                      T.C. Memo. 2001-36



                  UNITED STATES TAX COURT



               JUAN RODRIGUEZ, Petitioner v.
       COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 4624-97.            Filed February 14, 2001.




     Juan Rodriguez, pro se.

     George D. Curran, for respondent.



          MEMORANDUM FINDINGS OF FACT AND OPINION


     WHALEN, Judge:   Respondent determined the following

deficiencies in, additions to, and penalty with respect to

petitioner's Federal income tax for 1990, 1991, and 1993:
                                 - 2 -

                           Penalty and Addition to Tax
Year     Deficiency   Sec. 6651(a) Sec. 6554 Sec. 6662(a)

1990      $2,284          $571            $150     -0-
1991       2,374           -0-             –0-    $475
1993      24,654         6,164           1,035     –0-


       After concessions, the issues for decision are:   (1)

Whether petitioner is entitled to deduct wagering losses

in the amount of $19,690 for the taxable year 1991; (2)

whether petitioner must include in gross income a payment

in the amount of $100,000 that he received during 1993

from the Federal Bureau of Investigation (FBI) and, if so,

whether he is entitled to deduct a portion of such amount

as relocation expenses; (3) whether petitioner is liable

for the accuracy-related penalty under section 6662(a) for

the taxable year 1991; (4) whether petitioner is liable

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

failure to file a timely return for 1993; and (5) whether

petitioner is liable for the addition to tax under section

6654 for failure to pay estimated income tax for the

taxable year 1993.    Unless stated otherwise, all section

references in this opinion are to the Internal Revenue

Code as in effect during the years in issue.


                       FINDINGS OF FACT

       Some of the facts have been stipulated and are so

found.    The stipulation of facts and the attached exhibits
                           - 3 -

are incorporated herein by this reference.    Petitioner

resided in Philadelphia, Pennsylvania, when he filed his

petition in this case.

     At one time, petitioner operated an illegal bookmaking

business that was frequented by a number of drug dealers.

In 1987, he was arrested by the FBI while acting as a

middleman in a transaction involving the purchase and sale

of two kilograms of cocaine.   The criminal drug charges

stemming from his arrest carried a maximum prison sentence

of 80 years and fines of $2 million.    In order to avoid

incarceration on such charges, petitioner pleaded guilty

to a narcotics charge and agreed to work as an undercover

informant for the Philadelphia office of the FBI.    In

return, the FBI agreed to bring petitioner's cooperation

to the attention of the judge at the time of sentencing.

     In March 1988, petitioner and the FBI initiated an

undercover investigation of money laundering and drug

trafficking in the Philadelphia area.    The investigation

was assigned the code name Metroliner.     The investigation

took place at petitioner's off-track betting parlor where

petitioner also conducted his illegal bookmaking operation.

     Petitioner played a central role in the investigation.

He introduced five undercover FBI agents to drug

traffickers, money launderers, and gamblers.    He made over
                            - 4 -

150 tape recordings, both audio and video, documenting 72

transactions consisting of 23 drug purchases and 49 money

laundering transactions.   While under surveillance,

subjects of the investigation purchased 31 kilograms of

cocaine and laundered $5 million in drug proceeds from

seven different drug organizations operating in and around

Philadelphia.   As a result of the Metroliner investigation,

91 persons were indicted and $2.5 million was seized.

Petitioner testified in five trials, the last of which

ended in July 1993.   Ultimately, because of his coopera-

tion, petitioner was sentenced to 5 years' probation on

the drug charges mentioned above.

     During 1991 or 1992, operation Metroliner was

terminated upon short notice.   Due to the circumstances

surrounding the termination of the undercover investiga-

tion, petitioner lost certain personal property, including

a safe containing some of his personal records.   After the

investigation was terminated, petitioner declined to enter

the witness protection program.

     The FBI paid petitioner subsistence and other expenses

while the FBI's investigation continued.   Generally, this

consisted of monthly payments, that began at $1,500 in

1991, and increased to $2,000 in 1992, and further

increased to $3,000 in the middle part of 1992 when the
                             - 5 -

indictments were unsealed and petitioner became a witness

for the Government.   These payments ended in the summer

of 1993 at the conclusion of the last trial.

     Mr. Paul D. Allen, Jr., Supervisory Special Agent of

the FBI, wrote a letter to the United States Attorney's

Office, dated July 7, 1993, stating that between October

1987 and the present "Mr. Rodriguez has been paid by the

FBI a total   of $84,424.77 all of which has been for

expenses."    Mr. Allen's letter further states:


     These expenses were for items such as rent,
     utilities, food/subsistence, transportation
     (automobile, gas, oil, tolls, maintenance,
     insurance), clothing, child support,
     medical/dental and other miscellaneous
     living expenses.


In a letter to the Internal Revenue Service, dated

March 27, 1995, Mr. Allen stated: "Mr. Rodriguez was

paid a total of $75,400.00, all of which was considered

to be reimbursement for expenses he incurred during the

investigation."

     Petitioner executed receipts for expense reimburse-

ments in the aggregate amount of $81,732.30.    Three of the

receipts, totaling $4,500, are dated after July 7, 1993,

the date of Mr. Allen's letter to the United States

Attorney's Office mentioned above.
                           - 6 -

     Based upon petitioner's cooperation in the Metroliner

investigation and his testimony during the criminal trials,

the FBI made a lump-sum payment to petitioner of $100,000.

A telex from the Philadelphia office of the FBI requesting

the Director of the FBI to authorize the payment states as

follows:


          REQUEST OF THE BUREAU: BUREAU AUTHORITY
     IS REQUESTED TO EFFECT A LUMP SUM PAYMENT OF
     $100,000 TO CAPTIONED COOPERATING WITNESS (CW)
     FOR HIS COOPERATION IN PHFILE 245B-PH-224
     ENTITLED "METROLINER". THIS LUMP SUM PAYMENT
     REPRESENTS A SHARE OF THE VALUE OF UNITED STATES
     CURRENCY, CERTIFICATES OF DEPOSIT, VEHICLES,
     RESIDENCES, FARMS, AND BUSINESS LOCATIONS SEIZED
     AS A DIRECT RESULT OF THE COOPERATION FURNISHED
     BY THE [COOPERATING WITNESS].


Mr. Allen's letter of March 27, 1995, to the Internal

Revenue Service describes this payment as follows:


          At the conclusion of the case, Mr. Rodriguez
     was paid a lump sum of $100,000. These funds
     were to offset relocation expenses and compensate
     Mr. Rodriguez for his efforts during the
     investigation.


     Mr. John R. Thomas, Special Agent of the FBI, stated

in a letter dated May 16, 1995, to a revenue agent of the

Internal Revenue Service, that the lump-sum payment given

to petitioner at the conclusion of the case was "for any

and all claims he may have had, to include: services

rendered, relocation, reimbursement for reasonable and
                             - 7 -

necessary authorized expenditures, and the like.    Our

files do not disclose an allocation of these funds."

     Petitioner executed a receipt on or about

September 30, 1993, which states as follows:    "On this

date I, Tony Rodriguez, received $100,000 from the FBI

as witnessed by the two Special Agents of the FBI whose

signatures appear below mine."    At that time, petitioner

actually received a cash payment of $90,000 and the

cancellation of an advance of $10,000 that had previously

been made on August 6, 1993, in anticipation of the lump-

sum payment.    The receipt for the advance payment that

was executed by petitioner states that it was paid "for

services".

     Petitioner expected to receive more than the $100,000

from the FBI.    His understanding was that the FBI could

pay him a maximum of $250,000.    He expected the FBI to pay

him the maximum amount because the operation had been so

successful.    He later sued the FBI and six agents of the

FBI in the United States District Court for the Eastern

District of Pennsylvania attempting to obtain more money.

His suit was transferred by the District Court to the

United States Court of Federal Claims.    See Rodriguez

v. FBI, 876 F. Supp. 706 (E.D. Pa. 1995).    His suit was

unsuccessful.
                                            - 8 -

       While the undercover investigation was ongoing,

petitioner was permitted to continue his illegal bookmaking

business and to retain the net proceeds from that business.

Petitioner also continued his gambling activities, includ-

ing betting at various racetracks and casinos.                               During that

time, petitioner received sizeable winnings and incurred

sizeable losses from his gambling activities.                               Special

Agents of the FBI were aware of petitioner's gambling at

racetracks and casinos.

       Petitioner attached to his 1991 Federal income tax

return 10 Statements for Certain Gambling Winnings on Form

W-2G that report the following gross winnings, Federal and

State tax withholding, and net winnings from three race-

tracks:
                                                        Gross     Fed. Tax   St. Tax      Net
                                             Date     Winnings     Wheld.    Wheld.    Winnings

N.J. State Sports   & Exposition   Auth.   01/08/91   $8,140.00    $1,626     $244     $6,270.00
N.J. State Sports   & Exposition   Auth.   01/12/91    5,527.50     1,105      166      4,256.50
N.J. State Sports   & Exposition   Auth.   03/09/91      626.20       -0-      -0-        626.20
N.J. State Sports   & Exposition   Auth.   03/09/91      626.20       -0-      -0-        626.20
Garden State Race   Track, Inc.            05/16/91      652.80       -0-      -0-        652.80
N.J. State Sports   & Exposition   Auth.   05/30/91      685.00       -0-      -0-        685.00
Philadelphia Park   - GRI                  06/28/91    2,241.50       447      -0-      1,794.50
Philadelphia Park   - GRI                  07/30/91    1,801.20       359      -0-      1,442.20
N.J. State Sports   & Exposition   Auth.   08/01/91      918.60       -0-      -0-        918.60
Philadelphia Park   - GRI                  11/11/91      812.60       -0-      -0-        812.60

                                                      22,031.60     3,537      410     18,084.60



Petitioner also attached a handwritten schedule to his 1991

return that lists 9 of the 10 payments reported on the

Forms W-2G.          The handwritten schedule does not list the
                              - 9 -

payment from Garden State Race Track, Inc., shown above,

in the amount of $652.80.

     On line 22 of his 1991 return, petitioner reported

other income from "Race Track" in the amount of $21,379.

This amount is $652.60 less than the aggregate winnings

reported on the Forms W-2G attached to his return.     The

record does not explain why petitioner reported only

$21,379 of the $22,031.60 shown on the Forms W-2G that

are attached to petitioner's return.     Petitioner reported

no income from his gambling at casinos or from his other

gambling activities.

     For taxable year 1991, petitioner claimed a deduction

for "gambling losses" in the amount of $19,690.

Petitioner's return does not give any details concerning

this deduction, such as the identity of the payees, the

dates, or the amounts paid.    This amount is claimed as

miscellaneous itemized deduction.     Thus, petitioner's 1991

return does not claim that petitioner is in the trade or

business of gambling.   Petitioner also claimed a credit of

$3,537, the aggregate amount of Federal tax withheld from

the winnings reported on the Forms W-2G attached to his

return.
                            - 10 -

     Petitioner never filed a Federal income tax return for

1993.   Respondent prepared a return for that year, which

determined that petitioner owed tax on the $100,000 lump-

sum payment.

     In the subject notice of deficiency, respondent made

adjustments to petitioner's income for 1990, 1991, and

1993.   The adjustments for 1990 were resolved by the

parties and are no longer at issue in this proceeding.

Respondent made the following adjustments to petitioner's

taxable income for 1991 and 1993:

                                      1991      1993
     Exemptions                        -0-    ($2,350)
     Compensation (FBI)                -0-    100,000
     Itemized deduction/
       standard deduction        $16,290       (3,700)

        Total adjustments            16,290    93,950


The notice describes the adjustment disallowing the

gambling losses claimed in 1991 as follows:


     For the taxable year ending December 31, 1991,
     you have failed to substantiate the claimed
     gambling losses of $19,690. Since this was the
     only claimed itemized deduction, you are now
     entitled to the standard deduction of $3,400.
     Accordingly, your taxable income is increased
     $16,290.


The notice describes the adjustment increasing petitioner's

compensation from the FBI in 1993, as follows:
                            - 11 -

     Compensation you received from the Federal
     Bureau of Investigation for services rendered
     in [sic] includible in income. Accordingly,
     your taxable income for 1993 is increased
     $100,000.

                            OPINION

     Petitioner asks the Court to redetermine two of the

adjustments made in the subject notice of deficiency, the

disallowance of gambling losses in 1991 in the amount of

$19,690, and the inclusion in gross income of the lump-sum

payment of $100,000 from the FBI in 1993.    Petitioner also

seeks redetermination of the accuracy-related penalty under

section 6662(a) for tax year 1991 in the amount of $475,

and of the addition to tax under section 6651(a)(1) in the

amount of $6,164 for failure to timely file his return for

tax year 1993.

     At trial, petitioner presented no evidence regarding

the addition to tax under section 6654 for failure to pay

estimated tax with respect to his 1993 tax, and he made no

reference to it in his posttrial brief.    Therefore, we

consider this issue waived or abandoned.    See Bradley v.

Commissioner, 100 T.C. 367, 370 (1993) ("Petitioner has not

pursued this line of objection on brief, and we consider it

abandoned.").    We hereby sustain respondent's determination

with respect to the addition to tax under section 6654 for

1993.
                             - 12 -

Wagering Loss Deduction

     The first issue for decision is whether petitioner is

entitled to deduct wagering losses in the amount of $19,690

for the taxable year 1991.    As noted above, respondent

disallowed all of the wagering losses claimed by petitioner

because petitioner had failed to substantiate the

deduction.   In his posttrial brief, petitioner acknowledges

that he did not substantiate this deduction, but he argues

that some amount should be allowed as a deduction.    His

brief states as follows:   "Although it is true the

petitioner did not produce complete and accurate records

of gambling losses after seven years time, some allowance

should have been made for the losses sustained".

Respondent argues that petitioner did not prove the amount

of his gambling losses or that his gambling losses exceeded

the amount of his unreported gambling winnings.

     Section 165(d) allows taxpayers to deduct losses from

wagering transactions to the extent of the gains from such

transactions.   In order to establish entitlement to a

deduction for wagering losses in this Court, the taxpayer

must prove that he sustained such losses during the taxable

year.   See Mack v. Commissioner, 429 F.2d 182 (6th Cir.

1970), affg. T.C. Memo. 1969-26; Stein v. Commissioner, 322

F.2d 78 (5th Cir. 1963), affg. T.C. Memo. 1962-19.    He must
                           - 13 -

also prove that the amount of such wagering losses claimed

as a deduction does not exceed the amount of the taxpayer's

gains from wagering transactions.   See sec. 165(d).

Implicitly, this requires the taxpayer to prove both the

amount of his losses and the amount of his winnings.     See

Schooler v. Commissioner, 68 T.C. 867, 869 (1977); Donovan

v. Commissioner, T.C. Memo. 1965-247, affd. per curiam 359

F.2d 64 (1st Cir. 1966).   Otherwise, there can be no way of

knowing whether the sum of the losses claimed on the return

is greater or less than the taxpayer's winnings.   See

Schooler v. Commissioner, supra at 869.    For example, if

the taxpayer, in addition to the winnings reported on his

or her return, received other winnings that were not

reported, then the taxpayer must prove that the losses

claimed in his or her return exceeded the unreported

winnings in order to be entitled to deduct any such losses.

See id.; Donovan v. Commissioner, supra.    The amount

deductible in this situation is the amount of the claimed

losses which exceeds the unreported winnings, as long as

such excess is less than the winnings reported on the

taxpayer's return.   See sec. 165(d); Schooler v. Commis-

sioner; supra; Donovan v. Commissioner, supra.

      In this case, the "racetrack" winnings reported on

petitioner's 1991 return, $21,379, exceed the "gambling"
                           - 14 -

losses deducted on that return, $19,690.   Petitioner

testified at trial that at one time he had records

consisting of a shoe box full of losing tickets from the

racetrack that would have substantiated the loss deduction

but that those records were lost when the undercover

investigation was terminated.   Petitioner testified as

follows:


     THE WITNESS: *** Now, as one of the letters
     indicates from the FBI, that things were left
     behind. One of the things that was left behind
     in the safe was a shoebox of losing [racetrack]
     tickets that would have served [sic] the $19,000.


     Even if we were to accept petitioner's explanation for

his failure to verify the gambling losses claimed on his

1991 return, we could not agree that he has met his burden

of proof regarding the gambling losses.    Petitioner did not

prove the amount of his gambling winnings, both reported

and unreported, and, thus, he failed to prove that the

amount of the wagering losses claimed on his 1991 return,

$19,690, is greater than his unreported gains from wagering

transactions.

     Petitioner acknowledged during his testimony at trial

that he had additional winnings that were not reported on

his return.   On cross-examination, petitioner testified as

follows:
                            - 15 -


     Q    Now, these winnings are only based upon on [sic]
          the forms you received from the Government?

     A    Right.

     Q    You received other gambling winnings in that
          year, correct?

     A    Yes.   I also had a lot of losses.

     Q    But with respect to the gambling winnings, you
          won other money at the racetrack, correct?

     A    Oh, yes.


Thus, petitioner admitted that he had earned gambling

winnings at the racetrack in addition to the winnings he

reported on his return for 1991.

     There is also evidence that petitioner had winnings

other than from betting at racetracks.   For example, the

FBI agents with whom petitioner cooperated during the

undercover investigation were aware that he had "sizeable

losses and sizeable winnings at racetracks and casinos."

Furthermore, petitioner testified that in 1991 he engaged

in other gambling activities.   He testified as follows:


     Q    Did you bet any other activities during 1991?

     A    I bet summer baseball and I play casinos,
          the dice, poker, everything.

     Q    At the casinos?

     A    I'm a gambler.

     Q    And you bet--
                            - 16 -

     A      I'll bet anything.

     Q      -–anything and lose, correct?

     A      Anything you could bet.


When asked whether he reported "income" from those

activities, he gave the following vague testimony:


     Q      Okay. But you don't have any of that income
            listed on your 1991 tax return; is that
            correct?

     A      Well, there wasn't any at that time. I was
            with the FBI at all times. Being with the
            FBI, they were with me. I didn't list
            anything because we would be at the casinos.
            We would take drug dealers to the casinos.
            And I was always with two agents and I was
            always risking my life every time I went
            out because the FBI was a mile away from me.

     Q      Thank you. But you had other gambling wins
            that you did not report?

     A      I don't think so. I lost that year, because
            I was winning, too.


     There is no evidence in the record that gives us a

basis for determining or even guessing the amount of

unreported gambling winnings earned by petitioner during

1991.    Accordingly, we find that petitioner has failed to

prove that the losses from wagering transactions claimed as

a deduction on his 1991 return do not exceed the gains from

such transactions, as required by section 165(d), and we
                            - 17 -

sustain respondent's disallowance of the wagering losses

claimed on petitioner's 1991 return.


Lump-Sum Payment From FBI

     The next issue is whether petitioner is entitled to

exclude from gross income or deduct any or all of the lump-

sum payment received from the FBI in the amount of

$100,000.   Petitioner acknowledges that he received the

lump-sum payment, and he testified candidly:     "I know I owe

taxes on it."   He testified that the lump-sum payment was

paid in part as his share of the property seized by the

Government during the investigation, in part as considera-

tion for refusing to join the witness protection program,

and in part as reimbursement for the expenses of relocating

his family.   In his posttrial brief, petitioner focuses on

the last of the above three reasons for the lump-sum

payment, relocation expenses.   He argues that he "incurred

substantial expenses and cost associated with moving his

family" and that "an allowance for relocation expenses"

should be taken into account in computing the taxable

amount of this lump-sum payment.     Petitioner's brief

states:
                             - 18 -

     While acknowledging that the burden of proof
     rests upon the petitioner for this issue, common
     sense would dictate the consideration of some
     costs associated with moving the petitioner and
     his family.


Petitioner claims that the Internal Revenue Service had

previously agreed "to allocate twenty percent (20%) of

this payment toward relocation expenses."

     Respondent argues that petitioner is required to

include in gross income the entire lump-sum payment of

$100,000 received from the FBI.       Respondent argues that,

except for his self-serving testimony:       "Petitioner has

not offered any evidence to prove he incurred the expenses

claimed or that the alleged expenses were deductible."

     We agree with respondent.    There is no basis in the

record of this case upon which we can find that some or

all of the lump-sum payment should be excluded from

petitioner's gross income.    According to the record, the

FBI intended the payment to award petitioner a share of

the seized property, to compensate petitioner for his

cooperation, and to defray any relocation expenses he had

incurred.   The original telex requesting authorization to

make the payment states that it "represents a share of the

value of United States currency, certificates of deposit,

vehicles, residences, farms, and business locations seized

as a direct result of the cooperation furnished".       Rewards
                           - 19 -

of this kind are includable in gross income.     See sec.

1.61-2(a)(1), Income Tax Regs.    Similarly, Mr. Allen's

letter of March 27, 1995, states that the payment was to

offset relocation expenses and to compensate petitioner.

The receipt for the advance on the lump-sum payment

allocates the entire amount to "services".     Compensation

payments are includable in the recipient's gross income.

See sec. 1.61-2(a), Income Tax Regs.

     Petitioner cites no authority under which the lump-sum

payment would be excluded from gross income.     We understand

that payments to a Government witness are sometimes

considered by the Commissioner as welfare payments to the

recipient that are not includable in the recipient's

income.   See G.C.M. 37,028 (Mar. 3, 1977) and G.C.M. 37,564

(June 9, 1978).   For example, assistance payments made by

the Department of Justice under the witness protective

program of the Organized Crime Control Act of 1970, Pub. L.

91-452, tit. V, 84 Stat. 922, 933-934, are treated

as welfare payments and are excluded from gross income.

See G.C.M. 37,028 (Mar. 3, 1977).

     The lump-sum payment made to petitioner in this case

was not made under the witness protection program, nor was

it made in consideration of petitioner's declining to enter

the witness protection program.     Petitioner has shown no
                           - 20 -

basis for excluding all or any part of the lump-sum payment

in this case.

     Petitioner argues that the lump-sum payment was made

to reimburse him for "relocation expenses", and petitioner

claims to have incurred relocation expenses "greatly

exceeding" the lump-sum payment.    However, petitioner

presented no proof that he incurred any such relocation

expenses.   Indeed, in his posttrial brief, petitioner never

identifies the payees of such expenses, nor does he give

the amounts, dates, and purposes of any such payments.

At trial, he suggested, at one point, that his relocation

expenses consisted of cash payments made to his sons and

his former wife ("I gave each son $5,000, I gave her 10,

and $18,000 to move–-").   At another point, petitioner made

reference to "receipts from the moving company" that were

left in the abandoned safe when the undercover investiga-

tion terminated.   Petitioner never substantiated any such

payments, such as by obtaining duplicate "receipts" from

the moving company.   Thus, even if the lump-sum payment

were excludable from gross income to the extent used to

defray relocation expenses, petitioner has not

substantiated that he paid any such relocation expenses.

     To the extent that petitioner claims to be entitled

to deduct some part of the payment as relocation expenses,
                            - 21 -

we also agree with respondent that petitioner has not met

his burden of proving entitlement to the deduction.      See

Rule 142(a), Tax Court Rules of Practice and Procedure.

Petitioner does not cite the section of the Internal

Revenue Code under which he claims to be entitled to the

deduction.    See generally secs. 217, 132(a)(6), (g),    82.

Moreover, as described above, he refers to relocation

expenses, but he never explains the nature of the expenses

that he incurred, or identifies the payees, amounts, or

dates of any such payments, nor has he introduced proof

that he paid any such expenses.


Accuracy-Related Penalty for 1991

     The next issue for decision is whether petitioner is

liable for the accuracy-related penalty under section

6662(a), as determined by respondent in the amount of $475.

According to the schedules attached to the notice of

deficiency, respondent determined that the entire amount

of the underpayment was due to negligence.    Under section

6662, a penalty is added to a taxpayer's tax liability if

any portion of an underpayment is attributable to

negligence or disregard of rules or regulations.    See sec.

6662(b)(1).    For this purpose, the term "negligence"

includes any failure to make a reasonable attempt to comply

with the provisions of the Internal Revenue Code.     Sec.
                            - 22 -

6662(c).   The amount of the penalty is 20 percent of the

portion of the underpayment to which section 6662 applies.

See sec. 6662(a).

     An exception to imposition of the negligence penalty

is provided by section 6664(c).      Under that exception, "No

penalty shall be imposed * * * with respect to any portion

of an underpayment if it is shown there was a reasonable

cause" for that portion of the underpayment and "the

taxpayer acted in good faith".    Petitioner bears the burden

of proving that he is not liable for the penalty under

section 6662(a).    See Vaira v. Commissioner, 444 F.2d 770

(3d Cir. 1971), revg. on another issue 52 T.C. 986 (1969);

Bixby v. Commissioner, 58 T.C. 757, 791 (1972).

     Petitioner argues as follows:


     Accurate records of gambling losses and winnings
     are difficult to maintain. The very nature of
     the business makes this task daunting, if not
     impossible. The very fact that petitioner
     reported his gambling winnings and losses in his
     1991 income tax return, produced records of this
     fact seven years later, attests to the degree of
     effort taken by the petitioner to accurately
     report his gambling winnings and losses. Before
     the accuracy-related penalty is imposed, I.R.C.
     §6662(b)(1) requires taxpayer negligence or
     disregard for the rules. In the instant case,
     the respondent has shown neither exists.


Respondent argues that petitioner has not met his burden

of proof under section 6662(a).      According to respondent,
                            - 23 -

petitioner has not shown that there was a reasonable cause

for the underpayment or that he acted in good faith

regarding the underpayment.

     We agree with respondent.   Petitioner's contention,

that maintaining accurate records of gambling losses and

winnings is difficult, is legally insufficient to overcome

respondent's determination.   The fact is that all taxpayers

are required to substantiate deductions under section

165(d), and petitioner is being held to the same standard

that is imposed on all taxpayers seeking a deduction under

section 165(d).   See, e.g., Wolkomir v. Commissioner, T.C.

Memo. 1980-344; Salem v. Commissioner, T.C. Memo. 1978-142;

Myers v. Commissioner, T.C. Memo. 1976-191; Taormina v.

Commissioner, T.C. Memo. 1976-94.

     We find that petitioner did not prove that the under-

payment with respect to his 1991 return was due to reason-

able cause or that he acted in good faith.   Accordingly, we

sustain respondent's imposition of an accuracy-related

penalty under section 6662(a).


Additions to Tax for 1993

     The final issue is whether petitioner is liable for

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

file a timely return for 1993, as determined by respondent

in the amount of $6,164.    An addition to tax is imposed
                            - 24 -

under section 6651(a)(1) for failure to file a return

unless such failure is due to a reasonable cause and not

willful neglect.   See sec. 6651(a)(1).   The amount of the

addition to tax is 5 percent of the tax required to be

shown on the return, if the return is filed within a month

of the due date, with an additional 5 percent for each

additional month or fraction thereof during which the

failure continues, not exceeding 25 percent in the

aggregate.   See id.   Petitioner bears the burden of proving

that he is not liable for the addition.    See Rule 142(a).

     Petitioner argues as follows:


          * * * Of the $100,000.00 the petitioner
     received from the FBI, ninety percent (90%), or
     $90,000.00 was received after petitioner had
     worked undercover for the FBI. It was agreed
     that this payment of $100,000.00 would be used
     to pay for the enormous cost of relocating the
     petitioner and his family to Puerto Rico.
     Although it is true the FBI did not have the
     authority to determine the taxability of this
     payment, it is certainly reasonable for
     petitioner to rely on the FBI's position and
     statements regarding this payment. Respondent
     correctly states that is the burden of the
     petitioner to establish this fact. However,
     due to the highly sensitive nature of the
     undercover operation (which is ongoing), it can
     hardly be expected for the petitioner to produce
     as witnesses the FBI agents responsible for
     leading the petitioner to believe this payment
     would not be considered taxable income. It is
     the position of the petitioner that this
     $100,000.00 payment is not fully taxable. If
     plausible disagreement as to the taxability of
     this income exists to this day, it can surely be
     said the petitioner had a reasonable expectation
                              - 25 -

     this payment would not be taxable income; hence
     reasonable cause and not willful neglect. For
     these reasons, the respondent's determination
     should not be sustained.


     Thus, petitioner argues that his failure to file his

1993 return is due to "reasonable cause and not willful

neglect".   Sec. 6651(a)(1).    Respondent argues that

"petitioner failed to timely file an income tax return for

the taxable year 1993 and presented no evidence disputing

the assertion of the addition to tax."     We find that

petitioner's argument lacks merit.

     Petitioner admitted at trial that he received the

lump-sum payment of $100,000 from the FBI and he owed tax

on the payment.    He testified as follows:


     THE COURT:      * * * Do you admit that $100,000 is
                     income? * * *

     THE WITNESS:    I admit that was income.    * * *

                     *    *     *      *   *    *    *

     THE WITNESS:    I know I owe taxes on it. But I figure
                     a reasonable amount should be used for
                     relocation of me.


Thus, petitioner admittedly earned substantial taxable

income during 1993, and he was required to file a return

for that year.    See sec. 6012(a).

     Petitioner's posttrial brief implies that he relied on

the statements of unnamed FBI agents that the subject lump-
                             - 26 -

sum payment "would not be considered taxable income".

There is no factual basis for such argument in the record

of this case.   Neither petitioner nor the FBI agent who was

called as a witness testified that an FBI agent gave

petitioner any such advice.    Indeed, petitioner did not

even ask the FBI agent about any such statements.

Petitioner does not identify the agent or employee of the

FBI who allegedly gave him such advice, nor did he subpoena

such person to testify.    We do not accept petitioner's

attempt to explain his failure to call the agent to testify

on the ground that the undercover operation was ongoing at

the time of trial or that it would have been compromised by

the agent's testimony.    There is nothing in the record to

suggest that the operation was ongoing at the time of

trial, but, even if it were, there is no reason to believe

that the agent's testimony concerning statements about the

taxability of petitioner's lump-sum payment would have

compromised the operation.    Indeed, petitioner exhibited

no such reluctance in 1994 when he filed suit against the

FBI and six of its special agents seeking a greater share

of the money and property that had been seized during the

undercover operation.    We find that petitioner failed to

show that his failure to file a return for 1993 was due to

reasonable cause and not willful neglect, and we sustain
                          - 27 -

respondent's determination of the addition to tax under

section 6651(a)(1) in the amount of $6,164.

     To reflect the foregoing and concessions by the

parties,


                                   Decision will be entered

                              under Rule 155.
