                        T.C. Memo. 2000-278



                      UNITED STATES TAX COURT



                  SHIRLEY J. RANEY, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 18201-98.                     Filed August 30, 2000.



     Shirley J. Raney, pro se.

     J. Scot Simpson, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     RUWE, Judge:   Respondent determined deficiencies in

petitioner’s Federal income taxes and additions to tax as

follows:
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                                    Additions to Tax
     Year      Deficiency     Sec. 6651(f)   Sec. 6654(a)

     1992       $2,226            $1,568          $91
     1993        1,721             1,291           72
     1994        4,237             1,741          109
     1995        2,668             1,360           93
     1996        2,126             1,498          106

     The issues for decision are:    (1) Whether petitioner

received taxable wage and pension income during each of the years

in issue; (2) whether petitioner is liable for additions to tax

under section 6651(f)1 for fraudulent failure to file income tax

returns for the years in issue; and (3) whether petitioner is

liable for the additions to tax under section 6654(a) for failure

to pay estimated tax for the years in issue.

     When this case was called for trial, respondent moved,

pursuant to Rule 91(f), to compel petitioner to enter into a

proposed stipulation of facts.    After hearing the parties on the

motion, we determined that there was no real dispute about the

facts proposed for stipulation and that there was no good reason

why the facts and exhibits attached to the stipulation should not

be made part of the evidentiary record.    We therefore granted

respondent’s motion and deemed the matters contained in the

proposed stipulation to be facts for purposes of this case.    See

Rule 91(f).   After we granted the motion, the parties decided


     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
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that they would not call any witnesses, and the case was

submitted on the stipulated facts.

                          FINDINGS OF FACT

     Petitioner resided in Tampa, Florida, at the time she filed

her petition.   Petitioner was married and had no dependent

children during the years in issue.

     During 1992, petitioner was employed by Wal-Mart and

Fireman’s Fund and received wage income from those employers in

the amounts of $1,196 and $16,644, respectively.   During 1993,

petitioner was employed by Fireman’s Fund and received wage

income of $16,948.   During 1994, petitioner was employed by

Fireman’s Fund, Montgomery Ward, Data Input Services, and

Physicians Healthcare and received wage income from those

employers in the amounts of $16,274, $1,782, $1,728, and $1,513,

respectively.   During 1995, petitioner was employed by Physicians

Healthcare and Burns & Wilcox and received wage income from those

employers in the amounts of $10,839 and $6,564, respectively.

During 1996, petitioner was employed by Burns & Wilcox and the

U.S. Postal Service and received wage income from those employers

in the amounts of $5,326 and $14,765, respectively.   Petitioner

received Forms W-2, Wage and Tax Statement, reflecting these

wages.

     In 1992, petitioner received $1,368 from Fireman’s Fund

ESOP.    In 1994, petitioner received $6,102 in pension income from
                               - 4 -

The Bank of New York.   In 1995, petitioner received $3,693 from

the Fireman’s Fund Retirement Plan.

     Petitioner provided the Fireman’s Fund with Form W-4,

Employee’s Withholding Allowance Certificate, dated May 5, 1992,

on which she claimed 10 withholding allowances.   Petitioner

provided Montgomery Ward with Form W-4, dated July 29, 1994, on

which she claimed eight withholding allowances.   Petitioner

provided Data Input Services with Form W-4, dated October 10,

1994, on which she claimed eight withholding allowances.

Petitioner provided Physicians Healthcare with Form W-4, dated

November 28, 1994, on which she claimed eight withholding

allowances.   Petitioner provided Burns & Wilcox with Form W-4,

dated July 19, 1995, on which she claimed eight withholding

allowances.   Petitioner’s employers withheld Federal income taxes

from her wages in the amounts of $641.36, $0.00, $696.41,

$117.61, and $129.51 for the years 1992, 1993, 1994, 1995, and

1996, respectively.   Petitioner made no estimated tax payments

for the years in issue.

     Petitioner sent Forms 1040, U.S. Individual Income Tax

Return, to respondent for the years in issue.   The Forms 1040

were received by the Internal Revenue Service on December 17,

1997.   On those Forms 1040, petitioner reported no income.

Respondent did not accept the above-referenced Forms 1040 as tax
                                 - 5 -

returns.   Petitioner has not filed any other income tax returns

for the years in issue.

     In correspondence with respondent, petitioner indicated that

she did not believe that the tax laws required her to pay tax on

the income that she received.    Petitioner continues to take that

position in her brief.

                                OPINION

     Petitioner received wage income from various employers

during the years 1992, 1993, 1994, 1995, and 1996 in the

respective amounts of $17,840, $16,948, $21,297, $17,403, and

$20,091.   Petitioner also received pension income during 1992,

1994, and 1995 in the respective amounts of $1,368, $6,102, and

$3,693.2   Petitioner generally argues that no act of Congress

authorizes taxation of these amounts.     We disagree.   All these

amounts constitute gross income under section 61.     Petitioner’s

arguments to the contrary are wholly without merit and not worthy

of further analysis.   We hold that petitioner has deficiencies in

income taxes in the amounts determined in the notice of

deficiency.

     Respondent also determined that petitioner is liable for

additions to tax pursuant to section 6651(f) for fraudulent


     2
      In computing the amount of the deficiencies, respondent
determined that petitioner was liable for an increase in tax of
10 percent on the pension distributions pursuant to sec. 72(t).
Petitioner has not disputed this and offered no evidence on this
point.
                                - 6 -

failure to file returns for each of the years in issue.      The

existence of fraud is a question of fact to be resolved upon

consideration of the entire record.     See Gajewski v.

Commissioner, 67 T.C. 181, 199 (1976), affd. without published

opinion 578 F.2d 1383 (8th Cir. 1978); Estate of Pittard v.

Commissioner, 69 T.C. 391 (1977).     Fraud is not to be imputed or

presumed, but rather must be established by independent evidence

of fraudulent intent.    See Beaver v. Commissioner, 55 T.C. 85, 92

(1970); Otsuki v. Commissioner, 53 T.C. 96 (1969).       Fraud may not

be found under “circumstances which at the most create only

suspicion.”    Davis v. Commissioner, 184 F.2d 86, 87 (10th Cir.

1950); Petzoldt v. Commissioner, 92 T.C. 661, 700 (1989).

       A finding of fraud requires proof of specific intent to

evade a tax believed to be owing.    If an understatement of tax

is caused by a good faith misunderstanding of the tax laws, the

understatement would not be due to fraud.    See Niedringhaus v.

Commissioner, 99 T.C. 202, 217 (1992).    A good faith

misunderstanding for this purpose can exist even if the

misunderstanding is objectively unreasonable.    See id. at 216-

217.    We have cautioned, however, that a good faith

misunderstanding of the law is different from disagreement with

the law or a belief that the law is or may be unconstitutional.

See id. at 217-218.
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     The main thrust of petitioner’s position in this case is

that the tax laws do not require her to pay taxes on the income

that she received.   While we believe that petitioner’s position

is objectively unreasonable, the sparse evidence in the record

before us does not clearly and convincingly negate petitioner’s

implicit claim that she was acting on her good faith

understanding of the law.    Of course, we may question whether

petitioner’s purported misunderstanding of the law was the

product of good faith.   However, suspicions, no matter how

strong, are not a substitute for evidence.3   See id. at 210.

Respondent bears the burden of proving fraudulent intent by clear

and convincing evidence.    See sec. 7454(a); Rule 142(b).

Respondent has not done so.    We therefore hold that petitioner is

not liable for the additions to tax under section 6651(f).4

     Petitioner bears the burden of proof regarding the section

6654(a) additions to tax for failure to pay estimated tax.

Petitioner offered no evidence regarding the section 6654(a)




     3
      The record before us contains no evidence of petitioner’s
business experience, educational background, prior history of
filing income tax returns, or dealings with the Internal Revenue
Service, prior to 1992.
     4
      In respondent’s brief, he requests that we, on our own
motion, impose an additional penalty under sec. 6673. Given the
fact that petitioner has prevailed on the sec. 6651(f) issue, we
decline respondent’s invitation.
                              - 8 -

additions to tax, nor did she address this issue in her brief.

We therefore uphold respondent’s determination on this issue.



                                           Decision will be entered

                                      for respondent with respect

                                      to the deficiencies and the

                                      additions to tax under section

                                      6654(a) and for petitioner

                                      with respect to the additions

                                   to tax under section 6651(f).
