                        T.C. Memo. 2005-194



                      UNITED STATES TAX COURT



                 MICHAEL JOSEPH MAJOR, Petitioner v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 16592-02, 6343-03.      Filed August 9, 2005.


     Michael Joseph Major, pro se.

     Gregory M. Hahn and David Abernathy, for respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION


     COLVIN, Judge:   Respondent determined deficiencies of

$12,460 for 1999 and $10,308 for 2000 and accuracy-related

penalties under section 6662(a)1 of $2,492 for 1999 and $2,061.60

for 2000.


     1
       Section references are to the Internal Revenue Code in
effect for the years in issue. Rule references are to the Tax
Court Rules of Practice and Procedure.
                                - 2 -

       The issues2 for decision are:

       1.   Whether petitioner may deduct more business expenses

than respondent allowed for 1999 and 2000.      We hold that he may

not.

       2.   Whether petitioner is liable for self-employment tax of

$5,339 for 1999 and $4,313 for 2000.      We hold that he is.

       3.   Whether petitioner is entitled to the earned income

credit for 1999 and 2000.    We hold that he is not.

       4.   Whether petitioner is liable for accuracy-related

penalties under section 6662(a) for 1999 and 2000.      We hold that

he is.

                          FINDINGS OF FACT

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

A.     Petitioner

       Petitioner lived in Anacortes, Washington, when he filed the

petition.    In 1999 and 2000, he was a self-employed journalist.

       Petitioner has six children:    Mark, Matthew, Miranda,

Martin, Melanie, and Marlon.    Martin and Marlon were his

dependents in 1999.

B.     Petitioner’s 1999 and 2000 Tax Returns and Respondent’s
       Computational Corrections to Petitioner’s Returns

       Petitioner timely filed Federal income tax returns for 1999

and 2000.    He included with each of those returns a Schedule C,


       2
       Respondent determined that petitioner is entitled to a
child tax credit of $1,000 on his 1999 and 2000 tax returns.
                                - 3 -

Profit or Loss From Business, for his journalism activity.

Petitioner listed his six children as dependents on his 1999

return but claimed personal exemptions only for himself, Martin,

and Marlon.    He also claimed three personal exemptions on his

2000 return.    Petitioner attached to his 1999 and 2000 returns

Schedule EIC, Earned Income Credit, on which he listed Martin and

Marlon.   However, he did not claim the earned income credit for

1999 and 2000.

     1.    Corrections to Petitioner’s 1999 Return

     Because petitioner claimed exemptions for only two of his

children for 1999, respondent allowed petitioner a dependency

exemption for each of his four other children (Mark, Matthew,

Miranda, and Melanie).    On the Schedule C attached to his 1999

return, petitioner reported gross receipts of $60,152, expenses

of $41,512, and net income of $15,918.    Respondent corrected a

computational error in the amount of net income petitioner

reported, resulting in an increase of $2,722 and an increase in

petitioner’s self-employment tax of $1,509.    Respondent also

increased the amount of petitioner’s self-employment tax

deduction.    Petitioner claimed a $6,250 standard deduction for

head of household on his 1999 return.    The correct amount for

1999 was $6,350.    Respondent corrected that error.   Respondent

also allowed petitioner an earned income credit of $2,791 for

1999.
                                - 4 -

     On the basis of respondent’s adjustments to petitioner’s

1999 return, respondent concluded that petitioner’s tax liability

was $2,633.58, which was offset by the earned income credit of

$2,791, resulting in an overpayment of $157.42.     Respondent

applied the overpayment to taxes petitioner owed for 1995.

     2.     Corrections to Petitioner’s 2000 Return

     Petitioner attached to his 2000 return Schedule D, Capital

Gains and Losses, on which he reported short-term capital losses

of $4,499.51.    He did not claim a short-term capital loss on his

Form 1040, U.S. Individual Income Tax Return.     Respondent allowed

a short-term capital loss of $3,000.     Petitioner claimed a $6,350

standard deduction for head of household on his 2000 return; the

correct amount for 2000 was $6,450.     Respondent corrected that

error.    Respondent also allowed petitioner an earned income

credit of $2,596 for Martin and Marlon for 2000.

     On the basis of respondent’s adjustments to petitioner’s

2000 return, respondent concluded that petitioner’s tax liability

was $2,861, which was offset by the allowed earned income credit

of $2,596, resulting in a net balance due of $265.     Petitioner

paid the $265, plus interest, on June 22, 2001.

C.   Notices of Deficiency

     Respondent sent notices of deficiency to petitioner for 1999

and 2000.    Respondent disallowed petitioner’s claimed Schedule C

business expenses of $37,792 (including $2,023 for bad debts,
                              - 5 -

$6,799 of car and truck expenses, $1,240 of mortgage interest,

$2,800 of legal and professional expenses, $21,453 of office

expenses, and a $3,477 home office deduction) for 1999 and

$30,523 (including $7,110 of legal and professional expenses and

$23,412 of office expenses) for 2000.   Respondent disallowed

dependency exemptions of $8,250 for 1999 for Mark, Miranda, and

Melanie,3 disallowed the earned income credit of $2,791 for 1999

and $2,596 for 2000, and increased petitioner’s self-employment

tax (and self-employment tax deduction) for 1999 and 2000.

D.   Petitioner’s Constitutional Claims

     Petitioner filed a pretrial memorandum in which he

criticized respondent’s revenue agents and respondent’s counsel,

alleged that respondent had a personal vendetta against him, and

alleged that respondent had violated his rights under the U.S.

Constitution and various civil rights statutes.

     At trial, petitioner repeated the allegations made in his

pretrial memorandum.




     3
       Petitioner did not claim a dependency exemption on his
1999 return for Matthew, but respondent allowed that exemption in
the notice of deficiency.
                               - 6 -

                              OPINION

A.   Whether Petitioner May Deduct More Business Expenses Than
     Respondent Allowed for 1999 and 2000

     Petitioner contends that he may deduct more expenses for his

journalism activity for 1999 and 2000 than respondent allowed

($3,720 for 1999 and $7,650 for 2000).   We disagree.

     A taxpayer must keep records that are sufficient to enable

the Commissioner to determine his or her tax liability.   See sec.

6001; sec. 1.6001-1(a), Income Tax Regs.   A taxpayer must

substantiate the payments which give rise to claimed deductions.

Hradesky v. Commissioner, 65 T.C. 87, 90 (1975), affd. per curiam

540 F.2d 821 (5th Cir. 1976); see sec. 6001.   Petitioner has the

burden of establishing that he is entitled to the deductions

claimed.4   See INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84

(1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440

(1934).

     Petitioner did not offer any evidence that he was entitled

to deduct more business expenses for 1999 and 2000 than

respondent allowed.

     Petitioner urges this Court to allow him to deduct the

amounts he had deducted on his tax returns, and he contends his

deductions were reasonable.   However, it is not enough that

     4
       The burden of proof for a factual issue may shift to the
Commissioner under certain circumstances. Sec. 7491(a).
Petitioner does not contend that he meets the requirements of
sec. 7491(a), however.
                               - 7 -

petitioner asserts that his deductions were reasonable; he must

provide adequate proof.   See Wilkinson v. Commissioner, 71 T.C.

633, 639 (1979); Roberts v. Commissioner, 62 T.C. 834, 837 (1974)

(a tax return does not establish the correctness of the facts

stated in it).

     We conclude that petitioner may not deduct more business

expenses than respondent allowed for 1999 and 2000.

B.   Whether Petitioner Is Liable for Self-Employment Tax for
     1999 and 2000

     As discussed at paragraph A above, respondent disallowed

Schedule C expenses for 1999 and 2000.   Respondent determined

that petitioner is liable for additional self-employment tax

under section 1401 of $5,339 for 1999 and $4,313 for 2000 and

that he may deduct under section 164(f) self-employment tax of

$2,671 for 1999 and $2,157 for 2000.

     Section 1401 imposes a tax on an individual’s self-

employment income.   The self-employment tax is imposed on net

earnings of $400 or more derived by an individual from a trade or

business carried on by him.   Sec. 1402(a) and (b).

     Petitioner did not prove that respondent’s determination of

his liability for self-employment tax was incorrect.   We sustain

respondent’s determination.
                                 - 8 -

C.     Whether Petitioner Is Entitled to the Earned Income Credit
       for 1999 and 2000

       An individual may be eligible for an earned income tax

credit.    Sec. 32(a)(1).   An eligible individual is one who

either:    (1) Has a qualifying child as defined by section

32(c)(3)(A), or (2) meets the requirements of section

32(c)(1)(A)(ii).

       For the 1999 tax year, the earned income credit is

completely phased out for an individual with more than one

qualifying child if the taxpayer’s earned income and adjusted

gross income exceed $30,580.     Sec. 32(a)(2); Rev. Proc. 98-61,

1998-2 C.B. 811, 814.    Petitioner’s earned income and adjusted

gross income were $52,444 in 1999.       For the 2000 tax year, the

earned income credit is completely phased out for an individual

with more than one qualifying child if the taxpayer’s adjusted

gross income exceeds $31,152.     Sec. 32(a)(2); Rev. Proc. 99-42,

1999-2 C.B. 568.    Petitioner’s earned income and adjusted gross

income in 2000 were $44,185.     Petitioner is therefore not

entitled to the earned income credit for 1999 or 2000.

D.     Whether Petitioner Is Liable for the Accuracy-Related
       Penalty for 1999 and 2000

       Section 7491(c) places on the Commissioner the burden of

producing evidence that it is appropriate to impose additions to

tax.    To meet this burden, the Commissioner must produce evidence

showing that it is appropriate to impose the particular addition
                               - 9 -

to tax but need not produce evidence relating to defenses such as

reasonable cause or substantial authority.     Higbee v.

Commissioner, 116 T.C. 438, 446 (2001); H. Conf. Rept. 105-599,

at 241 (1998), 1998-3 C.B. 747, 995.

     Petitioner did not keep records or substantiate his

deductions.   Respondent concedes that petitioner is not liable

for the accuracy-related penalty on that part of the underpayment

attributable to the disallowed dependency exemptions.      Petitioner

is also not liable for the accuracy-related penalty on that part

of the underpayments for 1999 and 2000 attributable to the

disallowed earned income credit because petitioner did not claim

earned income credits for 1999 and 2000.    Respondent allowed

petitioner earned income credits for those years.    Thus,

respondent has met the burden of production, except with respect

to the penalty attributable to the disallowed dependency

exemptions for 1999 and the disallowed earned income credits for

1999 and 2000.   Petitioner did not show that he acted with

reasonable cause or in good faith.     We conclude that petitioner

is liable for the accuracy-related penalty for 1999 and 2000,

except that he is not liable for the accuracy-related penalty

attributable to the disallowed dependency exemptions for 1999 and

the disallowed earned income credits for 1999 and 2000.
                              - 10 -

E.   Petitioner’s Procedural and Constitutional Arguments

     Petitioner alleges various instances of misconduct by

respondent’s employees during the audit of his 1999 and 2000

returns.   Petitioner contends that:   (1) Respondent improperly

increased the number of dependency exemptions that petitioner

reported on his 1999 return and then used the later denial of

those same dependency exemptions as a basis for initiating an

unlawful audit of petitioner’s 1999 return; (2) respondent

improperly rejected petitioner’s offer in compromise; and (3)

respondent and the Court have illegally conspired to violate the

U.S. Constitution, RICO statutes, civil rights statutes, the IRS

Restructuring and Reform Act of 1998, the Internal Revenue Code,

the ABA Code of Professional Responsibility, and the Code of

Judicial Conduct.   We disagree.

     There is no evidence supporting petitioner’s allegations.

Petitioner has not shown that respondent’s agents engaged in

unconstitutional or illegal conduct.    On his 1999 tax return,

petitioner listed his six children as dependents but claimed only

three personal exemptions.   Upon receiving petitioner’s 1999

return, respondent allowed petitioner the benefit of four

additional dependency exemptions.   On audit, however, respondent

determined that petitioner was not entitled to dependency

exemptions for three of the four children for whom he did not

claim exemptions on his 1999 return.    Respondent’s actions with
                              - 11 -

respect to petitioner’s 1999 return appear to be respondent’s

good faith attempt to give petitioner the benefit of what

appeared to be valid dependency exemptions.   Respondent’s actions

were not illegal or unconstitutional, and they cast no doubt on

the validity of the notice of deficiency for 1999.

     We lack jurisdiction to consider petitioner’s contentions

regarding his offer in compromise because our jurisdiction in

this case is limited to redetermining petitioner’s correct tax

liabilities for 1999 and 2000.

     To consider petitioner’s contentions concerning a conspiracy

or vendetta against him, we would have to consider evidence of

respondent’s conduct other than that stated in the notices of

deficiency.   The notices directly pertain to petitioner and were

issued after an audit.   Petitioner has not alleged any conduct by

respondent sufficient to cause us to look behind the statutory

notices of deficiency under Greenberg’s Express, Inc. v.

Commissioner, 62 T.C. 324 (1974).   We are satisfied that

petitioner raises no issue warranting that we look behind the

statutory notices of deficiency.

     Petitioner contends that Bennett v. Commissioner, T.C. Memo.

1997-505, created an exception to this rule when there is

substantial evidence of unconstitutional conduct by the

Commissioner.
                              - 12 -

     Petitioner has not shown substantial evidence of

unconstitutional conduct by respondent.   Essentially,

respondent’s decisions in these cases were to audit petitioner’s

returns, to disallow business expense and home office deductions

for lack of substantiation, to adjust self-employment tax due as

a computational adjustment, to allow a child tax credit, and to

disallow certain dependency exemptions and the earned income

credit.   There is nothing in the record showing that respondent’s

determination of the deficiencies in the notices of deficiency

was arbitrary or that it involved unconstitutional conduct, and

in the absence of such a showing this Court does not look behind

a notice of deficiency to ascertain the Commissioner’s motives in

determining a deficiency or an addition to tax.   Moreover, these

are not cases in which review of respondent’s actions preceding

the issuance of the deficiency notices is necessary to determine

the merits of respondent’s substantive determination of a

deficiency.   Petitioner made only vague and unsubstantiated

allegations which do not persuade us that he is entitled to

relief from liability for the income tax deficiencies and

penalties at issue in these cases.

     To reflect the foregoing,


                                          Decisions will be entered

                                     under Rule 155.
