1Unless otherwise indicated, all section references are to

the Internal Revenue Code, and all Rule references are to the Tax

Court Rules of Practice and Procedure.

T.C. Summary Opinion 2008-109

UNITED STATES TAX COURT

MICHAEL RAY TOLLESON, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 15864-06S. Filed August 25, 2008. 

Michael Ray Tolleson, pro se.

Paul R. Zamolo and Jon Feldhammer (specially recognized), 

for respondent.

GOEKE, Judge: This case was heard pursuant to the

provisions of section 7463 of the Internal Revenue Code in effect

when the petition was filed.1 Pursuant to section 7463(b), the

decision to be entered is not reviewable by any other court, and
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2 The parties agreed to the allowable amounts of short-term

capital loss deductions.

this opinion shall not be treated as precedent for any other

case. 

Respondent determined deficiencies in petitioner’s Federal

income taxes of $12,832 and $9,171 for 2001 and 2002,

respectively. After concessions,2 the issue before the Court is

whether petitioner is entitled to business expense deductions for

an alleged independent architectural practice claimed on his

Schedules C, Profit or Loss From Business.

Background

At the time the petition was filed, petitioner was a

resident of California. 

Petitioner was employed full time by the firm of Richard

Pollack & Associates (Pollack), an architecture and interiordesign company, during 2001 and by WHL Architects Planners, Inc.

(WHL), during 2001 and 2002. Both firms issued to petitioner

Forms W-2, Wage and Tax Statement. Petitioner was occasionally

permitted to work from home, but Pollack and WHL provided him

with office space.

Petitioner included Schedules C with his 2001 and 2002

Federal income tax returns. Each Schedule C related to an

alleged architecture business with a listed address identical to

petitioner’s home address. On the Schedules C, petitioner
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claimed business expense deductions of $65,563 for 2001 and

$57,743 for 2002.

On May 25, 2006, respondent mailed to petitioner a statutory

notice of deficiency that disallowed petitioner’s claimed

business expense deductions for 2001 and 2002. Petitioner timely

petitioned this Court.

Discussion

Section 162(a) provides that “There shall be allowed as a

deduction all ordinary and necessary expenses paid or incurred

during the taxable year in carrying on any trade or business”. 

However, in order to be entitled to deduct business expenses on a

Schedule C, petitioner must prove that he was carrying on a trade

or business other than that of being an employee. See Weber v.

Commissioner, 103 T.C. 378, 386 (1994), affd. 60 F.3d 1104 (4th

Cir. 1995). Petitioner has not alleged or shown that section

7491(a) applies. Accordingly, petitioner bears the burden of

proving that he is entitled to the claimed business expense

deductions. See Rule 142(a); Welch v. Helvering, 290 U.S. 111,

115 (1933). 

Petitioner contends that during the years at issue he was

operating an independent architectural practice and the claimed

business expenses relate to this business. Petitioner contends

that he provided services for both firms as an independent
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contractor and that he elected employee status in lieu of

independent contractor status for personal accounting reasons. 

Whether a taxpayer was an independent contractor depends on

various factors such as: (1) The degree of control exercised by

the principal over the details of the work; (2) which party

invests in the facilities used in the work; (3) the opportunity

of the individual for profit or loss; (4) whether or not the

principal has the right to discharge the individual; (5) whether

the work is part of the principal’s regular business; (6) the

permanency of the relationship; and (7) the relationship the

parties believe they are creating. Weber v. Commissioner, supra

at 387.

Petitioner provided no evidence that any of these factors

weigh in favor of a finding that he worked for Pollack or WHL as

an independent contractor. To the contrary, the presidents of

both firms testified that he was a full-time employee during the

years at issue, and petitioner has provided no evidence to the

contrary. Therefore, we find that petitioner worked for Pollack

and WHL as an employee during 2001 and 2002, not as an

independent contractor.

Petitioner also argued that while he was working for Pollack

and WHL he operated his own separate business. Petitioner

claimed that during the years at issue he was continuously

developing plans for new houses and researching vacant lots in
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the surrounding locales in hopes of creating a base of

prospective properties to use in his independent practice. 

However, petitioner purchased no properties and completed no

services during 2001 or 2002. Petitioner made no showing that he

was actively seeking contracts during 2001 and 2002. 

Petitioner also claimed that he provided consulting services

to former students and took on interns during both years. 

However, petitioner could not provide any invoices, pay

statements, or other documentation to substantiate those claims. 

Petitioner’s only income from the years at issue was from his

work at both Pollack and WHL. See Owen v. Commissioner, 23 T.C.

377 (1954). 

The only documentation petitioner provided concerning his

independent practice during 2001 and 2002 were models of

theoretical projects and ideas, and the only invoices petitioner

could provide regarding services rendered from his independent

practice were from subsequent tax years not at issue. While it

is possible that some of petitioner’s expenses may qualify as

startup expenditures deductible under section 195, there is no

evidence in the record that petitioner began a trade or business

during the years at issue. 

Accordingly, we find that petitioner was not carrying on a

trade or business as an independent architect during 2001 or

2002. Therefore, we need not reach the question of whether the
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associated expenses would qualify for a deduction under section

162.

To reflect the foregoing,

Decision will be entered

under Rule 155.