                        T.C. Memo. 2011-272



                      UNITED STATES TAX COURT



                VERNELL DAVID WEST, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 14036-07.             Filed November 16, 2011.



     Vernell David West, pro se.

     Michael T. Sargent, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     PARIS, Judge:   Petitioner brought this action under section

6213(a)1 seeking redetermination of the following deficiencies in




     1
      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, unless otherwise
indicated.
                                   - 2 -

income tax and additions to tax for the tax years 1999, 2000,

2001, 2002, 2003, 2004, and 2005:

                                    Additions to Tax
Year     Deficiency   Sec. 6651(a)(1) Sec. 6651(a)(2)     Sec. 6654(a)

1999      $24,323      $5,472.68              ¹                  N/A
2000       46,355      10,429.88              ¹            $2,203.78
2001       24,494       5,511.15              ¹               978.87
2002       16,994       3,823.65              ¹               567.92
2003       20,651       4,646.48              ¹               540.44
2004       32,956       7,415.10              ¹               956.62
2005       39,956       8,990.10              ¹             1,602.69

     ¹The amount of any additions to tax under sec. 6651(a)(2)
shall be determined pursuant to sec. 6651(a)(2), (b), and (c).

The Court must decide the following issues:       (1) Whether

petitioner must recognize unreported income for the tax years

1999 through 2005; (2) whether petitioner is entitled to ordinary

and necessary business expense deductions for the tax years 1999,

2000, 2001, 2002, 2003, 2004 and 2005; and (3) whether petitioner

is liable for the additions to tax under sections 6651(a)(1) and

(2) and 6654(a) for the tax years 2000 through 2005.

                           FINDINGS OF FACT

       Some facts have been stipulated, and the stipulated facts

are incorporated in our findings by this reference.       Petitioner

resided in North Carolina at the time the petition was filed.

Petitioner operated both a farming business and a bricklaying

business in a location other than his home for the tax years 1999

through 2005.    The record does not indicate his method of

accounting.
                                 - 3 -

     Petitioner did not file Federal income tax returns for the

tax years 1999 through 2005.    Petitioner believed that once he

turned 72 years old, he did not have to pay taxes anymore.

Pursuant to section 6020(b), using information third parties

reported, respondent prepared a substitute return for petitioner

for each of the tax years at issue.

     The substitute returns respondent prepared indicated the

following payments and their categories were made to petitioner:

                             Social      Bricklaying
     Year         Total     Security       Business     Interest

     1999       $72,451       ---          $63,753         ---
     2000       136,271      $9,747         52,811        $108
     2001        86,182      13,488         50,848          19
     2002        66,003      13,814         45,337         ---
     2003        75,854      14,012         56,835         ---
     2004       109,137      14,302         89,541         ---
     2005       142,935      14,685         98,445         ---

The balance of all the payments each year was related to

petitioner’s farming business.

     Petitioner timely filed a petition for redetermination, and

a trial was set.    Before the trial date, petitioner’s

granddaughter Velicia L. Everett faxed to respondent six pages of

tables.     The first page summarized petitioner’s claims to farming

and bricklaying expenses for the tax years 1999 through 2005 and

categorized them according to “Expenses” and “Payroll”.          Copies

of Forms W-3, Transmittal of Wage and Tax Statements, for the tax

years 2002, 2003, 2004, and 2005 were attached.        The tables

identified each of the claimed farming and bricklaying business
                                - 4 -

expenses for services or goods for those tax years according to

the vendor who provided those services or sold the items and the

cost of each service or item.   The tables were prepared using

receipts included in petitioner’s records.   The expenses reported

for tax years 1999, 2000, 2001, 2002, and 2003 were not

documented by receipts or other substantiation, except for

petitioner’s purchase of a $14,580 tractor on May 4, 2001.

Petitioner could not provide any such records for those tax years

because his children had cleaned up his home and thrown away the

documents when he was seriously ill and was hospitalized for an

extended period.   Petitioner reported expenses for tax years 2004

and 2005, including the purchase of a Ford Expedition for

$35,055.79 on December 12, 2005.   He stated that he had used the

Ford Expedition only to drive from his personal residence to his

doctor’s office and the farming field.

     Respondent conceded the issue of the payroll expenses listed

on the tables for all the tax years.    Petitioner is entitled to

deduct the payroll expenses of $9,349, $8,758, $18,087, and

$19,375 for the respective tax years 2002, 2003, 2004, and 2005

for the bricklaying business.
                               - 5 -

                              OPINION

Burden of Proof

    The Commissioner’s determinations in the notice of deficiency

are presumed correct, and the taxpayer bears the burden of

disproving those determinations.   See Rule 142(a); Welch v.

Helvering, 290 U.S. 111, 115 (1933).    The burden of proof may

shift to the Commissioner with respect to a factual issue

relevant to ascertaining the liability of a taxpayer for tax when

the taxpayer has introduced credible evidence regarding that

issue and has met certain statutory requirements.    See sec.

7491(a).

Gross Income

     Section 61 provides that “gross income means all income from

whatever source derived”.   Sec. 61(a).   The U.S. Supreme Court

has construed this section to mean that gross income includes all

“accessions to wealth, clearly realized, and over which the

taxpayers have complete dominion.”     See Commissioner v. Glenshaw

Glass Co., 348 U.S. 426, 431 (1955).    There is no dispute that

petitioner received for the tax years 1999 through 2005 the

amounts shown on the table supra, from the substitute returns.2




     2
      However, the stipulation of facts contains a typographical
error. In 2005 petitioner received a Form 1099-S, Proceeds from
Real Estate Transactions, reporting the receipt of $19,508 from
the Farm Bureau. It was incorrectly listed as a Form 1099-MISC,
Miscellaneous Income, on the stipulation.
                                 - 6 -

     However, a taxpayer does not have to include a Social

Security benefit in gross income unless the taxpayer’s adjusted

gross income, with certain modifications, plus one-half of the

Social Security benefit exceeds a specified base amount.    Sec.

86(b).   An allowance of petitioner’s business expense deductions

will affect his adjusted gross income.    Therefore, in the Rule

155 computations the parties are to take into account that

petitioner has to include in gross income only the portion of

Social Security benefits prescribed by section 86.

Deductions

     Deductions are a matter of legislative grace.    See INDOPCO,

Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice

Co. v. Helvering, 292 U.S. 435 (1934).    A taxpayer must prove he

is entitled to any deduction.    See INDOPCO, Inc. v. Commissioner,

supra at 84; New Colonial Ice Co. v. Commissioner, supra at 440;

see also Rule 142(a).    Furthermore, the taxpayer must

substantiate his deductions.    See Welch v. Helvering, supra at

115; see also Rule 142(a).

Tractor and Car

     Under section 167 a depreciation deduction is allowed for

the exhaustion and wear and tear of property used in a trade or

business.    Section 179 provides that a taxpayer can elect a

deduction for certain depreciable property in the year that

property is placed in service.    Petitioner is not entitled to the
                                 - 7 -

depreciation deduction for his Ford Expedition because he used

that car only for personal reasons, traveling between his

residence and his regular place of business.    See Commissioner v.

Flowers, 326 U.S. 465 (1946); O’Hare v. Commissioner, 54 T.C. 874

(1970).    As to his tractor, petitioner did use the tractor for a

business purpose and can depreciate its cost over the recovery

period, using the applicable convention.    See sec. 168.

Petitioner cannot, however, reap an immediate deduction for his

tractor under section 179 because he failed to elect that

treatment.

Other Farming and Bricklaying Expenses

     Section 162(a) provides for the deduction of all the

ordinary and necessary expenses a taxpayer paid or incurred

during the taxable year in carrying on his business.       Respondent

concedes that petitioner had a farming business and a bricklaying

business that produced ordinary and necessary business expenses

under section 162.     Petitioner also provided specific

documentation of his farming receipts for tax years 2004 and

2005.     The issue remains as to whether petitioner has sufficient

documentation to substantiate the expenses related to his farming

business for tax years 1999 through 2003 and for his bricklaying

business for all tax years.

     This Court may estimate the amount of a deductible expense

in certain circumstances where a taxpayer establishes he paid the
                                  - 8 -

expense but cannot substantiate the precise amount.    See Cohan v.

Commissioner, 39 F.2d 540, 544 (2d Cir. 1930).    In its estimate,

this Court may bear heavily against a taxpayer whose inexactitude

is of his own making.   See id.    A taxpayer must provide a basis

upon which this Court can make its estimate of the expense.    See

Williams v. United States, 245 F.2d 559, 560 (5th Cir. 1957);

Cohan v. Commissioner, supra at 544; Vanicek v. Commissioner, 85

T.C. 731, 743 (1985).   In estimating a taxpayer’s expenses for

the year at issue this Court has relied upon a taxpayer’s

expenses incurred in previous or subsequent years.    See Young v.

Commissioner, T.C. Memo. 1989-241 (limiting the relevant year’s

repair expenses because they have exceeded the cost of the

previous year’s expenses); Hicks v. Commissioner, T.C. Memo.

1957-24 (estimating the present year’s income by comparison with

the income received in other relevant years).    The Court holds

that pursuant to section 162 petitioner can deduct his business

expenses for the tax years 2004 and 2005 as stipulated and can

deduct an estimated amount of the other expenses for the tax

years 1999, 2000, 2001, 2002 and 2003.

     Petitioner is entitled to deduct the listed expenses related

to his farming business for tax years 2004 and 2005 as the record

indicates that his tables were based on actual receipts for those

years, and respondent has conceded this.    In regard to the

business expenses related to farming for the tax years 1999,
                                - 9 -

2000, 2001, 2002, and 2003, the record as a whole warrants an

estimate of the expenses petitioner incurred for those tax years.

The estimate will be based on the average of the expenses he

incurred for 2004 and 2005.3

     Petitioner has provided documentation related to business

expenses for his bricklaying business only for 2004 and 2005.

The record as a whole warrants an estimate of the expenses

petitioner incurred for tax years 1999, 2000, 2001, 2002, and

2003.    The estimate will be based on the average of the expenses

he incurred in 2004 and 2005.

Additions to Tax

     Section 6651(a)(1) imposes an addition to tax if a taxpayer

failed to file an income tax return timely.   Under section

6651(a)(2), an addition to tax is imposed for a taxpayer’s

failure to pay taxes shown on any return.   Section 6654(a)

imposes an addition to tax for a taxpayer’s failure to pay

estimated income tax.4   Pursuant to section 7491(c), respondent

has the burden of production with respect to any penalty,



     3
      For the purpose of calculating the estimated expenses for
tax years 1999, 2000, 2001, 2002, and 2003, the cost of the Ford
Expedition will not be included because petitioner cannot deduct
the cost of the Ford Expedition for the tax year 2005. For the
tax year 2001, petitioner is entitled to the estimated other
business expenses in addition to the depreciation deduction
claimed for the tractor.
     4
      The only Federal tax deposit during the years in question
was for the 2000 taxable year made on Jan. 15, 2001, for $12,500.
                               - 10 -

addition to tax, or additional amount imposed by the Internal

Revenue Code.   See sec. 7491(c); Higbee v. Commissioner, 116 T.C.

438, 446 (2001).    Respondent has not carried the burden for

taxable year 2000 in regard to section 6654(a) in that there was

a significant Federal tax deposit relected in the stipulation of

facts; however the evidence is sufficient to satisfy respondent’s

burden of production under section 7491(c) for the balance of the

taxable years at issue.

     These additions to tax will not be imposed if a taxpayer’s

failure is due to reasonable cause and not willful neglect.      See

secs. 6651(a), 6654(e)(3).    Petitioner seeks relief from these

additions to tax, arguing that he is ignorant of and has

misinterpreted the law.    Petitioner’s mistake as to or ignorance

of the law does not amount to reasonable cause, and thus his

argument will not relieve him from the imposition of these

additions to tax.    See Joyce v. Commissioner, 25 T.C. 13, 15

(1955); Mostafa v. Commissioner, T.C. Memo. 2006-106; Guthrie v.

Commissioner, T.C. Memo. 1989-168.      Respondent introduced

evidence that petitioner did not file returns for tax years 1999

through 2005 or request additional time to file.

Conclusion

     Petitioner must recognize unreported income, as we have

found.   Petitioner is not entitled to a depreciation deduction

for his car for the tax year 2005.      He is entitled to the
                              - 11 -

depreciation deduction for his tractor and must depreciate the

cost of the tractor over the recovery period using the

applicable convention.   Also, petitioner is entitled under

section 162 to deduct for his farm business and for his

bricklaying business expenses for the tax years 2004 and 2005.

For each of the tax years 1999, 2000, 2001, 2002, and 2003, he

is entitled to the average of the other farm business expenses

incurred for the tax years 2004 and 2005.   Petitioner is

entitled to additional deductions related to his bricklaying

business for tax years 1999 through 2003 using the average

expenses incurred for 2004 and 2005.   Respondent has shown

adequate grounds for the additions to tax under section

6651(a)(1) and (2) for all years at issue and under section

6654(a) but for taxable year 2000, and this Court will therefore

sustain them.

     To reflect concessions and this Court’s conclusions stated

above,


                                         Decision will be entered

                                    under Rule 155.
