                          T.C. Memo. 1997-523



                        UNITED STATES TAX COURT



                     CAROL ANDERSON, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



        Docket No. 15248-96.                  Filed November 19, 1997.



        Carol Anderson, pro se.

        Reginald R. Corlew, for respondent.



                          MEMORANDUM OPINION


        DINAN, Special Trial Judge:   This case was heard pursuant

to the provisions of section 7443A(b)(3) and Rules 180, 181, and

182.1

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

     Respondent determined deficiencies in petitioner's Federal

income taxes for 1992 and 1993 in the amounts of $4,650 and

$2,148, respectively, and accuracy-related penalties pursuant to

section 6662(a) in the amounts of $927 and $430, respectively.

     After concessions by petitioner,2 the issues remaining for

decision are:   (1) Whether petitioner is entitled to dependency

exemption deductions for her two nieces and two nephews for 1992;

(2) whether petitioner is entitled to claim head of household

filing status for 1992; (3) whether petitioner is entitled to

child care credits for 1992 and 1993; (4) whether petitioner is

entitled to business expense deductions for 1992 in excess of the

amount allowed by respondent; (5) whether petitioner is liable

for self-employment tax for 1992; (6) whether petitioner is

entitled to a medical expense deduction for 1993; and (7) whether

petitioner is liable for the section 6662(a) accuracy-related

penalties for 1992 and 1993.

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

The stipulations of fact and attached exhibits are incorporated

herein by this reference.   Petitioner resided in Miami, Florida,

on the date the petition was filed in this case.

     Petitioner works as a claims processor for Ryder Truck

Rental in its warranty department.     During January and February


     2
          Petitioner concedes that she received and failed to
report interest income in the amount of $47 and dividend income
in the amount of $45 for the 1992 taxable year.
                               - 3 -

1992, petitioner also had a second, part-time job promoting

credit cards at shopping malls and college campuses.

     Petitioner and her husband, Morris Richard Anderson (Mr.

Anderson), were married on October 18, 1990.    Marital

difficulties arose, and Mr. Anderson vacated the marital

residence in 1991 and never returned.    They are not legally

separated or divorced.   Petitioner has a daughter, Morcie

Anderson, who was born in October 1993.

     Petitioner's sister-in-law was a drug addict who was in and

out of drug rehabilitation programs during 1992.    From March 1992

until December 1992, petitioner's two nieces, Shannon Givens and

Timpest Givens, and two nephews, Benjamin Givens and Daniel

Wilcher, stayed at petitioner's home.

     The first issue for decision is whether petitioner is

entitled to dependency exemption deductions for her two nieces

and two nephews for 1992.   Petitioner claimed dependency

exemption deductions for Shannon, Timpest, Benjamin, and Daniel

on her 1992 return.   Respondent disallowed the claimed deductions

in the statutory notice of deficiency.

     Respondent's determinations in the statutory notice of

deficiency are presumed to be correct, and petitioner bears the

burden of proving otherwise.   Rule 142(a); Welch v. Helvering,

290 U.S. 111, 115 (1933).   In deciding whether this burden is

satisfied, the Court is not bound to accept petitioner's self-

serving, unverified, and undocumented testimony.    Wood v.
                                 - 4 -

Commissioner, 338 F.2d 602, 605 (9th Cir. 1964), affg. 41 T.C.

593 (1964); Niedringhaus v. Commissioner, 99 T.C. 202, 219-220

(1992); Tokarski v. Commissioner, 87 T.C. 74, 77 (1986); Hradesky

v. Commissioner, 65 T.C. 87, 90 (1975), affd. per curiam 540 F.2d

821 (5th Cir. 1976).   Taxpayers are required to substantiate

amounts claimed as deductions, credits, etc., by maintaining the

records needed to establish such entitlement.      Sec. 6001; sec.

1.6001-1(a), Income Tax Regs.

     An individual taxpayer is allowed as a deduction in

computing taxable income an additional exemption for each

dependent as defined in section 152.     Sec. 151(c)(1).   A

dependent is generally defined as an individual who receives over

half of his support from the taxpayer in the calendar year in

which the taxpayer's taxable year begins.      Sec. 152(a).

Individuals listed under this general definition include, among

others, an individual who is a son or daughter of a brother or

sister of the taxpayer.   Sec. 152(a)(6).

     Respondent argues that petitioner failed to meet the support

requirements of section 152(a).    We agree.    Petitioner presented

no records to establish that she provided more than half of her

nieces' and nephews' support during 1992.      She has not convinced

us that the children were not supported by public assistance

payments received by their mother or amounts received from their

father (petitioner's brother).    In the absence of any

corroborating evidence, we find that petitioner has not proved
                                 - 5 -

that she provided more than half of the support for her nieces

and nephews during 1992.   Accordingly, we hold that petitioner is

not entitled to dependency exemption deductions for 1992 for her

two nieces and two nephews.

     The second issue for decision is whether petitioner is

entitled to claim head of household filing status for 1992.    In

the statutory notice of deficiency, respondent determined that

petitioner's proper filing status for 1992 is married filing

separate.

     "Head of household" is defined, in pertinent part, as an

unmarried taxpayer who maintains a household which constitutes

for more than one half of the taxable year the principal place of

abode of a son, daughter, or other qualifying individual, if the

taxpayer is entitled to a dependency exemption deduction for such

individual under section 151.    Sec. 2(b)(1)(A)(ii).   We hold that

petitioner may not claim head of household status because, as we

have held above, she is not entitled to deductions for her nieces

and nephews under section 151 and thus does not meet the

definition of head of household.    Respondent's determination on

this issue is sustained.

     The third issue for decision is whether petitioner is

entitled to child care credits for 1992 and 1993.    Petitioner

claimed credits on her 1992 and 1993 returns in the amounts of

$900 and $1,428, respectively.    Respondent disallowed the claimed
                                - 6 -

credits on the ground that petitioner did not establish that the

amounts claimed were paid for child care expenses.

       Section 21(a) generally allows a credit to any individual

who:    (1) Maintains a household that includes as a member one or

more qualifying individuals, and (2) pays employment-related

expenses.    The allowable credit is generally based upon

employment-related expenses that are paid to enable the taxpayer

to be gainfully employed, including expenses paid for the care of

a qualifying individual.    Sec. 21(b)(2).

       On her 1992 and 1993 returns, petitioner claimed that she

paid $4,500 each year to a care provider by the name of Mary

Jones.    However, petitioner testified at trial that the care

provider's name was Ella Kennedy, and she paid her $50 per week

to care for her nephew, Daniel, during 1992 and her daughter,

Morcie, during 1993.    We are entirely unpersuaded by petitioner's

testimony which is not supported by any credible evidence.      The

alleged payments would account for only $2,600 of expenses per

year if made over an entire year, and neither Daniel nor Morcie

was under petitioner's care for an entire year.    We find that

petitioner has failed to prove that the amounts claimed were paid

for child care expenses.    We hold that petitioner is not entitled

to child care credits for 1992 and 1993.

       The fourth issue for decision is whether petitioner is

entitled to business expense deductions for 1992 in excess of the

amount allowed by respondent.    Petitioner claimed Schedule C
                                - 7 -

business expenses on her 1992 return in the total amount of

$6,392.   In the statutory notice of deficiency, respondent

disallowed $6,172 of the claimed expenses.

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

necessary expenses paid or incurred during the taxable year in

carrying on a trade or business.    In the event that a taxpayer

establishes that she has paid a deductible expense, but is unable

to substantiate the precise amount of the expense, we may

estimate the amount of the deductible expense.    Cohan v.

Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930).    In order to

make such an estimate, the taxpayer must present evidence

sufficient to provide some rational basis upon which an estimate

may be made.    Vanicek v. Commissioner, 85 T.C. 731, 743 (1985).

     Based on the record, we find that petitioner has failed to

substantiate the business expense deductions claimed on her 1992

return in connection with her promotion activities.    Further, she

has not provided the Court with any evidence that would allow us

to make an estimate of her deductible business expenses under the

Cohan rule.    Therefore, we hold that she is not entitled to

business expense deductions for 1992 in excess of the amount

allowed by respondent.

     The fifth issue for decision is whether petitioner is liable

for self-employment tax for 1992.    After accounting for her

allowed deductions, petitioner realized net income in the amount
                               - 8 -

of $2,199 from her promotion activities.   Respondent determined

that such amount is subject to self-employment tax.

     Section 1401(a) imposes a tax on self-employment income for

old-age, survivors, and disability insurance.   An additional tax

for hospital insurance is imposed on self-employment income

pursuant to section 1401(b).   Self-employment income is defined

as the net earnings from self-employment derived by an individual

during any taxable year.   Sec. 1402(b).   The phrase "net earnings

from self-employment" is in turn defined as gross income derived

by an individual from any trade or business carried on by such

individual, less any attributable deductions.   Sec. 1402(a).

     Based on the record, we find that petitioner has not

established that her promotion activities do not constitute a

trade or business carried on by her in her individual capacity.

She presented no reliable evidence that she is properly treated

as an employee of another person with respect to her promotion

activities.   Accordingly, we hold that petitioner is liable for

self-employment tax as determined by respondent.

     The sixth issue for decision is whether petitioner is

entitled to a medical expense deduction for 1993.   Petitioner

claimed a medical expense deduction in the amount of $10,082 on

her 1993 return.   In the statutory notice of deficiency,

respondent disallowed the claimed deduction.

     Section 213(a) allows as a deduction the expenses paid

during the taxable year, not compensated for by insurance or
                                - 9 -

otherwise, for medical care of the taxpayer.    The deduction is

limited to expenses paid during the taxable year which exceed 7.5

percent of the taxpayer's adjusted gross income.    Petitioner's

adjusted gross income limitation on her deduction for medical

expenses is $2,801.

     Petitioner admitted at trial that the amount of her medical

expenses was overstated by $10,000 due to a clerical error.      She

maintains, however, that she paid out-of-pocket medical expenses

of between $2,000 and $3,000 during 1992 for her prenatal and

postnatal care which were not covered by her medical insurance

through her job at Ryder Truck Rental.    However, she did not

obtain any records which show what portions of her medical

expenses were paid by her insurance and herself.    We find that

petitioner has failed to meet her burden of proof with regard to

her medical expenses.    Rule 142(a).   Respondent's determination

is sustained on this issue.

     The seventh issue for decision is whether petitioner is

liable for the section 6662(a) accuracy-related penalties for

1992 and 1993.    Respondent's determinations of negligence are

presumed to be correct, and petitioner bears the burden of

proving that the penalties do not apply.    Rule 142(a); Welch v.

Helvering, 290 U.S. at 115; Bixby v. Commissioner, 58 T.C. 757,

791-792 (1972).

     Section 6662(a) imposes a 20-percent penalty on the portion

of the underpayment attributable to any one of various factors,
                                - 10 -

one of which is negligence or disregard of rules or regulations.

Sec. 6662(b)(1).   Respondent determined that petitioner is liable

for the accuracy-related penalty imposed by section 6662(a) for

her underpayments of taxes in 1992 and 1993, and that such

underpayments were due to negligence or disregard of rules or

regulations.   "Negligence" includes a failure to make a

reasonable attempt to comply with the provisions of the Internal

Revenue laws or to exercise ordinary and reasonable care in the

preparation of a tax return.    Sec. 6662(c); sec. 1.6662-3(b)(1),

Income Tax Regs.   "Disregard" includes any careless, reckless, or

intentional disregard of rules or regulations.    Sec. 6662(c);

sec. 1.6662-3(b)(2), Income Tax Regs.

     Section 6664(c)(1), however, provides that the penalty under

section 6662(a) shall not apply to any portion of an

underpayment, if it is shown that there was reasonable cause for

the taxpayer's position with respect to that portion and that the

taxpayer acted in good faith with respect to that portion.    The

determination of whether a taxpayer acted with reasonable cause

and in good faith is made on a case-by-case basis, taking into

account all the pertinent facts and circumstances.    Sec.

1.6664-4(b)(1), Income Tax Regs.    The most important factor is

the extent of the taxpayer's effort to assess her proper tax

liability for the year.   Id.

     Based on the record, we find that petitioner has not proved

that her underpayments were due to reasonable cause or that she
                              - 11 -

acted in good faith.   Accordingly, we hold that petitioner is

liable for the section 6662(a) accuracy-related penalties as

determined by respondent.

     To reflect the foregoing,

                                         Decision will be entered

                                    for respondent.
