                        T.C. Memo.  1997-509



                      UNITED STATES TAX COURT



                 EDWARD J. FRAMI, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No.  8333-96.                  Filed November 12, 1997. 



     Edward J. Frami, pro se. 

     James E. Schacht, for respondent. 



             MEMORANDUM FINDINGS OF FACT AND OPINION

     GERBER, Judge:   Respondent determined income tax

deficiencies in the amounts of $11,619 and $12,195 for

petitioner's 1993 and 1994 taxable years, respectively. 

Respondent also determined that petitioner's 1993 and 1994 income

tax returns were delinquent and that petitioner was liable for

additions to tax in the respective amounts of $3,391 and $3,676
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pursuant to section 6651(a)(1).1   The issues for our

consideration are:   (1) Whether petitioner is liable for any

portion of the 1993 or 1994 income tax deficiencies determined,

and (2) whether petitioner is liable for additions to tax for

failing to file a return. 

                         FINDINGS OF FACT

     Petitioner, who resided in Dousman, Wisconsin, at the time

his petition was filed, was a salaried employee prior to 1993 and

such employment ended prior to 1993.    Petitioner did not file a

Federal income tax return for 1993 or 1994.    Respondent's agent

contacted petitioner and requested that he file returns, and

during mid-December 1995 petitioner submitted "delinquent" 1993

and 1994 returns to respondent's agent reflecting approximately

$4,000 of income for each year and then reducing such amount to

zero by claiming that such income was "non-taxable compensation". 

Attached to the 1993 delinquent return was a three-page document

entitled "Affidavit and Statement", in which petitioner explained

the reasons why he believes he owes no tax and the conditions and

reasons for filing the "delinquent return". 

     In essence, petitioner's explanation is that no section of

the Internal Revenue Code requires him to pay income tax and the


     1
       All section references are to the Internal Revenue Code in
effect for the years under consideration, and all Rule references
are to this Court's Rules of Practice and Procedure, unless
otherwise indicated. 
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Federal income tax only applies to residents of Washington, D.C.

and U.S. territories.    Petitioner states that he is "a non-

resident alien (American)".    His explanation also contains

citations to a number of unrelated Internal Revenue Code sections

and cases that he concludes provide a basis for his not being

liable for Federal income tax. 

     For 1993 and 1994 petitioner was self-employed, and he

conducted some income-earning activity from his residence.      He

was also an employee and/or officer of the United States

Taxpayers Party of Wisconsin (Party).     For 1993, Party issued a

Form 1099-MISC, Miscellaneous Income, to petitioner in the amount

of $3,027, which represented Party's reimbursement of expenses to

petitioner of amounts over and above those incurred by petitioner

in the conduct of Party's activities during 1993.    For 1994,

Party changed its approach, and no Form 1099-MISC was issued to

petitioner.    Petitioner also received unemployment compensation

from the State of Wisconsin during 1993 in the amount of $2,173,

which was reported to petitioner and respondent by means of Form

1099-G, Certain Government Payments. 

       Due to the terse nature and format of petitioner's

delinquent returns and petitioner's refusal to provide

substantiation for the amounts reported in those returns,

respondent's agent used a method of reconstruction to determine

the amount of petitioner's 1993 and 1994 income.     The method used
                               - 4 -


was to estimate petitioner's income by starting with an adjusted

U.S. Department of Labor, Bureau of Labor Statistics (BLS) figure

and reducing that amount by the known sources of petitioner's

income, such as the Forms 1099 items. 

     Respondent's agent, at the time of the reconstruction had

only 1991 BLS information and used those amounts and adjusted

them by cost of living percentage increases applicable for the

years in question.    The agent used three sources of BLS income

statistics, including those germane to petitioner's age,

occupation, and geographical location.    The three sources were

then totaled and averaged for each year to arrive at the amounts

used--$40,984 for 1993 and $42,090 for 1994.    After reduction for

petitioner's Forms 1099 income, which was known to respondent and

the allowance of a personal exemption and standard deduction,

petitioner's taxable income was determined to be $32,192 for 1993

and $32,866 for 1994. 

     Petitioner received unemployment compensation for 1993 and

he lived without cost in his mother’s home during 1993 and 1994. 

Petitioner did not pay for meals taken at his mother's home. 

Petitioner owned and operated automobiles of nominal value during

1993 and 1994.    Petitioner's cost of living was below the average

due to his life style.    At the time of trial petitioner was not

under criminal investigation by the Internal Revenue Service

(IRS). 
                               - 5 -


                              OPINION

     Petitioner sought the jurisdiction of this Court by means of

a petition alleging that respondent had erred in determining

income tax deficiencies for petitioner's 1993 and 1994 taxable

years.    Petitioner refused to show his records to respondent's

agents, and he also refused respondent's offer to stipulate

facts.    Petitioner stated that he appeared at trial for the

purpose of expressing the view that the burden of proof should

not be on taxpayers, but instead should be on respondent.     The

Court explained to petitioner that the rules were well-

established that he had to bear the burden of showing that

respondent's determination was in error.     See Rule 142(a); Welch

v. Helvering, 290 U.S. 111 (1933).      It was also explained to

petitioner that if he did not come forward with any evidence, the

Court would have no choice other than to sustain respondent's

determination.    Petitioner stated that he was willing to bear a

tax burden for which he otherwise may not have been obligated in

order to make the point that the tax system, as statutorily

configured, is unfair. 

     Petitioner proceeded, under oath, to testify.     Petitioner's

relatively brief testimony mainly addressed his disagreement with

the current approach to Federal tax administration and the

resolution of Federal tax controversies.     Within those comments,

however, petitioner stated that he had some income, but that the
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amounts for 1993 and 1994 were insufficient to generate a Federal

income tax liability.    Petitioner also explained that he had

records that would substantiate that he would not be liable for

Federal income tax, but that he refused to show them to

respondent or the Court because of his disagreement with the

system and also because he invoked his privilege against self-

incrimination under the Fifth Amendment of the U.S. Constitution

either with respect to presenting records or filing a complete or

detailed return.    In that regard, petitioner indicated that he

did not knowingly commit any crime and that he did not believe

that his records would show that a crime had been committed. 

Petitioner's concern focused on the possibility that the

documents could be used as the basis for developing a criminal

case. 

     Petitioner's testimony also provided the basis for finding

that his actual cost of living for 1993 and 1994 was below

average and would not have been commensurate with BLS averages

that respondent utilized for the reconstruction of the 1993 and

1994 income.    At the conclusion of petitioner's brief statement

and testimony, respondent's counsel conducted a thorough cross-

examination of petitioner concerning the matters stated on

direct.    Petitioner was candid, and he was not evasive.    After

offering no documents at all and no testimony other than his own,

petitioner rested. 
                                - 7 -


     Respondent then called the examining agent as a witness to

introduce basic documents in the case, including a delinquent

1993 return, transcripts and computer records of petitioner's

1993 and 1994 tax years, and a copy of the deficiency notice. 

The agent also explained the reconstruction of petitioner's

income by means of BLS averages.    Petitioner, on cross-

examination, only asked respondent's agent why he used BLS

averages even though petitioner was drawing unemployment

compensation and had a standard of living far below the average

depicted by the statistics.    The agent responded that

petitioner's refusal to come forward with any information at the

time of the examination was the reason that any differences in

petitioner's cost of living and income from the statistical

averages were not taken into account in determining petitioner's

income for 1993 and 1994. 

     Petitioner admittedly and purposely failed to file returns

for the taxable years 1993 and 1994.     Petitioner asserted the

Fifth Amendment with respect to submitting documents or

information to respondent or the Court.     The filing of income tax

returns in accordance with statutory and regulatory provisions

does not, per se, violate a taxpayer's privilege against self-

incrimination under the Fifth Amendment.     White v. Commissioner,

72 T.C. 1126, 1130 (1979).     Petitioner in this case did not claim

to be under criminal investigation for the taxable years in
                                - 8 -


issue.     In addition, at trial, respondent's agent confirmed that

petitioner was not under criminal investigation by the IRS. 

     Likewise, we find petitioner's attempt to justify legally

his position that he is not subject to Federal income tax to be a

repeat of concepts which have been soundly rejected by the

Courts.    In a terse statement attached to his delinquent 1993

return, petitioner espoused several well-worn, protester-type

arguments why he should not be liable for Federal income tax.      He

attempted to support those arguments by reference to statutes,

regulations, and cases which are only related to each other

because they all involve issues of taxation.    Petitioner by

piecing together otherwise unconnected concepts into a patchwork

designed to suit his purpose of avoiding his tax obligations has

relied on material that is without direct relevance or substance. 

     Petitioner's legal arguments are without merit and lack

factual and legal foundation.    In that regard, we are not

obligated to exhaustively review and rebut petitioner's misguided

contentions.     Crain v. Commissioner, 737 F.2d 1417, 1417 (5th

Cir.  1984) ("We perceive no need to refute these arguments with

somber reasoning and copious citation of precedent; to do so

might suggest that these arguments have some colorable merit."); 

accord Casper v. Commissioner, 805 F.2d 902 (10th Cir.  1986),

affg.  T.C. Memo.  1985-154. 
                               - 9 -


     We turn now to respondent's reconstruction of petitioner's

income by use of BLS statistics.    Where a taxpayer has not filed

a tax return, respondent may reconstruct the taxpayer's

unreported income.    Holland v. United States, 348 U.S. 121

(1954).    The reconstruction of income need only be reasonable in

light of all surrounding facts and circumstances.     Giddio v.

Commissioner, 54 T.C. 1530, 1533 (1970). 

     Petitioner invoked the jurisdiction of this Court but at

trial did not produce evidence to rebut the fact that he had

sources of income during 1993 and 1994.     Petitioner possessed

records that he believed would show that he was not obligated for

tax, but he declined and refused to show those records.     A

blanket invocation of the Fifth Amendment privilege is simply not

a substitute for relevant evidence.     United States v. Rylander,

460 U.S. 752 (1983); Petzoldt v. Commissioner, 92 T.C. 661, 687-

688 (1989).    This Court has observed that

        A valid assertion of the privilege against self-
     incrimination, however, is not a "substitute for
     evidence that would assist in meeting a burden of
     production," for to adopt such a view "would convert
     the privilege from the shield against compulsory self-
     incrimination which it was intended to be into a sword
     whereby a claimant asserting the privilege would be
     freed from adducing proof in support of a burden which
     would otherwise have been his." * * * [ Petzoldt v.
     Commissioner, supra at 684-685 (quoting United States
     v. Rylander, supra at 758).] 

     The uncontroverted evidence produced by respondent and

petitioner's testimony shows that petitioner did earn income
                               - 10 -


during 1993 and 1994.     In that regard, it is clear that

petitioner worked for Party and was reimbursed for expenditures

he made.     Petitioner refused to show the amount of the

reimbursements and/or that the reimbursements were not income to

him and/or that any reimbursed expenditures would have been

deductible.     These circumstances permit respondent to reconstruct

petitioner's income.     At trial, however, petitioner did present

credible testimony showing that his costs of living were quite

modest.     In particular, petitioner lived with his mother and had

no cost for shelter and reduced costs for his food.     In addition,

petitioner's automobiles were nominal in value (several hundred

dollars).     Finally, petitioner had lost his regular job in 1992

and received unemployment compensation for some portion of the 2-

year period under consideration. 

     Petitioner's factual testimony was relatively abbreviated

because of his intention to criticize the tax system procedure

rather than to show that respondent's determination was in error. 

Within petitioner's abbreviated presentation, however, were

sufficient facts to demonstrate some flaws in respondent's

reconstruction.     In particular, petitioner's costs of living for

his age and locality were less than the average used by

respondent.     Accordingly, we hold that petitioner's taxable

income, as redetermined, should be reduced from $32,192 for 1993
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and $32,866 for 1994 to $20,000 for each of the taxable years in

issue. 

     Finally, respondent determined that petitioner’s 1993 and

1994 returns were each delinquent by more than 5 months.     Section

6651(a)(1) imposes an addition to tax for failure to file a

timely return of 5 percent of the tax due for each month a return

is delinquent, not to exceed 25 percent.     The addition does not

apply if the failure to timely file is due to reasonable cause

and not due to willful neglect.     Sec.  6651(a)(1).    Petitioner has

the burden of proving reasonable cause and the lack of willful

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

Baldwin v. Commissioner, 84 T.C. 859, 870 (1985).      To prove

"reasonable cause", taxpayers must show they exercised ordinary

business care and prudence and were nevertheless unable to file

the return within the statutorily prescribed time.      Crocker v.

Commissioner, 92 T.C. 899, 913 (1989); sec.  301.6651-1(c)(1),

Proced. &  Admin.  Regs. 

     Petitioner did not file timely 1993 and 1994 income tax

returns, and the delinquent return(s) filed by petitioner were

each more than 5 months after the due date.     Having considered

petitioner's reasons for not filing, we also find that petitioner

did not have reasonable cause for failing to file timely 1993 and

1994 Federal income tax returns. 
                              - 12 -


     Respondent, for 1993 and 1994, also determined that

petitioner was liable for self-employment tax and additions to

tax for failure to make estimated payments under section 6654. 

Petitioner bears the burden of showing that part of respondent's

determination is in error.     Petitioner chose not to carry that

burden.    Accordingly, petitioner is liable for self-employement

tax and additions to tax for failure to make estimated payments

under section 6654 for his 1993 and 1994 taxable years. 

     To reflect the foregoing,

                                         Decision will be entered

                                    under Rule 155.