United States Tax Court

T.C. Summary Opinion 2024-2

PATRICIA S. CHAPPELL,

Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

—————

Docket No. 25309-18S. Filed March 11, 2024.

—————

Patricia S. Chappell, pro se.

Evan K. Like and Louis H. Hill, for respondent.

SUMMARY OPINION

COPELAND, Judge: This case was heard pursuant to the 

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

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

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

be treated as precedent for any other case.

Petitioner, Patricia Chappell, has worked as a tax return 

preparer since 1996. During tax year 2015 she operated a sole 

proprietorship called Quik Tax. She had a home office in Maineville, 

Ohio, and a business office in Mason, Ohio, about a 15-minute drive

away. The Internal Revenue Service (IRS) audited Ms. Chappell’s 2015

federal income tax return and determined various adjustments to the 

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

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

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

relevant times, and Rule references are to the Tax Court Rules of Practice and 

Procedure. Some dollar amounts are rounded.

Served 03/11/24
2

expenses she reported on her Schedule C, Profit or Loss From Business. 

Specifically, the IRS disallowed $2,310 of expenses that Ms. Chappell 

reported for the business use of her home, $1,299 of contract labor 

expenses, $2,352 of phone expenses, and $15,385 of transportation

expenses. The Commissioner of Internal Revenue (Commissioner) has 

since conceded all of the previously disallowed expenses for business use 

of the home and contract labor. We are therefore left with 

Ms. Chappell’s request for us to redetermine her phone and 

transportation expenses and to review the Commissioner’s 

determination of a negligence penalty under section 6662(a) and (b)(1).

Background

Some of the facts have been stipulated by the parties and are so 

found. Ms. Chappell was a resident of Ohio when she timely filed her 

Petition.

I. Quik Tax

Ms. Chappell began working in tax preparation when she was 

hired in 1996 by her brother, Lonnie Bennett, who lived and worked in 

Belpre, Ohio, about a three-hour drive from Ms. Chappell’s home in 

Maineville. Ms. Chappell worked for Bennett Tax Service for two years 

before opening Quik Tax in 1998. However, Ms. Chappell and 

Mr. Bennett continued associating professionally and, during 2015, met

and corresponded periodically to collaborate on advertising, prepare 

newsletters, attend educational seminars, and discuss tax questions.

Ms. Chappell’s son, Chadrick Travis, worked for Quik Tax as an 

independent contractor during 2015. Ms. Chappell and Mr. Travis 

signed an “Independent Contractors [sic] Agreement” on January 2, 

2015, specifying (among other things) that Mr. Travis agreed to “pay all 

expenses incurred by [him] . . . in procuring and furnishing of the above 

referenced [tax preparation] services to customers.” Ms. Chappell 

compensated Mr. Travis in part by allowing him to pay certain of his 

personal expenses with her credit and debit cards. Some other relatives 

of Ms. Chappell also worked for Quik Tax in 2015, at least some of whom 

Ms. Chappell compensated in part by allowing them use of her credit 

cards for personal expenses.

II. Business Phones

Ms. Chappell paid a total of $3,418 to AT&T in 2015 for phone

“service charges” and “wireless equipment.” The AT&T monthly billing 
3

statements for these expenses listed the respective charges for each 

device, but all devices were part of a single wireless phone plan with a 

single monthly payment (i.e., Ms. Chappell received only one invoice

each month).

A. Service Charges

The phone “service charges” related to AT&T’s billing covering 

five different devices at various times during the year: (1) an Apple cell

phone for Ms. Chappell, (2) a Samsung cell phone for Mr. Travis, (3) an

iPad, (4) a tablet, and (5) a cell phone used for scheduling client 

appointments. The service charges for Ms. Chappell’s Apple cell phone

were particularly high in the February–March billing cycle, when she 

incurred $266 of roaming fees during a cruise in Florida with 

Mr. Bennett. Other than those roaming fees, each of the five devices 

had a set monthly fee that did not vary with the amount of use.

B. Wireless Equipment Charges

The AT&T billing statements also included installment charges 

for “wireless equipment” purchases. AT&T billed Ms. Chappell $31.25

monthly beginning in March for the purchase of a $750 Apple cell phone, 

a device she used during 2015. AT&T likewise charged Ms. Chappell 

$22.84 monthly beginning in June for a $685 Samsung cell phone

purchased for Mr. Travis.

III. Business Transportation

Beginning on March 23, 2015, Ms. Chappell used a cell phone

application called MileIQ to record most or all of her car trips during the 

year.2 She took most of these trips in her Toyota Prius. MileIQ used

GPS technology on Ms. Chappell’s phone to track starting points, 

stopping points, and transit mileage. At the end of each trip, 

Ms. Chappell would identify the trip as business or personal. MileIQ 

then compiled this information into a spreadsheet (MileIQ log) listing 

the following information for each recorded trip: date and starting time, 

category (business or personal), starting and ending locations, distance 

2 Ms. Chappell did not use MileIQ or any other contemporaneous 

recordkeeping for her trips between January 1 and March 22, 2015, nor did she offer 

any alternative substantiation for those trips.
4

(in miles), and vehicle.3 The MileIQ log shows a total of 15,204.8 miles

driven between March 23 and December 31, 2015, of which 13,585.8 

were labeled “business” and 1,619.0 “personal.”

At some point before trial, Ms. Chappell prepared an edited 

version of the MileIQ log (modified mileage log). The total number of 

business miles listed in the modified mileage log is less than the 

comparable figure in the MileIQ log: 11,598.2 versus 13,585.8.4 Despite 

the reduction in overall miles, 63 of the trips marked “personal” on the 

MileIQ log were changed to “business” on the modified mileage log, 

collectively accounting for 1,190.4 miles. The modified mileage log

includes a short “purpose” description for each trip (e.g., “Between 

Offices,” “Supplies,” “Staff Recruiting,” “[Office] Location Prospecting”);

those descriptions were not recorded on the original MileIQ log.

Ms. Chappell’s driver’s license was suspended for about six 

months in the middle of 2015. For at least some of that time,

Ms. Chappell employed a driver named Melissa Wright, who drove 

Ms. Chappell as a passenger in one or more vehicles and also drove those

vehicle(s) by herself at times, for instance to purchase gas.

IV. Tax Return and Examination

Ms. Chappell filed a Schedule C with her 2015 tax return. She 

reported gross receipts for Quik Tax of $152,521 and expenses totaling 

$140,768, which included (among other things) vehicle expenses of 

$15,385 and utilities expenses of $20,519 (including phone expenses of 

$3,360).

After the IRS examined Ms. Chappell’s 2015 return, the 

Commissioner issued a notice of deficiency dated September 28, 2018,

in which he disallowed deductions for all of her reported vehicle

expenses and $2,352 of her reported utilities expenses.5 The 

3 The Vehicle field of the MileIQ report lists “Missing Vehicle” from March 23 

through June 2 and lists “Prius” thereafter. Most of the trips tagged with “Missing 

Vehicle” were taken in the Prius, but Ms. Chappell did not see the appropriate field to 

enter the vehicle information into MileIQ until June 3.

4 Ms. Chappell’s tally of business miles, listed at the top of the modified mileage 

log, is 11,591.5. The Court arrived at 11,598.2 miles through its own review of the 

modified mileage log.

5 In the notice of deficiency the Commissioner also disallowed deductions for

$1,299 of her reported contract labor expenses and all expenses for business use of her 
5 

Commissioner also determined an accuracy-related penalty under 

section 6662(a) and (b)(1). The immediate supervisor of the IRS revenue 

agent who made the initial determination to impose this penalty 

approved that determination before its first communication to 

Ms. Chappell. After concessions by the Commissioner, Ms. Chappell 

requests that we increase her reported phone expenses from $3,360 to 

$3,418, and she requests that $10,615 of vehicle expenses be allowed 

(although she concedes that her vehicle expenses should be decreased 

from $15,385). 

Discussion

I. Burden of Proof

Generally, the Commissioner’s determinations in a notice of 

deficiency are presumed correct, and the taxpayer bears the burden of 

proving that those determinations are erroneous. See Rule 142(a);

Welch v. Helvering, 290 U.S. 111, 115 (1933). Further, a taxpayer is 

required to maintain sufficient permanent records to substantiate all 

components of reported net income, including deductible business 

expenses. See I.R.C. § 6001; Treas. Reg. § 1.6001-1(a). The burden of 

showing entitlement to a claimed deduction is on the taxpayer. See Rule 

142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992).6

 If a taxpayer clearly shows that she incurred a deductible expense 

but is unable to substantiate the exact amount, the “Cohan rule” permits 

the Court to estimate the amount of the expense, provided there is a 

reasonable basis for doing so. See Cohan v. Commissioner, 39 F.2d 540, 

543–44 (2d Cir. 1930); Vanicek v. Commissioner, 85 T.C. 731, 742–43 

(1985); Goldsmith v. Commissioner, 31 T.C. 56, 62 (1958). In making an 

estimate under the Cohan rule, the Court “bear[s] heavily if it chooses 

upon the taxpayer whose inexactitude is of his own making.” Cohan v. 

home; however, before trial he conceded those two adjustments. All of the remaining 

disallowed utility expenses in the notice of deficiency relate to phone expenses; 

however, the Commissioner allowed 80% of the aggregate of (1) the $70 monthly

“Mobile Share Value 6GB with Rollover Data” fee for Ms. Chappell’s multiline cell 

phone plan, (2) the $25 monthly “Mobile Share Value iPhone on 4G LTE w/VVM” fee 

for Ms. Chappell’s Apple cell phone, and (3) the $10 monthly “Mobile Share Value for 

Tablet 4G LTE” fee for the iPad and tablet. That is, the Commissioner allowed 80% of 

$105 per month, or $1,008 of phone expenses. Because Ms. Chappell claimed $3,360 

in total for phone expenses, the Commissioner disallowed the remaining $2,352.

6 Ms. Chappell does not contend, and the record does not establish, that the 

burden of proof should shift to the Commissioner as to any factual issue under section 

7491(a).
6 

Commissioner, 39 F.2d at 544. The Court may not use the Cohan rule 

to estimate expenses covered by the strict substantiation requirements 

of section 274(d), which apply to most transportation expenses. Sanford 

v. Commissioner, 50 T.C. 823, 827–28 (1968), aff’d, 412 F.2d 201 (2d Cir. 

1969).

II. Phone Expenses

Section 162(a) generally allows a deduction for the ordinary and 

necessary expenses of carrying on a business while section 262 prohibits 

a deduction for personal expenses. 

Ms. Chappell produced AT&T statements showing monthly 

billing charges for phone and other wireless service during 2015. The 

statements provide a breakdown of charges by device for each of 

Ms. Chappell’s five devices, as well as monthly installment billing for

the Apple and Samsung cell phones used in the business in 2015, listed 

on the statements as “wireless equipment” charges. Likewise, the 

statements reflect the additional roaming fees incurred by Ms. Chappell 

during her cruise in February. 

From the AT&T statements, Ms. Chappell created a phone 

expense spreadsheet listing each of her five devices as headings across 

the top and the monthly charges by device in the rows below the 

heading. She then totaled these monthly amounts for the year. The 

spreadsheet includes separate columns for monthly payments made and 

payment dates. The spreadsheet lists $3,166 as the total billed for all 

five devices in 2015 and $3,418 as the total paid. Of the $3,166 billed,

$97 (approximately two-thirds) of the 12/12/14 to 1/11/15 billing related 

to the 2014 tax year and $78 (approximately one-third) of the 12/12/15 

to 1/11/16 billing related to the 2016 tax year.

A. Ms. Chappell’s Cell Phone

Ms. Chappell offered evidence that she used her cell phone

extensively for business purposes during tax season, including while on 

the cruise. In addition, while the volume of tax work slowed during 

other times of the year, it seems appropriate that she would have needed 

to keep her and Mr. Travis’s cell phones, the iPad, the tablet, and the 

company cell phone active all year. While her phone expense

spreadsheet did not account for personal use, pursuant to the Cohan

rule this Court can estimate the amount of deductible expenses. We 

accept Ms. Chappell’s position that her cell phone use was substantial 

during tax season and allow 80% of the charges for her Apple cell phone
7 

during tax season, which lasted roughly from January through May 

2015. For the remainder of the year we will allow 50% as business

related. Accordingly, on the basis of the AT&T billing statements we 

hold that the total business-related cell phone charges for her personal 

phone were $1,296. This amount includes $313 of installment payments

on the phone purchase. 

B. Mr. Travis’s Cell Phone

Ms. Chappell provided a cell phone to Mr. Travis for Quik Tax

business use. She testified that in addition to the cell phone she paid 

for on his behalf, Mr. Travis also had a personal cell phone and two work 

phones during 2015. Ms. Chappell indicated that she paid for the

additional phone so that Mr. Travis could perform client tax work on her 

behalf and so that she could “bypass everybody else” and always reach 

Mr. Travis. We found this testimony credible. Because Ms. Chappell

provided the phone to her independent contractor for tax preparation 

work, we will allow Samsung cell phone expenses of $555 incurred in 

2015.7 This amount includes $160 of installment payments made 

toward the phone purchase.

C. Other Devices

Ms. Chappell also provided sufficient records for us to calculate 

the sum of the remaining phone expenses, relating to service for the 

iPad, tablet, and appointment-scheduling phone, and certain service 

charges. We therefore will allow these expenses to the extent they relate 

to the 2015 tax year. Specifically, we will allow $15 for the iPad, $167 

for the tablet, $161 for the appointment-scheduling phone and $55 of 

service charges, a total of $398. 

7 The Commissioner would have us rule that Ms. Chappell cannot deduct the 

cost of Mr. Travis’s cell phone service simply on the grounds that the Independent 

Contractors Agreement specifies that Mr. Travis will “pay all expenses incurred by 

[him] . . . in procuring and furnishing of the above referenced [tax preparation] services 

to customers.” However, the record clearly shows that Ms. Chappell, not Mr. Travis, 

made all payments on the Samsung cell phone and it is not unusual to provide cell 

phones to independent contractors in order for them to speak to the business’ owner 

and its clients. Accordingly, in redetermining Ms. Chappell’s income tax we look to 

the charges she actually incurred and paid for, regardless of the strict terms of the 

Independent Contractors Agreement.
8

D. Wireless Equipment

The Commissioner takes issue with the monthly AT&T billing 

statement charges related to the installment purchase of the Apple and 

Samsung cell phones costing $750 and $685, respectively. Again, these 

costs were referred to by the parties and in billing statements as 

“wireless equipment.” While such amounts might have been capitalized 

under section 263(a) and Treasury Regulation § 1.263(a)-2(d),8 they 

could also have been immediately deducted under section 179. Because 

Ms. Chappell is a cash basis taxpayer, we allow the monthly 

installments on the Apple and Samsung cell phones (as included in the 

monthly phone charges detailed above) to be deducted under section 

179.

E. Summary of Phone and Wireless Expenses Allowed

In sum, we will allow phone and wireless equipment expenses of 

$2,249 ($1,296 + $555 + $398), rather than the $3,360 Ms. Chappell 

included as a utilities expense on her return, making the downward

adjustment $1,111 rather than the $2,352 determined in the notice of 

deficiency.

III. Vehicle Expenses

Under section 274(d), taxpayers must meet strict substantiation 

requirements to deduct certain expenses under section 162, including 

expenses for the use of “listed property” as defined in section 280F(d)(4), 

such as passenger automobiles. To meet these strict requirements with 

respect to listed property, taxpayers must substantiate by adequate 

records, or by sufficient evidence corroborating their own statements,

(1) the amount of the expense, (2) the amount of total use and of business 

use of the listed property during the relevant tax year, (3) the date of 

each expense or use of the listed property, and (4) the business purpose 

of the expense or use. See I.R.C. § 274(d); Temp. Treas. Reg. § 1.274-

5T(b)(6).9

8 We note that the exception under Treasury Regulation § 1.162-3 that allows 

a business deduction for “materials and supplies” does not apply here, since (among 

other reasons) both pieces of wireless equipment cost more than $200. See Treas. Reg. 

§ 1.162-3(c)(1)(iv).

9 Section 7805(e)(2) provides that temporary regulations expire within three 

years after the date of issuance. However, that rule applies only to regulations issued 
9

To substantiate vehicle expenses by way of adequate records, 

taxpayers must maintain a contemporaneous log, trip sheet, or similar 

record, as well as corroborating documentary evidence, to establish each 

of the four required elements listed above. See Temp. Treas. Reg. 

§ 1.274-5T(c)(2)(i) and (ii). In the absence of adequate records, taxpayers 

may establish each required element by providing both “[their] own 

statement, whether written or oral, containing specific information in 

detail as to such element” and “other corroborative evidence sufficient 

to establish such element.” Id. subpara. (3)(i).

Treasury Regulation § 1.274-5(j)(2) authorizes the Commissioner 

to provide an alternative, simplified method for calculating vehicle 

expenses that requires neither adequate records of actual costs nor

sufficient corroborating evidence of actual costs:

The Commissioner may establish a method under which a 

taxpayer may use mileage rates to determine the amount 

of the ordinary and necessary expenses of using a vehicle 

for local transportation and transportation to, from, and at 

the destination while traveling away from home in lieu of 

substantiating the actual costs. . . . The taxpayer will not 

be relieved of the requirement to substantiate the amount 

of each business use (i.e., the business mileage), or the time 

and business purpose of each use.

Revenue Procedure 2010-51, § 4.01, 2010-51 I.R.B. 883, 884, clarifies 

that

[a] taxpayer may use the business standard mileage rate 

(published in an annual notice) to substantiate the amount 

of a deduction for an automobile that a taxpayer either 

owns or leases. A taxpayer generally may deduct an 

amount equal to either the business standard mileage rate 

times the number of business miles traveled or the actual 

after November 20, 1988. See Technical and Miscellaneous Revenue Act of 1988, Pub. 

L. No. 100-647, § 6232(b), 102 Stat. 3342, 3735. Temporary Treasury Regulation 

§ 1.274-5T was first issued in 1985, see T.D. 8061, 1985-2 C.B. 93, 100–09, and none of 

the provisions of that regulation relied upon here has since been amended.
10

costs (both fixed and variable) the taxpayer pays or incurs 

that are allocable to traveling those business miles . . . .[10]

I.R.S. Notice 2014-79, § 3, 2014-53 I.R.B. 1001, 1001, set out a business 

standard mileage rate for 2015 of 57.5 cents. Ms. Chappell asks the 

Court to allow her actual vehicle expenses as business deductions or, in 

the alternative, to allow a standard mileage rate deduction.

A. Actual Vehicle Expenses

Ms. Chappell did not keep any records of her vehicles’ business 

use percentages between January 1 and March 22, 2015, so we cannot 

allow any of her reported vehicle expenses for that period in any event.

See I.R.C. § 274(d); Temp. Treas. Reg. § 1.274-5T(b)(6).

As for the period of March 23 to December 31, Ms. Chappell 

provided bank records and some receipts for her vehicle expenses and 

relied on the MileIQ log and/or the modified mileage log for her business 

use percentage. However, much of her offered substantiation is not 

sufficiently reliable. 

Ms. Chappell’s receipts for fuel, insurance, interest on a car loan, 

repairs, licensing fees, and depreciation are flawed in that several other 

people had use of her debit and credit cards during 2015 and may have 

made personal use of those cards. For example, Ms. Chappell’s remarks 

at trial suggest that Ms. Wright may have used the cards for filling up 

her personal vehicle rather than a car used for Ms. Chappell’s business 

needs. If that is so, calculating the business use percentage from either 

of the mileage logs, see Temp. Treas. Reg. § 1.274-5T(b)(6)(i)(B), would 

not be reliable. (This business percentage is needed for prorating the 

total actual vehicle costs to determine the deductible portion.)

Moreover, the likelihood that some indeterminate portion of 

Ms. Chappell’s reported vehicles costs was actually incurred for 

nonbusiness uses is exacerbated by the fact that her receipts show two

or three same-day gas purchases on at least ten different days—days on 

which neither of the mileage logs shows an excessive number of miles 

driven. At trial, the Commissioner’s counsel confronted Ms. Chappell 

with ten instances where, in the receipts she submitted to the Court, she 

identified two separate purchases on the same day as having been made 

10 Revenue Procedure 2010-51 has been superseded by Revenue Procedure 

2019-46, 2019-49 I.R.B. 1301. However, Revenue Procedure 2010-51 was in effect 

during Ms. Chappell’s 2015 tax year.
11

for fuel. (In one case the number of purported same-day fuel purchases 

was three.)11 Ms. Chappell’s records also identify a purchase for gas in 

Kings Mill, Ohio, on July 9, 2015, a date when both the MileIQ log and 

the modified mileage log indicate that she was in the Washington, D.C.,

area for a conference hosted by the IRS. In response to these various 

incongruities, Ms. Chappell speculated that Ms. Wright may have 

sometimes purchased gas using one of Ms. Chappell’s debit or credit 

cards for a car owned by Ms. Wright or a third party, without 

Ms. Chappell’s knowledge or permission. For these reasons we decline 

Ms. Chappell’s invitation to rely on actual expenses and turn to the 

standard mileage rate to determine whether vehicle expenses can be 

allowed.

B. Standard Mileage Rate

We hold that Ms. Chappell qualifies for a deduction using the 

business standard mileage rate pursuant to Revenue Procedure 2010-

51, in lieu of actual expenses, for the period of March 23 to December 

31, 2015. Such a deduction required Ms. Chappell to substantiate the 

number, time, and purpose of her business miles under either the 

“adequate records” standard or the “sufficient evidence” standard of 

section 274(d) and Temporary Treasury Regulation § 1.274-5T(c)(2) 

and (3). See Treas. Reg. § 1.274-5(j)(2). The MileIQ log was compiled

contemporaneously during the period of March 23 to December 31;

although it did not specify the exact business purpose of any of the trips

listed (the trips are identified simply as “business” or “personal”), she 

produced a modified mileage log specifying a particular business 

purpose for each of the business-related trips (e.g., “Supplies,” “Staff 

Recruiting,” etc.). She corroborated that evidence with credible 

testimony at trial.

In addition, we can allow Ms. Chappell a standard-mileage-rate 

deduction for those trips whose business purpose is self-evident from 

their starting and ending points. Temporary Treasury Regulation 

§ 1.274-5T(c)(2)(ii)(B) provides as follows:

In order to constitute an adequate record of business 

purpose within the meaning of section 274(d) and this 

11 On none of these ten days does either the MileIQ log or the modified mileage 

log show an unduly large number of miles. The maximum daily mileage recorded 

among the ten days was 227.5. (This amount was recorded on March 29, 2015, and 

was an outlier by far.) Ms. Chappell testified that her Prius had a ten-gallon fuel tank 

and a fuel economy of around 40 miles per gallon.
12

paragraph (c)(2), a written statement of business purpose 

generally is required. However, the degree of 

substantiation necessary to establish business purpose will 

vary depending upon the facts and circumstances of each 

case. Where the business purpose is evident from the 

surrounding facts and circumstances, a written 

explanation of such business purpose will not be required.

This exception applies to those trips that Ms. Chappell took between her 

Maineville home and her Mason office, in light of the Commissioner’s 

concession that the Maineville home office qualified as Ms. Chappell’s 

principal place of business under section 280A(c)(1)(A). See Curphey v. 

Commissioner, 73 T.C. 766, 777–78 (1980) (holding that commuting 

expenses between a taxpayer’s home office and a business location may 

be deductible if the home office is the taxpayer’s principal place of 

business); Rev. Rul. 99-7, 1999-1 C.B. 361 (same). As a result, the 

modified mileage log meets the “sufficient evidence” standard, even if it 

did not strictly meet the contemporaneous “adequate records” standard. 

We thus allow a vehicle expense deduction based on 11,598 business 

miles at 57.5 cents per mile, or $6,669 (versus the $15,385 that 

Ms. Chappell claimed on her 2015 return and the $10,615 that she 

requested in her briefings).

IV. Accuracy-Related Penalty

Section 6662 imposes a 20% accuracy-related penalty on an 

underpayment of tax attributable to (among other things) negligence or 

disregard of rules or regulations. I.R.C. § 6662(a) and (b)(1). Negligence 

includes any failure to make a reasonable attempt to comply with the 

provisions of the Code, including any failure to maintain adequate books 

and records or to substantiate items properly. I.R.C. § 6662(c). 

Disregard includes “any careless, reckless, or intentional disregard.” Id.

Under section 7491(c), the Commissioner bears the burden of 

production regarding penalties and must come forward with sufficient 

evidence indicating that it is appropriate to impose a penalty in the 

absence of available defenses. Higbee v. Commissioner, 116 T.C. 438, 

446–47 (2001). As we noted in Graev v. Commissioner, 149 T.C. 485, 

493 (2017), supplementing and overruling in part 147 T.C. 460 (2016), 

one part of this burden is to show compliance with section 6751(b)(1),

which provides that “[n]o penalty . . . shall be assessed unless the initial 

determination of such assessment is personally approved (in writing) by 

the immediate supervisor of the individual making such determination.” 
13

Here, the parties have stipulated facts and documents substantiating

that the Commissioner met the supervisory approval requirement with 

respect to his determination of the penalty under section 6662(a) and 

(b)(1).

We next note that Ms. Chappell was at least careless in claiming 

deductions, without adequate substantiation or records, for the full cost 

of her cell phone service and for her actual vehicle costs. See I.R.C. 

§ 6001 (providing that taxpayers “shall keep such records . . . as the 

Secretary may from time to time prescribe”); Treas. Reg. § 1.6001-1(a) 

(providing that taxpayers “shall keep such permanent books of account 

or records . . . as are sufficient to establish the amount of gross income, 

deductions, credits, or other matters required to be shown by such 

person in any return of such tax or information”).

Section 6664(c)(1) grants an exception to a penalty under section 

6662 “if it is shown that there was a reasonable cause for such portion

[of an underpayment of tax] and that the taxpayer acted in good faith 

with respect to such portion.” The determination as to whether a

taxpayer acted with reasonable cause and in good faith is made on a 

case-by-case basis, considering all pertinent facts and circumstances. 

Treas. Reg. § 1.6664-4(b)(1). Generally, the most important factor in 

determining the existence of reasonable cause is the taxpayer’s effort to 

ascertain her correct tax liability. Id. Circumstances that may signal 

reasonable cause and good faith include an honest misunderstanding of 

fact or law that is reasonable in light of all the facts and circumstances, 

including the experience, knowledge, and education of the taxpayer. Id.

Ms. Chappell contends that she qualifies for a reasonable cause 

exception because in 2015 she was caring for her elderly disabled mother 

and was herself suffering from a painful tumor. Additionally, her 

daughter passed away in November 2015 after a period of injury and 

infection beginning in 2014, leaving Ms. Chappell to care for her four 

grandchildren while grieving for her daughter.

We sympathize with Ms. Chappell’s personal difficulties in 2015. 

However, she testified that during that year she continued to run a 

vibrant tax preparation business, make multiple business trips almost 

every day, and work up to 12 hours a day. This Court has consistently 

held that taxpayers dealing with personal or family illness, incapacity, 

or death do not qualify for a reasonable cause exception if they were able 

to continue their business affairs during the relevant period. See, e.g.,

Judge v. Commissioner, 88 T.C. 1175, 1189–91 (1987); Hardin v. 
14

Commissioner, T.C. Memo. 2012-162, 103 T.C.M. (CCH) 1861, 1862; 

Ruggeri v. Commissioner, T.C. Memo. 2008-300, 96 T.C.M. (CCH) 511, 

513 (collecting cases). Moreover, Ms. Chappell was almost surely 

familiar with the substantiation requirements for business deductions, 

given her professional experience as a tax preparer. Therefore, we hold 

Ms. Chappell liable for an accuracy-related penalty under section 

6662(a) and (b)(1).

We have considered all of the arguments made by the parties and, 

to the extent they are not addressed herein, we find them to be moot, 

irrelevant, or without merit.

To reflect the foregoing,

Decision will be entered under Rule 155.