United States Tax Court

T.C. Summary Opinion 2023-35

SEAN PAUL POLETE,

Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

—————

Docket No. 13479-20S. Filed December 18, 2023.

—————

Sean Paul Polete, pro se.

Joseph D. Boteler, Marc L. Caine, and Louis H. Hill, for respondent.

SUMMARY OPINION

LEYDEN, Special Trial Judge: This case was heard pursuant to 

the provisions of section 74631 of the Internal Revenue Code in effect 

when the Petition was filed. Pursuant to section 7463(b), the decision 

to be entered is not reviewable by any other court, and this Opinion shall 

not be treated as precedent for any other case.

Petitioner failed to file his 2017 federal income tax return, so the 

Internal Revenue Service (IRS)2 prepared a substitute for return in 

accordance with section 6020(b). Subsequently, the IRS issued a notice 

1 Unless otherwise indicated, statutory references are to the Internal Revenue 

Code, Title 26 U.S.C. (I.R.C.), in effect at all relevant times, regulation references are 

to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, 

and Rule references are to the Tax Court Rules of Practice and Procedure.

2 The Court uses the term “IRS” to refer to administrative actions taken outside 

of these proceedings. The Court uses the term “respondent” to refer to the 

Commissioner of Internal Revenue, who is the head of the IRS and is respondent in 

this case, and to refer to actions taken in connection with this case.

Served 12/18/23
2

of deficiency to petitioner and determined an income tax deficiency of 

$34,273 and additions to tax under sections 6651(a)(1) and (2) and 6654 

of $6,575.17, $5,114.02, and $686.15, respectively. Petitioner timely 

filed a Petition with this Court contesting the notice of deficiency. After 

filing the Petition, petitioner asserted that he was entitled to various 

deductions, as discussed below.

Both before and during trial, respondent and petitioner made 

concessions, listed in the table below relating to petitioner’s 2017 tax 

year.

Item Concession

Section 6651(a)(2) addition to tax Petitioner is not liable for this addition 

to tax

Section 6654 addition to tax Petitioner is not liable for this addition 

to tax

Head of Household filing status Petitioner is entitled to Head of 

Household filing status

Personal exemptions Petitioner is entitled to three personal 

exemptions

Wage income $59,510

Taxable retirement distributions $52,433

Interest $14

Capital gain $3,417

Donations (to Goodwill) $90

Withholdings $5,050

Estimated tax payments $0

Surplus & Adventure gross receipts $10,404

Surplus & Adventure cost of goods sold $7,595

Fibre Arts gross receipts $3,238

Fibre Arts cost of goods sold $7,595

STEAM Works gross receipts $0

Maryland rental property net rental 

income

$18,948.50

Maryland rental property real estate 

taxes

$2,887.33 

Maryland rental property mortgage 

interest

$8,917.28
3

Maryland rental property hazard 

insurance

$845.48

Oakwood residence Petitioner utilized this property as a 

personal residence in 2017

Oakwood residence real estate taxes $13,560.03 (petitioner was the sole 

payor/borrower)

Oakwood residence mortgage interest $9,264.48 (petitioner was the sole 

payor/borrower)

Beavercreek rental income $7,437.35

Beavercreek expenses $1,199.36

Alimony $3,000

After concessions, the remaining issues for the Court to decide are 

whether for 2017 petitioner is (1) entitled to deduct asserted expenses 

relating to three alleged businesses; (2) entitled to deduct asserted 

expenses related to two real estate properties; and (3) liable for an 

addition to tax for failure to timely file his tax return under section 

6651(a).

The Court holds that petitioner is entitled to deduct some of his 

asserted expenses, as discussed below, and petitioner is liable for an 

addition to tax for failure to timely file.

Background

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

Stipulation of Facts and the accompanying Exhibits 1-J, and 3-J through 

14-J are incorporated herein by this reference. The Second Stipulation 

of Facts and the accompanying Exhibit 15-J are also incorporated herein 

by this reference.

Respondent also filed Exhibit 2-R with the First Stipulation of 

Facts. At trial petitioner objected to the admission of Exhibit 2-R into 

evidence. The Court overruled petitioner’s objection and admitted 

Exhibit 2-R.

Before the trial petitioner filed Proposed Trial Exhibits 1001-P 

through 1018-P. At trial the Court admitted Proposed Trial Exhibits 

1006-P, 1009-P, 1013-P, and 1015-P renumbered as Exhibits 16-P, 17-P, 

18-P, and 19-P, respectively. The Court did not admit the remaining 

Proposed Trial Exhibits.
4

Petitioner resided in Ohio when he filed the Petition. Petitioner 

and his spouse separated in May 2017 and thereafter maintained 

separate households.3

I. Section 6020(b) Return

On April 15, 2018, petitioner filed for and received an extension 

of time to file his 2017 federal income tax return by October 15, 2018. 

However, petitioner did not file his 2017 tax return by the extended due 

date. After the extended filing deadline had passed, the IRS prepared a 

substitute for return for petitioner’s 2017 tax year pursuant to section 

6020(b).

II. Notice of Deficiency

On November 16, 2020, the IRS issued petitioner a notice of 

deficiency proposing for 2017 a deficiency of $34,273 and additions to 

tax under sections 6651(a)(1) and (2) and 6654 of $6,575.17, $5,114.02, 

and $686.15, respectively.

In the notice of deficiency respondent determined that in 2017 

petitioner received $158,209 in income. With respect to petitioner’s tax 

and credits the IRS calculated petitioner’s tax owed by (1) allowing a 

standard deduction of $6,350 and one personal exemption of $3,888 and 

(2) proposing a tax of $660 on individual retirement accounts (IRAs), 

other retirement plans, and medical savings accounts (MSAs).4

After the IRS issued the notice of deficiency, petitioner mailed to 

the IRS a proposed 2017 Form 1040, U.S. Individual Income Tax Return. 

The IRS did not accept or process that proposed tax return. At trial 

petitioner asserted he was entitled to deductions for various expenses.

III. Petitioner’s Activities

During 2017 petitioner operated three activities: (1) Surplus, 

Adventure, & Survival Gear (Surplus & Adventure), (2) Fibre Arts 

3 The notice of deficiency at issue was addressed only to petitioner. Petitioner’s 

wife did not sign the Petition filed by petitioner and is not a party to this case.

4 Some of the items in the notice of deficiency have been conceded. The parties 

stipulated the amount of unreported retirement income, and the $660 tax on IRAs, 

other retirement plans, and MSAs proposed in the notice of deficiency is purely 

computational.
5

Enterprises (Fibre Arts), and (3) STEAM Works Labs, LLC (STEAM 

Works). 

A. Surplus & Adventure

Petitioner operated Surplus & Adventure as a business that 

purchased and resold outdoor gear and equipment. In addition to the 

stipulated 2017 gross receipts and cost of goods sold for this business, 

petitioner paid advertising/marketing expenses of $1,092.37, PayPal 

fees of $1,077.77, a Penske truck rental expense of $80.19, and shipping 

fees from FedEx and the U.S. Postal Service (USPS) of $229.94.

B. Fibre Arts

Petitioner operated Fibre Arts as a business that sold 

embroidered articles online. In addition to the stipulated 2017 gross 

receipts for this business, petitioner paid Etsy selling fees of $202.90 and 

Ohio business filing fees of $145.15.

C. STEAM Works

Beginning in 2016 petitioner conducted STEAM Works, an 

activity which maintained a workshop where students could use the 

space and equipment such as 3–D printers without charge. Petitioner 

had planned to sell memberships that would allow only members to use 

the workshop and the 3–D printers, but he never sold such 

memberships. STEAM Works did not have any gross receipts in 2017.

IV. Petitioner’s Real Estate Properties

During 2017 petitioner and his wife jointly owned two real estate 

properties. The first was in Beavercreek, Ohio (Beavercreek property), 

and the second was in Lexington Park, Maryland (Maryland property).

A. Beavercreek Property

During 2017 petitioner and his wife jointly paid real estate taxes 

and mortgage interest of $4,715.32 and $5,490.90, respectively, for the 

Beavercreek property. Petitioner and his wife hired a property 

management company for the Beavercreek property that issued in both 

of their names a 2017 Form 1098, Mortgage Interest Statement. 

Because petitioner stipulated that he and his wife both paid the real 

estate taxes and mortgage interest, the Court finds that petitioner paid 
6

one half of the real estate taxes and mortgage interest. There is not 

anything in the record that suggests a different allocation.

In 2017 petitioner rented out the Beavercreek property for five 

months out of the year. Petitioner either did not rent out the 

Beavercreek property or lived in it as his personal residence for the other 

seven months of the year.

Only petitioner received the conceded rental income from the 

Beavercreek property.

The property management company also prepared and sent 

petitioner an owner activity statement listing the 2017 expenses, 

totaling $1,199.36. The parties have stipulated that petitioner paid 

those expenses.

B. Maryland Property

During 2017 petitioner and his wife jointly paid real estate taxes 

and mortgage interest of $2,887.33 and $8,917.28, respectively, for the 

Maryland property. Petitioner and his wife received a 2017 Form 1098 

issued in both of their names. Because petitioner stipulated that he and 

his wife both paid the real estate taxes and mortgage interest, the Court 

finds that petitioner paid one half of the real estate taxes and mortgage 

interest. There is not anything in the record that suggests a different 

allocation.

Petitioner contracted with a property management company with 

respect to the Maryland property. The company provided petitioner a 

2017 Form 1099–MISC, Miscellaneous Income, that reported gross 

income of $21,000 paid to petitioner during that year. 

The property management company also provided petitioner with 

a yearend statement that listed for the Maryland property rental income 

minus expenses of $18,948.50. On the basis of the parties’ stipulations 

the Court finds that petitioner paid the Maryland property expenses of 

$2,051.50.

Discussion

I. Burden of Proof

Generally, the Commissioner’s determination set forth in a notice 

of deficiency is presumed correct, and a taxpayer bears the burden of 
7

proving that the determination is in error. Rule 142(a); Welch v. 

Helvering, 290 U.S. 111, 115 (1933). Deductions are a matter of 

legislative grace, and a taxpayer bears the burden of proving that he is 

entitled to any deduction claimed. See Rule 142(a); INDOPCO, Inc. v. 

Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 

292 U.S. 435, 440 (1934). A taxpayer must maintain adequate records 

to substantiate the amounts of their income and entitlement to any 

deductions or credits claimed. I.R.C. § 6001. Under section 7491(a), the 

burden of proof may shift to the Commissioner if a taxpayer produces 

credible evidence with respect to any relevant factual issue and meets 

other requirements. Petitioner has neither argued that section 7491(a) 

applies nor established that its requirements have been met. The 

burden of proof remains with petitioner.

Respondent contends that petitioner has failed to carry his 

burden of proof with respect to the alleged deductions, as well as the 

section 6651(a)(1) addition to tax. Petitioner asserts that he did carry 

his burden of proof with respect to the disputed deductions and the 

section 6651(a)(1) addition to tax.

II. General Rules for Deductions

Generally, a taxpayer may deduct ordinary and necessary 

expenses paid or incurred during the taxable year in connection with 

operating a trade or business. I.R.C. § 162(a); Boyd v. Commissioner, 

122 T.C. 305, 313 (2004).

To be ordinary the expense must be of a common or frequent 

occurrence in the type of business involved. Deputy v. Du Pont, 308 U.S. 

488, 495 (1940). To qualify as necessary an expense must be appropriate 

and helpful to the taxpayer’s business. Welch v. Helvering, 290 U.S. 

at 113. It must be “directly connected with or pertaining to the 

taxpayer’s trade or business.” Treas. Reg. § 1.162-1(a). However, if an 

expense is a personal, living, or family expense, it may not be deducted. 

I.R.C. § 262(a).

When a taxpayer claims a deduction related to operating a trade 

or business, he must demonstrate that the deduction is allowable 

pursuant to some statutory provision, and he must further substantiate 

that the expense to which the deduction relates has been paid or 

incurred. See I.R.C. § 6001; Hradesky v. Commissioner, 65 T.C. 87, 

89–90 (1975), aff’d per curiam, 540 F.2d 821 (5th Cir. 1976); Meneguzzo 

v. Commissioner, 43 T.C. 824, 831–32 (1965); Treas. Reg. § 1.6001-1(a).
8

If a taxpayer incurs a trade or business expense contemplated by 

section 162(a) but is unable to adequately substantiate the amount, the 

Court may estimate the amount and allow a deduction to that extent. 

Cohan v. Commissioner, 39 F.2d 540, 543–44 (2d Cir. 1930). However, 

there must be some basis upon which an estimate may be made. Vanicek 

v. Commissioner, 85 T.C. 731, 742–43 (1985).

For certain expenses, section 274(d) overrides the Cohan doctrine. 

Sanford v. Commissioner, 50 T.C. 823, 827 (1968), aff’d per curiam, 412 

F.2d 201 (2d Cir. 1969); Temp. Treas. Reg. § 1.274-5T(a).

Deductions for expenses with respect to the use of passenger 

automobiles, if otherwise allowable, are subject to strict substantiation 

rules. See I.R.C. §§ 274(d), 280F(d)(4); Sanford, 50 T.C. at 827; Temp. 

Treas. Reg. § 1.274-5T(a). For expenses relating to passenger 

automobiles, a taxpayer must substantiate with adequate records or by 

sufficient evidence corroborating the taxpayer’s own statement: (1) the 

amount of each separate expense; (2) the mileage for each business use 

of the passenger automobile and the total mileage for all purposes 

during the taxable period; (3) the date of the business use; and (4) the 

business purpose of the use. See Temp. Treas. Reg. § 1.274-5T(b)(6). 

Substantiation by adequate records generally requires a taxpayer to 

“maintain an account book, diary, log, statement of expense, trip sheets, 

or similar record” prepared contemporaneously with the use of the 

passenger automobile as well as documentary evidence of the individual, 

actual expenses. Id. para (c)(2).

In the absence of adequate records, a taxpayer may substantiate 

passenger automobile expenses with sufficiently detailed written or oral 

statements and other collateral evidence establishing that the expenses 

were incurred. Dyer v. Commissioner, T.C. Memo. 2012-224, at *22; see

Temp. Treas. Reg. § 1.274-5T(c)(3). While a noncontemporaneous log 

may be used to substantiate these kinds of expenses, “the corroborative 

evidence required to support a statement not made at or near the time 

of the expenditure or use must have a high degree of probative value to 

elevate such statement and evidence to the level of credibility reflected 

by a record made at or near the time of the expenditure or use supported 

by sufficient documentary evidence.” Temp. Treas. Reg. § 1.274-

5T(c)(1).

Deductions for meals and entertainment expenses are also 

subject to strict substantiation rules. With respect to deductions for 

these types of expenses, section 274(d) requires that the taxpayer 
9

substantiate either by adequate records or by sufficient evidence 

corroborating the taxpayer’s own statement: (1) the amount of the 

expense; (2) the time and place the expense was incurred; (3) the 

business purpose of the expense; and (4) in the case of an entertainment 

expense, the business relationship to the taxpayer of each person 

entertained. Temp. Treas. Reg. § 1.274-5T(a) and (b).

Section 167(a) allows as a depreciation deduction a reasonable 

allowance for exhaustion, wear and tear, and obsolescence of property if 

a taxpayer uses that property in a trade or business or other incomeproducing activity. See also Treas. Reg. § 1.167(a)-1(a). To substantiate 

such a deduction, “[a] taxpayer must show that the property was used 

in a trade or business (or other profit-oriented activity). In addition, a 

taxpayer must establish the property’s depreciable basis, by showing the 

cost of the property, its useful life, and the previously allowable 

depreciation.” Cluck v. Commissioner, 105 T.C. 324, 337 (1995). A 

depreciation schedule alone is insufficient to substantiate the deduction. 

See Holden v. Commissioner, T.C. Memo. 2015-131, at *65–66.

III. Petitioner’s Businesses

During 2017 petitioner operated Surplus & Adventure and Fibre 

Arts as businesses, and he asserts he is entitled to deduct various 

expenses.

A. Surplus & Adventure

Petitioner asserts that during 2017 he incurred ordinary and 

necessary expenses operating Surplus & Adventure. Petitioner testified 

and the record includes documentary evidence that supports he is 

entitled to deduct the following asserted expenses: 

(1) advertising/marketing expenses of $1,092.37, (2) PayPal fees of 

$1,077.77, (3) a Penske truck rental of $80.19, and (4) shipping fees from 

FedEx and USPS of $229.94.

As discussed below, petitioner is not entitled to deduct the 

remaining asserted Surplus & Adventure expenses or depreciation.

1. Car and Truck Expenses

Although petitioner did provide some noncontemporaneous 

records and credible testimony about his asserted car and truck 

expenses, the records and testimony do not meet the statutory strict 

substantiation requirements discussed above. He did not keep 
10

contemporaneous records of the amounts of each separate expense, but 

rather noncontemporaneous estimates of mileage driven for his 

business. Further, those records did not include the required date or 

business purpose of the miles driven. Therefore, petitioner has not met 

his burden of proof that he is entitled to deduct the asserted car and 

truck expenses for this business.

2. Depreciation

To prove he is entitled to the asserted depreciation deduction for 

this business petitioner must show that the property was used in the 

business and establish the property’s depreciable basis, its useful life, 

and the previously allowable depreciation. Although petitioner testified 

that he was eligible to claim a depreciation deduction with respect to 

unidentified assets of Surplus & Adventure, he did not prove the 

properties’ depreciable bases, their useful lives, and the previously 

allowable depreciation deductions for any assets. Therefore, petitioner 

is not entitled to his asserted depreciation deduction.

B. Fibre Arts

Petitioner asserts that during 2017 he incurred ordinary and 

necessary expenses operating Fibre Arts. Petitioner testified and the 

record includes documentary evidence that supports he is entitled to 

deduct the following asserted expenses: (1) Etsy selling fees of $202.90 

and (2) Ohio business filing fees of $145.15.

As discussed below, petitioner is not entitled to deduct the 

remaining asserted Fibre Arts expenses or depreciation.

1. Car and Truck Expenses

As discussed above, car and truck expenses are subject to 

statutory strict substantiation rules. Petitioner’s records and testimony 

do not provide the Court with sufficient evidence of the dates and 

business purposes of petitioner’s asserted expenses. Petitioner kept only 

a noncontemporaneous summary log of his estimated miles driven for 

this business. As the Court concluded above, this type of record does not 

meet the strict substantiation requirements necessary for car and truck 

expenses. Therefore, petitioner did not meet his burden of proof that he 

is entitled to deduct the asserted car and truck expenses for this 

business.
11

2. Depreciation

To prove he is entitled to the asserted depreciation deduction for 

this business petitioner must show that the property was used in the 

business and establish the property’s depreciable basis, its useful life, 

and the previously allowable depreciation. Although petitioner testified 

that he was eligible to claim a depreciation deduction with respect to 

two embroidery machines, a generator, and a trailer used for Fibre Arts, 

he did not prove the properties’ depreciable bases, their useful lives, and 

the previously allowable depreciation deductions for any assets. 

Therefore, petitioner is not entitled to his asserted depreciation 

deductions.

IV. STEAM Works

A taxpayer is generally allowed to deduct business expenses. See 

I.R.C. §§ 162, 212. However, a taxpayer may not deduct expenses 

incurred in connection with activities not engaged in for profit, such as 

activities primarily carried on as a sport, a hobby, or for recreation, 

except to the extent provided by section 183(b). See I.R.C. § 183(a); 

Treas. Reg. § 1.183-2(a). Section 183(b) allows a taxpayer to deduct 

expenses that would have been allowable had the activity been engaged 

in for profit, but only to the extent of gross income derived from the 

activity.

A. STEAM Works Operated as a Hobby

Section 183(c) defines an activity not engaged in for profit as “any 

activity other than one with respect to which deductions are allowable 

for the taxable year under section 162 or under paragraph (1) or (2) of 

section 212.” Deductions are allowable under section 162 or under 

section 212(1) or (2) if a taxpayer shows that he is engaged in the activity 

with the primary objective of making a profit. Hayden v. Commissioner, 

889 F.2d 1548, 1552 (6th Cir. 1989), aff’g T.C. Memo. 1998-310. The 

expectation of a profit need not be reasonable, but the taxpayer must 

conduct the activity with the actual and honest objective of making a 

profit. Keating v. Commissioner, 544 F.3d 900, 904 (8th Cir. 2008), aff’g

T.C. Memo. 2007-309. Greater weight is given to objective facts than to 

the taxpayer’s self-serving statement of intent. King v. Commissioner, 

116 T.C. 198, 205 (2001); Treas. Reg. § 1.183-2(a) and (b).

To determine whether the required profit objective exists, the 

Court must look to the surrounding facts and circumstances. See 

Golanty v. Commissioner, 72 T.C. 411, 425–26 (1979), aff’d without 
12

published opinion, 647 F.2d 170 (9th Cir. 1981). The regulations set 

forth a nonexhaustive list of factors that may be considered in deciding 

whether a profit objective exists. These factors are (1) the manner in 

which the taxpayer carries on the activity; (2) the expertise of the 

taxpayer or his advisers; (3) the time and effort expended by the 

taxpayer in carrying on the activity; (4) the expectation that assets used 

in the activity may appreciate in value; (5) the taxpayer’s success in 

carrying on other similar or dissimilar activities; (6) the taxpayer’s 

history of income or losses with respect to the activity; (7) the amount of 

occasional profits, if any, which are earned; (8) the financial status of 

the taxpayer; and (9) any elements indicating personal pleasure or 

recreation. Treas. Reg. § 1.183-2(b). No single factor, or even the 

existence of a majority of factors supporting or rebutting the existence 

of a profit objective, is controlling. Id. Rather, all facts and 

circumstances with respect to the activity are to be taken into account. 

Golanty, 72 T.C. at 426; Treas. Reg. § 1.183-2(b).

Considering all the facts and circumstances, the Court concludes 

that petitioner did not conduct STEAM Works in a businesslike manner 

and did not engage in the activity with the requisite profit objective 

during tax year 2017. Rather, STEAM Works was operated as a hobby.

B. Not Any Deductible Losses

If an activity is not engaged in for profit, section 183(b)(1) allows 

deductions that would be allowable without regard to whether the 

activity is engaged in for profit. Section 183(b)(2) allows deductions 

equal to the amounts of deductions that would be allowable if the 

activity were engaged in for profit, but only to the extent gross income 

derived from the activity exceeds the deductions allowed by reason of 

section 183(b)(1).

However, because petitioner did not have any gross income from 

STEAM Works in 2017, he is not entitled to deduct any of the asserted 

expenses related to this hobby.

V. Petitioner’s Real Estate Properties

Under section 212, ordinary and necessary expenses paid or 

incurred to manage or maintain property held to produce income are 

deductible.
13

A. Beavercreek Property

At trial respondent conceded that petitioner rented out the 

Beavercreek property as a business for five months of 2017.5 Petitioner 

either did not rent it out or lived in it as his personal residence for seven 

months in 2017. The parties agree that petitioner and his wife jointly 

owned the Beavercreek property during 2017 and that each paid half of 

the associated real estate taxes and mortgage interest. However, the 

parties further agree that petitioner received the rental income and paid 

the expenses detailed in the owner activity statement provided by the 

property management company.

Therefore, for the Beavercreek property petitioner may deduct 

five-twelfths of his half of the mortgage interest and real estate taxes he 

paid under sections 162(a) and 212(2), and may deduct the remaining 

seven-twelfths as itemized deductions under sections 163(h) and 164(a), 

respectively.

Further, as to petitioner’s expenses enumerated in the owner 

activity statement and conceded by respondent, petitioner may deduct 

five-twelfths under sections 162(a) and 212(2). The remaining seventwelfths of those expenses are personal expenses and are not deductible.

1. Car and Truck Expenses

In support of his purported car and truck expenses for the 

Beavercreek property, petitioner provided a summary “Auto & Travel 

Log” with estimated cost and miles traveled with respect to his various 

rental properties. His records also included repair receipts for two 

vehicles. However, as discussed above, car and truck expenses are held 

to strict substantiation rules, which petitioner did not meet. His 

evidence of mileage traveled consists of a combined summary for his 

businesses and rental properties and does not include the required dates 

and business purpose of his asserted car and truck traveling expenses. 

For these reasons, petitioner has not met his burden of proof that he is 

entitled to deduct his asserted car and truck expenses with respect to 

the Beavercreek property for the five months it was rented.

5 Neither party has asserted that section 280A is applicable to the Beavercreek 

property, and the record does not support applying it.
14

2. Meals Expenses

As with car and truck expenses, section 274(d) imposes stricter 

substantiation for deductions claimed for other travel expenses, 

including meals and entertainment expenses. Such deductions are not 

allowed unless a taxpayer substantiates by adequate records, or by 

sufficient evidence corroborating his own statement, the amount, time, 

place, and business purpose for each expenditure. See I.R.C. § 274(d) 

(flush text).

The evidence provided to substantiate petitioner’s asserted meals 

expenses consists of a spreadsheet with the headings “Groceries” and 

“Restaurants” under which petitioner included dates, property location 

(Beavercreek), and a designation of “lunch” or the name of a grocery 

store or restaurant. He also referenced bank statements and credit card 

records, but none of his records included a referenced business purpose 

for his asserted meals expenses. See Treas. Reg. § 1.274-5(j) (detailing 

the substantiation requirements for meals allowances). Thus, petitioner 

has not met his burden of proof and is not entitled to his asserted meals 

expenses with respect to the Beavercreek property.

3. Depreciation

Petitioner testified that he should be entitled to a depreciation 

deduction “[i]n the range of $3,000” but did not provide the property’s 

depreciable basis, its useful life, or the amount of any previous allowable 

depreciation. Therefore, petitioner is not entitled to his asserted 

depreciation deduction for the Beavercreek property.

B. Maryland Property

The parties agree that the Maryland property was rented during 

all of 2017 and was also jointly owned by petitioner and his wife. The 

parties also agree that petitioner and his wife each paid half of the 

associated real estate taxes and mortgage interest for the property. 

Accordingly, petitioner may deduct one half of the total real estate taxes 

and mortgage interest under sections 162(a) and 212(2). The parties 

further agree that petitioner received the rental income and paid the 

expenses detailed in the yearend statement provided by the property 

management company. Further, the parties agree that petitioner paid 

hazard insurance for the Maryland property of $845.48. Thus, 

petitioner may deduct those expenses totaling $2,896.98 under sections 

162(a) and 212(2).
15

1. Car and Truck Expenses

Petitioner testified that he drove one of his vehicles for business 

purposes for several of his businesses and for the Maryland property. 

He also submitted receipts for repairs to the vehicle and a spreadsheet 

with estimated mileage driven for his various business activities. 

Petitioner did not keep contemporaneous records of the amount of each 

separate expense, but rather noncontemporaneous estimates of mileage 

driven for his business. Further, those records did not include the 

required date or business purpose of the miles driven. For these 

reasons, petitioner has not met his burden of proving that he is entitled 

to deduct his asserted car and truck expenses with respect to the 

Maryland property.

2. Meals Expenses

Petitioner’s evidence provided to substantiate his asserted meals 

expenses with respect to the Maryland property consisted of a 

spreadsheet with the headings “Groceries” and “Restaurants” under 

which petitioner included dates, property location (Maryland property), 

and a designation of “lunch” or the name of a grocery store or restaurant. 

Petitioner also included bank and credit card statements to substantiate 

his expenses in this category. However, as with his Beavercreek records, 

petitioner’s records did not include a business purpose for his asserted 

meals expenses. Thus, petitioner has not met his burden of proving that 

he is entitled to deduct his asserted meals expenses with respect to the 

Maryland property.

3. Depreciation

Petitioner testified that he should be entitled to depreciation 

deductions on the house and on a fence on the property but did not 

provide the property’s depreciable basis, its useful life, or the amount of 

any previous allowable depreciation. Therefore, petitioner is not 

entitled to his asserted depreciation deductions for the Maryland 

property.

VI. Failure to File Addition to Tax Under Section 6651(a)(1)

Section 6651(a)(1) imposes an addition to tax for a taxpayer’s 

failure to file a required tax return on or before the specified filing date, 

including extensions. The addition equals 5% of the net amount due for 

each month that the tax return is late, not to exceed 25%. The 

Commissioner has the burden of production with respect to any addition 
16

to tax. I.R.C. § 7491(c). The Commissioner satisfies his burden of 

production for an addition to tax for failure to timely file by providing 

sufficient evidence to show that the taxpayer filed his or her tax return 

late. Wheeler v. Commissioner, 127 T.C. 200, 207–08 (2006), aff’d, 521 

F.3d 1289 (10th Cir. 2008); Higbee v. Commissioner, 116 T.C. 438, 447 

(2001). A substitute for return prepared by the IRS is not considered a 

return filed by a taxpayer for purposes of section 6651(a)(1). I.R.C. 

§ 6651(g)(1).

The record establishes that petitioner’s 2017 federal income tax 

return, after he received an extension, was required to be filed by 

October 15, 2018, and petitioner did not file his return by that date. The 

IRS prepared a return for petitioner’s 2017 tax year, which does not 

qualify as a return filed by petitioner for the purposes of the failure to 

timely file a tax return addition to tax pursuant to section 6651(g)(1). 

Therefore, respondent has met his burden of production with respect to 

the addition to tax under section 6651(a)(1) for failure to timely file a 

tax return for tax year 2017.

A taxpayer is not liable for an addition to tax for failure to timely 

file a return if he shows the untimeliness was due to reasonable cause 

and not due to willful neglect. I.R.C. § 6651(a)(1); Higbee, 116 T.C. at 

447. “If the taxpayer exercised ordinary business care and prudence and 

was nevertheless unable to file the return within the prescribed time, 

then the delay is due to a reasonable cause.” Treas. Reg. § 301.6651-

1(c)(1). The taxpayer can show that he did not act with “willful neglect” 

if he can “prove that the late filing did not result from a ‘conscious, 

intentional failure or reckless indifference.’” Niedringhaus v. 

Commissioner, 99 T.C. 202, 221 (1992) (quoting United States v. Boyle, 

469 U.S. 241, 245–46 (1985)). The burden of showing reasonable cause 

under section 6651(a)(1) remains with petitioner. See Higbee, 116 T.C. 

at 446–48.

Petitioner has not claimed nor proven that he qualifies for an 

exception to the addition to tax for failure to timely file a return. He 

does not claim that he filed his return timely. Petitioner argues instead 

that he does not owe any deficiency for 2017, and, thus, he is not liable 

for the late filing addition to tax. Petitioner has not shown reasonable 

cause for failing to timely file his 2017 tax return. Therefore, petitioner 

is liable for the section 6651(a)(1) addition to tax for 2017 to the extent 

that after Rule 155 computations there is a determined deficiency.
17

The Court has considered all of the parties’ arguments, and, to 

the extent not addressed above, concludes that they are moot, irrelevant, 

or without merit.

To reflect the foregoing,

Decision will be entered under Rule 155.