T.C. M em o . 2 0 1 9 -1 6 3

UNITED STATES TAX COURT

RANDY M CRAE AND SHELBY M CRAE, Pet i t io n ers v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 2 0 5 52 -1 7
. Fi l edDecem b er 1 2 , 2 01 9
.

Ran dy M cRae an dSh el by

M cRae, p ro s es e. Ry an Z. Sarazi n , J effreyE. Go l d , an dBart h o l o m ew Ci ren za, fo r res po n d en t .

M EM ORANDUM FINDINGS OF FACT AND OPINION LAUBER, J u d g e: W i th res p ectt o p et i t i o ners ’ Fed eral i n co m e t ax fo r 2 0 1 3 -2 0 1 5 , th e In tern al Rev en u e Serv i ce (IRS o r res p o n d en t ) d et erm i n edd efi
ci en ci es an d accu racy -rel at edp en al t i es as fo l lo ws :- 2
-

[* 2 ] Year Defi ci en cy Pen al t y 2 01 3 $ 5 3 ,9 2 3 $ 1 0,7 8 5 2 01 4 1 9 ,3 9 8 3 ,8 8 0 2 01 5 1 1 ,2 2 3 2 ,2 4 5 Th e ques t i o n s rem ai n i n g fo r d eci s i o n are wh et h er p et i t i o n ers : (1 ) ex ecu t eda b i n d
i n g ag reem en tex ten d i n g t h e l i m i t at i o n s p eri odfo r 2 0 1 3 ; (2 ) u n d errep o rt edg ro s s recei p t s o n two Sch edul es C, Pro fi to r Lo s s Fro m Bu s in es s ; (3 ) s ub st an t i at edi t em i zedd educt i o n s fo r m o rt g ag e i n t eres tex p en s es ; (4 ) s ub s tan t iat edSch edul e C d edu ct i o n s i n ex ces s o f t he am ou n t s res p o nd en t al l o wed ; (5 ) s ub s tan t i at edd edu ct i on s fo r n eto perat i n g l o s s (NOL) carry fo rward s fro m 2 00 0 o r 2 0 01 ; an d(6 ) are l i ab l e fo r p en al t i es u nd er s ect i o n 6 6 6 2(a). 1 Aft er g iv in g effect t o co n ces s i o n s b y
res p o n d en t, 2 we res o lv e t hes e i s s u es i n h i s fav o r.

1 Un l es s o t h erwi s e i nd i cat ed , al l s tatu to ry referen ces are t o th e In t ern al Rev enu e Co de (Co d e) i n effect atth e rel ev an tt i m es , an dal l Ru le referen ces are t o th e Tax Co u rt Ru l es o f Pract ice an dPro cedu re. W e ro u n d al l d o l l ar am o u n t s t o th e n eares td o l l ar.

2 Res p o n d en tco n ced es t h at : (1 ) t h e ad ju s t m en tfo r g ro s s recei p t s rep o rt ed o n M rs . M cRae’ s Sch edu l e C fo r 2 0 1 4 , as d et erm i n edi n th e n o t i ce o f d efi ci en cy , i s o v ers t at edb y

$ 1 , 0 6 0 an d(2 ) p et i t i o n ers are n otreq u i redt o i n cl u d e i n i n co m e fo r 2 0 1 3 an d 2 0 1 4, as d et erm i n edi n th e n o t i ce o f d efi ci en cy , St at e t ax refu n d s o f $ 1 ,9 6 9 an d$ 2 0 5 , res pect i v el y . W e d eem p et i t io n ers t o h av e co n ced ed , b y th ei r fai l u re t o ad du ce an y

rel ev an tev i den ce at t ri al , al l ad j u s t m en t s d et erm i n edi n th e n o t i ce o f d efi ci en cy

th atare n o td i s cu ss edi n t h i s o p in i o n .- 3
-

[* 3 ] FINDINGS OF FACT So m e fact s h av e b een s t ip u l at ed an dare s o fo u n d. Th e s t ip u l at i o n o f fact s
an d th e at t ach edex h i b i t s are i n co rp o rat edb y th i s referen ce. Pet i ti o n ers res i d ed i n M ary l an dwh en th ey

fi l edth ei r p et i t i on . Du ri n g 2 0 1 3 -2 0 1 5 each p et i t i o n er earn edi n co m e fro m em p l o y m en t an d fro m s o l e p ro p ri et o rs h i p act i v i ty . M rs . M cRae o p erat edPrem iere M u l t i m ed i a, wh i ch p ro v i dedad v ert is i n g an d p ub li c rel at i o n s s erv i ces (Sch edu l e C1 b u si n es s ). M r. M cRae, wh o h as d eg rees i n l aw an d acco u n t an cy , p ro v id eds erv i ces t h ati n cl u d edg en eral acco u n ti n g wo rk an dt ax return p rep arat i o n (Sch edu le C2 b u s i
n es s ). Du ri n g th e t ax y ears ati s s u e p et it i on ers res i d edi n , an do p erat edth ei r Sch edu l e C b u s i n es s es fro m , a h o u s e o n W i n g at e Dri v e i n Gl en Dal e, M ary l an d (W in g at e p ro p ert y ). Th ey l eas edth e W i n g at e p ro p ert y fro m a l an d l o rdwh o ch arg ed th em

a d i s co u n t edm o n t h l y

ren t . Inco n s i d erat i o n o f t h e reduced ren t al ch arg e, p et i t i o n ers p ai dfo r cert ai n i m p ro v em en t s t o th e W i n gat e p ro p ert y du ri n g th ei r p eri o do f o ccup an cy . At n o t i m e d i dth ey o wnth e W i n g at e p ro p ert y . M o re t h an a d ecad e b efo re t h e t ax y ears ati s s u e, M r. M cRae o wn edres i d en t i al ren t al p ro p ert y

i n th e Di s t ri cto f Co lu m

b i a, i n cl u d i n g an ap art m en tb u il d i n g at 1 6 1 1 ParkRo ad , N.W . As o f 2 0 0 0 th atb u i l d i n g h adn u m ero u s u nab at edh o u s i n g- 4
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[* 4 ] co d e v i o l at i o n s. Th e Di s t ri cto f Co l u m b i a ch arg edM r. M cRae wi t h cri m i n al
v i o l at i o n s o f t h e h o u s i ng co d e. In Oct o b er 2 0 00 th es e cri m i n al ch arg es were res o l v edth ro u g h a “ d i sp o s i
t i on ag reem en t ” wh ereb y M r. M cRae p led g ed t o d i v es t h i m s el f o f al l D.C. res i d en t i al ren t al p ro p ert i es , p erfo rm 2 5 0 h o u rs o f co m

m u n i t y s erv i ce, an d“ d o nat e a t o t al
o f $ 1 75 ,0 0 0 ” t o t h e t en an t s as s o ci at i o n o f 1 6 11 Park Ro ad . M r. M cRae ag reedt o p ay th i s s u m i n i n st al l m en t s , th e l as to f wh ich was du e o n J an u ary 1 5 , 2 0 0 2. He p ai dl es s th an $ 1 3 ,0 0 0 b y th e du e d at e. To d efrayth e b al an ce, i tap p ears th atan o th er o f h i s p ro p ert i es was s o l d i n M ay 2 0 0 2 an dth ata p o rt i o n o f t h e p ro ceed s
was p ai d i n t o a co u rtreg i s t ry t o b e h el dfo r t h e b en efi to f t he t en an ts as s o ci at i o n . Sep arat el y , i n Oct o ber 2 0 1 4 M r. M cRae m ad e p aym en t s o f $ 25 ,0 0 0 each t o Ken net h Brewer an dthe U.S. Dep art m en to f Ho u s in g an d Urb an Dev el o pm en t (HUD). Hi s p aym en t s t o HUD t o o kth e fo rm o f a $ 2 0,0 00 cas h i er’ s ch eckan da $ 5 ,0 0 0 p ers o nal ch eckwi th th e n o t at i o n “ St at e o f M ary l an dv . Ran dy M cRae” o n th e m em o l i n e. M r. M cRae t es t i fi edth atth es e p aym en t s were co u rt -o rd eredres t i
tu t i o n ari s i n g fro m

h is b ei n g “ accu s edo f h av in g i m p ro p erl y t ak ens o m e m o n ey fro m M r. Brewer an d fro m

HUD.” He t es t ifi edth ath e h adrecei v edfu n ds fro m M r. Brewer an d HUD i n co n n ect i o n wi t h a p ro jectt o d ev el o p l o w-i nco m e h o u s i n g i n Pri n ce Geo rg e’ s Co u n t y , M ary l an d
.- 5
-

[* 5 ] It ap p ears th atM r. M cRae was ad ju d g ed g ui l t y

o f a cri m e an ds en t en cedi n Au g u s t2 0 1 4 b y

th e Ci rcu i tCo u rtfo r Pri n ce Geo rg e’ s Co u n t y . See St at e o f M ary l an dv . M cRae, No . CT 1 0 -0 6 3 7 X (M ar. 2 5 , 2 0 1 5 ) (o rd er s t ri k i n g “ g ui l t y fi n d i n g
an d s en t en ce d at e o f Au gu s t1 , 2 0 1 4 ”). Atthe cl os e o f t ri al we l eftth e reco rd
o p en t o en ab le M r. M cRae t o s up pl y d ocu m en t s th atwo u l ds h edl i g h t o n th e n atu re o f t he ch arg es fi l edag ai n s th i m , th e cri m e o f wh i ch h e was co n v i ct ed , an dth e
s en t en ce o ri gi nal l y

i m p o s edup o n h i m . OnDecem

b er 1 9, 2 01 8 , we ad m i t tedi n t o ev id en ce d o cu m en t s s h o wi n g th at th e at t orn ey

i n M r. M cRae’ s cri m i n al cas e h adfi leda m o t i o n t o reco n s i d er s en t en ci n g , requ es t in g thatM r. M cRae b e d is ch arg ed “ wi t h o utju d g m en to f co n v i ct i o n .” 3 OnM arch 2 5 , 2 0 1 5 , th e s en t en ci n g co u rtg ran tedth atm ot i o n , s tri k in g th e “ g u i l t y fi nd i ng an ds en t en ce” o ri g i nal l y i m p o s ed , s en ten ci n g M r. M cRae “ t o p ro b at i o n b efo re ju dg m en t ,” an d p l aci n g h i m o n u n s up erv i s edp ro b at i o n fo r o n e y ear. Ib i d
. As a co n d i ti o n o f p ro b at i o n , M r. M cRae was o rd eredt o p ay $ 2 5,0 0 0 o f res t i tu t i on t o each o f HUD an d M r. Brewer, am o u n t s th ath e ap p ears t o h av e p ai dfi v e m o n t h s p rev i o u s l y , i n Oct o ber 2 0 1 4.

3 See M d . Co d e An n ., Cri m . Pro c. s ec. 6 -2 20 (g )(3 ) (W es t 2 01 5 ) (“ D i s ch arg e * * * u n d er t h i s s ect i o n s h al l b e wi t h o u t ju d gm en to f co n v i ct i o n an di s n o t a co n vi ct i o n fo r t h e p u rp o s e o f an y d i s qu al i fi cat i o n o r d i s ab i l i t y i m p o sedb y l aw b ecau s e o f co n v i ct i on o f a cri m e.”).- 6
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[* 6 ] Fi n d i n g t h es e d o cu m en t s i l l eg i b le i n p art , we o ffered p et i ti o n ers an o t h er
o p p o rtu ni t y

t o s ub m itl eg i b le d o cu m en t s an dan y o t h er i n fo rm at i o n t hatwo u l d
ex p lai n th e b ack g ro u n d o f t h e cri m i n al cas e an dth e reas o n s wh y res t i tu t i on was
o rd ered . Pet i t i o n ers s ub m i t t edn o ad d i t i o n al cl ari fy i n g d o cu m en t s . Fo r t h e t ax y ears ati s s u e p et i t i o n ers jo i nt l y fi l edt i m el y

Fo rm s 1 0 4 0 , U.S. In d i v i du al In co m e Tax Retu rn , u s i n g co m m erci al t ax p rep arat i o n s o ftware t o p rep are t he ret u rn s . Fo r 2 0 13 an d2 0 14 th ey cl ai m edam o n g t h ei r i t em i zed d edu ct i on s m o rt g ag e i n t eres t ex p en s es o f $ 3 1,8 00 an d$ 1 6,8 0 0 , res p ect i vel y . On Li n e 2 1 , Oth er i n co m e, t h ey rep o rt edfo r 2 0 1 3 , 2 0 1 4, an d2 01 5 NOL carry fo rward d educt i o n s o f $ 7 9 ,1 6 0 , $ 1 8 ,9 4 0 , an d$ 6 0 ,0 00 , res p ect i vel y . Th e Sch edu l e C1 fo r M rs . M cRae’ s s ol e p ro p ri et ors h i p rep o rt edfo r 2 0 1 3, 2 0 14 , an d2 0 1 5 g ro s s recei p t s
o f $ 8 , 6 9 5 , $ 6 ,1 20 , an d$ 7 , 7 5 6 , res p ect iv el y . Th e Sch edu l e C2 fo r M r. M cRae’ s
s o l e p ro p ri et o rs h i p rep o rt edg ro s s recei pt s an d ex p en s es as fo l l ows : 2013 2014 2015 Gross receipts $12,550 $7,500 $16,720 Total ex penses 36,447 64,642 10,033 Net profit (L oss) (23,897) (57,142) 6,687 Th e IRS s el ect edp et i t i o n ers ’ 2 01 3 -2 0 15 retu rn s fo r ex am i n at i o n, wh i ch was
co n du ct ed b y

Rev en u e Ag en t(RA) Bo y d. Co n cl u d i n g t h atp et i t i o n ers h adn o t
m ai n t ai n edad equ at e reco rd s fo r t h ei r Sch edu le C act i v it i es , RA Bo y d s ecu red- 7
-

[* 7 ] b an k reco rd s o f t h ei r kn o wn acco u nt s an dp erfo rm ed a b an kd ep o s i t s an al y s i s . Sh e co n cl u d edthatthe g ro s s recei p t s o f M r. M cRae’ s Sch edu l e C2 b u s in es s fo r 2 0 1 3 an d2 0 1 4 were u nd ers t at edb y $ 2 6 ,2 0 5 an d$ 5 ,9 5 0 , res p ect i v el y , an dth atth e g ro s s recei p ts o f M rs . M cRae’ s Sch edu l e C1 b u si n es s fo r 2 0 1 4 were u n d ers t at ed b y $ 6 , 11 0 . RA Bo y dp ro v i dedt o p et it i o n ers du ri n g th e ex am i n at i o n t h e b an kd ep o s i two rk s h eet s s h e h adp rep aredt o s up p o rtth es e ad j u s t m en t s. RA Bo y d p ro p o s edt o d is al l o w, fo r l acko f s ub s t an t i at i o n, t he d edu ct i o n s fo r
u t i l i t i es ex p en s es cl ai m ed o n M rs . M cRae’ s Sch edu l es C1 an dm an y o f t h e d educt i on s cl ai m edo n M r. M cRae’ s Sch edu l es C2 . Sh e l i k ewi s e p ro p os edt o d i s al l o w, fo r l acko f s ub s t an t i at i o n , th e i t em i zedd edu ct i o n s p et i t i o n ers h adcl ai m edfo r
m o rt g ag e i n t eres tex p en ses an dal l o f t h ei r NOL d edu ct i o n s . OnDecem b er 2 3 , 2 0 1 6 , RA Bo y ds en t p et i t io n ers a l et t er n o t i n g t h atth e p eri o do f l i m i t at i o n s fo r 2 0 1 3 wo u l d s o o n ex p i re an das k i n g th atthey ex ecu t e Fo rm 8 7 2 , Co n s en tt o Ex
t en dth e Ti m e t o As s es s Tax , i f t h ey wi s h edt o co n t in u e d i scu s s i o n s . Wh en p et i t i o n ers d idn o t i m m ed i at el y res p o n dt o th i s l et t er, t h e cas e was fo rward edas an “ un ag reed cas e” t o t h e IRS Tech n i cal Serv i ces d i v i si o n , wh ere i t
was as s i g n edt o J u l i a Beck et t , a rev iewer, t o co n fi rm thatp et it i on ers u n d ers t o o d th ei r IRS ap p eal ri g h t s. Sh e t el ep h o n edM r. M cRae, wh o d i s p u t edthe p ro p o s ed d en ial o f t h e NOL d edu ct i o n s an ds t at edth at h e h adad d i t i o n al ev i den ce h e wi s h ed- 8
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[* 8 ] th e IRS t o co n s i d er. M s . Beck et ti n fo rm edh i m th atth e ex am i n er co u ld
co n si d er ad d i t io n al ev i d en ce o n l y i f h e an dh i s wi fe ag reedt o ex t en dth e p eri o d o f l i m i tat i on s fo r 2 0 1 3 . Sh o rt ly thereaft er p et i t i o n ers s ub m it t eda fu l ly ex ecu t ed Fo rm 8 7 2 th at ex t en d edb y

o ne y ear, t o Ap ri l 1 5 , 2 0 1 8 , th e as s es s m en t p eri o dfo r 2 0 1 3 . AnIRS o ffi ci al co u n t ers i g n edth e Fo rm 8 7 2 o n Feb ru ary

2 2 , 2 0 1 7
. Pet i t i o ners ap p ear t o h av e s ub m i t t edad d i ti o n al i n fo rm at i o n , b u ti td i dn o t ch an ge an y

m i n d s . OnAp ri l 2 1, 2 0 1 7 , RA Bo y dfi n al i zedan ds ub m it t edt o h er i m m ed i at e s up erv i s o r a Ci v i l Pen al t y Ap p ro v al Fo rm , reco m

m en d i n g th e as s ert i o n
o f accu racy -rel at ed p en al t i es ag ai n s t p et i ti o n ers fo r 2 0 13 -2 0 1 5 . Her s up erv i s o r
s i gn edth atfo rm

o n Ap ri l 2 6 , 2 0 1 7 . OnJ u n e 3 0 , 2 0 1 7, M s . Beck et t p rep aredFo rm 4 5 4 9 -A, In co m e Tax Ex am in at i o n Ch an g es , an den cl o sedth atrep o rtwi t h a n o t i ce
o f d efi ci en cy i s s u edt o p et i t i on ers o n J u l y 5 , 2 01 7 . OnSep t em

b er 2 9 , 2 01 7 , th ey t i m el y pet i ti o n edfo r red et erm i n at i on . OPINION A. Li m i t at i o n s Peri o d fo r 2 0 1 3 Pet i t i o ners co n t en dth atth e l i m i tat i o n s p eri o d fo r 2 0 1 3 ex p iredb efo re t h e IRS m ai l edth e n ot ice o f d efi ci en cy . Th e Co m m i s si o n er g en eral l y

m u s ti s s u e a
n o t i ce o f d efi ci en cy

wi t h i n t h ree y ears aft er t h e ret u rn was fi l edo r (i f t h e ret u rn
was fi l edearl y ) wi t h i n t h ree y ears o f t h e l as td ay p res cri b edfo r i t s fi l i n g. See- 9
-

[* 9 ] s ecs . 6 5 0 1 (a) an d (b )(1 ), 6 2 1 3 (a); W oo d s v . Co m m i s si o n er, 9 2 T.C. 7 76 , 7 7 9 -7 8 0 (1 9 8 9 ). Bu tth e l i m i t at i o n s p eri o dcan b e ex t en d ed i f “ t h e Secret ary an d th e t ax p ay er h av e co n s en t ed i n wri t i n g ” t o s u ch ex t en s i o n , p ro vi d ed t hatth ei r ag reem en ti s ex ecu t edb efo re ex p i rat i o n o f th e o th erwi se-ap pl i cab l e l i m i tat i o n s p eri o d . Sec. 6 5 0 1 (c)(4 )(A). Pet i t i o ners s i g neda Fo rm 8 7 2 co n s en t i n g t o ex t en si o n o f t h e 2 0 1 3 as s es s m en tp eri o dt o Ap ri l 1 5 , 2 0 1 8
. Th atco n s en tb ecam e effect i v e o n Feb ru ary 2 2 , 2 0 1 7 , wh en th e Fo rm

8 72 was s i g n ed b y

th e Co m m i s s i o n er’ s d el eg at e. As requ i redb y s ect i o n 6 5 0 1(c)(4 ), th e Fo rm 8 7 2 ag reem en twas fu l ly ex ecu t edb efo re Ap ri l 1 5 , 2 0 17 , wh en th e l i m it at i o n s p eri odfo r 2 0 1 3 wo u l do t h erwi s e h av e ex p i red . Th e n o t i ce o f d efi ci en cy was i s s u edo n J u l y 5 , 2 0 1 7 , n i n e m o n t h s b efo re t h e
en d o f t h e ex t en d edl i m i t at io ns p eri o d . Th e n ot i ce was th erefo re t i m el y . Wh en th e Co m

m i s s i o n er p ro du ces a p ro p erl y ex ecu t edFo rm 8 7 2 , th e t ax p ay er b ears th e b u rd en o f p ro v i n g th e ag reem en ti n v al id . Kro ni s h v . Co m m i s s io n er, 9 0 T.C. 6 8 4 , 6 92 -6 9 3 (1 9 88 ); Du n can v . Co m m i s s i o n er, T.C. M em o . 2 0 1 8 -1 9 0 , at* 1 0
. Pet i t i o n ers fi rs tco n t en dth atth e Fo rm 8 7 2 i s i n v al i do n i ts face b ecau s e th ey fi l edth ei r 2 0 1 3 return o n Feb ru ary 1 4, 2 0 1 4 , m o re t han th ree y ears b efo re t h e IRS co u n t ers i g n edth e Fo rm 8 72 . Bu t s ect i o n 6 5 0 1 (b )(1 ) p ro v i d es th at , fo r p u rp o s es o f s ect io n 6 50 1 , a retu rn“ fi l edb efo re t h e l as td ay p res cri b ed* * * fo r t h e- 1 0 -

[* 1 0 ] fi l i n g th ereo f, s h al l b e co n s id eredas fi l edo n s u ch l as td ay . ” Pet it i on ers ’ 2 0 1 3 retu rn i s t h u s co n s i d ered t o h av e b een fi ledo n Ap ri l 1 5 , 2 0 1 4
. Th e Fo rm 8 7 2 was fu l l y

ex ecu t edo n Feb ru ary

2 2 , 2 0 1 7 , wi t h i n th ree y ears o f t h atd at e, an d i t w as thu s ex ecu t edi n t im el y fas h i on . Pet i t i o ners n ex tco n t en dth atres p o nd en ts h o u l db e es t o pp edfro m rel y i n g o n th e Fo rm 8 7 2 . M r. M cRae as s ert s th at M s . Beck et t t o l d h i m , b efo re p et i t i on ers
s i gn edth atfo rm , th atp et it i on ers wo u l dh av e o n ly a “ s m al l l i ab i l i t y ” fo r 2 01 3 , as
o p p o s edt o th e $ 5 3 ,9 2 3 d efi ci en cy th atth e IRS d et erm i n ed . Bu tfo r t h is s up p o s ed
m i s rep res en t at i o n , p et i t i o n ers as s ertth atthey wo u ldn o t h av e ag reedt o ex t en dth e l i m i tat i on s p eri od
. Attri al we h eardt es t im o n y fro m M r. M cRae an dM s . Beck et t
o n th i s p o i n t .

“ Al t h ou g h th e d o ct ri n es o f es t o p p el an d qu as i -es t o p pel are ap p l i cab l e ag ai n s tth e Co m

m i ss io n er, i ti s wel l es t ab li s hedth atth es e d o ct ri n es s h ou l db e ap p l i edag ai n s th i m wi t h u t m os tcau t i o n an dres t rai nt .” Es tat e o f Em ers on v . Co m m i s s i o n er, 6 7 T.C. 6 1 2, 6 1 7 (1 9 7 7 ). A t ax p ay er cl ai m i n g th e b en efi t s o f es t o p p el
m u stes t ab l i s h (am o n g o t h er t h i n g s ) t h at : (1 ) th ere was a fal s e rep res en t at i o n o r
wro ng fu l m i s l ead i n g s i l en ce b y an IRS rep res en t at i ve, (2 ) t h e t ax p ay er was i g n o ran to f t he t ru e fact s , an d(3 ) t he t ax p ay er was ad v ers el y affect edb y

th e co n du ct
co m p l ai n edo f. Id . at6 17 -6 1 8; Co s t el l o v . Co m m i s s i o n er, T.C. M em o . 2 0 1 6 -1 8 4 ,- 1 1 -

[* 1 1 ] 1 1 2 T.C.M . (CCH) 3 9 6 , 3 9 9 ; s ee W i l k i n s v . Co m m is s i o n er, 1 2 0 T.C. 1 0 9 , 1 1 2 (2 00 3 ). Pet i t i o ners h av e fai ledt o es t ab l i s h an y o f t h es e el em en t s . Hav i n g h eardth e p art i ci p an t s ’ t es t i m on y , we d o n o tb el i ev e t hatM s . Beck et tm ad e an y m i s rep res en t at i o n t o M r. M cRae. In an y ev en t , M r. M cRae was n o ti g n o ran to f t he fact s . He kn ew t h atth e IRS was p ro p o s i n g t o d i s al l o w (am o ng o t her d edu ct i o n s ) an NOL d edu ct i on o f $ 7 9 ,1 6 0 fo r 2 0 1 3 ; th at d is al l o wan ce wo u l dn o th av e p ro du ceda

“ s m al l l i ab il i ty ” fo r 2 0 1 3 . An dp et it i on ers were n otad v ers el y affect edb y

s i g n i n g th e Fo rm 8 7 2 . Hadth ey

n o t d o n e s o , the IRS wo u l d h av e i s s uedth em i m m ed i at el y
a n o t i ce o f d efi ci en cy

d et erm i n i n g th e s am e ad ju s tm en t s t h ati tu l t i m at el y d et erm i n ed . W e fi n dth atp et i t i o n ers h av e fal l en wo efu l ly s h o rto f es t ab l i s h i n g
es t o p p el ag ai n s tth e Co m m i s s i o n er. B. Un rep o rt edGro ss Recei p t s Th e Co m m is s i o n er’ s d et erm i n at i o n s i n a n o t i ce o f d efi ci en cy are g en eral l y p res u m edco rrect . Ru le 1 4 2 (a)(1 ); W el ch v . Hel v eri n g , 2 90 U.S. 1 1 1, 1 1 5 (1 9 3 3 ). Th i s Co u rth as reco g n i zeda l i m i t ed ex cep t i o n t o t h e p res u m p t i o n o f co rrect n es s i n
u n rep o rt edi n co m e cas es , requ i ri n g th e Co m m is s i o n er t o es t ab l i sh a “ m i n im al ev i
d en ti ary fo u n d at i o n s upp o rt i n g h i s d et erm i n at i o n o f u n rep ort edi n co m e.” Fan k
h an el v . Co m

m i s s i o n er, T.C. M em o . 1 9 9 8 -4 0 3 , 7 6 T.C.M . (CCH) 8 0 9, 8 1 3 , aff’ d- 1 2 -

[* 1 2 ] wi th o u tp ub l i s h edo p i n i o n , 2 0 5 F.3 d1 3 3 3 (4 t h Ci r. 2 0 0 0 ). On ce t h e Co m m i s s i o n er h as l ai d t h i s fo u n d at i o n , the b u rd en s h i ft s t o th e t ax p ay er t o p ro v e b y a p rep o n d eran ce o f t he ev id en ce t h atth e Co m m is si o n er’ s d et erm i n at i o n s are arb i trary o r erro n eo u s . Hel v eri n g v . Tay l o r, 2 9 3 U.S. 5 0 7, 5 1 5 (1 9 3 5 ); To k ars k i v . Co m m i s s i o n er, 8 7 T.C. 7 4 (1 9 8 6 ). 4 If a t ax p ay er fai ls t o m ai n t ai n ad equ at e reco rd s , th e IRS m ay reco n s t ru cth i s i n co m e u s i n g an y m et h o dth at“ cl earl y refl ect [s ] i n co m e.” Sec. 4 4 6(b ); s ee Pet
zo l d tv . Co m

m i s s i o n er, 9 2 T .C. 6 6 1 , 6 8 7 (1 9 8 9 ). “ Th e u s e o f t he b an k d ep o s i t
m et h o d fo r co m

pu t i n g u n rep o rt edi n co m e h as l o n g b een s an ct i o n edb y th e co u rt s .” Cl ayt o n v . Co m

m i ss io n er, 1 0 2 T.C. 6 3 2 , 6 45 (1 99 4 ); s ee M i l l s v . Co m m is s i o n er, 3 9 9 F.2 d7 4 4, 7 4 9 (4 t h Ci r. 1 9 68 ), aff’ g T.C. M em o . 1 9 6 7 -6 7 ; Es t at e o f M as o n v . Co m m i s s i o n er, 6 4 T.C. 6 51 , 6 5 6 (1 9 7 5 ), aff’ d , 5 66 F.2 d 2 (6 t h Ci r. 1 9 7 7 ). A b an k d ep os i ti s “p ri m a faci e ev i d en ce o f i nco m e.” M i ll s , 3 9 9 F.2 dat7 4 9 ; To kars k i , 8 7 T.C. at7 7 . Th ro u g h h i s b an kd ep o si t s an al y s is res p o n d en th as cl earl y co n n ect ed p et i t i o n ers t o i n co m e-p ro du ci n g act i v i t y .

4 Ab s en ts t i pu l at i o n t o th e co n t rary , ap peal o f t he i n s t an tcas e wo u ldl i e t o th e U.S. Co u rto f Ap peal s fo r t h e Fo u rt h Ci rcu i t . See s ec. 7 4 8 2 (b )(2 ). Th atco u rt d o es no tap p ear t o h av e d eci d edex p l i ci t l y th e s co p e o f t h e ex cep t i o n d i s cu s s edi n th e t ex t . See Du n n e v . Co m m is s i o n er, T.C. M em o . 2 00 8 -6 3 , 9 5 T.C.M . (CCH) 1 2 3 6 , 1 2 4 6 n .5 (d is cu s s i n g Ceb o ll ero v . Co m m i s s i on er, 9 6 7 F.2 d 9 8 6 , 9 9 0 (4 t h Ci r. 1 9 92 ), aff’ g T.C. M em o. 1 9 9 0 -6 1 8 ). W e ap p l y th e fo rm u l at i o n t hath as b een ap p ro v edb y

th i s Co u rtan db y

m o s tCo u rt s o f Ap p eal s. See i d
. at1 2 46
.- 1 3 -

[* 1 3 ] Pet i t i o ners fi rs t co n t en dth atRA Bo y dwas n o tju s t i fi edi n em p l o y i ng th e b an k d ep o s i t s m et h o d , as s ert in g th atth ey h add el i v eredt o h er “ s uffi ci en t co m p et en tev i d en t i ary m at t er t o * * * at t es tt o th ei r reco rd s .” W e fi ndn o fact u al s up p o rt fo r t h i s as s ert i o n . Pet i t i on ers m ai n t ai nedn o d i s t i n ctreco rd s o f th ei r Sch edu l e C b u s i n es s es ; th ei r o n l y

“ reco rd s ” co n s i st edo f a few recei pt s an d t h e s am e b an k
s t at em en t s th atRA Bo y du s ed t o p erfo rm h er b an kd ep o s i t s an al y si s . Sh e d i dn ot err i n u si n g a b an kd ep o si t s an al y s i s t o reco n s t ru ctth ei r i nco m e. See s ec. 4 4 6 (b ); Pet zo l d t , 9 2 T.C. at6 9 3 ; s ec. 1 .4 4 6 -1 (b )(1 ), In co m e Tax Reg s . RA Bo y d t es t i fi edcred i b l y co n cern i n g h er ap p l i cat i o n o f t he b an kd ep o s i t s
m et h o d, p ro du ci n g s p read s heet s d o cu m en t i n g h er an al y s i s al o n g wi t h co p i es o f p et i t i o n ers ’ b an ks t at em en t s an dd ep o s i ts l i p s . Th es e s p read s h eet s s h o w th ats h e
ex cl u d edi t em s s h e i d en t i fi edas n o n t ax ab l e, i n cl u di n g cred i tad j u s t m en t s, b an k
erro rs , an d i n t eracco u n ttran s fers . Pet i t i o ners b o re t h e b u rd en o f s h owi n g th ath er
an al y s i s was i n accu rat e, e.g ., b y i d en t i fy i n g ad d i ti o n al n o n t ax ab l e i tem s t hats h e fai l edt o ex cl u d e. See Cl ayt o n , 1 0 2 T.C. at6 4 5 ; Di Leo v . Co m m is s i o n er, 9 6 T.C. 8 5 8 , 8 7 2 (1 9 9 1), aff’ d , 9 5 9 F.2 d1 6 (2 dCi r. 1 9 92 ); Ch i co v . Co m m i s s i o n er, T.C. M em o. 2 0 1 9 -1 2 3 , at * 1 9
.- 1 4 -

[* 1 4 ] W i t h o n e ex cep t i on , 5 p et i t i o n ers h av e fai l edt o carryth ei r b urd en . M r. M cRae s pecu l at edth ats o m e d ep o s i t s i n t o h i s acco u n tm ig h t h av e b een n on t ax ab l e recei p t s fro m

cl i en t s (s u ch as s ecu ri ty

d ep o si ts ), b uth e s up p l i ed n o d o cu m en t at i o n
o f an y k i n dt o s up p o rtth atcl ai m . Pet i ti o n ers h adam p l e t i m e t o s ecu re ev i d en ce
o n th i s p o i n t , h av i n g b een s up p l i edco p i es o f RA Bo y d ’ s b an kd ep o si two rk s h eet s du ri n g th e IRS ex am i n at i o n . Co n cl u d i n g t h atp et it i on ers h av e fai l edt o s h o w an y
erro r i n th e b an kd ep o s i t s an al y s i s ap art fro m th e erro r res p on d en tco n ced ed , we
s u s t ai n th e d et erm i n at i o n o f u n rep ort edSch edu l e C1 an dC2 g ro s s recei p t s i n th e ag g reg at e am o u n t s o f $ 2 6 ,2 0 5 fo r 2 0 1 3 an d $ 1 1 ,0 0 0 ($ 5 ,9 5 0 + $ 5,0 5 0 ) fo r 2 0 1 4
. C. Un s ub s t an t i at edDeduct i o n s Dedu ct i o n s are a m at t er o f l eg i s l at i v e g race, an dt ax p ay ers g en eral l y b ear th e b u rd en o f p ro v i n g t h ei r en t i t l em en tt o al l d edu ct i o ns cl ai m ed . INDOPCO, In c.
v . Co m m i s s i o n er, 5 0 3 U.S. 7 9, 8 4 (1 9 9 2 ); s ee Ru l e 1 4 2 (a). Tax p ay ers al s o b ear th e b u rd en o f s ub s t an t i at i ng th e am ou n t s o f t h ei r d edu ct i o n s b y k eep i n g an dp ro du ci n g reco rd s s u ffi ci en tt o en ab l e t h e IRS t o d et erm i ne t h e co rrect t ax l i ab i l i ty . See s ec. 6 0 0 1 ; s ec. 1
. 6 0 0 1-1 (a), In co m e Tax Reg s .

5 Res p o n d en tco n ced es t h ato n e d ep os i t , i n th e am o un to f $ 1 ,0 6 0 , s h o u l d h av e b een ex cl u d edfro m Sch edu l e C1 g ro s s recei p ts fo r 2 0 1 4 . See s upra n o t e 2
.- 1 5 -

[* 1 5 ] Cert ai n ex p en s es , i n cl u d i n g ex p en ses fo r t rav el an d“ l i s t edp ro pert y ,” are
s ub jectt o rel at i v el y

s t ri cts ub s t an t i at i o n ru les . See s ecs . 2 7 4(d ), 2 80 F(d )(4 ) (d efi ni n g “ l i s t edp ro p ert y ” t o i ncl u d e p as s en g er au t o m ob i l es ). No d educt i o n i s al
l o wedfo r ex p en d i tu res s ub jectt o th es e ru l es u n l es s a t ax p ay er s ubs t an ti at es , b y ad equat e reco rd s o r b y s uffi ci en tev id en ce co rro b o rat in g h i s o wns t at em en t s , th e
am ou n t , t i m e an dp lace, an db u s i n es s p u rp o s e fo r each ex p en d itu re. See s ec. 1 .2 74 -5 T(c), Tem

p o rary In co m e Tax Reg s . , 5 0 Fed . Reg . 4 60 1 6 (No v . 6 , 1 9 8 5 ). 1
. It em i zedDedu ct i o n s Pet i t i o ners cl ai m ed d educt i o n s o f $ 3 1,8 0 0 an d $ 1 6 ,8 0 0 fo r m o rt g ag e i n t eres tex p en s e i n 2 0 13 an d 2 0 14 , res p ect i v el y . Th e IRS p ro p erl y d i s al l o w edth es e d educt i o n s . Pet i t io n ers d i dn o to wn t h e W i n g at e p ro p ert y , th ey were l i ab l e o n n o
m o rt g ag e l o an , an dthey

s ub s t an t i at edn o p aym en t o f i n t eres t . Th ei r ev i d en ce o n th i s p o i n tco n s i s t edo f t h ei r l eas e, recei p t s fo r i m p ro v em en t s t o th e W i n g at e p ro p ert y (m ad e i n ex ch an g e fo r reduced ren t ), an db i l l s fo r u t i l i t i es an di n s u ran ce. Pet i t io n ers ap p aren t l y

h adan o p t i on t o acq u i re t he W in g at e p ro p ert y , b u t t h ey
n ev er ex erci sed t h at op t i o n . Th ey can n o td eductren t , s ub s ti tu t es fo r ren t , o r p ers o n al l i v i n g ex p en s es as “ m o rt g ag e i nt eres t .” See s ec. 1 6 3 ; Pu en t es v . Co m m i s s i on er T.C. M em o . 2 0 1 3 -2 7 7 , 1 0 6 T.C.M
. (CCH) 6 46 , 6 47 (“ W e h av e d is al l o wed th e d edu ct i o n fo r m o rt gag e i n t eres t wh ere t h e t ax p ay er d o es n o tes t ab l i s h l eg al o r- 1 6 -

[* 1 6 ] equi t ab l e o wn ers h i p o f m o rt g ag edp ro pert y .”); s ec. 1
. 1 63 -1 , In co m e Tax Reg s. 2
. Sch edu l e C Dedu ct i o n s Sect io n 1 6 2 (a) al l o ws th e d edu ct i o n o f “ al l the o rd i n ary an d n eces saryex p en ses p ai do r i n cu rredduri n g th e t ax ab l e y ear i n carry i n g o n an y trad e o r b u s i
n es s .” Anex p en s e i s o rd i n ary i f i ti s cu s t o m ary

o r u s u al wi t h in a p art i cu lar t rad e, b u s i n es s , o r i n du s t ry

o r rel at es t o a co m

m o n o r freq uen ttran s act i o n i n t h e t y p e o f b u s i n es s i n v o l v ed . See Dep u t y v . duPo n t , 3 0 8 U.S. 4 8 8 , 4 9 5 (1 9 4 0 ). Anex p en s e i s n eces s ary

i f i ti s ap p ro p ri at e an dh el p fu l t o the o p erat i o n o f t h e t ax p ay er’ s b u s i
n es s . See Co m

m i s si o n er v . Tel l i er, 3 8 3 U.S. 6 8 7 , 6 8 9 (1 96 6 ).
a. Ut i l i t i es Ex p en s es Fo r 2 0 1 3-2 01 5 p et i t i o ners cl ai m edSch edu l e C1 d edu ct i on s o f $ 1 ,4 2 0 , $ 1 ,3 0 0 , an d$ 1,4 4 0 , res p ect i v el y , fo r u t i l i t i es ex p en s es . To s ub s t an t i at e t hes e d edu ct i o n s p et i t i o n ers s ub m i t t ed i n v o i ces fo r u t i l i t y s erv ice t o th e W i n gat e p ro p ert y , ap p aren tl y

o n th e t heo ry

th atM rs . M cRae m ai n t ai n eda “ h o m e o ffi ce” t h ere. Bu t p et i t i o n ers rep o rt edn o “ h o m e o ffi ce” d edu ct io n s o n th ei r 2 0 13 -2 0 1 5 t ax retu rn s , an d M rs . M cRae d i d n o tt es t i fy at t ri al . Pet i t io n ers s ub m i tt edn o ev i d en ce t o
es t ab l i s h t h atan y

p arto f t h ei r h o m e was “ ex cl u s iv el y u s edo n a reg u l ar b as i s ” fo r th e co n du cto f M rs . M cRae’ s Sch edu l e C1 b u s i n es s o r M r. M cRae’ s Sch edu l e C2- 1 7 -

[* 1 7 ] b u s i n es s . See s ec. 2 8 0 A(c)(1 ). W e acco rd i n g l y s u s tai n res p on d en t ’ s d i s al lo wan ce o f t h e d edu ct io n s fo r u t i l i t i es ex p en s es .

b
. Car an dTru ckEx p en s es Fo r 2 0 1 4 p et it i o n ers cl ai m eda Sch edu l e C2 d edu ct i o n o f $ 1 2 ,4 8 0 fo r car
an d tru ckex p en ses . To s ub s tan t i at e t h i s d edu ct i o n p et i t io n ers s ubm i t t edn o l o g s
es t ab l i s h in g M r. M cRae’ s b u s in es s u s e o f an y v eh icl e, b uto n ly

two i n v o ices fo r car rep ai rs . Hav i ng fai l edt o es t ab l i s h th e ex t en t (i f an y ) t o wh i ch an y o f t h ei r
v eh icl es was u s edfo r b u s in es s p u rp o s es , p et i t io n ers h av e n ots at i s fi edth e s t ri ct
s ub s t an t i at i o n req u irem en t s o f s ect i o n 2 7 4 (d ). See Ro bi n s o n v . Co m m i s s i o n er, T.C. M em o . 2 01 1 -9 9 , 1 0 1 T.C.M . (CCH) 1 47 3 , 1 4 8 1 -1 4 8 2 (uph o ld i n g d i s al l o wan ce o f d edu ct i o n s fo r v eh i cl e an dtrav el ex p en s es wh ere t ax pay ers s up pl i edn o
ev i d en ce o f b u s i n es s p u rp o se), aff’ d , 4 8 7 F. Ap p ’ x 7 5 1 (3 dCi r. 2 0 1 2 ); s ee al s o Ren ner v . Co m

m i ss i o n er, T.C. M em o . 2 0 1 5 -1 0 2 , 1 09 T.C.M . (CCH) 1 5 2 6 , 1 5 2 9
. W e t hu s s u s t ai n res p on d en t’ s d i s al l o w an ce o f th e d edu ct i o n fo r car an dtru ck
ex p en s es . c. Trav el Ex pen s es Fo r 2 0 1 3-2 01 5 p et i t i o ners cl ai m edSch edu l e C2 d edu ct i on s o f $ 3 ,5 5 0 , $ 2 ,8 5 0 , an d$ 4,3 7 7 , res p ect i v el y , fo r t rav el ex p en s es . To s ub s t an t i at e th es e d edu ct i on s p et i t i on ers s ub m it t edrecei p t s fo r a few car ren t al s an dh o t el s t ay s . Attri al- 1 8 -

[* 1 8 ] M r. M cRae co u l d n o ti d en t i fy th e reas o n fo r t h i s trav el , m u ch l es s
s ub s t an t i at e i t s b u s i n es s p urp o s e. See s ec. 1 .1 6 2-2 (b )(1 ), In co m e Tax Reg s . Pet i t io n ers h av e n o ts at i sfi edthe s t ri cts ub s t an t i at i o n req u i rem en t s o f s ect i on 2 7 4 (d ) fo r t rav el ex p en s es . See Berk l ey M ach . W o rk s & Fo u n dry Co
. v . Co m m i s s i o n er, 6 2 3 F.2 d8 9 8 , 9 0 7 (4 t h Ci r. 1 9 8 0 ) (fi n d i n g ev id en ce co n cern i n g g en eral n atu re o f b us i n es s trav el i n su ffi ci en t t o d em o n st rat e a b u si nes s p u rp o s e fo r each tri p ), rev ’ g T.C. M em o . 1 9 7 7 -1 7 7 ; Ro bi n so n , 1 0 1 T.C.M . (CCH) at 1 4 8 2
. W e acco rd in g l y s us t ai n res p o n d en t ’ s d i s al l o wan ce o f t h es e d edu ct i o n s .

d
. Pro fes s i o n al Serv i ces Ex pen se Fo r 2 0 1 3-2 01 5 p et i t i o ners cl ai m edSch edu l e C2 d edu ct i on s o f $ 5 ,2 0 0 , $ 4 ,3 9 0 , an d$ 31 0, res p ect iv el y , fo r l eg al an dp ro fes s io nal s erv i ces . Pet i ti o n ers p res en t edn o d o cu m en t ary ev i d en ce t o s ub s t an t i at e t hes e d edu ct io n s, an dM r. M cRae o ffered n o cred i b l e t es ti m o n y co ncern i n g t h es e i t em s attri al
. W e acco rd
i n g l y s u s t ai n res p o nd en t ’ s d i s al l o wan ce o f t h es e d edu ct i o n s. 6

6 Pet i t i on ers as kth atwe es t i m at e t hei r b u s i n es s ex p en s es an d al l o w d edu ct i on s acco rd i n gl y . See Co h an v . Co m m i s s i o n er, 3 9 F.2 d5 4 0 , 5 4 3 -5 44 (2 d Ci r. 1 9 3 0 ). W e d ecl i n e t o d o s o . W e are n otau t h o ri zedt o es ti m at e ex p en s es s ub jectt o th e s tri cts ub s t an t i at i on req u irem en t s o f s ect i o n 2 74 (d ). See San fo rdv . Co m m is
s i on er, 5 0 T.C. 8 2 3 , 8 2 7 -8 2 8 (1 9 68 ), aff’ dp er cu ri am , 4 1 2 F.2 d2 01 (2 dCi r. 1 9 6 9 ). An di n th e ab s en ce o f an y p ro o f, we h av e n o reas o n ab l e b as i s t o es t i m at e th ei r o th er cl ai m edex p en ses . See W i l l i am s v . Un i t edSt at es , 2 4 5 F.2 d 5 5 9, 5 6 0
- 5 6 1 (5 th Ci r. 1 9 57 ); Van icekv . Co m m i s s i on er, 8 5 T.C. 7 3 1 , 7 4 3 (1 9 8 5 ).- 1 9 -

[* 1 9 ] e. Oth er Ex p en s es Fo r 2 0 1 3 an d2 0 1 4 p et i t i o n ers cl ai m edSch edu l e C2 d edu ct i o n s fo r “ o th er
ex p en s es ” i n th e am o u n t s o f $ 3 ,5 5 0 an d$ 5 0 ,0 0 0 , res p ect i v el y . Th ey o ffered n o
s ub s t an t i at i o n fo r t he 2 0 1 3 d edu ct i o n . Fo r t h e 2 0 1 4 d educt i on th ey o fferedev i
d en ce th atM r. M cRae h adp ai d$ 2 5 ,0 0 0 t o each o f HUD an d Ken n et h Brewer i n Oct o b er 2 0 1 4 as “ res t i tu t io n.” Al t h o u g h p et i t i o n ers h av e s ub s t an t i at edp aym en t s t o t al i n g $ 5 0 ,0 0 0 , th ey h av e n o tcarri edthei r b u rd en o f p ro v in g th ei r en t i t l em en tt o a d educt io n u n d er s ect i o n 1 6 2(a) fo r t h es e p aym en t s . M r. M cRae was o rd eredt o p ay res t itu t i o n b y a M ary l an dSt at e co u rtaft er i t fo u n d h i m

g u i l t y o f a cri m e. Pet i t i o n ers face t w o th res h ol do bs t acl es i n s eek i n g t o d eductth es e p aym en t s as “ o rd i n ary an d n eces saryex p en s es ” u nd er s ect i o n 1 6 2 (a). Fi rs t , p et i t io n ers fai l edt o s up p l y an y d o cu m en t s o r o th er ev id en ce t h atwo ul ds h ed l i gh t o n th e n atu re o f t h e ch arg es fi l ed ag ai n s tM r. M cRae, t h e cri m e o f wh i ch h e
was co n v i ct ed , o r t h e s en ten ce o ri gi n al l y i m p o s edup on h i m . If h e was ch arg ed wi th em bezzl em en t(fo r ex am

p l e), t h ere i s n o ev i d en ce t h atp et it i o n ers i n cl u d ed th e em b ezzl edfu n d s i n i n co m e fo r an y p ri o r y ear, a fact th atco u l daffect th ei r ab i l i ty t o cl ai m d educt i o n s fo r m ak i n g res t i tu t i o n t o th e v i ct i m s . See St ep h en s v . Co m m i s s i o n er, 9 0 5 F.2 d6 6 7 , 6 6 8 (2 dCi r. 1 9 9 0 ) (al l o w i n g l o s s d educt i o n u n d er
s ect i on 1 6 5 fo r res t i tut i o n p aym en twh ere t h e t ax p ay er i n a p ri o r y ear “ was t ax ed- 2 0 -

[* 2 0 ] up o n h is recei p to f t h e * * * [em b ezzl edfu n ds ] ”), rev ’ g an drem an d i n g 9 3 T.C. 1 0 8 (1 9 8 9 ); cf. Sm il i n g v . Co m m i s s i o n er, T.C. M em o. 2 0 1 7 -1 96 , 1 14 T.C.M
. (CCH) 4 0 3 , 4 0 6 (d i s al l o wi ng b u s i n es s -ex pen s e d edu ct i o n fo r p aym en tal leg ed l y
m ad e t o p ro tectat t o rn ey ’ s p ro fes s i o n al rep u t at i o n, wh ere p aym en tco n s t i tut edth e retu rn o f cl i en tfu nd s n o tp rev i o u s l y i n cl u d ed i n the at to rn ey ’ s i n co m e). Seco n d , s ect i o n 1 62 (f), as i n effect fo r t h e t ax y ears ati s s u e, 7 p ro v i dedth at

“ [n ] o d edu ct i o n s hal l b e al l owed* * * fo r an y fi n e o r s i m i l ar p en al t y

p ai dt o a g o v ern m en tfo r t h e v i o l at i o n o f an y l aw.” Th e t erm

“ g o vern m en t” was d efi n edt o i n cl u d e “ a St at e” o r an y

“p o li t ical s ubd i v is i o n ” t h ereo f. Sec. 1 .1 6 2 -2 1 (a)(1 ), (3 ), In co m e Tax Reg s . Th e t erm “ fi n e o r s i m i lar p en al t y ” was d efi n edt o i n cl u d e an
am ou n t“ [p ] ai dp u rs u an tt o co n v i ct i o n o r p l ea o f g u i l t y o r n o l o co nt en d ere fo r a cri m e (fel o n y

o r m is d em ean o r) i n a cri m i n al p ro ceed i n g .” Id
. p ara. (b )(1 )(i ). W e h av e h el d t h atco u rt -o rd eredres t i tu t i o n p ai dt o a t h irdp art y m ay b e d eem ed“p ai d t o a g o vern m en t ,” s ec. 1 6 2 (f), i f p ai d“ i n s at i s fact i on o f * * * [t h e d efen d an t ’ s ] cri m i n al l i ab i l i t y

t o th e St at e,” W al d m an v . Co m m i s s i o n er, 8 8 T.C. 1 3 8 4 , 1 3 8 9 (1 9 8 7), aff’ d , 8 5 0 F.2 d6 1 1 (9 t h Ci r. 1 9 8 8); cf. Cav aret t a v . Co m m i s si on er, T.C.

7 Sect i o n 1 6 2 (f) was am en d edb y the Tax Cu ts an dJ o bs Acto f 2 0 1 7 (TCJ A), Pub . L. No . 1 1 5 -9 7 , s ec. 1 3 3 0 6(a), 1 3 1 St at . at2 1 2 6. Th at am en d m en twas effect i ve fo r am o u n ts p ai daft er t h e TCJ A’ s d at e o f en act m en t(u n l es s p ai dp u rs u an tt o a b i n d in g ag reem en tex ecu t edp rev io u s l y ). See TCJ A s ec. 1 3 3 0 6(a)(2 ), 1 3 1 St at . at2 1 2 7.- 2 1 -

[* 2 1 ] M em o . 2 0 1 0 -4 , 9 9 T.C.M . (CCH) 1 0 2 8, 1 0 31 (h o ld i n g res t i tu t io n p aym en t d educt i b l e u n d er s ect i o n 1 6 2 (a) wh en res t i tu t i o n was n o tex p l i ci t l y o rd eredb y
s en t en ci n g co u rt , an di ts p ri m ary p u rp o s e was co m

p en s at o ry rat her t h an p u n i t i v e). W e fi n di tu n n eces s ary

t o ad dres s t hes e t h res h o l di s s u es h ere. Reg ard l es s o f wh et h er s ect i o n 1 6 2 (f) wo u l db ar t h e cl ai m edd edu ct io n an dwh et h er p et i t i o n ers p rev i o u s l y i n cl u d edi n i nco m e t h e fu n d s o f wh i ch th ey m ad e res t i tu t i o n, t hey

h av e fai l edt o es t ab l i s h th atth e res t itu t i o n p aym en t s o f $ 5 0 ,0 0 0 were o rd i n ary an dn eces s ary ex p en s es o f M r. M cRae’ s Sch edu l e C2 b u s i n es s . M r. M cRae’ s Sch edu l e C2 b u s in es s i n v o l v edg en eral acco un t i n g wo rkan d t ax return p rep arat i on . He s up p l i edn o t es t i m o n y o r d o cu m en taryev i d en ce t o
es t ab l i s h an y

l i n kb et ween th es e act i v i ti es an dh is res t i tu t io n p aym en t s . He t es t i
fi edthath e was “ accu sedo f h av i n g i m p ro p erl y t ak en s o m e m on ey

fro m M r. Brewer an d fro m

HUD” i n co n n ect i o n wi t h a p ro j ectt o d ev el o p l o w-i n co m e h o u s in g i n Pri n ce Geo rg e’ s Co u n t y . Fo r al l th atap p ears , th i s p ro ject i n v o l v edan i n v es t m en tact i v i t y o n M r. M cRae’ s p art , n o t an act i v it y h av i n g an y

rel at i on s h i p t o h i s Sch edu l e C2 b u s in es s . See W an g v . Co m m is s i o n er, T.C. M em o . 1 9 9 8-3 8 9 , 7 6 T.C.M . (CCH) 7 5 3 , 7 5 7 (h o l d i n g th ata b an k er’ s i n s i der t rad i n g was n o t d i rect l y o r p ro x im at el y rel at edt o h i s b an k i n g b u s i n es s b u twas s p o rad i c act i v i t y ari s i n g fro m- 2 2 -

[* 2 2 ] “ a l i m i tedo p po rtu n i s t i c t ran s act i o n al rel at i o n s h i p ”), aff’ d , 3 5 F. Ap p ’ x 6 4 3 (9 th Ci r. 2 0 0 2 ). Pet i t i o ners s ub m i tt edn o ev i d en ce t o s h o wth atM r. M cRae’ s p aym en to f
res t itu t i o n t o HUD an dM r. Brewer was n eces s ary t o p res erv e t h e cl i en tb as e o f h i s Sch edu l e C2 b u si n es s o r o t h erwi s e t o b en efi t t h atb u s i n es s. Fo r al l th atap p ears , M r. M cRae p ai dthe res t i tu t i on , as th e co u rto rd eredh im t o d o , fo r p u rel y

p ers o n al
reas on s , v i z., t o s at is fy

th e co n d i t i o n s o f h i s p ro b at i o n an d t h u s av o i d jai l t i m e. Co m p are Bo yk o v . Co m

m i s s i o n er, T.C. M em o . 1 9 9 8-6 7 , 7 5 T.C.M . (CCH) 1 8 30 , 1 8 3 5 (fi n d i n g p aym en tn o td edu ct i b l e as an o rd in ary an dn eces s ary

ex p en s e o f t ax p ay er’ s l aw p ract i ce wh ere h e “ p res en t edn o ev i d en ce t h ath i s b u s in es s rep u t at i on as an at to rn ey

wo u l d h av e b een ad vers el y affect ed ” b y n o np aym en t ), wi t h Go u l dv . Co m

m i s s i o n er, 6 4 T.C. 1 3 2, 1 3 5 (1 97 5 ) (al l owi n g b u s i n es s ex pen s e d edu ct i o n wh ere “ [t ] h e ev id en ce [wa] s cl ear t h at * * * [t h e t ax p ay er’ s ] m o t i v e was t o p res erv e h i s em

p l o ym en t ”), an dM ark s v . Co m m i s si on er, 2 7 T.C. 4 64 , 4 6 7 (1 9 5 6 ) (s am e, wh ere ev i d en ce s h owedth att ax p ay er m ad e p aym en tt o p ro t ecth i s “ b u s i
n es s rat h er t h an h is p ers o nal rep u t at i o n ”). Pet i t i o n ers s ub m it t edn o ev i d en ce o n th i s p o i n t , an d t h ey h av e t h erefo re fai l edt o carryth ei r b u rd eno f p ro v in g th atth e- 2 3 -

[* 2 3 ] res t i tu t i o n p aym en t s were “ o rd i n ary an dn eces s ary ” b u s i n es s ex p en s es d educt i b l e u n d er s ect i o n 1 6 2 (a). 8 3
. NOLs Fo r t h e t ax y ears ati s s u e s ect i o n 1 72 (a) al l o w eda d edu ct i o n equal t o th e
s u m o f t h e t ax p ay er’ s NOL carry o v ers an dNOL carry b ack s t o t h e t ax ab l e y ear. 9 Anu n u s edNOL was (an di s ) g en eral l y req u i red t o “b e carri edt o t he earl i es to f t h e t ax ab l e y ears t o wh ich * * * s u ch l o s s m ay b e carri ed .” Sec. 1 7 2 (b )(2 ). Th e p eri o dt o wh i ch NOLs co u l db e carri edg en eral l y ex ten d ed2 y ears b ackan dup t o 2 0 y ears fo rward . Sec. 1 7 2 (b )(1 )(A). A t ax pay er co ul d el ectt o rel i n qu i s h t h e carryb ackp eri o d, b uto n l y i f h e m ad e s u ch an el ect i o n b y the du e d at e fo r fi l i n g a retu rn fo r t he y ear i n wh i ch th e NOL aro s e. Sec. 1 7 2 (b )(3 ). Tax p ay ers b ear t h e b u rd en o f es t ab l i s h in g th e ex is t en ce an dam o u n to f NOL carryb ack s an dcarry fo rward s , wh ich req u i res th atth ey s ub m i tev i d en ce reg ard i ng p ri o r t ax y ears . See s ec. 6 2 1 4 (b ); Ru le 1 4 2 (a); Kei t h v . Co m m i s s i on er, 1 1 5 T.C.

8 Pet i t i on ers d o n o t co n ten d t h atth e res t i tu t i o n p aym en ts were d edu ct i b l e u n d er s ect i o n 1 6 5 (c)(2 ) as “ l o ss es i n cu rred i n an y t ran s act i o n en t eredi n t o fo r p ro fi t, th o u g h n o t co n nect ed wi t h a t rad e o r b u si n es s .” Cf. St ep h en s v . Co m m i s s i on er, 9 0 5 F.2 d6 6 7 (2 dCi r. 1 9 9 0 ) (d i s cu s si n g ci rcu m s tan ces i n wh i ch res t i tu t i o n p aym en t s m ay

b e d edu ct i b l e u n d er s ect io n 1 6 5 (c)(2 )), rev ’ g an drem an di n g 9 3 T.C. 1 0 8 (1 9 8 9 )).

9 Th e TCJ A m ad e am en d m en t s t o s ect i o n 1 7 2 thath av e n o ap p l i cat i o n h ere. See TJ CA s ec. 1 3 3 0 2 (a), (b ), (e), 1 3 1 St at . at2 1 2 1 -2 1 2 3.- 2 4 -

[* 2 4 ] 6 0 5 , 6 21 (2 0 00 ). Tax retu rn s fo r p ri o r y ears m ay b e n eces s ary

t o es t ab l i s h
an NOL carry fo rward , s ee s ec. 1 7 2 (b )(2 ) an d (3 ), b u tth e ret urn s th em s el v es
can n ots ub s t an t i at e, wi t h o u to t h er ev i d en ce, t h e l o s ses rep o rt edo n tho s e retu rn s , W i lk i n so n v . Co m

m i s s i on er, 7 1 T.C. 6 3 3, 6 3 9 (1 9 7 9) (“ Th e fact thata retu rn i s
s i gn edu n d er p en al ty

o f p erjury

i s n o ts u ffi ci en tt o s ub s t an t i at e d edu ct i o n s cl ai m ed
o n i t .”); Ro b ert s v . Co m

m i s s i o n er, 6 2 T.C. 8 3 4 , 8 3 7 (1 9 7 4 ) (s am e); Lee v
. Co m m i s s i o n er, T.C. M em o . 2 0 0 6 -7 0 , 9 1 T.C.M . (CCH) 9 9 9 , 1 0 01 (h o l d i n g t h ata p ri o r y ear ret u rn was i n s u ffi ci en tt o es tab l i sh th atan NOL was i n cu rredi n th at y ear). Pet i t i o ners cl ai m ed NOL carry fo rwardd edu ct io n s o f $ 7 9 ,1 6 0 , $ 18 ,9 4 0 , an d $ 6 0 ,0 0 0 fo r 2 0 1 3 , 2 0 14 , an d2 0 1 5 , res p ect i v el y . Th e reg u l at i o n s req ui re t h atan y t ax p ay er cl ai m i n g an NOL d edu ct i o n fo r an y y ear “ s h al l fi le wi t h h i s retu rn fo r
s u ch y ear a co n ci s e s tat em en t s et t i n g fo rt h th e am ou n to f t he * * * [NOL] d educt i o n cl ai m edan dal l m at eri al an dp ert i n en tfact s rel at i ve t heret o , i n cl ud i n g a d et ai led s ch edu l e s ho wi n g th e co m p u t at io n o f t h e * * * [NOL] d edu ct i on .” Sec. 1 .1 72 -1 (c), In co m e Tax Reg s . Pet i t io n ers at t ach ed n o s u ch s tat em en tt o th ei r 2 0 1 3 , 2 0 1 4 , o r 2 0 15 t ax retu rn . Pet i t i o ners co n t en dth atth ei r NOL carry fo rward s s t em fro m a s ect i o n 1 6 5 l o s s th ey s up p o s ed ly

i ncu rredi n 2 0 0 0 o r 2 0 0 1 , wh en M r. M cRae al l eg ed l y p ai d- 2 5 -

[* 2 5 ] $ 1 7 5 ,0 00 t o th e 1 6 1 1 ParkRo ad t en an t s as s o ci at i o n i n co n n ect i o n wi t h th e

“ d i sp o s i t i o n ag reem en t ” t h atres o lv edcri m in al h o u s i n g co d e ch arg es ag ai n s th i m . W e wi l l as s u m e arg u en d o th at M r. M cRae p ai dth i s s u m an dthatth e p aym en t g av e ri s e t o a l o ss d edu ct i o n i n 2 0 0 0 an d/ o r 2 0 0 1 u n d er s ect i o n 1 6 5(c)(1 ) o r (2 ). Pet i t io n ers h av e n ev ert h el es s fai l edt o es t ab li s h t h ei r en t i t l em en tt o NOL carry fo rwardd educt i o n s . Pet i t i o ners p ro du ced n o t ax retu rn s fo r an y y ear b efo re 2 0 1 3 an dn o ev i d
en ce reg ard i ng th ei r t ax treat m en to f t h i s i t em i n an y p ri o r y ear. Th ey h av e t h u s fai l edt o es t ab l i s h : (1 ) t he y ear o r y ears i n wh i ch th e o ri g in al l os s (es ) act u al l y o ccu rred ; (2 ) t h e am o un to f p et i t i o n ers ’ NOL fo r th aty ear o r y ears ; (3 ) wh et h er p et i
t i on ers m ad e a t i m el y

el ect i o n t o rel i nqu i sh th e carryb ackp eri o dfo r t he NOL(s ); (4 ) i f n ot , wh et h er an y p o rt i o n o f t h e NOL(s ) was carri edb ack t o p ri o r y ears ; o r (5 ) wh et h er an y

p o rt i o n o f t h e NOL(s ) was carri edfo rwardt o (an d t h u s u sedup i n ) t h e 1 0 y ears b etween 2 0 0 2 an d2 0 1 3. See Po wer v . Co m m i s s i o n er, T.C. M em o. 2 0 1 6 -1 5 7 , 1 1 2 T.C.M . (CCH) 2 41 , 2 45 (h o ld i n g th att ax p ay er fai l edt o

“p ro v e t h atth e p u rp o rt ed NOLs were n o tco m pl et el y ab s orb edb efo re t h e t ax ab l e y ears i n i s s u e”); J as p ers o n v . Co m m i s s io n er, T.C. M em o . 2 0 1 5 -1 8 6 , 1 1 0 T.C.M
. (CCH) 3 0 4 , 3 0 5 (h o l di n g th att ax p ay er fai ledt o es t ab l i s h t h at“ h e m ad e el ect i o n s- 2 6 -

[* 2 6 ] * * * t o w ai v e t h e carrybackreq u i rem en t ”), aff’ d , 6 5 8 F. Ap p ’ x 9 6 2 (1 1 th Ci r. 2 0 16 ). Th e NOL carry fo rwardd edu ct i o n s th atp et i ti o n ers cl ai m edfo r 2 0 1 3 -2 0 1 5 t o t al ed$ 1 5 8 ,1 0 0 , an am o u n tequ al t o 9 0 % o f th e $ 17 5 , 0 0 0 l o s s th ey s up p os ed l y i n cu rredi n 2 00 0 o r 2 0 0 1 . Itwo u l db e v ery s u rp ri s in g i f t hey

h adu s edo n l y $ 1 7 ,0 0 0 o f t h atl o s s , v ia carryb acko r carry fo rward , duri n g 1 9 9 8 -2 0 1 2 . Pet i t i o n ers ap p ear t o b el i ev e thatth e IRS s h o u l dh av e l o o k edi n t o thi s qu es t io n fo r t h em , co m p u t i n g t h ei r av ai l ab l e NOL carry fo rwardd edu ct i o n b y acces si n g t h ei r p ri o r t ax return s . Bu tthe b u rd en o f cl ai m i n g an ds ub s t an t iat i n g NOLs res t s wi t h th e t ax p ay er. See Kei t h , 1 1 5 T.C. at6 2 1. In an y ev en t , th e b u rd en o f s ub s tan t i at i n g NOLs can n o tb e s at i s fi edb y v i ewi n g t ax retu rn s al o n e. See W i l ki n s on , 7 1 T.C. at 6 3 9 ; Lee, 9 1 T.C.M . (CCH) at 1 0 0 1
. 1 0 D. Accu racy -Rel at edPen al t i es Sect io n 7 4 9 1 (c) p ro v i d es th at“ th e Secret ary s h al l h av e t h e b u rd en o f p ro du ct i o n i n an y

co u rtp ro ceed in g wi t h res p ectt o th e l i ab i l i t y o f an y i n d iv idu al fo r

1 0 In th ei r p o s t -t ri al b ri ef p et it i o n ers d o n otd i s p u t e t hatth ey s upp l i edn o ev i
d en ce th atwo ul d en ab l e t he Co u rtt o d et erm i ne t he ex i s t en ce o r am o u n to f an y NOL carry fo rwardt o 2 0 1 3 , 2 0 14 , o r 2 01 5
. Th ey as s ertthatth ey

“ rep eat ed l y

i n fo rm ed[r] es p o n d en tth atth e NOL b ei n g u t i l i zedo ccu rredi n y ear 2 0 0 0 / 2 00 1 ,” an d th ati ti s th ei r “ b el i ef an dreco ll ect i o n ” th at“ t h ere was an el ect io n fi l edt o carry fo rwardth e ap art m en tl o s ses .” Th es e as s ert io n s d o n o ts ub s t i tut e fo r ev id en ce.- 2 7 -

[* 2 7 ] an y p en al t y * * *
. ” Am o n g res p o n d en t ’ s b u rd en s i s t o s h o w co m p l i an ce wi th s ect i o n 6 7 5 1 (b )(1 ). Itp ro v i d es th at“ [n ] o p en al t y u n der t h i s t it l e s h al l b e as s es s edu n l es s th e i n i ti al d et erm i n at i o n o f s u ch as s es s m en t i s p ers on al l y ap p ro v ed (i n wri t i n g ) b y

the i m m ed iat e s up erv i so r o f t h e i n d iv i du al m ak i ng s u ch d et erm i n at i o n . ” RA Bo y d reco m

m en dedth e as s ert io n o f accu racy -rel at edp en al t ies u n d er
s ect i on 6 6 6 2 (a) an d(b )(2 ). Th atreco m m en d at i o n was ap p ro vedi n wri t i n g b y h er i m m ed i at e s up erv i s o r o n Ap ri l 2 6 , 2 0 1 7 , as ev i d en cedb y a Ci v il Pen al t y

Ap p ro v al Fo rm i n cl u d edi n th e reco rd . Sup erv is o ry ap p ro v al o f t h e p en al t i es was th u s s ecu redb efo re IRS o ffi cers co m p l et edthe Fo rm

4 5 4 9 -A (o n J u n e 3 0, 2 0 17 ) an di s s u ed th e n o t i ce o f d efi ci en cy (o n J u l y 5 , 2 0 1 7 ). W e fi n dth atres p o n d en th as m eth i s b u rd en o f p ro duct i on wi t h res p ectt o p en al ty ap p ro v al . Pet i t i o n ers d o n o tch al l en g e t h e t i m el i n es s o f t h atap p ro v al an d h av e s ub m i t t edi n t o th e reco rdn o ev i d en ce s u g g es t in g th at t h e ap p ro v al was u n t i m el y . W e t h u s co n cl u de t h atres p o n d en th as s at i s fi edth e requ i rem en t s o f s ect i o n 6 7 5 1 (b )(1 ). Th e Co d e i m

p os es a 2 0 % p en al t y

up o n th e p o rt io n o f an y

u nd erp aym en tat tri b u tab le t o an y

“ s ub s t an ti al u n d ers t at em en to f i nco m e t ax ,” i .e., an u n d ers t at em en tth atex ceed s t h e g reat er o f $ 5 ,0 00 o r 1 0 % o f t h e t ax req u iredt o b e s h o wno n- 2 8 -

[* 2 8 ] th e ret u rn . Sec. 6 6 6 2 (a), (b )(2 ), (d )(1 )(A). Pet it i on ers rep o rt edt ax l i ab i l i t i es
o f $ 1 7,1 1 1 , $ 1 ,0 1 3, an d$ 2,7 3 0 o n th ei r retu rn s fo r 2 0 1 3, 2 0 14 , an d2 0 1 5, res p ect i vel y . Th e n o ti ce o f d efi ci en cy d et erm i n edt ax l i ab i l i t i es o f $ 7 1 ,0 3 4 , $ 2 0 ,4 1 1 , an d $ 1 3 ,9 5 3 , res p ect i v el y . Al t h o u g h res po n d en t’ s co n ces s i o ns wi l l redu ce t h o s e l i ab i l i t i es s l i g ht ly , i ti s o b vi o u s th atp et i t i o n ers ’ u n d ers t at em en t o f i n co m e t ax fo r each y ear wi l l b e “ s ub st an t i al .” See s ec. 6 6 6 2(d )(1 ). Th e s ect i on 6 6 6 2 p en al t y d o es n o tap p l y

t o an y p o rt i o n o f an u nd erp aym en t

“ i f i t i s s h o wnth atth ere was a reas o n ab l e cau s e fo r s u ch p o rt i o n an d t h atthe t ax p ay er act edi n g o o dfai t h wi t h res p ectt o * * * [i t ] .” Sec. 6 6 6 4 (c)(1 ). Th e d eci s io n wh et h er t h e t ax p ay er act edwi t h reas o n ab l e cau s e an di n g o o dfai t h i s m ad e o n a
cas e-b y -cas e b as i s , t ak in g i nt o acco u n tal l p ert i n en tfact s an dci rcu m s tan ces . Sec. 1 .6 66 4 -4 (b )(1 ), In co m e Tax Reg s . Ci rcu m s t an ces th atm ay s i g n al reas o nab l e
cau s e an d g o o dfai t h “ i n cl u d e anh o n es tm i s u nd ers t an di n g o f fact o r l aw t h ati s
reas on ab l e i n l i g h to f al l o f t h e fact s an dci rcu m s tan ces .” Ib i d
. W e fi n dth atp et i t i o n ers h av e n o tes t ab l i sh edreas o n ab l e cau s e o r g o odfai t h
. M r. M cRae, a cert i fi edp ub li c acco u n tan t , p erfo rm edp ro fes s i on al s erv i ces th ati n cl u d edt ax return p rep arat i o n . He p res u m ab l y h ads u ffi ci en tkn o wl ed g e an dex p eri en ce t o u n d ers t an d h i s t ax o b l i gat i o n s . Yetp et it i o n ers fai l ed t o m ai nt ai n p ro p er reco rd s o f t h ei r Sch edu l e C b u s i n es s es , o ffered n o cred i b l e ex p l an at i o n fo r- 2 9 -

[* 2 9 ] fai l i n g t o rep o rts ub s t an t i al am o u n ts o f i n co m e, an dh adv i rtu al l y n o
s ub s t an t i at i o n fo r t hei r d edu ct i o n s . Pet i ti o n ers p rep aredth ei r retu rn s u s i n g
co m m erci al s o ft ware an d d o n o tal l eg e an y rel i an ce o n p ro fes s i o n al ad v i ce. See Lan gl ey v . Co m m i ss io n er, T.C. M em o . 2 0 1 3 -2 2 , 1 0 5 T.C.M . 1 1 4 8 , 1 1 50 (“ Tax p rep arat i o n s o ft ware * * * i s o n l y as g oo das th e i n fo rm at io n th e t ax p ay er p u t s i n t o i t . ”). Fi n d i n g th atp et i t i o ners h av e n o tes t ab l i s h edreas o n ab le cau se, we h o l dth at th ey are l i ab l e fo r accu racy -rel at edp en al t i es . To i m p lem en tth e fo reg o i n g , Deci s i o n wi ll b e en t eredu n d er Ru l e 1 5 5
.