1 All section references are to the Internal Revenue Code in

effect for the year in issue, and all Rule references are to the

Tax Court Rules of Practice and Procedure.

T.C. Memo. 1999-144

UNITED STATES TAX COURT

MARIAN AND MARIA JUSKUV, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 10725-97. Filed April 30, 1999.

Marian Juskuv, pro se.

Louise R. Forbes, for respondent.

MEMORANDUM OPINION

 DAWSON, Judge: This case was assigned to Special Trial

Judge Stanley J. Goldberg, pursuant to the provisions of section

7443A(b)(4) and Rules 180, 181, and 183.1 The Court agrees with

and adopts the opinion of the Special Trial Judge which is set

forth below.
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OPINION OF THE SPECIAL TRIAL JUDGE

GOLDBERG, Special Trial Judge: Respondent determined a

deficiency for 1995 in the amount of $3,914 and additions to tax

pursuant to sections 6651(a)(1) and 6654 of $2,171 and $364,

respectively. 

After concessions, the issues for decision are: (1) Whether

petitioners are entitled to deduct claimed Schedule C expenses

and Schedule E losses; (2) whether petitioners are entitled to

claim a $3,000 short-term capital loss on Schedule D for 1995;

(3) whether petitioners are liable for an addition to tax

pursuant to section 6651(a)(1); and (4) whether petitioners are

liable for an addition to tax pursuant to section 6654. 

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

The stipulation of facts and the attached exhibits are

incorporated herein by this reference. At the time that the

petition was filed, petitioners resided in Canton, Massachusetts. 

References to petitioner are to Marian Juskuv.

Background

Petitioners emigrated from Slovakia to the United States in

1980. While living in Slovakia, petitioner earned a college

degree in electronics from a technical college in Kosice. In

1995, petitioner worked as an electronics technician in Boston

for Teradyne, Inc. Maria Juskuv was also employed during 1995
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and worked for Faulkner Hospital in Jamaica Plain and the Hebrew

Rehabilitation Center for the Aged in Roslindale. 

Respondent’s Andover, Massachusetts, Service Center received

petitioners’ 1995 Federal income tax return, Form 1040, on

November 20, 1996, together with Forms W-2. On line 7 of the

Form 1040, petitioners reported wages of $78,613; and on line 22,

total income of $78,613. They claimed total adjustments to

income on line 30 of $78,613 and adjusted gross income on line 31

of zero. Thereafter, zero amounts were reported on line 37--

taxable income, and line 54--total tax. Petitioners requested a

refund of $8,942, an amount representing their total Federal

income tax withholding. The return did not include Schedules C,

D, and E. Attached to the Form 1040 was a three-page "Affidavit

and Statement" submitted by petitioners which set forth various

tax protester arguments, rejected by this and other courts, in

support of their claim that they owe no income tax. Petitioners

filed their return claiming married filing jointly status and two

exemptions.

In the notice of deficiency dated April 18, 1997, respondent

determined that petitioners failed to include $10,300 of taxable

distributions in their gross income for 1995. Respondent

computed the deficiency as follows:
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 Adjustment to income $10,300

 Taxable income per return 167,063

 Corrected taxable income 77,363

 Tax--from tax tables 16,595

 Additional tax on IRA (10 percent) 1,030

 Total corrected tax liability 17,625

 Less: Tax shown on return 13,711

 Deficiency 3,914

1 This amount was computed as follows:

 Wages per return $78,613

 Total income 78,613

 Less:

 Standard deduction $6,550

 Exemptions 5,000 11,550

 Taxable income 67,063

On the basis of the corrected tax liability of $17,625, less

the income withholding of $8,942, respondent determined an

addition to tax under section 6651(a)(1) of $2,171. Likewise,

starting with the $17,625 amount, respondent also determined an

addition to tax under section 6654(a) of $364. 

Petitioners abandoned their tax protester arguments and

filed a Second Amended Petition on March 30, 1998. In their

amended petition, they claimed Schedule C expenses and Schedule E

losses and a Schedule D capital loss. 

Simultaneously with the filing of their amended petition,

petitioners provided respondent with a revised 1995 Form 1040,

signed on March 30, 1998. On the Form 1040, they included in

gross income their previously reported wages. They also reported

distributions of $3,334 and pensions and annuities of $6,967,

totaling $10,301. Therefore, we deem that petitioners have
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2 Petitioners' claimed Schedule E losses include ordinary

losses of $509 and net short-term losses in the amount of $2,936. 

Petitioners' claimed Schedule E losses should therefore actually

total $3,445. No explanation for the discrepancy is given in the

(continued...)

conceded the issue as to unreported income from the

distributions. In addition, petitioners completed Schedules C,

D, and E. 

On the revised 1995 Form 1040, petitioner listed himself as

a "commodity broker" on Schedule C. Although he testified that

he has engaged in this activity since 1991 or 1992, petitioner

has never earned income from his commodity trading activity. 

Petitioners claimed the following Schedule C expenses incurred in

commodity trading for 1995:

Car and truck expenses $450

Advertising 50

Commissions and fees 562

Repairs and maintenance 978

Supplies 393

Meals and entertainment 14

Utilities 255

Other expenses 1 614

 

 Total claimed expenses 2 3,311

1 Petitioners' other expenses include $164 for the Wall Street

Journal and $450 paid to computer equipment suppliers.

2 Petitioners' claimed Schedule C expenses should actually total

$3,316. No explanation for the discrepancy is given in the

record, and it probably resulted from a mathematical error by

petitioners.

Petitioners also claimed Schedule E losses in the amount of

$3,435.2 Petitioners' claimed Schedule E losses were purportedly
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2(...continued)

record, and it probably resulted from a mathematical error by

petitioners.

3 Petitioners elected to make Capital Growth Fund an S

corporation on Aug. 28, 1995.

incurred by Capital Growth Fund, an S corporation,3 and passed

through to petitioners as the sole shareholders. Petitioner

listed Capital Growth Fund's business activity as "investment

company" on Capital Growth Fund's 1995 Form 1120S, U.S. Income

Tax Return for an S Corporation. Capital Growth Fund did not

earn any income for 1995. Petitioners also calculated short-term

capital losses of $7,543. They claimed total Schedule D shortterm capital losses for 1995 of $3,000 pursuant to the section

1211(b) limitation.

Petitioners listed their two children as dependents and

claimed exemptions for them. Apparently, respondent has no

disagreement with these two additional exemption deductions. 

Respondent asserted a claim for an increased deficiency in

petitioners’ 1995 Federal income tax pursuant to section 6214(a)

in the Answer to Second Amended Petition filed on April 20, 1998. 

Respondent seeks to increase the deficiency by $13,711 on the

basis of a computational error. Respondent contends that the

correct deficiency for 1995 on the basis of adjustments to gross

income set forth in the notice of deficiency is $17,625 and not

$3,914. As previously stated, in the notice of deficiency
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respondent computed petitioners’ corrected tax liability for 1995

as $17,625 and from this amount subtracted $13,711 representing

tax shown on petitioners’ return. On line 54 of their Form 1040,

petitioners reported zero tax liability. This is a mistake and

the correct deficiency based on the income tax return received

November 20, 1996, is $17,625.

Discussion

1. Schedules C and E Deductions

Petitioners contend that they are entitled to deduct

expenses and losses incurred in trading activities conducted

during 1995. Petitioners claimed deductions for expenses and

losses incurred in commodities trading on Schedules C and E of

their 1995 Federal income tax return.

Deductions are a matter of legislative grace, and a taxpayer

must be able to show that the deduction sought comes within the

express provisions of the statute. See New Colonial Ice Co. v.

Helvering, 292 U.S. 435, 440 (1934). All taxpayers are required

to keep sufficient records to enable the Commissioner to

determine their correct tax liability. See sec. 6001; see also

Meneguzzo v. Commissioner, 43 T.C. 824, 831-832 (1965). 

The deductions claimed by petitioners on their Schedules C

and E are disallowed for lack of substantiation. At trial,

petitioners offered no documentation to support their claimed

Schedules C and E deductions. It is well settled that we are not
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4 There is no explanation in the record as to the difference

between the amount listed on petitioners' 1995 Form 1099-B and

the amount claimed by petitioners on the 1995 Schedule D.

required to accept a taxpayer's self-serving testimony in the

absence of corroborating evidence. See Niedringhaus v.

Commissioner, 99 T.C. 202, 212 (1992). Respondent is sustained

on this issue. 

2. Schedule D Deductions

Petitioners claimed a Schedule D short-term capital loss

deduction in the amount of $3,000. Pursuant to section 1211(b),

a taxpayer other than a corporation is limited to $3,000 in net

capital losses in any given tax year. Under section 1212 any net

capital losses that are disallowed as a result of the limitation

in section 1211 may be carried forward to the next taxable year. 

At trial, petitioners submitted a Form 1099-B which listed

aggregate losses of $7,547.55 from futures contracts. 

Petitioners reported a Schedule D capital loss of $7,543 on their

revised 1995 Form 1040.4

Accordingly, we hold that petitioners have substantiated and

are entitled to claim a net short-term capital loss deduction of

$3,000 for 1995 pursuant to section 1211(b).

3. Addition to Tax for Failure To File a Timely Return

Petitioners filed their 1995 Federal income tax return on

November 20, 1996. 
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Section 6651(a)(1) imposes an addition to tax for failure to

file a timely tax return. The addition to tax is equal to 5

percent of the amount of the tax required to be shown on the

return if the failure to file is not for more than 1 month. See

sec. 6651(a)(1). An additional 5 percent is imposed for each

month or fraction thereof in which the failure to file continues,

to a maximum of 25 percent of the tax. See id. The addition to

tax is imposed on the net amount due. See sec. 6651(b).

The addition is applicable unless a taxpayer establishes

that the failure to file was due to reasonable cause and not

willful neglect. See sec. 6651(a). In order to establish

reasonable cause, a taxpayer must show that despite the existence

of ordinary business care and prudence, the taxpayer was unable

to file the required tax return within the prescribed time. See

United States v. Boyle, 469 U.S. 241, 246 (1985); Crocker v.

Commissioner, 92 T.C. 899, 913 (1989). "Willful neglect" means a

"conscious, intentional failure or reckless indifference." 

United States v. Boyle, supra at 245.

We find that petitioners have not established that their

failure to timely file their 1995 Federal income tax return was

due to reasonable cause. Therefore, we hold that they are liable

for an addition to tax under section 6651(a)(1) for 1995. 

Respondent is sustained on this issue.
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4. Addition to Tax for Failure To Pay Estimated Income Taxes

Section 6654(a) imposes an addition to tax where prepayments

of tax, either through withholding or estimated quarterly tax

payments during the year, do not equal the percentage of total

liability required under the statute. However, the addition to

tax is not imposed if the taxpayer can show that one of several

exceptions applies. See sec. 6654(e).

On the basis of the record, petitioners do not qualify for

any of the exceptions listed in section 6654(e). Therefore, we

hold that they are liable for the addition to tax pursuant to

section 6654(a) for 1995. Respondent is sustained on this issue. 

To reflect the foregoing,

Decision will be entered

under Rule 155.