T.C. M em o . 2 0 1 9 -3 0

UNITED STATES TAX COURT

M ICHAEL E. BROW

NAND M IRIAM L. M ERCADO-BROW N, Pet i t i o n ers v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 2 1 0 96 -1 5
. Fi l edAp ri l 8 , 2 0 1 9
.
PH i s an i n d ep en d en tco nt ract o r carry i n g o n a " co n ci erg e CFO b u s i n es s " . At t i m es h e h as h adas m an y as th ree cl i en t s s i m u l t an eo u s l y . Iny ear 1 , h e en t eredi n to a t h ree-y ear co n tract wi th Co . X an dwas req u i redt o wo rkfo ur d ay s a weeki n Pen n s au k en , New J ers ey . He retu rn edt o h i s h o m e i n At l an t a, Geo rg i a, fo r t h e res t o f t h e week . Co . X was th e s o l e s ou rce o f b u s i nes s i n co m e rep o rt ed b y Ps fo r th e p eri odb eg i n n i n g wh en PH wen tt o wo rkfo r Co . X an d ex t en d i n g th ro u g h y ear 2 . R d i s al l owedPs ' d educt i o n s o f PH's trav el i ng ex p en s es b et w een At l an t a an d Pen n s au k en fo r y ears 1 an d 2
. Hel d : Ps h av e fai l edt o p ro v e t h atPen n s au k en was n o tPH's reg u lar o r p ri n ci p al p l ace o f b u s in es s duri n g th e t im e h e wo rk edfo r Co . X. Hel d , fu rt h er, Ps h av e p ro v i dedu s wi th n o au th o ri ty th atwe are t o l o o katPH's b u s i n es s h i s t o ry as a wh o l e t o d et erm i ne wh et h er h e h ada reg u l ar o r p ri n ci pal p l ace o f b us i n es s .-2
-

[* 2 ] Hel d , fu rt h er, Ps h av e fai l edt o p ro v e th atPH's week l y tri ps fro m Pen n sau k en t o At l an t a were i n th e p u rs u i to f a t rad e o r b u s i n es s . Hel d , fu rt h er, I.R.C. s ec. 1 6 2 (a)(2 ) d edu ct i on s fo r t rav el in g ex p en s es d en i ed
. Hel d , fu rt h er, accu racy -rel at edp en al t ies s u s t ai n ed
.

Fran kG. Po d es t a, fo r p et i t i o n ers . J am es H. Bru n s o n III, fo r res p o n den t .

M EM ORANDUM FINDINGS OF FACT AND OPINION HALPERN, Ju d g e: Res p o n d en td et erm i n edd efi ci en ci es i n p et i t i o n ers ' Fed eral i nco m e t ax fo r t hei r 2 0 1 2 an d2 0 1 3 t ax ab l e (cal en d ar) y ears o f $ 3 ,6 6 9 an d $ 1 7 ,9 0 5 , res pect i vel y , an d accu racy -rel at edp en al t i es fo r t h o s e y ears o f $ 7 34 an d $ 3 ,5 8 1 , res p ect iv el y . W e m us td eci d e wh et h er p et i ti o n ers are en t i t l ed t o d edu ct fo r t h o s e y ears (s o m et i m es , ex am i n at i o n y ears ) ex p en s es fo r t rav el , fo o d , an d l o d g i n g u n d er s ect i on 1 62 (a) an dwh et h er t h ey are l i ab l e fo r t h e accu racy -rel at ed p en al t i es . Un l es s o th erwi s e s t at ed , al l s ect i o n referen ces are t o th e In tern al Rev en u e Co d e o f 1 9 8 6 , as am en d edan di n fo rce fo r t h e ex am i n at i o n y ears , an d al l Ru l e-3
-

[* 3 ] referen ces are t o th e Tax Co u rt Ru l es o f Pract i ce an dPro cedu re. Al l d o l l ar
am ou n t s h av e b een ro u n d edt o th e n eares td o l l ar. Pet i t i o n ers b ear t h e b u rd en o f p ro o f. See Ru l e 1 4 2 (a). 1 FINDINGS OF FACT Pet i t i o ners l i v edi n Al p h aret t a, Geo rg i a, a s ub u rb o f At l an t a (wi th o u t d i s t i n ct i o n , At l an t a), wh en th ey fi l edth e p et i t i o n . Th e p art i es h av e s ti p u lat ed cert ai n fact s an dth e au th en t i ci ty o f cert ai n d o cu m en t s . Th e fact s s t i p u l at edare s o fo u n d, an d d o cu m en t s s t i p ul at edare accep t edas au th en t i c. M r. Bro wn 's Bu si n es s M r. Bro wnh as an u n d erg radu at e d eg ree i n acco un t in g fro m La Sal l e Un i vers it y . He al s o h as a m as t er's d eg ree i n fi n an ce. In 1 9 89 , h e b ecam e a cert ifi edp ub l i c acco u n t an t . He p ro v i des fi n an ce-rel at eds erv i ces t o cl i en t s an d
v i ews h i m sel f as o p erat i n g a " co n ci erg e CFO [ch i ef fi n an ci al o ffi cer] b u s i n es s "
. He h as h adcl i en t s fo r h i s CFO b u s i n es s s i n ce atl eas t1 9 9 8 . Att i m es , h e h as h ad
as m an y as th ree cl ien t s s i m

u l t an eo u s l y . Hi s cl i en t s d o n o tn eces s ari l y req u i re h i m t o d o h i s wo rk fo r t h em

o n th ei r b u si n es s p rem i s es . If n o to n th e cl i en t 's b u s i n es s

1 Pet i t i on ers h av e n o trai s ed th e ap p li cab il i ty o f s ec. 7 4 91 (a), wh i ch s h i ft s th e b u rd en o f p ro o f t o th e Co m m i s s i o n er i n cert ai n s i tu at i o ns . W e co n cl u d e t h at s ec. 7 4 91 (a) d o es n o tap p l y h ere b ecau s e p et i t i o n ers h av e n o tp ro du cedan y ev i d en ce t h atth ey

h av e s at i s fi edth e p reco n d i t i o ns fo r i t s ap pl i cat io n .-4
-

[* 4 ] p rem i s es , h e m ay

wo rko n th e cl i en t ' s m at t ers fro m h o m e o r, i f h e i s o n th e
ro ad , fro m

h i s h o tel ro o m . Duri n g th e ex am i n at i o n y ears , h e m ad e a h o m e wi t h h i s wi fe an dch i l dren i n At l an t a. Tax Retu rn s M r. Bro wnp rep aredp et it i o n ers ' 2 0 12 an d2 0 1 3 Fed eral i n co m e t ax retu rn s (Fo rm 10 4 0 , U.S. In d i v i du al In co m e Tax Retu rn ). Pet i t i o n ers i n cl u d ed wi th th ei r 2 0 1 2 Fo rm

1 0 40 th ree Sch edu les C, Pro fi t o r Lo s s Fro m Bu s in es s , each s h o wi n g M r. Bro wnas p ro pri et o r o f t h e b u s i n es s an deach s h owi n g p et i t i o n ers ' h o m e ad dres s i n At l an t a as th e ad dres s o f t h e b u s i n es s. Th e th ree s ch edu l es d es cri b e t h e
s ub jectb u s i nes s es as " Park m o b i l e USA, In c." (Park m o b il e), " Am eri can Fu rn i tu re Ren tal , In c." (AFR), an d" Pro jectNex t , In c." (Pro

ject Nex t), res p ect i v el y . 2 Pet i t io n ers al s o i n cl u d edth ree Sch edu l es C wi th th ei r 2 0 1 3 Fo rm 1 04 0 , al l , l i k e th e 2 0 12 Sch edu l es C, s ho wi n g M r. Bro wnas th e p ro pri et or an d p et i t i o n ers ' h o m e ad dres s as th e b u s i n es s es ad dres s . Th e t h ree s ch edul es were fo r M i ch ael E. Bro wn --Co n s u l t i n g , Pro

jectNex t , an dM i ri am

L. M ercad o -Bro wn . Onn ei th er

2 Wh il e each of t h e t h ree Sch edu l es C d es cri b es th e s ub jectb u s i n es s as b ei n g i n co rp o rat ed , th e fi rs t two are d es cri b i n g th e n am es o f M r. Bro wn 's cl i en ts an dare n o tm ean tt o co m

m u n i cat e t h ath i s Sch edu l e C b u si n es s was i n co rp o rat ed . Th e th i rd Sch edu l e C rel at es t o h i s co n s u lt i n g b u s i n es s , wh i ch was n o t i n co rp o rat ed
.-5
-

[* 5 ] th ei r 2 0 1 2 n o r 2 0 13 Fo rm 1 0 4 0 d i dp et i t i o ners cl ai m an y d edu ct i o n fo r t h e b u s i n es s u s e o f an y

p o rt i o n o f t h ei r res i d en ce. Park m ob i l e M r. Bro wnwo rk ed fo r Park m o b i l e fro m Ap ri l 2 01 1 th ro u g h Ap ri l 2 0 1 2
. Park m ob i l e i s i n At lan t a. Onth e Park m ob i le Sch edu le C, p et i t i o ners rep ort ed
s ub s t an t i al g ro s s i n co m e fro m Park m o b i l e an da t rav el ex p en s e o f $ 7, the d educt i o n o f wh i ch was n o td i s al l o w edb y res p o n d en t . Pro ject Nex t M r. Bro wnd es cri b edth e n atu re o f Pro jectNex t 's b u s i n es s as p ro v i di n g
s erv i ces t o cl i en ts , v i z, h i s " co n ci erg e CFO b u s in es s " . Pet it io n ers rep o rt edn o g ro s s i n co m e fo r Pro

jectNex tfo r ei th er 2 0 1 2 o r 2 0 1 3 al th o ug h fo r each y ear t h ey cl ai m edd edu ct i on s fo r v ari o u s ex pen s es , u n ch al l en g edb y res po n den t , b u tn o trav el i n g ex pen s e. Fo r 2 01 2, they cl ai m edd edu ct i o n s fo r ad v ert is i n g , l eg al an d p ro fes s i on al s erv i ces , an do ffi ce ex pen s es o f $ 7 4 8 , $ 1 3 8 , an d$ 9 6, res p ect iv el y , an d fo r 2 0 1 3 th ey

cl ai m edd edu ct i on s fo r l eg al an dp ro fes si o n al s erv i ces an do t h er
ex p en s es , p ri n ci pal l y

" In t ern etad dres s ren ewal co s t s " , o f $ 1 3 8 an d $ 9 7 2 , res p ect i vel y .-6
-

[* 6 ] AFR M r. Bro wnb eg an wo rkfo r AFR i n Oct o b er 2 0 1 2. Hi s en gag em en tb y AFR
was g ov ern edb y

a " Co n s ul t i n g Ag reem en t " (ag reem en t ). Th e ag reem en tp ro v i d es th ath i s en gag em en twas t o co m m en ce o n Oct o b er 2 , 2 0 1 2 , an d co n t i n ue u n t i l Oct o b er 2 , 2 0 1 5 , u nl es s t erm i n at ed earl i er up o n , am o n g o th er h ap p en i n g s, ei th er p art y 's g iv i n g fi ve d ay s wri tt enn ot i ce o f t erm i n at i o n t o th e o th er p art y . Itreq u i res th atM r. Bro wnp ro v id e h is s erv i ces as an i n dep en d en tco nt ract o r an dn o t as an
em pl o y ee. Ital s o p ro v i des th atAFR i s t o p ay M r. Bro wna co n s ul t i n g fee o f $ 1 2 ,5 0 0 a m o n th fo r t h e fi rs ty ear o f the t h ree-y ear p eri o do f t h e ag reem en tan dan i n creas edm o n th l y

am ou n tdu ri n g each o f t h e rem ai n i n g y ears o f t he ag reem en t. AFR h as o ffi ces i n n um ero us l o cat i o n s , i n cl ud i n g Pen ns au k en , New J ers ey (ap p aren t l y

th e co m p an y 's h ead qu art ers ), an d At l an t a. Th e ag reem en t p ro v i d es th atAFR wo u ldrei m

b u rs e M r. Bro wn fo r cert ai n o f h i s b u s in es s ex pen s es , b u ti t
s p eci fi cal l y

ex cl u d es rei m

b urs i n g h i m

fo r h i s ex p en s es i n trav el i n g t o an d fro m Pen ns au k en . Pu rs u an tt o a Sep t em b er 1 4, 2 0 1 2 , em ai l fro m AFR's ch ief ex ecu t i ve
o ffi cer t o h i m , M r. Bro wnwas req u i redt o wo rka fo ur-d ay (M on d ay thro u g h Th u rs d ay ) wo rkw eeki n Pen n s au k en . Onth e 2 0 1 2 AFR Sch edu l e C, p et i t i o n ers rep o rt edco m

p en s at i o n o f $ 3 7 ,5 0 0 recei v edb y M r. Bro wnfro m AFR an dcl ai m ed a d educt io n o f $ 1 0 ,0 6 5 as a b u si n es s ex p en s e fo r t h e co s t o f h is week l y trav el fro m-7
-

[* 7 ] At l an t a t o Pen n s au k en . Pet i t i o n ers rep o rt edco m p en s at i o n o f $ 1 5 9 ,7 59 recei v edb y

M r. Bro wnfro m

AFR o n th e 2 0 1 3 Sch edul e C en t i t l ed " M i ch ael E. Bro wn --Co n s u l t i n g " an dcl ai m eda d edu ct i o n o f $ 5 2 ,6 1 7 as a b u si n es s ex pen s e fo r th e co s to f h is week l y

trav el fro m

At l an t a t o Pen n s au k en . M r. Bro wnwo rk edfo r AFR u n t il atl eas tAu g u s t 4 , 2 0 1 4
. M i ri am L. M ercad o -Bro wn Pet i t i o ners rep ort ed$ 2 5 ,0 0 0 o f i n co m e an dn o ex p en s es o n th e 2 0 13 M i ri am L. M ercad o -Bro wn Sch edu l e C. Th ati nco m e was M r. Bro wn 's i nco m e, p arto f wh ath e recei vedfro m AFR, an dn o th i s wi fe's i n co m e. Pan go USA Pan g o USA (Pan g o ) i s an Is rael i t ech n i cal co m p an y th atM r. Bro wn t es t i fi edh e wo rk ed fo r fro m 2 0 1 2 th ro ug h 2 0 14 . He n ev er v i s i t ed Pan g o ' s U.S. h ead qu art ers i n Harri s bu rg , Pen n s y l v an i a. He co u l dd o Pan g o 's wo rko n h i s
co m p u t er, i n At l an ta o r wh erev er h e was . Pet i ti o n ers rep o rt edn o i n co m e fro m Pan go o n thei r 2 0 12 o r 2 0 1 3 Fo rm 1 0 4 0. Pen al t i es Th e accu racy -rel at edp en al t i es th atres po n d en td et erm in edwere $ 7 3 4 fo r 2 0 1 2 an d$ 3 ,5 8 1 fo r 2 0 1 3 . Th o s e p en al ti es were p ro p os edb y o n e o f res p o n d en t 's t ax co m pl i an ce o ffi cers , J an i ce M o o re, wh o ex am i n edp et i t i o n ers ' retu rn s fo r t h e-8
-

[* 8 ] ex am i n at i o n y ears . Th e p en al t i es were ap p ro v edi n wri t i n g b y h er i m m ed iat e
s up erv i s o r, Sup erv is o ry

Tax Sp eci al i s tJ en n i fer Earl s , b efo re res po n den t i s s u edth e
s t atu to ry n o t i ce o f d efi ci en cy

h ere i n i s s u e. OPINION I. Trav el i n g Ex p en s es A. In tro du ct io n Sect io n 1 6 2 p erm i t s t ax p ay ers t o d edu ct al l o rd in ary an dn eces s ary

b u s i n es s
ex p en s es p ai d o r i n cu rreddu ri n g the t ax ab l e y ear an d s p eci fi cal ly i n cl ud es

" trav el i n g ex p en s es (i n cl u d i n g am o u n t s ex p en d ed fo r m eal s an dl o dg i n g o th er t h an
am ou n t s wh i ch are l av is h o r ex trav ag an tu nd er t h e ci rcu m s t an ces ) wh i l e away fro m h o m e i n th e p urs u i t of a t rad e o r b u s i n es s " . Sec. 1 6 2 (a)(2 ). 3 A t ax p ay er's " h o m e" , fo r p u rp o s es o f s ect i o n 1 6 2 (a)(2 ), g en eral l y m ean s th e
v i ci n i ty o f h i s p ri n ci pal p lace o f em p l o ym en t rat h er t han h is p ers on al res i d en ce. M i t ch el l v . Co m

m i s s i o n er, 7 4 T.C. 5 7 8 , 5 8 1 (1 9 80 ); Zb y l utv . Co m m i s s i o n er, T.C.

3 Sec. 2 7 4 (d ) g en eral l y

d i s al l o ws an y

d edu ct io n u n d er s ec. 1 6 2 fo r, am o n g o th er t hi n g s , " an y

trav el i n g ex p en se (i n cl u d i n g m eal s an dl o d g i n g wh i l e away fro m h o m e)" , u n l es s t h e t ax p ay er co m p l ies wi th s tri ng en ts ub s tan t i at i o n req u i rem en t s as t o th e am ou n t , t i m e an d p l ace, an db u s i n es s p u rp o s e o f t h e ex p en s e. Sec. 2 7 4 (d )(1 ). Attri al , i n res p on s e t o the Co u rt 's qu es t i o n as t o wh et h er th ere was an y

s ub s tan t i at io n i ss u e, co u n sel fo r res p on d en ti n fo rm edth e Co u rtth at th ere was n o n e. W e accep tth atan dco n s i d er s ub s t an t i at i o n t o n o t b e an i m p ed im en tt o p et i t i o n ers ' cl ai m s th atthey are en t i t l ed t o d edu ct io n s fo r t rav el i ng ex p en s es u n d er s ec. 1 6 2 (a)(2 ).-9
-

[* 9 ] M em o . 2 0 0 8 -4 4 , 2 0 0 8 W L 5 3 9 0 1 8 , at* 5 . Acco rd i n g ly , ex p en s es i n cu rred i n
co m m u t i ng fro m

a t ax p ay er's p ers on al res i d en ce t o a t ax p ay er's b u s i n es s o r p l ace
o f em p l o ym en t are g en eral l y n o n d edu ct i b l e p ers o nal ex p en ses . E.g ., Zb y l u tv . Co m m i s s i o n er, 2 0 0 8 W L 5 3 90 1 8 , at* 5 ; s ec. 1 .2 6 2 -1 (b )(5 ), In co m e Tax Reg s . Wh ere a t ax pay er d o es n o th av e a p erm an en tp l ace o f b u si n es s , b u t rat h er i s em

p l o y edt em

p orari ly b y v ari ou s em

p l oy ers atd i fferen t l o cat i o n s , we g en eral l y

d eem th e s itus o f t h e t ax p ay er's p erm an en t res i d en ce t o be h i s o r h er t ax h o m e, an d th e t ax p ay er's trav el i n g ex p en s es fro m

h i s res i den ce t o th o s e t em p o raryp l aces o f em

p l o ym en t m ay b e d edu ct i b l e. * * * Zb y l u tv . Co m

m i s s i o ner, 2 00 8 W L 5 3 9 0 1 8 , at* 5 ; acco rdBarret tv . Co m m i s s i o n er, T.C. M em o . 2 0 1 7 -1 9 5 , at* 1 0
. Ho wev er, [w] h en a t ax p ay er accep ts em p l o ym en t ei th er p erm an en tl y o r fo r an i n d efi n i t e t im e awayfro m th e p l ace o f h i s u s u al ab o d e, t h e t ax p ay er's t ax h o m e wi l l s h i ftt o th e l o cat i on o f t h e t ax p ay er's n ew p ri n ci pal p l ace o f b u s i nes s. Det erm i n i n g th e p ri nci p al p l ace o f b u si n es s i n cl u d es rev i ew o f t h e l o cat i o n wh ere t h e t ax p ay er s p en d s m ore o f h i s t i m e, en gag es i n g reat er b u s i n es s act i v i ty , an dd eri v es a g reat er p ro p o rt i o n o f h i s i n co m e. * * * Barret t v . Co m

m i s s i o n er, at* 1 0 (ci t at i o n s o m i tt ed ). B. Part i es ' Arg u m en t s 1
. Pet i t i o ners ' Arg u m en t Rel y i n g p ri n ci p al ly

o n Zb y l u t , p et i t i o n ers cl ai m thatb ecau s e, du ri n g t h e
ex am i n at i o n y ears , M r. Bro wn h adn o p ri n ci p al p l ace o f b u s i n es s an dwo rk edat-1 0
-

[* 1 0 ] m ul t i p l e l o cat i o n s , h i s t ax h o m e was h i s p erm an en t res i d en ce i n At lan t a. In
s up p orto f t h ei r cl ai m

th ath e h adn o p ri n ci p al p lace o f b u si n es s an dwo rk edat
m u lt i p l e l o cat i o n s , th ey

ci t e h i s t es t i m o n y

attri al th ath e wo rk edfo r t h ree
co m p an i es du ri n g 2 0 1 2 an d2 01 3 , " o n e ex cl us i v el y fro m At l an t a (ParkM o b i l e),
an o th er p red o m in at el y fro m At l an t a (Am eri can Fu rn itu re Ren t al ), an d a t h i rdfro m wh erev er h e was at th e t i m e, wh i ch m o re o ft en than n otwas At l an t a (Pan g o USA)." Th ey

ad d : " He al s o t es t i fi edth atth e v as t m ajo ri ty o f ad m i n is trat i v e an d
m ark et i n g wo rkwas p erfo rm edfro m At l an ta." Th ey

co n cl u d e: " M r. Bro wn
wo rk edm o re i n At l an t a, Geo rg i a t h an an ywh ere el s e, i n cl u d i n g * * * [Pen n s au k en ] ." Al t ern at i v el y , rel y i n g o n Dal y v . Co m m i s s i on er, T.C. M em o . 2 0 1 3 -1 4 7 , at* 10 , p et i t i on ers arg u e t h at , ev en i f M r. Bro wns p en ta m ajo ri ty o f h i s t i m e i n Pen n s au k en , h i s t ax h o m e wo u l db e i n At l an t a b ecau se h e d i dn o th av e a reg u l ar o r p ri n ci p al p l ace o f b u s i n es s . InDal y v . Co m m i s s io n er, at * 1 0 (ci t i n g
s ect i on 1 .9 1 1 -2 (b ), In co m e Tax Reg s .), we s ai d : " If an i n di v idu al h as n o reg u l ar
o r p ri n ci p al p l ace o f b u s i n es s b ecau s e o f t h e n atu re o f th e b us i n es s , th en the i n d i v i du al 's t ax h om e i s h is o r h er p l ace o f ab o de i n a real an ds ub s t an t i al s en s e."-1 1
-

[* 1 1 ] 2
. Res p o nd en t 's Arg u m en t Res p o n d en targ u es th atM r. Bro wn 's t ax h o m e b ecam e Pen n s au k en wh en h e
ex ecu t edth e ag reem en t an d , th erefo re, p et i t i o n ers can n o t d edu ct h is ex p en s es o f
co m m u t i ng week l y

fro m At l an t a t o Pen n s au k en . C. An al y s i s 1
. In tro du ct io n As we u nd ers t an di t, M r. Bro wni s i n es s en ce a b u s in es s co ns u l tan t wh o , o v er t h e y ears , h as h adn u m ero u s cl i en t s fo r h is co n ci erg e CFO b u s i n es s . Oft en , h e h as had m o re t han o n e cl i en tato n ce. M an y , i f n o tm o s t, o f h i s cl ien t s d i dn o t req u i re h i m

t o b e p res en t o n , o r, i n d eed , s pen d m u ch t i m e at , th ei r b u s i n es s p rem i s es . Su ch i s a wo n d er o f t h e i n fo rm at i o n ag e. Bu tAFR was d i fferen t . In Oct o b er 2 0 1 2, h e b eg an wo rkfo r AFR p u rs u an tt o th e ag reem en t , wh i ch , u n l es s earl ier t erm i n at ed , wo u ld ru n fo r t h ree y ears . Al s o , AFR req u i redth ath e wo rki n Pen ns au k en fo u r d ay s a week . He d i dn o tm ov e h i s fam i l y t o Pen n sau k en b u t trav el ed b et ween th e t w o ci t i es week l y . W e m u s td eci d e wh et h er p et it i o n ers m ay d eductth e ex p en s es o f t h attrav el , an dth atd ep en d s o n wh ere, du ri n g t h e t i m es h e i n cu rredth o s e ex p en s es , h i s t ax h o m e was .-1 2
-

[* 1 2 ] 2
. M r. Bro wn 's Tax Ho m e

a. M r. Bro wn 's En g ag em en t b y AFR W as In d efi n i t e. Attri al , M r. Bro wns u g ges t edth at , b ecau s e, u n d er th e ag reem en t , AFR
co u ldt erm i n at e h is en g ag em en tatwi l l , h is en g ag em en t b y i t was t em

p o rary (i m p l y i n g th at , b ecau s e t h e en g ag em en twas t em po rary , Pen ns au k en n ev er b ecam e h i s t ax h o m e). An dwh i l e p et it i o n ers d o n otp u rs ue t h atarg u m en t o n b ri ef, t h e fact th atth e ag reem en t, al th o u g h t erm i n ab l e b y ei th er p art y , was t o l as tfo r t h ree y ears i s i nd i cat i v e t h atM r. Bro wnco u l dn o th av e ex p ect edh i s wo rkfo r AFR i n Pen ns au k en t o b e t em

p o rary ; i
. e., h e co u ldn o t h av e ex p ect edi tt o b e co n cl u d ed wi th i n a reas o nab l y

s h ort p eri o d . See Gi es b rech tv . Co m m i s s i on er, T.C. M em o . 1 9 9 5 -1 1 8 , 1 9 9 5 W L 1 2 79 0 3 , at* 4 (fi nd i n g s i m i l ar ci rcu m s t an ces an dco n cl u d in g th att ax p ay er's co n tractem p l oym en twas i n defi n i t e, en ti t li n g h im t o n o d edu ct i o n fo r t rav el i n g ex p en d i tu res b ecau s e co n tract -em pl o ym en t l o cat i o n b ecam e t ax h o m e). b
. M r. Bro wnW o rk edEv ery W eeki n At l an t a. Pet i t i o ners al s o arg u e t h atPen n s au k en n ev er b ecam e M r. Bro wn 's t ax h o m e b ecau s e i n 2 0 13 (as i n 2 01 2 ) h e d i dn o t wo rkthe fu l l y ear i n Pen n s au k en . Iti s tru e t hatM r. Bro wnd i dt es ti fy th ati n m i d-2 0 1 3 h e n eg o t i at edwi th AFR's ch i ef
ex ecu t i v e o ffi cer a ch an g e i n h i s arran g em en t th atal l owedh i m t o wo rkal t ern at e-1 3
-

[* 1 3 ] two -week p eri o d s i n Pen n s au k en an di n AFR's At l an ta o ffi ce. Th at t es t i m o ny , h owev er, co n trad ict edh i s t es t i m o n y earl i er i n th e cas e t h at" [w] h en I fi rs tjo i n edAm eri can Fu rn i tu re Ren t al , In c. [i n Oct o b er 2 0 1 2 ] , I was i n a h o t el
ro o m fo r 1 7 m o n ths [,] ev ery week ." An d wh i l e s ubs t an ti at i o n i s n o t an i ss u e i n th i s cas e, s ee s upra n o t e 3 , we as s u m e t hatp et i t i o n ers h av e (o r atl eas th ad ) ad equat e reco rd s an drecei p t s d o cu m en t i n g M r. Bro wn 's trav el s ch edu l e t h at
wo u l ds up p o rth is cl ai m

thatb eg i n n i n g i n th e s eco n d h al f o f 2 0 1 3 , h e wo rk edi n Pen ns au k en an di n At l an t a o n an al t ern at i n g tw o -weeks ch edu l e. Pet i t i o ners ' fai l u re t o p ro du ce ev id en ce i n th ei r p o s s es s i o n th at , i f tru e, wo u l db e fav o rab l e t o th em g i v es ri s e t o th e p res u m

p t i o n th at , i f p ro du ced , the ev i d en ce wo u l db e
u n fav o rab l e. Th ati s es p eci al l y tru e wh ere t h e p art y fai l i n g t o p ro duce t he
ev i d en ce h as th e b urd en o f p ro o f. W i ch i t a Term i n al El ev at o r Co . v . Co m m i s s i o n er, 6 T.C. 1 1 58 , 1 1 6 5 (1 9 4 6), aff'd , 1 6 2 F.2 d5 1 3 (1 0 th Ci r. 1 9 4 7 ). Pet i t io n ers h av e fai ledt o co n v i n ce u s th at , b eg i nn i n g i n m i d -2 0 1 3 , M r. Bro wn
wo rk edal t ern at in g t wo -weekp eri o d s i n At l an ta an d i n Pen n s au k en . Acco rd i n g l y , th ey h av e fai l edt o co n v in ce u s th at , i n 2 0 1 3 (v acat i o n t i m e as i d e), M r. Bro wn
wo rk edl es s th an fo u r d ay s a week , ev ery week , i n Pen n s au k en .-1 4
-

[* 1 4 ] c. Fro m Oct o b er 2 0 1 2 Th ro u g h 2 0 13 Pen n s au k en was M r. Bro wn 's Reg u lar o r Pri nci p al Pl ace o f Bu s i n es s. Bu tM r. Bro wnd idretu rn t o At l an t a week l y . He was an i n d ep en d en t
co n tract or an d , ap p aren t l y , n otp recl u d edb y th e ag reem en tfro m

s o l i ci ti n g o r
wo rk i n g fo r o th er cl i en t s du ri n g h i s t en ure wi th AFR. He t es t ifi edth ath e d i d
m ark et i n g fo r h i s co n ci erg e CFO b u s i n es s u s i n g a co m p u ter ap p l i cat i o n , an dh e

" [c] o u l db e an ywh ere" t o d o th att as k . He t es t ifi edth at h e d i dad m in is trat iv e wo rk fo r h i s b u s i n es s i n At l an t a, b uth e d i dn o t d es cri b e t h atwo rko r s ay h o w l o n g h e
s p en t atth e wo rk . An dal th o u gh h e cl ai m edth at , du ri n g t h e ex am i n at i o n y ears , h e
wo rk edfo r Pan g o i n At l an ta, h e d i dn o td es cri b e t h atwo rk o r t h e t i m e h e s p en tat i t . As n o t ed , h e rep o rt edn o i n co m e fro m Pan g o fo r t h e ex am i n at i o n y ears . Fro m Oct o ber 2 0 1 2 t h ro u g h 2 0 1 3 , AFR was the s o le s o u rce o f M r. Bro wn 's b u s i n es s i n co m e. He s p en tth e m ajo ri ty o f h i s t i m e (fo ur d ay s a week ) i n Pen ns au k en , wo rk i ng fo r AFR. Wh i l e h e m ay h av e en g ag edi n act i vi t i es wi th
res p ectt o h i s co n ci erg e CFO b u s i n es s wh i l e ath o m e o n l o n g week en d s i n At l an t a, h e d i d no td es cri b e an y

cl ien tm eet i n g s i n At l an t a o r o th erwi s e d es cri b e wo rk
as s i g n m en t s o r b u s in es s -rel at edt as k s thatn eces s i t at edh i s b ei n g i n At l an t a t o
acco m pl i s h th em . Pet i t i o n ers h av e n o tp ers u ad edu s th at , fro m Oct o b er 2 0 1 2 th ro u g h 2 0 1 3 , h e wo rk ed fo r m u l t i p l e cl i en t s atv ari o u s l o cat i o n s . W e fi n dth at ,-1 5
-

[* 1 5 ] du ri n g th e t i m e h e wo rk edfo r AFR i n 2 01 2 an d2 01 3 , Pen n s au k en was h i s reg u l ar o r p ri n ci p al p l ace o f b u s i n es s . See Barret tv . Co m m i s s i o ner, at * 1 0 ; s ee al s o Green v . Co m

m i s s i o n er, 3 5 T.C. 7 6 4 (1 96 1 ) (h o ld i n g t ax p ay ers n o t en t i t l edt o a d educt io n fo r t rav el ex p en s es fro m h om e i n Green v i l l e, Oh i o , t o Dayt o n , Oh i o , fro m wh en ce cam e al l o f h u s b an d 's i n co m e), aff'd p er cu ri am , 2 9 8 F.2 d8 9 0 (6 t h Ci r. 1 9 62 ). Bu t , rel y i n g o n Dal y v . Co m m is s i o n er, at* 1 0 , p et i t i o n ers d o arg u e th at , b ecau se M r. Bro wn" d i dn o th av e a reg u l ar o r p ri n ci p al p l ace o f b u s i n es s " , h i s t ax h o m e was i n At l an t a.

d
. W e Do No tTak e a Lo n g -Term Vi ew. M r. Bro wnt es t i fi edth ath e h as h adb u s in es s cl i en t s s i n ce atl eas t1 9 9 8
. An di f, s in ce t h en , h e h as h adn u m ero u s cl i en t s , i t m ay wel l b e t ru e t hat , co n si d eri n g th e i n t erv en i n g 1 5 y ears as a wh o l e (1 9 9 8 t h ro u g h 2 0 1 3 ), h e h as h ad
n o reg ul ar o r p ri n ci p al p l ace o f b u si n es s . Bu tp et i t i o n ers h av e p ro v i d edu s wi t h n o
au th o ri ty th atwe are t o t ak e s u ch an ex t en d edv i ew t o d et erm i n e wh et h er, du ri n g th e fi ni t e p eri o do f h i s b u s i n es s h i s t o ry h ere u n d er co n s id erat i o n (fro m Oct o b er 2 0 1 2 thro u g h 2 0 1 3 ), h e h adn o reg u l ar o r p ri n ci p al p l ace o f b us i n es s . InGreen v . Co m m i s s i o n er, 3 5 T.C. 7 64 , th e t ax p ay er h u s b an dwas s el f-em p lo y edas an i n du s tri al an dm an ag em en tco n s u l t an t . Th e t ax p ay ers ' res i d en ce was i n Green v il l e, Oh i o , an dth e h us b an dh adan o ffi ce at the res i d en ce, wh ere h e d i d-1 6
-

[* 1 6 ] s o m e cl i en t -rel at edwo rk . Th e h u s b an dh adn o i n co m e fro m an y cl i en ti n Green v il l e, an d , fo r t h e t wo y ears i n i s s u e, al l o f h i s i n co m e was fro m Dayto n , Oh i o. Th e Co u rtd is al lo wedh is trav el i n g ex p en s es b et ween Green v il l e an d Dayt o n , s ay i n g th atthe wo rk h e d i d i n Green v i ll e co ul d h av e b een d o n e i n Dayt o n
an d th atth e t ax p ay ers ch o s e t o l i v e i n Green v i l l e " fo r p ers o n al reas o n s " . Id . at 7 6 7 . Th e Co u rtad d ed : " Th ei r wo rk i n Dayt on d o es n o tg i v e ri se t o b u s in es s
ex p en s es u n d er t h e ci rcu m s t an ces * * * , ev en th o ug h * * * [t ax p ay er h u s b an d ] d ep en d edup o n s h o rt -p eri odem p l o ym en t ." Id . Ju d ge Fi sh er, d i s s en ti n g , cau t i on ed : " If a t ax p ay er's h o m e au t o m at i cal l y fo l l ows a t em

p o rary jo b s it e, n o
wo rk i n g m an co u l dev er b e awayfro m h o m e wh i l e h e was wo rk i n g ." Id . at7 6 8 (Fi s h er, J ., d i s s en ti n g ). In affi rm i ng p er cu ri am th e Co u rto f Ap p eal s s ai d : " Th e
ev i d en ce rev eal s t h ath i s b u s in es s h ead qu art ers i n Dayto n was i n d efi n i t e an d i n d et erm i n at e. Hi s s i tu at i o n i s n o twi th i n th e co n cep to f t he al lo wab l e d edu ct i o n s fo r t rav el i n g ex p en s e." Green v . Co m m i s s i o ner, 2 9 8 F.2 dat8 9 1 . W e wi l l fo l l o w
o u r rep o rti n Green , as affi rm edb y th e Co u rt o f Ap p eal s , i n co n cl ud i ng th atM r. Bro wn 's t ax h o m e b ecam e Pen n s au k en wh en h e wen tt o wo rkfo r AFR.-1 7
-

[* 1 7 ] 3
. Trav el Fro m Hi s Tax Ho m e t o Hi s Fam i l y Ho m e Ho wev er, M r. Bro wnwas away fro m h i s t ax h o m e i n Pen n s au ken wh en , week l y , h e t rav el edt o h i s fam i l y h o m e i n At l an t a t o s pen d l on g week en d s wi th h i s wi fe an d ch i l dren . To d edu cth i s trav el i n g ex p en s es fro m an dt o h is t ax h o m e (Pen n s au k en ) un d er s ect i on 1 6 2 (a)(2 ), p et i t io n ers wo u l d h av e t o p ro v e t h atM r. Bro wn trav el ed t o At l an t a " i n th e p u rs u i to f a t rad e o r b u si n es s " . Pet i ti o n ers cl ai m edn o d edu ct i o n fo r t h e b u s in es s u se o f an y p o rt i o n o f t h ei r res i den ce. As
s t at ed , M r. Bro wnd i dt es t i fy th at , wh i l e i n At l an t a, h e wo rk edfo r Pan g o an d p erfo rm edad m i n i s trat iv e act i v i t i es fo r h i s b us i n es s . Hi s t es t i m o ny , h o wev er, was
v ag ue, an d h e fai ledt o o ffer a co n vi n ci n g b u si n es s reas o n wh y h e co u l dn o t
acco m pl i s h th o s e t as k s i n Pen n s au k en . He fai l edt o ex p l ai n wh y , as wi th h i s u s e
o f h i s co m

p u t er fo r m ark et i n g act i v i t ies , h e co u l dn o tu se h i s co m p ut er an d" b e
an ywh ere" t o wo rkfo r Pan go an dp erfo rm ad m i n i s trat i v e act i v i ti es . Ina n u t s h el l , p et i t i o n ers h av e fai l ed t o p ro ve t h atM r. Bro wn 's week l y trav el fro m

h is t ax h o m e i n Pen ns au k en t o At l an t a was "i n th e p u rs u i to f a trad e o r b u s i n es s " . See s ec. 1 6 2 (a)(2 ); M azzo t t a v . Co m m i s s i o n er, 5 7 T.C. 4 2 7, 4 2 9 (1 9 7 1 ) (h o l d i ng t ax p ay er
co u ldn o td edu cttrav el ex p en s es fro m h i s p l ace o f m ajo r em

p l o ym en tt o h i s
res i den ce, a p l ace o f m i no r em p l o ym en t , b ecau s e " [t ] h e p ri m ary m o ti v at i o n fo r-1 8
-

[* 1 8 ] * * * [t h e t ax p ay er's ] tri ps fro m h i s m ajo r p lace o f em

p l o y m en tt o h i s
res i den ce was p ers o n al " ), aff'd , 4 6 7 F.2 d 9 4 3 (2 dCi r. 1 9 7 2 ); Karp v . Co m m i s s i o n er, T.C. M em o . 1 9 7 6 -3 2 5 (" [E] ven th o u gh a t ax p ay er p erfo rm s s o m e b u s i n es s o f a m i n o r n atu re at h i s res i d en ce, h e m ay n otd edu ctth e ex p en s e o f trav el t o th i s p l ace o f b u si n es s i f h i s trav el t o th e p l ace i s p ri n ci p al ly m o ti v at edb y a d es i re t o retu rn t o h i s res i d en ce, a p u rel y p ers o n al m ot iv e, an d o n l y i n ci d en t al ly b y b u si n es s reas o n s ." ).

4
. Co n cl u si o n Becau s e p et i t i o n ers h av e fai l edt o s h o w th atM r. Bro wn 's t ax h o m e was i n At l an t a fro m Oct o b er 2 0 1 2 th ro u g h 2 0 13 o r t h at , du ri n g th e ex am i n at io n y ears , h e trav el ed fro m

h i s t ax h o m e i n Pen n s au k ent o At l an t a i n th e p urs u i to f h i s b u s i n es s , th ey h av e fai l edt o s h o w erro r i n res p o n d en t 's ad ju s t m en t s t o th ei r i nco m e d i s al lo wi n g th ei r rep o rt edtrav el i n g ex p en s es fo r M r. Bro wn 's week l y trav el b et ween At l an t a an dPen n s au k en . W e s u st ai n res po n den t 's ad ju st m en t s t o th at effect
. II. Accu racy -Rel at edPen al t i es Sect io n 6 6 6 2 (a) an d(b )(1 ) p ro v i d es fo r an accu racy -rel at edp en al ty o f 2 0 %
o f t h e p o rt io n o f an u n d erp aym en t o f t ax at tri b u t ab l e t o " [n ] eg li g en ce o r d i s reg ard
o f ru l es o r reg u l at i o n s." Neg l i g en ce as u s ed i n s ect i o n 6 6 6 2 (b )(1 ) i s d efi n edas-1 9
-

[* 1 9 ] an y fai l u re t o m ak e a reas o n ab le at t em p tt o co m p l y wi th th e In t ern al Rev enu e Co de an d an y

fai l u re t o k eep ad equ at e b oo k s an dreco rd s o r t o
s ub s t an t i at e i t em s p ro p erl y . Sec. 6 6 6 2(c); s ec. 1 .6 6 6 2-3 (b )(1 ), In co m e Tax Reg s . Neg li g en ce h as al s o been d efi n edas th e fai l u re t o ex erci s e du e care o r th e fai l u re t o d o wh at a reas o n ab l e p ers on wo u l dd o u n d er t h e ci rcu m s tan ces . See Al l en v . Co m m i s s i o n er, 9 2 T.C. 1 , 1 2 (1 9 8 9 ), aff'd , 9 2 5 F.2 d3 4 8 (9 th Ci r. 1 99 1 ). Th e Co m m is s i o n er h as th e b u rd en o f p ro duct i o n wi th res p ectt o th e
accu racy -rel at edp en al ty . Sec. 7 4 91 (c). To m eetth i s b u rd en , th e Co m m i s s i o n er
m u stp ro du ce s u ffi ci en t ev i d en ce i nd i cat i n g th ati ti s ap p ro pri at e t o i m p o s e t h e p en al ty . See Hi g b ee v . Co m m i s s i o n er, 1 16 T.C. 4 3 8 , 4 4 6 (2 0 0 1). Th e Co m m i s s i o n er's b u rd en o f p ro du ct i o n u n d er s ect i o n 7 4 91 (c) i ncl u d es es t ab l i s h i n g
co m p l ian ce wi th the s up erv i so ry ap p ro v al req u i rem en to f s ect io n 6 75 1 (b ). Graev
v . Co m m i s s i o n er, 1 4 9 T.C. 4 85 , 4 9 3 (2 0 1 7), s up p l em en t i n g an do verru li ng i n p art 1 4 7 T.C. 4 6 0 (2 01 6 ). On ce t he Co m m i s s io ner m eet s th i s b u rd en o f p ro du ct i o n , th e t ax p ay er m

u stco m e fo rwardwi th p ers u as i v e ev i d en ce t h at the Co m m i ss i o n er's d et erm i n at i o n i s i n co rrect . Ru l e 1 42 (a); s ee Hi g b ee v . Co m m is s i o n er, 1 16 T.C. at 4 4 7 . Th e t ax p ay er m ay

m eetth i s b u rd enb y

p ro v i n g th ath e act ed wi th reas o n ab l e
cau s e an d i n g oo dfai th wi th res p ectt o th e u n d erp aym en t . See s ec. 6 6 6 4(c)(1 ); s ee-2 0
-

[* 2 0 ] al s o Hi g b ee v . Co m m i s s io n er, 1 1 6 T.C. at 4 4 7; s ec. 1 .6 6 6 4 -4 (b )(1 ), In co m e Tax Reg s . Res p o n d en ts at i s fi ed h i s b u rd en o f p ro du ct io n wi th reg ardt o n eg l i g en ce b y
es t ab l i s h in g th atp et i ti o n ers h adl i t t l e i f an y g ro u n d s fo r cl ai m in g At l an t a as M r. Bro wn 's t ax h o m e wh en th ey fi l edthei r 2 01 2 an d 2 01 3 retu rn s. M r. Bro wni s a cert ifi edp ub l i c acco u n t an twi th a m as t er's d eg ree i n fi n an ce. He t oo ki t up o n h i m s el f t o p rep are t he co up l e's t ax retu rn s . Wh en h e p rep aredth o se t ax retu rn s , h e
o f co u rs e kn ew t h atth e ag reem en twas fo r t h ree y ears an d t h atn ei th er ret urn
s h o wedi n co m e earn edaft er Oct o b er 2 0 1 2 fro m an y cl ien to th er th an AFR. Hi s
ex p eri en ce an dtrai ni n g s h o u l dh av e al ert edh i m t o th e dub i ou s nes s o f p et i t i o n ers ' rep o rt i n g p o s i t i o n . Res p o n d en th as al s o s at is fi edh i s b urd en o f p ro du ct i o n wi th reg ardt o th e
s up erv i s o ry

ap p ro v al req u i rem en to f s ect i on 6 7 5 1(b ). Res po n d en tp ro du ceda
co m p l et edp en al ty

ap p ro v al fo rm

an dd ecl arat i on o f h i s ex am i ner t h ates t ab l i s h t i m el y sup erv is o ry

ap p ro v al
. Pet i t i o ners rel y

o n t h e ab s en ce o f an y

d efi ci en ci es as th ei r d efen s e t o th e
accu racy -rel at edp en al ti es . Becau s e we h av e fo u n dd efi ci en ci es i n t ax , p et i t i o n ers '-2 1
-

[* 2 1 ] d efen s e fai l s . W e, t h erefo re, s u st ai n res p o n d en t's i m p os i t i o n o f t h e
accu racy -rel at edp en al ti es fo r t h e ex am i n at i o n y ears . Deci s i o n wi ll b e en t eredfo r
res p o nd en t .