. Reg. 46016

(Nov. 6, 1985).    As pertinent here, “listed property” is defined

in section 280F(d)(4) to include passenger automobiles and other
                                   - 14 -

property used as a means of transportation, unless excepted by

section 280F(d)(4)(C) or (5)(B), and cellular telephones.15        See

sec. 280F(d)(4)(A)(i), (ii), (v).

     Section 167(a) allows a deduction for a reasonable allowance

for the exhaustion, wear and tear, and obsolescence of property

used in a trade or business or held for the production of income.

In general, the basis on which a depreciation deduction is

allowable with respect to any property under section 167(a) is

the adjusted basis of the property, determined under section 1011

for the purpose of determining gain on the sale or other disposi-

tion of such property.       See sec. 167(c)(1).

     Section 280A(a) generally disallows a deduction, otherwise

allowable under the Code, with respect to the use of a dwelling

unit.        That general rule, however, does not apply with respect to

     any item to the extent such item is allocable to a
     portion of the dwelling unit which is exclusively used
     on a regular basis–-

                     (A) as the principal place of business for
                any trade or business of the taxpayer, [or]

                     (B) as a place of business which is used by
                patients, clients, or customers in meeting or


        15
      The elements that a taxpayer must prove with respect to
any listed property are: (1)(a) The amount of each separate
expenditure with respect to such property and (b) the amount of
each business use based on the appropriate measure, e.g., mileage
for automobiles, of such property; (2) the time, i.e., the date
of the expenditure or use with respect to any such property; and
(3) the business purpose for an expenditure or use with respect
to such property. Sec. 1.274-5T(b)(6), Temporary Income Tax
Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985).
                                 - 15 -

             dealing with the taxpayer in the normal course of
             his trade or business * * *

Sec. 280A(c)(1)(A) and (B).

Evaluation of Certain Evidence on Which Petitioner Relies

     In order to satisfy his burden of proof, petitioner relies

on, inter alia, Ms. Johnson’s testimony,16 certain stipulated

documents, and certain other documents that petitioner introduced

into the record at trial.17     (We shall refer collectively to

those stipulated documents and those documents that petitioner

introduced into the record at trial as petitioner’s documents.)

     With respect to Ms. Johnson’s testimony, Ms. Johnson started

working for petitioner’s law practice on an undisclosed date in

August 1999.     She had no personal knowledge regarding peti-

tioner’s law practice or any other activities of petitioner

during 1998 to the date in August 1999 on which petitioner first

employed her.     As a result, at the trial in this case, Special

Trial Judge Powell ordered Ms. Johnson to restrict her testimony

to matters with respect to which she had personal knowledge.      See

Fed. R. Evid. 602.     During her testimony, Ms. Johnson failed in

certain material respects to comply with Special Trial Judge

Powell’s order.     Under the circumstances, we shall not rely on



     16
          Petitioner was not at the trial in this case.
     17
      As discussed below, in order to satisfy his burden of
proof, petitioner also relies on certain other documents (peti-
tioner’s proffered documents).
                               - 16 -

Ms. Johnson’s testimony to the extent that it pertained to

matters with respect to which she did not have personal knowl-

edge.     See id.

     In addition, we found Ms. Johnson’s testimony to be in

certain material respects general, vague, conclusory, internally

inconsistent, and/or contradicted by the record.   Under the

circumstances, we are not required to, and we shall not, rely on

that testimony to establish petitioner’s position with respect to

any of the issues presented in this case.   See Lerch v. Commis-

sioner, 877 F.2d 624, 631-632 (7th Cir. 1989), affg. T.C. Memo.

1987-295; Geiger v. Commissioner, 440 F.2d 688, 689-690 (9th Cir.

1971), affg. per curiam T.C. Memo. 1969-159; Shea v. Commis-

sioner, 112 T.C. 183, 189 (1999).

     With respect to petitioner’s documents, those documents

include the purported 1998 return and the purported 1999 return.

Petitioner apparently is relying on those purported returns to

support his position with respect to the Schedule C deductions

that he is claiming here.18   The respective expenses and the


     18
      Although not altogether clear, it appears that petitioner
is claiming for his respective taxable years 1998 and 1999 all of
the expense and depreciation deductions that are shown in the
purported 1998 Schedule C and the purported 1999 Schedule C,
except the respective expense deductions claimed in the 1998
purported Schedule C for “Other expenses”, “Meals and entertain-
ment”, and “Expenses for business use of your home”. If our
understanding were incorrect and if petitioner were also claiming
that he is entitled for his taxable year 1998 to deduct “Other
expenses”, “Meals and entertainment”, and “Expenses for business
                                                   (continued...)
                             - 17 -

respective amounts of depreciation that are shown in the pur-

ported 1998 Schedule C and the purported 1999 Schedule C are

nothing more than statements of petitioner’s position and do not

establish that petitioner is entitled to deduct those claimed

expenses and depreciation.

     Petitioner’s documents also include virtually all of peti-

tioner’s bank statements for 1998 and 1999, respectively, for

(1) petitioner’s Chevy Chase checking account (Chevy Chase bank

statements) and (2) petitioner’s IRFCU checking and savings

accounts (IRFCU bank statements).   Those bank statements show

withdrawals from, checks drawn on, and deposits into those

respective accounts during the years at issue.   The Chevy Chase

bank statements and the IRFCU bank statements do not show the

purpose of any of those withdrawals, the payee or the purpose of

any of those checks,19 or the source of any of those deposits,

except certain deposits into the checking account (petitioner’s




     18
      (...continued)
use of your home”, on the record before us, we find that peti-
tioner has failed to carry his burden of establishing that he is
entitled to those deductions.
     19
      Although the Chevy Chase bank statements and the IRFCU
bank statements do not show the payee of the checks drawn on
petitioner’s Chevy Chase checking account and petitioner’s IRFCU
checking account, petitioner included as part of petitioner’s
proffered documents copies of more than one-third of the checks
drawn on petitioner’s Chevy Chase checking account and one check
drawn on petitioner’s IRFCU checking account. Those checks show
the payees thereof.
                                 - 18 -

IRFCU checking account) that petitioner maintained at IRFCU.20

We shall not rely on those statements to establish the purpose of

any of the withdrawals from, the payee21 or the purpose of any of

the checks drawn on, or the source of certain of the deposits22

into petitioner’s bank accounts.

Unreported Income

     In the notice for 1998, respondent determined that peti-

tioner has the following unreported income:       (1) Nonemployee

compensation of $73,839 consisting of $44,424 from GSA and

$29,415 from the District of Columbia,23 (2) interest of $265,

and (3) a taxable distribution of $13,964 from the National

Finance Center Thrift Savings Plan.       In the notice for 1999,

respondent determined that petitioner has the following unre-

ported income:     (1) Nonemployee compensation of $64,944 from

GSA24 and (2) interest of $39.    Petitioner concedes the income

determinations in the notices.




     20
      We found above that the IRFCU bank statements show that
GSA was the source of certain of the deposits made into peti-
tioner’s IRFCU checking account during each of the years 1998 and
1999.
     21
          See supra note 19.
     22
       See supra note 20.
     23
       See supra note 7.
     24
       See supra note 8.
                                  - 19 -

     In the answer, respondent alleged (1) that the 1998 bank

deposits analysis showed that during 1998 petitioner made total

deposits of at least $166,658 into petitioner’s bank accounts, of

which $136,362 is taxable (and therefore $30,296 is not taxable),

and (2) that the 1999 bank deposits analysis showed that during

1999 petitioner made total deposits of at least $106,751 into

those accounts, of which $101,179 is taxable (and therefore

$5,572 is not taxable).25      Respondent did not allege in the

answer that respondent reduced the total deposits that respondent


     25
          In the stipulation of facts, the parties stipulated:

     Of the $42,145 petitioner deposited into the Chevy
     Chase checking account in 1998, $3,587 was from non-
     taxable sources.

           *       *       *        *       *       *       *

          * * * Of the $35,195 petitioner deposited into the
     Chevy Chase checking account in 1999, $5,572 was from
     non-taxable sources.

           *       *       *        *       *       *       *

          * * * Of the $124,513 petitioner deposited into
     the IRFCU accounts in 1998, $26,709 was from non-tax-
     able sources.

     We construe the foregoing stipulations to mean that at least
$30,296 of the total deposits that petitioner made during 1998
into petitioner’s bank accounts and at least $5,572 of the total
deposits that petitioner made during 1999 into those accounts are
not taxable. To construe those stipulations otherwise would mean
that petitioner conceded in the parties’ stipulation of facts
that for each of his taxable years 1998 and 1999 he has the total
amount of unreported income that respondent alleged in the answer
for each of those years. On the record before us, we find that
petitioner did not intend to make that concession. Cf. Rule
91(e).
                                 - 20 -

alleged for petitioner’s respective taxable years 1998 and 1999

by the amounts of total unreported income that respondent had

determined in the respective notices and that respondent should

have reasonably known had been deposited into petitioner’s bank

accounts during those respective years.     Nor did respondent

allege in the answer that respondent reduced the amounts of total

unreported income that respondent alleged in the answer for

petitioner’s respective taxable years 1998 and 1999 by any

portion of the amounts of unreported income that respondent had

determined in the respective notices.

     Where a taxpayer has failed to maintain sufficient records

under section 6001, as is the case here, the Commissioner of

Internal Revenue (Commissioner) may rely on the bank deposits

method in order to determine the taxpayer’s income.        Nicholas v.

Commissioner, 70 T.C. 1057, 1064 (1978).     Respondent has the

burden of proof with respect to the allegations of unreported

income that respondent advanced in the answer on the basis of the

bank deposits method, see Rule 142(a), and the obligation to

check all reasonable leads in order to verify the essential

accuracy of the income approximation produced by that method.26

     On the record before us, we find that respondent has failed

to carry respondent’s burden of showing that respondent checked

all reasonable leads in order to verify the essential accuracy of


     26
          See Cruz v. Commissioner, T.C. Memo. 1990-594.
                              - 21 -

the amount of total unreported income for each of petitioner’s

taxable years 1998 and 1999 that respondent alleged in the

answer.   In fact, respondent appears to have ignored actual facts

of which respondent was aware that affect the essential accuracy

of each of those amounts of alleged total unreported income.

     With respect to the total deposits that respondent alleged

in the answer for petitioner’s taxable year 1998, respondent knew

that at least certain ($10,464) of the nonemployee compensation

that petitioner received from GSA during that year, which respon-

dent included as part of the total unreported income determined

in the notice for 1998,27 had been deposited by direct deposit

into petitioner’s IRFCU checking account.28   Respondent has not

proffered any evidence as to whether the $30,296 that respondent

excluded from petitioner’s total deposits under the 1998 bank

deposits analysis included any of the $10,464 that GSA had

deposited into petitioner’s IRFCU checking account during 1998.

Nor has respondent proffered any evidence as to whether respon-

dent checked all reasonable leads in order to verify whether any

of the remaining unreported income that respondent determined in



     27
      In the notice for 1998, respondent determined that peti-
tioner has additional nonemployee compensation of $33,960 from
GSA. See supra note 7.
     28
      The IRFCU bank statements show that GSA started making
direct deposits into petitioner’s IRFCU checking account in
November 1998 and that during November through December 1998 GSA
made direct deposits totaling $10,464 into that account.
                              - 22 -

the notice for 1998 (i.e., the balance of the nonemployee compen-

sation from GSA ($33,960), the nonemployee compensation from the

District of Columbia ($29,415), and the distribution from the

National Finance Center Thrift Savings Plan ($13,964)), had been

deposited into petitioner’s bank accounts during that year.

     With respect to the total deposits that respondent alleged

in the answer for petitioner’s taxable year 1999, respondent knew

that all ($64,944) of the nonemployee compensation that peti-

tioner received from GSA during that year, which respondent

included as part of the total unreported income determined in the

notice for 1999, had been deposited by direct deposit into

petitioner’s IRFCU checking account.   Respondent has not prof-

fered any evidence as to whether the $5,572 that respondent

excluded from petitioner’s total deposits under the 1999 bank

deposits analysis included any of the $64,944 that GSA had

deposited into petitioner’s IRFCU checking account during 1999.

Moreover, even if respondent had excluded $5,572 of the total

amount that GSA had deposited, respondent did not exclude from

petitioner’s total deposits during 1999 the balance ($59,372)

that GSA had deposited into petitioner’s IRFCU checking account

during that year.   Nor did respondent reduce the amount of total

unreported income that respondent alleged in the answer for

petitioner’s taxable year 1999 by any portion of the amount of

unreported income that respondent determined in the notice for
                             - 23 -

1999.

     On the record before us, we find that respondent has failed

to carry respondent’s burden of establishing that petitioner has

unreported income for his respective taxable years 1998 and 1999

in excess of the amounts determined in the notices.    On that

record, we further find that respondent has failed to carry

respondent’s burden of establishing that petitioner has the

increases in the deficiencies for his respective taxable years

1998 and 1999 that respondent alleged in the answer.

Claimed Deductions

    It is petitioner’s position that he is entitled to deduct for

his taxable year 1998 the following:   (1) Advertising expenses of

$1,856, (2) vehicle expenses of $6,150, (3) insurance premiums of

$2,394, (4) mortgage interest of $11,538, (5) other interest of

$1,835, (6) office expenses of $8,300, (7) repair and maintenance

expenses of $3,374, (8) expenses for supplies of $3,125,

(9) taxes and licenses of $10,716, (10) utility expenses of

$1,100, and (11) depreciation of $3,601 with respect to (a) the U

Street property and (b) certain unidentified vehicles.    It is

petitioner’s position that he is entitled to deduct for his

taxable year 1999 depreciation of $8,782 with respect to (1) the

U Street property and (2) an unidentified vehicle.29


     29
      In his posttrial memorandum, petitioner states: “The
Petitioner includes all his 1999 business expenses under Depreci-
                                                   (continued...)
                                   - 24 -

        In support of his position that he is entitled to the

Schedule C deductions that he is claiming, petitioner relies on

Ms. Johnson’s testimony and petitioner’s documents.        We set forth

above our evaluation of that evidence.        Petitioner also relies on

petitioner’s proffered documents, virtually all of which pertain

to petitioner’s taxable year 1998 (petitioner’s 1998 proffered

documents).30       At the trial in this case, respondent objected to

the admission of petitioner’s proffered documents on the ground

that no proper foundation had been laid for the admission of

those documents as business records.        It is not clear from the

record whether Special Trial Judge Powell ruled on that objec-

tion.        The following discussion assumes arguendo that Special

Trial Judge Powell admitted petitioner’s proffered documents into

evidence and made them part of the record.




        29
      (...continued)
ation and section 179 expense deduction.” Although not alto-
gether clear, we construe petitioner’s statement to mean that the
only Schedule C deduction that he is claiming for 1999 is a
depreciation deduction. Our understanding of petitioner’s
statement in petitioner’s posttrial memorandum is consistent with
the purported 1999 return. The only deduction that petitioner
claimed in the purported 1999 Schedule C is a depreciation
deduction of $8,782.
        30
      Only two of petitioner’s proffered documents pertain to
petitioner’s taxable year 1999, i.e., a check drawn on peti-
tioner’s IRFCU checking account, dated Nov. 12, 1999, and payable
to “Ana & Jose Reyes” and a check drawn on petitioner’s Chevy
Chase checking account, dated June 12, 1999, and payable to “U
Street Cleaners”. The record does not disclose the issue(s)
presented in this case, if any, to which those checks pertain.
                             - 25 -

     We first evaluate petitioner’s 1998 proffered documents.

Those proffered documents consist of (1) certain checks (peti-

tioner’s checks) that petitioner issued to various individuals

and establishments, including certain checks that petitioner

issued to a pediatrician; (2) certain credit card statements

consisting of (a) two statements for a Chase card that show

closing dates of June 18 and July 20, 1998, respectively, and

(b) two statements for a Visa Gold card that show closing dates

of June 19, 1998, and September 11, 1998, respectively;

(3) a purported mileage log of petitioner (petitioner’s 1998

purported mileage log); (4) duplicates of certain of the IRFCU

bank statements and the Chevy Chase bank statements that are

included in petitioner’s documents that the parties stipulated;

(5) certain invoices and billing statements from various estab-

lishments (petitioner’s invoices and billing statements), includ-

ing certain statements from a pediatrician; (6) certain receipts

consisting of (a) two receipts from Sears dated September 12 and

October 21, 1998, respectively, (b) a receipt from Hechinger

dated October 17, 1998, and (c) a receipt from the University of

the District of Columbia dated May 29, 1998; (7) certain docu-

ments relating to certain student loans; (8) certain deposit

slips; and (9) a notice dated September 25, 1998, with respect to

an unsatisfied parking ticket.
                                - 26 -

     We find that petitioner’s 1998 proffered documents are

inadequate to establish petitioner’s entitlement to any of the

Schedule C deductions that he is claiming for his taxable year

1998.     By way of illustration of the inadequacies of petitioner’s

1998 proffered documents, we do not know the claimed expense(s)

to which approximately three-quarters of petitioner’s checks

pertain.31    As for the remainder of petitioner’s checks, although

we have been able to determine the claimed expense(s) to which

those checks pertain, we find that those checks do not establish,

inter alia, that petitioner paid those expenses in conducting his

law practice.

     By way of further illustration of the inadequacies of

petitioner’s 1998 proffered documents, petitioner’s credit card

statements do not establish the claimed expense(s) to which those

statements pertain or whether petitioner is claiming all of the

expenses shown in those statements.      Moreover, we find that

petitioner’s credit card statements do not establish, inter alia,

that petitioner paid the expenses shown in petitioner’s credit

card statements in conducting his law practice.




     31
      Included in petitioner’s checks are a substantial number
of checks with handwritten notations, most of which are illegible
or unclear as to their meaning. We note that even if the hand-
written notations on petitioner’s checks were legible and clear
as to their meaning, those notations do not establish that the
expenditures paid by those checks were paid in conducting peti-
tioner’s law practice.
                               - 27 -

     As a further illustration of the inadequacies of peti-

tioner’s 1998 proffered documents, petitioner’s 1998 purported

mileage log32 consists of four columns with the headings “Date”,

“From”, “To”, and “Miles”.    The entries shown in the columns

headed “From” and “To” for the period January 5 through May 10,

1998, consist of various addresses with no further explanation.

Virtually all of the entries shown in the columns headed “From”

and “To” for the period May 11 through December 29, 1998, consist

of terms such as “Home”, “Court”, “Jail”, “Witness”, “Client’s

Home”, and “Crime Scene”.33   Because petitioner was not at the

trial in this case, he was not available to explain the entries

in petitioner’s 1998 purported mileage log.    Nor is there reli-

able evidence in the record to explain (1) any of the entries in

petitioner’s 1998 purported mileage log and (2) how petitioner

used that purported log to calculate the deduction that he claims

for vehicle expenses.   We find that petitioner’s 1998 purported

mileage log does not establish, inter alia, that petitioner made

the purported trips reflected in that purported log in conducting



     32
      Ms. Johnson, who did not start working for petitioner
until sometime in August 1999, testified that petitioner prepared
petitioner’s 1998 purported mileage log. Ms. Johnson did not
testify (1) how she knew that petitioner prepared that purported
log, which purports to cover trips during 1998 only, or (2) when
he prepared it.
     33
      Certain of the entries in the respective columns headed
“From” and “To” for the period May 11 through July 19, 1998, are
addresses.
                               - 28 -

his law practice.

     By way of further illustration of the inadequacies of

petitioner’s 1998 proffered documents, we find that petitioner’s

invoices and billing statements do not establish, inter alia,

that petitioner paid the amounts shown therein and/or that

petitioner paid the amounts shown in those invoices and billing

statements in conducting his law practice.

     As a final illustration of the inadequacies of petitioner’s

1998 proffered documents, neither the receipt from the University

of the District of Columbia nor the receipts from Sears indicate

the reason petitioner expended the amounts shown in those respec-

tive receipts.   Although the receipt from Hechinger shows the

items34 that were purchased for the total amount shown in that

receipt, we find that it does not establish, inter alia, that

petitioner purchased those items in conducting his law practice.

     We now address petitioner’s argument that he is entitled to

the Schedule C deductions that he is claiming for his respective

taxable years 1998 and 1999.   With respect to the claimed Sched-

ule C deductions for 1998 for advertising expenses, vehicle

expenses, insurance premiums,35 mortgage interest, other inter-



     34
      The items shown in the receipt from Hechinger are “DRUM
LINER TRASH BAG”, “GROUND FAULT KIT”, “STAPLE DISPENSER”, “ROMEX
CONNECTOR”, and “NMB CABLE”.
     35
      The record does not establish the type of insurance policy
to which petitioner’s claimed insurance premiums pertain.
                             - 29 -

est,36 office expenses, repair and maintenance expenses, expenses

for supplies, taxes and licenses, and utility expenses, we find

nothing in the record that satisfies petitioner’s burden of

showing (1) that during 1998 petitioner paid or incurred those

expenses, (2) that he paid or incurred those expenses in conduct-

ing his law practice, and/or (3) that those expenses constitute

ordinary and necessary business expenses in conducting his law

practice under section 162(a).   On the record before us, we find

that petitioner has failed to carry his burden of establishing

that he is entitled for his taxable year 1998 to the respective

deductions under section 162(a) that he claims for advertising

expenses, vehicle expenses, insurance premiums, mortgage inter-

est, other interest, office expenses, repair and maintenance

expenses, expenses for supplies, taxes and licenses, and utility

expenses.

     With respect to the depreciation deductions that petitioner

claims with respect to the U Street property for his respective

taxable years 1998 and 1999, the only evidence that petitioner

introduced to support those claimed deductions is Ms. Johnson’s

general and vague testimony that “the depreciation on the home is

based on a calculation of a formula based on * * * the amount you

purchase the home over a period of time” and that a “good guess”



     36
      The record does not establish the nature of petitioner’s
claimed interest.
                              - 30 -

of the purchase price for that property is $260,000.   On the

record before us, we find that petitioner has failed to carry his

burden of establishing that he is entitled for his respective

taxable years 1998 and 1999 to the depreciation deductions under

section 167(a) that he claims with respect to the U Street

property.

     With respect to the respective depreciation deductions that

petitioner claims for his taxable year 1998 with respect to

certain unidentified vehicles and the depreciation deduction that

he claims for his taxable year 1999 with respect to an unidenti-

fied vehicle, on the record before us, we find that petitioner

has failed to carry his burden of establishing, inter alia, that

he used any vehicle as part of his law practice.   See sec.

167(a).   On that record, we further find that petitioner has

failed to carry his burden of establishing that he is entitled

(1) for his taxable year 1998 to the depreciation deduction under

section 167(a) that he claims with respect to certain unidenti-

fied vehicles and (2) for his taxable year 1999 to the deprecia-

tion deduction under that section that he claims with respect to

an unidentified vehicle.

     Assuming arguendo that we had found that petitioner carried

his burden of establishing (1) for his taxable year 1998 the

deductibility under section 162(a) of petitioner’s claimed

expenses pertaining to the U Street property (i.e., petitioner’s
                              - 31 -

claimed mortgage interest, petitioner’s claimed utility expenses,

and petitioner’s claimed repair and maintenance expenses) and

(2) for his respective taxable years 1998 and 1999 the deduct-

ibility under section 167(a) of petitioner’s claimed depreciation

with respect to that property, he would still have to satisfy the

requirements of section 280A(c) with respect to those expense and

depreciation deductions.   In order to satisfy the requirements of

that section, petitioner would have to establish that those

expense and depreciation deductions are allocable to a portion of

the U Street property that was exclusively used on a regular

basis as the principal place of business for his law practice or

as a place of business to meet or deal with clients in the normal

course of his law practice.   See sec. 280A(c).

     The parties do not dispute that petitioner resided at the U

Street property and that that property consisted of three floors.

Petitioner contends that during each of the years at issue he

exclusively used on a regular basis the lower two floors of the U

Street property as his principal place of business for his law

practice or as a place of business to meet or deal with clients

in the normal course of his practice.   To support petitioner’s

contention, petitioner relies on Ms. Johnson’s testimony.    As

discussed above, we are unwilling to rely on Ms. Johnson’s

testimony to the extent that it pertained to matters surrounding

petitioner’s law practice or any other activities of petitioner
                              - 32 -

during 1998 to the date in August 1999 on which petitioner first

employed her.

     Assuming arguendo that we were willing to rely on Ms.

Johnson’s testimony with respect to whether during each of the

years at issue petitioner exclusively used on a regular basis the

U Street property as his principal place of business for his law

practice or as a place of business to meet or deal with clients

in the normal course of his practice, we found her testimony to

be internally inconsistent.   Ms. Johnson testified on direct

examination that the top two floors of the U Street property were

“completely business”.   On cross-examination, Ms. Johnson contra-

dicted that testimony and testified that the top floor of the U

Street property was “just his residence” and that the lower two

floors of that property were used for business purposes.

     On the record before us, we find that petitioner has failed

to carry his burden of establishing that during each of the years

at issue he exclusively used on a regular basis any portion of

the U Street property as the principal place of business for his

law practice or as a place of business to meet or deal with

clients in the normal course of his law practice.   See sec.

280A(c).

     Assuming arguendo that we had found that petitioner carried

his burden of establishing for his taxable year 1998 the deduct-

ibility under section 162(a) of petitioner’s claimed vehicle
                                 - 33 -

expenses, petitioner would still have to satisfy the requirements

of section 274(d) with respect to those expenses.    On the record

before us, we find that he has not done so.    See sec. 274(d)(4);

sec. 1.274-5T(b)(6), Temporary Income Tax Regs., 50 Fed. Reg.

46016 (Nov. 6, 1985).

     Assuming arguendo that we had found that petitioner carried

his burden of establishing for his taxable year 1998 the deduct-

ibility under section 162(a) of petitioner’s claimed office

expenses, it appears from Ms. Johnson’s testimony that those

claimed expenses include certain expenses that pertained to the

use of a cellular telephone.37    To the extent that petitioner is

claiming expenses that pertained to the use of a cellular tele-

phone, petitioner would still have to satisfy the requirements of

section 274(d).    On the record before us, we find that he has not

done so.   See sec. 274(d)(4); sec. 1.274-5T(b)(6), Temporary

Income Tax Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985).

Additions to Tax

     It is respondent’s position that petitioner is liable for

the respective additions to tax under sections 6651(a)(1) and (2)

and 6654(a) that respondent determined in the notices and the


     37
      Because Ms. Johnson testified that she “itemized the
expenses” shown in the purported 1998 return, we believe that she
had personal knowledge of the nature of the expenses that peti-
tioner is claiming for his taxable year 1998. As discussed
above, that is not to say that Ms. Johnson had personal knowledge
of the expenses that petitioner paid during that year in conduct-
ing his law practice.
                               - 34 -

increases in those respective additions to tax that respondent

alleged in the answer.

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

file timely a return.    Section 6651(a)(2) imposes an addition to

tax for failure to pay timely the amount shown as tax in a

return.    The respective additions to tax under section 6651(a)(1)

and (2) do not apply if the respective failures to file timely

and to pay timely are due to reasonable cause, and not willful

neglect.   Sec. 6651(a)(1) and (2).     Section 6654(a) imposes an

addition to tax in the case of an underpayment of estimated tax

by an individual.38   The addition to tax under that section is

mandatory unless petitioner qualifies under one of the exceptions

in section 6654(e).39


     38
      For purposes of sec. 6654(a), it is necessary to determine
whether there is an underpayment of a required installment of
estimated tax. See sec. 6654(a) and (b). In this connection,
the amount of any required installment is 25 percent of the
required annual payment. Sec. 6654(d)(1)(A). The required
annual payment is equal to the lesser of (1) 90 percent of the
tax shown in the return for the taxable year or, if no return was
filed, 90 percent of the tax for such year, or (2) if the indi-
vidual filed a return for the preceding taxable year, 100 percent
of the tax shown in such return. Sec. 6654(d)(1)(B).
     39
      Sec. 6654(e) provides that no addition to tax shall be
imposed under sec. 6654(a) for any taxable year if (1) the tax
shown in the return for such taxable year (or, if no return is
filed, the tax), reduced by the credit allowable under sec. 31,
is less than $1,000, sec. 6654(e)(1); (2) the preceding taxable
year was a taxable year of 12 months, the individual did not have
any liability for such preceding taxable year, and the individual
was a citizen or resident of the United States throughout such
preceding taxable year, sec. 6654(e)(2); (3) the Secretary
                                                   (continued...)
                                - 35 -

     Respondent must carry the burden of production with respect

to the respective additions to tax under sections 6651(a)(1) and

(2) and 6654(a) that respondent determined in the notices and the

increases in those respective additions to tax that respondent

alleged in the answer.   Sec. 7491(c); Higbee v. Commissioner, 116

T.C. 438, 446-447 (2001).   To satisfy respondent’s burden of

production, respondent must come forward with “sufficient evi-

dence indicating that it is appropriate to impose” the additions

to tax.   Higbee v. Commissioner, supra at 446.   Although respon-

dent bears the burden of production with respect to the respec-

tive additions to tax under sections 6651(a)(1) and (2) and

6654(a) that respondent determined in the notices, respondent

“need not introduce evidence regarding reasonable cause * * * or

similar provisions. * * * the taxpayer bears the burden of proof

with regard to those issues.”    Higbee v. Commissioner, supra.

Respondent bears the burden of proof with respect to the in-

creases in the respective additions to tax under sections

6651(a)(1) and (2) and 6654(a) for petitioner’s taxable years



     39
      (...continued)
determines that by reason of casualty, disaster, or other unusual
circumstances the imposition of such addition to tax would be
against equity and good conscience, sec. 6654(e)(3)(A); or
(4) the Secretary determines that during the taxable year for
which the estimated payments are required or in the taxable year
preceding such taxable year, the taxpayer retired after having
attained the age of 62 or became disabled and the underpayment of
any estimated tax was due to reasonable cause and not willful
neglect, sec. 6654(e)(3)(B).
                              - 36 -

1998 and 1999 that respondent alleged in the answer.    See Rule

142(a).

     With respect to the respective additions to tax under

sections 6651(a)(1) and (2) and 6654(a) that respondent deter-

mined in the notices, we turn first to the addition to tax under

section 6651(a)(1).   We have found that petitioner did not file a

return for each of his taxable years 1998 and 1999.    On the

record before us, we find that respondent has carried respon-

dent’s burden of production under section 7491(c) with respect to

the additions to tax under section 6651(a)(1) that respondent

determined in the respective notices.

     Petitioner relies on Ms. Johnson’s testimony to support his

position that his failure to file timely was due to reasonable

cause, and not willful neglect.   Section 1.6081-4, Income Tax

Regs., provides that “An individual who is required to file an

individual income tax return will be allowed an automatic 4-month

extension of time to file the return after the date prescribed

for filing the return”.   After taking the automatic four-month

extension into account, the due date for petitioner’s return for

1998 would have been August 15, 1999, and the due date for

petitioner’s return for 1999 would have been August 15, 2000.

Ms. Johnson began working for petitioner sometime in August 1999

and continued to work for him until at least through 2004.      We

believe that Ms. Johnson had personal knowledge about why peti-
                                - 37 -

tioner failed to file a return for each of his taxable years 1998

and 1999.

     Ms. Johnson testified that petitioner did not file a return

for each of his taxable years 1998 and 1999 because he (1) did

not have all of the information that he needed to file a return

for each of those years and (2) was too busy in his law practice.

The unavailability of information or records does not necessarily

establish reasonable cause for failure to file timely a return.

See Elec. & Neon, Inc. v. Commissioner, 56 T.C. 1324, 1342-1343

(1971), affd. without published opinion 496 F.2d 876 (5th Cir.

1974).    A taxpayer is required to file timely based upon the best

information available and to file thereafter an amended return if

necessary.     Estate of Vriniotis v. Commissioner, 79 T.C. 298, 311

(1982).     Moreover, a taxpayer’s preoccupation with employment or

other activities does not necessarily establish reasonable cause

for failure to timely file a return.     Dustin v. Commissioner, 53

T.C. 491, 507 (1969), affd. 467 F.2d 47 (9th Cir. 1972).

     On the record before us, we find that petitioner has failed

to carry his burden of showing that his failure to file a return

for each of his taxable years 1998 and 1999 was due to reasonable

cause, and not willful neglect.    On that record, we further find

that petitioner has failed to carry his burden of establishing

that he is not liable for the additions to tax under section

6651(a)(1) that respondent determined in the respective notices.
                              - 38 -

     We turn now to the additions to tax under section 6651(a)(2)

that respondent determined in the respective notices.   That

section applies only in the case of an amount of tax shown in a

return.   Cabirac v. Commissioner, 120 T.C. 163, 170 (2003).   For

purposes of section 6651(a)(2), a return prepared by the Commis-

sioner under section 6020(b) is treated as the return filed by

the taxpayer.   Sec. 6651(g)(2); Cabirac v. Commissioner, supra.

Because petitioner did not file a return for each of his taxable

years 1998 and 1999, respondent prepared a substitute for return

under section 6020(b) for each of those years.   The substitute

for return for 1998 showed total tax of $30,228.40.   The substi-

tute for return for 1999 showed total tax of $20,760.   The record

establishes that petitioner failed to pay timely the tax shown in

each of those substitutes for return.   On the record before us,

we find that respondent has carried respondent’s burden of

production under section 7491(c) with respect to the additions to

tax under section 6651(a)(2) that respondent determined in the

respective notices.

     It appears that petitioner is claiming that he failed to pay

timely the tax shown in the substitute for return for 1998 and

the tax shown in the substitute for return for 1999 for the same

reasons that petitioner failed to file timely a return for each

of those years, that is to say, he (1) did not have all of the

requisite information and (2) was too busy in his law practice.
                              - 39 -

On the record before us, we find that petitioner has failed to

carry his burden of showing that his failure to pay timely the

tax shown in the substitute for return for 1998 and the tax shown

in the substitute for return for 1999 was due to reasonable

cause, and not willful neglect.40   On that record, we further

find that petitioner has failed to carry his burden of establish-

ing that he is not liable for the additions to tax under section

6651(a)(2) that respondent determined in the respective notices.

     We turn finally to the additions to tax under section

6654(a) that respondent determined in the respective notices.    We

have found (1) that petitioner filed a return for his taxable

year 1997 that showed tax due of $20,084 and that the IRS ac-

cepted as filed, (2) that petitioner did not file a return for

each of his taxable years 1998 and 1999, and (3) that petitioner

did not make any estimated tax payments for either of his taxable

years 1998 or 1999.   On the record before us, we find that

respondent has carried respondent’s burden of production under

section 7491(c) with respect to the additions to tax under

section 6654(a) that respondent determined in the respective

notices.

     With respect to the additions to tax under section 6654(a)

that respondent determined in the respective notices, petitioner



     40
      Cf. Klein v. Commissioner, T.C. Memo. 2007-325; Joubert v.
Commissioner, T.C. Memo. 2007-292.
                             - 40 -

does not argue, and the record does not establish, that he

qualifies under any of the exceptions listed in section 6654(e).

On the record before us, we find that petitioner is liable for

the additions to tax under section 6654(a) that respondent

determined in the respective notices.

     With respect to the increases in the additions to tax under

sections 6651(a)(1) and (2) and 6654(a) for petitioner’s respec-

tive taxable years 1998 and 1999 that respondent alleged in the

answer, we have found that respondent has failed to carry respon-

dent’s burden of establishing that petitioner has the increases

in the deficiencies for his respective taxable years 1998 and

1999 that respondent alleged in the answer.   On the record before

us, we find that respondent has failed to carry respondent’s

burden of establishing that petitioner is liable for his respec-

tive taxable years 1998 and 1999 for the increases in the addi-

tions to tax under sections 6651(a)(1) and (2) and 6654(a) that

respondent alleged in the answer.

     We have considered all of the contentions and arguments of

petitioner that are not discussed herein, and we find them to be

without merit, irrelevant, and/or moot.
                        - 41 -

To reflect the foregoing,


                                 Decision will be entered for

                            respondent with respect to the

                            deficiencies and additions to tax

                            determined in the notices and for

                            petitioner with respect to the

                            increases in those deficiencies and

                            those additions to tax alleged in

                            the answer.
