T.C. Mem o. 2 01 3- 21 9

UNITED STAT ES TAX COURT
JOYCE A. LINZY, Peti ti on er v . COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 13 23 0- 12
. Fil edSep te m be r 16 , 20 13
.
Jo y ce A. Lin zy , pro se. Kath ryn E. Kel ly, fo r res po nd en t.

MEMORANDUM FINDINGS OF FACT AND OPINION KERRIGAN, Ju dg e: Res po nd en t d et erm in eda de fic ie nc y of $ 8,6 91 an d a pe na lty un de r se ct io n 6 66 2( a) o f $1 ,73 8 wi th res pe ctto pe ti ti on er’s Fed eral in co m e ta x fo r ta x year 20 09
.- 2 -

[* 2] Unl es s o th erwi se in di cat ed , all sec ti on refe ren ces are t o the Int ern al Rev enue Co de ineffe ctforth e y ear i n i ss ue , andall Ru le refe ren ces are t o the Tax Co urt Ru le s o f Prac ti ce an d P ro cedur e. All m on et ary am ou nt s ar e ro un de d t o the
ne ares t d ol lar. Afte r co nc es si on s th e is su es forco ns id erat io n are (1 ) whe th er p et it io ne r is 1
en ti tl edto de du ctvario us expe ns es rep orte d o n h er Sc he du le C, Pro fitor Lo ss Fro m Bu si ne ss ; (2 ) whe th er p et it io ne r is en ti tl edto off se t h er g am

bl in g i nc om e b y an y ga m bl in g l os se s; (3) whet he r pe ti ti on er i s en ti tl edto de du cta pa ym en t m ad e to Metro po li tan Li fe In su ran ce Co . (Met Life ); a nd(4) whet he r pe ti ti on er i s l iabl e fo r th e p en al ty und er s ect io n 6 66 2( a). FINDINGS OF FACT So m e o f th e fac ts are s ti pu la te d andare s o fo un d. Pe ti ti on er re si de d i n Ill in oi s wh ensh e fi le d the pe ti ti on . Dur in g the tax y ear i n i ss ue pe ti ti on er was th e so le pro pr ie to r of a ta x pr ep arat io n b us in es s ca ll edJo y ce’s Tax Serv ic e. Pet it io ne r st art edJo y ce’s Tax Serv ic e in 20 03 . Befo re 2 00 3 p et it io ne r worke d fo r Ja ck so n Hewi ttan d fo r In st an t Tax Serv ic e, whe re s he was trai ne d t o p rep are t ax returns . Pet it io ne r ha s co nc ed edth atsh e fai le d t o re po rt $ 51 2 o f in te res t i nc om e fo r 1 ta x year 20 09 . Res po nd en t h as co nc ed edth atpe ti ti on er re cei ve d o nl y $1 0,2 27 of So ci al Secu rit y

be ne fit s fo r ta x year 20 09
.- 3 -

[* 3] Pet it io ne r rec ei ve d p aym en ts fro m Met Life be gi nn in g i n 2 00 5 i n c on ne ct io n with alo ng -te rm

di sabi li ty clai m . Peti ti on er’s l on g- te rm di sabi li ty pol ic y

with Met Life pro vi de d tha t h er b en efi ts wou ldbe reduc edif s he rece iv edan y So ci al Secu rit y di sabi li ty paym en ts . In 2 00 8 p et it io ne r was award edSo ci al Secu rit y di sabi li ty ben efi ts . She rece iv eda lu m p- su m So ci al Secu rit y

paym en t o f $2 2,7 17 fo r pr io r y ears onDecem be r 18 , 20 08 . Becau se sh e rec ei ve d S oc ia l Se curit y di sabi li ty ben efi ts , Met Life requi redpe ti ti on er t o re pa y a po rti on of t he paym en ts sh e h adrece iv edbe twee n 2 00 5 and20 08 . Peti ti on er p ai d $ 20 ,51 9 t o M et Life (Me tLi fe p aym en t) o n F eb ru ary 20 , 20 09
. On h er Fe de ral in co m e ta x re tu rnfortax y ear 2 00 9 p et it io ne r cl ai m ed $1 7,6 93 of o th er i nc om e rel at in g t o h er g am bl in g wi nn in gs . Peti ti on er atta ch ed Fo rm s W-2G, Certa inGam bl in g Win ni ng s, t o h er 2 00 9 F ed eral in co m e ta x re tu rn th atsh ow t ot al ga m

bl in g wi nn in gs of $ 17 ,69 3. Onhe r Sch edul e C p et it io ne r rep orte d m

ul ti pl e types of e xp en se s, i nc lu di ng th e fo ll owi ng :

Exp en se Am ou nt Trav el $3 ,78 6 Deduc ti bl e m eal s an d ent ert ai nm en t 5,2 00 Ren t o r le as e o f ot he r bu si ne ss pro pe rty 13 ,00 0- 4 -

[* 4] Inth e n ot ic e o f de fic ie nc y res po nd en t d is al lo wedth e Sch edul e C ex pe ns es fo r tr av el , m eal s an d e nt ert ai nm en t, an d re ntor l eas e o f othe r bu si ne ss pro pe rty. Pet it io ne r di sa gr ees with re sp on de nt ’s adju st m en ts . Peti ti on er al so m ak es two cla im s n otad dr es se d i n the no ti ce o f de fic ie nc y . Firs t, s he cla im s tha t s he ha d ga m bl in g l os se s fo r 20 09 bu t d idno t u se th em to off se t the ga m

bl in g wi nn in gs sh e rep orte d o n h er 2 00 9 F ed eral in co m e ta x re turn . Seco nd , pet it io ne r cl ai m s tha t be cau se of the Met Life paym en t s he is en ti tl edeit he r to off se t h er So ci al Secu rit y be ne fit s b y

th e Me tLi fe p aym en t o r to cla im a de du ct io n o n S ch edul e A, Ite m iz ed Deduc ti on s, re la ti ng to it
. OPINION I. Bu rd enof P ro of Gen eral ly, th e 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 pr es um edco rrec t, an d atax pa y er b ears th e b ur de n o f pr ov in g tho se de te rm in at io ns are e rro ne ou s. Ru le 14 2( a)(1 ); Welc h v . Helv eri ng , 29 0 U.S. 1 11 , 11 5 (1 93 3) . In
or de r to sh iftth e b ur de n, the tax pa y er m us t co m pl y with a ll subs tant ia ti on an d
reco rdke ep in g re qu ire m en ts an d c oo pe rat e with a ll reas on ab le reque st s b y th e Co m m is si on er fo r witne ss es , in fo rm at io n, d oc um en ts , m eet in gs , andin te rv ie ws, pu rs ua ntto sec ti on 74 91 (a)( 2) . See Hig be e v . Comm is si on er, 1 16 T.C. 43 8, 4 41 (2 00 1) . Peti ti on er d idno t ar gu e th atth e b ur de n s ho ul d s hi ft, andsh e fai le d t o- 5 -

[* 5] in tro du ce cr ed ib le ev id en ce tha t re sp on de nt ’s det erm in at io ns are i nc orrect . The burd enof p ro of

rem ai ns with p et it io ne r. II. Sch edul e C Ex pe ns es Pet it io ne r co nt en ds th atsh e is en ti tl edto de du ctex pe ns es fortra ve l, m eal s an d e nt ert ai nm en t, an d re ntor l eas e o f ot he r bu si ne ss pro pe rty. Sect io n 1 62 (a) a ll ows a ta xp ay er t o d educ t al l o rd in ary an d n eces sa ry ex pe ns es pa idor i nc urredincarry in g o n atra de or b us in es s. Anord in ary ex pe ns e is on e th atco m

m on ly or freque nt ly occu rs inth e ta xp ay er’s b us in es s, Dep ut y v. du Po nt , 30 8 U.S. 4 88 , 49 5 (1 94 0) , anda ne ces sa ry ex pe ns e is on e th atis ap pr op ria te
an d h el pf ul incarry in g o n the tax pa y er’s b us in es s, Welch v. Hel ve rin g, 2 90 U.S. at11 3. Th e ex pe ns e m

us t d ire ct ly con ne ctwith o r pe rta into th e ta xp ay er’s bu si ne ss . Sec. 1 .16 2- 1( a), In co m e Tax Reg s. A ta xp ay er m ay no t d educ t a pe rs on al , li vi ng , or fa m il y ex pe ns e unl es s the Co de ex pr es sl y pro vi de s o th erwi se . Sec. 2 62 (a). Whe th er anex pe nd itur e is ord in ary an d n eces sa ry is ge ne ral ly a qu es ti on of fact . Com

m is si on er v . Hein in ge r, 32 0 U.S. 4 67 , 47 5 (1 94 3) . A tax pa y er m us t sh ow a b on a fi de bu si ne ss pu rp os e fo r th e ex pe nd itur e, an d the re m us t al so be a pr ox im at e rel at io ns hi p b etweenth e ex pe nd itur e an d h is or h er b us in es s. Ch al le ng e Mfg . Co. v . Comm is si on er, 3 7 T.C. 6 50 , 66 0- 66 1 (1 96 2) . A tax pa y er’s- 6 -

[* 6] ge ne ral st at em en t tha t h is or h er ex pe ns es were i nc urredinpu rs ui t o f a trad e orbu si ne ss is no t s uf

fic ie ntto est ab li sh th atth e ex pe ns es ha d areas on ab ly dire ct rel at io ns hi p t o any suc h trad e o r bu si ne ss . Ferrerv. Co m m is si on er, 5 0 T.C. 1 77 , 18 5 (1 96 8) , aff’d p er cu ria m , 40 9 F .2d13 59 (2dCir . 19 69 ). Deduc ti on s ar e a m at te r of leg is la ti ve gra ce, an d atax pa y er m us t p ro ve hi s orhe r en ti tl em en t t o ade du ct io n. INDOPCO, In c. v. Co m m is si on er, 5 03 U.S. 79 , 84 (19 92 ); Ne w Col on ia l Ic e Co . v. Hel ve rin g, 2 92 U.S. 43 5, 4 40 (19 34 ). To tha t
en d, t ax pay ers are re qu ire d t o s ub st an ti at e eac h c la im edde du ct io n b y m ai nt ai ni ng reco rd s s uf

fic ie ntto est ab li shth e am ou ntof t he de du ct io n andto en ab le th e Co m m is si on er t o d et erm in e th e co rrec t t ax li ab il ity . Sec. 6 00 1; Hig be e v . Co m m is si on er, 1 16 T.C. at 4 40
. Norm al ly, th e Co urt m ay est im at e th e am ou ntof ade du ct ib le ex pe ns e if a ta xp ay er es tabl is he s tha t an ex pe ns e is de du ct ib le bu t i s u nabl e to subs tant iate th e pr eci se am ount . See Co ha n v . Comm is si on er, 3 9 F .2d54 0, 5 43 -5 44 (2dCir
. 19 30 ); Vani cekv. Co m

m is si on er, 8 5 T.C. 7 31 , 74 2- 74 3 (1 98 5) . This is oft en refe rredto as t he Co ha n ru le . See, e.g ., Van Du se n v . Commis si on er, 1 36 T.C. 51 5, 5 37 n.3 9 (2 01 1)
.- 7 -

[* 7] A. Trav el Exp en se s an d M eal s an d En te rta in m en t Expe ns es Trav el ex pe ns es an d m eal s an d e nt ert ai nm en t ex pe ns es are s ub ject t o the st ric t s ub st an ti at io n ru le s o f se ct io n 2 74 (d ). Sec. 2 74 (d )(1 ) an d (2 ). To m eetth es e st ric t s ub st an ti at io n ru le s, a t axpa y er m us t s ub st an ti at e b y

ad equa te reco rd s o r by
su ffi ci en t ev id en ce co rro bo rat in g the tax pa y er’s o wn s ta te m en t (1 ) th e am ou ntof th e ex pe ns e, (2 ) th e ti m e an d p la ce o f th e tr av el or u se , and(3) th e b us in es s pu rp os e o f th e ex pe ns e. Sec. 2 74 (d ). To s ub st an ti at e b y ad equa te reco rd s, the ta xp ay er m

us t p ro vi de (1) anacco un t b oo k, l og , or s im il ar re co rdan d (2 ) do cu m en tary

ev id en ce, wh ic h t og ethe r are s uf fic ie ntto est ab li sh each ele m en t o f
anex pe nd itur e. Sec. 1 .27 4- 5T(c )(2 )(i ), Tem po rary Inco m e Tax Reg s., 5 0 F ed
. Reg . 46 01 7 (No v. 6 , 19 85 ). Docu m en tary ev id en ce i nc lu de s re cei pt s, p ai d b il ls , or si mil ar ev id en ce. Sec . 1.2 74 -5 (c)( 2) (ii i), In co m e Tax Reg s. To subs tant ia te by
su ffi ci en t ev id en ce co rro bo rat in g the tax pa y er’s o wn s ta te m en t, the tax pa y er m us t
es tabl is h e ach ele m en t b y hi s o r he r own st at em en t an d b y do cu m en tary

ev id en ce orothe r di rectev id en ce. Sec . 1.2 74 -5 T(c)(3 )(i ), Tem po rary Inco m e Tax Reg s., 5 0 Fed . Reg . 46 02 0 (No v. 6 , 19 85 ). To es tabl is h the bu si ne ss pu rp os e o f an
ex pe nd itur e, ho wev er, a t ax pa y er m ay co rro bo rat e h is or h er o wn s ta te m en t wi th ci rcu m st an ti al ev id en ce. Id
.- 8 -

[* 8] Not ab ly, se ct io n 2 74 (d ) ov erri de s the Co han ru le . Boyd v. C omm is si on er, 12 2 T.C. 3 05 , 32 0 (2 00 4) ; s ec. 1 .27 4- 5T(a ), Tem po rary Inco m e Tax Reg s., 5 0 F ed
. Reg . 46 01 4 (No v. 6 , 19 85 ) (fl us h l an gu ag e). The refo re, we are pre cl ud edfro m es ti m at in g p et it io ne r’s tra ve l ex pe ns es an d m eal s an d e nt ert ai nm en t ex pe ns es . W ith re sp ectto he r tr av el ex pe ns es pe ti ti on er t es ti fie d tha t s he ranJo y ce’s Tax Serv ic e fro m

he r ho m e an d tha t cl ie nt s wo ul d c om e to he r pr op erty to ha ve th ei r ta x re turn s p rep ared . Peti ti on er t es ti fie d tha t l iv in g i n h er n ei gh bo rh oo d was st res sf ul an d tha t s he fel t h aras se d b y he r cl ie nt s wh o wo ul d c al l h er atho m e at
an y ho ur . For the se reas on s p et it io ne r co nt en ds th atitwas n eces sa ry for he r to tra ve l “ jus t t o g etres t s o tha t * * * [sh e] cou ldfun ct io n.” She pro vi de d i nv oi ces fro m a Hol id ay

Inn , a car re nt al servi ce, an d acas in o. Pet it io ne r ha s fa il edto sh ow tha t h er trav el ex pe ns es were re la te d t o h er bu si ne ss . A tax pay er’s ch oi ce ab ou t wh ere t o l iv e is pe rs on al . Cf. Co m mis si on er v. Fl owe rs , 32 6 U.S. 4 65 , 47 3- 47 4 (1 94 6) (rea so ni ng th atco m m ut in g e xp en se s ar e no t d educ ti bl e b ecau se th e ta xp ay er m ak es a pe rs on al ch oi ce ab ou t wh ere t o l iv e). The refo re, p et it io ne r’s tra ve l fo r a g oo d n ig ht ’s res t was a pe rs on al ex pe ns e, no t a de du ct ib le bu si ne ss ex pe ns e. W ith re sp ectto he r m eal s an d e nt ert ai nm en t ex pe ns es pe ti ti on er t es ti fie d th atsh e fre qu en tl y

ate lu nc h o r di nn er wi th he r em pl oyees andth atsh e h os te d a- 9 -

[* 9] cat eredcli en t p arty . Peti ti on er p ro vi de d re cei pt s fr om res taur an ts an d c afes whe re s he co nt en ds sh e at e with h er em pl oyees. So m e o f th e rec ei pt s ar e to o fa in t to read ; o th ers are fr om

m eal s p ur ch as edat c as in os , so m e o f whi chare i n In di an a. Pet it io ne r pr ov id edno ev id en ce re ga rd in g acli en t p arty , othe r th antwo let te rs ad dr es se d t o h er cl ie nt s tha t re fer t o araffl e. Pet it io ne r ha s fa il edto est ab li sh th e sp eci fic bu si ne ss na tu re o f an y of h er m eal s an d e nt ert ai nm en t ex pe ns es . Res po nd en t p ro pe rly dis al lo wedde du ct io ns forpe ti ti on er’s trav el ex pe ns es an d m eal s an d e nt ert ai nm en t ex pe ns es as r ep orte d o n h er 2 00 9 F ed eral in co m e ta x return. B. Ren t o r Leas e o f Oth er Bu si ne ss Pro pe rty Expe ns es Pet it io ne r cl ai m s tha t s he is en ti tl edto a ren t o r le as e d educ ti on . Peti ti on er te st ifi edth atsh e u se d the fir stflo orof h er two- st ory res id en ce fo r Jo y ce’s Tax Serv ic e. Pet it io ne r at te m pt s t o d educ t h al f of

he r m ortg ag e p aym en t. Gen eral ly, expe ns es of m ai nt ai ni ng a ho us eh ol d, i nc lu di ng am ount s p ai d fo r ren t, wat er, u ti li ti es , andsi m il ar ex pe ns es , are n otde du ct ib le . Sec. 1 .26 2- 1( b) (3 ), In co m e Tax Reg s. If, h owe ve r, a p artof t he ho m e is us edas apl ace o f bu si ne ss , a co rres po nd in g p orti on of the expe ns es --as is pro pe rly attrib ut ab le to su chpl ace o f bu si ne ss --m ay

be de du ct ib le as abu si ne ss ex pe ns e, subjec t t o the rul es of s ect io n 28 0A. Id . A tax pay er m

us t p ro vi de th e Co urt wi th a ba si s t o d et erm in e wha t- 10 -

[* 10 ] po rti on of t he ex pe ns es was a ll oc ab le to hi s o r he r bu si ne ss . DeLim a v . Co m m is si on er, T.C. Mem o. 2 01 2- 29 1, at*2 1; cf. Adl er v . Comm is si on er, T.C. Mem o. 2 01 0- 47 , sl ip op . at 2 1 (f in di ng th atth e ta xp ay er fa il edto pro vi de a ba si s to de te rm in e wha t p orti on of h ou se ho ldut il it ie s was all oc ab le to hi s b us in es s) , aff’d p er cu ria m , 44 3 F ed . App x. 7 36 (3dCir . 20 11 ). If a t ax pa y er fa il s t o p ro vi de th e Co urt wi th ev id en ce o f th e ex te ntto whi chhe or s he us eda po rti on of the ho m e ex cl us iv el y , we can no t es ti m at e th e d educ ti bl e p orti on s o f he r expe ns es . See S am Gol db erg er, In c. v. Co m m is si on er, 8 8 T.C. 1 53 2, 1 55 6- 15 57 (19 87 ). Pet it io ne r is no t en ti tl edto a de du ct io n fo r th e b us in es s u se of h er h om e. A ta xp ay er m ay

cla im a de du ct io n fo r th e b us in es s u se of h is or h er h om e to th e ex te ntitis all oc ab le to a po rti on of adwel li ng un itwhi chis ex cl us iv el y us edona reg ul ar b as is as ( 1) th e p rin ci pa l p la ce o f bu si ne ss foran y tra de or b us in es s o f th e ta xp ay er o r (2 ) a p la ce o f bu si ne ss whi chis us edby pat ie nt s, cl ie 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 the no rm al co ur se of h is or h er trad e o r bu si ne ss . Sec. 2 80 A(c)(1 )(A) an d (B ). Pet it io ne r ha s p ro vi de d n o e vi de nc e sh owi ng th atth e fi rs t fl oo r of he r res id en ce was us edex cl us iv el y ona reg ul ar b as is fora bu si ne ss pu rp os e. Pet it io ne r is no t en ti tl edto a de du ct io n fo r th e b us in es s u se of h er h om e.- 11 -

[* 11 ] Res po nd en t p ro pe rly dis al lo wedpe ti ti on er’s ren t o r le as e o f ot he r bu si ne ss pr op erty ex pe ns es as r ep orte d o n h er 2 00 9 F ed eral in co m e ta x re tu rn . III. Gam

bl in g Lo ss es Pet it io ne r rep orte d i nc om e o f $1 7,6 93 fro m ga m bl in g wi nn in gs onhe r 20 09 Fed eral in co m e ta x re tu rn , bu t s he di d n otoff se t h er g am

bl in g wi nn in gs by any ga m bl in g l os s d educ ti on s. Pet it io ne r co nt en ds th atsh e in curredgam bl in g l os se s inex ces s o f $1 7,6 93
. Tax pa y ers who are n otinth e tr ad e o r bu si ne ss of g am bl in g andwho ch oo se to cal cu la te th ei r ta xabl e in co m e u si ng it em iz edde du ct io ns inli euof t he st an da rd de du ct io n m ay

de du ctga m

bl in g l os se s u nd er ce rta incir cum st an ces . Sect io n 16 5( d) pro vi de s tha t “ [l]os se s fr om wage rin g tran sa ct io ns sh al l b e al lo wedon ly to th e ex te ntof t he ga in s fr om su chtra ns act io ns ”. Res po nd en t d oe s n otdi sp ut e th at pe ti ti on er h ad$1 7,6 93 of g am bl in g g ai ns . Peti ti on er the refo re m us t p ro ve th atsh e ha d g am bl in g l os se s dur in g the y ear i n i ss ue . Tax pa y ers are re qu ire d t o m ai nt ai n “pe rm an en t b oo ks of a cco un t o r rec or ds * * * as are s uf

fic ie ntto est ab li sh th e am ountof g ro ss in co m e, de du ct io ns , cred it s, orothe r m at te rs requi redto be sh own by suc h p ers on inan y return o f su chtax or in fo rm at io n.” Sec. 1 .60 01 -1 (a), In co m e Tax Reg s. Inth e cas e o f ga m bl in g win ni ng s an d l os se s t ax pa y ers cansubs tant ia te th ei r in co m e an d d educ ti on s b y- 12 -

[* 12 ] m ai nt ai ni ng a co nt em po ran eo us lo g, s ee Sc ho ol er v . Comm is si on er, 6 8 T.C. 86 7, 8 71 (19 77 ), orby con si st en tl y us in g apl ay er’s car d wh ic h m on it or s g am bl in g act iv ity , see Lut z v . Comm is si on er, T.C. Mem o. 2 00 2- 89 . Man y tax pay ers do no t ke ep a de ta il edreco rdof the ir wa ge rin g wi nn in gs an d l os se s, b utwe do no t treat ta xp ay ers who cla im

to ha ve su st ai ne d wag eri ng lo ss es m or e fav or ab ly than o th er ta xp ay ers by allo win g ade du ct io n fo r wag eri ng lo ss es when th e ev id en ce i s in ad equa te . Sch oo le r v. C omm is si on er, 6 8 T.C. at87 1. Pet it io ne r pr ov id edrece ip ts sh owi ng cas h a dv an ces fro m Am eri st ar Eas t Ch ic ag o c as in o andHarrah ’s Jo li etCas in o Ho te l as well as abankst at em en t sh owi ng cas h a dv an ces fro m “ GCA Am eri st ar Eas t Ch ”. Cas h a dv an ces or ATM withd rawal s ator n ear alo cat io n g en eral ly are no t
su ffi ci en t t o p ro ve th atth e cas h was sp en t atth atlo cat io n o r fo r an y sp eci fic pu rp os e. See Lu tz v. Co m m is si on er, s li p o p. at16 (“ [T]he m ere f act * * * [tha t the tax pay ers m ad e cas h wi th dr awal s o r cre di t ca rdch arg es at the
cas in os ] do es no t s ub st an ti at e actua l l os se s o f th os e fu nd s o n g am bl in g.” ). W e ha ve us edth e Co ha n ru le to est im at e a t ax pa y er’s g am bl in g l os s d educ ti on s wh en th e ta xp ay er p ro vi de d b ot h b an k s ta te m en ts reco rd in g ATM wi th dr awal s ata cas in o andcred ib le tes ti m on y reg ard in g s pe ci fic de ta il s o f hi s p ract ic es reg ard in g- 13 -

[* 13 ] ATM withd rawal s an d h is ga m bl in g a ct iv it ie s. See Lam b v . Commis si on er, T.C. Mem o. 2 01 3- 15 5. Pet it io ne r di d n otpro vi de an y tes ti m on y

reg ard in g s pe ci fic de ta il s o f he r pr act ic es reg ard in g ATM wi th dr awal s o r he r ga m bl in g a ct iv it ie s. We are unabl e to de te rm in e wha t p orti on of p et it io ne r’s cas h wi th dr awal s wer e sp en t o n ga m bl in g. Pe ti ti on er i s n oten ti tl edto off se t h er g am

bl in g wi nn in gs with any ga m bl in g l os s d educ ti on s. IV. Pet it io ne r’s Met Life Paym en t Pet it io ne r rep orte d $ 23 ,05 5 o f So ci al Securit y di sabi li ty ben efi ts onhe r 20 09 Fed eral in co m e ta x re turn . Res po nd en t h as co nc ed edth atsh e rec ei ve d o nl y $1 0,2 27 of S oc ia l Se curity be ne fit s fo r ta x year 20 09 . Peti ti on er co nt en ds th atsh e is furth er en ti tl edeit he r to off se t h er So ci al Secu rit y

be ne fit s fo r ta x year 20 09 by th e am ou ntof t he Met Life paym en t o r to cla im a Sch edul e A de du ct io n re la ti ng to th e Me tLi fe p aym en t b ecau se “ itwas fi le d a s So ci al Securit y in co m e” fo r ta x year 20 09
. So ci al Secu rit y

be ne fit s m ay

be off se t o nl y by repaym en ts of o th er So ci al Secu rit y be ne fit s p rev io us ly recei ve d. Se c. 86 (d )(2 )(A); see als o B rady v. Co m m is si on er, T.C. Mem o. 2 01 3- 1, at*5 . Sect io n 8 6( d) (2 )(A) p ro vi de s tha t “ th e am ountof s oc ia l s ecu rit y be ne fit s re cei ve d dur in g any tax ab le y ear s ha ll be- 14 -

[* 14 ] reduc edby any

rep aym en t m ad e b y

th e ta xp ay er dur in g the tax ab le y ear o f a
so ci al sec ur ity

be ne fitpre vi ou sl y

rece iv edby the tax pa y er (wh ethe r orno t s uc h be ne fitwas re cei ve d dur in g the tax ab le y ear) .” Sect io n 8 6( d) (1 ) de fin es th e te rm

“ so ci al sec ur ity

be ne fit ” as “ any

am ou ntrece iv edby the tax pay er b y reas on of
en ti tl em en t t o- -(A) a m on th ly ben efi t u nd er t it le II o f th e So ci al Secu rity Act, o r (B) ati er 1 rai lro adret ire m en t b en efi t.” Be ne fit s re cei ve d fr om pri va te in su rers do
no t s at is fy

th is de fin it io n. Th eref

or e, pe ti ti on er wo ul d n otbe all owe d t o o ffs ethe r So ci al Secu rit y

be ne fit s wi th th e rep aym en t o f pr iv at e in su ran ce b en efi ts . See Brad y v. Co m mis si on er, T.C. Mem o. 2 01 3- 1. Mo reo ve r, whe n areci pi en t o f So ci al Secu rit y be ne fit s i s re qu ire d b y co nt ractto rei m

bu rs e a thi rdparty for t ax -fre e b en efi ts pre vi ou sl y rece iv ed , th e reci pi en t i s n oten ti tl edto a de du ct io n fo r th e rei m bu rs em en t. Id . at * 5- *6 . The
reco rdrefl ect s tha t the be ne fit s p et it io ne r rec ei ve d fr om Met Life were t ax free
. The refo re, p et it io ne r is no t en ti tl edto a Sch edul e A de du ct io n re la ti ng to th e Met Life paym en t. Pet it io ne r is no t en ti tl edto off se t h er So ci al Secu rit y

be ne fit s wi thth e Met Life paym en t o r to a Sch edul e A de du ct io n re lati ng to itfortax y ear 2 00 9.- 15 -

[* 15 ] V. Sect io n 6 66 2( a) Accu racy-Rel at edPen al ty Res po nd en t d et erm in edth atpe ti ti on er i s l iabl e fo r th e acc ur acy-rela te d pe na lty purs uantto sec ti on 66 62 (a). Sec ti on 66 62 (a) a dd s t o the tax requi redto be sh own onth e ta xp ay er’s return 2 0% o f an y un de rp aym en t at tri bu tabl e to , am on g ot he r th in gs , (1) ne gl ig en ce o r di sr eg ardof rul es or r eg ul at io ns withi n the m ean in g of sec ti on 66 62 (b )(1 ), or(2) an y subs tant ia l u nd ers ta te m en t o f in co m e ta x wi th in th e m ean in g o f se ct io n 6 66 2( b) (2 ). Onl y on e acc ur acy-rela te d p en al ty m ay be ap pl ie d wi th res pe ctto an y gi ve n p orti on of a n u nd erp aym en t, ev enif tha t p orti on is subjec t t o the pe na lty

onm or e th anon e o f th e g ro un ds setou t i n s ect io n 66 62 (b ). Sec. 1 .66 62 -2 (c), In co m e Tax Reg s. Res po nd en t cl ai m s tha t p et it io ne r is li ab le forth e se ct io n 6 66 2( a) p en al ty du e to ne gl ig en ce. Neg li ge nc e in cl ud es an y fai lu re t o m ak e a rea so nabl e at te m pt to co m pl y with the pro vi si on s o f th e in te rn al rev enue laws , to ex erci se du e car e, or to do whata reas on ab le an d p ru de ntpe rs on wou lddo un de r th e ci rcu m st an ces . Sec. 6 66 2( c); Neel y

v. Co m m is si on er, 8 5 T.C. 9 34 , 94 7 (1 98 5) ; s ec. 1 .66 62
- 3( b) (1 ), In co m e Tax Reg s. Neg li ge nc e al so in cl ud es an y fai lu re b y

a ta xp ay er t o ke ep ad equa te bo ok s an d re co rd s o r to subs tant iate it em s p ro pe rly. Sec. 1.6 66 2- 3( b) (1 ), In co m e Tax Reg s.- 16 -

[* 16 ] Pet it io ne r cre di bl y

tes ti fie d a t tria l an d p ro vi de d s om e d oc um en ta ti on reg ard in g h er Sc he du le C expe ns es , herga m bl in g l os se s, an d the Met Life pa ym en t. Pet it io ne r’s reco rd s, h owe ve r, were i ns uf fic ie ntto subs tant iate th e ex pe ns es rep orte d o n h er Sc he du le C orto est ab li sh th e g am bl in g l os se s s he cl ai m s s ho ul d o ffs ethe r ga m bl in g wi nn in gs , andhe r arg um en ts reg ard in g the Met Life paym en t wer e n otgro un de d i n the in te rn al rev enue laws
. Pet it io ne r th eref

or e is li ab le forth e acc ur acy-rela te d p en al ty unl es s s he can sh ow s he ha d re as on ab le cau se foran d a ct edingo odfai th reg ard in g the
un de rp aym en t. See sec . 66 64 (c)( 1) ; s ec. 1 .66 64 -4 (a), In co m e Tax Reg s. An im po rta ntfact orforde m on st rat in g re as on ab le cau se an d g oo d fa ith i s the ex te ntof th e ta xp ay er’s eff

ort t o d et erm in e th e p ro pe r ta x l iabi li ty. Sec. 1 .66 64 -4 (b )(1 ), In co m e Tax Reg s. Pet it io ne r, a tr ai ne d t ax return p rep arer , di d n otpro vi de an y ev id en ce re ga rd in g wh at , if an y , effo rt s he m ad e to de te rm in e h er p ro pe r ta x li ab il ity whensh e p rep aredhe r 20 09 Fed eral in co m e ta x re tu rn . Peti ti on er i s fam il iar with F ed eral in co m e ta x l aws an d re gu la ti on s; he r ex pe rie nc e, kn owl ed ge , an d trai ni ng weig h a ga in sthe r. See Br own v. Co m m is si on er, T.C. Mem o. 2 01 1- 83 , aff’d, 6 93 F.3d76 5 (7 th Cir . 20 12 ). Pet it io ne r ha s fa il edto sh ow tha t s he ha d
reas on ab le cau se foran d a ct edingo odfai th reg ard in g the un de rp aym en t.- 17 -

[* 17 ] Acco rd in gl y , pet it io ne r is li ab le forth e acc ur acy-rela te d p en al ty und er se ct io n 6 66 2( a) an d (b )(1 ). Any con te nt io ns we ha ve no t ad dr es se d are i rrel ev an t, m oo t, o r m eri tl es s. To re fle ctth e fo reg oi ng , Deci si on wil l b e en te red
un de r Ru le 15 5.