                        T.C. Memo. 2011-47



                      UNITED STATES TAX COURT



                 TIMOTHY B. DICKEY, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 14196-07.              Filed February 28, 2011.



     Timothy B. Dickey, pro se.

     G. Chad Barton, for respondent.



                        MEMORANDUM OPINION


     RUWE, Judge:   Respondent determined deficiencies in

petitioner’s Federal income taxes and additions to tax as

follows:
                                   - 2 -

                                         Additions to Tax
 Year        Deficiency   Sec. 6651(a)(1)   Sec. 6651(a)(2)    Sec. 6654
                                                    1
 2002         $62,683        $14,056.43                          --
                                                    1
 2003          20,746          4,667.85                        $542.93
                                                    1
 2004           1,452            326.70                          42.18
                                                    1
 2005           1,181            265.73                          47.38
         1
       The amount of any addition to tax under sec. 6651(a)(2) shall
  be determined pursuant to sec. 6651(a)(2), (b), and (c).

     Petitioner does not dispute the deficiency or additions to

tax for 2005 in the petition, and respondent has conceded the

deficiency and additions to tax for 2004.         Respondent concedes

that the pension income petitioner received from the Los Angeles

County Employees Retirement Association in 2002 and 2003 is not

taxable.

                                Background

     The parties submitted this case fully stipulated pursuant to

Rule 122.1      The stipulation of facts, the supplemental

stipulation of facts, and the attached exhibits are incorporated

herein by this reference.      At the time the petition was filed,

petitioner resided in Oklahoma.

     Petitioner did not file timely Federal income tax returns

for taxable years 2002 and 2003.          On March 22, 2007, respondent

prepared returns under section 6020(b) for petitioner’s 2002 and




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

2003 taxable years.2    On March 23, 2007, respondent mailed to

petitioner a notice of deficiency.      On November 3, 2008,

petitioner provided respondent’s counsel with Federal income tax

returns for taxable years 2002 and 2003.

     The notice of deficiency determined that petitioner received

income in 2002 and 2003.    The parties stipulated that petitioner

received nonemployee compensation, interest income, proceeds from

the sale of stock, cancellation of debt income, and dividend

income for taxable years 2002 and 2003 as follows:

                       Nonemployee Compensation

              Source                    2002          2003

     American Medical Security,
       Inc.                              $615          --
     Allianz Life Insurance Co.         3,910          --
     FFP Advisory Services,
       Inc.                          33,388          $1,944
     FFP Securities, Inc.            59,758            --
     Clarica Life Insurance Co.       1,500            --
       Total                         99,171           1,944

                           Interest Income

              Source                    2002          2003

     First Trust Corp.                  $308           --
     WNC Housing Tax Credit
       Fund VLP                           44           --
     Boston Financial Qualified           48          $14
     Boston Capital Tax Credit
       Fund IV                            38           --



     2
      Under sec. 6020(b), when any taxpayer fails to make any
return required by law, the Internal Revenue Service (acting for
the Secretary of the Treasury) may make a return from such
information as it can obtain.
                                 - 4 -

     American Tax Credit Fund
       VLP                                  98       --
     WNC Housing Tax Credit
       Fund VLP                             20       --
     WNC Housing Credit Fund
       VILP                                 13       --
       Total                               569       14

                        Stock Sale Proceeds

               Source                      2002      2003

     Ultraotc Investor Shares
       Acct. xxxx1063                    $19,904      --
     Ameritrade Inc.
       Acct. xxxx9378                      3,246     --
     First Trust Corp.
       Acct. ETC2                         40,016      --
     Pershing LLC
       Acct. xxxx3942                       --     $72,190
       Total                              63,166    72,190

                   Cancellation of Debt Income

               Source                      2003

     Citibank South Dakota NA             $2,628
     Bank One Delaware NA                  4,372
       Total                               7,000

                            Dividend Income

               Source                      2002       2003

     General Electric Co.                  $186      $202
       Total                                186       202

     In addition, petitioner received and failed to report wages

of $4,200 from Nova Financial Group, Inc., and a State tax refund

of $496 from the Oklahoma Tax Commission for 2002.

     Before the mailing of the notice of deficiency, petitioner’s

only payment of income tax for 2002 and 2003 was income tax

withholding of $210 in 2002.    Petitioner is entitled to one
                                - 5 -

personal exemption for each of the 2002 and 2003 taxable years.

Petitioner’s filing status was married filing separate for

taxable year 2002 and single for taxable year 2003.

                              Discussion

     Petitioner received and failed to timely report total income

of $157,531 and $73,446 for the taxable years 2002 and 2003,

respectively.3   Petitioner acknowledged receipt of this income in

the stipulation of facts and in the returns provided to

respondent’s counsel in 2008.    Those returns claim certain

deductions and bases in stock that were not allowed in the notice

of deficiency.   Petitioner has failed to provide any evidence to

substantiate these deductions or bases in stock for 2002 and

2003; therefore, we hold that they are not allowable.

Additions to Tax

     (a) Section 6651(a)(1)

     Section 6651(a)(1) provides for an addition to tax when a

taxpayer fails to file a timely return, unless the taxpayer

establishes that the failure was due to reasonable cause and not

willful neglect.   The addition to tax is equal to 5 percent of

the amount required to be shown as tax on the delinquent return

for each month or fraction thereof during which the return



     3
      The $157,531 and $73,446 amounts include adjustments
respondent made to petitioner’s self-employment adjusted gross
income, standard deduction, and exemptions, in calculating
petitioner’s income for 2002 and 2003.
                                 - 6 -

remains delinquent, up to a maximum addition of 25 percent for

returns more than 4 months delinquent.   Sec. 6651(a)(1).

Petitioner failed to file timely Federal income tax returns for

taxable years 2002 and 2003.   Accordingly, we hold that

petitioner is liable for the addition to tax under section

6651(a)(1) and sustain respondent’s determination as set forth in

the notice of deficiency.

     (b) Section 6651(a)(2)

     Section 6651(a)(2) provides for an addition to tax for

failure to timely pay the amount of tax shown on a return, unless

the taxpayer establishes that the failure was due to reasonable

cause and not willful neglect.    The addition is calculated as 0.5

percent of the amount shown as tax on the return but not paid,

with an additional 0.5 percent for each month or fraction thereof

during which the failure to pay continues, up to a maximum of 25

percent.4   Sec. 6651(a)(2); see Verduzco v. Commissioner, T.C.

Memo. 2010-278.

     Under section 6020(b), when any taxpayer fails to make any

return required by law, the Internal Revenue Service (acting for

the Secretary of the Treasury) may make a return from such



     4
      The amount of the addition to tax under sec. 6651(a)(2)
reduces the amount of the addition to tax under sec. 6651(a)(1)
for any month for which an addition to tax applies under both
paragraphs. Sec. 6651(c)(1); Verduzco v. Commissioner, T.C.
Memo. 2010-278.
                                 - 7 -

information as it can obtain.    Under section 6651(g)(2), any

return so made is treated as the taxpayer’s return for purposes

of section 6651(a)(2).     See Missall v. Commissioner, T.C. Memo.

2008-258.   Therefore, we find that petitioner is liable for the

addition to tax under section 6651(a)(2) for taxable years 2002

and 2003.

     (c) Section 6654

     Section 6654 provides for an addition to tax when a taxpayer

fails to pay a required installment of estimated income tax.

Each required installment is equal to 25 percent of the required

annual payment.   Sec. 6654(d)(1)(A).    The required annual payment

is equal to the lesser of (1) 90 percent of the tax shown on the

return for the taxable year (or, if the taxpayer filed no return,

90 percent of the tax for that year), or (2) 100 percent of the

tax shown on the return, if any, for the preceding taxable year.

Sec. 6654(d)(1)(B).     Petitioner failed to file Federal income tax

returns for the taxable years 2002 and 2003.    Therefore,

petitioner’s required annual payment for 2003 was 90 percent of

the tax for that year.    See Missall v. Commissioner, supra.

Because he failed to pay any Federal income tax for 2003, we find

that petitioner is liable for the addition to tax under section

6654 for that year.   See id.

     On brief petitioner raised for the first time the issue that

respondent erred in calculating the deficiencies by not
                                 - 8 -

considering income reported and “tax paid” on the returns which

petitioner submitted after the notice of deficiency was issued.

     Where the taxpayer has made no return by the time the

Commissioner mails a notice of deficiency, then, for purposes of

determining the tax shown on the return, the taxpayer is deemed

to have made a return showing zero tax.       Mendes v. Commissioner,

121 T.C. 308, 327 (2003).   Respondent issued the notice of

deficiency on March 23, 2007, and petitioner did not submit his

returns to respondent’s counsel until November 3, 2008.

Therefore, in calculating petitioner’s deficiencies, respondent

correctly determined the tax shown on petitioner’s returns to be

zero.   See Mendes v. Commissioner, supra.      To the extent that any

assessments or payments were made after the notice of deficiency

was mailed, they can be reflected in the Rule 155 computations.

     To reflect the foregoing,


                                              Decision will be entered

                                         under Rule 155.
