1 Unless otherwise indicated, all subsequent section

references are to the Internal Revenue Code in effect for the

year in issue, and all Rule references are to the Tax Court Rules

of Practice and Procedure.

T.C. Summary Opinion 2008-132

UNITED STATES TAX COURT

EUGENIA GONZALEZ, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 14909-04S. Filed October 15, 2008.

Eugenia Gonzalez, pro se.

Jeffrey D. Heiderscheit, for respondent.

VASQUEZ, 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 Respondent concedes that there is no self-employment tax

due for tax year 2002, and that petitioner is entitled to deduct

$218.34 for music used as a group exercise instructor. 

this opinion shall not be treated as precedent for any other

case.

Respondent determined a $5,795 deficiency in petitioner’s

Federal income tax for 2002 and a $1,159 accuracy-related penalty

under section 6662(a).

After concessions,2 the issues for decision are: (1) 

Whether petitioner had allowable business expense deductions for

tax year 2002; and (2) whether petitioner is liable for the

accuracy-related penalty under section 6662(a) for tax year 2002.

Background

Some of the facts have been stipulated and are so found. 

The stipulation of facts and the attached exhibits are

incorporated herein by this reference. At the time she filed the

petition, petitioner resided in Texas.

During 2002 petitioner was employed by both Raytheon Co.

(Raytheon) and YMCA of Greater El Paso (YMCA). In 2002

petitioner reported wages from both Raytheon and YMCA on her

Federal income tax return. For the YMCA she facilitated group

exercise classes on an average of three nights per week. As a

group exercise instructor she was not reimbursed by the YMCA for

mileage, music, or clothing. Petitioner therefore purchased her

own clothing, music, and drove her personally owned vehicle to
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3 During tax year 2002 petitioner worked at three different

YMCA work sites in El Paso, Texas. The distance between

petitioner’s Raytheon work location and the YMCA work locations

was 7.5 miles, 16.5 miles, and 5.1 miles. 

4 This amount differs from the amounts claimed at trial. 

At trial petitioner claimed $2,910.95 in car and truck expenses,

including $776.72 in gasoline, $1,200 in maintenance, and $934.23

in auto insurance. 

5 Petitioner acknowledges that this amount is inaccurate

and should have been $349. 

6 Petitioner acknowledges that this amount is inaccurate

and should have been $658.74.

and from the YMCA for the aerobics classes. The distance between

her jobs at Raytheon and the YMCA averaged 9.7 miles.3 In

addition to transportation between work sites, petitioner used

her vehicle for personal purposes. 

Petitioner also worked as a Mary Kay consultant. As a Mary

Kay consultant she purchased cosmetics, attended meetings,

downloaded information and brochures, and performed one-on-one

skin care classes. She conducted this business out of her home. 

For tax year 2002 petitioner reported $550 as cost of goods

sold on her Schedule C, Profit or Loss From Business, associated

with her Mary Kay consulting; however, she reported no sales and

no income. She deducted $3,016 in car and truck expenses,4 $563

for homeowners insurance,5 $1,850 in interest expenses,6 $1,496 in
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7 Petitioner acknowledges that this amount is inaccurate

and should have been $548.44.

8 The claimed amount for utilities includes $353.34 for

water, $144.54 for gas, $463.33 for telephone, $386.87 for

electricity, and $964.36 for cell phone. 

9 In the notice of deficiency, respondent set forth selfemployment tax of $3,920 based on a $27,746 increase in selfemployment income. Respondent concedes that petitioner had no

self-employment income and therefore owes no self-employment tax. 

At trial respondent attempted to raise issues regarding

filing status, capital loss, and receipt of rental income. These

issues were not referenced in the statutory notice of deficiency

nor did respondent assert a claim for an increased deficiency

pursuant to sec. 6214(a) and Rules 36 and 41. We find that these

issues are not before the Court. See Foil v. Commissioner, 92

T.C. 376, 418 (1989), affd. per curiam 920 F.2d 1196 (5th Cir.

1990); Markwardt v. Commissioner, 64 T.C. 989, 997 (1975).

10 Petitioner does not contend that sec. 7491(a) applies to

this case. Sec. 7491(a) is in any event inapplicable because of

petitioner’s failure to comply with the substantiation

requirements of sec. 7491(a)(2). 

office expenses, $1,409 in repairs and maintenance,7 $2,942 for

supplies, and $2,322 for utilities.8 

In the notice of deficiency, respondent disallowed all of

petitioner’s claimed Schedule C deductions due to a lack of

substantiation.9

Discussion

Petitioner has neither claimed nor shown that she satisfied

the requirements of section 7491(a) to shift the burden of proof

to respondent with regard to any factual issue.10 Accordingly,

petitioner bears the burden of proof. See Rule 142(a). 
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Business expenses are deductible from gross income pursuant

to section 162. Deductions are a matter of legislative grace,

and the taxpayer has the burden of showing that he or she is

entitled to any deduction claimed. Rule 142(a); INDOPCO, Inc. v.

Commissioner, 503 U.S. 79, 84 (1992); Welch v. Helvering, 290

U.S. 111, 115 (1933). During 2002 petitioner maintained a

business as a Mary Kay consultant and was employed as a group

exercise instructor. However, petitioner failed to meet her

burden of proving that she is entitled to claim deductions in

excess of those amounts conceded by respondent.

Home Office Expenses

Section 280A(a) provides that no deduction otherwise

allowable shall be allowed with respect to the business use of a

taxpayer’s residence. Section 280A(c) provides exceptions to the

general rule of section 280A(a) and requires that expenses be

allocated between the business and personal use of the dwelling. 

Accordingly, in order to qualify under section 280A(c), a portion

of petitioner’s dwelling must be exclusively used on a regular

basis as the principal place of business for her trade or

business. See Hamacher v. Commissioner, 94 T.C. 348, 353 (1990). 

Petitioner has not established that a portion of her home was

used exclusively on a regular basis as the principal place of

business for her Mary Kay consulting. Furthermore, section

280A(c)(5) limits the home office deduction to the amount of
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gross income received from the business (reduced by deductions

otherwise allowable). Petitioner reported no income from her

Mary Kay business. Accordingly, she is not entitled to any home

office deductions. Id.

Petitioner has claimed business expense deductions for

office expenses, repairs, maintenance, supplies, utilities, and

other expenses. Specifically petitioner has indicated that the

$2,322 she claimed in utilities expenses included water, gas,

telephone, electric, cell phone, and Internet access fees. 

For expenses that include both personal and business uses,

the taxpayer must show that the total expense was greater than

what would have been made for personal use only, and if it is

not, then the expense is entirely nondeductible. See secs.

162(a), 274(d), 280F(d)(4)(A)(v); Sutter v. Commissioner, 21 T.C.

170, 173-174 (1953). Petitioner has not established that she

made expenditures and she has not substantiated either her total

usage or the amount of business use.

Section 274(d)(4) provides that no deduction shall be

allowed with respect to any listed property (as defined under

section 280F(d)(4)) without strict substantiation. Listed

property under section 280F(d)(4) includes but is not limited to

cellular phones, passenger automobiles, and computer equipment. 

See sec. 280F(d)(4)(A)(i), (iv), (v). Pursuant to section

274(d)(4), petitioner must substantiate the amount of total use
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and the amount of business use, and only the portion of the

expense that petitioner has substantiated to be ordinary and

necessary business expense is deductible. See secs. 162(a),

274(d)(4), 280F(d)(4)(A); sec. 1.274-5T(b)(6)(i)(B), Temporary

Income Tax Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985). Petitioner

has not substantiated either total usage or amounts of business

use for her cellular phone, or demonstrated that the expenses

were greater than they would have been had there been no business

use.

For utility expenses that are not listed items under section

274(d)(4), the strict substantiation rules of section 274 do not

apply, and the Court may estimate the business portion of a

utility expense. Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d

Cir. 1930); Farran v. Commissioner, T.C. Memo. 2007-151;

Pistoresi v. Commissioner, T.C. Memo. 1999-39. However,

petitioner still must present evidence supporting the amount of

the expense and the portion attributable to a business purpose to

allow the Court to apply the Cohan rule. Cohan v. Commissioner,

supra; Davis v. Commissioner, T.C. Memo. 2006-272. Although

petitioner did in fact present copies of her water, gas, and

electric statements, there is nothing in the record that would

indicate what portions of these expenses are attributable to

ordinary and necessary business purposes, or what portions are

attributable to personal use. We therefore find that petitioner
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has not adequately substantiated these expenses and they are

personal and nondeductible. 

Car and Truck Expenses

Automobile expenses are not deductible as a business expense

and will be disallowed in full unless the taxpayer satisfies the

substantiation requirements under section 274(d). Substantiation

includes adequate records or other corroborating evidence of the

amount of the expense, the time and place of the automobile’s

use, and the business purpose of its use. See Sanford v.

Commissioner, 50 T.C. 823, 827-828 (1968), affd. 412 F.2d 201 (2d

Cir. 1969); Maher v. Commissioner, T.C. Memo. 2003-85.

Respondent concedes that petitioner is entitled to a

deduction for the cost of driving between her job at Raytheon and

her aerobics instruction classes at the YMCA. The average

distance between petitioner’s places of employment is 9.7 miles,

and petitioner traveled between workplaces 3 times a week during

tax year 2002, for a total of 1,513.2 miles. As such respondent

concedes that petitioner may properly claim a deduction of

$552.32 for mileage on Schedule A as a miscellaneous itemized

deduction. Petitioner did not, however, substantiate that she

incurred any mileage in pursuance of her Mary Kay consulting

activities. We therefore find that petitioner has not adequately

substantiated these expenses and they are nondeductible.
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11 Respondent concedes that petitioner is entitled to

deduct $218.34 for music used as a group exercise instructor for

the YMCA.

12 Petitioner believes that it is through her appearance

that she is able to bring them (YMCA) a profit. 

Fitness-Related Expenses

Petitioner has provided receipts that she claims represent

deductible business expenses associated with her work as a

fitness instructor. The receipts include expenses for music,11

clothing, laundry, and hairstyling. Petitioner argues that these

expenses should be deductible because she was required to be

“presentable”12 during the course of her aerobics instruction. 

Clothing is deductible as a business expense only if it is

required for the taxpayer’s employment, unsuitable for general

wear, and not worn for personal use. See Hynes v. Commissioner,

74 T.C. 1266, 1290 (1980); Yeomans v. Commissioner, 30 T.C. 757,

767 (1958). The determination of suitability for general use is

an objective measure and does not rely on whether the taxpayer

actually used the items in general use. Pevsner v. Commissioner,

628 F.2d 467 (5th Cir. 1980), revg. T.C. Memo. 1979-311. Such

costs are not deductible even when it has been shown that the

particular clothes would not have been purchased but for the

employment. Stiner v. United States, 524 F.2d 640 (10th Cir.

1975); Donnelly v. Commissioner, 262 F.2d 411 (2d Cir. 1959),

affg. 28 T.C. 1278 (1957); Hynes v. Commissioner, supra at 1290. 
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Clothing and shoes purchased for use while exercising may be used

in a variety of other settings and therefore are generally not a

deductible expense. See Mella v. Commissioner, T.C. Memo. 1986-

594. Further expenses incurred for maintenance of nondeductible

clothing are also nondeductible. See, e.g., Pevsner v.

Commissioner, supra. 

Hairstyling and grooming expenses are generally considered

nondeductible personal expenses. See Hynes v. Commissioner,

supra at 1290; Boltinghouse v. Commissioner, T.C. Memo. 2007-324.

Like clothing expenses, deductions for grooming expenses are

limited to those that are considered unsuitable for general wear. 

See Genck v. Commissioner, T.C. Memo. 1998-105. Petitioner has

not substantiated that her clothing or hairstyling were required

for the fitness activities, or that they were unsuitable for

general use. 

Accuracy-Related Penalty

Section 7491(c) provides that the Commissioner will bear the

burden of production with respect to the liability of any

individual for additions to tax and penalties. “The

Commissioner’s burden of production under section 7491(c) is to

produce evidence that it is appropriate to impose the relevant

penalty, addition to tax, or additional amount”. Swain v.

Commissioner, 118 T.C. 358, 363 (2002); see also Higbee v.

Commissioner, 116 T.C. 438, 446 (2001). Once the Commissioner
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13 Sec. 6662(d)(1)(A) is not applicable in this case due to

respondent’s concession that petitioner had no self-employment

income or self-employment tax, thereby reducing the deficiency by

$3,920. 

has done so, the taxpayer must come forward with evidence

sufficient to persuade a Court that the Commissioner’s

determination is incorrect. See Higbee v. Commissioner, supra at

446.

Pursuant to section 6662(a), a taxpayer may be liable for a

penalty of 20 percent on the portion of an underpayment of tax

attributable to negligence or disregard of rules or regulations.13

See sec. 6662(b)(1). A taxpayer is negligent when he or she

failed “‘to do what a reasonable and ordinarily prudent person

would do under the circumstances.’” Korshin v. Commissioner, 91

F.3d 670, 672 (4th Cir. 1996) (quoting Schrum v. Commissioner, 33

F.3d 426, 437 (4th Cir. 1994), affg. in part, vacating in part

and remanding T.C. Memo. 1993-124), affg. T.C. Memo. 1995-46. 

Negligence includes the failure to make a reasonable attempt to

comply with the provisions of the Internal Revenue Code and also

includes any failure to keep adequate books and records or to

substantiate items properly. See sec. 6662(c); sec. 1.6662-

3(b)(1), Income Tax Regs. 

A taxpayer, however, may avoid the application of the

accuracy-related penalty by proving that he or she acted with

reasonable cause and in good faith. See sec. 6664(c). Whether a
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taxpayer acted with reasonable cause and in good faith depends

upon all the pertinent facts and circumstances (and, most

importantly, the extent to which he or she attempted to assess

the proper tax liability). See Neely v. Commissioner, 85 T.C.

934 (1985); Stubblefield v. Commissioner, T.C. Memo. 1996-537;

sec. 1.6664-4(b)(1), Income Tax Regs. 

Petitioner failed to maintain adequate records relating to

claimed business expenses. Petitioner knew or should have known

at all times that the claimed expenses were personal expenses and

not deductible business expenses. Petitioner argues that she

should be excused from the accuracy-related penalties because she

relied on her tax return preparer. Reliance on a return preparer

may relieve a taxpayer from the accuracy-related penalty where

the taxpayer’s reliance is reasonable. Freytag v. Commissioner,

89 T.C. 849, 888 (1987), affd. 904 F.2d 1011 (5th Cir. 1990),

affd. 501 U.S. 868 (1991). However, a taxpayer’s reliance must

be in good faith and demonstrably reasonable. Ewing v.

Commissioner, 91 T.C. 396, 423 (1988), affd. without published

opinion 940 F.2d 1534 (9th Cir. 1991); Freytag v. Commissioner,

supra at 888-889. 

The ultimate responsibility for a correct return lies with

the taxpayer, who must furnish the necessary information to the

agent who prepared the return. Enoch v. Commissioner, 57 T.C.

781, 802 (1972). In other words, reliance upon expert advice
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will not exculpate a taxpayer who supplies the return preparer

with incomplete or inaccurate information. Lester Lumber Co. v.

Commissioner, 14 T.C. 255, 263 (1950). Petitioner’s reliance on

the advice of her tax return preparer was not reasonable. 

Petitioner provided information to the preparer, and she knew, or

should have known that the amounts entered on the return were not

accurate. Reliance on a preparer is not reasonable where even a

cursory review of the return would reveal inaccurate entries. 

See Pratt v. Commissioner, T.C. Memo. 2002-279. Petitioner

failed to establish that she had reasonable cause or acted in

good faith for the year at issue. 

Respondent has shown that petitioner has failed to keep

adequate books and records or to properly substantiate the items

in question. Accordingly, we conclude that respondent has

produced sufficient evidence to show that the section 6662(a)

accuracy-related penalty is appropriate, and petitioner has not

proven that her negligence was due to reasonable cause. 

Petitioner is therefore liable for the section 6662(a) accuracyrelated penalty.

In reaching our holdings herein, we have considered all

arguments made by the parties, and to the extent not mentioned

above, we conclude they are irrelevant or without merit.
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To reflect the foregoing,

Decision will be entered

under Rule 155.