                   T.C. Summary Opinion 2004-31



                      UNITED STATES TAX COURT



         HARRY ALLEN AND EVELYN SCOTT HALL, Petitioners v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 13109-02S.              Filed March 16, 2004.



     Harry Allen Hall, pro se.

     T. Keith Fogg, for respondent.



     COUVILLION, Special Trial Judge:    This case was heard

pursuant to section 7463 of the Internal Revenue Code in effect

at the time the petition was filed.1    The decision to be entered

is not reviewable by any other court, and this opinion should not



     1
          Unless otherwise indicated, subsequent section
references are to the Internal Revenue Code in effect for the
year at issue. Rule references are to the Tax Court Rules of
Practice and Procedure.
                                - 2 -


be cited as authority.

     Respondent determined a deficiency of $13,267 in

petitioners’ Federal income tax and an accuracy-related penalty

under section 6662(a) of $2,653, for the year 2000.   After

concessions, the sole issue for decision is whether petitioners

had unreported gross income of $51,470 from a trade or business

activity in 2000.2

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

exhibits annexed thereto, are so found and are made part hereof.

Petitioners’ legal residence at the time the petition was filed

was Virginia Beach, Virginia.

     Petitioners were married during the year at issue and filed

a timely joint income tax return.   Harry Hall was a truck driver.

He conducted this occupation as a Schedule C, Profit or Loss From

Business, trade or business activity.   Evelyn Hall worked in

maintenance and reported $15,968 in wage and salary income.

     Mr. Hall operated a tractor-trailer.   He owned the tractor

and leased the trailer from American Road Lines (ARL), a private

corporation with whom he had a contractual relationship during

the year at issue.   ARL had contracts with the Federal



     2
          Petitioners conceded the sec. 72(t) tax due on an early
withdrawal from an Individual Retirement Account (IRA).
Respondent conceded the accuracy-related penalty and $10,983 in
additional allowable Schedule C expenses. Other adjustments are
computational in nature.
                               - 3 -


Government.   Under an agreement with ARL, Mr. Hall transported

Government freight across the United States as an independent

owner/operator.

     ARL sent Mr. Hall weekly settlement statements.    Each

statement consisted of a “permanent check voucher” and a

“settlement voucher,” which listed the income Mr. Hall had earned

on his trips for ARL, as well as any deductible charges he had

incurred during that week.   The charges included rent due on the

trailer and other expenses advanced by ARL, such as truck tags

needed to cross into various States, taxes, and expenses with

respect to use of the leased trailer.   Mr. Hall was obligated to

repay such expenses.   Each item of income and expense was

enumerated.   In the audit of their return by respondent,

petitioners provided roughly two-thirds of the weekly statements

for the year at issue.   These statements were produced at trial.

Other statements were either misplaced or lost.

     On the lower portion of each weekly settlement statement

were figures entitled, “YTD Amount” and “YTD 1099”.    These

figures suggested a running total, as they tended to increase

with each later statement.   However, some statements contained

the designation, “N/A,” in the “YTD Amount” or “YTD 1099" column.

The last statement for the year, dated December 21, 2000, showed

a “YTD Amount” of $54,197.69 and a “YTD 1099" of $43,983.72.

     During the course of the year, Mr. Hall noticed that his
                                   - 4 -


statements had inaccuracies.       Specifically, he did not understand

the instances when “N/A” appeared in the “YTD Amount” or “YTD

1099" column.       Both he and Mrs. Hall attempted to contact ARL on

several occasions for explanations; however, they were

unsuccessful.       Mr. Hall described these efforts to the Court:


          During the course of the year, I had the pleasure to
     call ARL constantly and question them about the figures on
     the bottom of the settlement. The woman said okay, we’ll
     try to get it straight. We’ll straighten it out.

     *          *          *         *       *          *        *

          I couldn’t make heads or tails just looking at their
     paperwork that they * * * [were] giving me a true figure
     because I had inquired to these people over and over that my
     statements didn’t look right. The figures wouldn’t match.

          I was asking them for help to figure out their own
     paperwork, and the woman there told me that she would try to
     figure it out. Don’t worry about it. It will be corrected.
     Just keep on trucking. I was being honest with them, and I
     was hoping that they were being honest with me.

     *          *          *         *       *          *        *

          When the figures did show up, I thought it was
     corrected. I took it at face value that the figures were
     correct.


Petitioners eventually lost faith in ARL.        Mr. Hall left the

company in December 2000 to pursue more local trucking work with

a different company.

     Petitioners filed their 2000 Federal income tax return

timely.   On Schedule C, they reported $47,773 in gross receipts

or sales from Mr. Hall’s activity as a truck driver.        This amount
                                - 5 -


represented the $43,983.72 in the “YTD 1099" column on the

December 21, 2000, settlement statement from ARL, plus payments

received from two other companies, Gilco Properties and RB&B

Trucking.

     On Form 1099-MISC, Miscellaneous Income, ARL reported the

amount it had paid to Mr. Hall in 2000 to the Internal Revenue

Service.    The parties stipulated that the information return

issued by ARL reflected that ARL paid $95,455 to Mr. Hall during

the year in question.3   Petitioners did not receive the Form

1099-MISC from ARL.   The Form 1099-MISC was not produced at

trial, but respondent’s explanation of adjustments refers to it,

indicating that a Form 1099 was received by respondent.

     The issue for decision is whether, on their 2000 income tax

return, petitioners underreported gross trade or business income

of $51,470, the difference between the $95,455 on the Form 1099

filed by ARL and the $43,983.72 stated on the settlement

statement issued to Mr. Hall by ARL.    Generally, the taxpayer has

the burden of proving that the determinations made by

Commissioner in the notice of deficiency are erroneous.    Rule

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

section 6201(d) provides that, if the taxpayer, in a court


     3
          In later correspondence with respondent, ARL indicated
that the Form 1099 had understated the amount paid to Mr. Hall by
$1,349. However, respondent has not sought an increased
deficiency.
                               - 6 -


proceeding, asserts a reasonable dispute with respect to income

reported on an information return and fully cooperates with the

Commissioner, the Commissioner has the burden of producing

reasonable and probative information in addition to the

information return.   Hardy v. Commissioner, T.C. Memo. 1997-97,

affd. 181 F.3d 1002 (9th Cir. 1999).   The Court is satisfied that

the requirements of section 6201(d) have been met, and the burden

of going forward is on respondent with respect to this additional

income.

     The Court concludes that respondent has met the burden of

producing reasonable and probative information with respect to

the deficiency.   In the audit of petitioners’ return,

respondent’s revenue agent, Elizabeth Isgett, obtained from ARL a

summary of the checks issued to Mr. Hall in 2000 (check summary).

The check summary was a complete record of ARL’s payments and

deductions with respect to Mr. Hall for the year at issue.   It

contained a column labeled “1099 Amount”.   Ms. Isgett determined

that the income and expense items on the check summary, when

combined, produced the net figure of $95,455 reported to the

Internal Revenue Service by ARL.4   This information was


     4
          Ms. Isgett compared the check summary with the
available weekly settlement statements and determined that the
“1099 YTD” total on the Dec. 21 settlement statement ($43,984.72)
did not represent the net effect of Mr. Hall’s income and
expenses as reflected in his check summaries. In fact, this
“1099 YTD” total did not correspond to any of the records she
                                                   (continued...)
                                - 7 -


reasonable, probative, and supportive of the allegation of

additional income.   Respondent satisfies the requirements of

section 6201(d).

     Although respondent bore the burden of proof with respect to

the issue of unreported income, nonetheless, the ultimate burden

of persuasion, or risk of nonpersuasion, remains on petitioners.

Senter v. Commissioner, T.C. Memo. 1995-311 (citing Higginbotham

v. United States, 556 F.2d 1173, 1176 (4th Cir. 1977)).5   For the

following reasons, the Court holds that petitioners have not met

their ultimate burden of persuasion that they did not receive the

$51,470 in gross income at issue.

     Gross income includes all income from whatever source

derived.   Sec. 61(a).   Despite the error in the running totals

columns, the available weekly statements do corroborate the

income and expense entries contained on the check summary.    The

Court thus concludes that the check summary is reliable evidence

of ARL’s payments and deductions with respect to Mr. Hall.



     4
      (...continued)
reviewed. As the Court was also not able to determine the origin
of that figure, the Court disregards the significance of the
“1099 YTD” amount as reflected on the Dec. 21 settlement
statement.
     5
          Because any appeal in this case, if it were
permissible, would lie to the Court of Appeals for the Fourth
Circuit, the Court follows the precedent established in that
Circuit. Golsen v. Commissioner, 54 T.C. 742, 756-757 (1970),
affd. 445 F.2d 985 (10th Cir. 1971).
                               - 8 -


Moreover, the check summary covers the entire taxable year and

supports respondent’s contention that petitioners had income that

was not reported on their return.    Petitioners have not contested

the accuracy of the check summary.

     Section 6001 provides generally that every person liable for

any tax shall keep such records, render such statements, make

such returns, and otherwise comply with applicable rules and

regulations for the reporting of income and expenses.     To be

sure, some of the monthly statements petitioners received from

ARL contained inaccuracies; however, petitioners knew that.

Petitioners failed to maintain their own books and records to

persuade the Court that the information return filed at yearend

with respondent by ARL was inaccurate.     On this record, the Court

finds that petitioners did receive $51,470 in unreported income

during the year 2000.   Respondent is sustained on this issue.

     Reviewed and adopted as the report of the Small Tax Case

Division.



                                            Decision will be entered

                                       under Rule 155.
