T.C. Memo. 1998-29

UNITED STATES TAX COURT

JEFFREY M. BUSKE, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 5410-97. Filed January 26, 1998. 

Jeffrey M. Buske, pro se.

James E. Gehres, for respondent.

MEMORANDUM OPINION

CHIECHI, Judge: Respondent determined the following deficiencies in, additions to, and accuracy-related penalty on

petitioner's Federal income tax for the years 1992 through 1995:
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1 All section references are to the Internal Revenue Code in

effect for the years at issue. All Rule references are to the

Tax Court Rules of Practice and Procedure.

 Additions to Tax 

Accuracyrelated Penalty

Year Deficiency Sec. 6651(a)(1)1 Sec. 6654 Sec. 6662(a)

1992 $16,442 $2,822 -- $3,264

1993 17,378 4,170 $728 --

1994 16,174 4,044 839 --

1995 46,117 11,529 2,501 --

We must decide whether respondent's determinations for each

of the years at issue should be sustained. We hold that they

should except to the extent stated herein.

Background

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

Petitioner lived in or near Boulder, Colorado, at the time

the petition was filed. 

In April 1994, petitioner filed an individual income tax

return (return) for 1992. Petitioner failed to file returns for

1993, 1994, and 1995.

On December 31, 1996, respondent issued a notice of deficiency (notice) to petitioner for his taxable years 1992, 1993,

and 1994, and on December 16, 1996, respondent issued a notice to

petitioner for his taxable year 1995.

Respondent determined in the notices, inter alia, that

during the years at issue petitioner received income consisting

of nonemployee compensation, rent, dividends, unemployment

compensation, a premature distribution from an individual retire-
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2 By way of illustration, petitioner states, inter alia, in his

trial memorandum the following:

 I have relied on the professional opinion of attorneys,

who have not been rebutted by the IRS, that (a) there is no

statute that compels anyone and everyone to filing and

assessing themselves a 1040 Tax [sic] and (b) Title 26, the

Income Tax Code cannot be enforced outside of the federal

government's jurisdiction, absent voluntary self assessment

by those outside such jurisdiction. Enacted Federal law is

limited by the Constitution to "10 Square Miles", Article I

Section 8. The fact that federal law cannot automatically

and presumptively extend into the States has been reconfirmed by the Supreme Court * * *. The only way that

federal legislation becomes effective outside the territories and possessions of the U.S. is by voluntary participa-

(continued...)

ment account, and/or capital gain. According to the notices,

respondent relied on, inter alia, certain information returns,

petitioner's 1992 return, and/or the Consumer Price Index rollover method (CPI rollover method) to reconstruct petitioner's

income for each of the years at issue. Respondent also determined in the notice, inter alia, that petitioner is not entitled

to certain deductions that petitioner claimed in Schedule C,

Profit or Loss From Business, and Schedule E, Supplemental Income

and Loss (Schedule E), of his 1992 return.

After petitioner filed the petition in this case, he did not

cooperate with respondent in preparing this case for trial or in

settling it, although he did submit a trial memorandum which the

Court had filed on October 27, 1997. In his trial memorandum,

petitioner advanced protester type contentions that have been

rejected by the courts as frivolous and/or groundless.2
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2(...continued)

tion. For that reason, the Code is very explicit in omitting the term "the 50 states" from the definition of

"United States" when applicable to Subtitle A "1040 Taxes"

* * *.

 Therefore, since my activities were not licenced, they

were not taxable and since I did not voluntarily enter into

the federal jurisdiction through filing a return, which

filing is not mandated by statute, then the assessment

against me is erroneous. * * * [Fn. ref. omitted.]

At the call of this case from the calendar, both parties

appeared, and respondent filed a motion to dismiss for lack of

prosecution (respondent's motion) because of petitioner's failure

to cooperate with respondent in preparing this case for trial or

in settling it. Based on petitioner's representations to the

Court that he wanted to have a trial and that he intended to

present evidence at trial in support of his position that the

notices are in error, the Court denied respondent's motion.

Discussion

Petitioner bears the burden of proving that respondent's

determinations in the notices are erroneous. Rule 142(a); Welch

v. Helvering, 290 U.S. 111, 115 (1933).

Petitioner contends that respondent's use of the CPI rollover method to reconstruct his income for the years at issue is

unfair and arbitrary. We disagree. The CPI rollover method is a

reasonable method of reconstructing income. See Moore v. Commissioner, 722 F.2d 193, 196 (5th Cir. 1984), affg. T.C. Memo. 1983-

20. Moreover, petitioner admitted at trial (1) that he worked
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during 1992, 1993, 1994, and a portion of 1995 as a contract

electrical technician and that he was paid for that work during

those years; (2) that he owned certain rental property during

1992, 1993, 1994, and 1995 and that he received rent thereon

during those years; (3) that during 1993 he received $6,500 of

unemployment compensation; (4) that during 1993 he received a

dividend of approximately $40; and (5) that during 1995 he sold a

rental property that he and his father had purchased in 1983. 

The record establishes that petitioner received income during the

years at issue, and we reject petitioner's position that respondent's income determinations are arbitrary. Nonetheless, we are

persuaded by the record before us that petitioner does not have

long-term capital gain and rental income for 1995 in the amounts

determined by respondent. 

With respect to respondent's determination that petitioner

has long-term capital gain for 1995 in the amount of $103,500,

respondent acknowledges that a Form 1099-S (Proceeds From Real

Estate Transactions) that was issued to petitioner's father, Owen

Buske, reflected the proceeds received during 1995 from the sale

of certain rental property and that, based on third-party information, petitioner was co-owner of that rental property (co-owned

rental property). However, because petitioner did not provide

respondent with information establishing the extent of his coownership of, and his basis in, the co-owned rental property,
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respondent determined that petitioner realized long-term capital

gain for 1995 equal to the proceeds received from the sale of

that property (i.e., $103,500). At trial, petitioner testified,

and we find, that he was a one-half owner of the co-owned rental

property. However, petitioner failed to present any evidence

establishing what, if any, basis he had in his one-half interest

in that property. Based on the record before us, we find that

petitioner realized long-term capital gain for 1995 from the sale

of the co-owned rental property in the amount of $51,750.

With respect to respondent's determination that petitioner

has rental income for 1995 in the amount of $18,171, petitioner

testified, and we find, that he did not receive rent on the coowned rental property after its sale at the end of February 1995. 

Immediately prior to trial, petitioner completed a Form 1040 for

1995. In the Schedule E attached to that form, petitioner admits

that during 1995 he received total rental income of $12,767

consisting of (1) $11,460 from a duplex and (2) $1,307 from the

co-owned rental property. We further find on the record before

us that petitioner received total rental income for 1995 in the

amount of $12,767. Cf. Cohan v. Commissioner, 39 F.2d 540 (2d

Cir. 1930).

Petitioner testified in a general and vague manner, and he

claims, that he is entitled to deduct certain expenses for the
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3 Although not altogether clear, it appears that petitioner may

be arguing that respondent's determination that petitioner is not

entitled to the deductions that he claimed in his 1992 return is

arbitrary. To the extent petitioner is making that argument, he

is wrong. Deductions are a matter of legislative grace, and the

taxpayer has the burden of showing that such taxpayer is entitled

to any deduction claimed. INDOPCO, Inc. v. Commissioner, 503

U.S. 79, 84 (1992).

years at issue.3 In an attempt to support that claim, petitioner

introduced into evidence at trial lists that he had prepared of

such alleged expenses. However, petitioner failed to proffer

into evidence any documentation or other evidence establishing

that he incurred the claimed expenses and that any expenses that

he did incur are deductible. On the record before us, we find

that petitioner has failed to establish that he is entitled to

deduct any expenses for the years at issue.

Based on the entire record before us, we find that, except

to the extent stated herein, petitioner has not satisfied his

burden of showing error in any of respondent's determinations in

the notices.

To reflect the foregoing,

Decision will be entered

under Rule 155.