                         T.C. Memo. 2007-276



                       UNITED STATES TAX COURT



                    MARC KIRCH, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7051-06L.                Filed September 13, 2007.



     Marc Kirch, pro se.

     Kaelyn J. Romey, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     HALPERN, Judge:    This case is before the Court to review a

determination (the determination) by respondent’s Appeals Office

(Appeals) to proceed with the collection of petitioner’s Federal

income tax liability for 1999.     We review the determination

pursuant to section 6330(d)(1).1


     1
        While petitioner requests redetermination of a
deficiency, clearly this case concerns a collection action, and
we shall treat it as such.
                                 - 2 -

     All section references are to the Internal Revenue Code of

1986, as amended.   All dollar amounts have been rounded to the

nearest dollar.

     Some facts have been stipulated and are so found.      The

stipulation of facts, with attached exhibits, is incorporated

herein by this reference.

                         FINDINGS OF FACT

     Petitioner resided in Berkeley, California, at the time the

petition was filed.

     During 1999 and 2000, petitioner worked full time as a

facilities technician for Pacific Bell.      On both his 1999 and

2000 Federal income tax returns, petitioner declared his

occupation to be “facilities technician”.

     Beginning in 1998 and continuing through 2000, petitioner

traded securities on his own account.      He did not have any

customers for his trading activity in 1999.

     Petitioner, a calendar year taxpayer, filed his 1999 Federal

income tax return on July 6, 2001.       He reported $28,160 in Form

W-2, Wage and Tax Statement, income from Pacific Bell and a net

short-term capital gain of $96,767 from his securities trading

activity.   He reported a tax liability of $32,246.     He has paid

only $3,447 of that liability.    Respondent assessed the tax

petitioner reported on the return, along with additions to tax

for late filing and failure to pay.
                                - 3 -

     Petitioner also filed his 2000 Federal income tax return on

July 6, 2001.    He reported, among other things, a net short-term

capital loss of $129,436 from his trading activity.

     Petitioner did not submit to the Internal Revenue Service

(IRS) or attach to his 1999 return an IRS Form 3115, Application

for Change in Accounting Method, making an election under section

475(f) to use the mark-to-market method of accounting.

     Petitioner did not submit to the IRS or attach to his 2000

return an IRS Form 3115 making an election under section 475(f)

to use the mark-to-market method of accounting.

     On or about February 23, 2006, petitioner attempted to file

IRS Forms 1040-X, Amended U.S. Individual Income Tax Return, for

1999 and 2000.   Petitioner’s purpose in attempting to file

amended returns was to carry back a net operating loss claimed in

2000 to offset the net short-term capital gain reported for 1999.

Respondent did not allow petitioner’s amended returns.

     On November 6, 2004, respondent issued a Collection Due

Process Notice to petitioner concerning his 1999 tax liability,

and on December 6, 2004, petitioner filed an IRS Form 12153,

Request for a Collection Due Process Hearing.   On February 23,

2006, respondent conducted a collection due process hearing for

petitioner.   During the course of that hearing, petitioner

submitted the Forms 1040-X to the Appeals settlement officer

conducting the hearing for transmission to the appropriate IRS

office.   Petitioner did not raise any collection alternative

during the hearing.
                                - 4 -

     By Notice of Determination Concerning Collection Action(s)

Under Section 6320 and/or 6330, Appeals determined that the

proposed collection action (levy) for 1999 should proceed.    An

attachment to the notice explains that (1) petitioner’s claim for

a loss carryback was not timely and (2) since he had raised no

collection alternative, collection by levy was correct.

                               OPINION

     Petitioner challenges his underlying liability for 1999, and

respondent agrees that petitioner’s liability is appropriately

before the Court.    See sec. 6330(c)(2)(B).

     Petitioner was a trader in securities during 1999 and 2000.

The parties have stipulated that he had no customers for his

trading activity in 1999, and he has failed to show (and does not

claim) that he had any customers for that activity in 2000.    Due

to the fact that he did not have customers, he was not a dealer,

and he must treat the securities that he bought and sold as

capital assets.2    His net capital loss for 2000 could, therefore,

     2
        As we recently described the situation in Chen v.
Commissioner, T.C. Memo. 2004-132:

          In general, for Federal tax purposes, a person who
     purchases and sells securities falls into one of three
     distinct categories: dealer, trader, or investor. See
     King v. Commissioner, 89 T.C. 445, 458-459 (1987).
     Both traders and dealers are engaged in the trade or
     business of buying and selling securities. Only the
     dealer’s business, however, involves sales to customers
     in the ordinary course of that business. Consequently,
     only the dealer’s securities fall within the exception
     to capital asset status that is provided for “property
     held by the taxpayer primarily for sale to customers in
     the ordinary course of his trade or business”. Sec.
     1221(a)(1). Thus, “traders * * * occupy an unusual
                                                   (continued...)
                               - 5 -

only be carried forward (i.e., to later years).   See sec.

1212(b).   As a trader in securities, however, he was eligible

under section 475 to elect the mark-to-market accounting method

for his securities trading activity.   See sec. 475(f).    Under the

mark-to-market accounting method, a trader in securities is

eligible to elect to “recognize gain or loss on any security held

in connection with such trade or business at the close of any

taxable year as if such security were sold for its fair market

value * * * [at yearend]”.   See sec. 475(f)(1)(A)(i).    In

general, any gains or losses with respect to those securities,

whether deemed sold at yearend under the mark-to-market method of

accounting or actually sold during the taxable year, “shall be

treated as ordinary income or loss.”   Sec. 475(d)(3)(A)(i),

(f)(1)(D).   An ordinary loss resulting in a net operating loss is

first carried back to the two preceding years before it is

carried forward.   See sec. 172(a) and (b).

     The procedures for traders in securities to make a mark-to-

market election under section 475(f) are specified in Rev. Proc.

99-17, 1999-1 C.B. 503.   In general, the election must be made no

later than the due date (without regard for extensions) of the

original return for the taxable year immediately preceding the

election year and must be attached either to that return or, if

applicable, to a request for extension of time to file that

     2
      (...continued)
     position with respect to the tax laws. Traders may
     engage in a trade or business which produces capital
     gains and losses rather than ordinary income and
     losses.” King v. Commissioner, supra at 457.
                                - 6 -

return.   Id., 1999-1 C.B. at 504-505.   Petitioner does not claim

that he has made a mark-to-market election in compliance with

section 475(f) and Rev. Proc. 99-17, supra.    Nor is petitioner

entitled to the benefit of relief under section 301.9100-3,

Proced. & Admin. Regs., to extend the time to make the section

475(f) election.   See generally Vines v. Commissioner, 126 T.C.

279 (2006).   Petitioner has neither requested that relief, nor is

there any evidence that he would not be using hindsight in

requesting that relief.    The hindsight would be in using 2000

losses to shelter 1999 gains.    See sec. 301.9100-3(b)(3)(iii),

Proced. & Admin. Regs. (taxpayer is deemed not to have met the

requirement of having acted reasonably and in good faith where he

uses hindsight in requesting relief).    Petitioner is not entitled

to the benefits of section 475(f).

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

event a taxpayer fails to file a timely return (determined with

regard to any extension of time for filing), unless it is shown

that such failure is due to reasonable cause and not due to

willful neglect.   Section 6651(a)(2) provides for an addition to

tax for failure to make timely payment of the tax shown on a

return, unless it is shown that such failure is due to reasonable

cause and not due to willful neglect.    Respondent bears the

burden of production with respect to those additions to tax.      See

sec. 7491(c).   In order to carry that burden, respondent must

produce sufficient evidence establishing that it is appropriate

to impose the additions.    Higbee v. Commissioner, 116 T.C. 438,
                                 - 7 -

446-447 (2001).   Once respondent has done so, the burden of proof

is upon petitioner to show that respondent’s determination of the

additions is incorrect.    See id. at 447.

     Petitioner filed his 1999 Federal income tax return on July

6, 2001.   That return was due on April 17, 2000.      See sec.

6072(a).   Accordingly, petitioner filed his 1999 return over a

year late.   Also, petitioner failed to pay timely the full amount

of his 1999 liability.    Respondent has carried his burden of

production, and petitioner has shown neither reasonable cause nor

a lack of willful neglect for either failure.       Therefore, we

sustain the section 6651(a)(1) and (2) additions to tax.

     To reflect the foregoing,


                                              Decision will be entered

                                         for respondent.
