T.C. Mem o. 2 01 5- 21 4

UNITED STAT ES TAX COURT

MARK R. SM ITH AND YO NG N. SMITH, Peti ti on ers v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No s. 2 20 33 -1 2, 2 96 21 -1 2. Fi le d No ve m be r 3, 2 01 5.

Mark R . Sm it h, p ro se. BryantW . Sm it h, fo r res po nd en t.

MEMORANDUM FINDINGS OF FACT AND OPINION HAINES, Ju dg e: Res po nd en t d et erm in edde fic ie nc ie s i n p et it io ne rs ’ Fed eral in co m e ta x a ndpe na lt ie s as fol lo ws:

Year Defi ci en cy Pen al ty se c. 66 62 (a) 20 09 $1 3,7 32 $2 ,74 6 20 10 6,0 98 1,2 19- 2 -

[* 2] Afte r co nc es si on s, we m us t d eci de whet he r Mr. Sm ith (p et it io ne r) is en ti tl ed 1 to am ou nt s i n e xc es s o f wha t re sp on de ntall owe d fo r: (1 ) returns an d a ll owa nc es rep orte d o n t he Sch edul e C, Pro fitor Lo ss Fro m Bu si ne ss , att ach edto th e 2 00 9 Fed eral in co m e ta x re tu rn(20 09 return) ; (2 ) un rei m bu rs edem

pl oyee bu si ne ss ex pe ns es rep orte d o n t he Sch edul e A, Ite m iz edDedu ct io ns , att ach edto th e 2 00 9 Mrs . Sm it h s ub m it te d F orm s 8 85 7, Re qu es t fo r In no cen t Sp ou se Rel ie f, 1 da te d S ep te m

be r 10 , 20 13 , forth e 2 00 9 t ax y ear a ndNov em be r 26 , 20 13 , forth e 20 10 tax y ear. Re sp on de ntrev ie wedMrs . Sm it h’s Fo rm s 8 85 7 a ndde te rm in ed th atsh e sh ou ldbe gra nt edrel ie f fro m joi ntan d s ev eral li ab il it y for20 09 an d 2 01 0 (y ears at i ss ue ) ex cep t fo r th e unr ep orte d t ax ab le Sta te in co m e ta x re fund s fr om th e 2 00 9 t ax y ear. Pe ti ti on er re fu se d t o a gr ee tha t M rs . Sm it h s ho ul d b e g ran te d rel ie f fro m

joi ntan d s ev eral li ab il it y forth e y ears at i ss ue . On Dec em

be r 16 , 20 14 , res po nd en t fi le d m ot io ns forpa rti al su m m ary jud gm en t i n d oc ke t No s. 2 20 33 -1 2 a nd29 62 1- 12 . W it h t he ex cep ti on of t he un rep orte d t ax ab le Sta te in co m e ta x re fund s fr om th e 2 00 9 t ax y ear, re sp on de nt adva nc edth e p os it io n t ha t M rs . Sm it h s at is fie d t he requi rem en ts of s ec. 60 15 (b )(1 )(A)-( E) an d was en ti tl edto rel ie f fro m joi ntan d s ev eral li ab il it y . Tria ls indo ck etNos . 22 03 3- 12 an d 2 96 21 -1 2 wer e h el d o n No ve m be r 18 , 20 14 , inSanFran ci sc o, Ca li fo rn ia . Mrs . Sm it h was fin an ci al ly unabl e to tra ve l fro m Virg in iato Cal ifo rn iafortri al an d was no t p res en t. The Co urt s ep arat edth e is su e o f rel ie f fro m

joi ntan d s ev eral li ab il it y to all ow tria l t o b e h el d o n t he ot he r is su es .On Ap ril 17 , 20 15 , th e Co urt g ran te d re sp on de nt ’s m ot io ns forpa rti al su m m ary jud gm en t i n d oc ke t No s. 2 20 33 -1 2 a nd29 62 1- 12 . The Co urt o rd ered th atMrs . Smit h was en ti tl edto rel ie f fro m joi ntan d s ev eral li ab il it y fro m an y un de rs ta te m en t re la te d t o h er an d p et it io ne r’s 20 09 an d 2 01 0 F ed eral in co m e ta x returns with t he ex cep ti onof u nd ers ta te m en ts st em m in g fr om

pe ti ti on ers ’ fai lu re to rep ort t ax ab le Sta te in co m e ta x re fund s fo r 20 09 . Becau se pe ti ti on er an d M rs . Sm ith c on ced edth atth ey fai le d t o re po rt t ax ab le Sta te in co m e ta x re fund s fo r 20 09 , th atis no t an is su e b efo re the Co urt. Co ns eque nt ly, th e Co urt’s d eci si on in th is cas e aff

ect s o nl y pe ti ti on er.- 3 -

[* 3] return; an d (3 ) co stof g oo ds so ld , ren t o r le as e ex pe ns es , andin te res t
ex pe ns es rep orte d o n t he Sch edul e C at ta ch edto th e 2 01 0 F ed eral in co m e ta x return (2 01 0 re tu rn ). W e m us t al so de te rm in e whe th er p et it io ne r is li ab le for
se ct io n 6 66 2( a) accu racy-rela te d p en al ti es forth e y ears at i ss ue . 2 FINDINGS OF FACT The se cas es were co ns ol id at edforpurp os es of b rie fin g a ndop in io n. Th e pa rti es ’ st ip ul at io ns of f

act s, wi th att ach edex hi bi ts , are i nc or po rat edhe rei n b y

th is refe ren ce. Pet it io ne r li ve d i n C al ifo rn iawhen th e p et it io ns were fi le d. The fol lo win g t ab le su m

m ari zes th e am ou nt s p et it io ne r rep orte d o n h is Fed eral in co m e ta x re tu rn s fo r th e y ears at i ss ue an d t he am ou nt s re sp on de nt al lo wedan d d is al lo wedinth e n ot ic es of d efi ci en cy : 3

Unl es s o th erwi se in di cat ed , all sec ti on refe ren ces are t o t he Int ern al 2 Rev enue Co de ineffe ctforth e y ears at i ss ue , andall Ru le refe ren ces are t o t he Tax Co urt Ru le s o f Prac ti ce an d P ro cedur e. Ite m s n otat i ss ue are n otsh own . 3- 4 -

[* 4] Year Ite m Am ou nt cl ai m ed Am ou nt

al lo wed Am ou nt

di sa ll owe d 20 09 Sch edul e C returns an d a ll owa nc es $4 5,0 21 -0
- $4 5,0 21 20 09 Sch edul e A un rei m bu rs edem

pl oyee bu si ne ss ex pe ns es --trav el whi le away fro m ho m e o ve rn ig ht 16 ,05 0 -0
- 16 ,05 0 20 09 Sch edul e A un rei m bu rs edem

pl oyee bu si ne ss ex pe ns es --p ark in g 46 8 -0
- 46 8 20 09 Sch edul e A un rei m bu rs edem

pl oyee bu si ne ss ex pe ns es --m eal s an d ent ert ai nm en t 11 3 -0
- 11 3 20 10 Sch edul e C i nt eres t-- ot he r 6,6 20 -0
- 6,6 20 20 10 Sch edul e C ren t/ le as e--o th er b us in es s pro pe rty 23 ,72 3 $1 2,8 92 10 ,83 1 20 10 Sch edul e C i nt eres t 8,4 25 -0
- 8,4 25 1. Re tu rn s an d Al lo wan ces In20 08 pe ti ti on er m anuf actur ed64 lar ge areaso la r pa ne ls inVirg in iawhi le li vi ng th ere. He s ol d 4 6 o f th es e so la r pa ne ls inlat e 2 00 8 a ndearl y 20 09 . In Mar ch20 09 pe ti ti on er s ol d e ig htof the pane ls to a cu st om er, Mi ch ael Rai ne s, i n Los Ang el es , Cal ifo rn ia . Sho rtl y aft er the pa ne ls were i ns ta ll edat aho m e, th ey cau gh t fi re, cau si ng ex te ns iv e d am ag e. The fi re p ro m pt eda go ve rn m en t in ve st ig at io n wh ic h re qu ire d p et it io ne r to rem ov e fro m th e m ark etall of t he so la r pa ne ls th athe ha d s ol d.- 5 -

[* 5] On the Sch edul e C at ta ch edto th e 2 00 9 re tu rnpe ti ti on er re po rte d z ero gro ss rece ip ts or s al es an d ato ta l o f $4 5,0 21 as r eturns an d a ll owa nc es . At tri al pe ti ti on er as ke d the Co urt t o a ll ow $ 24 ,32 5 fo r returns an d a ll owa nc es , $1 0,5 76 fo r th e co stof t he so la r pa ne ls th atwere m anuf actur edbu t n ev er s ol d, $ 9,3 12 .60 fo r so la r pa ne ls th atwere p ur ch as edfro m pe ti ti on er u si ng st ol encred itcard s, an d $6 00 forhi s p aym en ts to Heri ta ge W eb So lu ti on s. 4 On M arch 29 , 20 09 , pet it io ne r pa idMr. Rai ne s $ 7,5 12 by check
. Res po nd en t co nc ed edon bri ef tha t thi s amoun t s ho ul d b e al lo wedas areturn o r al lo wan ce. On S ep te m

be r 21 , 20 09 , pet it io ne r m ad e a $ 13 ,30 0 wi re tran sf er fro m hi s an d M rs . Sm it h’s b an k a cco un t t o Em pi re Cl eanEner gy Sup pl y with ano ta ti on in di cat in g i t was forth e “ Reynol ds W arra nt y Paym en t.” Pe ti ti on er cl ai m ed
an ot he r cu st om er h adask edforrep la cem en t s ol ar p an el s i n l ie u o f a ref un d. Pet it io ne r in tro du cedat t ria l a p ro form a in vo ic e fro m SET Sol ar Co rp . sh owi ng th atrep la cem en t p an el s wo ul d c os t $ 3,5 13
. In20 09 aft er p et it io ne r st op pe d s el li ng th e so la r pa ne ls he ha d
m anuf actur ed , he p ur ch as edso la r pa ne ls fro m who le sa le rs an d re so ldth em on th e In te rn et . Peti ti on er cl ai m s h e was no ti fie d a fte r fo urof t he ord ers ha d s hi pp edth at
Pet it io ne r di d n otex pl ai n t he di sc rep an cy be twee n t he am ou ntof r eturns 4 an d a ll owa nc es reque st edat tria l an d t he am ou ntrep orte d o n t he 20 09 return.- 6 -

[* 6] th e p ur ch as es ha d b eenm ad e wit h s to le n c red itcard s. Th ou gh pe ti ti on er so ug ht$9 ,31 2.6 0 a t tria l fo r pu rch as es m ad e wit h s to le n c red itcard s, h e in tro du cedon ly the fol lo win g wi th dr awal s t o s up po rt h is cla im s: 5

Date Am ou nt Ty pe of wi th dr awal 7/ 24 $2 ,48 6.2 0 Ban k c ard 8/ 10 1,9 16 .90 Ban k c ard 10 /2 2,2 20 .20 Ban k c ard 10 /1 9 2,1 88 .40 Ban k c ard At tria l p et it io ne r in tro du cedno in vo ic es or o th er p ro of of t he se all eg edfrau du le nt pu rch as es . Pet it io ne r hi redHeri ta ge W eb So lu ti on s t o ru n h is bu si ne ss ’ W eb si te . In la te 20 08 pe ti ti on er was pro m is edanad di ti on al y ear o f W eb servi ces if h e p rep ai d $1 ,20 0. Pe ti ti on er d idno t p ro du ce an y do cu m en ta ti onof t hi s ag reem en t. The $1 ,20 0 was pre pa idinfou r in st al lm en ts of $ 30 0 i n No ve m be r an d Dec em

be r 20 08
an d F eb ru ary an d M arch 20 09 . Peti ti on er i ntro du cedat t ria l p ro of of t he two pa ym en ts m ad e in20 09 . Herit ag e Web So lu ti on s cl os edsh ortl y aft er the las t pa ym en t was m ad e, an d p et it io ne r was witho utInt ern etsupp ort fo r th e b us in es s.

On Oct ob er 1 , 20 09 , $6 ,82 6.4 0 was withd rawnfro m th e b an k a cco un t v ia 5
“ Bam s” , bu t thi s amoun t was returne d o n No ve m be r 2, 2 00 9.- 7 -

[* 7] 2. Un rei m

bu rs edEm

pl oyee Bu si ne ss Exp en se s Afte r he was re qu ire d t o re m ov e fro m th e m ark etall of t he so la r pa ne ls he ha d s ol d, p et it io ne r so ug htot he r em pl oym en t. He o bt ai ne d avi si ti ng sch ol ar po si ti onwith Hewl ett-P ack ard(HP) i n C al ifo rn ia . As a v is it in g s ch ol ar, p et it io ne r was hi redto workon a res earc h p ro ject f orth e U.S. Arm

y . HP reim

bu rs ed pe ti ti on er $ 6,1 86 forth e co stof h is m ov e fro m Virg in iato Cal ifo rn ia . Whe n pe ti ti on er m ov ed , Mrs . Smit h re m ai ne d i n Vi rg in ia
. Pet it io ne r rec ei ve d an o fferlet te r fro m HP, bu t i t was no t i ntro du cedat t ria l. A cop y of p et it io ne r’s In te rn/R es earc h R el oc at io n P ro gr am Ackn owl ed gm en t Lett er, h owe ve r, was i ntro du cedat t ria l. Itst at es , inpa rt: “ [I]n the ev en t you le av e Hewle tt -Pac ka rd , for an y reas on , durin g t he term

of your 3- 12 m on th
as si gn m en t * * * y ouwil l b e requi redto rep ay Hewlet t-P ack ardfor

th e en ti re co stof your rel oc at io n b en efi ts ”. As l on g a s the res earc h wen t wel l an d t he U.S. Arm y pro vi de d fu nd in g fo r th e p ro ject, the re was so m e ex pe ct at io n t ha t pe ti ti on er’s em

pl oym en t wo ul d c on ti nu e, bu t HP p ro vi de d n o a ss ur an ces an d pe ti ti on er’s em

pl oym en t co ul d h av e b eenterm in at edat a ny tim e. Acco rd in g t o ade cl arat io n fr om AnnFau st m an n o f HP, pe ti ti on er was em pl oyed fro m

Marc h 2 3, 2 00 9, t o No ve m be r 1, 2 01 2. Pe ti ti on er, h owe ve r, te st ifi edth athi s emplo ym en t was no t co nt in uo us du rin g tha t p eri odan d t ha t h e- 8 -

[* 8] was “ la idoff

” dur in g t he m id dl e o f Decem be r eac h year. Pet it io ne r di d n ot
subm itpro of

of the se pe rio ds of u ne m pl oym en t, an d h e n ev er ap pl ie d fo r un em pl oym en t b en efi ts . Pet it io ne r si gn eda le as e fo r anap art m en t i n C al ifo rn iawith Tri ni ty Prop erty Co ns ul ta nt s i n M arch 20 09 th atwou ldlas t u nt il Apri l 3 0, 2 01 0. Pe ti ti on er di sc ov eredth atth e co m

pl ex ha d p oo r se cu rity

when a sh oo ti ng to okpl ace t he re i n Aug us t 2 00 9. Be cau se th e m an ag em en t d idno t i nt en d t o re m edy th e se curit y is su es , pet it io ne r pa idto term in at e h is lea se an d s ig ne d ane w 12 -m on th lea se be gi nn in g o n Au gu st8, 2 00 9, wi th Cupe rti no Cit y Cen te r in Cal ifo rn ia
. 3. Co stof Go od s So ld Pet it io ne r rep orte d c os t o f go od s s ol d o f $8 ,42 5 o n h is 20 10 return, al l o f whi chres po nd en t d is al lo wed . Peti ti on er co nc ed edat t ria l tha t the am ou ntcla im ed
on th e return was in co rrec t an d re qu es te d $ 1,5 75 forco stof g oo ds so ld . He pr oduc eda qu ot e fo r 1,0 00 “ Outba ckVFX3-2 4E, 3 .0k W , 24 V Inv ert er ex po rt[ s]” fro m Who le sa le So lar da te d M ay 4, 2 00 9, t o s up po rt t hi s as se rti on , tes ti fy in g t ha t itwas h is reco ll ect io n t ha t the da te sh ou ldha ve be enMay 4, 20 10 . The quo te st at es th e p ric e p er u ni t was $1 ,57 5, the subt ot al was $ 1,5 75 ,00 0, an d t he qu ot e to ta l was “ ? ”.- 9 -

[* 9] 4. Ren t/ Leas e Exp en se s Pet it io ne r rep orte d $ 4,5 50 ingro ss rece ip ts or s al es on hi s 2 01 0 re tu rn . Pet it io ne r cl ai m eda de du ct io n fo r $2 3,7 23 inren t o r le as e ex pe ns es on th e Sch edul e C atta ch edto th e 2 01 0 re tu rn , $1 0,8 31 of wh ic h was rel at edto hi s ap art m en t i n C al ifo rn ia . Res po nd en t d is al lo wedth e p orti onof t he de du ct io n rel at edto th e ap art m en t. Pet it io ne r pr oduc eda co py of th e ap art m en t’s fl oo r pl an an d d en ot edth e are as th athe cla im edto have us edex cl us iv el y for bu si ne ss pu rp os es . It i nd ic at edth atpe ti ti on er u se d 5 3% o f hi s ap art m en t-- th e en ti re en try
area , di ni ng area , li vi ng area , andde ck --ex cl us iv el y for bu si ne ss pu rp os es . The ap art m en t’s l ay ou t re qu ire d p et it io ne r to pa ss th ro ug h t he se area s t o e nt er the ap art m en t i ts el f, th e b edro om , th e b athr oo m , andth e k it ch en . 5. In te res t Ex pe ns es The c la im edin te res t ex pe ns es were i nt eres t ch arg es on cred itcard pu rch as es an d ape rs on al lo an . The cre di t ca rdin te res t re la te d t o p ur ch as es m ad e in earl ie r y ears as n o p ur ch as es were m ad e o n the cred itcard s dur in g 2 01 0. No
ev id en ce o th er than p et it io ne r’s te st im on y was i nt ro du cedto supp ort the cla im th at th e it em s p ur ch as edwith t he cred itcard s wer e u se d i n p et it io ne r’s bu si ne ss . Pet it io ne r di d n ottes ti fy

or p ro vi de ot he r ev id en ce re ga rd in g t he us e o f th e pe rs on al lo anpro ceed s.- 10 -

[* 10 ] OPINION W e m us t d et erm in e whe th er p et it io ne r is en ti tl edto am ou nt s i n e xc es s o f wha t re sp on de ntall owe d. We m us t al so de ci de whet he r pe ti ti on er i s l iabl e fo r se ct io n 6 66 2( a) ac cu racy-rela te d p en al ti es . I. Ite m s Di sa ll owe d b y

Res po nd en t The Co m m is si on er’s d et erm in at io ns ina no ti ce o f de fic ie nc y are p res um ed
co rrec t, an d t he tax pa y er h as th e b ur de n t o s ho w th athi s d et erm in at io ns are in co rrec t. Ru le 14 2( a); W el chv. Hel ve rin g, 2 90 U.S. 11 1, 1 15 (19 33 ). 6 Deduc ti on s ar e a m at te r of leg is la ti ve gra ce, an d t he tax pa y er b ears th e bu rd enof e st ab li sh in g e nt it le m en t t o a ny clai m edde du ct io n. Ru le 14 2( a); INDOPCO, In c. v. Co m

m is si on er, 5 03 U.S. 79 , 84 (19 92 ). Sect io n 1 62 (a) a ll ows a d educ ti on forall ord in ary an d n eces sa ry ex pe ns es pa idor i nc urreddu rin g the ta xabl e y ear i n c arrying ona tr ad e o r bu si ne ss . In g en eral , deduc ti on s ar e n ot al lo wedfor

pe rs on al , li vi ng , or fa m il y ex pe ns es . Sec. 2 62 (a). Tax pa y ers are re qu ire d t o m ai nt ai n s uf fic ie ntreco rd s tha t s ub st an ti at e th e am ou ntan d p ur

po se of e ach it em

forwhi chth ey

cla im a de du ct io n. Se c. 60 01 ;
Pet it io ne rs ha ve no t cl ai m edth atth e b ur de n s ho ul d s hi ft t o re sp on de nt , no r 6 do es th e rec or d s ho w th atsh ift in g t he bu rd enwou ldbe ap pr op ria te inth es e cas es . See s ec. 7 49 1( a).- 11 -

[* 11 ] Hrad es ky v. Co m

m is si on er, 6 5 T.C. 8 7, 8 9 (1 97 5) , aff’d p er cu ria m , 54 0 F.2 d 8 21 (5t h C ir. 1 97 6) ; s ec. 1 .60 01 -1 (a), In co m e Tax Reg s. Gen eral ly, a ta xp ay er’s s el f-s erv in g d ecl arat io n i s n ota su ffi ci en t s ub st itut e fo r rec or ds . W ei ss v. Co m m is si on er, T.C. Mem o. 1 99 9- 17 . Sect io n 2 74 (d ) im po se s s tri ct
subs ta nt ia ti on requi rem en ts forcert ai n d educ ti bl e expe ns es , su chas t rav el in g ex pe ns es (in cl ud in g m eal s an d l od gi ng away fro m ho m e) an d e nt ert ai nm en t
ex pe ns es . Returns an d a ll owa nc es an d c os t o f go od s s ol d are t ak enin to co ns id erat io n whe n d et erm in in g aSch edul e C b us in es s g ro ss in co m e. Dedu ct io ns are s ub tra ct ed fro m th e Sch edul e C b us in es s g ro ss in co m e in ord er t o d et erm in e it s n etpro fitor ne t l os s. Acco rd in gl y , returns an d a ll owa nc es an d c os t o f go od s s ol d a re n ot tre at edas d educ ti on s an d a re n otsubjec t t o t he li mit at io ns of s ect io n 1 62 . Metra Ch em Co rp . v. Co m

m is si on er, 8 8 T.C. 6 54 , 66 1 (1 98 7) ; Nu nn v. Co m m is si on er, T.C. Mem o. 2 00 2- 25 0. Nev erthe le ss , tax pa y ers m us t re ta in su ffi ci en t re co rd s t o subs ta nt ia te am ou nt s cl ai m edas r eturns an d a ll owa nc es or c os t o f go od s s ol d. Sec. 6 00 1; sec . 1.6 00 1- 1( a), In co m e Tax Reg s. 1. Re tu rn s an d Al lo wan ces On b rie f res po nd en t co nc ed edth atpe ti ti on er i s en ti tl edto a $7 ,51 2 Sch edul e C ad

jus tm en t t o g ro ss in co m e fo r returns an d a ll owa nc es forth e ref un d- 12 -

[* 12 ] is su edto Mr. Rai ne s i n c on ne ct io n wi th th e so la r pa ne ls th atcau se d t he fir e in San taMo ni ca, Ca li fo rn ia
. Pet it io ne r cre di bl y

tes ti fie d t ha t h e was requi redto rem ov e h is bu si ne ss so la r pa ne ls fro m

th e m ark etbe cau se th ey

cau se d afir e th atda m ag eda ho m e. Ban k s ta te m en ts refl ectth atpe ti ti on er m ad e a $ 13 ,30 0 wi re tran sf er t o Em pi re Cl eanEner gy Sup pl y

on Sep te m

be r 21 , 20 09 , with ano ta ti on in di cat in g i t was for th e “ Reynol ds W arra nt y

Paym en t” . W e fi ndth is subs ta nt ia ti on su ffi ci en t t o a ll ow pe ti ti on er t o i nc lu de th is am ou ntinreturns an d a ll owa nc es on th e 2 00 9 S ch edul e C. Pet it io ne r al so pre se nt eda pr o fo rm a in vo ic e fro m SET Sol ar Co rp . sh owi ng rep la cem en t s ol ar p an el s wo ul d c os t $ 3,5 13 , bu t h e d idno t p ro vi de an y reco rd s t o sh ow tha t thi s amoun t was ev er p ai d. Pe ti ti on er h as pro vi de d i ns uf fic ie nt
subs ta nt ia ti on to all ow h im to in cl ud e th is am ou ntinreturns an d a ll owa nc es on th e 2 00 9 S ch edul e C. The am ou nt s re po rte d fo r pa ym en ts to Heri ta ge W eb So lu ti on s an d a ll eg ed frau du le ntpurch as es sh ou ldno t h av e b eencat eg or iz edas r eturns an d a ll owa nc es bu t p ot en ti al ly cou ldbe co ns id eredord in ary an d n eces sa ry bu si ne ss ex pe ns es . See s ec. 1 62 (a). Pet it io ne r di d n otin tro du ce co py of th e ag reem en t wi th Heri ta ge W eb So lu ti on s, an d we c an no t d et erm in e whe th er h e rep orte d t hi s amoun t- 13 -

[* 13 ] els ewh ere o n t he 20 09 Sch edul e C. Inanatt em ptto subs ta nt ia te th e al le ge d frau du le ntpurch as es pe ti ti on er p ro vi de d o nl y bankst at em en ts sh owi ng withd rawal s m ad e v iaba nkcard . Peti ti on er h as no t p ro du cedsu ffi ci en t
subs ta nt ia ti on to all ow a d educ ti on foreit he r of th es e it em s. It i s u nn eces sa ry

forus to ad dr es s wh ethe r an d wh ere a ny am ou nt s fo r th e
m anuf actur edbu t u ns ol d s ol ar p an el s s ho ul d h av e b eenrep orte d o n t he 20 09 return b ecau se pe ti ti on er fa il edto pro vi de an y subs tant ia ti on to supp ort h is cla im s. W e fi ndth atpe ti ti on er i s en ti tl edto returns an d a ll owa nc es of $ 20 ,81 2 o n hi s 2 00 9 S ch edul e C. 2. Un rei m

bu rs edEm

pl oyee Bu si ne ss Exp en se s a. Trav el Whi le Away

Fro m Hom e Ove rn ig ht The ex pe ns es of m ai nt ai ni ng a ho us eh ol d, i nc lu di ng ren t an d u ti li ti es , are no t d educ ti bl e. Sec. 1 .26 2- 1( b) (3 ), In co m e Tax Reg s. Ho wev er, t o a ll ev ia te th e bu rd enon tax pa y ers who se bu si ne ss or e m pl oym en t re qu ire s the m

to in cu r dupl ic at e li vi ng ex pe ns es , tax pa y ers m ay de du cttra ve li ng expe ns es , su chas m eal s an d l od gi ng , if s uc h e xp en se s ar e: (1) ord in ary an d n eces sa ry ; (2 ) in cu rredwhi le away fro m

ho m e; an d (3 ) in cu rredinth e p ur su itof atra de or b us in es s. Sec
. 16 2( a)(2 ); s ee Co m

m is si on er v . Flo wers , 32 6 U.S. 4 65 , 47 0 (1 94 6) ; Tu ck er v .- 14 -

[* 14 ] Co m

m is si on er, 5 5 T.C. 7 83 , 78 6 (1 97 1) ; Kro ll v. Co m m is si on er, 4 9 T.C. 55 7, 5 62 (19 68 ). Fo r pu rp os es of s ect io n 1 62 (a)( 2) a ta xp ay er’s “ ho m e” i s g en eral ly the vi ci ni ty of th e ta xp ay er’s p rin ci pa l p la ce o f em pl oym en t. Mi tc he ll v. Co m m is si on er, 7 4 T.C. 5 78 , 58 1 (1 98 0) ; Dal y v. Co m mis si on er, 7 2 T.C. 1 90 , 19 5 (1 97 9) , aff’d, 6 62 F.2d25 3 (4 th Cir . 19 81 ). A tax pa y er’s res id en ce, wh enou ts id e th e v ic in it y

of t he tax pa y er’s p rin ci pa l p la ce o f em pl oym en t, m ay

be tre at edas t he ta xp ay er’s t ax ho m e if

th e ta xp ay er’s em

pl oym en t i s “ te m

po rary” rath er tha n

“ in de fin it e.” Peu rif

oy v. Co m

m is si on er, 3 58 U.S. 59 , 60 (19 58 ). Howev er, “ if t he
em pl oym en t wh il e away from ho m e, ev enif t em

po rary in i ts in cep ti on , bec om es subs ta nt ia l, i nd efi ni te , or i nd et erm in at e indurat io n, the si tu s o f su chem pl oym en t fo r pu rp os es of t he st atut e b eco m es th e ta xp ay er’s h om e.” Kro ll v. Co m m is si on er, 49 T.C. at 5 62
. Thi s C ou rt h as fou ndth atem pl oym en t i s “ te m

po rary” if i t i s the type whi ch
canbe ex pe ct edto las t o nl y fora sh ort p eri od . Alb ertv. Co m m is si on er, 1 3 T.C. 12 9, 1 31 (19 49 ). W e h av e fo un d e m pl oym en t i s “ in de fin it e” i f “ it s t erm in at io n can no t b e fo res eenwithi n afix edor r eas on ab ly sho rt p eri odof t im e.” Stric ke r v. Co m m is si on er, 5 4 T.C. 3 55 , 36 1 (1 97 0) , aff’d, 4 38 F.2d12 16 (6t h C ir. 1 97 1) . An ap pe al inth is cas e wou ldli e in th e Co urt o f App eal s fo r th e Nin thCir cu it , whi ch- 15 -

[* 15 ] di sa gr eedwith t hi s t es t i n Harve y v. Co m m is si on er, 2 83 F.2d49 1 (1 95 9) (9 th Cir . 19 60 ), rev ’g an d re m an di ng 32 T.C. 13 68 (19 59 ). In Harve y , th e Co urt of App eal s, drawi ng fro m

th e le gi sl at iv e p ur

po se of s ect io n 1 62 (a)( 2) , foc us edit s de te rm in at io n o n wh ethe r itwas re as on ab le un de r th e ci rcu m st an ces to ex pe cta ta xp ay er t o m ov e. See al so Wrig htv. Hart se ll , 30 5 F .2d22 1, 2 23 -2 24 (9t h C ir. 19 62 ). The l oc at io n o f a t ax pay er’s t ax ho m e an d wh ethe r a t ax pa y er’s
em pl oym en t was tem

po rary rath er tha n i nd efi ni te are que st io ns of f actto be de ci de d o n t he en ti re re co rd . See Peu rif oy v. Co m

m is si on er, 3 58 U.S. at 6 0- 61 ; Co m m is si on er v . Flo wers , 32 6 U.S. at47 0. The reco rdco nt ai ns rel at iv el y li tt le in fo rm at io n re gard in g p et it io ne r’s
em pl oym en t wi th HP. His p os it io n h adanin it ia l t erm of 3 to 12 m on th s, an d h e en de d up wo rk in g fo r HP fo r m or e th anth ree years. Atth e ti m e p et it io ne r was hi redth ere was anex pe ct at io n t ha t h is em pl oym en t wo ul d c on ti nu e if th e res earc h
wen t wel l an d t he pro

ject c on ti nu edto rece iv e fu nd in g fr om th e U.S. Arm

y . Pet it io ne r’s act io ns ev id en ce h is ex pe ct at io n t ha t the res earc h p ro ject wo ul d
co nt in ue foranin de fin it e ti m e. If p et it io ne r ha d t ru ly bel ie ve d tha t h is po si ti on in Cal ifo rn iawas t em

po rary, it i s d oubt fu l tha t h e wou ldha ve im m ed ia te ly ent ered in to a y earl on g l eas e in Marc h 2 00 9 o r en te redin to a y earl on g l eas e fi ve m on th s la te r inAug us t 2 00 9. Fu rth er, i n Dec em be r 20 09 when pe ti ti on er was tem po rari ly- 16 -

[* 16 ] lai d o ff, h e d idno t s eekun em pl oym en t b en efi ts . It i s h ig hl y un li ke ly tha t pe ti ti on er wo ul d fa il to see k u ne m pl oym en t b en efi ts if h e d idno t b el ie ve he was go in g t o b e ree m

pl oyed i n t he ne ar fu tu re. On the ba si s o f th e fac ts , we fin d t ha t p et it io ne r’s em pl oym en t i n C al ifo rn ia
was in de fin it e, an d i t wo ul d h av e b eenreas on ab le un de r th e ci rcu m st an ces to
ex pe cthi m

to m ov e th ere. Se e Harv ey v. Co m m is si on er, 2 83 F.2dat 4 95 -4 96 ; Stric ke r v. C ommis si on er, 5 4 T.C. at36 1. Acco rd in gl y , we ho ldpe ti ti on er i s n ot
en ti tl edto a de du ct io n fo r expe ns es whi le tra ve li ng away fro m ho m e b ecau se Cal ifo rn iawas h is tax ho m e.

b. Pa rk in g F ees , Tol ls , andTran sp orta ti on Pet it io ne r pr ov id edno reco rd s t o s ub st an ti at e th e am ou nt s cl ai m edfor pa rk in g fe es , to ll s, an d t ran sp orta ti on on th e 2 00 9 re tu rn . Accor di ng ly, he is no t
en ti tl edto a de du ct io n. Se e se c. 60 01
.

c. Mea ls an d En te rta in m en t Pet it io ne r pr ov id edno reco rd s t o s ub st an ti at e th e am ou nt s cl ai m edform eal s an d e nt ert ai nm en t o n t he 20 09 return. Acco rd in gl y , he i s n oten ti tl edto a de du ct io n. Se e id
.- 17 -

[* 17 ] 3. Co stof Go od s So ld At tria l p et it io ne r admitte d t ha t the am ou ntrep orte d o n t he return was in co rrec t an d re qu es te d $ 1,5 75 forth e co stof g oo ds so ld . To supp ort h is reque st , he pro du ceda qu ot e fro m Who le sa le So la r da te d M ay 4, 2 00 9, an d t es ti fie d t ha t h e be li ev edth e d at e was in co rrec t an d s ho ul d h av e b eenMay 4, 20 10 . The quo te was fo r 1,0 00 “ Outba ckVFX3-2 4E, 3 .0k W , 24 V Inv ert er ex po rt[ s]” with asubt ot al of $1 ,57 5,0 00 , anda qu ot e to ta l o f “ ? ”. The quo te fro m Who le sa le So la r co up le d with p et it io ne r’s te st im on y is in su ffi ci en t t o s ub st an ti at e co stof g oo ds so ld . See
se c. 60 01 ; s ec. 1 .60 01 -1 (a), In co m e Tax Reg s. Pet it io ne r is no t en ti tl edto an y co stof g oo ds so ldon hi s 2 01 0 S ch edul e C. 4. Re nt/Lea se Exp en se s Sect io n 2 80 A(a) g en eral ly dis al lo ws a d educ ti on forbu si ne ss us e o f a ta xp ay er’s p ers on al res id en ce. A tax pa y er, h owe ve r, m ay de du ctex pe ns es al lo cab le to a po rti on of t he dwel li ng un itwhi chis ex cl us iv el y us edon a reg ul ar ba si s as th e p rin ci pa l p la ce o f bu si ne ss forth e ta xp ay er’s trad e o r bu si ne ss or a pl ace o f bu si ne ss whi chis us edby clie nt s o r cu st om ers inm eet in g o r de al in g wi th th e ta xp ay er i n t he no rm al co ur se of t he tra de or b us in es s. Sec . 28 0A( c)(1 )(A) an d (B). “ Exc lu si ve us e” re qu ire s tha t a t ax pay er u se a “ sp eci fic pa rt o f a dwell in g un itso le ly for the pu rp os e o f carry in g o n h is tra de or b us in es s. Th e u se of a- 18 -

[* 18 ] po rti on of adwel li ng un itforbo th pe rs on al pu rp os es an d fo r th e carry in g o n of a tr ad e o r bu si ne ss do es no t m eetth e ex cl us iv e u se tes t.” Go ldbe rg er, In c. v. Co m m is si on er, 8 8 T.C. 1 53 2, 1 55 7 (1 98 7) (qu ot in g S . Rep t. No . 94 -9 38 , at 1 48 (1 97 6) , 19 76 -3 C.B. (Vo l. 3 ) 49 , 18 6, an d H.R. Re pt . No. 9 4- 65 8, at16 1 (1 97 5) , 19 76 -3 C.B. (Vo l. 2 ) 69 5, 8 53 ). Pet it io ne r te st ifi edth athe us edhi s ap art m en t’s en try, din in g a ndli vi ng area s, an d d eckex cl us iv el y forbu si ne ss pu rp os es . The o nl y ot he r ev id en ce of fere d t o s up po rt p et it io ne r’s te st im on y was aflo orpl anof t he ap art m en t o n whi chhe de no te d t he areaus edforbu si ne ss pu rp os es . Tho ug h p et it io ne r cl ai m s he m etcli en ts inhi s ap art m en t, n o t es ti m on y or o th er ev id en ce fr om

cli en ts was pr es en te d a t tria l. W e are no t re qu ire d t o fi ndpe ti ti on er’s u ns up po rte d andsel f-s erv in g te st im on y su ffi ci en t t o p ro ve th athe us edhi s ap art m en t’s en try, din in g a ndli vi ng area s, an d d eckex cl us iv el y as h is pri nc ip al pl ace o f bu si ne ss or a s a p la ce t o m eet cl ie nt s. See Tok ars ki v. Co m m is si on er, 8 7 T.C. 7 4, 7 7 (1 98 6) . Peti ti on er h as no t
m ethi s b ur de n o f pr ov in g t ha t h e u se d apo rti on of h is ho m e ex cl us iv el y forhi s bu si ne ss an d i s n oten ti tl edto a de du ct io n fo r 20 10 Sch edul e C ren t o r le as e ex pe ns es inex ces s o f th e am ou ntres po nd en t al lo wed
.- 19 -

[* 19 ] 5. In te res t Ex pe ns es Pet it io ne r in tro du cedm on th ly stat em en ts forcred itcard s an d ape rs on al lo anto subs ta nt ia te th e am ou nt s o f in te res t p ai d. Pe ti ti on er t es ti fie d t ha t the cred it card s wer e u se d t o m ak e b us in es s p ur ch as es inearl ie r ta x years, b uthe di d n ot pr ov id e subs ta nt ia ti on forth es e p ur ch as es . He di d n ottes ti fy or p ro vi de ot he r ev id en ce wi th res pe ctto th e u se of t he pe rs on al lo anpro ceed s. With ou t
subs ta nt ia ti on to sh ow tha t the in te res t ex pe ns es are o rd in ary an d n eces sa ry bu si ne ss ex pe ns es , we can no t al lo w a de du ct io n. Se e se cs . 16 2( a), 6 00 1. Pet it io ne r is no t en ti tl edto a 20 10 Sch edul e C d educ ti on forin te res t ex pe ns es . II. Sect io n 6 66 2 P en al ti es An ac cu racy-rela te d p en al ty of 20 % is im po se d o n the po rti on of a n un de rp aym en t at tri bu tabl e to ne gl ig en ce o r a s ub st an ti al un de rs ta te m en t o f in co m e ta x. Se c. 66 62 (a) and(b) (1 ) an d (2 ). Negl ig en ce i nc lu de s an y fai lu re t o k eep ad equa te bo ok s an d re co rd s o r to subs ta nt ia te it em s p ro pe rly. Sec. 1.6 66 2- 3( b) (1 ), In co m e Tax Reg s. Anun de rs ta te m en t o f in co m e ta x i s s ub st an ti al if i t ex ceed s the gr eat er o f 10 % of t he tax requi redto be sh own on th e return fo r th e ta xabl e y ear o r $5 ,00 0. Se c. 66 62 (d ). The Co m m is si on er b ears th e b ur de n o f pr oduc ti on with re sp ectto a ta xp ay er’s l iabi li ty for an y accu racy-rela te d p en al ty. Sec. 7 49 1( c). The- 20 -

[* 20 ] Co m

m is si on er “ m

us t co m e fo rwardwith s uf fic ie ntev id en ce i nd ic at in g t ha t itis ap pr op ria te to im

po se ” th e acc ur acy-rela te d p en al ty in o rd er t o m eetth is bu rd en . See Hig be e v . Comm is si on er, 1 16 T.C. 43 8, 4 46 (20 01 ). Once th e Co m m is si on er p ro vi de s s uf

fic ie ntin fo rm at io n t o s at is fy hi s b ur de n o f pr oduc ti on , th e b ur de n s hi fts to th e ta xp ay er t o s ho w th atth e p en al ty sho ul d n otbe im po se d. Id . at 4 47 ; s ee Ru le 14 2. Res po nd en t h as m ethi s b ur de n o f pr oduc ti onby sho win g t ha t p et it io ne r la ck s ad equa te reco rd s t o fu ll y subs ta nt ia te th e am ou nt s re po rte d o n t he 20 09 an d 20 10 returns . See s ec. 1 .66 62 -3 (b )(1 ), In co m e Tax Reg s. Th e p reci se am ou nt s o f pe ti ti on er’s u nd erp aym en ts wil l d ep en d upo n t he Ru le 15 5 c om pu ta ti on s, i n acco rd an ce wi th ou r fi nd in gs an d c on cl us io ns setforth ab ov e. To the ex te ntth at
su chco m pu ta ti on s es tabl is h, as see m s l ik el y , th atpe ti ti on er’s u nd ers ta te m en ts of in co m e ta x wer e subs ta nt ia l, re sp on de ntha s al so m ethi s b ur de n o f pr oduc ti on in th is reg ard . See Dia ll o v . Comm is si on er, T.C. Mem o. 2 01 1- 30 0. Pet it io ne r fai le d t o a rg ue or o ffer ev id en ce tha t re du cedpe na lt ie s s ho ul d b e im po se d. Se e se c. 66 64 (c). Acco rd in gl y , we fin d p et it io ne r is li ab le forsec ti on 66 62 (a) a ccu racy-rela te d p en al ti es forth e y ears at i ss ue . W e h av e co ns id eredth e p art ie s’ rem ai ni ng arg um en ts , andto th e ex te ntno t di sc us se d abo ve , con cl ud e th os e arg um en ts are i rrel ev an t, m oo t, o r witho utm eri t.- 21 -

[* 21 ] To re fle ctth e fo reg oi ng , Deci si on s wi ll be en te red
un de r Ru le 15 5.