1 Section references are to the Internal Revenue Code in

effect for the year at issue. All Rule references are to the Tax

Court Rules of Practice and Procedure. 

T.C. Memo. 1996-229

UNITED STATES TAX COURT

ANNE S. AND CHARLES G. VICK, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 13694-93. Filed May 21, 1996.

Anne S. and Charles G. Vick, pro se.

Martha J. Weber, for respondent.

MEMORANDUM OPINION

COUVILLION, Special Trial Judge: This case was heard

pursuant to section 7443A(b)(3)1 and Rules 180, 181, and 182.

Respondent determined a deficiency of $5,440 in petitioners'

1990 Federal income tax.
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2 At trial, respondent conceded that, for 1990, petitioners

are entitled, under sec. 63(f)(1), to the standard deduction

amount for joint filers where both spouses are age 65 or older,

rather than the basic standard deduction for joint filers.

After a concession by respondent, the issues for decision

are: (1) Whether petitioners failed to report miscellaneous

income of $3,341 received from the Shaklee Corp. (the

corporation) in 1990, and (2) whether petitioners are entitled to

trade or business deductions under section 162 for cost of goods

sold.2

Some of the facts were stipulated, and those facts, with the

annexed exhibits, are so found and are incorporated herein by

reference. At the time the petition was filed, petitioners'

legal residence was Memphis, Tennessee.

During 1990, Charles G. Vick (petitioner) was self-employed

selling the products of the corporation. Petitioners received

$3,341 from the corporation during 1990, and that amount was

reported by the corporation as a payer to the Internal Revenue

Service (IRS) on IRS Form 1099 as Miscellaneous Income. On

Schedule C of petitioners' 1990 Federal income tax return,

petitioners did not report the $3,341 received from the

corporation. Petitioners reported gross receipts of $1,150 and,

from this amount, deducted $30,650 as cost of goods sold. The

amount of the cost of goods sold was shown on Part III of

Schedule C of petitioners' return as follows:
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Beginning inventory $ 0

Purchases 12,000

Labor 18,000

Materials and supplies 4,000

Other costs 7,500 

 $41,500

Ending inventory (10,850)

Cost of goods sold $30,650

In the notice of deficiency, respondent determined that

petitioners had unreported income of $3,341 from the corporation

and disallowed the entire amount of cost of goods sold for lack

of substantiation.

The determinations of the Commissioner in a notice of

deficiency are presumed correct, and the taxpayer bears the

burden of showing the determinations are incorrect. Rule 142(a);

Welch v. Helvering, 290 U.S. 111 (1933).

With respect to the $3,341 received from the corporation,

petitioner acknowledged receipt of this amount but contended that

the amount represented nontaxable rebates, or purchase-volume

discounts, from the corporation. However, other than his own

self-serving testimony, petitioner presented no evidence to

support this contention. Petitioner failed to meet his burden of

proof on this issue. Accordingly, pursuant to section 61,

petitioners must include this amount in income. Respondent is

sustained on this issue.
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With respect to the Schedule C deduction for cost of goods

sold, petitioner presented no documentary evidence to support the

claimed amount and testified he believed all of his records had

been stolen. When questioned by the Court as to the possibility

of documenting the claimed expenditures through other sources,

such as records of purchases from the corporation, petitioner

stated that he had been unable to obtain such evidence. Other

than his own self-serving statements, petitioner presented no

evidence to substantiate the disallowed deduction for cost of

goods sold. Therefore, on this record, respondent's

determination on the disallowance of the Schedule C deduction for

cost of goods sold is sustained.

Decision will be entered 

under Rule 155.