T.C. M em o . 2 0 2 0 -1 4

UNITED STATES TAX COURT
DEAN LEE CHRISTENSEN, Pet i t i o ner v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 2 3 3 59 -1 5
. Fi l edJ an uary1 5 , 2 0 2 0
.

Dean Lee Ch ri s t en s en , p ro s e. R. Crai g Sch n ei der an dDav i dW . So ren sen , fo r res p o n d en t .

M EM ORANDUM FINDINGS OF FACT AND OPINION GERBER, J u d g e: Res p on d en td et erm i n eda d efi ci en cy i n p et i t io n er’ s Fed eral i nco m e t ax o f $ 6 ,9 1 8 fo r t he 2 01 2 t ax ab le y ear an dan accu racy -rel at ed p en al ty u n d er s ect i o n 6 6 6 2 (a). 1 Aft er co n ces s i o ns , th e rem ai n i n g i s s u e fo r

1 Al l s ect i o n referen ces are t o th e In tern al Rev en u e Co d e i n effect fo r t h e (co n ti n u ed ...)- 2
-

[* 2 ] co n si d erat i o n i s wh eth er p et i t i o n er i s en t i t l edt o v ari o us d educt i o n s cl ai m ed
o n Sch edu l e A, It em i zedDedu ct i o ns , fo r u n rei m b u rs edem

p l o y ee b u s i n es s
ex p en s es . Attri al res p on d en t co n ced edth atp et i t i o n er i s n o t l i ab l e fo r th e s ect i o n 6 6 6 2 (a) p en al ty . FINDINGS OF FACT Pet i t i o ner res i dedi n Nev ad a wh en h e fi l ed h i s p et i t i o n . Duri n g 2 0 1 2 h e
res i dedi n Ro x b o ro , No rt h Caro l i n a, an dwas em p l o y edas a p art -t i m e p ro fes s o r fo r Pi ed m on tCo m

m u n i ty Co l l eg e (Pi ed m o n t ), wh ere h e t au g h tcl as ses i n g en eral edu cat i o n , p s y ch o l o gy , t ech n o lo g y , an d h um an i t i es . Duri n g 2 0 1 2 h e recei v ed $ 1 3 ,3 0 6 i n wag es fro m

Pi edm o n t . Th e t o t al i nco m e rep o rt edo n h i s 2 0 1 2 ret u rn
was $ 72 ,9 4 8 . Inad d it io n t o t h e $ 1 3 ,3 0 6 i n wag es , p et i ti o n er h ad th e fo ll o wi n g i t em s o f i n co m e: IRA d is tri b u t i o n s o f $ 37 ,9 1 3 ; p en s i o n s an dan n ui t i es o f $ 9 ,2 8 5 ; a St at e i n co m e t ax refu n do f $ 8 4 9 ; i n t eres t i n co m e o f $ 5 0 ; an d$ 1 1 ,5 45 o f So ci al Secu ri ty b en efi t s. Pet i t i o ner t i m el y

fi l eda Fo rm

1 0 4 0 , U.S. In d i v i du al In co m e Tax Retu rn , fo r 2 0 1 2 . Onan at t ach ed Sch edu le A h e rep o rt edu n rei m b urs edem

pl o y ee b us i n es s
ex p en s es o f $ 35 , 5 4 0 o f wh i ch $ 3 4 ,0 8 1 was cl ai m ed as d edu ct i o n s aft er s t atu t o ry

1 (...co n t in u ed ) y ear i n i s s u e, an d al l Ru l e referen ces are t o the Tax Co urtRu l es o f Pract ice an d Pro cedure, u n les s o th erwi s e i n d i cat ed
.- 3
-

[* 3 ] redu ct i o n s . Res p o n d en td i s al l o wedth e $ 3 4,0 8 1 o f d edu ct i o n s an dm ad e o n e
o th er $ 1 ad

ju s t m en tt o So ci al Secu ri ty i n co m e, al l o f wh i ch res u l t ed i n a $ 6,9 1 8 i n co m e t ax d efi ci en cy d et erm i n at i o n . Th e em p l o y ee b u si nes s ex p en s e d edu ct i o n s cl ai m edcan b e b ro ad l y

cat eg o ri zedi n t o two g en eral izedty p es : th o s e co ncern i n g p et i t i o n er’ s t each i n g p o s i t i o n atPi ed m o n t an d t h o s e rel at edt o CYBER Learn i n g Co rp . (CYBER). Pet i t i o ner, Cat h eri n e Du n n ag an , an d an ot h er p ers o n fo rm ed CYBER i n 1 9 9 4 t o creat e s o ft ware an do ther p ro du ct s t o h el p p o ten t i al cl ien t s t o p erfo rm trai n in g an dedu cat i o n . J u s tb efo re M s . Du n nag an p as s ed away du ri n g 2 0 1 0 , s h e
as k edp et i t i o n er t o u s e t h e m o n ey h e wo u l di n h eri t fro m

h er t o co n ti n u e t h e wo rk
o f CYBER. Pet i t i o ner k ep t th e co rp o rat e en t i ty i n t act , b u t , u n fo rtu n at el y , CYBER h ad
n o th ada co nt ract (cu s t o m er) s i n ce 2 0 06 an dfro m th atp o i n th adn o i n co m e th ro u g h 2 0 1 2 , th e t ax y ear u n d er co n s i d erat i o n . CYBER’ s p ri m ary b u s i nes s p u rp os e was t o o b t ai n Go vern m en t an dp ri v at e co n tract s t o p ro du ce edu cat i o n al
an d trai n i n g s o ft ware. Befo re 2 0 0 6 CYBER’ s l as tco nt ract h adb een i n 2 0 0 0
. Pet i t io n er recei vedn o wag es , d i v i d en d s , cap it al g ai n, o r o th er i nco m e fro m CYBER i n 2 0 12 . Duri n g 2 01 2 p et i t i o n er was the p res i d en t, s o l e s h areh o l d er, an d
s o l e em p l o y ee o f CYBER. Fo r p u rp o s es o f th e ex pen s e d edu ct i o n s cl ai m edo n h i s- 4
-

[* 4 ] 2 0 1 2 t ax retu rn , h e rep o rt edth ath e was n o t act i n g i n th e cap aci ty o f
s h areh o ld er o r o ffi cer b u t o n l y i n the s el f-d es i g n at edro l e o f CYBER’ s em p l o y ee wi th th e jo b o f res earch i n g an dd ev el op i n g p o s si b l e l ead s t o n ew co n tract s . I. M i leag e OnFo rm 2 1 0 6 -EZ, Un rei m

b urs edEm

p l o y ee Bu s i n es s Ex pen s es , p et i t i o n er cl ai m eda d edu ct i o n o f $ 1 8 , 5 6 5 fo r 3 3 ,4 5 0 b u s i n es s v eh icl e m i l es dri v en , zero
co m m u t i ng m i les dri v en , an d4 ,5 5 0 “ o th er” m i l es dri ven . Pet i t io n er ch o s e t o dri v e rat h er t h anfl y fo r m an y

o f h i s cro s s -co u n try tri p s fo r p ers o nal reas o n s . A. Pi ed m o ntM il eag e Pi ed m o n th adtw o cam

p u s es : (1 ) t he Pers o n Co u nt y cam p u s (Pers o n
cam p u s ) i n Ro xb o ro , No rt h Caro l in a, an d (2 ) t he Cas wel l Co u n ty cam p us (Cas wel l cam

p u s ) i n Yan ceyv il l e, No rt h Caro l in a. Th e t w o cam p u ses were 2 4
. 4
m i l es ap art , an dp et i t i o n er l i v edap p ro x i m at el y o n e m i l e fro m

th e Pers o n cam

p u s . Pet i t i o ner t rav el edt o h i s o ffi ce atth e Pers o n cam p u s at the b eg i n n i n g o f
ev ery wo rk d ay i rres p ect i v e o f wh i ch cam p u s h e was wo rk i n g ati n o rd er t o ret ri ev e h i s cl as s ro s t ers . He al s o return edt o th e Pers o n cam pu s atth e en do f ev ery

d ay t o l o ckth e cl as s ro s ters i n h i s o ffi ce. He m ad e t h i s tri p reg ard l es s o f wh i ch cam p u s h e b eg an o r en d edh i s t each i n g d ay at . Pi ed m o n td id n o t req u i re i t s t each ers / p ro fes s o rs t o s t o re t h e cl as s ro st ers i n a s ecu re p lace. Pet i t i on er d i ds o b ecau s e h e- 5
-

[* 5 ] fel ti twas i m

p o rt an t t o p ro t ectth e p ers o n al i nfo rm at i on o f h i s s tu d en t s i n cl u d edo n the ro s t ers (i .e., ad dres s es , t el ep h o n e n u m b ers , an di n s o m e cas es So ci al Secu ri ty

n u m b ers ). Becau s e o f h i s p ers o nal co n cern s , p et i t i o n er trav el edt o th e Pers o n cam p u s atthe b eg i nn in g an den do f each t each in g d ay n o m at t er wh i ch cam p u s h e t au g h t ato n an y p art i cu l ar d ay . He cl ai m edro u nd -t ri p m i l eag e o f 4 8 .4 m il es fo r each d ay h e t au g h t , t o t al i n g 6 ,3 9 7 m i l es fo r 2 0 1 2. Pet i t i o ner d i dn o tt each atb o th cam p u ses
ev ery t each i n g d ay . Du ri n g th e 2 0 1 2 s p ri n g s em es t er, p et it i on er’ s cl as s s ch edu l e al t ern at edb et ween wh et h er h e wo u l d t each ato n e cam pu s o r th e o th er an d
s o m et i m es h e wo u l d b ro ad cas t h i s l ectu re l i v e fro m o n e cam p u s t o th e o th er as p arto f a d i s t an ce l earn i n g p ro gram . Pet i t i o ner was u n ab l e t o d et erm i n e fro m h i s
reco rd s o r rem em

b er wh i ch d ay s du ri n g 2 0 1 2 h e was s ch edu l edt o t each ato n l y
o n e cam p u s , ex cep tthat : (1 ) Fri d ay s du ri n g t h e 2 0 12 s p ri ng s em es t er p et i t i o n er t au g h to n l y

atth e Cas wel l cam

p u s an d(2 ) Tu es d ay du ri n g th e 2 0 1 2 fal l s em es t er h e t au g h to n l y

o n e cl as s atth e Cas wel l cam p u s. Pet i t i o n er o n s o m e d ay s d i dn o t trav el b et ween th e two cam p u s es . Pet i t io n er’ s Pi ed m o n tm i l eag e reco rd s rep o rt th e 4 8
. 8 m i l es o n s o m e d ay s wh en o ther t rav el reco rd s refl ect ed th ath e was n o tat th e Pi ed m o n tcam

p us .- 6
-

[* 6 ] B. CYBER M i l eag e Du ri n g 2 0 12 p et i ti o n er cl ai m edb u s i n es s m il eag e d edu ct io n s fo r v ari o u s
cro s s -co u n try

tri p s . A nu m

b er o f t h e t ri p s were m ad e t o Fal l o n, Nev ad a. Per p et i t i o n er’ s ex pl an at io n , h e was l o o k i n g i n t o rel o cat i ng CYBER an d s earch i n g fo r p o s s i b l e b u s i n es s o p p o rtu n it i es . Pet i t i o ner d i dn o tex p l ai n wh y i twas n eces s ary o r wh y h e wan t edt o m o v e CYBER fro m No rt h Caro l i na t o Nev ad a. Pet i ti o n er’ s fri en d wh o l at er b ecam e h i s wi fe l i v edi n Fal l o n , Nev ad a, an dp et i ti o ner v i s i t ed h er du ri n g each tri p m ad e t h ere du ri n g 2 0 1 2 . Pet i ti o n er m ad e t wo tri p s t o Oreg o n t o m eetwi th a fo rm er p ro g ram m er o f CYBER. Pet i t i o n er d i d n o t p ro v i d e a
s p eci fi c b u s in es s p u rp o s e fo r t h e m eet i n g s wi th t h e fo rm er p ro gramm er o th er t h an
s t at i n g th ath e was an am azi n g p ro g ramm er wh o d i d n o tl i k e t o co m m un i cat e b y p h o n e o r em ai l
. Pet i t i o ner m ad e a t ri p t o Pl ym o u th , M i n n es o t a, fo r m eet i ng s h e h el do n Ch ri s t m as Ev e an d Ch ri s t m as Day . Ad d i t io n al l y , h e m ad e a t ri p t o Green vi l l e, No rt h Caro l i n a fo r a “ m eet i n g co n feren ce”. Pet i t i o ner d i dn o t p ro v i d e an y fu rt h er i n fo rm at i o n o n th e h o s to r t h e s ub jecto f t h e co n feren ce. Pet i t i o n er al s o rep o rt ed 3 ,6 78 k i l o m et ers o f b u s in es s m i l eag e i n Berg en , No rway . Pet it i on er d i d n oto wna car i n No rway , an d th ere i s n o ev i d en ce o f a car ren t al i n No rway . He co n ced ed du ri n g h i s tri al t es t i m o n y th at th e Berg en m i l eag e was n o t a b u s i n es s ex p en s e.- 7
-

[* 7 ] II. Trav el Ex p en s es Wh i l e Away Fro m Ho m e OnFo rm 2 1 0 6 -EZ, p et i t i o n er cl ai m edt o t al trav el ex p en s e d edu ct i o n s o f $ 1 3 ,2 8 2 fo r t rav el away

fro m h o m e wh i ch co n s i s tedo f t wo tri ps : o n e t o Berg en , No rway , an d th e o th er t o Co st a Ri ca. A. No rway CYBER s i g n eda co o p erat i v e ag reem en twi th th e Un i v ers i ty o f Berg en du ri n g 1 9 9 4 . Pet i t i o n er trav el edt o th e Un i v ers i ty o f Berg en i n No rway

s ev eral t i m es du ri n g the l at e 1 9 90 s an dearl y 2 0 00 s . Pet i t i o n er t rav el edt o th e Un i v ers i t y
o f Berg en fro m

ab o u tJ u n e 1 thro u g h J ul y 2 1 , 2 0 1 2 , t o co n ductres earch an dt o h el p wri t e an art i cl e o n Sy s t em Dy n am i cs ap p l i ed t o edu cat i o n. Pet i t i o ner p ro v i d edtwo s ep arat e ex p en s e rep o rt s co veri n g n earl y th e s am e d at es wi th two d i fferen t t o tal s fo r t h e t ri p t o No rway . He d i d n o tp ro vi d e an
ex p lan at i o n fo r t h e d i s crep an cy . Th e ex p en s e rep o rt s co n s i s t edo f two cat eg o ri es t i tl ed(1 ) Pai dTo an d(2 ) Trav el Am o u n t . Ho wev er, t h e ex p en s e rep o rt s d i dn o t
s t at e t h e b u s i nes s p u rp o s e o f t he t ri p o r t h e p l aces trav el edt o as req u iredb y CYBER’ s rei m

bu rs em en t p o l i cy . Pet i t i o n er co u l dn o tb e rei m b u rs edb y CYBER fo r t h e t rav el away

fro m h o m e an dth e m il eag e b ecau s e CYBER h ad n o m o n ey t o p ay h i m .- 8
-

[* 8 ] B. Co s t a Ri ca Du ri n g 2 0 1 2 p et i t i o n er wen to n a t ri p t o Co s t a Ri ca. Th e t ri p was an
eco l o g i cal an d cu l tural s tu dy tri p s p o n s o red b y

Pi edm o n t fo r th e s tu d en t s an d facu l ty . Pet i t i o n er s ub m i t t edan ex p en s e rep o rtt o CYBER fo r rei m b u rs em en to f th e ex p en s es fo r t hi s tri p . III. Co m m u ni cat io n s an d Offi ce Sup p li es Onh i s 2 0 1 2 retu rn p et it i o n er cl ai m eda d edu ct i o n o f $ 1,7 98 fo r

“ co m m un i cat i o n s ” an d$ 1 ,8 9 5 fo r o ffi ce s upp l i es i n co n n ect i o n wi th h is CYBER act i vi ty . In cl u d edi n the d educt edam o u n t s were ex p en d i tures fo r l arg e-s creen t el ev is i o n s wi th HDM I cab l e i np u t s , s p eak ers , Ki n d l es , an di Pad s . OPINION Res p o n d en t ’ s co n t en ti o n s wi th res p ectt o th e d i sal l owedd edu ct i o ns are t h at p et i t i o n er h as n o ts h own th atth e u n d erl y i n g ex p en s es were o rd i n ary an dn eces s ary
o r reas o n ab l e b u s i n es s ex p en s es an d/ o r t hatp et i ti o n er h as n otad equ at el y
s ub s t an t i at edthem . Pet i t i o n er as s ert s th atth e v ari o us tri ps were req u iredi n o rd er t o res earch p o ss ib l e l ead s o n n ew co n tract s fo r CYBER an dth ath i s t es t i m o n y an d d o cu m en t at i o n s ub s t an t iat e an dju s t i fy th e cl ai m edd edu ct i o ns . 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 b ear t he b u rd en
o f es t ab l i s h i n g en t i t l em en t t o an y cl ai m edd edu ct i on . Ru l e 1 42 (a); INDOPCO,- 9
-

[* 9 ] In c. v . Co m

m is s io n er, 5 0 3 U.S. 7 9 , 8 4 (1 99 2 ). Tax p ay ers m u s t m ai n t ai n
reco rd s s u ffi ci en tt o al l o w th e Co m m i s s i o n er t o d et erm in e t h ei r co rrectt ax l i ab i l i t i es . Sec. 6 0 0 1 ; s ec. 1 .6 00 1 -1 (a), In co m e Tax Reg s . Ad d i t i o nal l y , t ax p ay ers b ear t he b u rd en o f s ub st an t i at i n g th e am o u n tan dp u rp o s e o f each i t em fo r wh i ch th ey cl ai m a d edu ct i o n . Hrad es ky

v . Co m m i s si on er, 6 5 T.C. 8 7, 8 9 (1 9 7 5 ), aff’ d p er cu ri am , 5 4 0 F.2 d8 2 1 (5 th Ci r. 1 9 7 6 ). Sect io n 1 6 2 (a) al l o ws a t ax p ay er t o d edu ctal l o rd i naryan dn eces s ary b u s i n es s ex p en s es p ai d o r i n cu rreddu ri ng th e t ax ab l e y ear. Th e t ax p ay er m u s t
s h o w th ata rep o rt edb us i nes s ex p en s e was i n cu rredp ri m ari l y fo r b us i n es s rat h er th an p ers o n al reas o ns an dth atth ere was a p ro x i m at e rel at io n s hi p b etween th e
ex p en s e an d the b u s i n es s . See W al l i s er v . Co m m i s si on er, 7 2 T.C. 4 3 3 , 4 3 7 (1 9 7 9). A t ax p ay er’ s p ers o n al ex p en s es are n otd edu ct i b l e. See s ec. 2 6 2
. Ano rd i n ary

ex p en s e i s o n e o f co m

m o n o r freq u en to ccu rren ce i n th e t y p e o f b u s i n es s i n v o l v ed . See Bo ser v . Co m m i s s i o n er, 7 7 T.C. 1 12 4 , 1 1 3 2 (1 9 8 1 ), aff’ d p er o rd er (9 th Ci r. Dec. 2 2 , 1 9 8 3 ). A n eces saryex p en s e i s ap p ro p ri at e an d h el p fu l i n carry i n g o n th e t rad e o r b u s i n es s . Hei n em an v . Co m m i s s io n er, 8 2 T.C. 5 3 8 , 5 4 3 (1 9 8 4). “Neces s ary ” h as b een co n s tru edt o m ean ap p ro p ri at e o r h el p fu l , n o t i n d i s p en s ab l e o r req u i red . Fo rdv . Co m m i ss i o ner, 5 6 T.C. 1 3 0 0 , 1 3 06 (1 9 7 1 ),- 1 0 -

[* 1 0 ] aff’ d , 4 8 7 F.2 d1 0 2 5 (9 th Ci r. 1 9 7 3 ); s ee al s o Bo ser v . Co m m i s s i o n er, 7 7 T.C. at1 1 3 2
. Ev en i f anex p en s e i s o rd i n ary an dn eces s ary , i ti s d educt i b l e u n der s ect i o n 1 6 2 o n l y t o th e ex t en ti ti s reas o n ab l e i n am o u n t. Gi l l v . Co m m is s i o n er, T.C. M em o. 1 9 9 4 -9 2 , aff’ dwi th ou tp ub l i s h edo p in i o n , 7 6 F.3 d3 7 8 (6 th Ci r. 1 9 9 6 ); Bral l i er v . Co m

m i s s i on er, T.C. M em o . 1 9 8 6 -4 2. Pi ed m o ntM il eag e--Res p o n d en tco n t en d s th atp et i t i o n er was co m m u t i n g fro m h i s h o m e t o h i s two t each i n g p o s i t i o n s fo r Pi ed m o n t , n ei th er o f wh i ch was
m o re th an 2 5 m i l es fro m

h i s h o m e. Res p o n d en tal s o co n t en d s th atp et i t i o n er’ s trav el l o g an dreco rd s reg ard in g Pi ed m on t were i n ad equat e. Pet i t i o n er co n t en d s th ath e was n o tco m

m u t i n g fro m

h i s h o m e b u ttrav el i n g fro m o n e t each i n g l o cat i o n t o the o th er, wh i ch i s n o tco m m u t i n g . He ex p l ai n s th atth e reco rd s h e m ai n t ai n ed reg ard i n g h i s s tu d en t s co n t ai nedp ers o nal i n fo rm at i o n th ath e k ep t l o ck edup atth e t each i n g l o cat io n wh ere h e h adan o ffi ce. So h e co n t en d s th ath e h adt o al way s trav el fi rs tt o th e s ch o o l wh ere h i s o ffi ce was t o p i ck up t h e reco rd s b efo re g o i n g t o the s eco ndt each i n g l o cat i o n . Em p l o y ee ex p en s es fo r trav el fro m h o m e t o wo rkare g en eral l y n o t d educt i b l e u n d er s ect i o n 1 6 2 (a). Peu ri fo y v . Co m m i s s i o ner, 3 5 8 U.S. 5 9 , 6 0 (1 9 5 8). Th ey are co ns i dered p ers o n al , l i v i n g, o r fam i l y ex p en s es . See s ec. 2 6 2 (a).- 1 1 -

[* 1 1 ] Trav el fro m

a t ax p ay er’ s h o m e, wh i ch i n th is cas e i s p et i ti o n er’ s “ t ax h o m e”, i s co n s i d eredco m

m u t i n g an di s n o td edu ct i b l e. Th e s ch oo l s atwh i ch p et i t i o n er t au g h twere 1 m i le an d ab o u t 2 5 m i l es fro m h i s h o m e, an das an em

p l o y ee o f Pi ed m on th e wo u l dn o tb e ab l e t o d edu cth i s trav el ex p en s es . Becau s e p et i t i o n er
was n otreq u i redb y

Pi ed m o n tt o l o ckup th e s tu d en t reco rd s ato n e o f t h e
cam p u s es o r o th erwi s e t o s to p ato n e o f th e cam p u ses b efo re t rav el in g t o th e o t h er
an d i twas h i s p ers o n al d eci s i o n t o d o s o , h i s tri p s b et ween th e t wo cam p u s es
wo u l dn o tb e co n v ert ed t o an em p l o y ee b us i n es s . CYBER M i l eag e an dTrav el Away Fro m Ho m e--Pet i t i o n er cl ai m s th atco s t s fo r s ev eral tri p s b y

v eh i cl e du ri n g 2 0 1 2 were em pl o y ee b u si nes s ex p en s es h e i n cu rredas an em

p l o y ee o f CYBER. He al s o cl ai m s t h at h e i n cu rredex p en s es o n a t ri p t o N o rway

an d a t ri p t o Co s t a Ri ca as an em p l o y ee o f CYBER. Pet i t i o ner co n ten d s th atth o se t ri p s an dm i leag e were i n fu rt h eran ce o f b u s i n es s o f CYBER. He i s cl ai m i n g th em , h o w ev er, as em p l o y ee b u s i n es s
ex p en s es . Res p o n den tco nt en d s th atp et i ti o n er’ s b u s in es s m i l eag e an d t ri p s away fro m h o m e were n o to rd i n ary

an dn eces s ary . He fu rt her arg u es thatp et i t i o n er’ s
m i l eag e an dtri p s away

fro m h o m e were u n reas o n ab l e b ecau s e CYBER was i n s o l v en ti n 2 0 1 2 an d h adb een wi th o u ta s ou rce o f i nco m e s i n ce 2 0 0 6 . Pet i t i o n er
co n ced es th atCYBER was i n s ol v en ti n 2 0 1 2 b u targ u es thati t i s h i s ri g h tt o- 1 2 -

[* 1 2 ] p u rs u e h i s b u s i n es s ev eni f h e d o es n o t s u cceed . Al th o u g h p et it i on er t es t i fi edth ats o m e b u s i n es s -rel at edact i v i ty o ccu rredo n h is b u si n es s tri p s , h i s t es t i m o ny was v ag u e an ds el f-s erv i n g . Fo r ex am p l e, p et i t i o n er’ s fri en dan dn o w wi fe l iv edi n Fal l o n, Nev ad a, an d h e v i si t edh er du ri n g each tri p . Si m i l arl y , h i s tri p t o Pl ym o u th , M i n n es o t a, fo r “ b u s i n es s ” m eet i n g s o ccu rred duri n g th e Ch ri s t m as h o l i d ay s wi th th e d au g h t er o f h i s fo rm er b u s i n es s p art n er. Th u s , i t ap p ears th at th ere was a s ig n i fi can tel em en to f p ers o n al p l eas u re, recreat i o n , o r
v acat i o n i n p et i t i o n er’ s v ari o u s tri p s du ri n g 2 0 1 2 an dth atth is el em en t was th e p ri m ary reas o n fo r t h es e t ri p s. Au t o m o bi l e, t rav el , an d en t ert ai n m en t ex pen s es are s ub jectt o m o re ri g o ro u s
s ub s t an t i at i o n req u irem en t s u n d er s ect io n 2 7 4 (d ). To d eductan y o f t h es e
ex p en s es , p et i t i o n er m

us ts ub s t an t i at e: (1 ) th e am o u n to f t h e ex p en s e; (2 ) t h e t i m e
an d p l ace t he ex p en s e was i n cu rred ; (3 ) t h e b u s i n es s p u rp os e o f t h e ex p en s e, an d (4 ) i n the cas e o f an en t ert ai n m en to r g i ftex p en s e, th e b u s i n es s rel at i o ns h ip o f t he reci pi en t t o p et i ti o n er at th e t i m e each ex p en s e was i n cu rred . See i d . Each el em en tm

u s tb e s ub st an t iat edb y

ad equ at e reco rd s o r o th er s u ffi ci en t ev i d en ce
co rro b o rat in g p et it i o n er’ s o wns t at em en t . See i d
. Pet i t i o ner p ro v i d edl o gs an dreco rd s o f h i s b us i n es s m i leag e an d t rav el away fro m h o m e ex p en s es ; h o wev er, t h ey are v ag ue an datt i m es co n trad ict o ry . Fo r- 1 3 -

[* 1 3 ] ex am

p l e, t h e m i l eag e an d t rav el l og v ag u el y d es cri b e al m o s tev ery

tri p as

“ b u s i n es s ” o r “ co nferen ce”. Th e Pi ed m o n t m i l eag e l o gs i n d i cat e t h at p et it i o n er trav el ed t o an d fro m

each cam p u s o n the s am e d at es thath e rep ort edb u s i n es s
m i l eag e fo r a t ri p t o Nev ad a. Th es e d o cu m en ts fal l s h orto f s at i s fy i n g t h e s tri ct req u i rem en t s o f s ect i o n 2 7 4 (d ). Pet i t i o ner rep o rt ed2 8 ,0 10 .3 m i l es o f v eh icl e t rav el . Ov er h al f o f th o s e
m i l es were t o Fal lo n, Nev ad a, wh ere h e was b eco m i n g reacq u ai n t edwi th a fri en d wh o h e s ub s equ en t l y

m arri ed . Pet i t i o n er cl ai m edth atthi s trav el was fo r “N ew Bu s i nes s Op p o rtu ni t i es ”, b u th e d i d n o tex p l ai n wh o h e was s eei n g th atco u l d p ro v id e b u s i n es s o pp o rtun i t i es fo r CYBER. Fo r each o f t h es e t ri p s t o Nev ad a an d
o th er l ocat i o n s , p et i t i o n er u s edb ro adg en eri c ex p l an at io n s s u ch as th e ab o ve an d d i dn o t p ro v i d e an y

s p eci fi cs , i n ei ther t he reco rd s o r h i s t es t i m o n y , o f effo rt s t o g en erat e b u s i n es s o r ab o u tp eo p l e wi th wh o m b u si n es s was d i s cu s s ed . Th e p at tern
o f t h e t ri p s th ro u g h o u t2 0 1 2 i s rep et i t i ve, i .e., t o the s am e l o cat io n s t o s ee t h e s am e p eo pl e wi th wh o m

p et i t i o ner h ada p ers o n al co n n ect i o n . Th ere are n ots p eci fi c b u s i n es s reas o n s fo r t h es e t ri ps i n th e reco rdo f t h i s cas e. See W al li s er v . Co m m i s s i o n er, 7 2 T.C. at 4 3 7
. Th e o ther p ers on p et it i o n er v i s i t eddu ri n g 2 0 12 was a fo rm er em p l o y ee o f CYBER, wh o h adn o two rk ed fo r t h e co m p an y s in ce 2 0 0 6 . Ag ai n p et i t io n er d i d- 1 4 -

[* 1 4 ] n o ts h o w h o w th o s e t ri p s wo u l db en efi t o r g en erat e b us i n es s fo r CYBER. In
s h o rt , n o n e o f t h e reco rd s o r t es t i m o n y o ffered s at i s fy the req u i rem en t s o f s ect i o n 2 7 4 (d ), s u ch as bu s in es s p u rp o s e, h o w th e p eo p l e o r p l aces v i si t eds erv ed th at p u rp os e, an d s o o n . Acco rd i n g l y , th ere h as b een n o s h owi n g th e t rav el was
o rd i n ary , n eces s ary , an dreas o n ab l e as req u i red b y s ect i o n 1 62
. Th e v ari at i o n i n rep o rt edco s t s o f t rav el t o Berg en , No rway , an do th er Eu ro p ean ci t i es , $ 1 6 ,9 04 .9 4 as s h o wni n Ex h i b i t4 P o r $ 2 5 ,8 4 8
. 9 0 as s h o wni n Ex h ib i t1 5 R, ev i d en ces an $ 8 ,9 4 3 .9 6 d i s crep an cy i n p et it i on er’ s reco rd s . Res po n d en ts et s fo rth fo u r reas o n s d edu ct i on s are n o tal l o wab l e. In p art i cu l ar (1 ) th ey d o n o tco m

p l y wi th CYBER’ s rei m

b u rs em en tp l an , s o th ey

were n o t
n eces s ary em p l o y ee b u s i n es s ex p en s es i f t h ey co u l dh av e b een rei m

b u rs edb y CYBER; 2 (2 ) th e i n fo rm at i o n p ro v i d edi n p et i t i o ner’ s ex p en s e rep o rt s d o es n o t
m eetth e h i g h er s t an d ardo f s ub s t an ti at i o n o f s ect i on 2 7 4 (d ); (3 ) p et i t i o n er’ s
reco rd s h av e dupl i cat i on s an d d i s crep an ci es ; an d (4 ) CYBER h as h adn o co n tract s
o r i n co m e fo r s i x y ears an d i ti s n o to rd i naryo r n eces saryt o i n cu r m an y tho u s an d s
o f d o ll ars i n trav el ex p en s es wi th o u ta co n tract o r p ro s p ect o f p aym en t .

2 Anem p l o y ee’ s p erfo rm an ce o f s erv i ces i s a t rad e o r b u s i nes s . Pri m u th v . Co m m i s s i o n er, 5 4 T.C. 3 74 (1 9 7 0 ). Anem p lo y ee ex p en s e i s n o td edu ct i b l e as o rd i n ary an dn eces s ary

i f i t was s ub

jectt o rei m

b u rs em en tb y

an em pl o y er. Po d em s v . Co m

m i s s i o n er, 2 4 T.C. 2 1 , 2 2 -2 3 (1 9 5 5 ).- 1 5 -

[* 1 5 ] W e ag ree wi th res p o n d en t ’ s an al y s i s an d s up p o rt i n g au th o ri ty wi th res p ect t o the t rav el i s s u es . So ft w are an dHard ware It em s Pu rch as edb y Pet i t i o n er--Pet i ti o ner cl ai m ed
ex p en s e d educt i o ns fo r th e p urch as e o f i t em s fo r CYBER du ri ng 2 0 1 2 i n cl u d i n g l arg e s creen t el ev i s io n s wi th HDM I cab l e i np u t s , s p eak ers , Ki n dl es , an di Pad s . Res po n d en targ u es th atth es e are cap i t al i t em s an dn otd edu ct i b l e as o p erat i n g
ex p en s es . Inad d it i on , i f t h es e were ex p en di tu re fo r t h e co rp o rat i o n p ai db y a
s h areh o ld er, t hey

are n o tco n s i d eredo rd i naryan dn eces s ary ex p en ses o f t h e
s h areh o ld er. See Dep u ty v . Du Po n t , 3 0 8 U.S. 4 88 , 4 93 -4 9 4 (1 9 4 0 ). In effect p et i t i o n er i s m ak i n g a cap i t al co n tri b u t i o n t o CYBER, wh i ch wo u l d n o tb e d educt i b l e as an em

p l o y ee b u s in es s ex p en se. M o reo ver, CYBER i s an em p ty s h el l wi th n o cu s to m ers o r s o u rce o f i n co m e fo r s ev eral y ears b efo re th e y ear u n d er
co n si d erat io n . W e acco rd i n 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 al l Sch edul e A d educt i o n s p et i t i o n er cl ai m edo n h i s 2 01 2 i n co m e t ax retu rn .- 1 6 -

[* 1 6 ] To refl ectthe fo reg o i n g an d res p on d en t ’ s co nces s i o n o f t h e s ect io n 6 6 6 2 (a) p en al ty , Deci s i o n wi ll b e en t eredfo r
res p o nd en t wi th res p ect t o th e d efi ci en cy
an dfo r p et i t i o ner wi th res p ect t o th e
s ect i o n 6 6 6 2 (a) p en al ty .