internal_revenue_service number release date index number ------------------ --------------------------- ------------------------------ -------------------------------------- ------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ------------- telephone number --------------------- refer reply to cc tege eoeg et2 plr-122803-09 date date legend taxpayer ---------------------------- state a ------ department a ------------------------------- x ------- dear ----------- this is in response to a letter dated date and supplemented by letters dated june august and date submitted on behalf of taxpayer by its authorized representative requesting a ruling that the value of certain articles of clothing and accessories provided by taxpayer to employees are excluded from gross_income as de_minimis_fringe_benefits under internal_revenue_code code sec_132 the ruling contained in this letter is based upon information and representations submitted by taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of this request_for_ruling such material is subject_to verification upon examination the information submitted in the request is substantially as set forth below facts taxpayer is a political_subdivision in state a it is divided into departments several of which are further divided into divisions and sections collectively departments taxpayer has over x employees many of whom are eligible to receive work-related articles of clothing and accessories including tee shirts polo shirts sweaters jackets plr-122803-09 swimsuits socks sweatshirts coats pants jeans shorts gloves hats fanny packs belts clip-on ties and equipment bags most of the items bear taxpayer’s logo or other information identifying the individual as an employee of taxpayer employees are required to wear the clothing items while performing services for taxpayer taxpayer’s departments may secure items annually under a contract system that begins when the city council-which is taxpayer’s legislative branch that is responsible in part for adopting annual operating and capital budgets-appropriates an amount for taxpayer to spend on clothing vendors then submit bids to provide particular items such as tee shirts that if accepted comprise contracts under which any department may order the item these contracts rarely enumerate either the precise number of items that taxpayer will collectively order or the precise cost of each item but do usually specify a maximum number of items that taxpayer may order escalation clauses and variations in the material and size of an item can cause the cost of an item to vary for example by allowing a vendor to charge one amount for a tee shirt in year one but to charge a different amount for the same tee shirt in year two even within the same year it is possible for a vendor to charge different amounts for a medium tee shirt as compared to an otherwise-identical large tee shirt or for a medium tee shirt of one material grade and a medium tee shirt of a higher grade once a vendor contract has been authorized departments may secure items by ordering them directly from the vendors the vendors submit invoices to the departments’ fiscal officers who forward them to the city auditor after confirming that the goods were received the city auditor pays the invoice storeroom supervisors issue items to employees in accordance with department policies department policies typically entitle employees to items both when they commence their employment and when they need replacements the exact frequencies with which the policies entitle new employees to receive items vary some for example limit new employees to a single provision of a particular item taxpayer provided the text of one collective bargaining agreement which requires the department to provide an initial issue of rain jacket and rain pants to all of its refuse collectors other departments’ policies however allow new employees to receive multiple provisions of particular items upon hiring replacement items are typically distributed on an as or if needed basis additionally different categories of employees may be entitled to different quantities of an item variables affecting the number of items any individual employee receives can include employment status eg full-time part-time seasonal volunteer etc job function and department for example department a’s garment distribution and replacement policy bases the number of tee shirts that it distributes to instructors on the number of hours that those instructors work-instructors who work twelve hours per week or more receive three tee shirts those who work six to eleven hours receive two plr-122803-09 tee shirts and those working one to five hours per week receive one tee shirt as another example section a’s policy categorically allows full-time part-time and seasonal employees to receive certain items but allows other employees to receive them only as established by the director or designee finally some departmental policies allow employees to wear appropriate personal clothing in lieu of the taxpayer- provided clothing items to which they are entitled because departments do not typically distribute every item ordered in a year many store items for future use taxpayer cannot enumerate the particular number of items that each employee receives each year however it has represented that the items generally are provided to employees no more frequently than annually and as part of its submission has also provided copies of department polices and a table that are consistent with this representation the table summarizes the number of items each department ordered the number of items each department issued and the number of employees entitled to receive the items the table indicates that in most instances individual employees receive less than one item per year that is the number of employees eligible to receive a given item typically exceeded the number of items distributed by the department ruling requested the values of articles of clothing and accessories provided by taxpayer to employees as specified in the table included as part of taxpayer’s submission are excluded from gross_income as de_minimis_fringe_benefits under code sec_132 law code sec_61 provides that gross_income means any income from whatever source derived including but not limited to compensation_for services including fringe_benefits code sec_132 states that gross_income does not include the value of a de_minimis_fringe benefit provided to an employee code sec_132 states the term de_minimis_fringe means any property or service the value of which is after taking into account the frequency with which similar fringes are provided by the employer to the employer's employees so small as to make accounting for it unreasonable or administratively impracticable sec_1_132-6 of the treasury regulations states generally the frequency with which similar fringes are provided by the employer to the employer's employees is determined by reference to the frequency with which the employer provides the fringes to each individual plr-122803-09 employee for example if an employer provides a free meal in_kind to one employee on a daily basis but not to any other employee the value of the meals is not de_minimis with respect to that one employee even though with respect to the employer's entire workforce the meals are provided infrequently sec_1_132-6 of the treasury regulations states notwithstanding the rule_of paragraph b of this section where it would be administratively difficult to determine frequency with respect to individual employees the frequency with which similar fringes are provided by the employer to the employer's employees is determined by reference to the frequency with which the employer provides the fringes to the workforce as a whole therefore under this rule the frequency with which any individual employee receives such a fringe benefit is not relevant and in some circumstances the de_minimis_fringe exclusion may apply with respect to a benefit even though a particular employee receives the benefit frequently for example if an employer exercises sufficient control and imposes significant restrictions on the personal_use of a company copying machine so that at least percent of the use of the machine is for business purposes any personal_use of the copying machine by particular employees is considered to be a de_minimis_fringe sec_1_132-6 of the treasury regulations states unless excluded by a provision of chapter of the internal_revenue_code_of_1986 other than sec_132 the value of any fringe benefit that would not be unreasonable or administratively impracticable to account for is includible in the employee's gross_income thus the provision of any cash fringe benefit is never excludable under sec_132 as a de_minimis_fringe benefit similarly a cash_equivalent fringe benefit such as a fringe benefit provided to an employee through the use of a gift certificate or charge or credit card is generally not excludable under sec_132 even if the same property or service acquired if provided in_kind would be excludable as a de_minimis_fringe benefit for example the provision of cash to an employee for a theatre ticket that would itself be excludable as a de_minimis_fringe is not excludable as a de_minimis_fringe analysis the code and regulations require taxpayer to establish that the value of the items it seeks to exclude as de_minimis fringes is so low as to make accounting for them plr-122803-09 administratively impracticable neither the code nor the regulations specify a particular value above which an item can no longer be considered a de_minimis_fringe even an item with a low value may not be a de_minimis_fringe if an individual receives it too frequently code sec_132 therefore requires taxpayer to establish that it does not provide items so frequently that the aggregate value is not de_minimis sec_1_132-6 of the treasury regulations generally requires taxpayers to establish this frequency by referencing the frequency with which the employer provides the fringes to each individual employee the employee-measured frequency standard if the taxpayer can establish that it would be administratively difficult to determine such employee-measured frequency it may instead reference the frequency with which the employer provides the fringes to the workforce as a whole under sec_1_132-6 of the treasury regulations the employer-measured frequency standard finally taxpayer must establish that it would be unreasonable or administratively impracticable to account for the value of the items it is for this reason that sec_1_132-6 of the treasury regulations specifies that employer provisions of cash or equivalents are generally not excludable under code sec_132 even if the same property or service acquired if provided in_kind would be excludable as a de_minimis fringe-there are little-to-no administrative costs associated with accounting for the fair_market_value of a cash-denominated item applying the facts to these standards the items that taxpayer has provided to its employees qualify as de_minimis_fringe_benefits under code sec_132 taxpayer has provided evidence objectively demonstrating that the items are of low value were not distributed too frequently and it would be administratively impracticable to account for the value of the items value of benefits the items identified by taxpayer are of low value using the cost of the items as an approximation of their values it is reasonable to conclude that the items listed in taxpayer’s ruling_request are de_minimis fringes if taxpayer can also establish both that the frequency with which the items were distributed does not preclude such a finding and that it would be administratively impracticable to account for each item’s value frequency with which taxpayer distributed benefits it is appropriate for taxpayer to use the employer-measured frequency standard as discussed earlier sec_1_132-6 of the treasury regulations states that the employer-measured frequency standard is available to taxpayer if it can establish that it would be administratively difficult for it to use the employee-measured frequency standard whether the frequency determination is administratively difficult is based on an objective demonstration of difficulty not an unsupported assertion further an plr-122803-09 employer cannot tailor its procedures to make accounting for fringe_benefits administratively difficult for the purpose of achieving de_minimis_fringe benefit treatment 40_fedclaims_712 ct_cl aff’d 204_f3d_1103 fed cir stating that difficulty caused by the employer’s chosen accounting system does not constitute administrative impracticability in this case taxpayer has established administrative difficulty by providing objective evidence that the costs associated with determining employee-measured frequency would exceed the nominal tax revenue generated by including the value of the benefits in income in particular taxpayer’s submission indicates that the administrative costs it would have to incur to establish employee-measured frequency include requiring department storerooms to track the number of items that each employee received maintaining records for each employee and routinely transmiting the records to fiscal officers these records would also have to be provided for payroll departments and the city’s auditor adding additional difficulty are the facts that many departments- particularly those that provide the items on an as-needed basis-do not distribute items at regular intervals taxpayer provides many items to volunteers a population whose receipt of employer-provided items is inherently difficult to track and not all employees opt to receive all items which they are entitled to receive under departmental policies the relevant inquiry for purposes of determining employer-measured frequency is not the frequency with which each individual employee actually received the benefits but the frequency with which all employees collectively received the benefits sec_1_132-6 of the treasury regulations generally this analysis requires determining the number of times particular or similar benefits were provided to the work force as a whole taxpayer’s submission summarizes departmental policies that enumerate the maximum number of items that employees may receive in a given year these policies typically entitle employees to items when hired and replacements on an as needed basis we do not consider the provision of the items once or perhaps twice annually as so frequent that given the low value of each item the provision could not properly be characterized as de_minimis administratively impracticable to require taxpayer to account although the determination of administrative impracticability is inherently a function of facts and circumstances one objective guidepost exists where the administrative costs associated with determining the value of the benefit and accounting for it may be more expensive than providing the benefit as shown above neither the values of the items nor the frequencies with which taxpayer provides these items to employees independently prevent these items from plr-122803-09 qualifying as de_minimis fringes these items will therefore fail to qualify as de_minimis_fringe_benefits only if the administrative costs of accounting for their fair market values is so low that requiring taxpayer to make such an accounting is not unreasonable or administratively impracticable taxpayer’s submission however demonstrates based on objective data that taxpayer would have to incur substantial administrative costs to account for the fair_market_value of each item establishing a system to track each individual item’s cost would be expensive such accounting would be impossible unless vendors provided invoices detailing the particular types and amounts of clothing that each department purchased taxpayer has indicated that vendors do not presently provide such detailed invoices and do not possess the resources to provide such invoices vendors would undoubtedly pass at least some portion of the recordkeeping costs associated with establishing such a system to taxpayer and it would be even more burdensome to require taxpayer to account for each item’s fair_market_value as the code and regulations require simply requiring taxpayer to pinpoint each item’s fair_market_value would be difficult as the variables discussed above-such as escalation clauses and variations in clothing sizes and materials- which cause items’ costs to vary would also cause items’ fair market values to vary because most of the items bear taxpayer’s insignia or other writing there may not be a readily_ascertainable_fair_market_value for the items making it even more difficult for taxpayer to determine fair_market_value complicating matters even further is the fact that taxpayer cannot measure administrative impracticability-and thus each item’s fair market value-until it actually provides the benefits thus although it would likely be most efficient for taxpayer to determine these items’ values when it received large quantities of them taxpayer would have to forgo making this determination until the time at which it actually distributed the items this would be the only way for taxpayer to ensure that employees’ forms w-2 wage and tax statements accurately reflected the items’ values taxpayer would also have to incur costs to maintain records of the fair_market_value of each item that each employee received its necessarily large and bureaucratic structure would however make this process costly taxpayer has determined that this tracking process would require a storeroom worker to complete a form every time an employee received an item this form would have to identify the employee the item received the date received and the item’s fair_market_value storerooms would have to maintain these records and routinely which taxpayer defines as most likely weekly prepare reports and transmit copies of the records to their department’s fiscal officer the fiscal officer would have to transfer the forms to the payroll department for a preliminary calculation of the taxable_amount to be added to each employee’s wages taxpayer would ultimately have to transfer all information-including copies of each paper form- to its auditor’s office for a final review the auditor’s office would have to add the plr-122803-09 appropriate amount to each employee’s wages each department would have to maintain copies of associated forms and records for many years although many of the administrative costs discussed above are a result of taxpayer’s large and decentralized structure it is notable for the purposes of a de_minimis_fringe analysis that there is no indication that taxpayer designed this system with an intent to make it administratively impracticable to track the items’ values rather the size and nature of taxpayer’s operations necessitates such an administrative structure this objectively supports taxpayer affirmative representation that the difficulty in accounting for the provision of the items at issue herein is not of taxpayer’s own making to summarize taxpayer has demonstrated that it is unreasonable to account for the value of the items because it would have to incur substantial administrative costs to track the fair_market_value of each item it provides to its employees the information it has provided objectively supports the notion that these items’ values-while taking into consideration the frequency with which employees receive them-are so small that the administrative costs that would be associated with accounting for them would make such an accounting administratively impracticable ruling based on the information submitted and the representations made we rule that the values of articles of clothing and accessories provided by taxpayer to employees as specified in the table included as part of taxpayer’s submission are excluded from gross_income as de_minimis_fringe_benefits under code sec_132 this private_letter_ruling is directed only to taxpayer who requested it code sec_6110 provides that it may not be used or cited as precedent a copy of this letter_ruling must be attached to any federal_income_tax return to which it is relevant sincerely paul carlino senior technician reviewer employment_tax branch tax exempt and government entities


t c memo united_states tax_court howard h thompson jr petitioner v commissioner of internal revenue respondent docket no filed date howard h thompson jr pro_se robert m fowler for respondent memorandum findings_of_fact and opinion chiechi judge respondent determined the following defi- ciencies in additions under sec_6651 to and accuracy-related_penalty under sec_6662 on petitioner’ sec_1all 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 federal_income_tax tax_year deficiency additions to tax dollar_figure big_number big_number dollar_figure -- dollar_figure the issues remaining for decision are accuracy-related_penalty -- dollar_figure -- does petitioner have certain unreported income for each of the years and we hold that he does is petitioner liable for for an addition_to_tax under sec_6651 we hold that he is findings_of_fact most of the facts have been deemed established pursuant to rule c and pursuant to the court’s order under rule f dated date at the time he filed the petition in this case petitioner resided in minnetonka minnesota during each of the years at issue uptime nutrition inc uptime nutrition employed petitioner on date petitioner opened a checking account petitioner’s checking account in the name of norwest realty inc of minnetonka norwest realty at first bank in edina 2in addition to the issues remaining for decision listed below there are other questions relating to certain determina- tions in the notice_of_deficiency notice that are computational in that their resolution flows automatically from our resolution of the remaining issues that we address herein and from the concessions of the parties minnesota first bank during each of the years at issue petitioner used petitioner’s checking account as his personal account making personal deposits into and writing personal checks on that account norwest realty has never filed a tax_return weavewood inc in petitioner’s father howard thompson sr mr thompson who died in founded weavewood inc weavewood a closely_held_corporation located in minneapolis minnesota minneapolis at all relevant times weavewood engaged in the business of manufacturing wood products such as bowls and trays at such times weavewood maintained a checking account weavewood’s checking account at norwest bank in minneapolis norwest bank-minneapolis beginning in and continuing throughout each of the years at issue various members of petitioner’s family managed weavewood from date until date petitioner served as president secretary treasurer and chairman of the board_of directors board_of weavewood weavewood did not compensate petitioner for serving in those positions weavewood’s company vehicle on date petitioner signed a dollar_figure check weavewood’s date check payable to an individual named paul robinson mr robinson and drawn on weavewood’s checking account weavewood’s date check repre- sented a partial payment for a cadillac that weavewood purchased to use as its company vehicle petitioner’s mother virgene thompson ms thompson among others drove that cadillac in connection with weavewood business weavewood’s termination of petitioner a letter dated date from ms thompson to peti- tioner stated in part as follows pursuant to the authority vested to me as personal administrator of the estate of howard h thompson please be advised that in the best interests of weavewood inc you are being removed effective imme- diately from any and all positions that you now may have at weavewood inc effective immediately you will no longer have any physical access to the offices of weavewood inc or access to the financial accounts of weavewood inc if you attempt physical access to weavewood inc or its financial accounts the proper authorities will be contacted and you will be removed immediately and procedures for a restraining order will be commenced minutes of a weavewood board meeting held on date stated in part as follows present at the meeting were virgene thompson vice president gail thompson mosley barbara thompson meyer and peter meyer it was discussed that a decision had been reached by virgene thompson to formally remove howard thompson jr from all corporate matters of weavewood inc including but not limited to the offices held as chariman sic of the board president secretary and treasurer howard thompson jr was also removed as the signer for the corporate bank account at the norwest bank and any other financial decision making in regards to weavewood inc a new corporate bank ac- count was established by virgene thompson naming gail thompson mosley and barbara thompson meyer as the only signers new officers were appointed as follows chairman of the board - virgene thompson president - gail thompson mosley vice president - virgene thompson secretary - barbara thompson meyer treasurer - barbara thompson meyer appointments were duly voted upon and passed unani- mously howard thompson jr left the weavewood premises in the corporate car a cadillac allante convertible taking with him the contents of the corporate safe neither of which he is entitled to john caylor remains as the weavewood corporate accoun- tant on date ms thompson acting as vice president of weavewood removed petitioner from holding any positions at weavewood and from having any authority with respect to weavewood including any signing authority that petitioner had had over weavewood’s checking account weavewood’s litigation against petitioner on a date not disclosed by the record on or before date weavewood ms thompson and petitioner’s sister gail thompson mosley ms mosley collectively the plaintiffs in weavewood’s litigation against petitioner filed a motion for a temporary restraining order against petitioner on date the district_court fourth judicial district county of hennepin county district_court issued an order that stated in part as follows the above entitled matter came on for hearing pursuant to plaintiffs’ motion for a temporary restraining order against defendant petitioner plaintiffs gail mosley thompson and virgene thompson appeared by and through their attorney michael l puklich plaintiff weavewood inc by and through samuel dalluge and defendant through his attorney william skolnick based upon the argument of counsel the affidavits and complaint filed herein and being duly advised in the premises it is hereby ordered that defendants sic shall be and hereby are a b c temporarily restrained and enjoined from moving removing any property off the premises of weavewood from entering the premises of weavewood and from writing checks out of the corporation’s corporate checking account further defendant is ordered and directed to provide to the court under seal all books_and_records of weavewood inc which defendant has in his possession during the court’s regular hours further defendant is ordered and directed to immediately return all property owned by weavewood inc which defendant has in his possession to the office of the attorney for plaintiffs to be held until further order of this court not to be returned to or reviewed by plaintiffs personally until further order of the court the next hearing on this matter is scheduled to be held on monday date pincite noon this order shall be in effect until further order of this court on date weavewood one of the plaintiffs in weavewood’s litigation against petitioner filed in the county district_court what was identified as a notice of motion and motion motion that motion stated in part as follows please take notice that on the 22nd day of july pincite p m of said day the undersigned will move the court for an order as follows temporarily restraining and enjoining howard thompson from the following a from moving removing any property off the premises of weavewood inc b from entering the premises of weavewood inc and c from writing checks out of the corpora- tion’s corporate checking account further defendant is ordered and directed to provide to the court under seal all books_and_records of weavewood inc which defendant has in his posses- sion during the court’s regular hours further defendant is ordered and directed to immediately return all property owned by weavewood inc which defendant has in his possession to the office of the attorney for plaintiff’s to be held until further order of this court not to be returned to or reviewed by plaintiff’s personally until further order of this court this motion is based upon the order from this court dated date and upon all of the files records and proceedings herein on date in preparation for a hearing that the county district_court scheduled on that day with respect to the temporary injunction that weavewood sought against petitioner weavewood one of the plaintiffs in weavewood’s litigation against petitioner filed a memorandum of law weavewood’s memorandum of law weavewood’s memorandum of law stated in part as follows this memorandum of law is submitted in support of plaintiff’s motion for a temporary injunction prevent- ing plaintiff’s former president board_of director and secretary treasurer defendant from continuing to use certain equipment financial documents and corporate funds that he has misappropriated from plaintiff weavewood and requiring defendant to return the equip- ment corporate funds and financial documents and preventing defendant access to the premises of weavewood inc facts plaintiff weavewood inc is a family run busi- ness and has been in the business of making wood prod- ucts since the 1940's in the sole shareholder of the company howard thompson sr past sic away and his estate is currently in probate pursuant to his last will and testament he appointed his wife virgene thompson as personal administrator and also gave her the authority to make all of the decisions regarding the business approximately one year ago she appointed howard thompson jr her son to the positions of president chairman of the board and secretary treasurer he was also the only signor on the corporate checking account thereafter the business suffered financially bills were not being paid taxes were not being paid stocks which the company had owned for decades were being sold and corporate funds were being used by howard thompson jr for non-business purposes based on these findings virgene thompson removed howard thompson jr from his corporate officer positions on date a board meeting followed appointing new officers the company has since learned from norwest bank that at approximately p m on date after howard thompson had been removed from his officer positions he wrote a check to himself from the weavewood account in the amount of dollar_figure since this court’s order of date defen- dant has written at least two checks on the weavewood checking account for non-business purposes defendant was taken off as signor on the account on monday july and on tuesday the account was closed on tuesday defendant attempted to cash another check made payable to himself from the corporate account in the amount of dollar_figure dollar_figure in a cashiers check and dollar_figure in cash norwest was able to stop payment on the cashiers check but because of a mistake made by the bank defendant did receive dollar_figure in cash regarding the computer equipment defendant has acknowledged to virgene thompson in a conversation that he would return the computer equipment however this has not happened ironically the computer which is currently missing was taken while we were at the hearing on monday date regarding past misappropriation of corporate funds weavewood has retained the services of john d caylor c p a to review certain financial documents it still had in its possession it is the opinion of mr caylor that corporate funds have been misappropriated by defendant reproduced literally attached to weavewood’s memorandum of law were two affida- vits by ms thompson ms thompson’s affidavit and ms thompson’s supplemental affidavit respectively an affidavit by ms mosley ms mosley’s affidavit and an affidavit by weavewood’s accoun- tant john caylor mr caylor’s affidavit ms thompson’s affidavit dated date stated in part as follows i virgene thompson being first duly sworn do hereby state and depose as follows that your affiant was the wife of howard thompson sr and the personal administrator of howard thompson’s estate and has been involved in the opera- tion of weavewood inc for approximately years and accordingly is familiar with the facts and circumstance sic surrounding this motion for a temporary restrain- ing order that on friday date a board_of directors meeting was held at the corporate offices of weavewood inc during the board_of directors meeting it was resolved that howard thompson jr was to be removed as the chairman of the board president secretary and treasurer of weavewood inc and that said removal was effective date that on date howard thompson was personally served with a letter of termi- nation removal the termination removal letter was written by your affiant that on date after receiving the letter of termination removal howard thompson made the following threats a to take corporate funds by writing a corporate check to himself b to take corporate equipment c to take remove corporate documents from the corporation d ferent site to move corporate operations to a dif- e to sell the corporate automobile and f threatened that the corporate building would not be standing inferring that he was going to burn it that on friday date after howard thompson had been removed he howard thompson changed the door locks at weavewood inc that on friday date your affiant witnessed howard thompson remove corporate documents from the corporation ms thompson’s supplemental affidavit which was undated stated in part as follows i virgene thompson being first duly sworn do hereby state and depose as follows that this is a supplemental affidavit to ms thompson’s affidavit that approximately year age sic your affiant appointed the defendant howard thompson to the positions of president chairman of the board secre- tary treasurer and he was also the only signor on the weavewood bank account with norwest that the cadillac owned by weavewood inc has been returned to anderson cadillac that howard thompson has acknowledged to your affiant that he would return the computer equipment that was taken however to the best of your affiant’s knowledge this equipment has not been returned that during the same meeting your affiant served the tempo- rary restraining order on defendant petitioner and advised defendant that he had to appear at the hearing scheduled for monday date defendant told your affiant that he did not have to be at any hearing that your affiant has not received any corpo- rate monies in the form of a corporate distribution or otherwise since approximately august of that your affiant has never received the proceeds indicated by the attached checks particularly the check for dollar_figure your affiant also does not remember en- dorsing any checks for deposit into your affiant’ sec_3the checks attached to ms thompson’s supplemental affida- vit included the following three checks discussed below that were payable to her drawn on weavewood’s checking account and signed by petitioner a dollar_figure check dated date a dollar_figure check dated date and a dollar_figure check the date of which is not shown in the court’s copy of the attachments to ms thompson’s supplemental affidavit personal checking account ms mosley’s affidavit dated date stated in part as follows i gail thompson mosley being first duly sworn do hereby state and depose as follows that your affiant is the daughter of howard thompson sr and virgene thompson and is the newly appointed president of weavewood inc and accordingly is familiar with the facts and circumstances surround- ing this motion for a temporary restraining order that your affiant was an employee of weavewood inc for approximately years that on friday date a board_of directors meeting was held at the corporate offices of weavewood inc during the board_of directors meeting it was resolved that howard thompson jr was to be removed as the chairman of the board president secretary and treasurer of weavewood inc and that said removal was effective date that on date howard thompson was personally served with a letter of termi- nation removal that prior to date howard thompson threatened to take corporate funds by writing a corpo- rate check to himself that on date after receiving the letter of termination removal howard thompson made the following threats a to take corporate equipment b to take remove corporate documents from the corporation c to move corporate operations to a different site d to sell the corporate automobile e threatened that the corporate building would not be standing inferring that he was going to burn it that on friday date howard thomp- son changed the door locks at weavewood inc that on friday date your affiant called the golden valley police department to have mr thompson removed and that the golden valley police ordered the parties to leave and took the keys to the building pending an order from the court releasing the keys that pincite p m today date an employee of weavewood called your affiant and reported that howard thompson had some how sic gained access to the building and was at the corporate offices mr caylor’s affidavit dated date stated in part as follows i john d caylor being first duly sworn do hereby state and depose as follows that your affiant is a certified public ac- countant licensed to practice in the state of minne- sota that your affiant has been the accountant for weavewood inc since date and is accord- ingly familiar with the tax and financial affairs of weavewood inc for purposes of this hearing your affiant has been retained to review certain financial documents of weavewood inc including but not limited to a canceled checks b bank statements c computerized check ledger d investment broker statement sec_4 that your affiant has also reviewed certain american express credit card statements of an individ- ual named paul robinson that it is the professional opinion of your affiant that corporate funds belonging to weavewood have been misappropriated by the defendant howard thompson your affiants sic opinion is based on the following findings a that to the best of your affiant’s knowl- edge since august of howard thompson was never an employee of weavewood or in a compensated officer position of the company however after reviewing certain canceled checks and bank statements your affiant has discovered that howard thompson had been writing checks from the weavewood account to himself the most recent of these incidents occurred on friday date and tuesday date your affiant has also discovered that on prior occasions howard thompson has written other checks to himself from the weavewood account and after your affiant has had an opportunity to review all of the canceled checks an opinion as to the exact amount can be given to this court if requested b that virgene thompson does have a compen- sated position at weavewood your affiant has discov- ered that a number of checks from weavewood have been written to virgene thompson and after consulting with ms thompson she has advised your affiant that she has not received any monies from the company since august of attached hereto are three checks written to virgene thompson c that after reviewing certain canceled checks bank statements and credit card statements 4three of the checks attached to mr caylor’s affidavit were the same three checks discussed supra note that were attached to ms thompson’s supplemental affidavit we note that the dollar_figure check the date of which is not shown in the court’s copy of the attachments to ms thompson’s supplemental affidavit is shown in mr caylor’s affidavit as having a date of date your affiant has discovered that corporate funds from weavewood have been used to pay howard thompson’s personal debt and other financial obligations of howard thompson attached hereto are canceled checks to paul robinson for payment of charges on mr robinson’s credit card check to philip villaume for personal legal services check to james caveness sic who is a personal friend of howard thompson’s and not an em- ployee of weavewood see also attached paul robinson credit card statement of account for howard thompson the weavewood check ledger also indicates that howard thompson’s personal auto lease was paid with weavewood funds as recent as friday date howard thompson attempted to use weavewood proceeds to pay for past due legal services d that it is your affiant’s opinion that howard thompson has also violated his fiduciary duty to weavewood inc by investing corporate funds and sell- ing stocks that had been with the company for decades and using the corporate proceeds to purchase volatile stocks when funds were needed to pay past due bills and operate the day to day operations of the company that your affiant has also discovered that howard thompson acting on behalf of the company borrowed dollar_figure from norwest bank and after reviewing numerous corpo- rate records your affiant has found no evidence that these borrowed funds were used for the benefit of the company or for any business_purpose that your affiant is familiar with the office equipment and corporate automobile owned by or leased by weavewood that attached hereto is a copy of the title card for a cadillac allante which is owned by weavewood inc also please find attached a lease agreement for certain pieces of computer equipment currently leased to weavewood inc transactions involving petitioner and checks that were drawn on weavewood’s checking account weavewood’s checks that were payable to ms thompson during date petitioner signed the following checks collectively weavewood’s date checks that were payable to ms thompson and drawn on weavewood’s checking ac- count date of check date date date amount dollar_figure big_number big_number total dollar_figure ms thompson did not become aware of weavewood’s date checks until some time after petitioner signed them as dis- cussed above in ms thompson’s supplemental affidavit which she wrote in date in connection with weavewood’s memorandum of law filed on date ms thompson denied having received any moneys from weavewood since date it was petitioner who received the proceeds from weavewood’s date checks weavewood’s checks that were payable to james cavness or phil villaume during february and date petitioner signed the following checks collectively weavewood’s february and date checks that were payable to james cavness mr cavness or phil villaume mr villaume and drawn on weavewood’s checking account 5petitioner deposited into petitioner’s checking account the dollar_figure check dated date discussed above and the dollar_figure check dated date discussed above it is not clear from the record whether petitioner deposited the dollar_figure check dated date discussed above into petitioner’s checking account or cashed that check date of check date date date date payee james cavness phil villaume james cavness james cavness total amount dollar_figure big_number big_number dollar_figure petitioner used weavewood’s february and date checks either to make payments for petitioner’s personal expenses or to make payments to a nominee of petitioner in this connection at the time petitioner signed weavewood’s february and date checks mr cavness was a personal friend of petitioner more- over at the time petitioner signed weavewood’s february and date checks mr villaume was an attorney practicing in the minneapolis-st paul area of minnesota who during the years at issue had performed personal legal services on behalf of peti- tioner and whom weavewood had not employed during any of those years weavewood’s checks that were payable to petitioner on date the day on which weavewood terminated petitioner petitioner signed without weavewood’s authorization and later negotiated the following checks collectively weavewood’s date checks that were payable to petitioner and drawn on weavewood’s checking account date of check date date total amount dollar_figure big_number dollar_figure on date when petitioner negotiated weavewood’s dollar_figure check dated date weavewood’s date check for dollar_figure at norwest bank in ridgedale norwest bank- ridgedale he received dollar_figure in cash and a dollar_figure cashier’s check dollar_figure cashier’s check on date weavewood placed a stop payment on weavewood’s date check for dollar_figure consequently norwest bank-ridgedale voided the dollar_figure cashier’s check weavewood’s checks that were payable to mr robinson during march and date petitioner signed or caused to be issued to mr robinson the following checks collectively weavewood’s march and date checks that were payable to mr robinson and drawn on weavewood’s checking account date of check date date amount dollar_figure dollar_figure dollar_figure total petitioner used weavewood’s march and date checks to make payments petitioner’s american express card payments to mr robinson for personal expenses that petitioner incurred under the following arrangement petitioner’s arrangement with mr robinson that he had with mr robinson regarding mr robinson’s american express card at a time around the end of when petitioner was unable to obtain any credit in his own name petitioner approached mr robinson to request access to mr robinson’s american express account mr robinson’s american express account by having mr robinson authorize american express to issue a credit card in petitioner’s name with respect to mr robinson’s american express account in return for mr robinson’s authorizing petitioner to have a credit card issued with respect to mr robinson’s american express account peti- tioner agreed that mr robinson was to receive and retain all the points from american express that accrued for each dollar of charges that petitioner incurred using that card in date mr robinson agreed to petitioner’s arrangement with mr robinson and american express issued a credit card to petitioner with respect to mr robinson’s american express account peti- tioner’s american express card issued on mr robinson’s american express account as part of petitioner’s arrangement with mr robinson petitioner submitted to mr robinson payments for charges that petitioner incurred on petitioner’s american express card issued on mr robinson’s american express account during the time petitioner’s arrangement with mr robinson was in effect american express issued bills to mr robinson for all charges made on mr robinson’s american express account including the charges that petitioner made on petitioner’s american express card issued on mr robinson’s american express account american express held mr robinson accountable for any charges that petitioner made on petitioner’s american express card issued on mr robinson’s american express account in date mr robinson terminated petitioner’s arrange- ment with mr robinson after a dispute arose between mr robinson and petitioner in date mr robinson resumed peti- tioner’s arrangement with mr robinson that arrangement contin- ued until date when mr robinson canceled petitioner’s american express card issued on mr robinson’s american express account because petitioner failed to pay the charges that he had incurred on that account weavewood’s checks that were payable to gold key lease during may and date petitioner signed the following checks collectively weavewood’s may and date checks and individually weavewood’s date check and weavewood’s date check that were payable to gold key lease gold key and drawn on weavewood’s checking account date date date amount dollar_figure dollar_figure petitioner used weavewood’s may and date checks to make payments to gold key for the lease discussed below of a jeep grand cherokee jeep grand cherokee during january february march and date petitioner had paid for the 6petitioner’s use of weavewood’s date check to make the date lease payment for the jeep grand cherokee was the payment of a personal_expense of petitioner lease of that vehicle by giving gold key in each of those months a dollar_figure check that he signed which was payable to gold key and drawn on petitioner’s checking account in order to qualify to lease the jeep grand cherokee from gold key on date ms thompson and petitioner submitted to gold key a credit application gold key credit application that application indicated that ms thompson was retired and that uptime nutrition employed petitioner the gold key credit application did not indicate that weavewood was applying for credit to lease the jeep grand cherokee or that weavewood was in any way connected with that application sometime in date gold key entered into a lease agreement gold key lease agreement with ms thompson and petitioner for the lease of the jeep grand cherokee the gold key lease agreement indicated that ms thompson and petitioner were the lessee and colessee respectively the gold key lease agreement did not indicate that weavewood was a lessee or colessee or that weavewood was in any way connected with that agreement at no relevant time was the jeep grand cherokee weavewood’s company vehicle transactions involving petitioner and checks that were payable to weavewood date checks on date after weavewood terminated petitioner petitioner deposited into petitioner’s checking account the following checks that were payable to weavewood collectively date checks that were payable to weavewood payor nearly new restaurant equip supplies stratosphere rykoff-sexton inc fri city rykoff-sexton inc don united restaurant equip dba the miners bldg ss kemp co l m food service tinkels spanky’s - fredericksburg boelter total amount dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure petitioner’s deposit into petitioner’s checking account of the date checks that were payable to weavewood was done without weavewood’s authorization and constituted a conversion of those checks date checks on date petitioner deposited into petitioner’s checking account the following checks that were payable to weavewood collectively date checks that were payable to weavewood payor harrah’s don pfs harrah’s brown total amount dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure petitioner’s deposit into petitioner’s checking account of the date checks that were payable to weavewood was done without weavewood’s authorization and constituted a conversion of those checks transaction involving petitioner with respect to timmerman leasing on date petitioner received a dollar_figure check date check from or through weavewood the febru- ary check related to a sale-leaseback transaction that petitioner had negotiated with timmerman leasing on behalf of weavewood transactions involving petitioner and checks that were payable to mr thompson at a time not disclosed by the record before mr thompson petitioner’s father made an investment with respect to the leasing of certain airplanes mr thompson’s investment through a program known as polaris aircraft investment program polaris pursuant to that program every six months polaris issued a check payable to mr thompson with respect to mr thompson’s investment after mr thompson’s death in polaris continued to issue every six months checks that were payable to mr thompson with respect to mr thompson’s invest- ment on date polaris issued a dollar_figure check payable to mr thompson date check petitioner negotiated the date check at first bank on date polaris issued a dollar_figure check payable to mr thompson date check petitioner ms thompson and donald d kallestad mr kallestad whom weavewood employed during and endorsed the date check on a date not disclosed by the record between july and date petitioner negotiated the date check by giving it to mr kallestad as a loan on date mr kallestad deposited that check into his personal checking account mr kallestad’s personal checking account at norwest bank-minneapo- lis approximately two or three months after mr kallestad deposited the date check into mr kallestad’s personal checking account mr kallestad gave petitioner dollar_figure in repayment of the loan that he received from petitioner on date polaris issued a dollar_figure check payable to mr thompson date check petitioner negotiated the date check on date polaris issued a dollar_figure check payable to mr thompson date check petitioner negotiated the date check by endorsing it to an individual named gayle bjorkland sale of petitioner’s arcade games around date petitioner sold arcade games arcade games to reality entertainment a company located in des moines iowa petitioner and mr robinson delivered those arcade games to reality entertainment reality entertainment financed the purchase of the arcade games through norwest equipment finance inc norwest equipment finance a company located in minneapo- lis on date norwest equipment finance issued a dollar_figure check date check payable to petitioner and drawn on its account at norwest bank-minneapolis as payment to petitioner for the sale of the arcade games petitioner’s sales proceeds from the sale of the arcade games petitioner endorsed the date check and sent it to mr kallestad at weavewood which mr kallestad received on or about date on date at petitioner’s request mr kallestad arranged through norwest bank of wayzata minnesota to have petitioner’s sales proceeds from the sale of the arcade games wired to petitioner at caesar’s tahoe casino ms thompson’s tax returns for and ms thompson filed form_1040 u s individual_income_tax_return form_1040 for each of her taxable years ms thompson’s return ms thompson’s return and ms thompson’s return in ms thompson’s return ms thompson reported dollar_figure of wage income from weavewood dollar_figure of taxable interest_income which in a statement with respect to such interest_income that she attached to that return she indicated was from polaris aircraft investment program and dollar_figure of social_security_benefits of which dollar_figure was reported as taxable in schedule e supplemental income and loss schedule e included as part of ms thompson’s return ms thompson’s schedule e ms thompson reported dollar_figure in rents received from an undivided interest in four used aircraft pittsburg sic pa dollar_figure in expenses and dollar_figure in total rental real_estate income in ms thompson’s return ms thompson reported dollar_figure of wage income from weavewood dollar_figure of taxable interest_income and dollar_figure of taxable refunds credits or offsets of state_and_local_income_taxes in schedule b included as part of ms thompson’s return ms thompson indicated that the dollar_figure of taxable interest_income that she reported was from polaris 7ms thompson did not include schedule b interest and dividend income schedule b as part of ms thompson’s return 8although not altogether clear from the record it appears that the dollar_figure in rents received from an undivided interest in four used aircraft pittsburg sic pa reported in ms thompson’s schedule e related to checks that were payable to mr thompson and that polaris issued in with respect to mr thompson’s investment ms thompson did not include schedule e as part of ms thompson’s return in ms thompson’s return ms thompson reported only dollar_figure of taxable interest_income in schedule b included as part of ms thompson’s return ms thompson indicated that the dollar_figure of taxable interest_income that she reported was from polaris ms thompson did not include schedule e as part of ms thompson’s return petitioner’s tax returns for and petitioner filed form_1040 for his taxable_year peti- tioner’s return in petitioner’s return petitioner reported dollar_figure of wage income from uptime nutrition in sched- ule c profit or loss from business schedule c included as part of petitioner’s return petitioner’s schedule c petitioner reported that he was in the vending business and that he had gross_income of dollar_figure and expenses of dollar_figure including dollar_figure of car and truck expenses a vehicle expense worksheet attached to petitioner’s schedule c indicated that the car and truck expenses claimed in that schedule related to a jeep grand cherokee that was placed into service on date petitioner did not file tax returns for his taxable years and notice respondent issued a notice to petitioner with respect to his taxable years and in that notice respondent determined inter alia that for each of the years and petitioner has unreported income of dollar_figure from polaris respon- dent further determined in the notice that for petitioner has unreported income of dollar_figure from the sale of vending ma- chines9 and dollar_figure of unreported embezzelment sic form_1099 income respondent further determined in the notice that peti- tioner is liable for for an addition_to_tax under sec_6651 opinion petitioner bears the burden of showing error in the determi- nations in the notice that remain at issuedollar_figure see rule a 290_us_111 the only issues that remain for decision relate to certain alleged unreported income for each of the taxable 9in the notice respondent erroneously referred to the arcade games that petitioner sold to reality entertainment around date as vending machines petitioner does not dispute that respondent’s determination in the notice with respect to the dollar_figure of unreported income for relates to the sale of the arcade games 10petitioner does not contend that sec_7491 is applicable in this case even if petitioner had advanced such a contention he has not established that he has complied with the applicable_requirements of sec_7491 under the circumstances pre- sented in this case we conclude that the burden_of_proof does not shift to respondent under sec_7491 with respect to the deficiency determinations and that respondent does not have the burden of production under sec_7491 with respect to the addition_to_tax under sec_6651 years and and the addition_to_tax under sec_6651 for the taxable_year we turn first to the alleged unreported income the unreported income items at issue for pertain to petitioner’s use of the date check and the date check both of which were payable to mr thompson peti- tioner’s father and issued by polaris with respect to mr thompson’s investment the unreported income items at issue for pertain to petitioner’s use of weavewood’s date checks that were payable to ms thompson and drawn on weavewood’s checking account petitioner’s use of weavewood’s february and date checks that were payable to mr cavness or mr villaume and drawn on weavewood’s checking account petitioner’s use of weavewood’s date checks that were payable to petitioner and drawn on weavewood’s checking account petitioner’s use of weavewood’s march and date checks that were payable to mr robinson and drawn on weavewood’s checking account petitioner’s use of weavewood’s may and date checks that were payable to gold key and drawn on weavewood’s checking account petitioner’s use of the date checks and the date checks that were payable to weavewood petitioner’s receipt of the date check relating to timmerman leasing petitioner’s use of the date check and the date check both of which were payable to mr thompson petitioner’s father and issued by polaris with respect to mr thompson’s investment and petitioner’s receipt of petitioner’s sales proceeds from the sale of the arcade games in support of his position that he does not have the unre- ported income at issue for and petitioner relies on his testimony in an order dated date at the call of this case from the calendar on date and at the trial of this case on date the court advised petitioner that he may not introduce at the trial in the instant case any evidence that is inconsistent with or contrary to the deemed admissions and the deemed stipulations in this case at trial respondent objected to certain of petitioner’s testimony on the ground that it was inconsistent with or contrary to certain of the deemed admissions and deemed stipulations in this case the court sustained respondent’s objections to the extent the court found petitioner’s proffered testimony to be inconsistent with or contrary to certain of those admissions and stipulations nonetheless petitioner persisted in proffering testimony to which respondent objected as inconsistent with or contrary to certain of the deemed admissions and deemed stipula- tions in this case in order to facilitate the trial in this case without repeated objections by respondent the court allowed respondent to make a standing objection to petitioner’s testimony on the ground that it was inconsistent with or contrary to certain of those admissions and stipulations the court directed respondent to bring to the court’s attention on brief any of petitioner’s testimony to which respondent objected as inconsis- tent with or contrary to certain of the deemed admissions and deemed stipulations in this case and informed the parties that it would deem stricken from the record any such inconsistent or contrary testimony the court deems stricken from the record in the instant case any testimony of petitioner that is inconsistent with or contrary to the deemed admissions and the deemed stipulations in this case assuming arguendo that the court had not deemed such testimony stricken the court would not rely on petitioner’s testimony to establish his position that he does not have the unreported income at issue for and that is because the court found petitioner’s testimony to be in material respects not credible general conclusory vague self-serving uncorrob- orated and or inconsistent with certain other evidence in the record transactions involving petitioner and weavewood the following are the unreported income items at issue for which relate to petitioner’s use in that year of various checks that were drawn on weavewood’s checking account that were payable to weavewood or that petitioner received from or through weavewood all of which respondent included as part of the adjustment in the notice referred to as embezzelment sic form_1099 to increase petitioner’s income for by dollar_figure petitioner’s use of weavewood’s date checks that were payable to ms thompson and drawn on weavewood’s checking account petitioner’s use of weavewood’s february and date checks that were payable to mr cavness or mr villaume and drawn on weavewood’s checking account petitioner’s use of weavewood’s date checks that were payable to petitioner and drawn on weavewood’s checking account petitioner’s use of weavewood’s march and date checks that were payable to mr robinson and drawn on weavewood’s checking account petitioner’s use of weavewood’s may and date checks that were payable to gold key and drawn on weavewood’s checking account petitioner’s use of the date checks and the date checks that were payable to weavewood and petitioner’s receipt of the date check relating 11the amount of dollar_figure by which respondent determined in the notice to increase petitioner’s income for was the amount reported in form 1099-misc miscellaneous income form_1099 that weavewood issued for that year with respect to petitioner weavewood’s form_1099 in preparation for trial respondent reconstructed various items of unreported income for which were included as part of the dollar_figure total amount of income reported in weavewood’s form_1099 except for the unre- ported income items for that we address herein respondent concedes the balance of the dollar_figure of unreported income for that respondent determined in the notice as an adjustment referred to in the notice as embezzelment sic form_1099 to timmerman leasing with respect to the foregoing unreported income items at issue for petitioner testified in part as follows the embezzlement issue on the form has already been ruled on in date by the honorable hennepin county district_court judge myron greenberg in which his order specifically writes that the dollar_figure -- and i believe it wa sec_87 cents -- which is missing from this particular entry was null and void and should be reclassified as dollar_figure in addition on brief petitioner denies all claimes made in the f motion and has consistantly denied these bogas alegations petitioner fought in state district_court the exact same claims and after nearly four years of trial and pretrial judge myron greenburg ruled all of these claims to be untrue this court has no jurisdiction to rule on the same claims already decided reproduced liter- ally respondent counters that petitioner did not articulate any credible explanation at trial why the income attributed to him from his misappropriations from weavewood would not be income to him he testified that a hennepin county district judge had ruled that the form_1099 issued by weavewood was null and void and should be reclassified as zero but he presented no documentary_evidence corrobo- rating his claim about either the ruling or the basis for the ruling even if such an order had been en- tered however it has no legal effect on this case since petitioner did not claim and respondent would have contested such a claim if it had been made that respondent was a party to the state court_proceeding furthermore this proceeding the instant case would have been the appropriate forum in which to raise the issue whether the form_1099 was accurate or not not in a state court action respondent notes that according to petitioner’s testimony the state court ruling would 12see supra note have occurred two years after petitioner brought this proceeding in the tax_court in any event respondent’s position in this case is not dependent on the accuracy of the form_1099 issued by weavewood rather than relying on the weavewood in preparing for trial respondent has reconstructed the amount of petitioner’s misappropriations from weavewood and proved the spe- cific items of income includible in the reconstruction most of the evidence on this issue has been estab- lished by respondent through the admissions and stipu- lation process we reject petitioner’s argument that we do not have juris- diction over the determination in the notice referred to as embezzelment sic form_1099 moreover even if the record had established which it does not that a proceeding before a hennepin county district_court judge addressed and ruled on that determination we would not be bound by any such ruling weavewood’s date checks with respect to petitioner’s use of weavewood’s date checks that were payable to ms thompson and drawn on weavewood’s checking account the record establishes that peti- tioner received the proceeds of those checks on the record before us we find that petitioner has failed to carry his burden of showing that he used those proceeds for or on behalf of weavewood on that record we further find that petitioner has failed to carry his burden of showing that he does not have unreported income of dollar_figure for from his use of weavewood’s date checks that were payable to ms thompson and drawn on weavewood’s checking accountdollar_figure weavewood’s february and date checks with respect to petitioner’s use of weavewood’s february and date checks that were payable to mr cavness or mr villaume and drawn on weavewood’s checking account the record establishes that petitioner used those checks to make payments for petitioner’s personal expenses or to make payments to a nominee of petitioner on the record before us we find that petitioner has failed to carry his burden of showing that he used those checks for or on behalf of weavewood on that record we further find that petitioner has failed to carry his burden of showing that he does not have unreported income of dollar_figure for from his use of weavewood’s february and date checks that were payable to mr cavness or mr villaume and drawn on weavewood’s checking account weavewood’s date checks with respect to petitioner’s use of weavewood’s date checks that were payable to petitioner and drawn on 13as discussed above in ms thompson’s supplemental affida- vit which she wrote in date in connection with weavewood’s memorandum of law filed on date ms thompson denied having received any moneys from weavewood since date moreover ms thompson did not report as income in ms thompson’s return weavewood’s date checks totaling dollar_figure that were payable to her that petitioner signed and that were drawn on weavewood’s checking account weavewood’s checking account the record establishes that peti- tioner signed and negotiated those checks without weavewood’s authorization on the record before us we find that petitioner has failed to carry his burden of showing that he used those checks for or on behalf of weavewood on that record we further find that petitioner has failed to carry his burden of showing that he does not have unreported income of dollar_figure for from his use of weavewood’s date checks that were payable to petitioner and drawn on weavewood’s checking account weavewood’s march and date checks with respect to petitioner’s use of weavewood’s march and date checks that were payable to mr robinson and drawn on weavewood’s checking account the record establishes that peti- tioner used those checks to make petitioner’s american express card payments which were for personal expenses of petitioner on the record before us we find that petitioner has failed to carry his burden of showing that any of the charges that petitioner made on petitioner’s american express card issued on mr robinson’s american express account were incurred for or 14in determining that petitioner has unreported income of dollar_figure as a result of petitioner’s use of weavewood’s date checks respondent added the amounts of weavewood’s date checks for dollar_figure and dollar_figure respectively and reduced that sum dollar_figure by dollar_figure to take account of the fact that norwest bank-ridgedale voided the dollar_figure cashier’s check that petitioner received along with dollar_figure in cash on date when he negotiated weavewood’s date check for dollar_figure on behalf of weavewood on that record we further find that petitioner has failed to carry his burden of showing that he does not have unreported income of dollar_figure for from his use of weavewood’s march and date checks that were payable to mr robinson and drawn on weavewood’s checking account weavewood’s date check with respect to petitioner’s use of weavewood’s date check that was payable to gold key and drawn on weavewood’s checking account the record establishes that petitioner used that check to make the date lease payment for the jeep grand cherokee which was a personal_expense of petitioner on the record before us we find that petitioner has failed to carry his burden of showing that he used the date check that was payable to gold key and drawn on weavewood’s checking account for or on behalf of weavewood on that record we further find that petitioner has failed to carry his burden of showing that he does not have unreported income of dollar_figure for from his use of that check weavewood’s date check with respect to petitioner’s use of weavewood’s date check that was payable to gold key and drawn on weavewood’s checking account the record establishes that petitioner used that check to make the date lease payment for the jeep grand cherokee petitioner testified that weavewood made certain payments for the lease of the jeep grand cherokee because ms thompson used that vehicle for company business we reject that testimony which is contrary to other evidence in the record the record establishes that as of date weavewood’s company vehicle was a cadillac and not a jeep grand cherokee and that ms thompson among others drove that cadillac in connection with weavewood business the record further establishes that the gold key credit application_for the lease of the jeep grand cherokee indicated that ms thompson and petitioner were applying for credit for that lease and did not indicate that weavewood was applying for credit to lease that vehicle or that weavewood was in any way connected with that application the record also shows that the gold key lease agreement for the jeep grand cherokee indicated that ms thompson and petitioner were lessee and colessee respectively and did not indicate that weavewood was a lessee or colessee or that weavewood was in any way connected with that agreement furthermore during the first four months of petitioner paid for the lease of the jeep grand cherokee by signing checks that were payable to gold key and drawn on petitioner’s checking account moreover a vehicle expense worksheet associ- ated with petitioner’s schedule c indicated that the car and truck expenses claimed in that schedule related to a grand cherokee that was placed into service on date in addition mr caylor’s affidavit indicated that petitioner used weavewood’s funds to pay for the lease of petitioner’s personal automobile lease on the record before us we find that peti- tioner has failed to carry his burden of showing that he used for or on behalf of weavewood the date check that was payable to gold key and drawn on weavewood’s checking account on that record we further find that petitioner has failed to carry his burden of showing that he does not have unreported income of dollar_figure for from his use of that check date checks and date checks that were payable to weavewood with respect to petitioner’s use of the date checks and the date checks that were payable to weavewood the record establishes that petitioner deposited those checks into petitioner’s checking account without weavewood’s authorization and that such deposits constituted a conversion of those checks on the record before us we find that petitioner has failed to carry his burden of showing that he used those checks for or on behalf of weavewood on that record we further find that petitioner has failed to carry his burden of showing that he does not have unreported income of dollar_figure and dollar_figure respec- tively for from his use of the date checks and the date checks that were payable to weavewood date check with respect to the date check relating to timmerman leasing the record establishes that petitioner re- ceived that check on the record before us we find that peti- tioner has failed to carry his burden of showing that he used that check for or on behalf of weavewood on that record we further find that petitioner has failed to carry his burden of showing that he does not have unreported income of dollar_figure for from his receipt of the date check relating to timmerman leasing transactions involving petitioner and checks that were payable to mr thompson with respect to petitioner’s use in of the date check and the date check and in of the date check and the date check all of which were payable to mr thompson petitioner’s father and issued by polaris with respect to mr thompson’s investment petitioner claims on brief that he cashed those checks for and that he gave the proceeds from those checks to his mother ms thompson ms thompson’s return and ms thompson’s return belie that claim in ms thompson’s return and ms thompson’s return ms thompson reported taxable interest_income from polaris of dollar_figure and dollar_figure respectively ms thompson did not report in ms thompson’s return the date check and the date check payable to mr thompson and issued by polaris or in ms thompson’s return the date check and the date check payable to mr thompson and issued by polaris nor did ms thompson report in ms thompson’s return or in ms thompson’s return rents received from an undivided interest in four used aircraft pittsburg sic pa or any other amount attributable to mr thompson’s investmentdollar_figure on the record before us we find that petitioner has failed to carry his burden of showing that he does not have unreported income of dollar_figure and dollar_figure respectively for from his use of the date check and the date check which were payable to mr thompson and issued by polaris with respect to mr thompson’s investment 15pursuant to rule c the following matters are deemed admitted on date petitioner alleging to respondent that his mother was the actual recipient of certain income items that were attributable to peti- tioner in the statutory_notice_of_deficiency told respondent in the presence of his mother that his mother would amend her federal_income_tax returns for and to report the income although respondent stated that he expected any amended returns to be sent to him and to be filed within thirty days of the meeting and although respon- dent informally extended the deadline for filing the amended tax returns the last time to date no amended returns have been filed by petitioner or his mother as of the trial in this case petitioner had not proffered any amended_return of ms thompson for reflecting that she reported for that year the date check and the date check payable to mr thompson and issued by polaris or any amended_return for reflecting that she reported the date check and the date check payable to mr thompson and issued by polaris and unreported income of dollar_figure and dollar_figure respec- tively for from his use of the date check and the date check which were payable to mr thompson and issued by polaris with respect to mr thompson’s investment sale of petitioner’s arcade games with respect to petitioner’s receipt of petitioner’s sales proceeds from the sale of the arcade games petitioner claims on brief that he gave those proceeds to his mother ms thompson ms thompson’s return belies that claim ms thompson did not report in ms thompson’s return petitioner’s sales proceeds from the sale of the arcade gamesdollar_figure on the record before us we find that petitioner has failed to carry his burden of showing that he does not have unreported income of dollar_figure for from his receipt of petitioner’s sales proceeds from the 16respondent acknowledges that the deemed admissions contain a mathematical error in showing the total of the date check for dollar_figure and the date check for dollar_figure as dollar_figure and the total of the date check for dollar_figure and the date check for dollar_figure as dollar_figure the correct total of the two checks issued in is dollar_figure as is the correct total of the two checks issued in such correct totals shall be reflected in the parties’ computa- tions under rule 17as indicated supra note on date in the presence of his mother petitioner told respondent that his mother was the actual recipient of certain income items that were attributable to petitioner in the notice and that his mother would amend her federal_income_tax returns for and in order to report such income items as of the trial in this case petitioner had not proffered any amended_return of ms thompson for reflecting that she reported for that year petitioner’s sales proceeds from the sale of the arcade games sale of the arcade gamesdollar_figure addition_to_tax under sec_6651 respondent determined that petitioner is liable for for an addition_to_tax under sec_6651 the record estab- lishes that petitioner did not file a tax_return for petitioner claims that he does not have the requisite amount of income that would have required him to file a tax_return for that year the record in the instant case belies that claim in a stipulation of settled issues filed by the parties on date petitioner conceded that for he has dollar_figure of income consisting of dollar_figure of income with respect to his employment by uptime nutrition and dollar_figure of income with respect to unemploy- ment compensation from the minnesota department of economic security based on petitioner’s concessions alone he was required to file a tax_return for dollar_figure see sec_6012 on the record before us we find that petitioner has failed to carry his burden of showing that he is not liable for an addition_to_tax under sec_6651 for we have considered all of the contentions and arguments of petitioner that are not discussed herein and we find them to be 18petitioner does not contend and has failed to establish that he has a basis in the arcade games that he sold to reality entertainment 19in addition to the dollar_figure of income that petitioner con- ceded he has for we have found that petitioner has dollar_figure of income for that year without merit and or irrelevant to reflect the foregoing and the concessions of the parties decision will be entered under rule