                    T.C. Summary Opinion 2006-159



                       UNITED STATES TAX COURT



                    GERRY M. GRIGGS, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 9068-04S.                Filed September 27, 2006.


     Gerry M. Griggs, pro se.

     Portia N. Rose, for respondent.



     DEAN, Special Trial Judge:    This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code.

Unless otherwise indicated, section references are to the

Internal Revenue Code as in effect for the year at issue, and

Rule references are to the Tax Court Rules of Practice and

Procedure.    The decision to be entered is not reviewable by any

other court, and this opinion should not be cited as authority.
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     Respondent determined for 2001 a deficiency in petitioner's

Federal income tax of $24,702 and additions to tax of $5,557.95

under section 6651(a)(1), an uncomputed amount under section

6651(a)(2), and $977.53 under section 6654(a).

     The parties agree that petitioner:   (a) Received wages of

$99,522 and unemployment compensation of $6,468, (b) is entitled

to a filing status of single and to claim one personal exemption,

(c) is entitled to deduct property taxes paid to the Harris

County Tax Assessor and the Houston Independent School District

in the amounts of $3,039.46 and $3,102, (d) is entitled to

deduct, as a charitable contribution, a $185 donation to the Rice

University Owl Club, and (e) is not liable for the addition to

tax provided by section 6651(a)(2).

     The issues for decision are whether petitioner:   (1) Is

entitled to claim itemized deductions and business losses in

excess of those allowed by respondent, (2) is liable for the

addition to tax under section 6651(a)(1) for failure to file

timely a Federal income tax return for the year without

reasonable cause, and (3) is liable for the addition to tax under

section 6654 for failure to pay estimated tax.

     The exhibits received into evidence are incorporated herein

by reference.   At the time the petition was filed, petitioner

resided in Houston, Texas.
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                              Background

Administrative History

     The Form 4340, Certificate of Assessments, Payments, and

Other Specified Matters, for petitioner’s 2001 tax year shows

that the Internal Revenue Service (IRS) has no record of

receiving a tax return from petitioner for the year.      Respondent

determined in the statutory notice of deficiency that petitioner

had failed to file a Federal income tax return for 2001.      After

the petition for redetermination was filed, the case was assigned

to the office of Appeals.    The Appeals Office requested that

petitioner provide a copy of a completed 2001 income tax return.

Petitioner did not do so.    The case was subsequently transferred

to respondent’s counsel for trial or settlement.

Document Request by Counsel

     Respondent’s counsel requested that petitioner provide a

completed 2001 income tax return and supporting documentation for

the items on the return.    There was no response.    Respondent

served petitioner with a Request for Production of Documents

(Request).   The Request asked for:     (1) Books and records that

petitioner intended to introduce into evidence at trial for 2001,

(2) business and personal bank statements for the year, (3)

documents evidencing the receipt of income, (4) documents

evidencing the expense reimbursement policy of petitioner’s

employer, and (5) documentary evidence bearing on the additions
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to tax for failure to file timely and the failure to pay

estimated tax.   After several months during which petitioner

failed to respond to respondent’s Request, respondent moved to

compel production of the requested items.

Order of the Court

     On August 4, 2005, the Court granted respondent’s motion to

compel production of the requested documents and ordered that

they be provided to respondent “on or before August 31, 2005”.

The order warned petitioner that upon his failure to fully

comply, the Court would be inclined to impose sanctions under

Rule 104, including dismissal of his case.    On August 31, 2005,

petitioner transmitted “hundreds of pages” of electronic

facsimiles of some documents to respondent’s counsel.    On

September 9, 2005, the Court filed petitioner’s motion to extend

time to produce documents in which he requested additional time

to “fully comply with the August 4 Order”.    Petitioner’s motion

to extend time was denied on September 19, 2005.

Petitioner’s Documents

     Using copies of the documents transmitted to her on August

31, 2005, that were legible, respondent’s counsel prepared a

proposed stipulation of facts for trial.    Petitioner, however,

refused to stipulate any of the documents that he had

transmitted, including a copy of the statutory notice of

deficiency, a copy of which was attached to his petition.     At the
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beginning of trial, petitioner produced a Form 1040X, Amended

U.S. Individual Income Tax Return, for 2001 that he stated he

wanted to “file”.   The document was received into evidence over

the objection of respondent’s counsel.

     Petitioner also attempted to introduce into evidence a stack

of miscellaneous receipts, reports, checks, statements,

handwritten notations, invoices, and other documents.

Respondent’s counsel was able to determine that the documents had

not been provided to her on August 31, 2005, in response to the

Court’s order compelling production.     Respondent’s counsel

objected to the introduction into evidence of any document

petitioner had not produced by August 31, 2005.     The Court

sustained the objection of respondent’s counsel.

                            Discussion

     Petitioner has made no argument that the burden of proof

shifting provisions of section 7491(a)(1) apply to this case, nor

has he offered any evidence that he has complied with the

requirements of section 7491(a)(2).

Itemized Deductions

     Among the documents that petitioner provided to respondent

in response to the August 4, 2005, order was a copy of a Schedule

A, Itemized Deductions, for 2001.   In addition to the Schedule A

deductions allowed by respondent, petitioner argues that he is

entitled to deductions for “points” from a mortgage refinancing,
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a casualty loss, and an additional amount for charitable

contributions.

     Points

     Petitioner presented a copy of a settlement statement to

substantiate a deduction for $3,800 in “points” as a mortgage

interest deduction.    Petitioner testified that this was his third

refinancing.

     Personal interest is generally not allowed as a deduction.

Sec. 163(h).    “Qualified residence interest”, however, is not

treated as personal interest.    Sec. 163(h)(2)(D).   Qualified

residence interest includes interest paid on “home equity

indebtedness with respect to any qualified residence”.     Sec.

163(h)(3)(A)(ii).    Home equity indebtedness is indebtedness,

other than “acquisition indebtedness”, secured by a qualified

residence, to the extent that it does not exceed the fair market

value of the residence, reduced by the amount of the acquisition

indebtedness.    Sec. 163(h)(3)(C).   Acquisition indebtedness is

the indebtedness secured by the residence that was incurred in

acquiring, constructing, or substantially improving the qualified

residence.    Sec. 163(h)(3)(B)(i).

     The maximum amount that can be treated as home equity

indebtedness is $100,000.    Sec. 163(h)(3)(C)(ii).   Petitioner’s

loan amount was $170,000.    Petitioner has provided no evidence of

the amount of the acquisition indebtedness, if any, or the fair
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market value of the residence.    He has failed to show that his

points are qualified residence interest.1

     Casualty Loss

     Petitioner testified that he suffered a casualty loss

consisting of two items:    a “flat tire” on his automobile and “a

broken vase or bottle, perfume bottle, large one that my dog

broke” that was a gift.    Petitioner submitted to respondent’s

counsel a Form 4684, Casualties and Thefts, listing the cost of

the tire as $174.62 and the cost of the vase or perfume bottle as

$800.

     Losses may be deductible under section 165(a) to the extent

“not compensated for by insurance or otherwise.”    In the case of

an individual, section 165(c)(3) allows a taxpayer to claim as a

deduction any loss from theft or casualty sustained during the

taxable year.   The loss is allowed only to the extent that it

exceeds $100 and the net casualty loss is in excess of 10 percent

of adjusted gross income.    Sec. 165(h).   The amount of the loss

is the lesser of (1) the fair market value of the property

immediately before the casualty reduced by the fair market value

after the casualty, or (2) the adjusted basis of the property.




     1
      Were the points qualified residence interest, petitioner
would be required to amortize the points over the life of the
loan unless he provided sufficient evidence that the loan
proceeds were used to purchase or improve the residence. Sec.
461(g)(1) and (2).
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Helvering v. Owens, 305 U.S. 468 (1939); sec. 1.165-7(b), Income

Tax Regs.

     The basis of property acquired by purchase is its cost.

Sec. 1012.   The basis of property acquired by gift is the same as

it would be in the hands of the donor or the last preceding owner

by whom it was not acquired by gift.     If such basis is greater

than the fair market value of the property at the time of the

gift, however, the basis for determining loss is the fair market

value of the property.   Sec. 1015.

     In order for the Court to determine whether petitioner is

entitled to a casualty loss, petitioner’s basis in the property

damaged or destroyed must be known.     Where a taxpayer fails to

prove that basis, the Court is unable to determine the amount of

the loss that is deductible.    Zmuda v. Commissioner, 79 T.C. 714,

727-728 (1982), affd. on other grounds 731 F.2d 1417 (9th Cir.

1984); Millsap v. Commissioner, 46 T.C. 751, 760 (1966), affd.

387 F.2d 420 (8th Cir. 1968).

     Petitioner offered no evidence of either the fair market

value of the property at the time of the loss or his basis in the

items.   Further, it appears that petitioner cannot meet the

requirement of section 165(h)(2) that the net casualty loss

exceed 10 percent of adjusted gross income.
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     The Court therefore sustains respondent’s determination that

petitioner is not entitled to deduct on Schedule A a casualty and

theft loss.

     Charitable Contributions

     Petitioner offered only his testimony that he “gave $350 in

out-of-hand contributions at church services, to people on the

street, et cetera” to support his claim of an additional

charitable deduction.

     Taxpayers are required to keep records of charitable

contributions of money.   Sec. 1.170A-13(a)(1), Income Tax Regs.

A taxpayer must maintain one of the following:   (1) A canceled

check; (2) a receipt or letter from the donee charitable

organization showing the name of the donee, the date, and the

amount of the contribution; or (3) other reliable records showing

the name of the donee, the date, and the amount of the

contribution.   Id.

     Petitioner’s church and “charity” donations do not meet the

recordkeeping requirements of section 1.170A-13(a)(1), Income Tax

Regs.   See Blair v. Commissioner, T.C. Memo. 1988-581.

Petitioner is not entitled to a deduction for charitable

contributions in an amount greater than that allowed by

respondent.
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Schedule C Losses

     Petitioner submitted a Schedule C, Profit or Loss From

Business, to respondents’s counsel for four putative businesses.

Supporting documents relating to only one of them were provided

in response to the Court’s August 4, 2005, order.

     On November 1, 2000, petitioner purchased a one-third

interest in a luxury suite at Enron Field/Minute Maid Park for

Houston Astros baseball games for $26,000.   The “business”, as

described by petitioner, was the resale of the luxury suite

tickets.   Petitioner argues that he is entitled to claim a loss

of $17,671.54 from this “business”.

     Petitioner’s evidence that he was carrying on a ticket

resale business is a receipt for purchase or use of the luxury

suite, a receipt for catering services in the suite, and one

invoice to one person for “2 Nights Enron Box” at $1,008 per

night.

     Section 162(a) generally allows a deduction for ordinary and

necessary expenses paid or incurred during the taxable year in

carrying on a trade or business.   Generally, no deduction is

allowed for personal, living, or family expenses.   See sec. 262.

The taxpayer must show that any claimed business expenses were

incurred primarily for business rather than social reasons.     See

Rule 142(a); Walliser v. Commissioner, 72 T.C. 433, 437 (1979).

To show that the expense was not for personal reasons, the
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taxpayer must show that the expense was incurred primarily to

benefit his business, and there must have been a proximate

relationship between the claimed expense and the business.    See

Walliser v. Commissioner, supra.

     Petitioner provided no business records or other evidence

that he resold tickets to anyone other than to one person for “2

Nights Enron Box”.   Petitioner has not provided sufficient

evidence to show that there was a business or that the claimed

expenses were paid primarily for business reasons.

     Section 183(b)(2) permits a deduction for expenses that

would be deductible only if the activity were engaged in for

profit, but only to the extent that the gross income derived from

the activity exceeds the deductions allowed by section 183(b)(1).

Petitioner is entitled to the deductions allowed by section

183(b)(2) for his luxury suite activity.

Additions to Tax

     Respondent bears the burden of production with respect to an

addition to tax.   Sec. 7491(c).   In order to meet this burden,

respondent must produce evidence sufficient to establish that it

is appropriate to impose the addition to tax.    Higbee v.

Commissioner, 116 T.C. 438, 446-447 (2001).

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

     Respondent produced a certified copy of Form 4340 showing

that the IRS has no record of petitioner’s having filed a Federal
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income tax return for the year.   Respondent has met his burden of

production under section 7491(c) with respect to imposing the

addition to tax under section 6651(a)(1).   See Downey v.

Commissioner, T.C. Memo. 2005-215.

      Petitioner testified that “I filed my return.   I filed it

by regular mail so I don’t have any evidence that I filed it.”

The Court is not required to accept the unverified and

undocumented testimony of petitioner.   See Hradesky v.

Commissioner, 65 T.C. 87, 90 (1975), affd. 540 F.2d 821 (5th Cir.

1976); see also Christensen v. Commissioner, 786 F.2d 1382, 1383-

1384 (9th Cir. 1986), affg. in part and revg. in part T.C. Memo.

1984-197.   The Court finds that petitioner did not timely file

his return.

     Petitioner has the burden of proving that he had reasonable

cause and lacked willful neglect in not filing his return timely.

See United States v. Boyle, 469 U.S. 241, 245 (1985); Higbee v.

Commissioner, supra at 447; sec. 301.6651-1(a)(1), Proced. &

Admin. Regs.   Because petitioner failed to offer any evidence of

reasonable cause and lack of willful neglect for his failure to

file timely, respondent’s determination that petitioner is liable

for the addition to tax under section 6651(a)(1) is sustained.
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     Addition to Tax Under Section 6654

     Petitioner underpaid his estimated tax for the year, and

respondent has carried his burden of production to show that it

is appropriate to impose the addition to tax.    The section 6654

addition to tax applies in a mathematical fashion unless it is

shown that any of certain statutory exceptions apply.    See

Grosshandler v. Commissioner, 75 T.C. 1, 20-21 (1980); Goers v.

Commissioner, T.C. Memo. 1999-354.     Petitioner has not shown that

any exceptions apply.   Accordingly, respondent’s determination

that petitioner is liable for an addition to tax under section

6654 is sustained.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect the foregoing,

                                           Decision will be

                                     entered under Rule 155.
