                        T.C. Memo. 2006-129



                      UNITED STATES TAX COURT



                     DIANA COTE, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 12502-04.               Filed June 21, 2006.



     Philip A. Putman, for petitioner.

     Gavin L. Greene, for respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION


     LARO, Judge:   Respondent determined a deficiency in

petitioner’s Federal income tax of $176,428 for 1999 and

additions to tax of $55,249.74 under section 6651(a) and

$6,479.40 for failure to pay estimated tax under section 6654.1


     1
         Section references are to the applicable versions of the
                                                    (continued...)
                               -2-

After concessions by respondent, the issues for decision are (1)

whether petitioner had unreported income in the amounts

determined by respondent, (2) whether petitioner is liable for a

10-percent additional tax on early distributions from her

individual retirement accounts (IRAs), (3) whether petitioner is

liable for the addition to tax determined by respondent under

section 6651(a)(1), and (4) whether the Court should impose a

penalty against petitioner pursuant to section 6673.

                        FINDINGS OF FACT

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

petition was filed, petitioner resided in Cobb, California.

     In 1999, petitioner received gains of $16,194 from the sale

of securities through National Financial Services, gains of

$90,039 from the sale of securities through OppenheimerFunds

Services, income of $5,936 from the Social Security

Administration, dividends of $50 from National Financial

Services, dividends of $1,827 from OppenheimerFunds Services,

interest of $210 from the Rhode Island State Employees Credit


(...continued)
Internal Revenue Code. Rule references are to the Tax Court
Rules of Practice and Procedure. Some dollar amounts have been
rounded.
     Respondent stated in the explanation of income tax
examination changes attached to the notice of deficiency that
petitioner was liable for additions to tax of $27,321.30 for
failure to file under sec. 6651(a)(1) and $27,928.44 for failure
to pay tax under sec. 6651(a)(2), totaling $55,249.74.
Respondent concedes that petitioner is not liable for the
additions to tax under sec. 6651(a)(2).
                                 -3-

Union, interest of $116 from the Xerox Federal Credit Union,

distributions from an IRA of $179,558 from OppenheimerFunds

Services, distributions from an IRA of $3,407 from Delaware

Service Company, and distributions from an IRA of $129,064 from

Franklin Templeton Investor Services.    Petitioner’s basis in the

securities sold through OppenheimerFunds Services was $100,000.

During 1999, petitioner was under the age of 55, and she did not

receive the distributions from any of her IRAs as a result of

becoming disabled.    Federal income tax of $55,000 was withheld

from her income for 1999.

     Petitioner did not file a Federal income tax return for

1999.    Respondent has no record that petitioner filed a tax

return for 1999, and petitioner has never disputed respondent’s

assertion that petitioner failed to file a tax return for 1999.

Respondent issued a notice of deficiency on April 7, 2004, and

determined the above-stated deficiency and additions to tax.

Petitioner timely filed a petition disputing the determinations.2

     Petitioner failed to submit to the Court a pretrial

memorandum as required by the Court’s standing pretrial order.



     2
        On July 12, 2004, the Court filed as a petition a letter
received from petitioner. By an order dated July 19, 2004, the
Court directed petitioner to file an amended petition complying
with the Rules of the Court as to form and content of a proper
petition by Sept. 2, 2004. Despite issuance by the Court of
several orders to petitioner in the ensuing months, petitioner
did not submit an amended petition to the Court until May 24,
2005.
                                -4-

At calendar call, petitioner did not appear, but the Court had

before it and granted petitioner’s motion for a trial time and

date certain.   At trial, petitioner did not personally appear but

was represented by counsel.   Petitioner’s counsel did not

introduce any evidence on petitioner’s behalf at trial and failed

to file a posttrial brief following the trial.

                              OPINION

1.   Unreported Income

     As a general rule, the Commissioner’s determinations set

forth in a notice of deficiency are presumed correct, and the

taxpayer bears the burden of showing that these determinations

are in error.   Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115

(1933).3   In order for the presumption of correctness to attach

to the deficiency determination in unreported income cases, the

Commissioner must establish “some evidentiary foundation”

connecting the taxpayer with the income-producing activity,

Weimerskirch v. Commissioner, 596 F.2d 358, 361-362 (9th Cir.

1979), revg. 67 T.C. 672 (1977), or demonstrate that the taxpayer

received unreported income, Edwards v. Commissioner, 680 F.2d

1268, 1270 (9th Cir. 1982) (Commissioner’s assertion of a


     3
        Pursuant to sec. 7491(a), the burden of proof as to
factual matters shifts to respondent under certain circumstances.
Petitioner has neither alleged that sec. 7491 applies nor
established her compliance with the requirements of sec.
7491(a)(2)(A) and (B) to substantiate items, maintain records,
and cooperate fully with respondent’s reasonable requests.
Petitioner therefore bears the burden of proof.
                                 -5-

deficiency is presumptively correct once some substantive

evidence is introduced demonstrating that the taxpayer received

unreported income).   McManus v. Commissioner, T.C. Memo. 2006-57;

see also Palmer v. United States, 116 F.3d 1309, 1312 (9th Cir.

1997) (“The Commissioner’s deficiency determinations and

assessments for unpaid taxes are normally entitled to a

presumption of correctness so long as they are supported by a

minimal factual foundation.”).   If the Commissioner introduces

some evidence that the taxpayer received unreported income, the

burden shifts to the taxpayer to show by a preponderance of the

evidence that the deficiency was arbitrary or erroneous.    Hardy

v. Commissioner, 181 F.3d 1002, 1004 (9th Cir. 1999), affg. T.C.

Memo. 1997-97.

     We conclude that respondent has shown a sufficient

evidentiary foundation as to the unreported income determined in

the notice of deficiency.   Respondent has introduced, and we have

admitted, into evidence certified transcripts listing the amount

of income that third parties have represented to respondent as

having been paid to petitioner, and petitioner makes no challenge

to the accuracy of these transcripts.   See Green v. Commissioner,

T.C. Memo. 1996-107, affd without published opinion 113 F.3d 1251

(11th Cir. 1997).   Respondent also has introduced, and we have

admitted, into evidence records of OppenheimerFunds Services and

Franklin Templeton Investor Services.   The records show that
                                  -6-

during 1999, OppenheimerFunds Services (1) distributed $179,558

to petitioner from one of petitioner’s retirement accounts and

(2) received on petitioner’s behalf $1,827 of dividends and

$90,039 from the sale of stock.    The records also show that

during 1999, Franklin Templeton Investor Services distributed

$129,074 to petitioner from another of petitioner’s retirement

accounts.4    The records of these two entities support the lion’s

share of unreported income determined by respondent, and we hold

that respondent has sufficiently linked petitioner to the

unreported income.    See Hardy v. Commissioner, supra at 1005; cf.

McManus v. Commissioner, supra (sufficient link not found in

absence of adequate evidentiary foundation).    Given petitioner’s

failure to disprove respondent’s determination of unreported

income, as modified through concessions, we sustain the

determination as modified.

2.   10-Percent Additional Tax on Early Distributions From IRAs

     Section 72(t) generally provides that a taxpayer is liable

for a 10-percent additional tax on early distributions from a

qualified retirement plan such as an IRA.    See also sec.

4974(c)(4).    In 1999, petitioner received taxable distributions

of $312,029 from her IRAs; of this amount, respondent concedes

that $3,407 was not subject to the 10-percent additional tax.


     4
        The parties have not explained the $10 difference between
the $129,074 shown in the records of Franklin Templeton Services
and the $129,064 shown in the certified transcripts.
                                 -7-

Petitioner does not qualify for any exception to the 10-percent

additional tax on the remaining $308,622 and is thus liable for

the additional tax on this amount.

3.   Addition to Tax Under Section 6651(a)(1)

     Section 6651(a)(1) imposes an addition to tax for failure to

file a return when due “unless it is shown that such failure is

due to reasonable cause and not due to willful neglect”.      The

addition equals 5 percent for each month that the return is late,

not to exceed 25 percent in total.      The Commissioner has the

burden of production with respect to the liability of an

individual for an addition to tax under section 6651(a)(1).        Sec.

7491(c).   The burden of showing reasonable cause under section

6651(a) remains on the taxpayer.       Higbee v. Commissioner, 116

T.C. 438, 446-448 (2001).    “Reasonable cause” requires petitioner

to demonstrate that she exercised ordinary business care and

prudence and nevertheless was unable to file her 1999 Federal

income tax return by the due date.      United States v. Boyle, 469

U.S. 241, 246 (1985); sec. 301.6651-1(c), Proced. & Admin. Regs.

Willful neglect is defined as a “conscious, intentional failure

or reckless indifference.”    United States v. Boyle, supra at 245.

     We have found that petitioner did not file a tax return for

1999.   On the record before us, we find that respondent has

satisfied his burden of production with regard to the section

6651(a)(1) addition to tax.   See sec. 7491(c); Higbee v.
                                 -8-

Commissioner, supra.    Petitioner has neither offered an

explanation for her failure to file nor produced evidence to

establish any reasonable cause for her failure to file the

return.   We sustain respondent’s determination of an addition to

tax under section 6651(a)(1) in the amount to be calculated by

the parties in their Rule 155 computation.

4.   Section 6673(a)(1)

     Section 6673(a)(1) provides that this Court may require a

taxpayer to pay to the United States a penalty not in excess of

$25,000 whenever it appears either that the taxpayer instituted

or maintained the proceedings primarily for delay or that the

taxpayer’s position in the proceeding is frivolous or groundless.

     On the basis of the record before us, we are convinced that

petitioner has instituted and maintained these proceedings

primarily for delay.   Petitioner failed to submit to the Court a

pretrial memorandum as directed by the Court’s standing pretrial

order and failed to attend the calendar call, either personally

or through counsel.    Petitioner also failed to appear at trial.

While petitioner was at that time ostensibly represented by

counsel who did appear on petitioner’s behalf, petitioner’s

counsel neither presented a case nor offered any evidence on

petitioner’s behalf.   Moreover, following trial, neither

petitioner nor her counsel submitted a brief as we ordered.

Petitioner has never responded to respondent’s motion to impose a
                                 -9-

penalty under section 6673 in which respondent sets forth

specific examples of petitioner’s refusal to cooperate with

respondent before trial.   In light of the foregoing, we believe

that sanctions are necessary to deter petitioner and others

similarly situated from comparable dilatory conduct.     Pursuant to

section 6673(a)(1), we impose against petitioner a penalty in the

amount of $1,000.

     To reflect the foregoing,


                                            Decision will be entered

                                       under Rule 155.
