T.C. Summary Opinion 2017-29

UNITED STATES TAX COURT

EDGAR DAVID BROWN, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 20970-14S. Filed May 8, 2017.

Edgar David Brown, pro se.

Paul Isherwood and Nicholas R. Rosado, for respondent.

SUMMARY OPINION

PANUTHOS, Chief Special Trial Judge: This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in effect when the

petition was filed.

1

 Pursuant to section 7463(b), the decision to be entered is not

1Unless otherwise indicated, subsequent section references are to the

(continued...)
2

reviewable by any other court, and this opinion shall not be treated as precedent

for any other case. 

In a notice of deficiency dated June 6, 2014, respondent determined a

deficiency of $15,453 in petitioner’s 2011 Federal income tax, a section

6651(a)(1) addition to tax of $2,432 for failure to timely file a return, and a section

6662(a) accuracy-related penalty of $3,091.

After concessions,

2

the issues for decision are:

(1) whether petitioner is entitled to deduct charitable contributions for the

year in issue;

(2) whether petitioner is entitled to deduct miscellaneous expenses for the

year in issue;

(3) whether petitioner is entitled to deduct unreimbursed employee business

expenses for the year in issue;

1

(...continued)

Internal Revenue Code (Code) in effect for the year in issue, and all Rule

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

2At trial petitioner conceded the home mortgage interest deduction of

$9,151 and the mortgage insurance premium deduction of $1,578 claimed on his

2011 Federal income tax return and the taxable State income tax refund of $2,253

not reported on his return. Petitioner also conceded that his income tax withheld

for the year in issue was $5,897 and not $13,491 as claimed on the return.
3

(4) whether petitioner is entitled to deduct job search expenses for the year

in issue;

(5) whether petitioner is entitled to deduct home office expenses for the year

in issue;

(6) whether petitioner is liable for the section 6651(a)(1) addition to tax for

failure to timely file his 2011 Federal income tax return; and

(7) whether petitioner is liable for the accuracy-related penalty under section

6662(a) for the year in issue.

Background

Petitioner resided in California when his petition was timely filed.

I. Professional Background

Petitioner is a financial services professional. During 2011 he was

employed by Metropolitan Transportation Commission (MTC), a quasigovernmental agency that administers the regional planning and the distribution of

transit funds in the San Francisco area. Petitioner’s primary responsibility at MTC

was the oversight of the clearing and settlement system that supported transit fare

collection for the San Francisco area. Clearing and settlement involves using

payment mechanisms such as credit cards to replenish amounts on fare cards,

which are used to pay for transit services.
4

MTC had a written policy for reimbursing employees for their work-related

expenses for the year in issue.3

Petitioner worked regularly at an office provided by MTC. Sometimes

petitioner worked at home, either telecommuting during regular business hours or

working after hours. Petitioner resided in a four-bedroom house of approximately

2,000 square feet. Petitioner converted one of the four bedrooms into a home

office of approximately 220 square feet. It contained office items including a

computer, a scanner, a modem, a router, a telephone, a typewriter, and plastic bins

holding files kept for work projects, tax records, and other items.

During 2011 petitioner sought a new position in the financial services field. 

Petitioner traveled for interviews and had conversations with people at various

potential employers including the Federal Reserve Bank in Philadelphia,

Pennsylvania, the Environmental Protection Agency, and Qualcomm.

Petitioner was also an independent business owner for ACN during the year

in issue. ACN is a multilevel marketing company that repackages and resells

services from various vendors. Petitioner could earn commissions from ACN

3MTC’s written employee expense reimbursement policy was not made a

part of the record.
5

based on a percentage of the amounts of services he sold to customers. Petitioner

did not have any gross receipts from his activity with ACN.

II. Julian Brown Memorial Fund

In 2005 petitioner established the Julian Brown Memorial Fund (Memorial

Fund). During 2011 the Memorial Fund qualified as an exempt organization

under section 501(c)(3).

The Memorial Fund hosted an annual soccer tournament in Charlotte, North

Carolina. Petitioner owned a house in North Carolina and stayed in this house

when he visited Charlotte for the tournament.

III. Records Maintenance and Computer Failure

Petitioner maintained his business records and other records, including

records he used to prepare his Federal income tax returns, on a personal computer. 

In 2011 petitioner’s personal computer “crashed”, resulting in a loss of tax records

for 2010 and part of 2011.

4

 Petitioner took the computer to Best Buy for repair in

July 2011 but was informed that it was not salvageable. Some of petitioner’s 2011

4Petitioner asserts that the computer crash occurred in “mid-year 2011”. In

petitioner’s prior case for his 2010 tax year, the Court found that the computer

crash had occurred in February 2011. See Brown v. Commissioner, T.C. Summary

Opinion 2016-89. Petitioner did not provide an explanation for this discrepancy.
6

Federal income tax records were unavailable because of this computer failure. 

Petitioner used bank statements to reconstruct some of his 2011 expenses.

IV. 2011 Tax Return

Petitioner filed a delinquent 2011 Form 1040, U.S. Individual Income Tax

Return, on December 31, 2012.

5

 He reported his salary from MTC and $7,765 of

tax due. Petitioner did not file a Schedule C, Profit or Loss From Business, for his

activity with ACN and did not report any gross receipts from this activity.

On Schedule A, Itemized Deductions, petitioner claimed a $9,200 deduction

for charitable contributions by cash or check. He also claimed the following

miscellaneous itemized deductions: (1) $4,039 in unreimbursed employee

business expenses; (2) $233 in tax return preparation fees; and (3) $7,849 in

attorney’s and accountant’s fees. Petitioner attached a Form 2106-EZ,

Unreimbursed Employee Business Expenses, reporting $4,039 in unreimbursed

employee business expenses. He did not provide a detailed breakout of these

expenses on his return.

5Petitioner requested an extension of time to file his 2011 Form 1040,

extending the due date to October 15, 2012.
7

Petitioner prepared his 2011 Form 1040 using TurboTax software. He

prepared a number of versions of his 2011 Form 1040 with “what if” scenarios,

including one in which he had had more income tax withheld during the year.

Petitioner provided a copy of a screenshot from the TurboTax program that

listed various versions of tax returns created, with titles such as “2011-Edgar

Filing HOH-As Filed” and “2011 Edgar Filing HOH-As Submitted”. Some of

these documents were last modified in 2012, and the rest were modified in 2015 or

2016.

6

V. Notice of Deficiency and Trial

On June 6, 2014, respondent issued a notice of deficiency to petitioner for

tax year 2011. Respondent adjusted various items on petitioner’s 2011 Form

1040, including charitable contribution deductions and miscellaneous itemized

deductions. Petitioner timely filed a petition for redetermination.

Petitioner would not agree to stipulate any documents before or during

trial.

7

 Respondent introduced into evidence a copy of petitioner’s 2011 Form

6The printout itself did not have a time stamp; instead it listed the dates on

which the documents had been modified. One document titled “2011-Edgar Filing

HOH-As Submitted” was modified on September 12, 2016.

7As previously indicated, petitioner had a trial before the Court with respect

to his 2010 tax year. See Brown v. Commissioner, T.C. Summary Opinion 2016-

(continued...)
8

1040 as filed, a copy of the notice of deficiency, a certified copy of petitioner’s

certified wage and income transcript for 2011, and a certified copy of petitioner’s

2011 Form 4340, Certificate of Assessments, Payments, and Other Specified

Matters.

Petitioner provided copies of PDF files he called “summary of expenses” at

trial for purposes of substantiating many of his expenses. Each summary of

expenses document listed a transaction description, copied from bank statements.

For example, the summary contained a description such as “Online banking

transfer” or the check card number used and the name of the vendor, a date, an

amount, and the expense category that petitioner had assigned.

A. Deductions Claimed on Petitioner’s Return

After concessions and additional amounts claimed,

8

 the deductions in

dispute are as follows:

7

(...continued)

89. Thus, petitioner has some familiarity with Court procedure and practice. The

Court reminded petitioner of the Rules and also the benefits of stipulation. 

Petitioner nevertheless refused to stipulate documents, including his 2011 Form

1040 as filed, which he acknowledged was the return which he filed for 2011.a

8Petitioner claimed a $9,200 charitable contribution deduction on his return

and conceded $901. Petitioner claimed a $4,039 deduction for unreimbursed

employee business expenses on his return and claimed a $4,651 deduction at trial.
9

Deduction Amount

Charitable contributions $901 

Tax return preparation fees 233 

Attorney’s and accountant’s fees 7,849 

Unreimbursed employee business 

 expenses

 Automobile 3,363

Tolls 197 

Parking 347 

Publications 744 

 Total 4,651

Petitioner presented copies of summaries of expenses at trial relating to his

charitable expenses and some of his unreimbursed employee business expenses

(automobile, tolls, and publications expenses).

Petitioner’s summary of charitable expenses listed 45 entries, reflecting

charges on credit cards or bank cards. The expenses can be broken down as

follows: (1) 14 entries totaling $492, paid to restaurants or an indiscernible payee

(either no entry, inadequate description, or multiple entries for one expense) and

(2) 31 entries totaling $409, paid to punchbowl.com, hst*julianbrownmemorial,

bigstockphoto.com, Facebooktabsite, and Google*youtube.
10

Petitioner also provided a printout of the Charlotte United Soccer Club

calendar for April 2011 that listed Julian Brown Memorial Cup events on April 16

and 17, 2011.

Petitioner did not provide copies of any documents for purposes of

substantiating either his tax return preparation expense or his attorney’s and

accountant’s fees, each deducted on his Schedule A. Petitioner also did not

provide the copies of his bank statements which he asserts he used to reconstruct

his 2011 expenses. Further, petitioner also did not provide underlying receipts or

other documentation, with the exception of his job search expenses.

B. Additional Deductions Claimed at Trial

Petitioner asserts he is entitled to additional deductions for the following

expenses: (1) job search expenses; (2) Schedule C expenses relating to his ACN

activity; and (3) home office expenses.

9

First, petitioner asserts he is entitled to deduct $2,476 for travel and other

expenses related to his job search. Petitioner provided copies of receipts for the

following job search expenses:

10

9Although petitioner did not raise the additional expenses in his petition, we

consider this issue to have been tried by consent. See Rule 41(b).

10The summary of petitioner’s job search expenses is a poor copy and

(continued...)
11

Travel dates Expense Location(s) Amount

Jan. 9 Hotel Washington, D.C. $181

Jan. 9-11 Hotel Washington, D.C. 440

Mar. 3-8 Flight Washington, D.C. to San Francisco, Cal. 110

Mar. 27-31 Hotel Miami, Fla. 974

Mar. 27-31 Flight San Francisco, Cal. to Miami, Fla. 1,224

July 3 Flight San Francisco, Cal. to Los Angeles, Cal. 83

July 6 Train Washington, D.C. to Philadelphia, Pa. 48

 Total 3,060

Second, petitioner asserts that he is entitled to a deduction of $1,754 for

“network marketing expenses” related to his involvement with ACN, which he

asserts should be deducted on Schedule C. Petitioner provided a summary of

expenses with nine entries totaling $1,754, paid to retailers such as Costco,

Beverages & More, and Target.

10

(...continued)

difficult to read. The expenses total $2,755, and petitioner subtracts $279 which

he states is attributable to meals and entertainment ($2,755 ! $279 = $2,476). The

copies of receipts attached reflect expenses totaling $3,060. It is unclear whether

the entries on the summary of expenses correlate with the attached receipts, and it

is also unclear why petitioner is claiming a deduction of $2,476 for total job search

expenses.
12

Third, petitioner asserts that he is entitled to a deduction of $4,248 for home

office expenses. Petitioner provided a printout of a Powerpoint slide which

calculates home office expense deductions as follows:

11

Expense type Total

Business use

percentage

Total

business use ACN Other

Rental $14,337 11% $1,577 $1,025 $552

Computer 1,065 50% 533 346 186

Telephone and fax 4,275 50% 2,138 1,390 748

 Total 4,248 2,761 1,486

Petitioner also provided copies of three recent photographs of his home

office showing the following: (1) a tall stack of plastic bins of various colors,

some of which appear to contain papers; (2) a desk with three computers, a

typewriter, and other miscellaneous office items; and (3) a shelf with a telephone,

a router, a few three-ring binders, and other miscellaneous office items.

12

11The business use percentage for the home office is based on the 220

square footage of the room divided by the 2,000 total square footage of the house

(220 square feet ÷ 2,000 square feet = 11%). Petitioner did not explain the basis

for the 50% estimate for the business use of his computer and telephone and fax. 

Petitioner also did not explain the basis for his allocation of the total business

expenses, resulting in network marketing expenses of $2,761 and other expenses

of $1,487.

12Petitioner took the photographs of his home office on September 11, 2016. 

The composition of items in petitioner’s home office has changed somewhat since

2011. For example, in 2011 petitioner had only one computer in his home office,

(continued...)
13

Discussion

I. Burden of Proof

In general, the Commissioner’s determination set forth in a notice of

deficiency is presumed correct, and the taxpayer bears the burden of proving that

the determination is in error. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115

(1933). Pursuant to section 7491(a), the burden of proof as to factual matters

shifts to the Commissioner under certain circumstances. Petitioner did not allege

or otherwise show that section 7491(a) applies. See sec. 7491(a)(2)(A) and (B). 

Therefore, petitioner bears the burden of proof. See Rule 142(a).

II. General Principles Governing Substantiation

Deductions are a matter of legislative grace, and a taxpayer is required to

maintain records sufficient to substantiate expenses underlying deductions claimed

on his or her return. Sec. 6001; sec. 1.6001-1(a), Income Tax Regs.; see New

Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).

If the taxpayer is able to establish that he paid or incurred a deductible

expense but is unable to substantiate the precise amount, the Court generally may

approximate the deductible amount, but only if the taxpayer presents sufficient

12

(...continued)

whereas he currently has three. Respondent did not object to the admission of

these copies of color photographs into evidence.
14

evidence to establish a rational basis for making the estimate. See Cohan v.

Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930); see also Vanicek v.

Commissioner, 85 T.C. 731, 742-743 (1985). Business expenses specified in

section 274 are subject to rules of substantiation that supersede the Cohan test. 

Sanford v. Commissioner, 50 T.C. 823, 827-828 (1968), aff’d, 412 F.2d 201 (2d

Cir. 1969); sec. 1.274-5T(a), Temporary Income Tax Regs., 50 Fed. Reg. 46014

(Nov. 6, 1985).

III. Section 162 Expenses

Section 162(a) generally allows deductions for all ordinary and necessary

expenses paid or incurred during the taxable year in carrying on any trade or

business. In general, no deduction is permitted for personal, living, or family

expenses. Sec. 262(a). The taxpayer bears the burden of proving that expenses

were of a business nature rather than personal and that they were ordinary and

necessary. Rule 142(a); Welch v. Helvering, 290 U.S. at 115.

Petitioner seeks to deduct $4,651 in unreimbursed employee business

expenses relating to his employment with MTC and $1,754 in network marketing

expenses relating to his activity with ACN.
15

A. Unreimbursed Employee Business Expenses

On his Schedule A petitioner claimed a deduction of $4,039 for

unreimbursed employee business expenses. He now claims unreimbursed

employee business expenses totaling $4,651 ($3,363 for automobile expenses,

$197 for tolls expenses, $347 for parking expenses, and $744 for publications

expenses). Petitioner provided summaries created from bank statements to

substantiate his automobile expenses, tolls expenses, and publications expenses.

Qualifying expenses under section 162 include expenses paid or incurred as

an employee. Lucas v. Commissioner, 79 T.C. 1, 6 (1982). Expenses are not

“necessary” when an employee fails to claim reimbursement for expenses incurred

in the course of his employment when entitled to do so. Orvis v. Commissioner,

788 F.2d 1406, 1408 (9th Cir. 1986), aff’g T.C. Memo. 1984-533. Accordingly, a

taxpayer cannot deduct employee business expenses to the extent he is entitled to

reimbursement from his employer for those expenses. See Lucas v.

Commissioner, 79 T.C. at 7. Deductions for those expenses belong to the

employer. See Kennelly v. Commissioner, 56 T.C. 936, 943 (1971), aff’d without

published opinion, 456 F.2d 1335 (2d Cir. 1972).

The taxpayer bears the burden of proving that he is not entitled to

reimbursement from his employer for such expense. See Fountain v.
16

Commissioner, 59 T.C. 696, 708 (1973). The taxpayer can prove that he was not

entitled to reimbursement by showing, for example, that he was expected to bear

these costs. See id.; see also Dunkelberger v. Commissioner, T.C. Memo. 1992-

723, 1992 WL 379282, at *1 (finding that management team expected taxpayer to

bear expense of business lunches with vendors). 

Petitioner asserted that his employer MTC had a written reimbursement

policy for employees, but MTC’s unofficial policy did not provide for

reimbursement of some of his employee business expenses. Petitioner asserted

that “legitimate business expenses * * * that exceeded a per diem, for example,

would not be reimbursed” and that MTC would reject reimbursement requests for

expenses that qualified under the written reimbursement policy. Petitioner also

asserted that he did not submit reimbursement requests for some qualifying

expenses because he knew that the requests would be rejected under the unofficial

reimbursement policy.

Petitioner has not offered credible evidence to corroborate his testimony

about MTC’s “unofficial reimbursement policy” and that it differed from MTC’s

written reimbursement policy. Because petitioner did not provide a copy of

MTC’s written reimbursement policy or sufficient detailed evidence of MTC’s

unofficial reimbursement policy, we cannot make a finding as to which of the
17

expenses might have been eligible for reimbursement by MTC. Petitioner has not

met his burden of showing that MTC would not have reimbursed the automobile,

tolls, parking, or publications expenses. See Orvis v. Commissioner, 788 F.2d at

1408; Lucas v. Commissioner, 79 T.C. at 7; Fountain v. Commissioner, 59 T.C. at

708; Dunkelberger v. Commissioner, 1992 WL 379282, at *1. Therefore,

petitioner is not entitled to a deduction for his unreimbursed employee business

expenses.

B. Network Marketing Expenses

Petitioner claims a deduction of $1,754 for network marketing expenses,

which he asserts is related to his activity as an independent business owner at

ACN.

Taxpayers are allowed a deduction for ordinary and necessary expenses paid

or incurred in carrying on a trade or business. Sec. 162(a). Whether an

expenditure is ordinary and necessary is usually a question of fact. Commissioner

v. Heininger, 320 U.S. 467, 475 (1943). Generally, for an expenditure to be an

ordinary and necessary business expense, the taxpayer must show a bona fide

business purpose for the expenditure; there must be a proximate relationship

between the expenditure and the business of the taxpayer. Challenge Mfg. Co. v.
18

Commissioner, 37 T.C. 650, 659-660 (1962); Henry v. Commissioner, 36 T.C.

879, 884 (1961); sec. 1.162-1(a), Income Tax Regs.

For the network marketing expenses, petitioner merely presented a summary

of purported expenses at trial, asserting that the summary represented business

expenses. Petitioner did not provide testimony or other evidence to establish a

bona fide business purpose for these expenses. Thus, we are unable to make a

finding as to whether the expenses are ordinary and necessary or whether they are

reasonable in amount. See sec. 162(a); Commissioner v. Heininger, 320 U.S. at

475; Challenge Mfg. Co. v. Commissioner, 37 T.C. at 659-660; Henry v.

Commissioner, 36 T.C. at 884. Therefore, petitioner is not entitled to a deduction

for the network marketing expenses related to his ACN activity.

IV. Section 274 Expenses

Petitioner claims a deduction of $2,476 for hotel, flight, and train expenses

incurred during his job search. 

Section 162(a) allows a taxpayer to deduct expenses incurred in searching

for new employment within the same trade or business. See Primuth v.

Commissioner, 54 T.C. 374, 378-379 (1970). Job search expenses include travel

and transportation expenses. See Murata v. Commissioner, T.C. Memo. 1996-321,

1996 WL 392503, at *6-*7.
19

Traveling expenses are subject to the strict substantiation requirements of

section 274(d). To deduct travel expenses, the taxpayer must substantiate through

adequate records or other corroborative evidence the following elements: (1) the

amount of the expense; (2) the time and place of the expense; and (3) the business

purpose of the expense. Sec. 274(d).

A taxpayer satisfies the “adequate records” test if he or she maintains an

account book, a diary, a log, a statement of expense, trip sheets, or similar records

prepared at or near the time of the expenditures, such as receipts or bills, that show

each element of each expenditure or use. See sec. 1.274-5T(c)(2), Temporary

Income Tax Regs., 50 Fed. Reg. 46017 (Nov. 6, 1985). Contemporaneous logs are

not required, but corroborative evidence to support a taxpayer’s reconstruction of

the elements of an expenditure or use must have “a high degree of probative value

to elevate such statement” to the level of credibility of a contemporaneous record. 

Id. subpara. (1), 50 Fed. Reg. 46016-46017.

Section 274(d) was intended to preclude use of the test set forth in Cohan

for the expense categories it covers. Sanford v. Commissioner, 50 T.C. at 828;

H.R. Rept. No. 1447 (1962), 1962-3 C.B. (Part 3) 405, 427; S. Rept. No. 1881

(1962), 1962-3 C.B. (Part 3) 707, 741. If a taxpayer’s records have been destroyed

or lost because of circumstances beyond his control, he may substantiate expenses
20

subject to section 274(d) by making a reasonable reconstruction of the

expenditures through other credible evidence. Boyd v. Commissioner, 122 T.C.

305, 320 (2004); Furnish v. Commissioner, T.C. Memo. 2001-286, 2001 WL

1325956, at *4; sec. 1.274-5T(c)(5), Temporary Income Tax Regs., 50 Fed. Reg.

46022 (Nov. 6, 1985). The burden is on the taxpayer to show that the

documentation was actually lost or destroyed because of circumstances beyond his

control. See Rule 142(a)(1); Adler v. Commissioner, T.C. Memo. 2010-47, 2010

WL 934267, at *9, aff’d, 443 F. App’x 736 (3d Cir. 2011).

A taxpayer is required to reconstruct pertinent records to the fullest extent

possible. See, e.g., Chong v. Commissioner, T.C. Memo. 2007-12, 2007 WL

109055, at *3. If no other documentation is available, the Court may, but is not

obliged to, accept credible testimony of a taxpayer to substantiate an expense

underlying a deduction. See Boyd v. Commissioner, 122 T.C. at 320 (citing

Watson v. Commissioner, T.C. Memo. 1988-29); Freeman v. Commissioner, T.C.

Memo. 2009-213, 2009 WL 2958663, at *6. The test set forth in Cohan comes

back into play in these circumstances. See Scully v. Commissioner, T.C. Memo.

2013-229, at *17. In the absence of adequate records to establish each element of

an expense under section 274(d), a taxpayer may alternatively establish each

element: “(A) By his own statement, whether written or oral, containing specific
21

information in detail as to such element; and (B) By other corroborative evidence

sufficient to establish such element.” Sec. 1.274-5T(c)(3)(i), Temporary Income

Tax Regs., 50 Fed. Reg. 46020 (Nov. 6, 1985); see also Lussy v. Commissioner,

T.C. Memo. 2015-35, at *12.

Petitioner seeks to deduct travel expenses incurred during his job search. At

trial petitioner stated merely that he had “sought interviews and exploratory

conversations with a range of financial services companies” and listed only three

potential employers with which he had sought interviews/conversations. Although

petitioner provided copies of receipts to substantiate these expenses, which

provided the dates and amounts paid, he did not provide any information about the

business purpose of the expenses, such as where he interviewed or the

individual(s) conducting interviews.

Petitioner’s receipts, without corroborating information such as locations or

names of individuals who interviewed him to establish a business purpose, are by

themselves insufficient to meet the strict substantiation requirements for travel

expenses under section 274(d). See secs. 162(a), 274(d); Primuth v.

Commissioner, 54 T.C. at 378-379; sec. 1.274-5T(c)(1), Temporary Income Tax

Regs., 50 Fed. Reg. 46016-46017 (Nov. 6, 1985).
22

We note that petitioner testified about the computer failure in 2011 that

caused him to lose some of his records for the year. See Rule 142(a)(1); Adler v.

Commissioner, 2010 WL 934267, at *9. But we are not satisfied that petitioner

made a reasonable reconstruction of each element of his claimed deductions

through other credible evidence. Petitioner merely provided summaries of

purported expenses and did not reconstruct records to establish the business

purposes for his claimed expenses through testimony or other evidence. See Lussy

v. Commissioner, at *12; sec. 1.274-5T(c)(3)(i), Temporary Income Tax Regs.,

supra.

Therefore, because petitioner did not establish the business purpose for the

job search expenses, he is not entitled to a claimed deduction for same.

V. Charitable Contributions

On his return petitioner claimed a charitable contribution deduction of

$9,200, but conceded some of this amount at trial. Petitioner provided a summary

of expenses totaling $901 which he asserts were related to his work for the

Memorial Fund.

No deduction is allowed under section 170 for a contribution of services. 

However, “unreimbursed expenditures made incident to the rendition of services

to an organization contributions to which are deductible may constitute a
23

deductible contribution.” Sec. 1.170A-1(g), Income Tax Regs. To be deductible,

unreimbursed expenses must be directly connected with and solely attributable to

the rendition of services to a charitable organization. Van Dusen v.

Commissioner, 136 T.C. 515, 525 (2011); Saltzman v. Commissioner, 54 T.C.

722, 724 (1970). “In applying this standard, courts have considered whether the

charitable work caused or necessitated the taxpayer’s expenses.” Van Dusen v.

Commissioner, 136 T.C. at 525.

A. Meals and Other Expenses

Petitioner asserts that he is entitled to deduct unreimbursed expenses for

meals and other travel expenses totaling $492 that he incurred in connection with

a North Carolina soccer tournament sponsored by the Memorial Fund.

A taxpayer may deduct “out-of-pocket transportation expenses necessarily

incurred in performing donated services” and “[r]easonable expenditures for meals

and lodging necessarily incurred * * * in performing donated services”. Sec.

1.170A-1(g), Income Tax Regs. Section 170(j) provides that no deduction is

allowed “for traveling expenses (including amounts expended for meals and

lodging) while away from home, whether paid directly or by reimbursement,

unless there is no significant element of personal pleasure, recreation, or vacation

in such travel.” As this Court has stated: “[T]ravel expenditures which include a
24

substantial, direct, personal benefit * * * are not deductible.” Tafralian v.

Commissioner, T.C. Memo. 1991-33; see also Babilonia v. Commissioner, 681

F.2d 678, 679 (9th Cir. 1982), aff’g T.C. Memo. 1980-207. The burden of proving

that such expenditures qualify as charitable contributions rests with the taxpayer. 

Tafralian v. Commissioner, T.C. Memo. 1991-33.

Petitioner failed to establish that his travel to North Carolina and the

expenses for meals whose costs he seeks to deduct involved “no significant

element of personal pleasure, recreation, or vacation in such travel.” See sec.

170(j). While he credibly testified that he established the Memorial Fund and its

soccer tournament, petitioner did not specify what he did for the 2011 tournament

or how much time he devoted to it. Without this information, we cannot conclude

that petitioner’s trip to North Carolina, where he owns a home, was directly

connected with and solely attributable to services performed at the tournament. 

See Babilonia v. Commissioner, 681 F.2d at 679; Tafralian v. Commissioner, T.C.

Memo. 1991-33. Therefore, petitioner is not entitled to a deduction for charitable

meals and other expenses.
25

B. Website Costs

Petitioner also asserts that he is entitled to deduct expenses totaling $409

that he incurred to maintain the Memorial Fund’s website. None of the individual

expenses was greater than $250.

Contributions through the payment of unreimbursed volunteer expenses of

less than $250 are subject to the requirements for contributions of money set forth

in section 1.170A-13(a), Income Tax Regs. Van Dusen v. Commissioner, 136

T.C. at 531. A taxpayer is required to maintain a canceled check or a receipt from

the donee organization. Sec. 1.170A-13(a)(1), Income Tax Regs. In the absence

of a canceled check or a receipt from the donee organization, the taxpayer must

maintain other reliable written records showing “the name of the payee, the date of

the payment, and the amount of the payment.” Van Dusen v. Commissioner, 136

T.C. at 534; see also sec. 1.170A-13(a)(1), Income Tax Regs.

Petitioner credibly testified that he volunteered for the Memorial Fund, that

he paid for website expenses to maintain the Memorial Fund’s website, and that he

was not reimbursed for these website expenses. Petitioner provided a written

record in the form of his summary of expenses. We find these reported

expenditures to be “directly connected with and solely attributable to the rendition

of services to a charitable organization” because petitioner incurred them to
26

promote the Memorial Fund. Since the entries in the summary show the date and

amount of the contribution and the name of the payee, we conclude that petitioner

is entitled to deduct these payments. See Van Dusen v. Commissioner, 136 T.C. at

534; sec. 1.170A-13(a)(1), Income Tax Regs.

Accordingly, petitioner is entitled to a total deduction of $409 for charitable

contributions.

VI. Home Office Expenses

Petitioner seeks to deduct home office expenses totaling $4,248 ($1,487 for

“other”, including working from home for MTC, and $2,761 for his ACN activity).

A taxpayer generally is not entitled to deduct any expenses related to a dwelling

unit used as a residence during the taxable year. Sec. 280A(a). A taxpayer may

deduct expenses allocable to a portion of the dwelling unit which is exclusively

used on a regular basis as the principal place of business for any trade or business

of the taxpayer or a place of business which is used by patients, clients, or

customers in meeting or dealing with the taxpayer in the normal course of the

trade or business. Id. subsec. (c)(1)(A) and (B). The “exclusive use” requirement

is an “all-or-nothing standard”. Hamacher v. Commissioner, 94 T.C. 348, 357

(1990). Further, it must be used exclusively for the employer’s work and not for
27

personal use. Sec. 280A(c)(1); Cadwallader v. Commissioner, 919 F.2d 1273,

1275 (7th Cir. 1990), aff’g T.C. Memo. 1989-356.

A. Home Office Use as an Employee of MTC

In the case of a taxpayer who is an employee, the home office must be

maintained for the convenience of the employer; it cannot just be a place in which

the employee chooses to do some of his work. Sec. 280A(c)(1) (flush language);

Frankel v. Commissioner, 82 T.C. 318, 323, 326 (1984). Such use has been found

where the home office was necessary for the functioning of the employer’s

business or necessary to allow the employee to perform his duties properly. 

Frankel v. Commissioner, 82 T.C. at 325-326. A home office is not for the

convenience of the employer if it is maintained merely for the employee’s own

convenience, comfort, or economy; for example, where the employee finds it more

convenient to work from home instead of staying late at the office or where the

employee prefers to perform certain activities at home. See Sharon v.

Commissioner, 591 F.2d 1273, 1274 (9th Cir. 1978), aff’g 66 T.C. 515 (1976);

Hamacher v. Commissioner, 94 T.C. at 358.

Petitioner, as an employee of MTC, had an office that MTC provided where

he worked regularly during 2011. Petitioner asserts that he worked in his home

office when he telecommuted and after normal business hours. Petitioner did not
28

assert nor provide evidence that MTC required him to maintain the home office or

to work from home or that it was necessary for him to maintain the home office to

perform his duties properly. See Frankel v. Commissioner, 82 T.C. at 325-326.

Instead, it appears that on occasion petitioner preferred to work from his home

office instead of at MTC’s office. On the basis of this record, we conclude that

petitioner chose to maintain the home office and work from home for his own

convenience, comfort, and economy. See sec. 280A(c)(1) (flush language);

Sharon v. Commissioner, 591 F.2d at 1274, Hamacher v. Commissioner, 94 T.C.

at 358-359; Frankel v. Commissioner, 82 T.C. at 326. Therefore, petitioner’s

claimed home office expense deductions relating to his employment for MTC are

not deductible.

B. Home Office Use for ACN Activity

A taxpayer may have only one principal place of business for each business

in which he is engaged. See Curphey v. Commissioner, 73 T.C. 766, 776 (1980). 

To determine the principal place of business for the purpose of a home office

expense the Court must also ascertain the “focal point” of a taxpayer’s business

activities. Jackson v. Commissioner, 76 T.C. 696, 700 (1981); Baie v.

Commissioner, 74 T.C. 105, 109 (1980). The taxpayer must be able to

demonstrate how much time is spent in the home office compared with how much
29

time is spent at other locations to demonstrate that the home office is the “focal

point” of his business activities and thus his principal place of business. Christine

v. Commissioner, T.C. Memo. 2010-144, 2010 WL 2640125, at *11, aff’d without

published opinion, 475 F. App’x 259 (9th Cir. 2012).

Petitioner did not provide testimony or other evidence about his activity

with ACN, including how much time he spent on the activity in his home office

compared with how much time he spent at other locations. Therefore, petitioner

did not demonstrate that the home office was the “focal point” of his activity for

ACN. See Christine v. Commissioner, 2010 WL 2640125, at *11. Further,

petitioner did not provide testimony nor other evidence that the home office was

used exclusively for business purposes and not for personal use. See sec.

280A(c)(1); Cadwallader v. Commissioner, 919 F.2d at 1275. Therefore,

petitioner’s claimed home office expenses deductions relating to his activity with

ACN are not deductible.

VII. Other Miscellaneous Expenses

On his Schedule A petitioner claimed deductions of $233 for tax return

preparation fees and $7,849 for “attorney and accounting fees”. Petitioner did not

address these deductions at trial and did not provide testimony or other evidence
30

to substantiate these deductions. On the basis of this record, we conclude that he

is not entitled to deductions for these expenses.

VIII. Section 6651(a)(1) Addition to Tax

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

the date prescribed (including extensions) unless the taxpayer can establish that

the failure is due to reasonable cause and not due to willful neglect. Section

7491(c) provides that the Commissioner has the burden of production in any Court

proceeding with respect to liability for an addition to tax. The Commissioner

satisfies this burden of production by coming forward with sufficient evidence that

the taxpayer did not file his return by the due date of the return. See Wheeler v.

Commissioner, 127 T.C. 200, 207-208 (2006), aff’d, 521 F.3d 1289 (10th Cir.

2008); Higbee v. Commissioner, 116 T.C. 438, 446 (2001). Respondent has

satisfied his burden of production by introducing a certified copy of petitioner’s

account transcript that reflects that petitioner’s 2011 Form 1040 was not filed until

December 31, 2012, over two months past the extended due date of October 15,

2012. See sec. 7491(c); Wheeler v. Commissioner, 127 T.C. at 207-208; Higbee

v. Commissioner, 116 T.C. at 446.

Reasonable cause and the absence of “willful neglect” are defenses to the

section 6651(a)(1) addition to tax. Sec. 6651(a)(1). “[W]illful neglect” means a
31

“conscious, intentional failure or reckless indifference.” United States v. Boyle,

469 U.S. 241, 245 (1985). “The determination of whether reasonable cause exists

is based on all the facts and circumstances.” Ruggeri v. Commissioner, T.C.

Memo. 2008-300, 2008 WL 5411919, at *2. A taxpayer meets the reasonable

cause exception if he demonstrates that he “exercised ordinary business care and

prudence” in trying to file his return. Sec. 301.6651-1(c)(1), Proced. & Admin.

Regs. This determination is factual, and the burden of proof is on the taxpayer. 

Merriam v. Commissioner, T.C. Memo. 1995-432, 1995 WL 522813, at *11, aff’d

without published opinion, 107 F.3d 877 (9th Cir. 1997).

Petitioner did not provide evidence that his failure to timely file was due to

reasonable cause. Although petitioner discussed his computer failure that

occurred sometime before July 2011, it occurred over a year before his 2011 tax

return was due. Thus, we find that petitioner is liable for the section 6651(a)(1)

addition to tax. See sec. 6651(a)(1); Ruggeri v. Commissioner, 2008 WL

5411919, at *2; Merriam v. Commissioner, 1995 WL 522813, at *11; sec.

301.6651-1(c)(1), Proced. & Admin. Regs.

IX. Accuracy-Related Penalty

Section 6662(a) and (b)(1) and (2) imposes an accuracy-related penalty on

any portion of an underpayment of Federal income tax that is attributable to the
32

taxpayer’s “negligence or disregard of rules or regulations” or “substantial

understatement of income tax.”

An understatement of Federal income tax is substantial if the amount of the

understatement for the taxable year exceeds the greater of 10% of the tax required

to be shown on the return for the taxable year or $5,000. Sec. 6662(d)(1)(A). If

the understatement of income tax for the year in issue is substantial, the

Commissioner has satisfied the burden of producing evidence that the penalty is

justified. Respondent met this burden because the amount of petitioner’s

understatement for 2011 is substantial.

13

Once the Commissioner has met his burden, the taxpayer may rebut the

evidence that a section 6662(a) accuracy-related penalty is appropriate if he can

demonstrate (1) reasonable cause for the underpayment and (2) that he acted in

good faith with respect to the amount paid. Sec. 6664(c)(1). A determination of

reasonable cause and good faith “is made on a case-by-case basis, taking into

account all pertinent facts and circumstances.” Sec. 1.6664-4(b)(1), Income Tax

13Petitioner’s notice of deficiency reflected an increase in tax of $15,453. 

Because petitioner is entitled to a deduction of only $409 for charitable

contribution expenses, the reduction of this increase in tax will be minimal. Thus,

the amount of tax required to be shown on petitioner’s 2011 return is

approximately $23,000 ($7,765 reported on return % $15,453 increase in tax '

$23,218). This $15,453 increase in tax is greater than $5,000, which is greater

than $2,322, which is 10% of $23,218. See sec. 6662(d)(1)(A).
33

Regs. Generally, the most important factor is the extent of the taxpayer’s effort to

assess his or her proper tax liability. Id.; see also Humphrey, Farrington &

McClain, P.C. v. Commissioner, T.C. Memo. 2013-23, at *33-*34.

The term “negligence” in section 6662(b)(1) includes any failure to make a

reasonable attempt to comply with the Code and any failure to keep adequate

books and records or to substantiate items properly. Sec. 6662(c); sec. 1.6662-

3(b)(1), Income Tax Regs. Negligence has also been defined as the failure to

exercise due care or the failure to do what a reasonable person would do under the

circumstances. See Allen v. Commissioner, 92 T.C. 1, 12 (1989), aff’d, 925 F.2d

348, 353 (9th Cir. 1991); see also Neely v. Commissioner, 85 T.C. 934, 947

(1985). The term “disregard” includes any careless, reckless, or intentional

disregard. Sec. 6662(c).

Nothing in the record suggests that petitioner consulted with a professional

adviser or conducted research before preparing his 2011 income tax return. 

Petitioner asserts that when preparing his 2011 Form 1040 using TurboTax he

mistakenly filed one of these “what if” versions instead of the correctly prepared

version and that this mistake explains some of the errors in claimed deductions

and withholding. Petitioner asserts that his filing of a 2011 Form 1040 that was

not intended to be complete resulted in some of the errors conceded.
34

We found petitioner’s testimony and the screenshot he provided credible,

and we believe that he mistakenly submitted an incorrect version of his 2011 Form

1040. However, petitioner’s explanation about this error does not demonstrate

that he exercised due care in the preparation of his tax return. It is unclear why

petitioner would have created versions of his return with incorrect information. 

Further, this explanation does not account for all of the deductions disallowed; for

example, this does not explain petitioner’s failure to substantiate his charitable

expense deductions. Thus, we are not convinced that petitioner made a reasonable

attempt to comply with the Code. See sec. 6662(c); Allen v. Commissioner, 92

T.C. at 12; Neely v. Commissioner, 85 T.C. at 947; sec. 1.6662-3(b)(1), Income

Tax Regs.

Petitioner’s recordkeeping was disorganized, and the documents that he

provided were difficult to read. Additionally, some appeared to be inaccurate. 

Petitioner’s computer failure does not account for his failure to keep proper

records for the remainder of 2011, nor does it account for his failure to provide the

bank statements he used to reconstruct his expenses. Thus, we are not convinced

that petitioner made a reasonable attempt to keep adequate books and records or to

substantiate items properly. See sec. 6662(c); Allen v. Commissioner, 92 T.C. at

12; Neely v. Commissioner, 85 T.C. at 947; sec. 1.6662-3(b)(1), Income Tax Regs.
35

Accordingly, we sustain the accuracy-related penalty.

We have considered all of the parties’ arguments, and, to the extent not

addressed herein, we conclude that they are moot, irrelevant, or without merit.

To reflect the foregoing,

Decision will be entered

under Rule 155.