                       T.C. Memo. 1997-103



                     UNITED STATES TAX COURT



             LINDLEY ANTHONY SWANSTON, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent


     Docket No. 8261-95.                Filed February 27, 1997.


     Lindley Anthony Swanston, pro se.

     Charles M. Ruchelman, for respondent.


                       MEMORANDUM OPINION


     COUVILLION, Special Trial Judge:    This case was heard

pursuant to section 7443A(b)(3)1 and Rules 180, 181, and 182.

     Respondent determined a deficiency in Federal income tax of

$2,929.75 and the addition to tax under section 6651(a)(1) in the

amount of $732.43 for petitioner's 1988 tax year.

1
     Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the year at issue. All Rule
references are to the Tax Court Rules of Practice and Procedure.
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     The issues for decision are:    (1) Whether petitioner is

entitled, under section 162(a), to cost of goods sold and

deductions for trade or business expenses incurred in connection

with a book-selling activity, and (2) whether petitioner is

liable for the addition to tax under section 6651(a)(1).

     Some of the facts were stipulated.     Those facts, with the

exhibits offered in connection therewith, are so found and are

incorporated herein by reference.    Petitioner was a resident of

Silver Spring, Maryland, at the time the petition was filed.

     During 1988, petitioner sold books, an activity he began

sometime during 1987 following a career as a life insurance

agent.   Petitioner sold his books at conventions and seminars in

various parts of the United States.     Most of the places where

petitioner sold his books were religious gatherings or

conventions, and most of his books were of a religious nature;

however, sometime during 1988, he began selling secular books

together with the religious books.      Petitioner generally rented

one or more booths or exhibit spaces at each convention, where he

displayed and sold his books.    Petitioner did not have a fixed

retail place of business.    When he was not attending a

convention, he stored his book inventory at home.     He did not

conduct any sales activity at home.     Petitioner did not employ

anyone, but, frequently, his wife and daughter accompanied him

and assisted in his sales.
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     Petitioner and his wife filed a joint Federal income tax

return for 1988.   The return was received by the Internal Revenue

Service on May 22, 1992, although the signature lines on the

return bear signature dates of April 3, 1989.2

     Petitioner filed a Schedule C, Profit or Loss From Business,

with his 1988 Federal income tax return in connection with his

book-selling activity.   That schedule reflected the following

items of income and expenses:


     Income:
       Gross receipts or sales                            $16,250
       Less cost of goods sold                              9,750
         Gross income                                     $ 6,500

     Expenses:
       Advertising                           $1,220
       Bank service charges                     145
       Car and truck expenses                 3,651
       Office expense                           755
       Rent on business property              1,200
       Travel                                 1,760
       Meals and entertainment (net)            852
       Utilities and telephone                4,230
       Wages                                    550
       Exhibit spaces                         4,460
         Total                                             18,223
         Net loss                                         $12,323*

          * The expenses shown total $18,823 rather than $18,223
     shown on petitioner's return. The $12,323 net loss is the
     correct figure.



2
     The notice of deficiency is addressed jointly to petitioner
and his wife Maureen. His wife did not petition the Court, nor
did she appear at trial. Petitioner referred to her at trial as
his "ex-wife" and testified she was living in Florida. Their
current marital status is not indicated in the record.
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     In the notice of deficiency, respondent disallowed the

$9,750 cost of goods sold and all of the $18,823 claimed expenses

for lack of substantiation.

     The determinations of the Commissioner in a notice of

deficiency are presumed correct, and the taxpayer bears the

burden of proving that the determinations are incorrect.   Rule

142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).

     Petitioner produced no documentary evidence to substantiate

any of the items that were disallowed by respondent.

Petitioner's explanation for the failure to produce such evidence

is that, in late April and early May 1989, he attended a

religious convention in Richmond, Virginia.   He took all his

books and records with him to work on his Federal income tax

return for 1988.   After the Richmond convention concluded, he

drove to New York, and, while he was having lunch with his sister

at a Brooklyn restaurant, someone broke into his truck and took

his briefcase, which contained all of his tax records.   No other

property in the truck was taken, although petitioner acknowledged

he had books in the truck having a value of over $9,000.   Upon

discovery of the break-in, petitioner drove the truck a few

blocks and located his briefcase, which was damaged.    All of the

contents were missing.   For this reason, petitioner had no

records to produce at trial to support his claimed expenses.

When questioned by the Court, petitioner admitted he had made no
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attempt to reconstruct his records, such as obtaining

verifications and/or copies of receipts or certifications of

transactions he engaged in with his book suppliers.   Petitioner

produced no bank records or statements, copies of which could

have easily been obtained.   The Court was not impressed with

petitioner's credibility as a witness.   To begin with, he

produced no documentary information, such as a police report, to

establish that a break-in occurred.    Moreover, if petitioner is

to be believed, the break-in occurred on either May 3 or 4, 1989;

however, the income tax return filed by petitioner and his then

wife bears signature dates of April 3, 1989, at least 1 month

prior to the purported break-in.   Petitioner's explanation for

this was not plausible.   He testified that, prior to leaving his

home to attend the Richmond convention, he and his wife presigned

the return on April 3, 1989, and he left the signed, blank return

at home.   When he returned home sometime in May 1989, after the

break-in, sans records, he completed his previously signed blank

return based on his "terrific memory".   Left unexplained are

reasons for the gap between May 1989 and the receipt of the

return by the Internal Revenue Service approximately 3 years

later.

     Even if the Court should accept petitioner's version of what

happened, there are other matters regarding the return that are

questionable.   For example, the Schedule C, which is handwritten,
                                - 6 -


shows several instances of numbers that are written over, which

suggests to the Court that petitioner altered the numbers to

attain a desired result.    In juggling the numbers, he apparently

forgot to correct the line totaling his expenses.    That line

showed total deductions of $18,223, when the correct amount was

$18,823.    That is not the only problem the Court has with the

return.    The return was a joint return, and one of the expenses

claimed on the Schedule C is wages of $550.    Petitioner testified

that this represented a payment to his wife for services she

rendered.    Yet, the return fails to reflect the $550 as gross

income that should have been reported because petitioner's wife

was reporting jointly with petitioner.    Some of the other

expenses claimed on the Schedule C appear to be duplicative,

particularly expenses relating to a home office.    With respect to

the home office, the Schedule C claimed $755 for "office

expenses", $1,200 for rent on business property (on petitioner's

home), and telephone and utilities of $4,230.    Aside from the

fact that all or some of these expenses appear to be duplicative,

petitioner presented no evidence that these expenses, if paid or

incurred, would be allowable under section 280A, which, in

general, denies deductions with respect to the use of a dwelling

unit used by the taxpayer as a residence, unless such expenses

are, under section 280A(c)(1), allocable to that portion of the
                               - 7 -


dwelling used exclusively on a regular basis as "the principal

place of business" of the taxpayer's trade or business.

     Petitioner admitted under cross-examination that, in

addition to the $12,323 Schedule C loss claimed on his 1988

return, he has never realized a net profit from his book-selling

activity.   He reported net losses of $17,992, $61,283, and

$7,280, respectively, for 1989, 1993, and 1994.   Except for small

amounts of other income petitioner earned from commissions on

insurance renewals, his only explanation to the Court as to how

his negative cash-flow was financed was that he was on the

accrual basis of accounting, and he carried his accounts on a

"continuing basis".   The Court is skeptical that petitioner's

creditors would "carry" his unpaid accounts over the several

years that he sustained losses.

     Petitioner did not corroborate his testimony to support the

positions he asserted.   Under these circumstances, the Court is

not required to, and the Court does not, accept such testimony to

support petitioner's positions.   See Geiger v. Commissioner, 440

F.2d 688, 689-690 (9th Cir. 1971), affg. per curiam T.C. Memo.

1969-159; Mills v. Commissioner, 399 F.2d 744, 749 (4th Cir.

1968), affg. T.C. Memo. 1967-67; Tokarski v. Commissioner, 87

T.C. 74, 77 (1986).   Accordingly, the Court sustains respondent

with respect to petitioner's Schedule C activity.
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     Petitioner's 1988 return was filed on May 22, 1992.     Under

section 6072(a), income tax returns must be filed on or before

the 15th day of April following the close of the taxable year,

subject to exceptions not pertinent here.     Petitioner's 1988

return, therefore, should have been filed on or before April 15,

1989.

     The addition to tax under section 6651(a)(1) applies where

there is failure to timely file a tax return, unless it is shown

that the failure to timely file is due to reasonable cause and

not due to willful neglect.   Petitioner presented no evidence to

establish reasonable cause for the delinquent filing of his

return.   Respondent, therefore, is sustained on this issue.



                                            Decision will be entered

                                       for respondent.
