                        T.C. Memo. 1997-145



                      UNITED STATES TAX COURT



                TERENCE M. BENNETT, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 21163-94.              Filed March 19, 1997.



     Peter D. Anderson, Steven M. Burke, and Kelly A. Ayotte, for

petitioner.

     Ronald F. Hood, for respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION


     RUWE, Judge:   Respondent determined a deficiency of $778,866

in petitioner's 1988 Federal income tax.   Respondent further
                              - 2 -

determined additions to tax pursuant to sections 6653(a)(1)1 and

6661 in the amounts of $38,943 and $194,717, respectively.

     The issues for decision are:   (1) Whether respondent

fraudulently induced petitioner to execute a Form 872 (Consent to

Extend the Time to Assess Tax) and is therefore estopped from

relying upon petitioner's consent to extend the period of

limitations; (2) whether the presumption of correctness should

attach to respondent's determination of unreported income; (3)

whether petitioner was the owner of five antique automobiles and

realized gain on their sale for a price of $3 million in 1988;

(4) if we find that petitioner owned the automobiles in issue,

whether he is entitled to bases in three of the automobiles in

excess of that determined by respondent; (5) whether petitioner

is liable for an addition to tax for negligence or intentional

disregard of rules or regulations pursuant to section 6653(a)(1);

and (6) whether petitioner is liable for an addition to tax for a

substantial understatement of income tax pursuant to section

6661.


                        FINDINGS OF FACT


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

The stipulation of facts and supplemental stipulations of facts


     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the taxable year in
issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
                                - 3 -

are incorporated herein by this reference.    Petitioner resided in

Rochester, New Hampshire, at the time he filed his petition.

     Petitioner is a physician who received his medical degree

from Harvard Medical School in 1964.    Petitioner and his former

wife Linda Bennett (Linda) were married on June 1, 1964.

     In 1973, petitioner moved to Saudi Arabia where he worked as

a physician for Raytheon.    From 1974 to 1981, petitioner operated

a medical clinic in Jeddah, Saudi Arabia.     While in Saudi Arabia,

petitioner became acquainted with Abdul Aziz Ben-Jabr (Abdul),

whom he treated for hepatitis, and other members of the Ben-Jabr

family.    Abdul died in late 1977 or early 1978.


Petitioner's Acquisition and Sale of the Automobiles in Issue


     Petitioner has collected antique automobiles since his

youth.    At the time he moved to Saudi Arabia, petitioner had a

collection of approximately 60 antique automobiles, which he

stored in Gloucester and Rowley, Massachusetts.     Petitioner

continued to pursue this hobby while in Saudi Arabia.

     On or about August 18, 1978, petitioner purchased a 1937

Mercedes Benz 540-K, Serial No. 130941, from Earl Blakely for

$60,000.    The bill of sale dated August 18, 1978, listed

petitioner as the buyer of the automobile.2     In November 1978,


     2
      Par. 6 of the stipulation of facts lists the automobile as
a 1937 Mercedes 540-K. The bill of sale indicates that the
automobile was a 1936 Mercedes 540-K. We assume this to be an
                                                   (continued...)
                               - 4 -

petitioner purchased a 1929 Bentley Tourer Speed Six, Serial No.

K2683, from Herbert A. Schoenfeld, Sr., for $40,000.   In a letter

dated April 16, 1979, Mr. Schoenfeld released title and interest

in the automobile to petitioner.

     During late 1979 or early 1980, petitioner purchased a 1936

500K Mercedes Roadster, Serial No. 130857, from Carlisle L.

Marshall for $100,000.   Mr. Marshall transferred the automobile's

Motor Vehicle Certificate of Title (State of Florida) to

petitioner on or about January 3, 1980.3

     At some point during the late 1970's or early 1980's,

petitioner also purchased a 1932 Mayback Zepplin, Serial No.

1388, and a Lagonda LG45 Repead, Serial No. 12226.   The amount

petitioner paid for each of these automobiles is unknown.

     Petitioner retained possession and control over the five

previously mentioned automobiles until their sale in 1988.    In a

letter dated June 5, 1988, petitioner offered to sell these five

automobiles to Nicholas Harley for a total sales price of $3

million.   Pursuant to petitioner's instructions, on or about July

6, 1988, Mr. Harley wire transferred $3 million from the Gota



     2
      (...continued)
error and will follow the year as indicated in the stipulation of
the parties.
     3
      Par. 5 of the stipulation of facts lists the automobile as
a 1936 500K Mercedes Roadster. The Motor Vehicle Certificate of
Title (State of Florida) indicates that this automobile was a
1937 model. We assume this to be an error and will follow the
year indicated in the stipulation of the parties.
                               - 5 -

Bank in Stockholm, Sweden, to Bank Julius Baer & Co. (Julius

Baer) of London, England.   The funds were credited to Julius

Baer's account (No. 04-056-925) at Banker's Trust Co. in New

York, and were available on or about July 7, 1988.

     On or about July 8, 1988, petitioner sold the five

automobiles for $3 million to Mr. Harley who was acting on behalf

of Winkeleigh Garage, Ltd., of London, England.4     Petitioner

signed the bill of sale for each automobile, thereby covenanting

to the buyer that he was the lawful owner.5   Mr. Harley

subsequently wrote the sale price for each automobile on the bill

of sale based upon his opinion of the automobile's market value.6

Petitioner also transferred to Mr. Harley the certificate of

title for each automobile except the Lagonda LG45 Repead.

     On July 18, 1988, $453,375 was wired from the Julius Baer

account (No. 04-056-925) at Banker's Trust Co. in New York, to



     4
      At the time of the transaction, Mr. Harley was a director
and major shareholder of Winkeleigh Garage, Ltd.
     5
      Petitioner never represented to Mr. Harley that he was not
the owner of the automobiles.
     6
      Mr. Harley attributed the following sales prices to the
automobiles:

               Automobile                Sale Price

             1937 Mercedes 540-K          $550,000
             1929 Bentley Tourer           250,000
             1936 500K Mercedes          1,500,000
             1932 Mayback Zepplin          550,000
             Lagonda LG45 Repead           150,000
                                 - 6 -

the Indian Head Bank in Portsmouth, New Hampshire, in

satisfaction of an outstanding mortgage on property that

petitioner owned in Maine.


Petitioner's Divorce


     Petitioner and Linda Bennett began to live apart sometime

around November 1987.     In the spring of 1988, petitioner

compiled, in contemplation of divorce, a three-page list of the

couple's marital assets and their estimated values.     Included on

this list were the five automobiles later sold to Mr. Harley on

or about July 8, 1988.7    On July 9, 1988, petitioner informed

Linda that he had sold these automobiles in order to finance the

couple's divorce settlement.     Linda then wrote "sold" beside the

listing for each automobile.

     On or about September 7, 1988, petitioner paid $2.5 million

to Linda in connection with the settlement of their divorce.

This money was paid by a check dated September 7, 1988, drawn on

the account of Banque de l'Etat de Fribourg at the New York

Branch of Credit Lyonnais Bank.

     On September 15, 1988, petitioner filed with the Superior

Court of the State of New Hampshire a document entitled "Support


     7
      The stipulation of facts and exhibits contain slight
discrepancies regarding the model year of petitioner's
automobiles. However, there is no question that the automobiles
sold to Mr. Harley were the same automobiles that were included
on the list of marital assets that petitioner and Linda Bennett
compiled in contemplation of their divorce.
                               - 7 -

Affidavit of Terry M. Bennett", which included a listing of

petitioner's outstanding bills and balances due thereon.

Petitioner listed an outstanding mortgage of $865,000.   He did

not list any liabilities to the Ben-Jabr family on his support

affidavit.

     Petitioner and Linda Bennett entered a permanent stipulation

of divorce with the Superior Court of the State of New Hampshire

on September 16, 1988.


Petitioner's 1988 Federal Income Tax Return


     On his 1988 return, petitioner did not attach a Schedule D

or otherwise report any capital gain from the sale of any

automobiles.   Petitioner concedes that he failed to report income

for 1988 of $10,000 and $6,500 from the sale of a Bugatti and a

Lotus automobile, respectively.    The sale of these automobiles is

unrelated to the five automobiles sold to Mr. Harley on July 8,

1988.

     Charles W. Tilton, Jr., is a licensed public accountant in

Hampton, New Hampshire, with over 25 years of experience.   Mr.

Tilton prepared petitioner's Federal income tax returns for the

taxable years 1985 through 1988.

     On January 25, 1993, petitioner delivered a letter to Mr.

Tilton that petitioner had written for Mr. Tilton's signature

regarding the sale of the automobiles in 1988.   The letter, which

petitioner wanted Mr. Tilton to adopt as his own, stated:
                         - 8 -


1. Dr. Bennett told me in July or August of 1988 that
he had sold five antique automobiles for the sum of
Three Million Dollars.
This was not surprising. Previously in my association
with Dr. Bennett he had sold other cars and told me of
the details, including the cars sold in 1987 to pay off
the 1987 assessment on his 1985 return.
There was no new behaviour[sic] here, and no surprise.
Only the sum of money was in any way unusual.

2. Dr. Bennett said that the cars belonged to the
estate of a deceased patient from Saudi Arabia. (Abdul
Aziz Ben Jabr)

3. Dr. Bennett said that the cars had been sold to a
European buyer through some kind of an English broker,
and that the money had been paid into the control of
the Ben Jabr family at their bank, that he had not
handled any of the money at the time of the sale.

4. Dr. Bennett said that he had arranged to borrow
almost all of the money back from the Ben Jabrs to
finance his divorce and pay off a mortgage at the
Indian Head Bank. These transfers were effected by the
Saudis via a Bank Check, and a bank to bank direct
transfer, all completely aboveboard. He got divorced,
and the Bank got their money.

5. I told Dr. Bennett that, in my opinion, this was
not a taxable transaction.

6. Accordingly it was not reported on his 1988 tax
return.

7. Dr. Bennett discussed this sale/loan with me at the
time it occurred. He was up front about the
transaction, and truthful, to the best of my knowledge.

There is no mystery here. This is not a taxable
transaction, to the best of my knowledge.

8. That the IRS is trying to argue that in 1993 the
value of Dr. Bennett's holdings is not enough to repay
the loans is a lame argument.

9. In 1988 Dr. Bennett's real estate holdings alone
were worth several times the amount borrowed, and he
                                 - 9 -

     owned cars, art, etc with great value in that boom time
     economy.

     Dr. Bennett still owns a lot of stuff (real estate,
     cars, an antique business, etc etc.)

     I'm sure that Dr. Bennett plans to repay the loan as
     soon as the economy allows him to convert his assets
     without losing his shirt. He says he will repay the
     loan, and I believe him.

     10. Moreover, it is my understanding that the Saudis
     are not pressing this matter, and have corroborated all
     details of Dr. Bennett's story. Is this correct? If
     so what is the problem?

     Best Regards,


     Charles Tilton.


     Petitioner told Mr. Tilton to retype the letter on Mr.

Tilton's letterhead, sign it, and send it to Michael J. Asselin.

Mr. Asselin was petitioner's representative and held a valid Form

2848 (Power of Attorney and Declaration of Representative).    Mr.

Tilton refused to carry out these instructions.   On February 17,

1993, Mr. Tilton wrote to Mr. Asselin concerning his recollection

of petitioner's explanation of the automobile sales in 1988.   In

his letter, Mr. Tilton stated:


        At the beginning of 1989 I stopped at Terrys[sic]
     office to pick up his 1988 tax information. He told me
     that his wife Linda had been paid off and the divorce
     was final. He told me he had sold an auto collection
     belonging to a friend of his and this person was
     letting him borrow the money to pay off Linda and some
     other bills. I asked him if he had received a
     commission on the sale and was any part of the payment
     to Linda for alimony. He said there was no commission
     or alimony paid.
                              - 10 -

        A few weeks later when I dropped off the completed tax
     return he said he was concerned that the IRS would
     wonder where he got the money to pay Linda. He wanted
     me to attach a note to his tax return telling the IRS
     that the money paid to Linda was not taxable. I told
     Terry that I could not write a meaningful letter to the
     IRS about the auto sales. I did not know the cars
     sold, date of sale, who the buyers and sellers were,
     social security numbers. I suggested he write the
     letter himself or else have the Lawyer handling the
     sale write a letter for him.


Petitioner's 1988 return as filed contained no attachments or

other references to any automobile sales or loans used to pay

amounts due to Linda pursuant to the divorce.


Additional Facts


     Although the exact date on which respondent began her civil

examination of petitioner's 1988 Federal income tax return is

unknown, the investigation appears to have been underway by the

beginning of 1990.   From approximately May 1990 to September

1991, respondent also conducted a criminal investigation of

petitioner's 1988 Federal income tax return.    The investigation

did not result in a recommendation of criminal prosecution.

     On February 16, 1993, petitioner executed a Form 8728

extending the period of limitations for assessment of

petitioner's 1988 income tax to June 30, 1994.   In July or August


     8
      Petitioner executed a total of three Forms 872 in this
case. On Feb. 12, 1992, petitioner executed his first Form 872,
which extended the period of limitations to June 30, 1993. In
addition, on June 9, 1994, petitioner executed his third Form
872, extending the period of limitations to Aug. 31, 1994.
                               - 11 -

1993, Revenue Agent Rigney received information that petitioner

allegedly had unreported income from an antique automobile sale

in 1987.    At this time, Revenue Agent Rigney believed that a re-

referral of petitioner's case to respondent's Criminal

Investigation Division (CID) was necessary, because there

appeared to be a 2-year pattern of omitted income on petitioner's

part.    Respondent conducted a second criminal investigation from

October 1993 to April 1994, which also did not result in a

recommendation of criminal prosecution.

     In September 1991, petitioner auctioned off a substantial

portion of his antique car collection and donated approximately

$4 million in proceeds to the Harvard Medical School, which

established a scholarship trust fund.    Petitioner reserved a

lifetime income equal to 5 percent of the face value of the

trust.


                               OPINION


     Before reaching the substantive issues in this case, we must

dispose of two preliminary issues raised by petitioner.   First,

petitioner argues that Revenue Agent Rigney fraudulently induced

him into signing a Form 872 on February 16, 1993, extending the

period of limitations.   Petitioner alleges that Revenue Agent

Rigney induced Mr. Asselin to get petitioner to sign the Form 872

with false representations that an extension was necessary to

conclude respondent's civil investigation.   Petitioner contends
                                - 12 -

that respondent was, in fact, attempting to obtain information

for her second criminal investigation of his 1988 taxable year

under the guise of a civil investigation.

     Section 6501(a) generally requires the assessment of income

taxes within 3 years after the filing of the taxpayer's return.

However, the taxpayer and Secretary may consent in writing to

extend the period of limitations for an assessment.    See sec.

6501(c)(4).9   Petitioner maintains that respondent should be

estopped from relying upon his consent to extend the period of

limitations in this case.    It is well settled that the doctrine

of estoppel should be applied against the Government "with utmost

caution and restraint."     Estate of Emerson v. Commissioner, 67

T.C. 612, 617 (1977).     Courts have set forth several conditions

which must be satisfied before estoppel will be applied.    See,

e.g., Lignos v. United States, 439 F.2d 1365, 1367-1368 (2d Cir.

1971); Kronish v. Commissioner, 90 T.C. 684, 695 & n.10 (1988);

Boulez v. Commissioner, 76 T.C. 209, 214-215 (1981), affd. 810



     9
      Sec. 6501(c)(4) provides:

           (4) Extension by agreement.--Where, before the
     expiration of the time prescribed in this section for
     the assessment of any tax imposed by this title, * * *
     both the Secretary and the taxpayer have consented in
     writing to its assessment after such time, the tax may
     be assessed at any time prior to the expiration of the
     period agreed upon. The period so agreed upon may be
     extended by subsequent agreements in writing made
     before the expiration of the period previously agreed
     upon.
                              - 13 -

F.2d 209 (D.C. Cir. 1987).   Two of these requirements are: (1)

The existence of a false representation or wrongful misleading

silence by the party against whom the doctrine is applied; and

(2) the party claiming the benefits of estoppel must be adversely

affected by the acts or statements of the other party.    Kronish

v. Commissioner, supra at 695 & n.10; Estate of Emerson v.

Commissioner, supra at 617-618.10

     The record contains no evidence of either requirement.

First, Revenue Agent Rigney did not mislead petitioner into

executing the Form 872.   Revenue Agent Rigney testified that he

told Mr. Asselin in February 1993 that the period of limitations

was scheduled to expire on June 30, 1993, and he still had

additional work to complete with respect to petitioner's civil

investigation.   Without the execution of a Form 872 extending the

period of limitations, respondent would have issued a notice of

deficiency, and petitioner would have lost the opportunity for a

settlement conference with respondent's Appeals Office.   At this

time, Revenue Agent Rigney had no intention to refer petitioner's

case back to respondent's CID.   Indeed, Revenue Agent Rigney

testified that it was not until July or August 1993 that he



     10
      The remaining requirements are: (1) The error must be in
a statement of fact and not in an opinion or statement of law;
(2) the party claiming the benefits of estoppel must be ignorant
of the true facts; and (3) the party claiming the benefit of
estoppel must reasonably rely on the acts or statements of the
one against whom estoppel is claimed. Kronish v. Commissioner,
90 T.C. 684, 695 n.10 (1988).
                              - 14 -

received information concerning petitioner's 1987 taxable year

and the possibility of omitted income from an antique automobile

sale in that year.   It was this information, obtained after

execution of the relevant Form 872, that caused Revenue Agent

Rigney to believe that a referral of petitioner's case to CID was

appropriate, because petitioner then appeared to have a 2-year

pattern of omitted income.

     Concerning the second requirement, even if petitioner had

been affirmatively misled, he still has not shown the existence

of any detrimental reliance on his part.     Kronish v.

Commissioner, supra at 695 & n.10.     Petitioner signed the Form

872 expecting respondent to use this waiver for civil purposes,

and that is all she ever used it for.    No criminal prosecution of

petitioner has ever resulted from the investigation by the CID.

Thus, we conclude that Mr. Asselin's execution of the Form 872 on

February 16, 1993, was valid, and respondent is not estopped from

relying on it.

     The second issue for decision involves the presumption of

correctness.   Petitioner argues that the presumption of

correctness should not attach to respondent's deficiency notice

in this case, because respondent did not present sufficient

evidence linking petitioner to the alleged unreported income.

When a taxpayer contests a tax that has been determined by the

Commissioner, the Commissioner's determination is generally

presumed correct, unless the taxpayer produces evidence
                              - 15 -

establishing that the determination is arbitrary and erroneous.

See Helvering v. Taylor, 293 U.S. 507, 515 (1935).   Several

Courts of Appeals recognize an exception to this general rule

where the Commissioner determines that the taxpayer received

income that was not reported on the taxpayer's return.    In these

instances, the Commissioner must first present "'some predicate

evidence connecting the taxpayer to the charged activity.'"

Anastasato v. Commissioner, 794 F.2d 884, 887 (3d Cir. 1986)

(quoting Gerardo v. Commissioner, 552 F.2d 549, 554 (3d Cir.

1977)), vacating and remanding T.C. Memo. 1985-101.11

     In any event, respondent's notice of deficiency here is

entitled to the traditional presumption of correctness.    See Rule

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

has clearly produced sufficient "predicate evidence" linking

petitioner to the sale proceeds in this case.   See Anastasato v.

Commissioner, supra at 887.   Respondent produced evidence that:

(1) Petitioner had possession and control over the five

automobiles in issue from the date of acquisition until their

sale to Mr. Harley in July 1988; (2) petitioner provided Mr.

Harley with bills of sale listing himself as the owner of the



     11
      The Court of Appeals for the First Circuit (to which this
case is appealable) has held that "in a deficiency or refund
suit, the burdens of going forward and of ultimate persuasion are
always on the taxpayer and never shift to the Commissioner."
United States v. Rexach, 482 F.2d 10, 17 (1st Cir. 1973); see
also Delaney v. Commissioner, 99 F.3d 20, 23 (1st Cir. 1996),
affg. T.C. Memo. 1995-378.
                               - 16 -

automobiles; (3) petitioner provided Mr. Harley with certificates

of title to four of the automobiles; (4) Mr. Harley was acting at

the express direction of petitioner when he wired the $3 million

in sale proceeds to the Julius Baer account at Banker's Trust in

New York; (5) approximately 10 days after the sale proceeds were

deposited into the Julius Baer account at Banker's Trust,

$453,375 was wired from this account to the Indian Head Bank in

Portsmouth, New Hampshire, in satisfaction of an outstanding

mortgage on property owned by petitioner; (6) approximately 2

months later, petitioner provided his wife with $2.5 million in

satisfaction of his divorce settlement obligation; and (7) in

connection with the divorce, petitioner had included the

automobiles in question on a three-page list that he compiled of

the couple's marital assets.

     The principal issue for decision is whether petitioner owned

the automobiles in issue and, therefore, realized gain on their

sale on or about July 8, 1988.   Petitioner argues that he sold

the automobiles on behalf of the late Abdul Aziz Ben-Jabr, and

then borrowed a total of $2,953,000 from the Ben-Jabr family to

satisfy an outstanding $453,375 mortgage on property he owned in

Maine, as well as a $2.5 million divorce settlement obligation.

Respondent, on the other hand, contends that petitioner was the

owner of the five automobiles in question and used almost all the

sale proceeds to satisfy the above obligations.
                               - 17 -

     The record contains persuasive objective evidence indicating

petitioner's ownership of the automobiles.   For instance, the

bill of sale that petitioner received on his acquisition of the

1937 Mercedes Benz 540-K, Serial No. 130941, listed petitioner as

the buyer of the automobile.   Mr. Schoenfeld, who sold petitioner

the 1929 Bentley Tourer Speed Six, Serial No. K2683, released

title and interest in that automobile to petitioner in a letter

dated April 16, 1979; and Mr. Marshall, who sold petitioner the

1936 500K Mercedes Roadster, Serial No. 130857, transferred the

certificate of title to that automobile to petitioner as well.

Moreover, petitioner had possession and control over all five

automobiles in question from the time he acquired them until they

were sold in 1988.

     When petitioner sold the automobiles in July 1988, he

personally signed the bill of sale for each automobile,

covenanting to the buyer that he was the lawful owner.

Petitioner also transferred certificates of title for four of the

automobiles to Mr. Harley.

     Of even greater significance is the three-page list of the

marital assets of petitioner and Linda Bennett, which petitioner

prepared in the spring of 1988 in contemplation of divorce.

Included on this list were the five automobiles sold by

petitioner in July of that year and their estimated market

values.   Petitioner's inclusion of these automobiles on his list

of marital assets was contrary to his pecuniary interest, as the
                                 - 18 -

list was used in determining petitioner's divorce settlement

obligation.     We simply do not believe that petitioner would have

included these automobiles on the list if he did not, in fact,

own them.     See Masson v. New Yorker Magazine, Inc., 501 U.S. 496,

512 (1991) ("we assume 'that persons do not make statements which

are damaging to themselves unless satisfied for good reason that

they are true.'") (citations omitted); cf. Fed. R. Evid.

804(b)(3) (allowing the admission of statements against a

declarant's interest as an exception to the rule against

hearsay).

     The testimony of former New Hampshire State Police Officer

Donald Gates further confirms our conclusion that petitioner

owned the automobiles in question.        Mr. Gates had been assigned

to investigate a robbery at petitioner's house on or around April

3, 1990, and a fire approximately 2 weeks later at a location

where petitioner stored automobiles.12       Through the course of his

investigation, Mr. Gates learned that petitioner needed to sell

several of his antique automobiles in order to finance his

divorce settlement with Linda Bennett.       Given the prior robbery

and the fire, Mr. Gates inquired about these automobiles and the

status of the sale in order to determine whether petitioner might

be the potential target of future crimes.       When asked about his




     12
          Neither occurrence is relevant to this case.
                                 - 19 -

discussions with petitioner regarding the sale of these

automobiles, Mr. Gates explained as follows:


     I was asking about the mechanics of the transaction,
     where did it go and how did it have to go, and I was
     told [by petitioner] that the cars were delivered and
     the transaction took place outside the United States.
     My obvious question is why does it need to be that
     confusing, why does it have to be that complicated.
     * * *

     Q:   What did Mr. Bennett say?

     A: He said he did not want to--he wanted to avoid
     paying the taxes. He didn't want to pay any more money
     to the IRS than he had to pay. * * *

     Q: Did he[petitioner] say anything with respect to the
     money vis-a-vis overseas banks?

     A: I recall the conversation about the transaction
     taking place outside of the country and the cars being
     delivered outside of the country and everything was
     done outside of the country.

     Q:   Including the money.

     A:   Including the money.

     Q: And the money was taken care of outside the United
     States, according to Dr. Bennett, for what purpose?

     A: So that he would not have to pay IRS any more taxes
     than he had to pay them.


Clearly, any potential income tax consequences from the sale of

the automobiles should have been irrelevant to petitioner if he

was not the owner of the automobiles.

     Petitioner's story that he purchased the five automobiles in

question for his good friend Abdul Aziz Ben-Jabr is also

inconsistent with the fact that three of the automobiles were
                                - 20 -

purchased after Abdul's death.     Abdul died in late 1977 or early

1978.     Petitioner purchased the 1937 Mercedes Benz 540-K, Serial

No. 130941, on or about August 18, 1978; the 1929 Bentley Tourer

Speed Six, Serial No. K2683, in November 1978; and the 1936 500K

Mercedes Roadster, Serial No. 130857, in late 1979 or early 1980.

In an attempt to explain this, petitioner testified that the Ben-

Jabr family did not notify him of Abdul's death until late 1979

or early 1980.     Petitioner also testified that Abdul had

established an account in Saudi Arabia from which petitioner

could draw funds to purchase automobiles, and petitioner did not

need to consult with Abdul before making a purchase.     Petitioner,

who referred to himself and Abdul as "kindred spirits", lived in

Saudi Arabia from 1973 through 1981.     During this time, he became

acquainted with Abdul's younger brother, Fallah, as well as other

members of the Ben-Jabr family.     Accepting the portion of

petitioner's story about his friendship with Abdul and the Ben-

Jabr family, it is difficult to believe that petitioner did not

learn of Abdul's death for approximately 2 years, during which

period he continued to purchase expensive automobiles for Abdul

with funds from Abdul's Saudi account.13




     13
      As an additional indication of petitioner's lack of
credibility, we note his execution of a settlement agreement on
Feb. 10, 1995, with the New Hampshire Board of Registration in
Medicine, in which petitioner admitted to two separate instances
of dishonest conduct and was fined $1,000.
                             - 21 -

     We also reject petitioner's contention that he received a

loan totaling $2,953,000 from the Ben-Jabr family in 1988 to

satisfy a mortgage on property he owned in Maine and to satisfy

his divorce settlement obligation.    The record in this case

contains no credible evidence of the existence of a loan.    For

instance, there is no evidence of any note, written loan

agreement, fixed payment schedule, request for collateral,

interest charge, demand for repayment,14 or reflection of the

transaction as a loan in the parties' records.    See Frierdich v.

Commissioner, 925 F.2d 180, 182 (7th Cir. 1991), affg. T.C. Memo.

1989-393; Busch v. Commissioner, 728 F.2d 945, 948 (7th Cir.

1984), affg. T.C. Memo. 1983-98.


     14
      Petitioner argues that he repaid approximately $1.2
million of the alleged loan with insurance proceeds that he
received as a result of a fire that destroyed his house in 1993.
Petitioner contends that he transferred funds to an account held
by the Estate of Abdul Aziz Ben-Jabr at the Credit Lyonnais Bank
in Switzerland. In support of his position, petitioner relies
upon the following evidence of wire transfers from the Plaistow
Bank & Trust Co. (Plaistow) (account number 02120186) in
Plaistow, New Hampshire. One wire transfer in the amount of
$700,000 was dated Nov. 1, 1993, and stated: "wire transfer to
Estate of AA Ben Jabr, plus fee" A second wire transfer in the
amount of $300,000 was dated Apr. 11, 1994, and stated: "wire
transfer to Credit Lyonnais (Schweiz) AG Zuerich-Estate A.A. Ben
Jabr". The third document is a wire request form in the amount
of $225,000 and dated Mar. 3, 1995. This form stated that the
transfer was to be made to an account named "Estate of A.A. Ben
Jabr" (account number 08-05866.1). However, this evidence does
not constitute proof of a loan repayment. Instead, it only shows
that, at most, petitioner transferred approximately $1.2 million
to an account that was created in the name of the Estate of Abdul
Aziz Ben-Jabr. Indeed, although they had ample opportunity to do
so, neither petitioner nor Fallah Ben-Jabr presented any
documentary evidence establishing that the Ben-Jabr family had an
account at Credit Lyonnais.
                              - 22 -

      In connection with his divorce, petitioner filed a document

entitled "Support Affidavit" with the Superior Court of the State

of New Hampshire.   Petitioner listed an outstanding mortgage of

$865,000 on this affidavit.   He did not include any debt that was

outstanding to any member of the Ben-Jabr family.    Petitioner

filed the document on September 15, 1988, which would have been

after petitioner's receipt of the alleged loan proceeds.    The

following day, petitioner and Linda Bennett entered a permanent

stipulation of divorce agreement with the court, which recounted

petitioner's obligation to pay Linda $2.5 million in connection

therewith.   Assuming the loan existed, it clearly would have been

in petitioner's best interest to include a $2,953,000 loan

obligation as an expense on his support affidavit.

      Finally, we note that the testimony of petitioner's

principal witness, Fallah Ben-Jabr, the brother of Abdul Aziz

Ben-Jabr, was unreliable, and we decline to place any weight on

it.   For instance, when asked on direct examination if he knew

whether petitioner and Abdul had any financial arrangement with

respect to petitioner's alleged acquisition of the automobiles

for Abdul, Fallah could only testify that "I believe so, yes."

When questioned about it further, Fallah responded:    "The details

I cannot inform you."   In addition, when questioned on cross-

examination regarding his knowledge of the sale of the

automobiles in 1988, Fallah testified that he had no personal

knowledge of the transaction or what actually happened to the
                               - 23 -

proceeds from the sale.   Furthermore, Fallah testified that he

lacked any firsthand knowledge of any loan repayments by

petitioner.   When asked, for example, if he had any knowledge as

to whether petitioner ever wired funds to any accounts controlled

by the Ben-Jabr family in repayment of the purported loan, Fallah

testified:    "It was done during the life of my dad and he was the

person responsible for it.   * * *   My dad was alive when some

things were happening and that is all I know."

     Having found that petitioner owned the automobiles in issue,

we must now consider petitioner's alternative argument that

respondent erroneously computed the cost bases of three of the

automobiles when calculating petitioner's gain.    In particular,

petitioner argues that his cost bases in the 1932 Mayback

Zepplin, Serial No. 1388, and Lagonda LG-45 Repead, Serial No.

12226, were $450,000 and $80,000, respectively.    In the notice of

deficiency, respondent determined a zero basis for each

automobile, because petitioner had failed to provide

documentation of his actual cost.    In addition, petitioner

contends that he had a $335,000 basis in the 1936 500K Mercedes

Roadster, Serial No. 130857.   Respondent determined that

petitioner's cost basis in this automobile was $100,000, based on

information provided from the seller.

     Section 1012 provides that a taxpayer generally has a basis

in property equal to its cost.   Petitioner bears the burden of

demonstrating that he is entitled to a basis in the automobiles
                              - 24 -

in excess of that determined by respondent.   Rule 142(a); Burnet

v. Houston, 283 U.S. 223, 227-228 (1931).   Petitioner has not

presented any documentation to support his alleged bases in the

automobiles.   Indeed, all petitioner offers in support of his

position is his self-serving and totally uncorroborated

testimony, which this Court is not required to accept.    Tokarski

v. Commissioner, 87 T.C. 74, 77 (1986).

     Petitioner's argument is also inconsistent with a previous

statement made by his representative.   In a letter to IRS Special

Agent James P. John dated February 20, 1991, Mr. Asselin provided

petitioner's answers to a series of questions regarding the

automobiles in issue.   In response to a question concerning the

acquisition of these automobiles, Mr. Asselin wrote:


     Dr. Bennett and Mr. [Abdul] Aziz [Ben-Jabr] were never
     in a partnership to acquire antique cars. Mr. Aziz
     purchased the cars on his own and had them sent to Dr.
     Bennett's home for storage. Dr. Bennett's best
     estimate is that Mr. Aziz acquired the cars during the
     period of 1974 through 1976. He does not know the cost
     of the cars, since they were purchased by Mr. Aziz, or
     from whom they were purchased. [Emphasis added]


Suffice it to say, this statement contradicts petitioner's

current argument regarding his bases in several of the

automobiles.   Based on the record before us, we also decline to

attempt any estimate of the cost bases for the two automobiles

for which respondent has determined a zero basis, as there is no

reasonable evidentiary basis upon which to do so.   See Vanicek v.
                                - 25 -

Commissioner, 85 T.C. 731, 743 (1985).       Petitioner has not shown

that he is entitled to a basis in any of the automobiles in issue

in excess of that determined by respondent.

     Respondent also determined that petitioner is liable for an

addition to tax for negligence or intentional disregard of rules

or regulations.    Section 6653(a)(1)(A) imposes an addition to tax

equal to 5 percent of the entire underpayment if any part of the

underpayment is due to negligence.       Section 6653(a)(1)(B) imposes

an addition to tax equal to 50 percent of the interest payable

under section 6601 with respect to the portion of the

underpayment that is due to negligence.      This Court has defined

negligence as a lack of due care or failure to do what a

reasonable and ordinarily prudent person would do under the

circumstances.     McGee v. Commissioner, 979 F.2d 66, 71 (5th Cir.

1992), affg. T.C. Memo. 1991-510; Neely v. Commissioner, 85 T.C.

934, 947 (1985).

     We have declined to sustain additions to tax for negligence

where taxpayers have relied reasonably and in good faith on the

advice of tax experts.     Metra Chem Corp. v. Commissioner, 88 T.C.

654, 662 (1987); Weis v. Commissioner, 94 T.C. 473, 487 (1990).

To demonstrate such good faith reliance, taxpayers must establish

that they supplied their return preparer with all necessary

information, and the incorrect return was a result of the

preparer's mistakes.     Weis v. Commissioner, supra at 487; Pessin

v. Commissioner, 59 T.C. 473, 489 (1972).       Respondent's
                                - 26 -

determination is presumed correct, and petitioner bears the

burden of proving otherwise.    Rule 142(a); Luman v. Commissioner,

79 T.C. 846, 860-861 (1982).

     In the instant case, petitioner argues that he informed his

return preparer, Mr. Tilton, of the sale of the automobiles on

behalf of the Ben-Jabr family and the loans he received in 1988.

Petitioner contends that Mr. Tilton advised him that the receipt

of the loan proceeds was not taxable.    Petitioner claims that his

alleged reliance on Mr. Tilton's advice was reasonable, and he

acted in good faith in not including the proceeds from the sale

of the automobiles in his gross income for 1988.

     However, we have already found that the five automobiles in

issue belonged to petitioner.    The information that petitioner

allegedly gave to Mr. Tilton was not accurate, and, therefore,

any advice based on this inaccurate information cannot be relied

upon by petitioner to shield him from the addition to tax for

negligence.   We also note that petitioner failed to report gain

on his 1988 return from the sale of two additional automobiles

which he admittedly owned.   Petitioner has failed to present any

credible evidence demonstrating that he was not negligent, and,

therefore, we sustain the addition to tax.

     Finally, respondent determined that petitioner is liable for

an addition to tax for substantial understatement of income tax.

Section 6661(a) provides for an addition to tax equal to 25

percent of the amount of any underpayment attributable to such
                               - 27 -

understatement.    Pallottini v. Commissioner, 90 T.C. 498, 503

(1988).   An understatement is substantial if it exceeds the

greater of $5,000 or 10 percent of the tax required to be shown

on the return.    Sec. 6661(b)(1)(A).   This amount may be reduced,

however, if the taxpayer shows that there was substantial

authority for his treatment of an item, or that the relevant

facts affecting the tax treatment of the item are adequately

disclosed on the return or in a separate statement attached to

the return.   Sec. 6661(b)(2)(B).   Substantial authority exists

only if the weight of the authorities supporting the treatment of

an item is substantial in relation to the weight of authorities

supporting contrary positions.    Sec. 1.6661-3(b)(1), Income Tax

Regs.     Petitioner bears the burden of demonstrating that he had

substantial authority for his position.    Rule 142(a); King's

Court Mobile Home Park, Inc. v. Commissioner, 98 T.C. 511, 517

(1992).

     We have already rejected petitioner's explanation for his

failure to report the sale of the automobiles on his 1988 return,

and petitioner has failed to offer any other reason for relieving

him of the section 6661 addition to tax.    Since all of the

requirements for imposition of the section 6661 addition to tax

have been satisfied, we sustain respondent's determination.



                                         Decision will be entered

                                    for respondent.
