T.C. Memo. 2003-203 

UNITED STATES TAX COURT

MARK A. MEHNER, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 5286-02. Filed July 10, 2003.

Mark A. Mehner, pro se.

Albert B. Kerkhove, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

LARO, Judge: Petitioner petitioned the Court to redetermine

respondent’s determination of a $38,360 deficiency in

petitioner’s 1997 Federal income tax and additions thereto of

$6,023, $5,622, and $1,363 under sections 6651(a)(1) and (2) and
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1 Section references are to the applicable versions of the

Internal Revenue Code, Rule references are to the Tax Court Rules

of Practice and Procedure, and dollar amounts are rounded.

2 Respondent conceded that: (1) Petitioner is not liable

for the addition to tax of $5,022 under sec. 6651(a)(2); and (2)

petitioner is entitled to additional dependency exemptions for

his wife and two children.

6654, respectively.1 After concessions by respondent,2 we

decide:

(1) Whether petitioner’s gross income includes nonemployee

compensation of $82,500 from Integrated Business Nonemployee

Strategies, Inc., wages of $53,092 from ACI, Inc., and interest

of $130 from various financial institutions (collectively,

unreported amounts). We hold it does;

(2) whether petitioner is liable for self-employment tax of

$3,735. We hold he is;

(3) whether petitioner is entitled to itemized deductions

exceeding the standard deduction allowed by respondent. We hold

he is not;

(4) whether petitioner is entitled to dependency exemptions

exceeding those allowed by respondent. We hold he is not;

(5) whether petitioner is liable for the additions to tax

determined by respondent under sections 6651(a)(1) and 6654. We

hold he is.
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FINDINGS OF FACT

Some facts were stipulated. The parties’ stipulation of

facts and the exhibits submitted therewith are incorporated

herein by this reference. We find the stipulated facts

accordingly. Petitioner resided in Omaha, Nebraska, when his

petition was filed. 

Respondent’s records contained no information on

petitioner’s having filed a 1997 Federal income tax return. 

Respondent prepared a substitute for return for that year. On

November 30, 2001, respondent issued to petitioner a notice of

deficiency on the basis of the substitute for return.

Petitioner received the following items of income during

1997:

 Payor Amount Type

Integrated Business $82,500 Nonemployee 

 Strategies, Inc. compensation

 

ACI, Inc. 53,092 Wages

First Deposit 19 Interest

 National Bank 

First Bank, N.A. 47 Interest

First Bank, N.A. 50 Interest

Capital One, F.S.B. 14 Interest
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OPINION

Petitioner asserts that he timely filed his 1997 Federal

income tax return, but that it was either lost by the Internal

Revenue Service or misplaced by the U.S. Postal Service. On the

basis of this assertion, petitioner concludes that respondent

erred in the notice of deficiency in that he determined

petitioner’s tax liability for 1997 “in lieu of the timely filed

original tax return” and did not give petitioner “full credit for

any allowable deductions under Schedule C.” Petitioner did not

present at trial a copy of his 1997 income tax return that he

purportedly mailed to respondent, a proof of its mailing, or

evidence as to his entitlement to any deductions not allowed by

respondent in the notice of deficiency.

A. Burden of Proof

The parties agree that the burden of proof as to the

deficiency is on petitioner. Respondent bears the burden of

production as to the additions to tax. See sec. 7491(c). In

order to meet his burden of production, respondent must present

evidence indicating that it is appropriate to impose an addition

to tax. See Higbee v. Commissioner, 116 T.C. 438, 446 (2001). 

The burden of proof remains with petitioner in that once

respondent comes forward with sufficient evidence that the

relevant penalties or additions to tax are appropriate,

petitioner must come forward with evidence sufficient to persuade
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the Court that respondent’s determination is incorrect. Id. at

446-447.

B. Unreported Amounts

The definition of gross income under section 61(a) broadly

encompasses any accession to a taxpayer’s wealth. United States

v. Burke, 504 U.S. 229 (1992); Commissioner v. Glenshaw Glass

Co., 348 U.S. 426, 431 (1955). Compensation for services and

interest are specifically included within that definition. Sec.

61(a)(1), (4). We conclude that the unreported amounts are

includable in petitioner’s gross income and are taxable as such.

C. Self-Employment Tax

Section 1401 imposes a tax on the self-employment income of

every individual for old age, survivors, and disability

insurance, and hospital insurance. Sec. 1401(a) and (b);

Schelble v. Commissioner, 130 F.3d 1388, 1391 (10th Cir. 1997),

affg. T.C. Memo. 1996-269; sec. 1.1401-1(a), Income Tax Regs. 

Self-employment income includes the net earnings from

self-employment derived by an individual during the taxable year. 

Sec. 1402(b). In this context, the term “net earnings from

self-employment” denotes the gross income derived by an

individual from any trade or business carried on by the

individual, reduced by, inter alia, the deductions attributable

to the trade or business. Sec. 1402(a); sec. 1.1402(a)-1, Income

Tax Regs.
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3 The minimum amount exception under sec. 6012(a)(1)(A)(i)

does not apply to petitioner, as petitioner’s income exceeded the

minimum amount.

In that petitioner received his nonemployee compensation

from Integrated Business Strategies, Inc., in his capacity as a

nonemployee, we sustain respondent’s determination that

petitioner is liable for self-employment tax on those earnings. 

D. Deductions/Exemptions

Taxpayers are required to keep sufficient records to enable

the Commissioner to determine their correct tax liability. Sec.

6001; Menequzzo v. Commissioner, 43 T.C. 824, 831-832 (1965);

sec. 1.6001-1, Income Tax Regs. The record before us does not

contain any documents which would substantiate the allowance of

any deductions and/or exemptions not allowed by respondent. We

sustain respondent’s determination as to this issue.

E. Additions to Tax

1. Section 6651(a)(1)

Section 6651(a)(1) imposes an addition to tax for failing to

file timely a required Federal income tax return, unless it is

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

willful neglect. Petitioner was required to file a Federal

income tax return for 1997. Secs. 6012, 6072.3

Respondent met his burden of production in that respondent

introduced (and the Court admitted) into evidence a Form 4340,

Certificate of Assessments, Payments and Other Specified Matters,
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and the testimony of the revenue agent who audited petitioner,

both to the effect that respondent’s records do not indicate that

respondent has ever received a Federal income tax return from

petitioner for the subject year. Petitioner, in turn, has failed

to meet his burden of proof. Petitioner has never presented any

credible evidence indicating that he filed a 1997 tax return, nor

has he established that his failure to file the return was on

account of cause that is reasonable. We hold that petitioner is

liable for the addition to tax under section 6651(a)(1). See

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

Commissioner, 105 T.C. 324, 338-339 (1995).

2. Section 6654(a)

Section 6654 imposes an addition to tax on an underpayment

of estimated tax. This addition to tax is mandatory unless the

taxpayer establishes that one of the exceptions listed in section

6654(e) applies. Recklitis v. Commissioner, 91 T.C. 874, 913

(1988).

The record establishes that petitioner failed to pay the

required amount of estimated tax for 1997. We conclude that

respondent has met his burden of production as to this issue. 

Given that the record does not establish that any of the

referenced exceptions applies, we conclude that petitioner has

failed to meet his burden of proof and sustain respondent’s
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determination as to this issue. See Motley v. Commissioner, T.C.

Memo. 2001-257.

We have considered all arguments and have found those

arguments not discussed herein to be irrelevant and/or without

merit. To reflect respondent’s concessions,

Decision will be entered

under Rule 155.