1 Unless otherwise indicated, subsequent 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. Summary Opinion 2003-56

UNITED STATES TAX COURT

LUCIANO V. FLORES, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 5411-02S. Filed May 19, 2003.

Luciano V. Flores, pro se.

Michael W. Lloyd and Sara J. Barkley, for respondent.

POWELL, Special Trial Judge: This case was heard pursuant

to the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed.1 The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority.
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2 In the notice of deficiency, respondent also determined a

deficiency of $2,531 and an addition to tax under sec. 6651(a)(1)

of $273.45 for the taxable year 1999. In the petition,

petitioner did not raise the 1999 taxable year, and those

determinations are not before the Court.

Respondent determined a deficiency of $10,422 in

petitioner’s 1998 Federal income tax and an addition to tax under

section 6651(a)(1) of $2,338.50.2 The issues are whether

petitioner is entitled to greater deductions for Schedule C,

Profit or Loss From Business, expenses than that allowed by

respondent and whether petitioner is liable for the addition to

tax under section 6651(a)(1) for 1998. Petitioner resided in

Commerce City, Colorado, at the time the petition was filed.

1. Post-Trial Motions

On February 28, 2003, the Court received a document from

petitioner entitled “Motion to Admit Evidence”. Attached to that

document were literally hundreds of documents most of which

appear to be receipts. As far as we can tell, however, these

documents are in no particular order, nor are there any

explanations as to what the documents relate. Accordingly, this

document and the attachments thereto will be returned to

petitioner unfiled.

Prior to the trial on October 23, 2002, petitioner and

respondent executed a stipulation of facts that essentially

provided that petitioner had substantiated approximately $54,000

in expenses. On March 3, 2003, petitioner submitted a document
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that has been filed as petitioner’s Motion to be Relieved of the

Stipulation of Facts. As we understand, the gist of this motion

is that, even though petitioner signed the stipulation of facts

on the advice of his accountant, he had not been able to present

all of his receipts. Petitioner also submitted a document

entitled “Motion to be Released of Trial Memorandum”. The only

trial memorandum contained in this case was filed by respondent. 

Trial memorandums are used as an information tool in the

preparation of a trial and are not evidence. As such, this

document is improper and will be returned to petitioner unfiled.

When this case was originally called for trial on Monday,

October 22, 2002, petitioner was not ready for trial. He had

turned over to respondent’s counsel some records the previous

Friday. His records were not organized in categories of

expenses. The case was set for trial on the following day and

petitioner was instructed to organize his records. Petitioner

did not organize the records.

In submitting the records in this fashion, petitioner

essentially asks this Court to conduct an accounting analysis of

his business. That is not a function of this Court. The notice

of deficiency was issued December 7, 2001, and petitioner was

surely aware of respondent’s determination that he had not

substantiated the deductions for the Schedule C expenses he had

claimed. The case was set for trial 10 months later. Petitioner
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had the help of an accountant, and he still had not organized his

records. This is inexcusable. Petitioner’s posttrial motion to

be relieved of the stipulation of facts and the other documents

referred to above are simply a continuation of this conduct. 

Petitioner’s motion will be denied.

2. The Deductions

For reasons that are apparent, we combine our findings of

facts with our discussion. Petitioner was a residential building

contractor during 1998. The parties agree that petitioner had

gross receipts of $107,668. While he did have a checking

account, petitioner received from his customers and paid to his

suppliers mostly cash. Petitioner kept no books of record of his

income or expenses. Rather he seems to have used a recordkeeping method of throwing receipts in a box and thereafter

ignoring the box when the return was prepared. On Schedule C

petitioner claimed total expenses of $100,330 or approximately 93

percent of his gross receipts. Even though he prepared the 1998

return, petitioner cannot explain the entries on the return. 

Upon examination, respondent disallowed $36,914 of the expenses

claimed. Under respondent’s view, petitioner’s expenses were

approximately 59 percent of his gross receipts.

At trial petitioner’s testimony was often vague and

contradictory. Many of the receipts that petitioner presented

are made out to his brother, who was also a contractor, and/or
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3 It would be ludicrous to say that under these circumstances

petitioner is entitled to shift the burden of proof to respondent

under sec. 7491(a). To say the least, he did not maintain

adequate records or present credible evidence. See sec. 7491(a).

his girlfriend. But even if we accepted petitioner’s testimony

that these people acted as his agents, there are items that have

a hollow ring. For example, petitioner testified that his cell

phone was in his girlfriend’s name. However, deductions are

alleged for two phones. 

Ordinarily we would be inclined to simply hold that

petitioner has not carried his burden of proof3 (see Rule 142)

and sustain respondent’s determination. We believe, however,

that most of the problem results from ignorance of any type of

bookkeeping skills and requirements. Furthermore, we are

concerned that, notwithstanding the failures in petitioner’s

case, respondent’s determination that petitioner’s expenses were

59 percent of his gross income is erroneous. During 1998, a

general building contractor’s expenses were approximately 86

percent of the gross income. See Internal Revenue Service,

Statistics of Income Bulletin, p. 30 (SOI) (Summer 2000). We

are, therefore, fairly confident that petitioner did have some

expenses in addition to those allowed by respondent. 

In such circumstances, although absolute certainty is

usually impossible, courts have allowed deductions based on a

close approximation but bearing heavily against the taxpayer
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“whose inexactitude is of his own making.” See Cohan v.

Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930). In making

such an approximation, we start with the consideration of the 86

percent figure derived from SOI. But, we recognize that there

are expenses contained in that figure (such as employee benefit

programs, commissions, profit-sharing plans, etc.) that

petitioner did not incur. Accordingly, we believe that

petitioner’s expenses would have been approximately 80 percent of

his revenues or $86,134.

With respect to the addition to tax under section

6651(a)(1), the parties have stipulated that the return was filed

March 7, 2000, almost 11 months after the return should have been

filed, and petitioner has offered no evidence that the late

filing was due to reasonable cause and not willful neglect. We

sustain respondent’s determination of the section 6651(a)(1)

addition to tax for 1998. See United States v. Boyle, 469 U.S.

241 (1985).

 Reviewed and adopted as the report of the Small Tax Case

Division.

An appropriate order will be

issued, and decision will be

entered under Rule 155.