                       T.C. Memo. 1996-409



                     UNITED STATES TAX COURT



           JACK A. AND NANCY R. HAIGH, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 4361-95.                 Filed September 9, 1996.



     Jack A. Haigh, pro se.

     Edith Moates, for respondent.



                       MEMORANDUM OPINION

     CARLUZZO, Special Trial Judge:   This case was heard pursuant

to section 7443A(b)(3) and Rules 180, 181, 182.1   Respondent

determined deficiencies in petitioners' 1991, 1992, and 1993


     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue. All
Rule references are to the Tax Court Rules of Practice and
Procedure.
                               - 2 -

Federal income taxes in the amounts of $2,539, $5,284, and

$9,476, respectively.   The issues for decision are:   (1) Whether

Jack A. Haigh is entitled to Schedule F expense deductions in

excess of those allowed by respondent for each of the years in

issue, and (2) whether petitioners are entitled to net operating

loss carryovers in the amounts of $16,460, $2,567, and $3,851,

for 1991, 1992, and 1993, respectively.

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

The stipulation of facts and the exhibits attached thereto are

incorporated herein by this reference.    During the years in

issue, petitioners were husband and wife and filed joint Federal

income tax returns.   At the time the petition was filed,

petitioners resided in Winter Park, Florida.    References to

petitioner are to Jack A. Haigh.2

     During the years in issue petitioners resided in Winter

Park, Florida.   Petitioner was born in 1928.   He had been

employed by the U.S. Department of the Navy as a computer

specialist but had retired at some point prior to the years in

issue.

     The disputed issues in this case involve a 300 acre farm

located on the banks of the Red River, 23 miles east of Durant,


     2
      Nancy R. Haigh did not appear at trial or sign the
stipulation of facts. The case was dismissed as to her for
failure properly to prosecute. A decision will be entered
against her consistent with the decision entered against Jack A.
Haigh.
                                 - 3 -

Oklahoma.   According to petitioner, the farm was owned and

operated by his parents for many years.    Upon his father's death,

the farm passed to his mother, who with petitioner's help

continued to farm the property until her death in 1982.

Petitioner claims that he operated the farm after the death of

his mother.   He now claims to be the owner of the property,

although for reasons unexplained, the property is still titled in

his mother's name.   According to petitioner, he traveled to the

farm from his residence in Florida several times a year in order

to plant and harvest crops.

     During the years in issue, there were several structures on

the farm property, including barns and a farm house.    The house

was uninhabitable, and petitioner stayed in a local motel when he

traveled to the farm from his residence.    There were no

recreational facilities on the property, such as tennis courts or

swimming pools.   According to petitioner, there were two crops

planted and harvested on the farm during the years in issue,

wheat and peanuts, although there is no corroborative evidence on

this point.

     Petitioners filed Schedules F, Profit or Loss from Farming,

with their Federal income tax returns for the years 1991, 1992,

and 1993.   Petitioners' returns for those years were prepared by

a certified public accountant.    On the Schedules F, petitioner

reported farm income in the respective amounts of $960, $1,215,

and $1,100.   Petitioner also claimed farm expense deductions
                                - 4 -

totaling $55,369, $53,376, and $49,495, respectively.

Specifically, the Schedules F reflected the following:

                         1991           1992     1993

Part II--Farm Expenses
  Chemicals                         $1,467      $1,540     $1,815
  Custom hire (machine work)         4,335       4,110      3,765
  Depreciation                       3,780       2,980      3,028
  Fertilizers and lime               6,238       5,750      4,872
  Freight and trucking               2,150       1,863      1,605
  Gasoline, fuel, and oil            4,610       4,974      3,840
  Insurance (other than health)      3,375       3,980      3,980
  Interest:
     (b) Other                          4,135    3,318      3,648
  Labor hired (less jobs credit)        3,498    2,514      2,690
  Repairs and maintenance               5,854    7,579      5,173
  Seeds and plants purchased            6,775    6,315      5,155
  Storage and warehousing               1,200    1,200      1,200
  Supplies purchased                    1,992    1,655      2,140
  Taxes                                   726      810        840
  Utilities                             1,241      905      1,892
  Other expenses                        3,993    3,883      3,852

  Total expenses                    55,369      53,376     49,495

  Net loss                          54,409      52,161     48,395


Respondent allowed expenses to the extent of petitioner's

reported Schedule F income for each year in issue.       Respondent

disallowed the remaining deductions claimed on the ground that

petitioner failed to establish that the expenses were ordinary

and necessary within the meaning of section 162 and for lack of

substantiation.

     Respondent's determinations, having been made in a notice of

deficiency, are presumed correct, and petitioner bears the burden

of proving such determinations to be erroneous.     Rule 142(a);

Welch v. Helvering, 290 U.S. 111, 115 (1933).     Furthermore,
                                - 5 -

deductions are a matter of legislative grace, and the taxpayer

bears the burden of proving that he or she is entitled to any

deduction claimed.   Rule 142(a); INDOPCO, Inc. v. Commissioner,

503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292

U.S. 435, 440 (1934); Welch v. Helvering, supra.    Section 6001

requires the taxpayer to keep records sufficient to show whether

or not the person is liable for tax.    Where a taxpayer fails to

produce any records to substantiate his or her deductions,

disallowance of the claimed deductions is proper.    Williams v.

Commissioner, T.C. Memo. 1986-195.

     According to petitioner, the farming activity was a cash

operation.   He testified that suppliers and laborers demanded to

be paid in cash.   He claims that he was paid in cash for the sale

of crops and paid many, if not most, of the expenses claimed on

the Schedules F in cash.    Petitioner did not maintain a checking

account for the farming activity.    Although petitioner had a

personal account, he claims that he never deposited any of the

cash income he received from the farm into his personal account,

but rather used the cash to pay the farming expenses he allegedly

incurred.    Petitioner produced absolutely no records to support

any claimed deductions.    Petitioner testified that he kept

records of his farming expenditures but that such records were

now in the possession of his accountant.    Petitioner presented no

bills, receipts, canceled checks, or other records to verify any

of his farming expenditures.    Petitioner's testimony with respect
                               - 6 -

to specific categories of expenses was vague and uninformative.

Moreover, petitioner made no effort to retrieve and produce in

this proceeding the records that he claims were turned over to

his accountant.

     Simply put, petitioner has failed to present sufficient

evidence from which this Court could conclude that any farming

expenses were incurred and paid.   In effect, petitioner has done

nothing more than offer his Federal income tax returns as proof

for the deductions here in dispute.    Such evidence is hardly

sufficient to satisfy his burden of proof.    See Roberts v.

Commissioner, 62 T.C. 834, 837 (1974).    Accordingly, petitioner

is not entitled to Schedule F expense deductions in excess of

those allowed by respondent.   Because of our holding, we need not

address whether the expenses claimed were ordinary and necessary

within the meaning of section 162.

     The net operating loss carryovers that were claimed by

petitioners and disallowed by respondent for each year in issue

result from the losses petitioners claim to have incurred in the

farming activity.   With respect to the year 1991, petitioners

conceded on their 1992 return that the 1991 net operating loss

deduction was miscalculated and that they were not entitled to a

net operating loss carryover in 1991.    Our holding with respect

to deductions claimed on the Schedules F results in the

elimination of the net operating loss carryovers claimed in 1992

and 1993 that resulted from the claimed losses incurred from
                                 - 7 -

farming.   Accordingly, respondent's determinations disallowing

the net operating loss carryovers are sustained.

     To reflect the foregoing,

                                 Decision will be entered for

                                 respondent with respect to

                                 petitioner Jack A. Haigh and an

                                 appropriate decision reflecting

                                 the dismissal of the case as to

                                 Nancy R. Haigh will be entered.
