T.C. M em o . 2 0 2 0 -1 1 9

UNITED STATES TAX COURT

ALKA SHAM , Pet i t io n er v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 1 0 5 31 -1 7
. Fi l edAu gu s t 1 2 , 2 0 2 0
.

In 2 0 1 0 P was u n em

p l o y edaft er l eav i n g wo rki n th e i n v es t m en tm an ag em en t fi el dan dex p eri en ced m ed i cal p ro b l em s req u iri n g treat m en t . In2 0 1 1 P b ecam e an i n d ep en d en tb u s i n es s co n s u l tan ti n th e m ed i cal i n du s try . Fro m 2 0 11 th ro u g h p art o f 2 0 1 5 , P was ret ai nedb y

an an es t h es i ol o gi s tt o ex pan d h is p ract i ce an d p erfo rm b as i c b u s in es s m an ag em en t . P d i dn o t accu rat el y rep o rto r m ai n t ai n reco rd s o f h er g ro s s recei p t s . P fi l edl at e h er i n co m e t ax retu rn s fo r th e y ears 2 0 1 0 th ro ug h 2 0 1 5 . Ontho s e ret u rn s P cl ai m eds i g n i fi can tm ed i cal ex p en s e d edu ct i o n s an do th er m i s cel l an eo u s d edu ct i o n s o n Sch edul es A, “ It em i zedDeduct i o n s”, o f h er ret u rn s , s o m e o f wh i ch s he co u l dn o t s ub s t an t i at e. P al s o cl ai m edb u s i nes s d educt i o ns o n Sch edu les C, “ Pro fi to r Lo s s Fro m

Bu s i n es s”, o f h er ret u rn s fo r t ax y ears 2 0 1 1 th ro ug h 2 0 15 th ats h e co u l dn o ts ub s t an t i at e. P d i d n o t rep o rt a refu n do f St at e t ax o n h er ret u rn fo r 2 0 1 4
.- 2
-

[* 2 ] By

a s t atu t o ry

n ot i ce o f d efi ci en cy

(“ SNOD”) i ss u ed i n 2 0 1 7 , R d et erm i nedthatP d idn o trep o rtal l o f h er i n co m e an d t h ats o m e o f h er cl ai m edd edu ct i o n s s h o u l db e d i s al l o wed . R al s o d et erm i n edthat P i s l i ab l e fo r accu racy -rel at edp en al ti es fo r t h e y ears 2 0 1 0 th ro u g h 2 0 1 3 an d ad d i t i o n s t o t ax fo r th e y ears 2 0 13 th ro ug h 2 0 15
. Hel d : P fai l edt o i n cl u de cert ai n am o u n t s i n g ro s s i n co m e t h at s h o u l d h av e b een rep o rt edo n h er t ax retu rn s . Hel d , fu rt h er, wi th few ex cep ti o ns , P fai l ed t o s ub s t an t i at e h er en t i t l em en t t o d edu ct i o n s fo r m ed i cal ex p en ses an db u s i n es s ex p en s es b ey o n dth o s e R al read y

al l o wedi n th e SNOD o r co n ced edato r aft er tri al
. Hel d , fu rt h er, P i s l i ab le fo r accu racy -rel at edp en al t i es fo r t h e y ears 2 0 1 0 th ro u g h 2 0 1 3 an dad d i t i o n s t o t ax fo r t he y ears 2 0 1 3 th ro ug h 2 0 15
.
Al k a Sh am , fo r h ers el f. Ch ri st o p h er D. Dav i s , fo r res p o n den t . CONTENTS I. FINDINGS OF FACT
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 A. Back g ro u n d
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 B. Un em

pl oym en ti n 2 0 1 0
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 C. Sel f-em

pl o ym en ti n 2 0 1 1 -1 5
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 D. Ap art m en t1 6 A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 E. Dr. Ku kreja’ s fi n an ces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 F. Sel f-em

pl o ym en ti n co m e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 G. Sel f-em

pl o ym en tex p en s es . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4- 3
-

[* 3 ] 1
. Th e cl ai m edex p en s e d educt i o n s g en eral ly
. . . . . . . . . . . . . . . 1 4

2
. Trav el ex pen s es . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6
a. Car an d tru ck ex pen s es . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 b
. Lo cal tran sp o rt at i o n . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 7 c. Trav el fo r m ed i cal co n feren ces . . . . . . . . . . . . . . . . . . . 1 7 d
. Oth er t rav el
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 8 3
. M eal s an d en t ert ai nm en t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9 4
. Ex p en s es p ai db y

Dr. Ku kreja
. . . . . . . . . . . . . . . . . . . . . . . . . 2 0 5
. Rei m

b u rs edex pen s es . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1 H. M ed i cal ex p en s es . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2 1
. Dedu ct i b l e ex p en s es . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2 2
. Rei m

b u rs em en t s fro m

h eal th i n s u ran ce . . . . . . . . . . . . . . . . . 2 6
a. 2 01 0
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 6 b
. 2 01 1 -1 3
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 8 c. 2 01 4 -1 5
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 9 I. St at e i n co m e t ax refu n d
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 9 J
. Tax ab l e i n t eres tan dd i v i d en d s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 0 K. Ch ari t ab l e co n tri b u t i o n s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 0 L. Tax retu rn s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1 M
. Ex am i n at i o n an d SNOD
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 6 II. OPINION
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 7 A. Ap p li cab l e l eg al p ri n ci p l es . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 7 1
. Bu rd en o f p ro o f
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 7 2
. Reco rd -k eep i n g . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 0 B. In co m e i s su es . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2 1
. Sch edu l e C i n co m e fo r 2 0 1 4
. . . . . . . . . . . . . . . . . . . . . . . . . . 4 2- 4
-

[* 4 ] 2
. St at e t ax refu n d
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 5

3
. In t eres tan dd i v i d en d s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 7 4
. Cap i t al gai n / l o s s fo r 2 0 1 4 an d2 0 1 5
. . . . . . . . . . . . . . . . . . . . 4 7 C. 2 01 0 Sch edu l e A m i s cel l an eo u s ex p en s es . . . . . . . . . . . . . . . . . . . . 4 8 D. Sch edu l e A i t em i zedd edu ct i on s . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 0 1
. M ed i cal ex p en s es . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 0
a. M ed i cal ex p en s es g en eral l y . . . . . . . . . . . . . . . . . . . . . 5 0 b
. Sel f-em

p l o y edh eal th i n s u ran ce ex p en s e . . . . . . . . . . . 5 1 c. Un rei m

b u rs edi t em izedd edu ct i bl e m ed i cal ex p en s es . 5 2 d
. Su m

m ary o f d edu ct i bl e m ed i cal ex p en ses . . . . . . . . . . 5 4 2
. Ch ari t ab l e co n tri b u t i o n s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5 E. Sch edu l e C ex pen s es . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 8 1
. Ren t/ l eas e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 8 2
. Dep reci at i o n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 9 3
. Offi ce ex pen s e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 0 4
. Ut i l i t i es . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1 5
. Car/ tru ck
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1 6
. Trav el
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3 7
. Oth er . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 4
a. “ Lo cal tran s p o rt ”
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 4 b
. “ Du es an ds ub s cri p t i o n s ”
. . . . . . . . . . . . . . . . . . . . . . . 6 5 c. “ IT an dt ech n ol o g y ”
. . . . . . . . . . . . . . . . . . . . . . . . . . . 6 6 d
. “ Tel ep h o n e an di n t ern et ”
. . . . . . . . . . . . . . . . . . . . . . . 6 6 e. “ Bu s in es s res earch an des t ab l i s h m en t”
. . . . . . . . . . . . . 6 7 f. “ Pro fes s i o n al d ev el op m en t ”, “ co n feren ces ”, an d “ co n t i n u in g edu cat i o n ”
. . . . . . . . . . . . . . . . . . . . . . . . . 6 7 g . “ M eal s an den t ert ai n m en t ”
. . . . . . . . . . . . . . . . . . . . . . 6 9 h
. “ Ou t si d e/p ro fes s io n al s erv i ces ”
. . . . . . . . . . . . . . . . . . 7 0 i
. “ Pro m o t i o n ” an d“ g i ft s ”
. . . . . . . . . . . . . . . . . . . . . . . . 7 1- 5
-

[* 5 ] F. Pen al t ies an d ad d i t i o n s t o t ax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1

1
. Ad d it i on s t o t ax u n der s ect i o n 6 6 5 1 (a)(1 ) an d(2 )
. . . . . . . . . 7 1 2
. Ad d it i on t o t ax u n d er s ect i o n 6 6 5 4
. . . . . . . . . . . . . . . . . . . . . 7 6 3
. Accu racy -rel at edp en al ty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 7 Co n cl u s i o n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1 Ap p en d ix A: In co m e i t em s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2 Ap p en d ix B: Dedu ct i on s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 7

M EM ORANDUM FINDINGS OF FACT AND OPINION GUSTAFSON, Jud ge: Th e In t ern al Rev enu e Serv i ce (“ IRS”) i s s uedt o p et i t i o n er, Al k a Sh am , a s t atu t o ry n o t i ce o f d efi ci en cy

(“ SNOD”) p u rs u an tt o
s ect i on 6 2 1 2 1 o n Feb ru ary 1 7 , 2 0 1 7 , d et erm in i ng d efi ci en ci es i n M s . Sh am ’ s Fed eral i nco m e t ax (p l us p en al t i es an dad d i t i o ns t o t ax ) fo r t h e y ears 2 0 1 0 th ro u g h 2 0 1 5 , as fo l l o ws :

1 Un l es s o th erwi s e i nd i cat ed , al l ci t at i o ns o f s ect i on s refer t o th e In tern al Rev enu e Co de o f 1 98 6 (2 6 U.S.C.) i n effect atal l rel ev an tt i m es , an dal l ci t at i o n s o f Ru les refer t o the Tax Co u rtRu l es o f Pract i ce an d Pro cedu re.- 6
- Pen al ty Ad d i ti o n s t o t ax Year Defi ci en cy Sec. 66 6 2 Sec.

66 5 1 (a)(1 ) Sec.

66 5 1 (a)(2 ) Sec.

6 65 4 2 01 0 $ 1 4 ,8 0 4 $ 2 ,9 6 1 --- --- --- 2 01 1 1 7 ,7 1 6 3 ,5 4 3 --- --- --- 2 01 2 1 8 ,7 4 9 3 ,7 5 0 --- --- --- 2 01 3 2 1 ,5 2 0 4 ,3 0 4 $ 9 69 --- --- 2 01 4 5 4 ,9 7 9 --- 1 2 ,3 70 ( 1 ) 2 $9 8 7 2 01 5 2 1 ,4 3 6 --- 4 ,8 23 ( 1 ) 3 86

1 To b e d et erm i n ed
. 2 Befo re t ri al , the Co m

m is s i o n er co n ced edth e s ect i o n 6 6 5 4 ad d i ti o n t o t ax fo r 2 0 1 4
. M s . Sh am

fi l eda t i m el y

p et i t i o n u n d er s ect i o n 6 2 1 3 (a) fo r red et erm in at i o n o f t h e d efi ci en ci es , p en al t ies , an d ad di t i o n s t o t ax . Aft er th e p art i es ’ co n ces s io n s o f
v ari o u s i s s u es , we m

u s td eci d e: the am o u n to f M s . Sh am ’ s i n co m e fo r t h e y ear 2 0 1 4 , wh et h er s h e i s en t i t l edt o cert ai n d edu ct i o n s s h e cl ai m edfo r t h e y ears 2 0 1 0 th ro u g h 2 0 1 5 , an dwh eth er s h e i s l i ab l e fo r th e p en al t i es an d ad di t i o n s t o t ax d et erm i n edb y

the IRS (wi th th e ex cep t i o n o f t h e s ect io n 6 6 5 4 ad d i t i o n t o t ax fo r 2 0 1 4 , wh i ch was co n ced ed ). W e up h o l dth e IRS’ s ad ju s tm en t s i n l arg e p art , an d
we m o s t l y

d en y th e ad di t i o n al d edu ct i o n s th atM s . Sh am cl ai m s . W e uph o l dth e ad d it i o n s t o t ax an dth e i m p o s it i o n o f t h e accu racy -rel at edp en al t i es u n der s ect i o n 6 6 6 2
. [* 6 ]- 7
-

[* 7 ] Onth e ev i d en ce b efo re u s , an d em p l o y i n g th e b u rd en -o f-p ro o f p ri n ci p l es s et
o u tb el o w, we fi n d t h e fo l l o wi n g fact s . I. FINDINGS OF FACT A. Back g ro u n d M s . Sh am

h as two m as t er’ s d eg rees . Sh e was an i n v es t m en tm an ag er fo r
s ev eral y ears , m an ag i n g th ree p o rt fo l io s . B. Un em

pl oym en ti n 2 0 1 0 In 2 0 0 9 M s . Sh am hada d i s p u te wi th h er t h en em p l o y er th atp reci p i t at eda
s eri ou s i l l n es s . M s . Sh am l eftwo rk fo r t h atem

p l o y er i n 2 0 0 9 an dh ad m ajo r
s u rg ery i n 2 0 1 0. Sh e h adm an y

m ed i cal ap p o i n t m en ts i n 2 0 10 an do ft en u s eda t ax i o r p ub l i c t ran si t t o trav el t o an dfro m h er ap p o i n t m en t s . Th ats am e y ear s h e p ai da l awy er $ 6 ,1 00 t o n eg o t i at e a s et tl em en twi th h er fo rm er em p l o y er an d
ev en tu al l y

reach edan ag reem en t , p u rs u an t t o wh i ch s h e rem ai n edath om e,
u n wo u ndp o s i ti o n s i n th e p ort fo l i o s s h e m an ag ed fo r h er fo rm er em p l o y er, an d
co l l ect ed$ 1 3 6 , 1 5 4 i n s et tl em en to f a d i s p u t e th atreq ui redh er fo rm er em pl o y er t o
co m p en s at e h er “ l i ke an ex ecu t i v e” du ri n g t h att i m e. Al s o i n 2 0 10 M s . Sh am p ai d a d i fferen tl aw fi rm

a ret ai n er o f $ 1 ,2 5 0 t o rep res en t h er i n a m at t er en t i t l edM H Res id en ti al I, LLC v
. Ro b ertHan ey , Al k a Sh am , wh i ch d id n o t p ert ai n t o h er d i s p u t e wi th h er fo rm er em p l o y er.- 8
-

[* 8 ] Du ri n g 2 0 1 0 M s . Sh am res i d edatan ap art m en ti n New Yo rk , New Yo rk , i n
a res i den t i al b u i l d i ng kn o wn as th e M an h at t an Ho u s e. M s . Sh am

co l l ect edu nem

p l o ym en t b en efi ts fro m th e St at e o f New Yo rkata rat e o f $ 3 5 4 p er weekfro m Decem b er 2 0 0 9 th ro u g h J an u ary 2 0 1 1
. In2 0 1 0 th o s e b en efi t s t o t al ed$ 1 8 ,4 4 0 , wh i ch s h e rep o rt edo n h er 2 0 1 0 t ax retu rn . W e fi n dth at M s . Sh am

was i n fact u n em

p l oy edfo r al l o f 2 0 10
. C. Sel f-em

pl o ym en ti n 2 0 1 1 -1 5 In 2 0 1 0 M s . Sh am ex p eri en cedm ed i cal p ro b lem s t hatcau s edh er t o s eek
em pl o y m en ti n a n ew fi el d. Hav i ng h ads i gn i fi can tex peri en ce wi th th e h eal th care i ndu s try , s h e b eg an t o wo rkas a s el f-em p l oy edb u s i n es s co n s ul t an tfo r Dr. Nav rajan Ku kreja, an an es th es i o l o g i s twi th wh om s h e h ada 1 5-y ear p ers o n al rel at i o n s h i p . Dr. Kukreja d idb u s i n es s th ro ug h th ree en t i t i es --An es thes i o lo g y Co n s u l t an t s , LLC, Peri o p erat i ve Co n s u l t an ts , LLC, an dSM KM In v es t m en t s , LLC--t o wh i ch we s o m et i m es refer as Dr. Ku kreja’ s “ en t i t i es ”. Dr. Ku kreja’ s
m ed i cal b u s i n es s was l i m it edt o an es th es i o l o g y . In h er wo rkfo r Dr. Ku kreja, M s . Sh am was t o n eg o t i at e co n tract s b y wh i ch th e en t i t i es wo u l dp ro v i d e an es th es i o l o g y s erv i ces t o “ am

b u l at o ry s u rg i cal
cen t ers ” i n New J ers ey . Dr. Kukreja en g ag edh er t o ex p an di n t o th e u np en et rat ed p art s o f t h e New J ers ey

an dNew Yo rkm ark et s , b u t n o b u s i n es s ev er m at eri al i zed- 9
-

[* 9 ] th ere. M s . Sh am

al s o fu n ct i on edt o s o m e ex t en tas a b us i n es s m an ag er fo r Dr. Ku kreja an dh i s en t i t i es . Fro m 2 0 1 1 t o 2 0 1 5 Dr. Ku kreja (t h ro u g h h i s en t i t i es )
was M s . Sh am ’ s o n ly

p ay i n g cl i en t . M s . Sh am d i dn o ti d en t i fy an y p ro s p ectwi t h wh o m sh e s u cces s fu ll y

n eg o t i at eda co n tract fo r Dr. Ku kreja’ s b u s i nes s o r an y p ro s p ect s wh o m s he p urs u ed fo r t h atp u rp o s e (an dn ei th er d i d Dr. Ku kreja). Du ri n g th e t i m e th atM s . Sh am wo rk edfo r Dr. Ku kreja an dh i s en t i ti es , s h e
wo rk edap p ro x i m at el y

2 0 h o urs p er week , wh i ch i n cl u d ed t i m e s p en ts p eak i n g wi th s p eci al is t s , v is i ti n g th ei r faci l i t i es , trav el i n g t o m eet i ng s , ch i t -ch at t i n g , an d read i n g . Sh e was al s o an act i v e m em b er o f th e Fi n an ci al W o m en ’ s As s o ci at i o n o f New Yo rk an dat t en d edn et w o rk i n g ev en t s wi th Yo u ng J ewi s h Pro fes s i o n al s , wh ere s h e en g ag edwi th o ther fi n an ci al p ro fes s i o n al s . M s . Sh am ceas edwo rk i n g fo r Dr. Ku kreja i n 2 0 1 5 an d , as o f t h e d at e o f tri al , rem ai n edu nem p l o y ed
. D. Ap art m en t1 6 A In No v em

b er 2 0 1 0 M s . Sh am

s i g n eda l eas e o n a n ew ap art m en ti n New Yo rk(“ Ap art m en t 1 6 A”). Sh e v acat edh er p rev i o us ap art m en tatth e M an h at t an Ho u s e an dren tedan dres i d ed in Ap art m en t1 6 A fro m 2 0 1 1 t o 2 0 1 5; du ri n g th o s e y ears s h e p ai d ren to n n o o th er res i d en ce. (M s . Sh am s ay s thatdu ri n g t h es e y ears , s h e l i v edwi th fri en d s an d ren t edAp art m en t1 6 Ao n l y fo r b u s i nes s p u rp o s es , b u t fo r reas o ns we ex p l ai n b el o w i n p artII.E.1 , we co n cl u d e o th erwi s e.) To an ex t en t- 1 0 -

[* 1 0 ] th atwe can n ot qu an t i fy , s h e s om et i m es u s edAp art m en t1 6 A fo r b u si n es s
m eet i n g s , th o u g h s he al so co n du ct edb u s i n es s m eet i n g s ato th er l o cat i o ns , s u ch as
res t au ran t s . Sh e d i d n o t u s e an y p ort i on o f Ap art m en t 1 6A ex cl u s i v el y fo r b u s i n es s p u rp o s es . Th ro u g h 2 0 1 3 M s . Sh am p ai dren to n h er ap art m en t fro m b an k acco u n t s i n h er n am e. In2 0 1 4 Dr. Ku kreja m ad e a d irect p aym en tt o th e ren tal co m pan y o f $ 3 5 ,0 0 0 t o wardth e ren t o n Ap art m en t1 6 A. In2 01 5 Dr. Ku kreja m ad e an o th er d i rect p aym en to f $ 1 5 ,0 00 t o w ard th e ren to n Ap art m en t1 6 A. E. Dr. Ku kreja’ s fi n an ces No fi n an ci al reco rd s o f Dr. Ku kreja an dh i s en t i t i es were o fferedi n t o
ev i d en ce, b u tfro m th e ev i d en ce t h atwas o ffered we co n cl u d e t hath i s fi nan ci al
m at t ers were h an d l edi n an u no rt h o d ox m an n er, wi th wh ich M s. Sh am co o p erat ed
. Dr. Ku kreja u s edh i s p ers o n al an db u s i n es s b an kacco un t s t o p ay ex p en ses th at were ap paren t l y M s. Sh am ’ s (wh i ch s h e rei m b u rs edt o an ex t en twe can n ot d et erm i n e); h e s i m

ul tan eo u sl y d ep os i tedb u s i n es s recei p t s o f t he en t i ti es (an dh i s
o wnm on ey ) i n t o acco u nt s t h atb el o n g edt o M s . Sh am an d h adh er m ak e, fro m

h er
acco u n t s, p aym en t s o f h i s ex pen s es . Befo re 2 0 14 M s . Sh am was u s i n g h er p ers o n al acco u n ten d i n g i n -0 9 6 4 t o d ep o s i t ch eck s fro m Dr. Ku kreja an d al s o t o p ay h i s b u s i n es s an dn on -b u s i n es s ex p en ses .- 1 1 -

[* 1 1 ] In Feb ru ary

2 0 1 4 atDr. Ku kreja’ s req ues t , an du s in g a $ 1 0 0 ,0 0 0 d ep o s i t fro m Peri o perat i v e Co n su l t an t s , LLC, M s . Sh am o p en edi n h er o wnn am e an dwi t h h ers el f as the s o l e s i g n at o ry a TD Ban kch eck i n g acco u n ten d i n g i n -9 2 32 (“ TD ch eck i n g acco un t ”). In M ay 2 01 4 , u s i n g a $ 2 5 , 0 0 0 d ep o si t fro m th e TD ch eck i n g
acco u n t , s h e o pen edi n h er o wnn am e an dwi th h ers el f as th e s o l e s ig n at o ry a TD Am eri trad e s ecu ri t i es trad i n g acco u n ten di n g i n -2 2 4 5 (“ TD Am eri trad e acco u n t ”). Reco rd s o f t h e TD Am eri trad e acco u n ts h o w s ho rt -t erm cap i t al l o s s es o f $ 1 5 7 ,6 0 0 i n 2 0 1 4 an d$ 3 5 3 , 7 2 9 i n 2 0 1 5 res u l t i n g fro m trad es i n thatacco u n t . In2 0 1 5 M s . Sh am

al s o h ada s h o rt -t erm

cap it al l o s s o f $ 3 5 , 5 4 2 an da n etl o n g-t erm cap i t al l o s s o f $ 2 5 5 res u l t i n g fro m trad i n g act iv i ty i n an o th er TD Am eri trad e acco u n t
en d in g i n -4 5 1 6 an dt i t l eds o lel y i n h er n am e (“p ers o nal Am eri trad e acco u n t ”). Ev en tho u g h M s . Sh am

h adl eg al t i tl e t o th es e t h ree acco u nt s , Dr. Ku kreja h ad p ri m ary

co n tro l o v er t wo o f t h e acco u n t s--t h e TD ch eck i ng acco u n tan dth e TD Am eri trad e acco u n t --an dwas s o l el y res p o ns i b l e fo r t h e act i v i t i es i n th o s e t wo
acco u n t s. M s. Sh am

h ado pen edth e TD ch eck i n g acco u nt , l eftDr. Ku kreja wi t h a b o o ko f b l an kch eck s t hats h e h ads i g n ed , an dth enl eftth e co u n try t o trav el t o In d i a. M s . Sh am th ereaft er s i g n ed ch eck s atDr. Ku kreja’ s d i rect i o n , b u ts h e
o th erwi s e h adi n s i g ni fi can to v ers i gh to f t h e act i vi t i es o n th e TD ch eck in g acco u n t
an d th e TD Am eri trad e acco un t .- 1 2 -

[* 1 2 ] W i th th e ex cep t i o n o f t h e i n i t ial $ 2 5 ,0 0 0 d ep o s i tM s . Sh am m ad e fro m

th e TD ch eck i n g acco u n t t o o p en th e TD Am eri trad e acco u n t , s h e was n o t res p o n s i b l e fo r t h e act i vi ty

o n ei th er acco u n t . Dr. Kukreja u s edth e TD ch eck in g acco u n tfo r h i s p ers o n al u s e an dfo r t h e b u s i n es s n eed s o f h i s en t i t i es . He h ado b t ai nedth e p as s wo rdan d o n li n e l o g i n i n fo rm at i o n an dp erfo rm edth e s ecu ri t ies trad es o n th e TD Am eri trad e acco u n t . Th ereaft er i n 2 0 1 4 an d2 0 1 5, ch eck s fro m the TD ch eck i n g acco un twere wri t t enfo r t h e b en efi to f Dr. Ku kreja an dh i s en ti t ies
. Aft er t ri al th e Co m

m is s i o n er co n ced edth ato n l y Dr. Ku kreja trad edwi th o r wi th drew p ro ceed s fro m

th e TD Am eri trad e acco u n t . Th e t ran s fers t o th e TD Am eri trad e acco u n t were al l ei th er d ep o s i t s fro m th e TD ch eck i n g acco un to r wi re tran s fers i n i ti at ed b y

Dr. Ku kreja. Th e wi re t ran s fers b y Dr. Ku kreja t o t al ed $ 1 1 9 ,0 0 0
. F. Sel f-em

pl o ym en ti n co m e 2 M s . Sh am ’ s arran g em en twi th Dr. Ku kreja ap p aren t ly cal l edfo r h er t o recei v e co m

p en s at i o n as a p ercen t ag e o f t he b u s i n es s i n co m e s h e g en erat ed , b u ti t d o es no tap p ear t h ats h e was ev er p ai do n thatb as i s o r o n an y o th er co h eren tb as is
. Her co m p en s at i o n cam e s o m et i m es i n th e fo rm o f ch eck s p ay ab l e t o h ers el f an d

2 A s u m m ary o f al l o f M s . Sh am ’ s i nco m e i t em s fo r t h e y ears ati s s u e i s i n cl u d edas Ap p en d i x A t o t h i s M em o ran du m Op i ni o n .- 1 3 -

[* 1 3 ] s o m et i m es b y

ch eck s p ai db y

Dr. Ku kreja o r o n e o f h i s en t i ti es t o co v er M s . Sh am ’ s ex p en s es (fo r ex am p l e, t h e $ 3 5 ,0 0 0 p aym en ti n 2 0 1 4 an dth e $ 1 5 ,0 00 p aym en t i n 2 0 15 t o w ard s th e ren t al o f Ap art m en t1 6A). Fo r 2 0 1 1-1 3, the p art i es h av e ag reed , an dwe fi n d , th atM s . Sh am ’ s g ro s s recei p t s fro m

s el f-em p l o ym en trep o rt edo n Sch edu l e C, “ Pro fi to r Lo s s Fro m Bu s i nes s”, were $ 6 , 4 5 1 fo r 2 0 1 1 , $ 1 6 2 ,2 8 3 fo r 2 0 1 2 , an d$ 9 8 ,7 9 0 fo r 2 0 1 3
. 3 On Sch edu l es C acco m

p an y i ng h er ret u rn s fo r 2 0 14 an d2 0 1 5 , M s . Sh am rep o rt edth at h er g ro s s recei p ts fro m

s el f-em p l o ym en twere $ 71 ,4 5 1 4 fo r 2 01 4 an d $ 3 6 ,0 0 0 fo r

3 Attri al M s . Sh am

s h o wed(o n Ex h i b i t7 1 -P) h er co m p ut at i o n o f t h es e am ou n t s o f g ro s s recei p t s fo r 2 0 1 1 -1 3 , an d th e Co m m i s s io n er accep tedth em

i n h is p o s t -t ri al an s weri n g b ri ef. Th e ag reedg ro s s recei p t s are n o tth e s am e as the am ou n t s th at Dr. Ku kreja rep o rt edfo r 2 0 1 4 o n u n t i m el y Fo rm s 1 0 9 9-M ISC, “ M is cel l an eo u s In co m e”--i .e., $ 7 2 ,3 5 5 fo r 2 0 1 1 , $ 8 6,6 0 0 fo r 2 0 1 2, an d$ 11 7 ,3 0 0 fo r 2 0 1 3 --an dth atM s . Sh am rep o rt edo n h er t ax retu rn s . Reg ard l es s o f wh et h er th e co m pen s at i o n h adb een p ai db y Dr. Ku kreja o r an y

o f h i s en t it i es , al l o f t h o s e am ou n t s were i ncl u d edo n th e Fo rm s 1 0 9 9 -M ISC i s s u edb y An es th es ia Co n s u l t an t s . Th e am o u nt s o n th e Fo rm s 1 0 9 9-M ISC d i dn o ti n cl u de an y am o u n t s th atDr. Ku kreja p ai d“ ag ai n[s ] t[M s . Sh am ’ s ] i n co m e” i n an y g i v en y ear fo r ex p en s es s u ch as o ffi ce s up p l i es an dcar rep ai rs , n o r d i d th ey i n cl ud e an y

am o u n t s co n si s t i n g o f rei m

b u rs em en t s fo r ex p en s es M s . Sh am p ai do n b eh al f o f Dr. Ku kreja o r h i s en t i ti es . M s . Sh am rep o rt edth e am o u nt s fro m th e Fo rm s 1 0 9 9
- M ISC o n th e Sch edu l es C-1 at t ach edt o h er t ax return s fo r t h o se y ears --wh i ch s h e fi led lat e, as we ex p l ai n b el o w i n p artI.L. (Itap p ears th ats o m e am ou n ts rep o rt ed fo r 2 0 1 1 m ay

n o t h av e act u al l y

b een p ai du nt i l 2 0 1 2 ; b u tthe Co m m i ss i o n er d o es n o td i s p u t e h er g ro s s recei p t s fo r t h o s e y ears , an dwe m ak e n o ad j u s t m en t . )
4 M s . Sh am

co n t en d s i n h er p o s t -t ri al b ri ef t h ath er g ro s s recei p ts fo r 2 0 1 4 s h o u ldb e fu rt h er red uced t o $ 51 ,5 6 2 b y s ubt ract i n g $ 2 0 ,8 38 , an am o u ntth ati s th e (co n ti n u ed ...)- 1 4 -

[* 1 4 ] 2 0 1 5
. 5 In h is p o s t -tri al an s weri ng b ri ef, t h e Co m m i s s i o n er accep t s t h es e
am ou n t s , an dwe fi n dth at h er g ro ss recei p t s were as rep o rt ed
. G. Sel f-em

pl o ym en tex p en s es 1
. Th e cl ai m edex p en s e d edu ct i o n s g en eral ly In h er t ax return s fo r t he y ears 2 0 11 , 2 01 2 , 2 0 1 3, 2 0 1 4 , an d2 0 1 5 (d es cri bed b el o w i n p artI.L), M s . Sh am cl ai m edd educt i o n s fo r ex pen s es o n Sch edul es C fo r b ei n g i n th e b u s i n es s o f m ark et i n g an d b u s i nes s d ev el op m en t . Fo r 2 01 1 , 2 0 1 2 , an d 2 0 1 3 , M s . Sh am

cl ai m ed d edu ct i o n s fo r ex p en s es o n t wo d i fferen t Sch edu l es C (wi tho u td i fferen t i at i n g b et ween th e ty p e o f b us i n es s d es cri bedo n each s ch edu le). Th e ex p en s es fo r wh ich s h e cl ai m edd edu ct io n s i n cl ud e, i n t er al i a, ren t , u t i l i t i es , d ep reci at i on , trav el , o ffi ce s upp l i es , l o cal tran s i t , t el ep h o n e,

4 (...co n t in u ed ) s u m o f t wo al leg edm o rt g ag e p aym en t s m ad e fo r Dr. Ku kreja’ s b en efi t fro m $ 7 2 ,4 0 0 (t he s u m

o f t h e am o u n t s s h e co n t en d s were g ro s s recei p t s ). Fo r t h e reas on s ex p l ai n ed b el o w i n p artII.B.1 , we rejectth i s co n t en t i o n an dfi n dth ath er Sch edu l e C g ro s s recei p t s fo r 2 0 1 4 are $ 7 1 ,4 5 1, as s h e rep o rt edo n h er 2 0 1 4 retu rn . 5 As wi th 2 0 1 1 -1 3 , th es e am o u n t s fo r 2 01 4 an d 2 0 1 5 v ary fro m wh at Dr. Ku kreja rep o rt edo n Fo rm s 1 0 9 9 -M ISC. An es th es i a Co n s ul t an t s rep o rt ed M s . Sh am ’ s co m

p en s at i o n o n Fo rm s 1 0 9 9-M ISC t hatwere n otfi l ed u n t i l 2 0 1 7
. Th o se fo rm s rep o rt edco m p en s at i o n o f $ 15 7 ,3 3 6 fo r 2 01 4 an d$ 72 ,8 0 0 fo r 2 0 1 5
. Th e Co m m i ss i o n er h as co n ced ed$ 8 5 ,8 8 5 o f t he $ 1 5 7 ,3 36 i n Sch edu le C g ro s s recei p t s fo r t h e y ear 2 0 1 4 an d $ 3 6 , 8 0 0 o f t h e $ 7 2 ,8 0 0 i n Sch edu l e C g ro s s recei p t s fo r t h e y ear 2 0 1 5
.- 1 5 -

[* 1 5 ] b u s i n es s d ev el o pm en t , m eal s an den t ert ai n m en t , p ro fes s i o n al s erv ices , an d p ro m o t io n al ex p en ses . Th e Co m m is s i o n er h as ei th er co nced edo r d idn o t d i s al l o w m an y o f th e Sch edu l e C ex pen s e d edu ct i o n s cl ai m edo n M s . Sh am ’ s retu rn s . M s . Sh am h as at t em p t edt o s ub s t an t i at e b us i n es s ex p en s es ev en wh ere i tap p ears fro m the reco rd th ats u ch ex p en ses are n o tati s s u e, an di n th o s e i n st an ces we d o n o tal l o w h er an y ad d it i o n al d educt i o n . 6 In g en eral , M s . Sh am

h as es t ab l i s h edthats h e p ai dfo r m an y o f t h e i t em s fo r wh i ch s h e cl ai m s ex p en s e d educt i o n s (t h o u g h n o t al way s i n th e am o u n t s s he cl ai m edo n h er ret u rn s o r i n th is l i t i g at io n ). Ho wev er, wh ere s he h as fai ledt o p ro v e a b u si n es s p u rp o s e fo r t h o s e ex p en d itu res , we fi n d thats h e h as n o tp ro v eda d educt i b l e ex p en s e. W e d i s cu ss th e d i s p u t ed ex p en s es b el o w i n p art s I.G.2 thro u g h I.H an d
ex p lai n wh i ch cat eg ori es o r i tem s o f b us i n es s an dn o n-b u s i n es s ex pen ses th at M s . Sh am

was ab l e t o s ub s tan t i at e. In p art II we d i scu s s th e l eg al p ri n ci p l es th at

6 Fo r 2 0 1 3 M s. Sh am

d ids ub s t an t i at e th atth e am ou n to f h er s el f-em p l o y ed h eal th i n s u ran ce was g reat er t h an th e am o u nts h e rep o rt edo n h er ret u rnan dth at th e Co m m i s s i o n er d i d n o t ch al len g e i n th e SNOD (an d we al lo w th e h i g her am ou n t ). Wh i le t h e av ai l ab i l i ty o f t h is s o -cal l ed“ ab o v e-t h e-l i n e” d edu ct i o n d o es d ep en do n h er b ei n g s el f-em p l oy ed , i ti s n o ta b u s in es s ex p en s e t o b e rep o rt edo n Sch edu l e C.- 1 6 -

[* 1 6 ] we ap p l y

i n m ak i n g o u r h o ld i n g , an d i n Ap p en di x B we t al l y th e al l o wed i t em s . 2
. Trav el ex pen s es

a. Car an dtru ck

ex pen s es M s . Sh am

rep ort ed b u s i n es s car an dtru ckex pen s es o f $ 9 ,8 21 fo r 2 0 1 1 ; $ 7 ,3 7 2 fo r 2 01 2 ; an d$ 7 ,5 7 7 fo r 2 0 1 3 . Sh e p ro v id edi n vo i ces rel at edt o
au t o m ob i l e m ai n ten an ce an drep ai rs fo r each o f t h os e y ears o f $ 6,4 5 5 fo r 2 0 1 1 ; $ 5 ,6 4 0 fo r 2 01 2 ; an d$ 5 ,5 2 1 fo r 2 0 1 3 . W e fi n d th atth e am o u n ts o n th e i n v o i ces fo r au t o m o b i l e m ai n t en an ce an drep ai rs were ex p en ses p ai d b y Dr. Ku kreja, as we
ex p lai n b el o w i n p artI.G.4 , an dwe d en y th o s e am o u nt s o n t h atb as i s . M s . Sh am
as s ert s th atth e rem ai n in g am o un t s o f t h e d edu ct io n cl ai m edfo r each y ear--$ 3 ,3 6 6 fo r 2 0 1 1 ; $ 1 ,7 3 2 fo r 2 0 1 2 ; an d$ 2 ,0 5 6 fo r 2 0 1 3 --were m i l eag e ex p en s es , b u ts h e d i dn o t m ai n t ai n an y

v eh i cl e m i l eag e l o g s as a co n tem po ran eo u s reco rdo f h er
m i l es dri ven , th e d es ti n at i o n reach ed , o r th e b us i n es s p u rp os e o f t h e u s e o f a
v eh icl e du ri ng an y

o f t h e y ears ati s s u e. W e fi ndth ats h e d i dn ots ub s t an t i at e t h e
car an dtru ck

ex pen s es . See i n fra p t . II.E.5
.- 1 7 -

[* 1 7 ] b
. Lo cal tran s p o rt at i o n Du ri n g th e y ears ati ss u e M s . Sh am o ft en trav el ed b y

t ax i , s h ut t l e s erv i ce,
an d p ub l i c t ran s p o rt at io n. As we ex p l ai n b el o w i n p artII.E.7
. a, M s . Sh am d i dn ot
o ffer an y s p eci fi c ev i d en ce o f t h e cl ai m ed b us i n es s p u rp o s e o f t h i s tran s i to th er th an h er o wnco ncl u s o ry

as s ert i o n s . W e fi n dthats h e d i d n o ts ub st an t i at e l o cal tran s itex p en s es b ey o n dwh atth e Co m m i s s i on er co n ced edas d educt i b l e n o t b ecau s e o f t h e es t ab l is h edb u s i n es s p urp o s e o f t h e ex p en s es , b utrat h er as
u n rei m b u rs edex p en s es i n cu rredt o faci l i t at e h er m ed i cal care. See i n fra p t. I.H.1
. c. Trav el fo r m ed i cal co n feren ces Du ri n g th e y ears ati ss u e, M s . Sh am trav el edt o M o n t au k , New Yo rk , an d Nap a, Cal i fo rn i a, t o at ten dco n feren ces th att arg et ed ex ecu t i v es i n th e m ed i cal i n du s try , fo r wh i ch s he p ai dex p en s es t ot al i n g $ 5 ,9 8 1 i n 2 0 1 2, $ 2 ,0 0 0 i n 2 0 1 3 , $ 1 2 ,7 4 3 i n 2 0 1 4 , an d$ 5 5 4 i n 2 0 1 5
. 7 Th e Co m m i s s i o n er h as co n ced edo n b ri ef

7 Th i s b u s i n es s -rel at ed trav el co n s i s t edo f: fo r 2 0 1 2 , $ 5 , 9 8 1 fo r a p ro g ram o n b u s i n es s n eg ot i at i o n s, i n cl u d i n g th e p ro g ram fee, h o tel , an dfl i g htex p en s e; fo r 2 0 1 3 , $ 2 ,0 0 0 fo r “ M PF Co ach in g ” t arg et edatex ecu t i v es ; fo r 2 01 4 , $ 2 ,0 00 fo r “ M PF Co ach i n g ”, $ 6 ,8 3 3 fo r a co n feren ce i n Nap a, Cal i fo rn i a, o n h eal th care an d i n v es t i n g , $ 7 7 0 fo r a p ro g ram o n n eg o t i at io n s i n M on t au k, New Yo rk ; an d$ 3 ,1 4 0 fo r an ad d i ti o n al co n feren ce o n n eg o t i at i o n s fo r ex ecu t i v es i n th e m ed i cal i n du s t ry (co n feren ces i n cl u si v e o f m eal s an dtrav el ); an d fo r 2 01 5 , $ 5 5 4 fo r a co n feren ce fo r m ed ical i n du s try

p ro fes s i o n al s (wi th as s o ci at edtrav el an d h o t el ). Onh er retu rn s M s . Sh am

cl as s i fi edeach o f t h es e Sch edu l e C ex p en s es as ei th er “ Oth er (Co nferen ces )” o r “ Oth er (Pro fes s io n al Dev el o p m en t)”.- 1 8 -

[* 1 8 ] th atM s . Sh am

m eth er b urd en t o es t ab l i s h t h e b u s in es s p urp o s e fo r h er at t en dan ce atco n feren ces an dtrai ni n g s peci fi c t o ex ecu t iv es i n th e m ed ical i n du s try , an dwe fi n dth at th es e co n feren ces were rel at edt o h er s el f-em p l o ym en t . See i n fra p t . II.E.7
. f. 8

d
. Oth er t rav el M s . Sh am

al s o p ai d s ubs t an t i al trav el ex p en s es fl y i n g t o Am ri ts ar, In d i a; Am s t erd am , Neth erl an d s ; Pari s , Fran ce; an dCh arl o t t e, No rth Caro l i n a, an dth es e
ex p en s es were n o t rel at edt o h er s el f-em p l o ym en t . See i n fra p t s . II.E.6 , II.E.7 .f. So m e o f t h i s trav el was t o at t en dcl as s es an dp res en tat i on s i n the areas o f Eri ck s o n i an h y

p n o si s , n eu ro -l in g u i s t i c p ro g ramm i n g , b o un d ari es trai n i n g, an d
m i n d -res o n an ce p ro ces s i n g (“ M RP”). Th is trai n in g fo cu sedo n t h e d ev el o p m en t
o f “ s ofts k i l l s ” an d g av e g en eral s el f-h el p g u i d an ce; i td i d n o t d ev el o p p ro fes s i o n al
s k i l l s s p eci fi c t o M s . Sh am ’ s s el f-em p l o ym en t (an dfo r t h atreas o n , i n ad d i t i o n t o M s . Sh am ’ s fai l u re t o m eet th e h ei g h t en eds ub st an t i at i on req ui rem en t s fo r t h es e

8 As we ex p l ai n b el o w i n p art II.E.6 , we d o n o tfi n d t h atM s. Sh am m etth e h ei g h t en eds ub s t an t i at io n req u irem en t s ap p l i cab l e t o d edu cth er t rav el ex p en s es as a b u s in es s ex p en d i tu re. In l i gh to f t h e Co m m i s s io n er’ s co n ces si o n o f a p o rt i o n o f th es e t rav el ex p en s es d edu ct edfo r co n feren ces rel at ed t o p ro fes s i o n al d ev el o p m en t(d et ai ledb el o w i n p artII.E.7 .f), we al lo w th o s e co n ced edi t em s . Bu t b ecau s e th e Co m

m is s i o n er co n ced edn o n e o f t h e “ o th er t rav el ”--p res um ab l y b ecau s e, as we fi n d , i twas n o trel at edt o th e b u s i n es s o f M s . Sh am ’ s s el fem pl o y m en t --we d is al l o wth o s e ex p en s es .- 1 9 -

[* 1 9 ] i t em s , we d o n o t al l o wd edu ct i o n s s o u g h tfo r t h i s t rai n i n g fo r t h e p ro ffered
reas on o f “p ro fes si o n al d ev el o p m en t ”, as we ex p l ai n b el o wi n p artII.E.7 .f). Dr. Ku kreja d i dn oth av e an y b u s i nes s u s e fo r t h e d ev el o p m en t o f s k i l l s i n v o l v i n g Eri ck s o n i an h y

p n o si s , n eu ro -l in g u i s t i c p ro g ramm i n g , o r M RP, n o r was h e s eek i n g t o ex p an dh i s m ed i cal p ract i ce i n t o th es e areas . Ov er t h e p eri o d th atM s . Sh am trav el ed t o at t en d t rai n i n g fo r Eri ck s o n i an h y p n o s i s , n eu ro -l i n g u i s ti c p ro g ram m i n g, an dM RP, s h e was al s o reco v eri n g fro m trau m a an d , i n 2 0 1 4 an d 2 0 1 5 , s ep arat i n g h er affai rs fro m th o s e o f Dr. Ku kreja, wh o s h e b el iev edh ada
n eg at i v e p s y ch o l o g i cal i m p act o n h er. Oth er o f M s . Sh am ’ s trav el i n th es e y ears i n cl u d edv is i ts wi th rel at i v es , an d we d o n o tfi n dthatth es e tri p s rel at eds ubs t an ti al l y t o h er b u si n es s o r t o d ev el o p in g cl i en tp ro s p ect s . M s . Sh am h as n o tes t ab l i sh edth atth e rem ai n i n g trav el o r o th er ex p en di tu res fo r t rai n i n g rel at i ng t o s o fts k i l l s d ev el op m en t h av e a b u s i n es s p u rp o s e, an d we fi n d th atth es e were n o t rel at edt o h er s el f-em p lo ym en t . 3
. M eal s an d en t ert ai n m en t M s . Sh am

rep ort ed d edu ct i b l e ex p en s es fo r m eal s an den t ert ai n m en to f $ 1 ,2 5 5 fo r 2 01 4 an d$ 4 3 3 fo r 2 0 1 5 . Th e p art i es ag ree t h atM s . Sh am p ai d$ 1 ,2 5 5 i n 2 0 1 4 (t h e am ou n ts h e rep o rt edo n h er ret u rn ) an d $ 1,0 0 0 i n 2 01 5 (m o re t h an s h e- 2 0 -

[* 2 0 ] rep o rt ed o n h er ret u rn ) fo r b u s i n es s -rel at edm eal s an d en t ert ai n m en t . Bu t
s ee i n fra p t . II.E.7 .g . 4
. Ex p en s es p ai d b y Dr. Ku kreja W i th reg ardt o d edu ct io ns cl ai m edfo r ex p en s es th atwere p ai db y Dr. Ku kreja “ ag ai n[s ] t [M s . Sh am ’ s ] i n co m e” fo r an y g i v en y ear, we fi n dth at M s . Sh am

i s n oten ti t l edt o thes e d edu ct i o n s b ecau s e s he d i dn oti n cu r th e
ex p en s es as s o ci at edth erewi th . Rat h er, we fi ndth at as a res ul to f t he m et h o ds h e
em pl o y edt o cal cu l at e h er g ro s s recei pt s , i n wh i ch th e am o u n ts s h e p ai d (o r rep ai d ) t o (o r o n b eh al f o f) Dr. Ku kreja were s ub tract edfro m h er g ro s s recei p ts , s h e was
n o tev er ch arg edwi th th e i n co m e t h atwas u s edt o p u rch as e t h es e p art i cu l ar i t em s th ats h e cl ai m s were h er ex p en s es . M o reo v er, t h e Co m

m i s s i o n er d o es n o t n o w arg u e t h at M s . Sh am s ho u l db e ch arg ed w i th g ro s s i n co m e i n th e am o u nto f t h e ex p en s es Dr. Ku kreja p ai do n h er b eh al f. 9 Th e n atu re o f t h e arran g em en t i n wh i ch Dr. Ku kreja p ai d fo r i t em s M s . Sh am

co n t en d s were fo r t h e u se o f h er b u s i n es s el i m i nat edth e p o s s i b i l i ty o f d educt i n g th o s e i t em s ; th ey were ei th er al read y s ub tract edfro m h er g ro s s recei p t s

9 Th ere i s o n e ex cep t i o n : th e ren t th at Dr. Ku kreja p ai do n Ap art m en t1 6 A. Ho wev er, th i s i s a s p eci fi cal ly i d en t i fi edex p en d i tu re th atb ot h p art i es ag ree was g ro s s i n co m e t o M s . Sh am . Th e d i s pu t e i s wh et h er t h e am o u n to f ren tp ai di s d educt i b l e o n Sch edu l e C.- 2 1 -

[* 2 1 ] (b y Dr. Ku kreja) o r, i f n o ts o s ub tract ed , h adn o effect o n the cal cu l at i o n o f h er i n co m e i n th e fi rs ti n s tan ce. Th es e ex p en s es co n s i s to f: $ 6 ,4 55 i n au t o m o b i l e
m ai n t en an ce an d rep ai rs , $ 5,2 5 7 i n o ffi ce fu rn i tu re, an d $ 2 ,5 2 3 i n o ffi ce rep ai r fo r 2 0 1 1 ; $ 4 ,3 0 8 i n o ffi ce s up p l i es an dh ard ware, $ 1 ,4 3 8 i n m ark et i n g , an d $ 5 ,6 4 0 i n
au t o m ob i l e rep ai rs fo r 2 0 1 2 ; an d$ 7 ,6 3 0 i n o ffi ce s up p l i es an dh ard ware an d $ 5 ,5 2 1 i n au t o rep ai rs fo r 2 0 13 . W e fi ndth at , t o th e ex ten tth e ex p en s es were i n cu rred , th ey

were n o tex p en d i tu res o f am o u n t s i n cl ud ed i n M s . Sh am ’ s g ro s s recei p t s; we acco rd i n g l y

fi n dthatM s . Sh am

d i dn o ti n cu r t hes e ex p en s es fo r wh i ch d edu ct i o n s were d i s al l o wedi n the SNOD. 1 0 5
. Rei m

b u rs edex p en s es Th ere are al s o o ccas i o ns o n wh i ch i tap p ears th at Dr. Ku kreja p ai d M s . Sh am

as p u rp o rt edrei m

b u rs em en t s o f ex p en s es s h e h adp ai d . Fo r ex am p l e, M s . Sh am

d ep o s i t eda $ 2 5,0 0 0 ch eckfro m An es th es i a Co ns u lt an t s o n M arch 4 , 2 0 1 3 , wi th the m em o l i n e n o t at i o n “ Ex p Rei m b .” W i th th e ex cep t i o n o f t ax y ear 2 0 1 4 , h er g ro s s recei p t s h av e b een es t ab l i sh edb y s ti p u l at i o n ; an d i tap p ears th at th e p aym en t s th at Dr. Ku kreja m ad e t o M s . Sh am an dth ath e ch aract eri zedas

1 0 Th e i n v oi ces th atM s . Sh am h as o fferedfo r t h e ex p en s es p ai db y Dr. Ku kreja co n t ai n n ei th er t h e p reci s e cat eg ori es o f ex p en s e d es cri b edo n h er retu rn s n o r t h e p reci s e am o u n t o f each d edu ct i o n cl ai m ed o n t h e ret u rn s . So m e o f th e am o un t s refl ect edo n th e i n v o i ces rep res en tcl ai m edd edu ct io n s t hatth e Co m m i s s i o n er h as n o t d i s al l o wed
.- 2 2 -

[* 2 2 ] rei m

b u rs em en ts were acco u n t ed fo r i n th e p art i es ’ s t i p u lat edm et h o do f d eri v i n g M s . Sh am ’ s i n co m e fo r t hes e y ears . Thu s , i f s h e h ads h o wedth atth e rei m b u rs em en twas i n d eedfo r a d edu ct i b l e ex p en s e th ats h e h adactu al l y p ai d , th en s h e m i g h tb e en ti t l edt o a d edu ct i o n , n ot wi th s t an di n g th e rei m b u rs em en t . Ho wev er, M s . Sh am

h as n o tes t ab l i s h edfo r an y o f th e y ears at i s su e an y s p eci fi c
ex p en d i tu res fro m

h er o wni n co m e t h atco rres p o ndwi th an y p art i cu lar ex p en s e rep aym en t . Acco rd i ng l y , we fi n dth ats h e i s en ti t ledt o n o ad d i t i o n al d edu ct i o n s
o n th e s up po s edb as i s t h ats h e h adi n cl u dedi n h er g ro s s i n co m e rei m b urs em en t s fo r d edu ct i b l e ex p en s es th ats h e h adp ai d
. H. M ed i cal ex p en s es 1
. Dedu ct i b l e ex p en ses 2 0 1 0 . In2 01 0 M s. Sh am h ada m ajo r s urg ery

th at was v ery

co m pl ex , req u i ri n g t h ree s ep arat e s u rg eo n s . Duri n g 2 0 1 0 an dthe y ears th ereaft er, M s . Sh am
was v ery d ep res s ed , recei v edm

u ch h eav y

m ed i cat i o n , an dwas treat edb y m u l t i p l e p s y ch o lo g i s t s an d p s y ch i at ri st s . M s . Sh am al s o h i redan d p ai d $ 2 ,8 7 0 t o a M s . Garci a, wh o as s i s tedM s . Sh am ath om e du ri n g h er i l l n es s b u twas n o ta- 2 3 -

[* 2 3 ] m ed ical p ro fes s i o n al
. 1 1 M s . Sh am p ai d$ 4 3 6 fo r ed ib l e aro m at i c o i ls fro m

“ Ori g i nal Swi s s Aro m at i ” t h at were n o tm ed i cal ly p res cri b edt o h er. Th e p art i es ag ree as t o $ 5 4 ,4 0 4 i n d educt i b l e m ed i cal ex p en ses th at M s . Sh am

p ai dfo r 2 01 0 . Rel ev an tt o M s . Sh am ’ s cl ai m fo r l o cal tran s p ort at i o n
ex p en s es , s ee s up ra p t . I.G.2 .b , th e Co m m i ss i o n er’ s co n ces s i o n i ncl u d ed tran s po rt at i o n ex p en s es o f $ 1 ,0 0 2 th atM s. Sh am o ri g i n al l y

s o ug h tt o cl ai m

as a b u s i n es s ex p en s e d edu ct i on an dth en d i s t i ng u is h ed fro m h er o th er rep o rt ed tran s po rt at i o n ex p en s es as tran s p o rt at i on t o an d fro m m ed i cal ap p o in t m en t s . Th e Co m m i s s i o n er d i s p ut es th e d edu ct i b i l i ty o f t h e $ 4 3 6 fo r aro m at i c o il s an d t h e $ 2 ,8 7 0 p ai dt o M s . Garci a, an dh e d i s p u t es th atM s . Sh am h as s ub s t an t i at ed$ 6 0 0
wo rt h o f m ed i cal ex pen s e p aym en t s fo r s erv i ces h e ag rees are d edu ct i b l e. 1 2 As we
ex p lai n b el o w i n p artII.D.1 .c, th es e ad d i t i o n al am o u n t s are n o t d edu ct i b l e, s o s h e
s ub s t an t i at edm ed i cal ex p en s es t o t al i n g $ 5 4 ,4 04 . Inp art I.H.2 .a b el o w we d i s cu s s

1 1 In 2 0 12 M s . Sh am

p ai d$ 2 ,6 7 5 t o M s . Garci a, wh i ch s h e cl ai m edwas an ex p en s e fo r o ffi ce h el p / m ai n ten an ce.

1 2 Th e $ 60 0 d i fferen ce ap p ears t o ari s e fro m ari t m et i c erro rs i n ad d in g up v ari o u s s erv i ces fo r tw o m ed i cal care p ro v i ders , an d i n b o th i n s tan ces we ag ree wi th th e Co m

m i s s i on er’ s ad d i ti o n , fi n d i n g thatM s. Sh am s ub st an t i at edo n l y $ 7 ,2 9 0 i n p aym en t s t o Iren a Gi n s b erg fo r acupu n cture (n o t$ 7 ,4 9 0 ) an d$ 1 ,8 0 0 i n p aym en t s t o M ari a Iag er (n o t$ 2 ,2 0 0 ).- 2 4 -

[* 2 4 ] rei m

b u rs em en t o f a p o rt i o n o f t h o s e 2 0 1 0 ex p en s es b y M s . Sh am ’ s i ns u ran ce p ro v id er(s ). 2 0 1 1 . Fo r 2 0 1 1 M s. Sh am rep o rt edo n h er ret urn i t em i zedd educt i bl e
m ed i cal ex p en s es o f $ 21 ,2 7 2 , an dth e Co m m i s s i on er co n ced es th atam o u n t . 2 0 1 2 . M s. Sh am

p ro v edattri al th ati n 2 0 1 2 s h e p ai d$ 2 7 ,6 0 2 i n m ed i cal
ex p en s es , an am o u nts l i g h t l y l arg er th an th e am o un to f i t em i zedd edu ct i b le
m ed i cal ex p en s es o f $ 26 ,5 8 2 th ats h e rep o rt edo n h er ret urn an dth at th e Co m m i s s i o n er co n ced es . 2 0 1 3 . Fo r 2 0 1 3 M s. Sh am rep o rt edo n h er ret urn i t em i zedd educt i bl e
m ed i cal ex p en s es o f $ 16 ,5 5 2 , an dth e Co m m i s s i on er co n ced edth i s am o un tattri al
. (W it h o utth e b en efi to f t h is co n ces s i o n , we wo u l dfi n dth ats h e p ro v edo n l y $ 5 ,5 8 4 i n i tem i zedd edu ct i b le m ed i cal ex p en s es , co n s i st i n g o f $ 2 ,5 7 9 i n co -p aym en t s an d $ 3 ,0 0 5 fo r acup u n ctu re, b ecau se s h e t o o ka s ep arat e d edu ct i o n fo r t he ex p en s e o f
s el f-em p l o y ed h eal th i n su ran ce.) Fo r 2 0 1 3 M s . Sh am

cl ai m eda s ep arat e d edu ct io n o f $ 1 2 ,5 61 fo r t h e
ex p en s e o f h er s el f-em

p l o y edh eal th i n s uran ce (i n s t eado f i n cl u d i n g th atex p en s e
am on g h er o th er i t em i zedm ed i cal ex p en s es o n Sch edu l e A, “ It em i zed Deduct io n s”). Th e Co m

m is s io n er d i dn o tch al l en g e t h atd educt i on i n the SNOD. Attri al M s . Sh am

s ub s t an t i at edad d i t i o n al p aym en t s fo r h eal th i ns u ran ce wi th- 2 5 -

[* 2 5 ] co pi es o f ch eck s s h e wro t e fo r t h e p rem i u m s, th e t ot al am ou n tan dp u rp o s e
o f wh ich th e Co m

m i ss i o n er d o es n o td i s p u t e, wh i ch b ri n g th e t o t al s ub s tan t i at ed
am ou n tt o $ 1 8 , 9 9 6
. W e fi n d s he p ai dth i s am ou n tfo r h eal th i n s u ran ce. 2 0 1 4 . Fo r 2 0 1 4 M s. Sh am rep o rt edo n h er ret urn i t em i zedd educt i bl e
m ed i cal ex p en s es o f $ 12 ,0 1 7 . Attri al M s . Sh am arg uedth ats h e p ai d$ 4 ,0 9 5 fo r i n s u ran ce co -p aym en t s an d $ 2 ,7 8 0 fo r acup u nctu re, t o t al i n g $ 6 ,8 75 . Th e Co m m i s s i o n er h as co n ced edth atM s . Sh am p ai dth e acup un ctu re ex p en s e an dth at i t is d educt i b l e, an dh e h as al s o co n ced ed$ 5 2 0 o f th e co -p aym en tex p en s e, t o t al i n g $ 3 ,3 0 0 i n i t em i zedd edu ct i bl e m ed i cal ex p en s es fo r 2 0 1 4 . M s . Sh am h as
n o tp ro v en an y

am o u n ts o v er t h e Co m

m i ss i o ner’ s co n ces s i o n s . Th e Co m m is s i o n er d o es n o t d i s p u t e--an d we fi n d --t h ati n 2 0 1 4 M s . Sh am p ai d , i n ad d i t i o n t o the fo reg o i n g m ed i cal ex p en s es , $ 8 , 6 0 5 fo r s el f-em pl o y ed
m ed i cal i n s u ran ce. 2 0 1 5 . Fo r 2 0 1 5 M s. Sh am d i dn o t i t em i ze h er d educt i b l e m ed i cal ex p en s es
o n h er ret u rnb u ti n st eadt o okth e s t an d ardd edu ct i o n . At tri al s h e p ro v edo n l y $ 6 7 5 o f co -p aym en t s fo r m ed i cal s erv i ces --an am o u ntthe Co m m i ss i o n er d o es n o t ch al l en g e.- 2 6 -

[* 2 6 ] Th e Co m

m is s i o n er d o es n o t d i s p u t e--an d we fi n d --t h ati n 2 0 1 5 M s . Sh am p ai d , i n ad d i t i o n t o the fo reg o i n g m ed i cal ex p en s es , $ 8 , 8 3 1 fo r s el f-em pl o y ed
m ed i cal i n s u ran ce. 2
. Rei m

b u rs em en t s fro m

h eal th i n s u ran ce
a. 2 01 0 M s . Sh am

o ri g i n al l y h adan i n d i v i du al h eal th i n s u ran ce p l an wi th Un i t ed Heal th care Ox fo rd(“ Ox fo rdp lan ”) wh i ch h adh i g h p rem iu m s an d s tri ct req u i rem en t s fo r co v eri n g o u t -o f-n et wo rktreat m en t . Th e p o l icy s p eci fi ed p ro cedures t o m ak e cl ai m s fo r rei m b u rs em en t s fo r cert ai n ty pes o f s erv i ces . Th e Ox fo rd p l an req u iredp re-au th o ri zat io n fo r al l h o s p i tal i zat i o n s an d i np at i en to r
o u tp at i en ts u rg i cal p ro cedu res , wh i ch M s . Sh am d idn o t o b t ai n . In2 0 1 0 s h e
s wi t ch edp l an s t o Ho ri zo n Bl u e Cro s s Bl u e Sh i el d(“ Ho ri zo n p l an ”), wh i ch h ada d educt i b l e; l at er i n 2 01 0 s h e ch an g edi n s u ran ce p l an s ag ai n t o Em p ire Bl u e Cro s s Bl u e Sh i el d(“ Em

p ire p l an ”). Du ri n g 2 0 1 0 M s . Sh am

s ub m i t t edh er m ed i cal ex p en ses t o h er h eal th i n s u ran ce p ro v i d er fo r rei m b urs em en t an dd i drecei v e s o m e rei m bu rs em en t p aym en t s. Beg i n n i n g i n 2 0 1 1 M s . Sh am ’ s b an k reco rd s fo r h er p ers o n al ch eck i n g
acco u n t s en d i n g i n -0 9 6 4 an d -4 4 7 7 refl ectth ats h e recei ved rei m bu rs em en t s
u n d er t h e Ho ri zo n p l anan dth enl at er u n d er t h e Em p i re p l an . Ho wev er,- 2 7 -

[* 2 7 ] M s . Sh am ’ s b an kreco rd s i n ev i den ce are i n co m p l et e an dd o n o tco n tai n an y
co p ies o f ch eck s d ep os i tedi n h er acco un t s i n th e y ear 2 0 1 0 ; th ey d o n o t co n t ai n
co p ies o f an y

ch eck s d ep o s it edi n 2 0 1 1 b efo re J u l y . (M s . Sh am p ro vi d edh er
m o nt h l y b an ks t at em en t s fo r al l o f t h e y ears ati s s ue b u ts ep arat el y p ro v id edco p i es
o f ch eck s t hatco rres po n dwi th cert ai n d ep o s i ts an dwi th drawal s o n th e acco u n t s .) Th e Co m m is s i o n er co n t en d s th atM s. Sh am recei v edrei m

b urs em en t s fro m h er h eal th i n s u rer i n 2 01 0 . To s up p o rtth i s co n t en t i o n h e p o i nt s t o : (1 ) v ari o u s d ep os i t s i n t o h er acco u n ten d i n g i n -0 9 6 4 th atap p ear o n the acco u n t s t at em en t s fo r 2 0 1 0 , (2 ) h er ev i d en t ro u t i n e, d o cu m en t edfo r s ub seq u en ty ears , o f s ub m i t t i n g rei m b u rs em en treq u es t s t o h er i n s u ran ce co m p an i es (an d recei v i n g rei m b u rs em en t s ), an d(3 ) h er t es t i m o n y ad m it t in g th ats h e d i ds ub m i ts o m e rei m b u rs em en treq u es t s i n 2 0 1 0 an dd i d recei v e s o m e rei m b u rs em en t s. Th e Co m m i s s i o n er p o s i ts th atcert ai n d ep o s i t s i n t o M s . Sh am ’ s acco u n t en di n g i n -0 9 6 4 t o t al i n g $ 14 ,7 06 are at tri b u t ab le t o rei m b u rs em en t s fro m

i ns u ran ce. W e fi n d , o n th e b as is o f t h e am o u n t s an dfreq u en cy o f th e d ep o s i ts , th e h i g h l ev el o f m ed i cal care t h atM s . Sh am recei v edi n 2 0 1 0 , an dth e ab s en ce o f an y o t h er cred i b l e ex p lan at io n fo r t h e d ep o s i t s, th atd ep o s it s i n t o M s . Sh am ’ s acco u nt
en d in g i n -0 9 6 4 th at t o t al $ 1 0 ,1 4 9 (n otth e Co m m i s s i o ner’ s l arg er t ot al ) were- 2 8 -

[* 2 8 ] m ed ical ex p en se rei m b u rs em en t s fro m

h er h eal th i n s u ran ce p ro vi d er. 1 3 Her
acco u n t st at em en t s fo r t h e -0 9 6 4 acco u n t refl ectn u m ero u s d ep o si t s t h ro u gh o u tth e y ear, i ncl u d i n g reg u l ar u n em p l o ym en tco m

p en s at i o n an d , i n th e l at t er h al f o f t h e y ear, reg u l ar d ep os i t s fo r m o re s i g n ifi can tam o u nt s i n “ ro un d ” i n crem en t s--e.g ., $ 6 ,0 0 0 , $ 7 ,0 0 0 , $ 1 0,0 0 0 . No n e o f t h o s e d ep os i t s i s i n cl u d ed i n th e $ 1 0 ,1 4 9 o f i rreg ul ar d ep o s i t s i n “ o d d ” am o u n t s co ns i s t en t wi th o th er i n s u ran ce rei m b u rs em en t s thatM s . Sh am recei v ed . M s . Sh am

d i dn o ts h o w an al t ern at i v e
s o u rce fo r an y

o f th es e d ep o s i t s . Th e p rep o n d eran ce o f t h e ev i d en ce s h o w s th at $ 1 0 ,1 4 9 o f t h e d ep os i t s refl ect s t h o s e rei m b u rs em en t s . (Th i s $ 1 0 ,1 4 9 am o u n t redu ces h er $ 5 4 , 4 0 4 i n d edu ct ib l e m ed i cal ex pen s es rep o rt edo n Sch edu l e A t o $ 4 4 ,2 5 5 . See i n fra p t. II.D.1 .d .)

b
. 2 01 1 -1 3 Fo r t h e y ears 2 0 11 th ro u g h 2 0 1 3 M s . Sh am ’ s o wn b an ks t at em en t s , wh i ch i n cl u d e co p i es o f can cel edch eck s , refl ectthatth e am o u n t s the Co m m i ss i o n er as k s
u s t o fi n dare rei m

b u rs em en t s o f m ed i cal ex p en s es were p aym en t s fro m h er h eal t h

1 3 Th e d ep os i t am o u n ts were $ 3 ,7 55 o n J an u ary 8 , 2 01 0 ; $ 1 ,1 8 6 o n M arch 9 , 2 0 1 0 ; $ 1 ,4 8 5 o n M ay

2 7 , 2 0 10 ; $ 7 0 5 o n Decem ber 6 , 2 0 1 0 ; $ 8 2 0 o n Decem b er 1 3 , 2 0 1 0 ; an d$ 2,1 9 8 o n Decem b er 3 0 , 2 0 1 0 . Th e Co m

m is s i o n er arg u es th atan ad d it i o n al $ 4 ,5 6 0 o n J u n e 1 0 , 2 0 1 0 , al s o rep res en t ed a rei m b u rs em en t o f m ed i cal ex p en s es . Ho wev er, b ecau s e t here was a ch eckwi th drawn o n th e acco u n ti n th e i d en t i cal am o u n t o f $ 4 ,5 6 0 o n e d ay p ri o r, we fi n dth atex p l an at i o n u n l i k el y .- 2 9 -

[* 2 9 ] i n s u ran ce d ep o s it edi n t h e rel ev an t t ax y ear. Co n seq u en tl y , th e p rep o n d eran ce o f t h e ev i den ce es t ab l i s h es thats h e recei v edrei m b u rs em en t s fo r
m ed i cal ex p en s es i n th e am o u n t s o f $ 4 ,1 1 2 i n 2 0 1 1 , $ 6 ,6 2 0 i n 2 0 1 2 , an d$ 2 ,3 7 7 i n 2 0 1 3
. c. 2 01 4 -1 5 Th ere i s n o ev i d en ce (n or d o es th e Co m m i s si o n er co n ten d ) t h atM s . Sh am recei v edrei m

bu rs em en t s fo r d edu ct i b l e m ed i cal ex p en s es rep o rt edfo r 2 0 1 4 o r 2 0 1 5
. I. St at e i n co m e t ax refu n d M s . Sh am

m ad e p aym en t s o f New Yo rk St at e i n co m e t ax t o t al i n g $ 1 2 ,0 2 2 fo r t h e y ear 2 0 1 0 , an d s he cl ai m edh er St at e t ax p ai d as a d edu ct io n o n h er Fed eral i n co m e t ax retu rn fo r 2 0 10 . Sh e d i dn o t fi l e h er New Yo rkSt at e i nco m e t ax retu rn fo r 2 0 1 0 u nt i l 2 0 1 4 , an do n th atSt at e ret u rn M s . Sh am cl ai m eda St at e t ax refu n d
o f $ 1 2,0 2 2 . New Yo rkp ai dM s . Sh am th e St at e t ax refu n d i n 2 0 1 4 an ds ub m i t t ed Fo rm 1 0 9 9 -G, “ Cert ai n Go v ern m en tPaym en t s ”, t o th e IRS rep ort i n g th atth e $ 1 2 ,0 2 2 h adb een refu nd edt o M s . Sh am i n 2 0 1 4 , b utM s. Sh am

d i d n otrep o rtth at refu ndo n h er l at e Fed eral i n co m e t ax retu rn fo r 2 0 1 4 (fi l edi n 2 0 1 7 ). W e fi n dth at M s . Sh am

recei v eda refu n do f New Yo rkSt at e i nco m e t ax i n 2 0 1 4 (an dfo r t h e
reas on s s t at ed b el o wi n p artII.B.2 , th e i n cl u s i o n o f t h atrefu n d i n h er i n co m e fo r- 3 0 -

[* 3 0 ] 2 0 1 4 d ep en d s o n a co m p u t at i o n al i s s u e reg ard i ng h er Fed eral i nco m e t ax l i ab i l i ty fo r 2 0 1 0 ). J
. Tax ab l e i n t eres tan d d i v id en d s Th e p art i es ag reedth atM s . Sh am recei v edt ax ab l e i n t eres ti n co m e o f $ 1 9 8 i n 2 0 1 1; $ 1 0 4 i n 2 0 1 2 ; $ 1 1 i n 2 0 1 3 ; an d $ 1 0 i n 2 01 4 . Th e p art i es al s o ag reedth at M s . Sh am

recei v edt ax ab le d i vi d en di n co m e o f $ 1 4 1 i n 2 0 1 3 an d $ 5 3 i n 2 0 1 4
. K. Ch ari t ab l e co n tri b u t i on s Th e Co m m is s i o n er d i dn o tch al l en g e i n th e SNOD th e d edu ct io n s M s . Sh am cl ai m edo n h er ret u rn s fo r ch ari t ab l e co n tri b u t i o n s fo r 2 01 0 an d2 01 1 . As we
ex p lai n b el o w i n p artI.L, M s . Sh am carri edfo rwardal l o f t h e am ou n t s s h e rep o rt edfo r ch ari t ab l e co n tri b ut i o n s fo r th e y ears 2 01 2 th ro u g h 2 0 1 4 an d d i dn o t cl ai m an y ch ari t ab l e co n tri b u t i o n d educt i o n s fo r 2 0 1 5. Her l i t i g at i n g p o si t i o n i s th ats h e i s en t i t l edt o d edu ctch ari t ab l e co n tri b u t io n s fo r each o f t h e y ears ati s s u e. M s . Sh am ’ s cred i t cards t at em en ts s h o wv ari o u s am o un t s o f $ 50 0 o r m o re th atwere p ai dt o t h e fo l lo wi n g en t i t i es wh i ch s h e co n t en d s were ch ari t ab l e
co n tri b u t i o n s: o n Decem b er 1 , 2 0 13 , a $ 1 , 5 0 0 p aym en tt o “ Vi p as s an a M ed i t at i o n , Sh el b u rn e, M A” (cl as s i fi edo n th e s t at em en tas “ o th er p u rch as es an dcas h”); o n Sep tem b er 1 2 , 2 0 1 5, a $ 5 0 0 p aym en tt o “No rt h wes t Vi p as s an a, M A” (cl as s i fi ed
o n th e s tat em en tas “ ch ari t i es an do th er o rg an i zat i o n s ”); an do n Sep t em b er 1 3 ,- 3 1 -

[* 3 1 ] 2 0 1 5 , a $ 6 0 p aym en tt o “ Pari y at t i, WA ” (al s o cl as s i fi edo n th e s t at em en tas

“ ch ari t i es an do th er o rg an i zat i on s ”). M s . Sh am d i d n o to ffer i nt o ev i d en ce an y recei p t o r o th er wri tt enackn o w l ed gm en t fro m an y o f t h es e en t i t i es . L. Tax retu rn s M s . Sh am

fi l edh er Fed eral i n co m e t ax retu rn s fo r 2 0 1 0-1 3 o n t h e fo l l o wi n g d at es : Year D at e 2 0 1 0 Ap r. 1 9 , 2 0 1 4 2 0 1 1 Au g . 1 0 , 2 0 15 2 0 1 2 Au g . 1 7 , 2 0 15 2 0 1 3 Oct . 1 9 , 2 01 5 Aft er fi l i ng h er p et it i on , M s . Sh am s ub m it tedt o th e IRS t ax return s fo r 2 0 1 4 an d 2 0 1 5 o n th e fo ll o wi n g d at es : Year D at e 2 0 1 4 J u l y

2 5, 2 0 1 7 2 0 1 5 Sep t em ber 2 0 18 M s . Sh am

h i red p ro fes s i o n al acco u nt an t s t o p rep are h er t ax return s fo r al l
s i x y ears ati s s u e, s pen d i n g $ 3 0 0 o n t ax p rep arat i o n fees i n 2 0 1 3 an d$ 8 0 0 i n 2 0 1 4 . M s . Sh am ’ s t ax retu rn s s h ow t h atfo u r d ifferen t p ro fes s i o n al s s i g n edh er t ax retu rn s as a “ p ai d p rep arer” d u ri n g th e y ears ati s s u e: o ne i n Haup pau ge, New Yo rk , fo r 2 0 1 0 ; an o th er i n Cl i ft o n , New J ers ey , fo r 2 0 1 1 th ro u g h 2 0 1 3 ; a t h i rd i n- 3 2 -

[* 3 2 ] Hi gh l an dPark , New J ers ey , fo r 2 0 1 4; an da fo u rt h i n Hy d e Park , New Yo rk , fo r 2 0 1 5 . Sh e d idn o tcal l an y retu rn p rep arer t o t es t i fy attri al
. Wh en t es ti fy in g ab o u th er ret u rn p o si t i o n s, M s . Sh am m ad e rep eat ed referen ces t o “ the acco u n t an t”, n ev er d i s t i n g u i s h i ng am o ng th e v ari o u s p rep arers
s h e u sedo r referri n g t o an y o f t h em b y n am e. Fo r ex am

p le, s h e as s ert edth atth e
acco u n t an ti n cl u d edh er 2 0 14 St at e t ax refu n di n h er Sch edu l e C g ro s s recei p t s ; th e acco u n t an t d et erm i n edth ats h e s h o u l ds ep arat e h er ren t ex p en s e o n t o tw o d i fferen t Sch edu l es C an dd et erm i n edh o w m u ch was “ reas o n ab l e an dcu s t o m ary ”
as a d edu ct i o n ; th e acco u nt an th ad“ d o n e m i l eag e cal cu l at i o n s ” t o ex p lai n d educt i o n s cl ai m edfo r b u s in es s u s e o f a p ers o n al v eh i cl e. Dep reci at i o n d educt i o n s th ats h e co u ld n o tex p l ai n were t he acco u n t an t ’ s i d ea. W i th res p ectt o th es e ret urn p os i t i o ns , M s . Sh am ei th er co u l d n o tex p l ai n h o w th e acco u n t an t p o s tu l at edth e i t em cl ai m edo n th e ret u rn , o r i n s o m e i n s t an ces s eem edt o d i s cl ai m th e i t em s , l eav i n g th em

u n ex pl ai n ed . Inh er cl o s i n g arg u m en t , referri ng ag ai n t o wh ats h e al l eg edwas th e acco u n t an t ’ s i d ea t o g en erat e t wo Sch edu l es C, M s . Sh am

i m p li edth ats h e s ig neda retu rn th ats h e d i d n o tu n ders t an d , aft er b ei n g p ers u ad edb y

th e acco un t an t th at“ th i s i s th e way i t i s d o n e.” M s . Sh am

m ad e o n ly

g en eral s t at em en t s reg ard i ng th e i n fo rm at i o n s h e p ro v id edt o th e acco un t an t s t o p rep are h er ret u rn s: “ I wo u l d g i v e t h em p ro o f o f- 3 3 -

[* 3 3 ] p aym en ts l i ke, h o w [s i c] are t h e i n v o i ces an d fo r 2 01 0 b ecau s e o f t h e y ear o f th e s u rg ery , I was n o tv ery wel l o rg an i zed . I g en eral l y g i v e th em

a l o t o f m at eri al
. So th ey o rg an i zedi ti n wh i ch ev er way .” Sh e d i dn o tp ro vi d e s p eci fi c d et ai l ab o u t th e i n fo rm at i o n s he p ro v i d edt o th e acco u n tan t s fo r each o f t h e y ears at i s s ue, wi t h
o n e ex cep t i o n : Ex h i b i t6 5 -P was ad m i t t edfo r t h e p u rp os e o f s h o wi n g M s . Sh am ’ s
co n ten t i o n s as t o wh ats h e b el i ev edh er al lo wab l e d edu ct i o ns were fo r 2 0 1 1 . Th at d o cu m en tco n t ai n s s pread s h eeten tri es , ty p ewri t t en an dh an dwri t ten l i s t s , an d cal cu l at io n s --al l ap p aren t l y co m p o s edb y M s . Sh am --b u t n o o ri g in al b ackup d o cu m en t at i o n t o s ub s tan t i at e th e n u m b ers o n th o s e p ap ers . Des cri b i n g th at d o cu m en t , M s . Sh am

s t at ed : “ [S] o ev eryth i n g o u t h ere i s wh atI wo u l d g i v e t o th e
acco u n t an tt o d o the t ax es . Th i s i s n o t wh aty o uwo ul ds ee o n the t ax retu rn .” Sh e al s o at tri b u t ed th e d el ay i n fi l i ng h er 2 0 1 4 an d 2 0 1 5 return s t o u ncert ai n ty ab o u t h o w t o t reat th e TD Am eri trad e acco u n tan dth e fact th at , wh i l e h er ret u rn s were
u n d er au d i t , h er acco u nt an tad v i s edh er t h at s he was “ i n b ads h ap e” wh et h er o r n o t
s h e fi l edth e ret u rn s . Onl i n e 2 1 o f Sch edu l e A i n h er t ax retu rn fo r 2 0 1 0 , M s . Sh am cl ai m ed

“ Un rei m b u rs edem

p l o y ee ex p en s es ” o f $ 3 4 , 5 63 , i d en t i fi edas “ Fo rm 2 1 0 6 Ex p en s es ”. Onh er Fo rm 2 1 0 6 , “ Em

p l o y ee Bu s i n es s Ex p en s es ”, s h e rep o rt ed : $ 1 ,2 2 0 o f “ Park i n g fees , t o ll s , an d tran sp o rt at i o n , i n cl u d in g trai n, b u s, et c.” o n- 3 4 -

[* 3 4 ] l i n e 2 ; $ 3 ,4 6 1 o f “ Trav el ex p en s e wh il e awayfro m h o m e” o n l i n e 3 ; $ 8 ,4 4 1
o f “ M eal s an den t ert ai n m en tex p en s es ” o n l i n e 4 (redu cedb y 5 0 % t o $ 4 , 2 2 1 o n l i ne 8 ); an d$ 2 5,6 6 1 i n o th erwi s e u nex p l ai n ed“ Bu s i n es s ex p en ses n o t i n cl u d edo n l i nes 1 thro u g h 3 ”. Th i s u n ex p l ai n ed$ 2 5 ,6 6 1 was th e l arg es tp arto f h er
m i s cel l an eo u s Sch edu l e A ex p en s es s ub ject t o t h e s o -cal l ed“ 2 % Fl o o r”. Attri al
an d i n th e p art ies ’ s t i p u l at i o n s s h e d is cl o s edth at thi s u n s p eci fi edam o u nti ncl u d ed $ 1 0 ,0 0 0 i n ren t fo r t h e M an h at t an Ho u s e ap art m en t(p l u s u t i l i t ies , t el ep h o n e, an d i n t ern etex p en s es as s o ci at ed wi th th atap art m en t ) an dth e l eg al fees M s. Sh am p ai d t o b o th l aw fi rm s du ri n g the y ear. M s . Sh am d idn o t at t ach Fo rm

8 82 9 , “ Ex p en s es fo r Bu s i n es s Us e o f Yo u r Ho m e”, t o an y o f h er t ax retu rn s fo r t he y ears ati s s u e. Onh er t ax retu rn s fo r 2 0 1 2 th ro u g h 2 0 1 4 , 1 4 M s . Sh am rep o rt edo n Sch edu l e A “ Gi ft s t o Ch ari ty ” o f $ 2 ,3 7 0 fo r 2 0 12 , $ 3,1 0 0 fo r 2 0 1 3 , an d $ 1 ,0 7 2 fo r 2 0 1 4
. Th e am ou n trep o rt ed fo r 2 0 1 3 ex ceed s the am o u n t o f t h e p aym en ti n 2 0 1 3 d es cri b edab o v e i n p artI.K, an dn o ev i d en ce o f p aym en t was o ffered fo r 2 0 1 2 o r

1 4 Th e Co m

m is s i o n er d idn o td i s al l o w i n th e SNOD M s . Sh am ’ s cl ai m ed d educt i o n s fo r “ Gi ft s t o Ch ari ty ” o f $ 8 4 5 fo r 2 0 1 0 an d $ 2,6 6 2 fo r 2 0 1 1 , s o we d o n o td i s cu s s th em . Onh er 2 0 15 retu rn , M s . Sh am d i dn otrep o rt an y

g i ft s t o ch ari t y b ecau s e s h e d i dn otat tach Sch edu l e A t o t h atretu rn , b utrat h er t o o k th e s t an d ard d educt i o n . M s . Sh am

co nt en d edattri al th ats h e i s en t i t l edt o a $ 5 6 0 d edu ct i o n fo r g i ft s t o ch ari ty

fo r 2 0 1 5 , wh i ch i s th e s u m o f t h e p aym en t s d es cri b edab o v e i n p artI.K.- 3 5 -

[* 3 5 ] 2 0 1 4 . M s . Sh am

co u l dn o t(an d d idn o t) act ual l y cl ai m d edu ct i o n s fo r t h e rep o rt edam o u n ts b ecau se s h e rep o rt edth ath er ad ju s t edg ro ss i n co m e i n tho s e y ears was n eg at i v e, an dh er co n tri b ut i o n b as e t h erefo re zero . See 1 7 0 (b )(1 )(A), (G). (M s . Sh am

n o wcl ai m s d edu ct i o n s , an dth e Co m m i s s i o ner ch al len g es th em .) Onh er t ax retu rn s M s . Sh am d i dn o t rep o rtth e t ax ab le i nt eres t i n co m e s h e h ad recei v edi n 2 0 11 -1 4 an d d i dn o trep o rtth e t ax ab l e d i v i d en di n co m e t hats h e h ad recei v edi n 2 0 13 an d 2 0 1 4
. Onh er l at e Fed eral i nco m e t ax retu rn fo r 2 0 1 4 (fi l edi n 2 0 1 7 ), M s . Sh am d i dn o t rep o rtth e St at e i nco m e t ax refu n do f $ 1 2 , 0 2 2 fo r 2 01 0 thats h e recei v edi n 2 0 1 4
. M s . Sh am

al s o cl ai m edo n h er ret u rn s l o s s es fro m th e TD Am eri trad e
acco u n t of $ 1 57 , 6 0 0 fo r 2 0 1 4 an d$ 3 5 3 ,7 2 9 fo r 2 0 15 . Li m i t edb y s ect i on 1 2 1 1 (b )(1 ), M s . Sh am

rep o rt eda $ 3 ,0 0 0 cap it al l o s s fo r each o f t h o s e y ears . Co n s i s t en twi th h er p o s i t i o n th ats he was n o tres p o ns i b le fo r t h e act iv i ty o n th e TD Am eri trad e acco u n t (an d w as n o tt ax ab l e fo r i ts i n co m e), M s . Sh am h as co n ced ed th e l o s s es at tri b u t ab l e t o th o s e acco u n t s . Sh e at tach edt o h er 2 0 15 retu rn th e
s t at em en tfo r h er p ers o n al Am eri trad e acco un ts h o wi n g the s h ort -t erm cap i t al l o ss
o f $ 3 5,5 4 2 an dth e n etl o n g -t erm cap i t al l o s s o f $ 25 5 thatwe h av e fo u nds h e d i d i n cu r. See s up ra p t . I.E. (Fo r t h e reas o ns we ex p l ai n b el o w i n p artII.B.4 ,- 3 6 -

[* 3 6 ] M s . Sh am

i s en t i t l edt o a cap i t al l o ss d educt i o n o f $ 3 ,0 0 0 fo r 2 0 1 5 b u tn o t fo r 2 0 1 4 .) M
. Ex am in at i o n an d SNOD Th e IRS co m

m en cedan ex am i n at i o n fo r t h e y ears 2 0 1 0 th ro u g h 2 0 15 . A Ci v il Pen al ty

Ap p ro v al Fo rm

ap p ro vi n g th e as sert i o n o f p en al t i es fo r s ub s t an t i al
u n d ers t at em en t s o f i nco m e t ax an d , al t ern at i v el y , n eg l i g en ce, fo r t he y ears 2 0 1 0
- 1 5 was s i g nedo n Decem

b er 1 5, 2 0 1 6 , b y

th e “ Gro up M an ag er” fo r t h e IRS
ex am i n er wh o ex am i n edM s. Sh am ’ s retu rn s . OnJ an u ary 2 4 , 2 0 1 7 , h av i n g n o t recei v eda 2 0 1 4 retu rn o r a 2 0 15 retu rn fro m M s . Sh am , th e IRS p rep areda
s ub s t i tu t e fo r retu rn (“ SFR”) fo r each o f t h o s e y ears p u rs uan t t o s ect i o n 6 0 2 0 (b ). As we n ot edab o v e, M s. Sh am th ereaft er s ub m i t t edu n t i m el y retu rn s fo r 2 0 1 4 an d2 0 1 5 , b u ts h e h as n o t m ad e an y p aym en t s t owardh er t ax l i ab i l i ty fo r 2 0 1 4 o r 2 0 1 5
. OnFeb ru ary 1 7 , 2 0 1 7, the IRS i s s u edt o M s . Sh am i t s SNOD fo r t ax y ears 2 0 1 0 thro u g h 2 0 1 5 , d et erm i n i n g a d efi ci en cy i n t ax fo r each y ear, as wel l as ad d it i o n s t o t ax an da p en al ty . OnM ay 1 2 , 2 0 1 7 , M s . Sh am

t i m el y fi l ed h er p et it i o n co m

m en ci n g th i s cas e. Wh en s h e fi l edh er p et i t io n , s h e res i ded i n New Yo rk
.- 3 7 -

[* 3 7 ] II. OPINION A. Ap p li cab l e l eg al p ri n ci p l es 1
. Bu rd en o f p ro of Th e IRS’ s d et erm i n at i o n i s p res u m edco rrect , an dt ax p ay ers g en eral l y b ear th e b u rd en t o p ro ve i n co rrect th e ad ju s t m en t s m ad e b y

th e IRS i n i t s SNOD. See Ru l e 1 4 2 (a); W el ch v . Hel veri n g , 2 9 0 U.S. 1 1 1 , 1 1 5 (1 93 3 ). A t ax p ay er’ s
s t at em en ti n a b ri ef d oes n o t co n s t i tu te ev id en ce, Ru l e 1 43 (c), an dcan n o t
s up p lem en tthe reco rd , s ee Ni ed ri ng h au s v . Co m m i s s i o n er, 9 9 T.C. 2 0 2 , 2 1 4 n .7 (1 9 9 2). Th e IRS m ay

rel y o n i nfo rm at i on return s (Fo rm s W -2 , “ W ag e an dTax St at em en t ”, an d1 09 9) fro m th i rd -p art y p ay ors wh en d et erm i n i n g a t ax p ay er’ s t ax ab l e i n co m e. See, e.g ., Cab i rac v . Co m m i s s io n er, 1 2 0 T.C. 1 63 , 1 67 (2 0 0 3 ), aff’ d , 9 5 A.F.T.R.2 d (RIA) 2 0 04 -5 4 9 0 (3 dCi r. 2 0 0 4 ). Bu t i f “ [i ] n an y co u rt p ro ceed in g * * * a t ax p ay er as s ert s a reas on ab l e d i s p u t e wi th res pect t o an y i t em
o f i n co m e rep o rt edo n an i n fo rm at i o n retu rn fi l ed wi th the Secret ary * * * an dth e t ax p ay er h as fu l l y

co o p erat edwi t h th e Secret ary * * * , th e Secret ary

s h al l h av e t h e b u rd eno f p ro du ci n g reas o n ab l e an dp ro b at i ve i nfo rm at i on co ncern i n g s u ch d efi ci en cy

i n ad d i t i o n t o s u ch i n fo rm at i o n retu rn .” Sec. 6 2 0 1 (d ).- 3 8 -

[* 3 8 ] Fo r t h e y ears 2 0 14 an d2 0 1 5 , th e Co m m i s s i o n er rel iedo n th e Fo rm s 1 0 9 9
- M ISC fi l edb y An es th es i a Co n s u l t an t s t o reco n st ru ct M s. Sh am ’ s i nco m e wh en h e i s su edth e SNOD. Attri al M s . Sh am was ab l e t o p ro du ce cred i bl e ev i d en ce th at th e am o un t s rep o rt edb y

An es th es i a Co n s ul t an t s were i n accu rat e, a p o in tthe Co m m i s s i o n er co n ced ed . Th e p reci s e ex t en to f th e Co m m i ss i o ner’ s co n ces s i o ns
was t o redu ce M s . Sh am ’ s g ro s s Sch edu l e C recei p ts t o the am o u nt s s h e rep o rt ed wh en s h e fi l edh er t ax retu rn fo r each o f t h o se y ears , an dg ro s s i nco m e rem ai n s at i s su e wi th res pect t o o n l y th e 2 0 1 4 retu rn . Th e Co m m is s i o n er b ears th e b u rd en o f p ro o f o n th e i s su e o f M s . Sh am ’ s g ro s s i n co m e fo r 2 0 1 4 . He h as s u cces sfu l l y
s u s t ai n edth atb u rd en , as we s h o w b el o w i n p artII.B. Th e Co m m is s i o n er b ears th e b u rd en o f p ro o f wi th res pect t o “ an y n ew
m at t er, i n creas es i n d efi ci en cy , an daffi rm at i v e d efen s es , p lead edi n th e an s wer”. Ru l e 1 4 2 (a)(1 ). M s . Sh am co n t en d s o n b ri ef t hatth e Co m m i s si o n er’ s as s ert i o n th atth e ex pen s es Dr. Ku kreja “ p ai dag ai n s t [h er] i nco m e” are n o td educt i b l e fro m h er i n co m e i s a “ n ew rep aym en tth eo ry ” an d arg u es th atth e “ rep aym en t th eo ry i s
u n s ubs t an t i at ed b y

th e ev i d en ce o n reco rd .” In W ayn e Bo l t& Nu tCo . v . Co m m i s s i o n er, 9 3 T.C. 5 00 , 5 0 7 (1 9 8 9 ), we s t at ed : “ A n ew t h eo ry th ati s p res en t edt o s u s t ai n a d efi ci en cy i s treat edas a n ew m at t er wh en i tei ther al t ers th e
o ri g i nal d efi ci en cy o r req u i res th e p res en tat i o n o f d i fferen tev i den ce. * * * A n ew- 3 9 -

[* 3 9 ] th eo ry

wh i ch m erel y

cl ari fi es o r d ev el o p s th e o ri gi n al d et erm in at i o n i s n o ta
n ew m at t er i n res pect o f wh i ch res p o n d en tb ears th e b u rd en o f p ro o f.” See al s o Sh ea v . Co m

m i s s io n er, 1 1 2 T.C. 1 8 3 , 1 9 1 -1 9 7 (1 9 9 9). Th e rep aym en to f th e
ex p en s es fo r wh i ch M s . Sh am cl ai m edd edu ct i o n s g o es t o t h e i s s u e o f t h ei r d educt i b l e ch aract er an d d o es n o tal t er t h e o ri g in al d efi ci en cy o r req u i re d i fferen t p ro o f. Acco rd i n g l y , M s. Sh am ret ai n s t h e b u rd en o f p ro o f o n th e i s s u e o f t h es e d educt i o n s . Du ri n g th es e p ro ceed i n g s M s . Sh am h as ei th er rai s edn ew d edu ct i o ns o r rech aract eri zedth e am o un t s an dth e n atu re o f t h e ex p en s es fo r wh i ch s h e cl ai m s d educt i o n s . Ev en tho u g h th e n ewl y al l eg edd edu ct i o n s were n o td i rect l y ad dres s edi n th e SNOD, th e Co m m i s s i o ner d oes n o tb ear t h e b u rd eno f d i s p ro v i n g d educt i o n s th ata t ax pay er b el at ed l y cl ai m s . See Rap p ap o rtv . Co m m i ss i o n er, T.C. M em o. 2 0 0 6 -8 7 , 9 1 T.C.M
. (CCH) 1 0 7 9, 1 0 82 (2 0 06 ). M s . Sh am th erefo re ret ai n s th e b u rd eno f p ro o f o n an y d edu ct i o n s s h e cl ai m s i n ad d it i on t o th o s e o n h er fi led retu rn s . Th i s i s n o ta cas e wh ere t h e fact s p res en t edo n an y i s su e are i n equ i p o i s e; rat h er, h ere we fi n dth atth e p rep o n d eran ce o f th e ev i den ce res ol v es th e i s s u es i n d i s p u t e, t h ereb y

n eg at in g t h e i m

p orto f wh i ch p art y

b ears th e b u rd en o f p ro o f. See Dag res v . Co m

m i ss i o n er, 1 3 6 T.C. 2 6 3 , 2 7 9 (2 0 1 1).- 4 0 -

[* 4 0 ] 2
. Reco rd -k eep i n g Wh en d edu ct i o n s are i n d i s p u t e, th e t ax p ay er m u sts at i s fy

th e s peci fi c req u i rem en t s fo r an y

d edu ct i on cl ai m ed . See INDOPCO, In c. v . Co m m i s s i o n er, 5 0 3 U.S. 7 9 , 8 4 (1 9 9 2 ). Fu rth erm o re, t ax p ay ers are req u iredt o m ai n t ai n reco rd s
s u ffi ci en tt o s ub s t an t i at e i t em s u n d erl y i n g th ei r cl ai m edd edu ct i on s . See
s ec. 6 0 01 ; s ec. 1 .6 0 0 1 -1 (a), In co m e Tax Reg s .; s ee al so i d
. s ec. 1 .6 0 0 1 -1 (e) (“ Th e b o o k s o r reco rd s * * * s h al l b e ret ai n eds o l o n g as th e co n t en t s thereo f m ay b eco m e m at eri al i n th e ad m i n is trat i o n o f an y i nt ern al rev en ue l aw”). Th e fai l u re t o k eep an dp res en taccu rat e reco rd s co u nt s h eav i ly ag ai n s t a t ax p ay er’ s at t em p t ed p ro o f. Ro g ers v . Co m

m i s si o ner, T.C. M em o . 2 01 4 -1 4 1, at* 17
. Sect io n 2 7 4 (d ) es t ab l i s h es h i g h er s ub s tan t i at i o n req ui rem en t s fo r ex p en s es rel at ed t o trav el , m eal s , an dl od g i ng wh i le awayfro m h om e, en t ert ai n m en t , g i ft s , an d “ l i s t edp ro p ert y ”, d efi n edi n s ect i o n 2 80 F(d )(4 ) t o i n cl u d e p as s en g er
au t o m ob i l es an dco m

p u t ers --i .e., m an y

o f th e rep o rt edex p en s es ati s s u e h ere. Fo r
ex p en s es as s o ci at edwi th “ l i s t edp ro p erty ”, a t ax p ay er m u s tp ro v e: (1 ) t h e am o u n t
o f each s ep arat e ex pen d i tu re wi th res p ectt o s u ch p ro p erty ; (2 ) th e am o u n t o f each b u s i n es s u s e; an d(3 ) t he b u s i n es s p u rp o s e fo r an ex p en d i ture o r u s e wi th res p ect t o s u ch p ro p ert y . 2 6 C.F.R. s ec. 1 .2 7 4 -5 T (b )(6 ), Tem p oraryIn co m e Tax Reg s ., 5 0 Fed
. Reg . 4 6 0 1 6 (No v . 6 , 1 9 85 ). Sect i o n 2 7 4 (d ) p ro v i d es th atn o d edu ct i o n o r- 4 1 -

[* 4 1 ] cred i tu nd er s ect i o n 1 6 2 o r 2 1 2 s h al l b e al l o wedfo r t h es e ex p en s es u n l es s th e t ax p ay er s ub s t an ti at es th es e ex p en s es b y ad equ at e reco rd s o r s u ffi ci en t
ev i d en ce co rro b o rat i n g h i s o wns t at em en t s . 1 5 Fo r t rav el ex p en s es , n o t o n l y m u s ta t ax p ay er s ub s tan t i at e t he “ [a] m o u n to f each s ep arat e [trav el ] ex p en d i tu re” an d th e t i m e an d p l ace o f t he t rav el , b utal s o
s h e m u s t s ub s tan t i at e t h e “ [b ] u s i n es s reas o n fo r trav el o r n atu re o f t he b u s i n es s b en efi td eri v ed* * * as a res u l to f t rav el .” 2 6 C.F.R. s ec. 1 .2 7 4 -5 T(b )(2 ). A d educt i o n fo r b u s i n es s g i ft s req u i res th e t ax p ay er t o d es cri be t h e g i ft , t o
s ub s t an t i at e t h e am o un t , t im e, an d“b u s i n es s reas o n fo r t h e g i fto r n atu re o f b u s i n es s b en efi td eri v edo r ex p ect edt o b e d eri v ed as a res ul to f t he g i ft ”, an dt o p ro v id e i n fo rm at i o n s u ffi ci en tt o es t ab l i s h th e b u s i n es s rel at i o n s h i p o f t h e g i ft reci pi en t, s u ch as “ n am e, t i t l e, o r o th er d es i g n at i o n”. Id . s ub p ara. (5 ).

1 5 M s . Sh am

h as u rg edth atwe ap p l y

th e “ th e Co h an ru l e”, d eri v edfro m Co h an v . Co m

m i s s i o n er, 3 9 F.2 d5 4 0 , 5 4 3 -5 4 4 (2 dCi r. 1 9 3 0 ). Un d er t h at ru l e, i f a t ax p ay er ad equ at el y

es t ab l i sh es th ats h e p ai do r i n cu rreda d edu ct i b l e ex p en s e b u td o es n otes t ab l i s h t h e p reci s e am o u n t , th en the Co u rt m ay i n s o m e i n s t an ces es t i m at e th e al l o wab le d edu ct i o n , b eari n g h eav il y ag ai n s tthe t ax p ay er wh o s e i n ex act i tu d e i s o f h er o wnm ak i n g . Ho wev er, s ect i o n 2 7 4 (d ) s et s s tri ct er s ub s t an t i at i o n ru l es that , wh en th ey ap pl y , s up ers ed e t h e Co h an d o ct ri n e. See San fo rd v. Co m

m is s i o n er, 5 0 T.C. 8 2 3 , 8 2 7 -8 2 8 (1 9 6 8), aff’ d p er cu ri am , 4 1 2 F.2 d2 0 1 (2 dCi r. 1 9 69 ); s ec. 1 .2 7 4-5 T(a), Tem p oraryIn co m e Tax Reg s ., 5 0 Fed
. Reg
. 4 6 0 1 4 (No v. 6 , 1 98 5 ).- 4 2 -

[* 4 2 ] M s . Sh am

h as o ffered v ari o u s reco rd s i n th e fo rm o f cred i tcardan dacco u nt
s t at em en t s t o s ub st an t iat e h er ex p en d i tures . Wh i l e s h e h as cro s s -referen cedm an y
o f t h es e ex pen d i tu res wi th s el f-g en erat eds p read s h eet s th at l i s tth e d at e an d
am ou n to f cert ai n ex p en s es , h er reco rd s d o n o t co nt ai n an y co n t em p o ran eo u s i n d i cat i o n o f t h e b u s i n es s p u rp o s e fo r an y g iv en ex p en d i ture--wh eth er t h e ex p en s e
was fo r a t ax i , a m eal , o r s o m et h i n g el s e. Attri al M s . Sh am t es t i fi edt o th e b u s i n es s p u rp o s e o f h er at t en d an ce at cert ai n co n feren ces , th e ex p en s es o f wh i ch th e Co m m i s s i o n er u l ti m at el y co n ced edh ad a b u s i n es s p u rp o s e. W it h few
ex cep t i o n s , s ee i n fra p t. II.E, we fi n dth atM s . Sh am o th erwi s e fai ledm eet h er b u rd ent o es t ab l i s h the d edu ct i b i l i ty o f h er b u s i n es s ex p en s es , an d we are u n ab l e t o ap p ly th e Co h an ru l e i n th es e ci rcu m s t an ces . B. In co m e i s su es 1
. Sch edu l e C i n co m e fo r 2 0 1 4 Th e o n l y y ear fo r wh i ch th e p art i es h av e n o tres o l v ed th e i s s u e o f Sch edul e C g ro ss recei p t s b y ag reem en ti s 2 0 14 . As we ex p l ai n b el ow, we fi n d t h atth e
ev i d en ce attri al was s u ffi ci en tt o es t ab l i s h th at M s . Sh am ’ s g ro s s recei p t s were at l eas t $7 1 ,4 5 1 , wh i ch th e Co m m i s s i o n er i n h i s an s w eri n g b ri ef co n ced ed i s th e

“ co rrect am o u nt ”. Th i s i s th e am o u n tth atM s . Sh am cl ai m edo n h er l at e-fi l ed retu rn an dth ats h e affi rm edatth e b eg i n ni n g o f t he t ri al was th e am o u n ts h e- 4 3 -

[* 4 3 ] co nt en d s i s h er g ro s s recei p t s fro m s el f-em p l o ym en t. Gi v en h er p o si t i o n at tri al , th e Co m

m i s s i on er h adn o reas on t o p u rs u e fu rt h er t h e am ou n t o f h er 2 0 1 4 g ro s s recei p ts . Ho wev er, i n h er p o s t -t ri al b ri ef M s . Sh am co nt en d s t h ath er g ro s s recei p t s fo r 2 0 1 4 s h o u l d b e fu rt h er red uced b y $ 2 0,8 3 8 , an am o u n tthati s the s u m o f t wo al l eg edm o rt g ag e p aym en ts m ad e fo r Dr. Ku kreja’ s b en efi tfro m th e acco u n t
en d in g i n -0 9 6 4 o n Sep t em b er 1 5 an d Oct ob er 7 , 2 0 14 --a co n t en ti o n t h atth e Co m m i s s i o n er h adn o o ccas i on t o ex am i ne at tri al . Wh il e t h es e p aym en t s d o ap p ear t o b e m o rt g ag e p aym en t s , th i s fact al o n e d oes n o t es tab l is h th atth es e p aym en t s s h o ul d b e s ubt ract edfro m M s . Sh am ’ s 2 0 1 4 g ro s s recei p t s o f $ 71 ,4 5 1
. Th ey m i g h ti ns t eadh av e b een g i ft s s h e m ad e t o Dr. Ku kreja, o r p aym en t s o f a d eb t
s h e o w edt o h i m , o r cap it al i nv es t m en t s i n h i s b u s in es s ; b u twe s ee n o reas o n th at th ey s h o u l dn eces s ari l y

redu ce h er g ro ss recei p t s . An d i f we were t o en t ert ai n h er l at e ret ract io n o f t h e $ 7 1 ,4 5 1 t o t al an dwere t o reco n s i d er t h e qu an t i ty o f h er 2 01 4 g ro ss recei p t s , th en we wo u l dap p aren t l y fi nda l arg er am ou n tt o b e m o re p ro b ab le t h an n o t. Dep o s i t s i n t o acco un t-0 9 6 4 i n 2 0 1 4 thatt o t al $ 5 2,4 0 0 ev i d en t l y co n s t i tu t e b u s i n es s g ro s s recei p t s . 1 6 M s . Sh am

1 6 A b an kd ep o s i ti s p ri m a faci e ev i d en ce o f i n co m e. To k ars k i v . Co m m i s s i o n er, 8 7 T.C. 7 4, 7 7 (1 9 8 6 ). Th e t o t al am o u nto f al l o f t h e d ep o si t s i n (co n ti n u ed ...)- 4 4 -

[* 4 4 ] al s o co n ced edattri al an do n b ri ef t h atth e $ 3 5 ,0 0 0 thatDr. Ku kreja p ai d t o ward th e ren t o n Ap art m en t1 6 A co n s ti tu t edad d it io n al b u s i n es s g ro s s recei p t s . Th i s ad d i t i o n wo u l d y iel da t o t al o f $ 8 7,4 00 o f p ro b ab l e g ro s s recei p t s . An dth e
am ou n tm i gh th av e g ro wn ev en fu rt h er i f M s . Sh am h adn o twai t edu n t i l aft er t ri al t o d i s cl ai m

wh ats h e rep ort edo n h er ret u rn , an di f t h e Co m m i s s i o ner h adh adth e i n cen t i v e an do ccas i o n t o ch al l en g e M s. Sh am ’ s redu cedam o un t . Th e ev i d en ce
s h o ws o th er m on i es d ep o s i tedi n h er n am e i n o th er acco un t s s h e h adatth e t i m e, wh i ch th e Co m

m i s s i o n er m i g h t h av e co n t en d edwere ad d it i on al g ro ss recei p t s . In s t ead , th e Co m

m i s s i on er l im i t edh i m s el f t o co nt en d i n g o n l y wh atM s . Sh am

h ad rep o rt edo n h er ret u rn an ds t at edatth e b eg in n i n g o f t ri al th ato n l y $ 7 1,4 5 1
co n st i tu t edg ro s s recei pt s t o h er. Th e p rep o n deran ce o f t h e ev i den ce s h o ws th at M s . Sh am

recei v edatl eas t $ 7 1 ,4 5 1 i n g ro s s recei pt s fo r 2 0 1 4 . Acco rd i n g ly , we

1 6 (...co n t i nu ed ) th e acco u n ten d i n g i n -0 9 64 al on e i n 2 0 1 4 i s $ 64 ,4 0 0 ; b u to f th att o t al , $ 1 2 ,0 0 0 i s ap p aren tl y

n o tt ax ab le i n co m e. (Itev i d en t l y co n si s tedo f am o u nt s tran s ferred fro m an o th er acco u n t i n M s . Sh am ’ s n am e en d i n g i n -4 4 7 7 , an d th e Co m m i s s io n er h as n o targ u edth atd ep o si t s i nt o t h e acco u n ten d in g i n -4 4 7 7 co ns i s t o f i t em s o f h er t ax ab l e i n co m e.) Th is l eav es $ 5 2 ,4 0 0 o f d ep o s it s t o acco u n t -0 9 6 4 th atm u s tb e acco u n t edfo r. Of thatam o u n t , M s . Sh am ’ s b ri ef ch aract eri zedo n e $ 2 5,0 0 0 ch eck fro m Peri o perat i v e Co n su l t an t s as b u si n es s g ro s s recei p t s ; s he co n ced es thatan ad d it i o n al d ep os i t o f $ 1 2 ,4 0 0 o n Oct o b er 1 , 2 0 1 4 , wh ich ap p ears t o co rres p o n d wi th a s ep arat e can cel edch eckfro m Peri o perat iv e Co n s u lt an t s , al s o co n si s t s o f b u s i n es s g ro s s recei p t s; an ds h e d o es n o tex p l ai n the s o u rce o f an y o f th e o th er d ep os i t s t o acco u n t -0 9 6 4 . Itthu s ap p ears th at$ 5 2 , 4 00 o f t h e 2 0 1 4 d ep o s i t s t o acco u n t -0 9 6 4 was b us i nes s g ro s s recei p ts .- 4 5 -

[* 4 5 ] fi n dth ath er g ro s s recei p t s fo r 2 0 1 4 are t h e am o u n t s he rep ort edo n h er t ax retu rn : $ 7 1,4 5 1
. 2
. St at e t ax refu n d A refu n do f St at e t ax i s t ax ab l e t o th e reci p i en t t ax p ay er o nl y t o t h e ex t en t
o f an y Fed eral t ax b en efi treal i zed as a res ul t o f t h e d edu ct i on cl ai m edfo r t h e St at e t ax i n a p ri o r y ear. See s ec. 1 1 1 (a). Th e St at e o f New Yo rk rep ort edth ati n 2 0 1 4 i t m ad e a St at e t ax refu n d t o M s . Sh am o f $ 1 2 ,0 2 2 fo r St at e t ax p ai d i n 2 0 1 0
. M s . Sh am ’ s 2 0 1 0 Fed eral i n co m e t ax retu rn s h o w s th ats h e rep o rt edal t ern at i v e
m i n i m u m t ax (“ AM T”) fo r 2 01 0 , an dSt at e i n co m e t ax i s n o td edu ct i b l e i n
co m p u t i n g th e AM T i n co m e o n wh ich th e AM T i s b as ed . Sec. 5 6 (b )(1 )(A)(i i ). Th erefo re a t ax p ay er wh o i t em i zes St at e t ax o n Sch edu l e A b u ti s al s o l i ab l e fo r AM T d o es n o trecei v e a Fed eral t ax b en efi tfo r t h e t ax wi th i n th e m ean in g o f
s ect i on 1 1 1 (a). M s . Sh am rai s es two i s s u es reg ard i ng wh et her s he s h o u l di n cl u d e i t in h er i n co m e fo r 2 0 1 4 : fi rs t , s h e arg u es thats h e d i di n factrep o rtth e refu n do n h er ret u rn fo r 2 0 1 4 (b u tn o t o n th e ap p ro p ri at e l i n e o f t h e ret u rn ); s eco n d , s h e d i s p u t es wh eth er s h e i n fact“ recei v ed ” t h e refu n dthatNew Yo rkrep o rt edi t i s su edt o h er. M s . Sh am

i n it i al l y t o o k th e p o s i ti o n attri al th atth e $ 1 2 ,0 2 2 St at e t ax refu n d fo r 2 0 1 0 was i n cl ud ed(i n erro r) i n th e $ 7 1 ,4 51 o f b u s i n es s g ro s s recei p t s s h e- 4 6 -

[* 4 6 ] rep o rt ed fo r 2 0 1 4
. Ho wev er, M s . Sh am p ro p erl y rep o rt edrefu n ds o f St at e t ax o n th e ap p ro p ri at e l i n e o f h er t ax return s fo r p ri o r y ears . M o reo v er, h er
ex p lan at i o n o f h ow s he arri v edatth e am o u nto f h er g ro s s recei pt s fo r 2 0 1 4 (b y arg u i n g th ato n l y

cert ai n d ep os i t s i n t o the acco u n ten d i n g i n -0 9 64 were act u al l y i n co m e t o h er) d i dn o ti n cl u d e a $ 1 2 ,0 2 2 d ep o s i to f St at e t ax . W e fi n d t h ats h e d i d
n o ti n cl u d e t h e refu n do f New Yo rkt ax o n h er ret u rn fo r 2 0 14
. Nex t , s h e arg u es th atth e Co m m is si o n er d i dn o tp ro v e t h ats h e recei v edth e refu nd . Inl i g h to f h er fi rs targ u m en t(t h at s he rep o rt edth e refu n d ) an dth e
ev i d en ce b efo re u s , we d o ub tth e cred i b i l i ty o f t h i s as s ert i o n . M s . Sh am ’ s New Yo rki n co m e t ax return fo r 2 01 0 i n cl u deda cl ai m fo r a refu n d o f $ 1 2,0 2 2 . Th e
o n l y New Yo rk St at e t ax retu rn i n th e reco rdi s fo r 2 0 10 , s o we are u n ab l e t o d et erm i n e wh eth er M s . Sh am m ay h av e recei v ed , i n s t eado f a refu n d , a cred i t ag ai n s tan y

o ther New Yo rkt ax l i ab i l i t i es . W e d o n o t fi n dth atM s . Sh am , h av i n g i n s i s tedth ats h e rep o rt edth e New Yo rk St at e refu n das i nco m e fo r 2 0 1 4 , rai s ed a
reas on ab l e d i s p u t e t o New Yo rk ’ s 1 0 9 9 -G th at rep o rt edth at refu n d . Th e b u rd en
o f p ro o f o n th i s i t em

therefo re d i dn o ts hi ft u nd er s ect i o n 6 2 0 1 (d ). W e fi ndth at M s . Sh am

h as fai l edt o p ro v e t h at s he d i dn o trecei v e a St at e t ax refu ndo f $ 1 2 ,0 2 2 i n 2 0 1 4. Ho wev er, wh et h er s h e m u s t i n cl u d e t h e refu ndi n i n co m e fo r 2 0 1 4 i s a
co m p u t at i o n al i ss ue t h atd ep en d s o n wh eth er, o n th e b as i s o f o ur fi n d i n g s fo r- 4 7 -

[* 4 7 ] 2 0 1 0 , s h e wi l l co n t i n ue t o o we AM T fo r t h aty ear. M s . Sh am wi l l i n cl u d e th e $ 1 2,0 2 2 i n i nco m e fo r 2 0 1 4 o n l y t o th e ex t en t(t o b e res o l v edi n th e Ru l e 1 5 5
co m p u t at i o n ) t h ats h e d o es n oto we AM T fo r 2 0 1 0. See, e.g ., As h k o u ri v . Co m m i s s i o n er, T.C. M em o . 2 0 1 9 -9 5 , at* 4 1
. 3
. In t eres tan dd iv id en d s Th e IRS d et erm in edfro m th i rd -p art y

rep ort i ng o n Fo rm s 1 0 9 9 th at M s . Sh am

recei v eds m al l am o u n t s o f i n t eres t i n co m e i n 2 0 1 1 th ro u g h 2 0 1 4 an d
s m al l am o u n t s o f d iv i d en d i n co m e i n 2 01 3 an d2 0 1 4 . M s . Sh am h as co n ced ed th es e am o u n t s , wh i ch are s etfo rt h i n d et ai l i n Ap p en d i x A. 4
. Cap i t al gai n / l o s s fo r 2 01 4 an d2 0 1 5 Th e p art i es h av e ag reedth atM s . Sh am i s n o ten t i t l edt o d edu ctcap i t al l o s s es fro m

th e TD Am eri trad e acco u n ti n th e am o u n ts o f $ 1 5 7,6 0 0 fo r 2 0 1 4 an d $ 3 5 3 ,7 2 9 fo r 2 0 1 5, b ot h y ears fo r wh ich s h e rep o rt ed a $ 3 ,0 0 0 cap i t al l o s s p u rs u an t t o th e l i m it at i o n s o f s ect i on 1 2 1 1(b )(1 ). Th e Co m m i s s i o ner arg u es th at th e effect o f M s . Sh am ’ s co n ces s i o n o f t h e TD Am eri trad e acco un tl o s ses i s th at
s h e i s n o ten t i t l ed t o d edu cta $ 3 ,0 0 0 cap it al l o s s fo r ei th er o f t h o s e y ears . Inh er rep l y b ri ef, h owev er, M s . Sh am co u n ters th ats h e s u s t ai n edo ther cap i tal l o s s es i n h er p ers o n al Am eri trad e acco u n t . M s . Sh am h as n ots ub s t an t i at ed an y cap i t al l o s s es fo r 2 0 1 4 . Ho wev er s h e d i ds ub s t an t i at e a s h o rt -t erm cap i t al l o s s o f $ 3 5 ,5 4 2- 4 8 -

[* 4 8 ] an d a n etl o n g -t erm cap i t al l os s o f $ 2 5 5 fo r 2 0 1 5 i n h er p ers o n al Am eri trad e
acco u n t . Pu rs u an t to s ect i o ns 1 2 1 1 (b )(1 ) an d1 2 12 (b )(1 ), s h e i s en t i t l edt o a cap i t al l o s s d edu ct i on o f $ 3 ,0 0 0 fo r 2 0 1 5 , an da co rres p o n d i n g redu ct i o n i n t h e
s h o rt -t erm

cap i t al l o ss (i .e., fro m

$ 3 5 ,5 4 2 t o $ 3 2 ,5 4 2 ) av ai l ab l e as a carry fo rward
. Sec. 1 2 12 (b )(2 )(A)(i ). C. 2 0 1 0 Sch edu l e A m i s cel l an eo u s ex p en s es Fo r 2 0 1 0 a t ax p ay er m ay cl ai m an u n rei m

bu rs edem

p l o y ee b u s i nes s ex p en s e
as a m is cel l an eo u s d edu ct i o n o n Sch edul e A, p urs u an t t o s ect i on 1 6 2 (a). An
em pl o y ee i s co n s i d eredt o b e i n th e b u si nes s o f b ei n g an em p l o y ee an d m ay

d edu ct
ex p en s es th atare: (a) n o n rei m b u rs ab l e, (b ) rel at edt o th e em p l o y ee’ s trad e o r b u s i n es s o f ren d eri ng s erv i ces t o th e em p lo y er, an d (c) o rd i n ary

an dn eces sary
ex p en s es o f s u ch a t rad e o r b u s i n es s . See Lu cas v . Co m m i s s i o ner, 7 9 T.C. 1 , 6 -7 (1 9 8 2). Ex p en s es are “ o rd i n ary ” wh en th ey are “ n orm al , u s u al , o r cu s t o m ary ” i n th e t ax p ay er’ s trad e o r b u s i n es s . Dep u ty v . Du Po n t , 3 0 8 U.S. 4 8 8 , 4 9 5 (1 94 0 ). Ex p en s es are “ n eces s ary ” wh en th ey are “ ap p ro p ri at e” o r “ h el p fu l ,” ev en i f n o t

“ i n di s p en s ab l e” o r “ req u i red .” Fo rdv . Co m m i s s io n er, 5 6 T.C. 1 3 0 0 , 1 3 0 6 (1 9 7 1 ), aff’ dp er cu ri am , 4 8 7 F.2 d1 0 2 5 (9 th Ci r. 1 9 7 3 ). Un rei m b u rs ed em

p lo y ee
ex p en s es are s ub

j ect t o th e i tem i zedd edu ct i o n l i m i t at io n o f s ect i o n 6 7 (a)--i .e., th e 2 % fl oo r.- 4 9 -

[* 4 9 ] Th e em

pl oy ee b u s i n es s ex p en s e d edu ct i on s th atM s . Sh am cl ai m edm

u s tb e d i s al lo wedb ecau s e s h e d i dn ots ub s t an t i at e t he ex p en s es . Th e p rep o n d eran ce o f th e ev i d en ce s h o ws thats h e was u n em pl o y ed(an d co l l ect edu n em pl o y m en t b en efi t s ) fo r t he en t i re du rat i o n o f 2 0 1 0 . Ev en i f th e ev i d en ce s h o w edth at M s . Sh am

co n t i n u edt o wo rk as an em p l o y ee fo r h er fo rm er em pl o y er wh i l e s h e
was ath o m e “ u n wi n di n g ” i n v es t m en t p o s it i on s i n 2 0 1 0 (wh i ch i td o es n o t ), i n
o rd er t o b e d edu ct i b l e, t h e ex p en s es s h e p ai dwo u l dh av e t o h av e b een o rd i n ary
an d n eces s ary

i n th e co u rs e o f h er b u s i nes s as an em p l o y ee. See s ec. 1 6 2 (a). Th e
ex p en s es s h e rep ort ed fo r h av i n g a h o m e o ffi ce (ren tan du t il i t i es ) an d fo r p ark i n g t o l l s , p ro fes s i o n al s up p li es an ds erv i ces , p ro m o t i o n al g i ft s , co m p u t er ex p en s es , an d l eg al ex p en s es (o th er t h an th e $ 6 ,2 1 0 fo r t h e d i s p u t e wi th h er p ri o r em p l o y er th atth e Co m

m i ss io n er h as co n ced ed ) are s i m p l y n o ts ub s t an t i at edas p ai dfo r an y
s p eci fi c b u s in es s p u rp o s e an dth erefo re can no tb e ch aract eri zedas “ ord i n ary an d
n eces s ary ”. M s . Sh am

h as n o t s h o wnth atan y

p o rt i o n o f h er ap art m en twas u s ed
ex cl u s i v el y

an d o n a reg u l ar b as i s as th e p ri n ci p al p l ace o f th e b us i n es s s he carri ed
o n as an em

p l o y ee as req u i redb y

s ect i on 2 8 0 A (c)(1 ). Sh e h as o ffered n o
co n vi n ci n g ex pl an at io n fo r an y o f t he o th er ex pen s es t o ex p l ai n h o w th ey are rel at ed t o h er al leg edem

p l o y er’ s b u s i nes s . Pers o n al ex pen s es are n o td edu ct i b l e. Sec. 2 6 2; Ham ach er v . Co m m i s s i o n er, 9 4 T.C. 3 4 8 , 3 5 9 (1 99 0 ). Th erefo re, o th er- 5 0 -

[* 5 0 ] th an th os e d educt i o n s t h e Co m m i s s i on er h as co n ced ed , we fi n dth at M s . Sh am

i s n oten ti t l edt o d edu ctSch edu l e A u n rei m b u rs ed em

p l o y ee ex p en s es fo r 2 0 1 0
. D. Sch edu l e A i t em i zed d edu ct i o n s 1
. M ed i cal ex p en s es
a. M ed i cal ex p en s es g en eral l y M ed i cal ex p en s es wh i ch are “ n o tco m p en sat edfo r b y

i n su ran ce o r
o th erwi s e” are d edu ct i b l e, s ub ject t o co m

pu t at i o n al l i m i tat i o n s . See s ec. 2 1 3 (a) (fo r t ax y ears 2 0 1 0 th ro u g h 2 0 1 2 , s u ch ex p en s es are d edu ct i b l e t o th e ex ten tth ey
ex ceed 7
. 5 % o f a t ax p ay er’ s ad ju s t edg ro s s i n co m e; fo r t ax y ears 2 0 13 th ro u g h 2 0 1 5 , s u ch ex p en s es are d edu ct i b l e t o t he ex t en tth atth ey ex ceed 1 0 % o f t h e t ax p ay er’ s ad

ju s t ed g ro s s i n co m e). 1 7 M s . Sh am b ears th e b u rd en t o p ro v e t h ats he p ai dan y ex p en s e an dth ati twas n o trei m b u rs ed
. See W eav er v . Co m m i s s io n er, T.C. M em o . 1 98 4 -6 3 4 , 4 9 T.C.M . (CCH) 2 49 (1 9 8 4 ) (b u rd en m etwh ere t ax p ay er t es t i fi edth atn o cl ai m

fo r rei m b u rs em en twas fi l edan dreco rdco n t ai n edn o
ev i d en ce t o the co n trary ).

1 7 Un l es s o th erwi s e s t at ed , am ou n t s d es cri b edh ere as i t em i zedd educt i b l e m ed i cal ex p en s es are t he am ou n t s b efo re t h e ap p l i cat i o n o f t h e s ect i o n 2 1 3 (a) l i m i tat i on .- 5 1 -

[* 5 1 ] Th e ex p en s e o f h eal th i n s u ran ce fo r t h e t ax p ay er i s i t s el f a d edu ct i b l e
m ed i cal ex p en s e, s ee s ec. 2 1 3 (d )(1 )(D), b u ta t ax p ay er wh o i s s el f-em p l o y edi s p erm i t t ed , t o th e ex t en to f h er earn edi n co m e fro m h er trad e o r b u s in es s , t o cl ai m i t
as a s ep arat e d edu ct i on --as an ab ov e-t h e-l i n e ad j u s t m en t t o i nco m e, as o p po s edt o
an i t em i zedd edu ct i o n, s ee s ec. 1 6 2 (l )(1 ) an d (2 )(a). An y am o u n td educt edfo r h eal th i n s u ran ce can n o tal s o b e t ak en i nt o acco u n ti n co m p u t i n g t h e m ed i cal
ex p en s e d educt i o n u n d er s ect i o n 2 1 3 (a). Sec. 1 62 (l )(3 ).

b
. Sel f-em

pl o y edh eal th i n s u ran ce ex p en s e M s . Sh am

was s el f-em

p l o y edi n th e y ears 2 0 1 1 th ro u g h 2 0 1 5, an d fo r t h e y ears 2 0 1 3 th ro u g h 2 0 1 5 , s he cl ai m eds ep arat e d edu ct i o n s fo r t he ex p en s e o f h er
s el f-em p l o y ed h eal th i n su ran ce (i n s t eado f i n cl u d i n g th atex p en s e am on g h er o t h er i t em i zedm ed i cal ex p en s es o n Sch edu l e A). W e h av e fo un d , s ee s up ra p t . I.H.1 , th atM s . Sh am

p ai dfo r h eal th i n s u ran ce i n th e fo l l o wi n g am o u n ts , wh i ch s h e m ay d eductab o v e t h e l i n e (rat h er t han o n Sch edu l e A):

Year Heal th i n s u ran ce p rem i u m s as cl ai m ed Heal th i n s u ran ce p rem i u m s as al lo wed 2 0 1 3 $ 1 2 ,5 6 1 $ 1 8 ,9 9 6 2 0 1 4 8 ,6 0 5 8 ,6 05 2 0 1 5 8 ,8 3 1 8 ,8 31- 5 2 -

[* 5 2 ] c. Un rei m b urs edi t em izedd edu ct i bl e m ed i cal ex p en ses 2 0 1 0 . Fo r 2 0 1 0 M s. Sh am rep o rt edo n h er ret urn i t em i zedd educt i bl e
m ed i cal ex p en s es t o t al i n g $ 6 1 ,2 3 0 ; h er p o s it i on aft er t ri al i s th atth es e ex p en s es t o t al ed$ 5 8 ,3 09 fo r 2 0 10 . As we n o tedab o v e, s ee s up ra p t . I.H.1 , o f t h e $ 5 8 ,3 0 9
s h e cl ai m s , th e o n ly

ex p en ses th atth e Co m

m i s s i o n er ch al l en g es o n g ro u n d s o f d educt i b i l i ty

are $ 4 3 6 s pen to n aro m at i c o i l s an d$ 2 ,8 7 0 p ai d t o M s . Garci a. M s . Sh am

h as arg u edth atthe ed i b l e aro m at i c o i l s were p res cri b edt o h er, b u th er fai l u re t o o ffer p ro o f p recl u d es an y d edu ct io n . See s ec. 2 13 (b ). M s. Garci a’ s
s erv i ces were n o tm ed ical an dth erefo re were n o td edu ct i bl e. See Green v . Co m m i s s i o n er, T.C. M em o . 2 0 1 0 -1 0 9 , 9 9 T.C.M . (CCH) 1 4 4 4 , 1 4 4 8 (2 0 1 0 ) (h o u sek eep er h iredt o h el p p res erv e m en t al h eal th o f th e “ m et i cu lo u s ” t ax p ay er wi fe was n o ta d edu ct i b l e m ed i cal ex p en s e). Co n s equ en t l y , we h o l dth at M s . Sh am

s ub s t an t iat edm ed i cal ex p en s es o f $ 5 4 ,4 04 fo r 2 0 1 0
. (W e fo u ndab o v e i n p art I.H.1 th atth e $ 6 0 0 d i fferen ce b et ween the t wo am o u n t s i s at tri b u tab l e t o M s . Sh am ’ s ari th m et ic erro r.) Ho wev er, s ect i o n 2 1 3 (a) al l ows a d edu ct i o n o n l y fo r m ed i cal ex p en ses “ n o t
co m p en s at edfo r b y

i n su ran ce o r o th erwi se”, an dwe h av e fo u n d , s ee s up ra p t . I.H.2 .a, th at$ 1 0 ,1 4 9 o f t h o s e ex p en s es were rei m b u rs edb y M s. Sh am ’ s h eal t h i n s u rer. Her i t em i zedd edu ct i b l e m ed i cal ex p en s es fo r 2 0 1 0 are t h erefo re $ 4 4 ,2 5 5
.- 5 3 -

[* 5 3 ] 2 0 1 1 . Fo r 2 0 1 1 M s. Sh am rep o rt edo n h er ret urn i t em i zedd educt i bl e
m ed i cal ex p en s es o f $ 21 ,2 7 2 , an dth e Co m m i s s i on er co n ced es th e am ou n t o f t h e d educt i o n . See s up ra p t . I.H.1 . W e h av e fo u n dthati n 2 0 1 1 s h e recei v ed rei m b u rs em en t s o f $ 4 ,1 12 , s ee s up ra p t . I.H.2 .b , thatredu ce t o t al m ed i cal ex p en s es t o y i el dth e d educt i b l e, u nrei m b u rs edp ort i on ; b uts i n ce t h e Co m m i ss i o ner h as
co n ced edth e am o u n t o f t h e i t em i zedd educt i bl e m ed i cal ex p en s es , h e h as
co n ced edth atth e $ 2 1 ,2 7 2 i s n eto f rei m b u rs em en t s , s o we d o n o tredu ce t h att o t al fu rt her. 2 0 1 2 . M s. Sh am

p ro v edattri al th ati n 2 0 1 2 s h e p ai d$ 2 7 ,6 0 2 i n m ed i cal
ex p en s es , an am o u nts l i g h t l y l arg er th an th e d edu ct i o n o f $ 2 6 ,5 8 2 th ats h e cl ai m ed
o n h er ret u rnan dth atth e Co m m i s s i o n er co n ced es . W e h av e fo u n d , s ee s up ra p t . I.H.2 .b , th ati n 2 0 1 2 s h e recei v ed$ 6 ,6 2 0 i n rei m b u rs em en t s fro m h er h eal th i n s u ran ce co m

p an y . Su ch rei m

b u rs em en t s wo ul dredu ce th e d edu ct i b le am o u n t , an d i f we s ub tract th at am o u ntfro m th e p ro v en ex p en ses , we wo u l d redu ce t h em fro m $ 2 7,6 0 2 t o $ 2 0 ,9 82 . Ho wev er, we h o l dth e Co m m i s si o n er t o h is co n ces s i o n
o f t h e am o u nto f i tem i zedd educt i b l e m ed i cal ex p en ses , an dwe th erefo re al l o w M s . Sh am

th e am o u n ts h e rep o rt edan dth ath e co n ced ed : $ 2 6 ,5 8 2
. 2 0 1 3 . Fo r 2 0 1 3 M s. Sh am rep o rt edo n h er ret urn i t em i zedd educt i bl e
m ed i cal ex p en s es o f $ 16 ,5 5 2 , an dth e Co m m i s s i on er co n ced edth i s am o un tat- 5 4 -

[* 5 4 ] tri al
. 1 8 See s up ra p t . I.H.1 . Becau s e t h e Co m m i s s i o n er h as th u s co n ced ed th e am o un to f t h e u n rei m bu rs edi t em i zedd educt i b l e m ed i cal ex p en s es fo r 2 0 1 3 , we h o l dh i m

t o th atco n ces s i o n an dd o n o tm ak e an y reduct i on s fo r rei m b u rs em en t s o f $ 2 ,3 77 fo r 2 0 1 3 . See s up ra p t . I.H.2
. b
. 2 0 1 4 . W e h av e fo u n d th atfo r 2 0 1 4 M s . Sh am p ai dd edu ct ib l e m ed i cal
ex p en s es o f $ 3,3 0 0 . Th ere were n o i ns u ran ce rei m b u rs em en t s , s o s h e i s en t i t l edt o i t em i zedd edu ct ib l e m ed i cal ex p en s es o f $ 3 ,3 0 0
. 2 0 1 5 . W e h av e fo u n d th atfo r 2 0 1 5 M s . Sh am p ai dd edu ct ib l e m ed i cal
ex p en s es o f $ 67 5. Th ere were n o i n s u ran ce rei m b u rs em en t s , s o s h e i s en t it l edt o i t em i zedd edu ct ib l e m ed i cal ex p en s es o f $ 6 7 5
.

d
. Su m

m ary o f d edu ct i bl e m ed i cal ex p en ses W e h o ldth atth e i t em izedd edu ct i b l e m ed i cal ex p en s es th atM s . Sh am i s
en t i t l edt o d edu ctas u n rei m b u rs edm ed i cal ex p en s es o n Sch edu l e A 1 9 fo r t h e t ax

1 8 Onb ri ef t he Co m

m i s s i o n er arg u es th ati f we fi n d(as we h av e) t h at M s . Sh am ’ s s el f-em

p l o y edh eal th i n su ran ce d edu ct i o n was h i g h er t h an the d educt i o n h e d i dn o tch al l en ge i n th e SNOD, th en we s h o u ld n o t h o l dh i m t o h i s co n ces si o n i n 2 0 1 3 as t o th e am o u n to f M s . Sh am ’ s d edu ct i b le i t em i zedm ed i cal ex p en s es an d s h ou l dl i m i tM s. Sh am t o th e l o wer am ou n t($ 5 ,5 84 , l es s $ 2,3 7 7 i n rei m b u rs em en t s , t o t al in g $ 3 ,2 0 7 ) t h ats he p ro v edattri al . W e d i s ag ree. Th es e are d i s t i n cti t em s.

1 9 Th es e am o u n t s ex cl u d e h eal th i n s uran ce ex p en s es fo r t ax y ears 2 0 1 3 th ro u g h 2 0 1 5 th atM s. Sh am rep o rt edas a s ep arat e d edu ct i o n fo r s el f-em p l o y ed (co n ti n u ed ...)- 5 5 -

[* 5 5 ] y ears 2 0 1 0 th ro u g h 2 0 1 5 are as s tat edb el o w. W e s h o w h ere t he am o u n t s th ats h e cl ai m edattri al , th e am o u n t s th ats h e s ub s tan t i at ed , th e am o u n t s o f rei m b u rs em en t s thats h e recei v ed , an dth e n eti t em i zedd edu ct i b l e m ed i cal
ex p en s es as fo l l o ws : Year Cl ai m ed Sub s t an t i at ed Rei m b u rs ed A l l owed 1 2 0 1 0 $ 6 1 , 2 3 0 $ 5 4 ,4 0 4 $ 1 0 ,1 4 9 $ 4 4,2 5 5 2 0 1 1 2 1 ,2 7 2 2 1 ,2 7 2 4 , 1 1 2 2 1 ,2 7 2 * 2 0 1 2 2 6 ,5 8 2 2 7 ,6 0 2 6 , 6 2 0 2 6 ,5 8 2 * 2 0 1 3 16 ,5 52 1 6 ,5 5 2 2 , 3 7 7 1 6 ,5 5 2 * 2 0 1 4 6 ,8 75 3 ,3 0 0
--- 3 ,3 0 0 2 0 1 5
--- 6 7 5
--- 6 7 5
1 Am o u n t s thatare al l o wed p u rs u an tt o a co n ces s i o n o r ag reem en to f t h e p art i es are i n d i cat edwi th an “ * ”. 2
. Ch ari t ab l e co n tri b u t i o n s Sect io n 1 7 0 (a) al l o ws as a d edu ct i o n an y ch ari t ab l e co n tri b ut i o n m ad e wi th i n th e t ax ab le y ear. To qu al i fy as a d edu ct i o n, the co n tri b ut i o n m us tb e m ad e t o a d o nee o rg an i zat i on d es cri b edi n s ect io n 1 70 (c), i n cl u d i n g , i n t er al i a, “ [a]
co rp o rat i o n, tru st , o r co m m u ni ty ch es t , fu n d , o r fo un d at i o n * * * o rg an i zedan d
o p erat edex cl u s i v el y fo r rel i g i o u s , ch ari t ab l e, s ci en t i fi c, l i t erary , o r edu cat i o n al

1 9 (...co n t i nu ed ) h eal th i n s u ran ce u n der s ect i o n 1 6 2 (l )). Fo r 2 0 11 an d 2 0 1 2 M s . Sh am d idn o t cl ai m a s ep arat e d edu ct i o n fo r s el f-em pl o y edh eal th i ns u ran ce b u trat h er el ect edt o i n cl u d e t h atex p en s e as p arto f h er u n rei m bu rs ed m ed i cal ex p en s e d edu ct i o n .- 5 6 -

[* 5 6 ] p u rp o ses ”. Dedu ct i o n s fo r ch ari t ab le co nt ri bu t i o n s are al l o w ab l e o n l y i f
v eri fi ed un d er t h e reg ul at i o n s p res cri b edb y th e Secret ary . Sec. 1 7 0(a)(1 ). Th e d educt i b i l i ty

o f a ch ari t ab l e co n tri b u ti o n i s g en eral l y l i m i tedt o 5 0 % o f an i n d i v i du al t ax pay er’ s “ co n tri b u t i o n b as e” fo r th e t ax ab l e y ear; an y ex ces s m ay

b e carri ed fo rwardfo r t h e s ucceed i n g fi ve y ears . See s ec. 1 7 0 (b )(1 ). Fu rt her, ch ari t ab l e co n tri b u t i o n s o f cas h o r p ro p ert y o f $ 2 5 0 o r m o re m

u s t b e s ubs t an t i at edb y a co n t em p oran eo u s wri t t en ackn o wl ed gm en t(“ CWA”) fro m th e d o nee. See s ec. 1 7 0(f)(8 ); 2 6 C.F.R. s ec. 1
. 1 70 A-1 3(f)(1 ), In co m e Tax Reg s . A CWA i s “ co n t em

po ran eo u s” i f i ti s o bt ai n edb y th e t ax p ay er o n o r b efo re th e earl ier o f t h e d at e t h e t ax p ay er fi l es th e o ri g in al retu rnfo r th e t ax ab l e y ear o f t h e
co n tri b u t i o n o r t h e du e d at e (i ncl u d i n g ex ten s i o n s ) fo r fi l i n g th e o ri g i n al retu rn fo r th e y ear. Sec. 1 70 (f)(8 )(C); 2 6 C.F.R. s ec. 1 .1 7 0 A -1 3 (f)(3 ). Th at ack n owl ed gm en t , wh i ch m us t b e fu rn i s h edb y

th e d o nee, m

us t(1 ) s t at e th e am o u n t
o f cas h an dd es cri b e o th er p ro p ert y co nt ri b u t ed , (2 ) i n d i cat e wh eth er t h e d o n ee
o rg an i zat i o n p ro v i d edan y g o o ds o r s erv i ces i n co ns i d erat i o n fo r th e co n tri b u t i o n , an d (3 ) p ro v i d e a d es cri p t io n an dg o o dfai th es t im at e o f t h e v al u e o f an y g o o d s o r
s erv i ces p ro vi dedb y

the d o n ee. Sec. 1 7 0 (f)(8 )(B); 2 6 C.F.R. s ec. 1 .1 7 0A-1 3 (f)(2 ). Th ere i s n o ev i d en ce t h atthe en t i t i es t o wh ich M s . Sh am cl ai m s s h e m ad e ch ari t ab le co n tri b u t i on s are q u al i fy i n g d o n ee o rg an i zat i o n s u n d er s ect i on 1 7 0 (c).- 5 7 -

[* 5 7 ] Ev eni f t h ey

were, we h av e n o ev i den ce t h atM s . Sh am ’ s p aym en t s were i n fact d on at i o ns . Rat h er, t h es e en t i t i es ap p ear t o b e o rg an i zat io n s t hato ffer
m ed i t at i o n s erv ices , an dth at fact s u g ges t s , i n l i g h t o f o th er ev i d en ce, t h at M s . Sh am ’ s p aym en t s t o th em were m o re l i k el y

t o h av e b een co n s id erat i on fo r g o o d s o r s erv i ces fro m

th e o rg an i zat i o n , wh ich wo u ldp recl u d e th ei r d edu ct i b i l i t y . See 2 6 C.F.R. s ec. 1 .1 7 0 A-1 (h ), In co m e Tax Reg s . M s . Sh am

cl ai m s d edu ct i o n s fo r ch ari t ab l e co n tri b u t i o n s fo r each o f th e y ears 2 0 1 2 th ro u g h 2 0 1 5 . Sh e h as p ro v i d edn o d o cu m en t ary ev i d en ce o th er t h an h er cred i t card acco u n ts t at em en t s fo r 2 0 1 3 an d2 0 1 5 . (Sh e al s o p ro ffers h er t ax retu rn s fo r t h e y ears fo r wh i ch s h e rep o rt ed an i t em izedam o u n tfo r “ G i ft s t o Ch ari ty ” (2 0 1 2 th ro u g h 2 0 1 4 ), b u tth es e ret u rn s are n o tev i d en ce, s i nce t he rep o rt i n g o f an i t em

o n a retu rn d o es n ots ub s t an t i at e t h ati t em . See Lawi n g er v . Co m m i s s i o n er, 1 0 3 T.C. 4 2 8 , 4 3 8 (1 9 9 4) (“ T ax retu rn s d o n otes t ab l i s h th e t ru t h
o f t h e fact s s t at ed th erei n ”).) As t o th e $ 1 ,5 00 p aym en tt o Vi p as s an a M ed i t at i o n i n 2 0 13 an dth e $ 5 0 0 p aym en t t o No rt h wes tVi p as s an a i n 2 0 1 5 , we fi n dth atM s . Sh am h as fai l edt o
m eetth e s ub s t an t i at i o n req u i rem en t s fo r co nt ri b u ti o n s o ver $ 2 5 0 s etfo rt h ab o v e. W i th res p ectt o th e $ 60 p aym en tt o Pari y at t i , WA, s h e h as fai l edt o es t ab li sh th at th i s was a ch ari tab l e d on at i o n an dn o ta p aym en t o f co ns i d erat i o n . W e h o l dth at- 5 8 -

[* 5 8 ] s h e i s n o ten t i t l edt o d edu ctth e fo l l owi n g am ou n t s s h e cl ai m s were ch ari t ab le co n tri b u t i on d educt i o n s , o r t o carryfo rward an y “ u n u s ed ” am o u n t s th ereo f: $ 2 ,3 7 0 fo r 2 0 1 2 ; $ 3 ,1 0 0 fo r 2 0 1 3 ; $ 1 ,0 7 2 fo r 2 0 1 4 ; an d$ 5 6 0 fo r 2 0 1 5
. E. Sch edu l e C ex pen s es Sect io n 1 6 2 (a) al l o ws “ as a d edu ct i o n al l th e o rd i n ary an dn eces s ary
ex p en s es p ai d o r i n cu rreddu ri n g the t ax ab l e y ear i n carry in g o n an y trad e o r b u s i n es s ”. To p ro v e en t i t l em en tt o d eductan ex p en s e, t h e t ax p ay er m u s tp ro v e
n o to n ly th e facto f t h e ex p en d i tu re b u tal s o th e b u s in es s p u rp o s e. A t ax p ay er’ s g en eral s t at em en tth atex p en s es were p ai di n p urs u i to f a trad e o r b u s i n es s i s i n s u ffi ci en tt o es t ab l i s h th atth e ex p en s es h ada reas o n ab l y d irect rel at i o ns h i p t o
an y s u ch trad e o r b u s i n es s . Ferrer v . Co m m i s s i o n er, 5 0 T.C. 1 7 7 , 1 8 5 (1 96 8 ), aff’ dp er cu ri am , 4 0 9 F.2 d1 3 5 9 (2 dCi r. 1 9 69 ). Pers o n al ex p en s es are g en eral l y
n o tal l owedas d edu ct i o ns . Sec. 2 62 (a). 1
. Ren t/ l eas e Th e ev i d en ce s h o ws th atM s . Sh am u s ed Ap art m en t1 6 A fo r p ers o n al rat h er th an b us i n es s p u rp os es . See s up ra p t . I.D. Ins up p orto f h er co n t en t i o n thats h e
u s ed itas an o ffi ce, s h e as s ert s th ats h e d i d n o t s eek a d edu ct i o n o f 1 0 0% o f t h e
ren t(b u td oes n o ts t at e wh atp o rt i o n o f t h e ap art m en t was u s ed“ ex cl us i v el y ” as an- 5 9 -

[* 5 9 ] o ffi ce); 2 0 s h e al s o cl ai m edd edu ct i on s fo r t h e ex p en s e o f m eet i n g s h el d
o u t s i d e o f t h e ap art m en t --i n res t au ran ts , fo r ex am p l e--an dwe d o n o tfi n d h er arg u m en tth atth e “ s m el l [as s oci at edwi th u si n g th e ap art m en tfo r o th er t h an b u s i n es s u s e] l i n g ers ” t o b e a co n v i n ci n g arg u m en t th ats h e u s ed the en t i re s p ace
as an o ffi ce. Wh en p ro m pt ed , M s . Sh am

was v ag u e ab o u twh ere s he l i v edwh i l e
s h e p ai dren t o n Ap art m en t1 6A, an dwe co ncl u d e th ati twas i n fact h er res i d en ce. W e h o l dth atth e ren tex p en s e o f Ap art m en t 1 6A was p ers o nal , thats h e d i dn o t p ro v e th atan y p o rt i o n o f t h e ap art m en t was u s edex cl u s i v el y fo r h er b u s i n es s , an d th ats h e i s n oten t i t l ed t o d edu ctan y p o rt io n o f h er ren tfo r an y o f t h e y ears cl ai m ed(2 0 1 1 t h ro u gh 2 0 1 3). 2
. Dep reci at i o n M s . Sh am

d i d n o t i d en ti fy

an y o f t h e d ep reci ab l e p ro pert y fo r wh i ch s h e cl ai m eda d edu ct i o n ; s he o fferedn o s ub s tan t i at i o n o n th i s i s s u e. W e acco rd i n g l y d en y an y cl ai m edd ep reci at io n d edu ct i o n fo r each o f t h e y ears 2 0 1 1 th ro u gh 2 0 1 4
.

2 0 As we n ot edab o v e i n p artII.C, s ect io n 2 80 A(c)(1 ) req ui res th at , i n o rd er fo r an em p l o y ee t o d edu cta p o rt i o n o f t he co s to f h er res i d en ce as a “ h o m e o ffi ce” b u s i n es s ex p en s e, s h e m

u s tu s e a p o rt i o n o f t he h o m e ex cl us i v el y an do n a reg u lar b as i s as th e p ri n ci pal p l ace o f t h e b u s in es s s h e carri es o n as an em p l o y ee.- 6 0 -

[* 6 0 ] 3
. Offi ce ex pen s e M s . Sh am

cl ai m edo ffi ce ex p en s e d edu ct i o n s o f $ 8 ,0 8 5 fo r 2 0 1 1 , $ 6 ,1 3 0 fo r 2 0 1 2 , an d$ 6 ,2 9 3 fo r 2 0 1 3, am o u n t s th atl arg el y co rres po n d edwi th t h e i n v o i ces
s h e p ro ffered t o s ho w th e “ ex p en s es p ai dag ai n st i nco m e” b y Dr. Ku kreja. As
ex p lai n eds up ra p art . I.G.4 , we fi n d t h atM s . Sh am d i dn ots ub s t an t i at e t hats h e i n fact p ai dth es e ex pen s es . Acco rd i n g l y , we fi n dth ats h e i s n o t en ti tl edt o d educt i o n s fo r t hes e ex p en s es . W i th res p ectt o an y o th er am o un t s rep o rt edas
o ffi ce ex pen ses (i n cl u di n g th e $ 1 ,0 0 0 ch eckt o h ers el f t hatM s. Sh am d es cri b edas

“p et ty cas h ” fo r 2 01 2 an dch eck s i n v ari o u s am o un t s p ai dt o v ari o u s p ers o ns i n th es e t hree y ears , 2 1 n o ne o f wh o m M s. Sh am

h as es t ab l i s h edh adan y

co n n ect i o n t o h er b u si n es s ), we can d i s cern n o s ub s t an t i at io n o f th e b us i n es s p u rp os e fo r an y
ex p en s e. Acco rd i n gl y , we d en y th e o ffi ce ex p en s e d edu ct io n fo r each o f t he y ears cl ai m ed(2 0 1 1 t h ro u gh 2 0 1 3).

2 1 In 2 0 12 M s . Sh am

p ai d$ 2 ,6 7 5 t o M s . Garci a, wh i ch s h e arg u es i s a d educt i b l e ex p en s e fo r “ o ffi ce h el p / m ai n t en an ce”. In l i g h to f M s . Sh am ’ s o th er u n s ubs t an t i at ed cl ai m

th atp aym en t s o f $ 2 ,8 7 0 t o M s . Garci a i n 2 01 0 were fo r m ed i cal ex p en s es an d t h e co m p l et e l acko f ev i d en ce as t o wh ats p eci fi c s erv i ces M s . Garci a i n factd i dp ro v id e, we d en y an y d edu ct io n fo r t h es e p aym en t s (as wel l as o th er p aym en t s m ad e t o o th er i nd i v i du al s wh o se al l eg eds erv i ces rem ai n u n d i s cl o s ed , fal li n g far s h o rto f b ei n g s ub s t an t iat edas a b us i n es s ex p en s e).- 6 1 -

[* 6 1 ] 4
. Ut i l i t i es Th e Co m m is s i o n er d i dn o tch al l en g e M s . Sh am ’ s d educt i o n s fo r u t i li t i es fo r 2 0 1 1 , 2 0 1 2 , an d 2 0 1 3. Fo r 2 0 1 4 an d2 0 1 5 , M s . Sh am t o okth e p o s it i o n th ath er
u t i l i ty ex p en s es were d edu ct ib le b ecau s e t h ey were p ai d fo r h er al l eg edh o m e
o ffi ce atAp art m en t 1 6 A. Becau s e we fi n dth ats h e d i dn o t s u s t ai n h er b u rd en t o p ro v e en t i t l em en tt o an y

d edu ct i o n s as s o ci at edwi th a h om e o ffi ce, we d en y th e d educt i o n s cl ai m edfo r u t i l i t i es fo r 2 0 1 4 an d 2 0 1 5
. 5
. Car/ tru ck Pet i t i o ner cl ai m edcar an dtru ckex p en s e d educt i o n s o f $ 9 ,8 2 1 fo r 2 0 1 1 , $ 7 ,3 7 2 fo r 2 01 2 , an d $ 7 ,5 7 7 fo r 2 0 1 3 . Becau s e p as s en g er au t o m o bi l es co n s t i tut e

“ l i s t edp ro p ert y ”, p et i t i o n er’ s rep o rt edcar an dtru ck ex p en s es are s ub

jectt o th e h ei g h t en eds ub s t an t i at io n req u irem en t s d es cri bedab ov e i n p artII.A.2 . See Fern an dez v
. Co m

m i ss i o n er, T.C. M em o . 2 0 1 1 -2 1 6 , 1 02 T.C.M . (CCH) 2 4 2 , 2 4 4 (2 0 1 1). To s at i s fy

th es e req u i rem en t s , “ a t ax p ay er m u s t s ub s t an t i at e each el em en t
o f an ex p en d i tu re o r u s e * * * b y ad equ at e reco rd s o r b y

s u ffi ci en t ev i d en ce
co rro b o rat in g * * * [h er] o wns t at em en t .” 2 6 C.F.R. s ec. 1 .2 7 4 -5 T(c)(1 ). A
co n tem p o ran eo u s t i m e l og o r o th er reco rd“ m ad e at o r n ear t h e t i m e o f t h e
ex p en d i tu re o r u s e” i s affo rd ed- 6 2 -

[* 6 2 ] a h i g h d eg ree o f cred i b i l i ty n o tp res en t wi th res p ectt o a s t at em en t p rep areds ub s equ en t * * * [t o th e reco rd edev en t] wh en g en eral l y th ere i s a l acko f accu rat e recal l . Thus , th e co rro b o rat i v e ev i d en ce req u iredt o s up p ort a s t at em en tn otm ad e at o r n ear t h e t i m e o f t h e ex p en d itu re o r u s e m

u sth av e a h i g h d eg ree o f p ro b at i ve v al u e t o el ev at e s u ch s t at em en tan dev i d en ce t o t h e l ev el o f cred i b i l i ty refl ect edb y

a reco rdm ad e ato r n ear t h e t i m e o f t he ex p en d i tu re o r u s e s up p o rt edb y

s u ffi ci en td o cu m en t ary

ev i d en ce. Id .; s ee al s o Fl ak e v . Co m m i s s i o n er, T.C. M em o . 2 0 1 4 -7 6 , at* 1 1 -* 1 2. Lack i n g ad equat e reco rd s , the t ax p ay er m u stp ro duce o th er cred ib l e ev i d en ce s uffi ci en tt o
co rro b o rat e h er o wn s tat em en t s co n cern in g b us i n es s u s e. 2 6 C.F.R. s ec. 1 .2 7 4
- 5 T(c)(3 ). Th e au t o m o b i l e ex p en s es M s . Sh am h as rep o rt edd o n o trel at e t o a v eh i cl e th ats h e i n fact o wn ed ; rat h er, Dr. Ku kreja l en th er o n e o f h i s au t o m o bi l es an dp ai d th e ex p en s es as s o ci at edwi th h er u s i n g t h e v eh i cl e, as refl ect edi n th e i n v o i ces
s h o wi n g “ ex p en s es p ai dag ai n st[M s . Sh am ’ s ] i n co m e”. Th e ex p en s es o n th o s e i n v o i ces --$ 6 ,4 5 5 fo r au t o m o b i le m ai n t en an ce i n 2 0 1 1 ; $ 5 , 6 4 0 fo r au to m o b i l e rep ai rs i n 2 0 1 2 ; an d$ 5 ,5 2 1 fo r au t o rep ai rs i n 2 0 1 3 --were l es s t h an th e am o u n t s rep o rt edo n h er ret u rn i n each y ear. W e fi n d t h atM s . Sh am i s n o ten t i t l edt o th e car/ tru ckex p en s e d edu ct i o n s i n t h e am ou n t s s etfo rt h i n t h e i n v oi ces b ecau s e s h e d i dn o t i n cu r t hes e ex p en s es ; as t o th e rem ai n i ng am o un t s cl ai m ed , we h o l do n th e- 6 3 -

[* 6 3 ] b as i s o f th e h ei g h t en edreq u irem en ts o f s ect i o n 2 7 4 (d ) t h ats h e fai l edt o
s ub s t an t i at e t h em . 6
. Trav el Trav el ex pen s es are al so s ub jectt o th e h ei gh t en eds ub s t an t i at i o n req u i rem en t s o f s ect i o n 2 7 4 (d ). M s . Sh am co n ced edtrav el ex p en s es fo r 2 0 1 1 , an d fo r o th er y ears th e Co m

m i s s i on er h as co n ced eds o m e ex pen s es fo r t rav el t o
m ed i cal co n feren ces fo r p ro fes s i o n al d ev el o p m en t . See s up ra p t . I.G.2 .c.; i n fra p t . II.E.7 .f. St il l at i s su e are t h e y ears 2 0 12 th ro u g h 2 0 1 5 , fo r wh i ch M s . Sh am
s eek s d edu ct i o ns at tri b u t ab le t o h o t el , m eal s, 2 2 an dai rfare fo r t ri p s t o Am ri t s ar, In d i a (t o v is i th er fat h er); Am s t erd am , Neth erl an d s (rel at edt o a s o ft -s ki l l s trai n in g ); Pari s, Fran ce; an dCh arl o t t e, No rth Caro li n a, an do th er h o t el an d tran s po rtex pen s es s h e s ub m i t s o n b ri ef were t o s ee o r m eetwi th p ro fes s i o n al s i n th e fi el d s o f Eri ck s o n i an h y p n o s i s an dM RP. See s up ra p t . I.G.2 .d . So m e o f t h e trav el ex p en ses th atM s . Sh am rep o rt s are d i fferen t fro m o r g reat er t h an th e
ex p en s es s h e rep ort ed o n h er t ax retu rn s . M s. Sh am rel i es p ri m ari ly

o n cred i tcard
s t at em en t s an do n h er arg u m en ti n h er b ri ef t o ex pl ai n t h es e d edu ct i o n s ; s h e h as
n o ts ub s t an t i at edwi th ev i d en ce a b u s i n es s p u rp o s e fo r an y o f t h es e t ri ps . No n e o f

2 2 A s m al l p o rt i o n o f th e ex p en s es was cl ai m edfo r m eal s , an ex p en s e fo r wh i ch s h e s ep arat el y

cl ai m eda d edu ct i o n fo r each o f t h e y ears ati s s u e. See i n fra p t . II.E.7 .g .- 6 4 -

[* 6 4 ] th e t ri p s p ert ai nedt o m ark et i n g o r b u s i n es s d ev el o p m en t u n d ert ak enfo r h er
o n l y p ay i n g cl i en t du ri n g th e y ears ati s s u e, wh o s e b u s i n es s i n t eres t s were fo cu s ed i n ex p an d i n g an an es th es i o l o g y p ract i ce i n t o th e y etu np en et rat edareas o f t h e New Yo rkan dNew J ers ey

m ark et s . Acco rd i n g l y , o th er t h an th e t rav el ex p en s e t h atthe Co m m i s s i o n er co n ced edas a p o rt i o n o f “ Oth er” ex p en s es rel at edt o co n feren ces fo r p ro fes s i o n al d ev el o p m en t (ad dres s edb el o w), we d en y th e t rav el ex p en s e d educt i o n fo r each o f t h e y ears cl ai m ed(2 0 1 2 th ro u g h 2 0 1 5 ). 7
. Oth er 2 3 Fo r t ax y ears 2 0 11 th ro u g h 2 0 1 5 , M s . Sh am rep o rt edad d it i o n al ex p en s es o n h er Sch edu l es C cl as s i fi edas “ o t h er”, s o m et i m es d es cri b i n g d i fferen t l y i n d i fferen t y ears wh at ap p ear t o b e t h e s am e cat eg o ri es o f ex p en s es , as fo ll o ws :

a. “ Lo cal tran s p o rt ” Th i s ex p en se ap p ears t o co rres po n dwi th t ax i , ri de-s h ari ng , s h u t t l e, an d
o th er t ran s i tp aym en t s , fo r wh ich M s . Sh am p ro v i d edcred i t cards t at em en t s an d
s o m e s p read s h eet s i n d i cat i n g the d at es an d am o u n t s o f th e p aym en t s , b u tn o i n fo rm at i o n t o s upp o rt th ei r s up p o s edb u si n es s p u rp o se. Fo r m o sty ears th e t o t al
ex p en s e rep o rt edd o es n otco rres p o n d cl earl y t o th e am o u nt s M s . Sh am co n t en d s

2 3 M s . Sh am

co nced edth e “ St o rag e” ex p en ses s h e rep o rt edi n th i s cat eg o ry fo r 2 0 1 1 , 2 0 12 , an d 2 0 1 3
.- 6 5 -

[* 6 5 ] s h e p ai d --fo r i n s t an ce, fo r 2 0 1 2 s h e cl ai m ed$ 4 ,6 4 7 i n l o cal tran sp o rto n h er retu rn , b u t h er l i t i g at i n g p o s i ti o n cl ai m edo n l y $ 2 ,4 50 o f l o cal tran s p o rt . Fu rt h er,
o th er t han th e t ran s p ort at i o n ex p en s es fo r m ed ical p u rp o ses th atM s . Sh am rep o rt edan dth atth e Co m m i s s i o n er co n ced edfo r 2 0 10 i n th e am o u n to f $ 1 ,0 0 2 , M s . Sh am ’ s reco rd s d o n o t cl earl y d el i n eat e b et ween ex p en s es al l eg ed l y m ad e fo r b u s i n es s tran s p o rt at i o n an d th o s e m ad e fo r an y o th er t ran sp o rt at i o n . Oth er t h an th e co n ced edam o u n ts , we h o l dth atM s . Sh am h as n o ts ub st an t i at edh er l o cal tran s po rt at i o n ex p en s es an di s th erefo re n o ten t i tl edt o th e d edu ct i o n s s h e cl ai m ed fo r t h em . b
. “ Du es an d sub s cri p t i o n s ” In s up p o rto f h er d edu ct i o n fo r “ p ro fes s i o n al s ub s cri p t i o n s ”, M s. Sh am ’ s cred i tcards t at em en t s s h o w ex pen d i tu res fo r p eri o di cal s thati n cl u de t h e New Yo rkTi m es , the Fi n an ci al Ti m es , th e Eco n o m i s t , an dp ub li cat i o n s reg ard i n g
wo m en i n fi nan ce. Sh e al s o p ai ds m al l am o un t s t o Fi n an ci al W o m en ’ s As s oci at i o n o f New Yo rk(“ FWA”) an dYo u n g J ewi s h Pro fes s io n al s (“ YJ P”) i n
co n nect io n wi th du es an d n et wo rk i n g ev en t s i n wh i ch s h e p art i ci p at ed wi th th o s e
as s o ci at io n s . Th e p u rch as e o f g en eral ci rcu l at i o n n ews p ap ers i s a n on -d edu ct i b le p ers o n al
ex p en s e. St emk o ws k i v . Co m m i s s i o n er, 6 9 0 F.2 d4 0 , 4 7 (2 dCi r. 1 9 82 ), aff’ g i n- 6 6 -

[* 6 6 ] p art , rev ’ g i n p art7 6 T.C. 2 5 2 (1 9 81 ). Oth er t han th e ex p en s es M s . Sh am p ai dd irect l y

t o t h e p ro fes s i o n al as s o ci at io n s i n wh i ch s h e p art i ci p at ed , h er cl ai m s fo r d edu ct i o n s i n t h i s cat eg o ry were l arg el y

u n s ub s t an t i at ed . W e fi ndth ats h e i s
en t i t l edt o d edu ct i o n s fo r o nl y th e fo ll o w i n g am o u n t s : fo r 2 0 12 , $ 10 0 (t o FWA); fo r 2 0 1 3 , $ 1 02 (t o YJ P); fo r 2 0 1 4 , $ 1 6 5 (t o FWA); fo r 2 0 1 5 , $ 6 4 5 ($ 5 4 3 t o FWA
an d $ 1 0 2 t o YJ P).

c. “ IT an d t ech n ol o g y ” M s . Sh am

h as o ffered n o cred i b l e ex p l an at i o n o f h er d edu ct i o n ch aract eri zedas “ IT an dt ech n o l o g y ” fo r an y o f t h e y ears ati s s u e. Sh e h as n o t
s ub s t an t i at edan y

ex p en s es u n derl y i n g thes e d edu ct i o n s . d
. “ Tel ep h on e an di n t ern et ” Th e b i ll s fo r i n t ern ets erv i ce s h o w th atthey were m ai ledt o th e ad dres s o f Ap art m en t1 6 A, wh i ch we h av e fo u n dt o b e M s . Sh am ’ s p ers o nal res i d en ce. Th e b i l l s fo r t h e t el ep h o n e are ap p aren t l y fo r cel l u l ar p h o ne s erv i ce. M s . Sh am p ro ffered n o s peci fi c b u si n es s p u rp o s e fo r t h es e ex p en s es o th er t h an h er g en eral
s t at em en t s , an d we fi n d th atth e t el ep h o n e an di n tern ets erv i ces were fo r p ers o n al
u s e. M s . Sh am

h as fai l edt o m eetth e s tri cts ub s t an t iat i o n req u i rem en t s o f s ect i o n 2 7 4 (d ) fo r t h es e d edu ct i o n s .- 6 7 -

[* 6 7 ] e. “ Bu s in es s res earch an des t ab l i s h m en t” M s . Sh am

cl ai m ed$ 4 ,7 90 as a d edu ct i o n fo r b us i n es s res earch an d
es t ab l i s h m en tfo r 2 0 11 (an d no n e fo r an y o th er y ear ati s s u e). Sh e h as n ot i d en t i fi ed , m

u ch l es s s ubs t an ti at ed , an y ex p en s es th atco rres p o n dwi th th i s d educt i o n . f. “ Pro fes s i o n al d ev el op m en t ”, “ co n feren ces ”, an d“ co n t i n u i n g

edu cat i on ” Th e Co m m is s i o n er h as co n ced edthe d edu ct ib i l i ty o f ex p en s es as s o ci at ed wi th b us i n es s trav el an dat t en d an ce atm ed i cal co n feren ces , t o t al i n g $ 5 ,9 8 1 fo r 2 0 1 2 , $ 1 0 ,7 43 fo r 2 0 14 , an d$ 5 5 4 fo r 2 0 15
. Th e rem ai n i n g ex pen s es i n th i s cat eg o ry --p ai di n th e y ears 2 0 1 2 th ro u g h 2 0 1 5 --are i n d i s p u t e. Th es e rel at e t o p ro g ramm i n g fo r Eri ck s o n i an h y p n o s i s , M RP, an do th er “ s o ft -s k i l l s ” t rai n i n g th atM s. Sh am arg u es are o rd i n ary an d
n eces s ary ex p en ses o f h er b u s i n es s . As wi th o th er ex p en s es ati s s u e, t h e am o u n t s rep o rt edfo r t h i s cat eg o ry o n M s . Sh am ’ s t ax retu rn s d i ffer fro m th e am o u n t s s h e ad v an cedi n h er l i t i g at i n g p o s i ti o n . Year It em Retu rn p o s it i o n Li t i g at i n g p o si t io n 2 0 1 2 Pro fes s i o n al

d ev el o p m en t $ 6 ,8 2 5 $ 2 ,2 7 4 Co n feren ces --- 5 ,9 8 1- 6 8 -

2 0 1 3 Pro fes si o nal

d ev el o p m en t 7 ,8 60 8 ,7 2 8 2 0 1 4 Pro fes s i o n al

d ev el o p m en t 7 ,5 24 9 ,3 0 4 Co n feren ces 7 ,7 01 1 5 ,5 8 2 Co n t i nu i n g edu cat i on 7 ,8 23 --- 2 0 1 5 Pro fes si o nal

d ev el o p m en t 6 ,2 74 6 ,2 4 4 Co n feren ces 5 54 5 5 4 Co n t i nu i n g edu cat i on 9 ,6 47 6 ,9 0 2 M u ch o f wh atM s . Sh am

h as o ffered o n t h i s p o i n t --i n cl u d in g th e i d en t i t i es o f s o m e
o f t h e p ro fes s io nal s wh o h av e h o s t edo r h el d t h es e co n feren ces an dtrai n in g
s es s i on s --h as b een n o t s w o rnt es t i m o n y attri al b utarg u m en to n b ri ef t h at , as s u ch , we can n o tco n si d er. See Ru l e 1 4 3 (c). W e res o l v e t h i s i s s ue ag ai n s tM s . Sh am b ecau se s h e h as n o t p ro v edth ath er p art i ci p at i o n i n th es e s o ft -s k i l l s trai n i n g s es s i o n s an dp ro g ram s “ [m ] ai n t ai n s o r i m p ro v es s k i ll s req ui redb y

th e i n d i vi du al i n h i s em

p l o ym en t o r o th er t rad e o r b u s i n es s ”. 2 6 C.F.R. s ec. 1
. 1 6 2 -5 (a)(1 ), In co m e Tax Reg s . Th e p u rp o s e o f t h es e
s es s i on s was n o tt o l earn fro m a p ro fes s i o n al i n h er fi el do f b u s i nes s h o w t o i m p ro v e a s p eci fi c s k i l l n eed edi n th e b us i n es s , n o r was i t t o m eet p ro fes si o n al s [* 6 8 ]- 6 9 -

[* 6 9 ] wh o m

s h e was p u rs u i n g as p o t en t i al cl i en t el e wh o m i g hth i re h er as a b u s i n es s co n s u l t an t . Rat h er, s h e at ten d edth es e s es s i on s t o i m p ro v e h er ab i l i ty

t o
m ak e p ers u as i v e i n-p ers o n p res en t at i o n s ; an di n s om e s es s i o ns , th e fo rm o f p ers u as i o n u n d ert o o k u n co nv en t i o n al m ean s , s u ch thatth e co n t en to f t h e co u rs es d i dn o t atal l res em

b l e s k il l s s h e wo u l dn eedt o p ro m o t e t h e b u s in es s o f h er o n l y cl i en t, an an es th es i o l o g is t . Atth e s am e t i m e M s. Sh am t o o k t h i s trai n i n g , s h e was al s o reco v eri n g fro m

trau m a an ds ep arat in g h er affai rs fro m th o s e o f Dr. Ku kreja, wh o s h e b el i ev edh ad a n eg at i v e p s y ch o l og i cal i m p acto n h er. Th e g reat er wei g ht
o f t h e ev i d en ce s up p o rt s th e co n cl us i on th atth es e co urs es l ack edb u s i n es s p u rp os es . W e co ncl u d e t h at h er p ri n ci p al i n t eres t i n t h es e co n feren ces was n o tt o i m p ro v e h er s k i l l s as a b u si n es s co n s ul t an t b u tt o b ol st er h er s en s e o f wel ln es s an d h er ab i l i ty

t o en g ag e i n i n t erp ers o n al rel at i o n sh i p s. Of co u rs e a p ers o n i s free t o at t en d s u ch ev en t s , b u t th ey are n o tp ri m ari ly

b us i n es s ev en t s . Acco rd i n g l y , M s . Sh am

i s n oten ti t l edt o d edu ct i o n s i n ex ces s o f t h o s e t he Co m m i ss i o n er h as
co n ced ed
. g . “ M eal s an den t ert ai n m en t ” Th e Co m m is s i o n er d i dn o tch al l en g e t h e d educt i o ns th atM s . Sh am cl ai m ed fo r m eal s an d en t ert ai n m en t fo r 2 0 1 1 , 2 0 12 , an d 2 0 1 3 . Fo r 2 0 1 4 an d2 0 1 5 , th e Co m m i s s i o n er co n ced edM s . Sh am ’ s rep o rt edex p en s es i n t h i s cat eg o ry , b u twi t h- 7 0 -

[* 7 0 ] th e cav eatthats h e d i dn o tredu ce t h es e ex p en s es b y 5 0 % as req u iredb y
s ect i on 2 7 4 (n ), wh i ch M s . Sh am ad m i t t ed . W e acco rd i n g l y h o ldth atM s . Sh am

i s
en t i t l edt o d edu cth al f o f t h e ex p en s es s h e as s ert s s he h adi n th o s e t wo y ears : $ 6 2 8 o f t h e ag reedam o un to f $ 1 ,2 5 5 fo r 2 0 1 4 an d $ 5 0 0 o f t h e ag reedam o u n to f $ 1 ,0 0 0 fo r 2 01 5
.

h
. “ Ou t si d e/

p ro fes si o n al s erv i ces ” M s . Sh am

cl ai m ed , i n th i s cat eg o ry , d edu ct i o n s as s o ci at edwi th
ex p en d i tu res atth e U.S. Po st al Serv i ce, Pri n t ec, Go o g l e Serv i ce, an d p ro fes s i o n al
acco u n t in g s erv i ces refl ect ed o n h er p ers o n al cred i t cards t at em en t s . Sh e d i dn o t
s ub s t an t i at e b u s i n es s p u rp o ses fo r t h e ex p en d i tu res , s o t o th e ex t en tth ey were d i s al lo wedi n th e SNOD, we fi n dth es e d edu ct io n s were p ro p erl y d en ied
. Ho wev er, M s . Sh am ’ s t ax p rep arat i o n ex p en ses were $ 30 0 fo r 2 0 1 2 an d $ 8 0 0 fo r 2 01 4. Th e Co m m i s s i o n er h as o p po s ed thes e ex p en s es o n Sch edu l es C fo r l acko f b us i nes s p u rp o s e, b u twe d eem M s . Sh am ’ s d i s p u t e o f t h e d edu ct i o n s fo r acco u n t i ng fees t o b e co n s tru edas cl ai m in g th e d edu ct i o n s wh ere t hey wo u l d b e p ro perl y

t ak en , i .e., o n Sch edu l es A o f h er ret u rn s . W e acco rd i n g l y fi n dth at M s . Sh am

m ay p ro p erl y d edu ct$ 3 0 0 i n acco u n t i n g fees fo r 2 0 1 2 an d$ 8 0 0 fo r
acco u n t in g fees fo r 2 0 1 4 o n h er ret u rn s b ecau s e s h e was ab l e t o s ub s tan t i at e t h at
s h e p ai dth e ex p en s es i n co n n ect i o n wi th h er o wn t ax p rep arat i o n .- 7 1 -

[* 7 1 ] i
. “ Pro m o t i on ” an d“ g i ft s ” Th e “ p ro m ot i o n ” ex p en s es M s . Sh am rep o rt edwere s yn o n ym o u s wi th g i ft
ex p en s es , an dh er p ro o f o f t h em co n s i s tedo f h er cred i tcards t at em en t s s h o wi n g
ex p en d i tu res fo r fru i t , wi n e, fl o wers , an do th er s i m il ar i t em s . Becau s e t h ey are

“ l i s t edp ro p ert y ”, g ift s are s ubjectt o th e h ei g h t en eds ub s t an t iat i o n req u i rem en t s o f
s ect i on 2 7 4 (d ). Ad d i t io n al l y , an y d edu ct i o n fo r a g i ft u n d er s ect i o n 1 6 2 i s l i m i ted t o $ 2 5 i n cu m

u l at i v e v al u e o f al l g i ft s t o an y i n di v i du al p er y ear. Sec. 2 7 4 (b ). Each i n d iv i du al ex pen d i ture rep o rt edwas i n ex ces s o f $ 25 , an dM s . Sh am o ffered
n o ev i den ce reg ard in g the i d en t i t y , m u ch l es s the b u s i nes s rel at i on s hi p , o f an y o f th e reci p i en t s o f t h e al l eg edg i ft s . W e h o l dthatan y d edu ct i on s fo r “ g i ft s ” o r

“p ro m o t i o n ” were p ro p erl y d en i ed
. F. Pen al t i es an d ad d i t io n s t o t ax 1
. Ad d it i on s t o t ax u n d er s ect i o n 6 6 5 1 (a)(1 ) an d(2 ) Sect io n 6 6 5 1 (a)(1 ) au tho ri zes th e i m p o s i t io n o f anad d i t i on t o t ax fo r fai l u re t o fi l e a t i m el y

retu rn (u n l es s th e t ax p ay er p ro v es thats u ch fai l u re i s du e t o
reas on ab l e cau s e an di s n o tdu e t o wi l l fu l n eg l ect ). See al s o Un i t edSt at es v . Bo y l e, 4 6 9 U.S. 2 4 1 , 2 4 5 (1 9 8 5 ). Th e ad d i t io n co n s i s t s o f 5 % p er m on th (up t o a
m ax i m u m o f 2 5 % ) o f “ the am o u n treq u i red t o b e s h o wnas t ax o n s u ch retu rn ”. Sec. 6 6 51 (a)(1 ). Sect i o n 6 6 5 1 (a)(2 ) p ro v i des fo r an ad d i t i o n t o t ax fo r fai l u re t o- 7 2 -

[* 7 2 ] t i m el y

p ay “ th e am o u n ts h o wnas t ax o n an y return s p eci fi edi n p arag rap h (1 )” u n l es s th e t ax p ay er es t ab l i s h es th atth e fai l u re was du e t o reas o n ab l e cau s e
an d n o twi ll fu l n eg l ect . Th e ad d i t i o n co n s i s t s o f 0 .5 % p er m o n th (up t o a
m ax i m u m o f 2 5 % ) o f “ the am o u n ts h o wnas t ax o n s u ch return ”. Sec. 6 6 5 1 (a)(2 ). Th e am o u n to f t he ad d i t i o n t o t ax u n d er s ect i o n 6 6 5 1 (a)(2 ) redu ces th e ad d i t i o n t o t ax u n der s ect i o n 6 6 5 1 (a)(1 ) fo r an y m o n th fo r wh i ch b o th ad d i t i o ns t o t ax ap p l y . See s ec. 6 6 5 1 (c)(1 ). Wh en a t ax p ay er h as n o tfi leda retu rn , th e s ect i o n 6 6 5 1 (a)(2 ) ad d it i o n t o t ax m ay n o tb e i m p o s edu nl es s th e Secret ary h as p rep aredan SFR t hat
m eet s th e req u irem en t s o f s ect i o n 6 0 2 0 (b ). Wh eel er v . Co m m i ss i on er, 1 2 7 T.C. 2 0 0 , 2 0 8 -2 0 9 (2 0 06 ), aff’ d , 5 2 1 F.3 d1 2 8 9 (1 0 th Ci r. 2 0 08 ). Pu rs u an tt o
s ect i on 6 6 5 1 (g )(2 ), an SFR p rep aredb y th e Co m m i s s i o n er u n d er s ect i o n 6 0 2 0 (b ) i s treat edas a t ax pay er ret u rn fo r p u rp o s es o f d et erm i ni n g the ad d i t i o n t o t ax u nd er
s ect i on 6 6 5 1 (a)(2 ). In th e SNOD th e IRS d et erm i n edag ai n s tM s . Sh am ad d i ti o n s u n d er
s ect i on 6 6 5 1 (a)(1 ) fo r fai l u re t o t i m el y fi l e o n l y fo r 2 0 1 3 , 2 0 1 4 , an d2 0 1 5 , an d d et erm i n edad d i t i o ns u n d er s ub s ect i o n (a)(2 ) fo r fai l u re t o t i m el y p ay o nl y fo r 2 0 1 4 an d2 0 1 5 , s o we d o n o tco n s i d er t h e o th er y ears . M s . Sh am ’ s t ax retu rn fo r 2 0 1 3 was du e i n Ap ri l 2 0 1 4 an d was fi l edo n Oct o b er 1 9 , 2 0 1 5 ; h er t ax retu rn fo r 2 01 4 was du e i n Ap ri l 2 0 1 5 an d was fi l ed- 7 3 -

[* 7 3 ] o n J u l y

2 5 , 2 0 1 7 ; an d h er t ax retu rnfo r 2 0 1 5 was du e i n Ap ri l 2 01 6 an dwas fi led in Sep t em

b er 2 0 1 8 . Th es e fact s are n o t i n d i s p u t e an d are s u ffi ci en t t o
es t ab l i s h th atth e Co m

m i s si o ner h as m eth is b u rd en o f p ro du ct io n t o es tab l i s h M s . Sh am ’ s l i ab i l i ty u n d er s ect i o n 6 6 5 1 (a)(1 ). M s . Sh am ’ s o n l y av ai l ab l e d efen s e t o thes e ad di t i o n s t o t ax wo u l db e a s h o wi n g thath er fai l u re t o fi l e a return fo r each y ear at i s s u e was du e t o reas o n ab l e cau se an dn ot wi l l fu l n eg l ect , fo r wh i ch
s h e b ears the b u rd en o f p ro of. See Hi g b ee v . Co m m i s si on er, 1 1 6 T.C. 4 3 8 , 4 4 7 (2 0 0 1). M s . Sh am

h as g en eral l y

arg u edth ath er h eal th p ro b l em s p rev en t edh er fro m b ei n g i n co n tro l o f h er o wnaffai rs t o th e ex t en tth ats h e co u l dn o tfi le h er retu rn s o n t i m e, an dth atfo r 2 0 1 4 an d2 0 1 5 h er t rep id at i o n ab o u t h o w t o res o l v e th e i s s ue o f t h e o wn ers h i p o f t h e TD Am eri trad e acco u n t p rev en t edh er fro m fi l i n g retu rn s b ecau s e s h e was u n s u re ab o utwh atp o si ti o n t o t ak e. W e fi n dth es e arg u m en t s u np ers u as i v e. Fi rs t , M s . Sh am was ab l e t o fi l e h er t ax return fo r 2 0 1 0 i n 2 0 1 4 wh en h er ret u rn fo r 2 0 1 3 was du e. Th i s fact d efeat s h er as s ert i o n th ath er h eal th co nd i t i o n m ad e i ti m p o s s i b l e fo r h er t o fi l e t ax retu rn s . Fu rt h er, t h e ev i d en ce t h at M s. Sh am h as p ro ffered i n s up p o rto f h er ex pen s e d educt i o n s du ri n g th es e y ears s h o ws th ath er p h y s i cal co n d it i on d i d n o tp rev en t h er fro m trav el i n g freq u en t l y

an dat t en d in g v ari o u s co n feren ces an dev en t s du ri n g 2 0 1 4 an d2 0 1 5 . Inl i g hto f M s . Sh am ’ s ab i li ty t o co n ducth er o th er affai rs , th e- 7 4 -

[* 7 4 ] o m i s s i o n o f fi l in g h er t ax retu rn s ap p ears as o n e o f “ s el ect iv e i n ab i l i ty ” i n 2 0 1 4 an d2 0 1 5 ; we fi n d t h ats h e l ack edreas o n ab l e cau s e fo r t h es e y ears . See Wri g h t v . Co m

m i ss i o n er, T.C. M em o . 1 9 9 8-2 2 4 , 7 5 T.C.M . (CCH) 2 5 3 6 , 2 5 3 9 (1 9 9 8) (q u o ti n g Tab b i v . Co m m i s s i o n er, T.C. M em o . 1 99 5 -4 6 3 , 7 0 T.C.M . (CCH) 8 3 6 , 8 4 9 (1 9 9 5)), aff’ d , 1 73 F.3 d8 48 (2 dCi r. 1 9 9 9 ). M s . Sh am ’ s p h y s ical
co n di t i o n i m

p ro v edaft er 2 0 15 , an dth erefo re we co n cl u d e t h ats h e rem ai n ed cap ab l e o f fi l i n g a t ax retu rn i n Ap ri l 2 0 16
. As t o h er o th er arg u m en t s reg ard i ng h er u n cert ai n ty ab o u t th e p ro p er treat m en to f t h e TD Am eri trad e acco u n t , we h av e h el dth atm i s t ak e o r i g n o ran ce
o f t h e l aw d o es n ot ex cu s e a fai l u re t o t im el y fi l e a t ax retu rn . See J o y ce v . Co m m i s s i o n er, 2 5 T.C. 1 3, 1 5 (1 9 5 5 ). M s . Sh am i s l i ab l e fo r t h e ad d i t i o n s t o t ax
u n d er s ect i o n 6 6 5 1 (a)(1 ) fo r 2 0 1 3 , 2 0 1 4, an d 2 01 5
. Sect io n 6 6 5 1 (a)(2 ) i m

p o s es an ad d i t io n t o t ax fo r fai lu re t o t i m el y p ay th e
am ou n to f t ax s h o wno n a retu rn . Th e l i ab i l i t i es were du e t o b e p ai d o n th e
u n ex ten deddu e d at es o f M s . Sh am ’ s retu rn s . See s ec. 6 1 5 1 . Th e ad d i t i o n t o t ax
u n d er s ect i o n 6 6 5 1 (a)(2 ) ap p l i es o n l y wh en an am o u n t o f t ax i s s h o wno n a retu rn --i n th i s cas e, o n th e SFR t h atth e Co m m is s i o n er p rep aredfo r each o f t h e two y ears fo r wh i ch th e ad d i t i o n was d et erm i n ed
. See Wh eel er v . Co m m i s s i o n er, 1 2 7 T.C. at2 10 . To co ns t i tu te a v al i dSFR u n d er s ect i o n 6 0 20 (b ), “ th e ret u rn- 7 5 -

[* 7 5 ] m us tb e s ub s cri b ed , i tm

us tco n t ai n s u ffi ci en ti n fo rm at i on fro m wh i ch t o
co m p u t e t h e t ax p ay er’ s t ax l iab i l i ty , an d t h e ret urn fo rm an dan y at t ach m en t s m

u s t p u rp ortt o b e a ‘ retu rn ’ .” Sp u rl o ckv . Co m m i s s i o ner, T.C. M em o. 2 0 03 -1 2 4 , 8 5 T.C.M . (CCH) 1 2 3 6 , 1 2 43 (2 0 0 3 ). Th e SFRs fo r 2 0 1 4 an d2 0 1 5 co n t ai n s u ffi ci en t i n fo rm at i o n , p urp ort t o b e ret u rn s , an dare s ub s cri b edas req u i redb y s ect io n 6 0 2 0 (b ). Acco rd i n g l y , th e Co m m is s i o n er h as m eth i s b urd en t o s ho w th att ax was du e o n the ret u rn s (b u t th e ad d i t i o n s t o t ax wi l l n eedt o b e recal cu l at edi n l i g h to f
o u r o th er fi n d i n gs . See s ec. 6 6 5 1 (c).) As wi th th e s ect io n 6 6 51 (a)(1 ) fai l u re-t o -fi l e ad d i ti o n t o t ax , s ect i o n 6 6 5 1 (a)(2 ) p ro v i d es th atth e t ax p ay er i s l i ab l e fo r t h e fai l u re-t o -p ay ad d i t i o n t o t ax

“ u n l es s i t i s s h o wn th at su ch fai l u re i s due t o reas on ab l e cau s e an dn o tdu e t o wi l l fu l n eg l ect ”. M s . Sh am m u s ts h o w th ats h e ex erci s edo rd in ary b u s i n es s care
an d p ru d en ce i n p ro v i d i ng fo r p aym en t o f h er t ax l i ab i l i t i es i n l i g h to f h er fi n an ci al
s i tu at i o n . See 2 6 C.F.R. s ec. 3 0 1 .6 6 5 1 -1 (c), Pro ced . & Ad m i n . Reg s . Gi v en M s . Sh am ’ s co n t i n u ed ex p en d i tu res o n i tem s u n rel at edt o h er b u s i nes s --s u ch as trav el , M RP co ach i n g , an d co s t l y p ro g ram s g eared t owardd ev el op i n g p ers o n al
s k i l l s --d es p i te h er co n t i n uedl acko f b u s in es s p ro s p ect s o th er t h an Dr. Ku kreja, we h o l dth ats h e d idn o tex erci se o rd i n ary b u s i n es s care an d p ru d en ce i n p ro v id i n g fo r p aym en t o f h er t ax l i ab i li t i es , an dwe d o n o tfi n dp ers u as i v e t h e reas o ns s h e- 7 6 -

[* 7 6 ] ad van ces in s up p o rto f reas o n ab le cau s e (th e s am e as u n d er s ect i o n 6 6 5 1 (a)(1 ), ab o v e). 2
. Ad d it i on t o t ax u n d er s ect i o n 6 6 5 4 Sect io n 6 6 5 4 i m

p os es an ad d i t i o n t o t ax o n an i n di v i du al t ax p ay er wh o
u n d erp ay s h er es t im at edt ax . A t ax p ay er m u stp ay es t im at edt ax fo r an y y ear i n wh i ch s h e h as a “ requi redan nu al p aym en t ”. Sec. 6 6 5 4 (d ). A “ req u i redan n u al p aym en t ” i s d efi n edi n s ect io n 6 6 5 4 (d )(1 )(B), i n p ert i n en tp art , as “ th e l es s er o f-- (i ) 9 0 p ercen to f t h e t ax s h own o n th e ret u rn fo r t h e t ax ab l e y ear (o r, i f n o retu rn i s fi led , 9 0 p ercen t o f t h e t ax fo r s u ch y ear)”, o r (i i) i f t he i n d i v i du al fi l eda retu rn fo r th e p reced i n g t ax ab l e y ear, t h en “ 1 0 0 p ercen to f t h e t ax s h o wno n th e ret u rn o f t h e i n d i v i du al fo r t h e p reced i n g t ax ab l e y ear.” Th u s , th e IRS’ s b u rd en o f p ro du ct i on
u n d er s ect i o n 7 4 9 1 (c) req u ires i tt o p ro du ce, fo r each y ear fo r wh i ch th e ad d i t i o n i s as s ert ed(h ere, 2 0 1 5 ), ev id en ce t h atth e t ax p ay er h ada req u i redan n u al p aym en t
u n d er s ect i o n 6 6 5 4 (d ). Wh ere a t ax p ay er d o es n o tfi l e a ret u rn fo r t h e y ear fo r wh i ch th e p en al ty

i s as s ert ed , th e Co m

m i s s i on er m

u s tp u tfo rt h ev i d en ce s uffi ci en t fo r t h e co u rtt o d et erm i n e t h atth e t ax p ay er h adan o b l i g at io n t o fi l e an i n co m e t ax retu rn fo r t he y ear fo r wh i ch th e p en al ty i s as s ert ed , an dei th er: the am o u nto f t ax
s h o wno n t h e p ri o r y ear’ s return , o r ev i d en ce s u ffi ci en t t o co n cl u d e t h atthe- 7 7 -

[* 7 7 ] t ax p ay er d i dn o tfi l e a ret u rn fo r t h e p ri o r y ear. Sec. 6 6 5 4(d )(1 )(B); s ee al s o Wh eel er v . Co m

m i s s i on er, 1 2 7 T.C. at2 1 1-2 1 2
. Th e Co m m is s i o n er m etth i s b u rd en h ere b y s h o wi n g thatM s . Sh am

h ad t ax ab l e i n co m e i n 2 0 1 5 an dth ats h e h adn o tfi l eda retu rn fo r 2 0 1 4 o r 2 0 1 5 atth e t i m e t h at th e IRS i s s u ed th e SNOD i n Feb ru ary 2 0 1 7
. Co n s equen t l y , th e Co m m i s s i o n er carri edh i s b u rd en o f p ro du ct i o n t o s h o w th atM s. Sh am i s l i ab l e fo r th e s ect i o n 6 6 5 4 ad d it i o n ; M s . Sh am d o es n o tco n t es tth es e fact s o r arg ue an y d efen s e. Sh e i s th erefo re l i ab l e fo r t h i s ad di t io n fo r fai l u re t o p ay es ti m at edt ax . 3
. Accu racy -rel at edp en al ty Sect io n 6 6 6 2 (a) an d(b )(1 ) an d(2 ) i m p o s es an “ accu racy -rel at edp en al ty ” o f 2 0 % o f t h e p ort io n o f t h e u n derp aym en to f t ax th ati s at tri bu t ab le t o th e t ax p ay er’ s
n eg li g en ce o r d i sreg ardo f ru les o r reg u l at i o ns o r t h ati s at tri b u t ab le t o an y
s ub s t an t i al u n ders t at em en to f i nco m e t ax . Th e IRS d et erm i n edp en al t i es fo r t h e fi rs tfo u r y ears ati s s u e--i .e., 2 01 0 th ro u g h 2 01 3 , th e y ears fo r wh i ch M s . Sh am fi led retu rn s b efo re t h e SNOD was i ss u ed
. M s . Sh am d oes n o trai s e an y

i s s u es reg ard i n g th e Co m

m i s s i on er’ s co m

p l i an ce wi th s ect i o n 6 7 5 1 (b )(1 ), wh ich req u i res

“ ap p ro v [al ] (i n wri ti n g ) b y th e i m m ed i at e s up erv is or o f t he i nd i v i du al m ak i n g s u ch d et erm i n at i o n ” o f p en al ty l i ab i l i t y . Th e Ci v il Pen al ty Ap p ro v al Fo rm , wh i ch refl ect s th e s i g n atu re o f t h e g ro up m an ag er ap p ro v i n g b o th p o s si b l e al t ern at i v e- 7 8 -

[* 7 8 ] g ro u n ds fo r t h e p en al t i es (i .e., s ub s t an t i al u nd ers t at em en tan dn eg l i g en ce) b efo re t h e i s s u an ce o f t he SNOD t o M s . Sh am i s s u ffi ci en tt o s h o w th atthe IRS
co m p l iedwi th t h e req u i rem en t o f s ect i o n 6 7 5 1 (b )(1 ) fo r wri t ten s up erv i s o ry ap p ro v al o f t he accu racy -rel at edp en al t i es . See Cl ay v . Co m m i s s i o n er, 1 5 2 T.C. 2 2 3 , 2 4 9 (2 0 1 9). It ap p ears th atev en aft er red u ci n g t h e t ax l i ab i l i t i es t o refl ectth e Co m m i s s i o n er’ s co n ces s i on s an do u r h o l d i n g s as t o ad d i t io n al d edu ct i o ns t o wh i ch M s. Sh am

i s en t i t l ed , th e u n d ers t at em en t s t h at we s u s t ai n fo r t he y ears 2 0 1 0 , 2 0 1 2 , an d 2 0 1 3 are “ s ub s t an t i al ” u n d er s ect i o n 6 66 2 (d )--i .e., th ey ex ceed th e g reat er o f $ 5 ,0 0 0 an d 1 0 % o f t h e t ax th ats h o u l dh av e b een rep o rt edo n each retu rn . Inad d i t i o n --b u tm o s t rel ev an t t o th e retu rn fo r 2 0 11 (s i n ce th e 2 01 1
u n d ers t at em en tm ay

n otb e “ s ub s t an t ial ”)--we h o l d th atM s . Sh am was n eg l i g en t 2 4 i n p rep ari n g h er ret u rn s , s i n ce h er fai l u re t o m ai n t ai n reco rd s t o s ub s tan t i at e h er d educt i o n s was n eg l i g en tan dth atth e i m p ro p ri et y o f m an y o f t h e d edu ct io n s i s
o b v i o u s an dm

u s th av e b een o bv i o u s t o h er. Th e Co m m i s s i on er h as carri edh i s b u rd eno f p ro du ct i o n , s ee s ec. 7 4 9 1 (c), t o s ho w th atp et i t i o n er i s l i ab l e fo r t h e p en al t i es . Acco rd i ng l y , i f M s . Sh am ’ s reco m p u t edt ax l i ab i l i ty

fo r 2 0 1 0, 2 0 1 1 ,

2 4 Sect i o n 6 6 6 2 (c) p ro v i d es : “ Fo r p u rp os es o f t h i s s ect i o n , th e t erm ‘ neg l i g en ce’ i n cl u d es an y fai lu re t o m ak e a reas on ab l e at t em p t t o co m p l y wi th th e p ro v is i o n s o f t h i s t i t l e”.- 7 9 -

[* 7 9 ] 2 0 1 2 , o r 2 0 1 3 s h o ws an u n d erp aym en t o f t ax req u i redt o b e s h o wno n th e retu rn , b u t n ota s ub s tan t i al u n d ers t at em en t (aft er acco u nt i n g fo r n eto p erat i n g l o s s es ), we h ol dth ats h e i s l i ab l e fo r t h e accu racy -rel at edp en al ty u n d er s ect i o n 6 6 6 2 (a) an d (b )(1 ) o n acco un to f n eg l i gen ce. Ho wev er, u n d er s ect i o n 6 6 6 4 (c)(1 ), a t ax p ay er wh o i s o th erwi s e l i ab l e fo r th e accu racy -rel at edp en al ty m ay av o i d th e l i ab il i ty

i f s h e can s h o w, fi rs t , “ th at th ere was a reas o n ab l e cau s e” fo r t h e u n d erp aym en t an d , s eco n d , th ats h e “ act edi n g o o dfai th wi th res p ectt o ” t h e u n d erp aym en t, th en n o accu racy -rel at edp en al ty

“ s h al l b e i m

p o s ed ”. Wh et h er th e t ax p ay er act edwi th reas o n ab l e cau s e an di n g o o dfai th d ep en d s o n th e p ert in en tfact s an d ci rcu m st an ces , i n cl u d i ng h er effo rt s t o as s es s h er p ro p er t ax l i ab i l i ty , h er kn o wl ed g e an dex p eri en ce, an dth e ex t en tt o wh i ch s h e rel i edo n th e ad v i ce o f a t ax p ro fes si o n al . 2 6 C.F.R. s ec. 1 .6 66 4 -4 (b )(1 ), In co m e Tax Reg s . “ Rel i an ce o n * * * p ro fes s i o n al ad v i ce, o r
o th er fact s , h o w ev er, co n s t i tu t es reas o n ab l e cau se an d g oo d fai th i f, u n d er al l the ci rcu m s t an ces , s u ch rel i an ce was reas on ab l e an dth e t ax pay er act edi n g o o dfai t h .” Id . M s . Sh am

co n t en d s th ats h e rel i edo n th e ad vi ce o f p ro fes s i o nal s --i .e., th e
acco u n t an t s wh o p rep aredh er retu rn s --an dth atth i s fact s up po rt s a “ reas o n ab l e
cau s e” d efen se.- 8 0 -

[* 8 0 ] Th e Co u rt ’ s cas el aw s et s fo rt h th e fo ll o wi n g th ree req u irem en ts fo r a t ax p ay er t o s h o w rel i an ce o n a t ax p ro fes s i o nal t o av o idl i ab i l i ty fo r a s ect i o n 6 6 6 2 (a) p en al ty : “ (1 ) Th e ad v is er was a co m p et en tp ro fes si o n al wh o h ad
s u ffi ci en tex p ert i s e t o ju st i fy rel i an ce, (2 ) th e t ax p ay er p ro v i d edn eces s ary an d
accu rat e i n fo rm at i o n t o th e ad v i s er, an d (3 ) t h e t ax p ay er act u al l y rel iedi n g o o d fai th on th e ad vi s er’ s ju dg m en t .” Neo n at ol og y As so cs ., P.A. v . Co m m i s s i on er, 1 1 5 T.C. 4 3 , 9 9 (2 0 0 0 ), aff’ d , 2 9 9 F.3 d2 21 (3 dCi r. 2 00 2 ). M s . Sh am fai l edt o
s h o w th ats h e p ro vi d edn eces s ary an daccu rat e i n fo rm at i o n t o th e ad v i s ers i n
s up p orto f t h e i n co m e s he rep o rt edan dth e d educt i o n s s h e cl ai m ed . Ev en i f we were t o accep th er as sert i o n th ats h e p ro v i d edh er acco u n t an t s wi th al l o f th e d o cu m en t ary

ev i d en ce s h e p ro du cedattri al , fo r each y ear at i s s u e h er p ro of fel l
s i gn i fi can t l y

s h o rto f s ubs t an t i at i n g h er n u m ero u s rep ort edex p en s es . W e fi n dth at M s . Sh am

h as n o tm eth er b u rd en t o p ro v e rel i an ce o n a t ax p ro fes s io n al t o d em o n s trat e reas o n ab l e cau s e an dg o o dfai th i n th e p rep arat i o n o f h er ret u rn s .- 8 1 -

[* 8 1 ] Co n cl us i o n Th e d et erm i n at i o n s i n t h e SNOD are s u s t ai n edi n p art , t o t h e ex t en ts eto u t ab o ve. To refl ectthe fo reg o i n g an dth e p art i es ’ co n ces si on s , Deci s i o n wi ll b e en t eredu n d er Ru l e 1 5 5
.- 8 2 -

[* 8 2 ] APPENDIX A: INCOM E ITEM S Th e fo l l o w i n g t ab l es d i s pl ay , fo r each o f t h e y ears 2 01 0 th ro u g h 2 01 5 , (i ) th e am o u n t o f each i t em o f i n co m e t h ats h o u l db e s h o wn o n M s. Sh am ’ s retu rn ; (i i) t h e s u m

o f t h e am o u nt s t o wh i ch th e p art ies h av e ag reedan dth e am o u n t s wh i ch h av e n o tb een d i sp u t ed ; an d(i i i ) an y ad ju s t m en tt o th e am o u n ts s h o wn o n th e ret urn b as ed ei th er o n the p art ies ’ ag reem en to r (wh ere t h e am o u n t s i n th e t h ird
co l u m n are n o ts i m

p ly th e d i fferen ce i n th e fi rs ttwo co l u m n s ) o n o u r fi n d i n g s i n th i s M em o ran du m

Op i n i o n : 2 0 1 0 It em Retu rn Ag reed Ad ju s t m en t W ag es , s al ari es , t i ps , et c. $ 13 6 ,1 5 4 $ 1 36 ,1 5 4 -0
- Tax ab l e i nt eres t 1 ,2 2 0 1 ,2 2 0 -0
- Tax ab l e refu n d s , cred i t s o r o ffs et s o f St at e i n co m e t ax 1 ,2 5 7 1 ,2 5 7 -0
- Un em p l o ym en tco m

p en s at i o n 1 8 ,4 4 0 18 ,4 4 0 -0
- Th e fo reg o i n g ag reedam o un ts refl ectth e Co m m i s s i o n er’ s co n ces s i o n o f $ 4 5 i n
u n rep o rt edi n t eres td et erm i n edi n th e SNOD.- 8 3 - 2 0 1 1 It em Retu rn Ag reed Ad ju s t m en t Sch edu l e C g ro s s recei p ts $7 2 ,3 1 1 $6 ,4 5 1 ($ 6 5 ,8 6 0 ) Tax ab l e i nt eres t 6 9 4 8 9 2 1 9 8 Tax ab l e refu n d s , cred i t s o r o ffs et s o f St at e i n co m e t ax 6 2 7 6 2 7 -0
- IRA d is tri b u t i o n s 1 9 ,0 0 4 19 ,0 0 4 -0
- Un em p l o ym en tco m

p en s at i o n 1 1 ,7 4 6 11 ,7 4 6 -0
- Th e fo reg o i n g ag reedam o un ts refl ectth e Co m m i s s i o n er’ s co n ces s i o n o f $ 3 i n
u n rep o rt edSt at e t ax refu nd i n co m e d et erm i n edi n th e SNOD.

2 0 1 2 It em Retu rn Ag reed Ad ju s t m en t Sch edu l e C g ro s s recei p ts $8 6 ,6 0 0 $1 6 2 ,2 83 $7 5 ,6 8 2 Tax ab l e i nt eres t 1 0 2 2 06 1 0 4 Tax ab l e refu n d s , cred i t s o r o ffs et s o f St at e i n co m e t ax 9 ,1 7 6 9 ,1 76 -0
- Oth er i nco m e (1 2 ,8 4 7 ) -0
- TBD Th e ! $ 1 2 ,8 4 7 n eto p erat i n g l o s s carry o v er l i s t edab o v e, wh i ch p et it io n er rep o rt ed
as “ Oth er i n co m e”, wi ll n eedt o b e ad ju st edi n acco rd an ce wi th th e fi n di n g s fo r 2 0 1 0 an d2 0 1 1
. [* 8 3 ]- 8 4 - 2 0 1 3 It em Retu rn Ag reed Ad ju s t m en t Sch edu l e C g ro s s recei p ts $ 11 7 ,3 0 0 $ 98 ,7 9 0 ($ 1 8 ,5 1 0 ) Tax ab l e i nt eres t -0
- 1 1 1 1 Di v i d en d s -0
- 1 4 1 1 4 1 Oth er i nco m e (2 1 ,6 7 5 ) -0
- TBD Th e ! $ 2 1 ,6 7 5 n eto p erat i n g l o s s carry o v er rep ort edas “ Oth er i n co m e” wi ll n eed t o b e ad j u s tedi n acco rd an ce wi th th e fi nd i n g s fo r 2 0 1 0 th ro u g h 2 0 1 2
. 2 0 1 4 It em Retu rn Ag reed Ad ju s t m en t Sch edu l e C g ro s s recei p ts $ 7 1 ,4 5 1 $ 71 ,4 5 1 -0
- Tax ab l e i nt eres t 1 1 1 $ 1 0 Di v i d en d s 5 4 1 0 7 5 3 Tax ab l e refu n d s , cred i t s o r o ffs et s o f St at e i n co m e t ax -0
- -0
- 1 1 2 ,0 2 2 Cap i t al g ai n o r (l o s s ) (3 ,0 0 0 ) -0
- 3 ,0 0 0 Oth er i nco m e (2 1 ,6 7 5 ) -0
- TBD

1 Th i s ad ju s tm en twi l l b e m ad e o n ly i f M s. Sh am

i s n o tl i ab l e fo r AM T fo r 2 0 1 0 wh en h er t ax l i ab i l i ty fo r t h aty ear i s reco m

p ut ed
. Th e “ Ag reed ” am ou n to f Sch edu l e C g ro ss recei p t s o f $ 7 1 ,4 5 1 rep res en t s t h e Co m m i s s i o n er’ s co n ces s i on o f $ 8 5 ,8 8 5 o f t h e $ 1 5 7 , 3 36 d et erm i n edi n th e SNOD. M s . Sh am

rep ort ed th is am ou n to n h er ret u rn an dd i d n o td i s p u te i tattri al (o u r [* 8 4 ]- 8 5 -

[* 8 5 ] reas o n fo r n o trev i s i n g th e l ab el “ Ag reed ”). Sh e d i s p ut edi taft er t ri al , as s ert i n g i twas o n l y

$ 5 1,5 6 2, b u twe h av e res o l v edth e d is pu t e i n fav o r o f th e Co m m i s s i o n er, res ul ti n g i n n o ad ju s t m en tt o th e am o u n trep o rt edo n the ret u rn . Th e ! $ 2 1 ,6 7 5 n eto p erat i n g l o s s carry o v er rep ort edas “ Oth er i n co m e” wi ll n eed t o b e ad j u s tedi n acco rd an ce wi th th e fi nd i n g s fo r 2 0 1 0 th ro u g h 2 0 1 3 . Fu rt h er,
co n si s t en twi th o u r fi n d i n g th atth e act i v i ty i n t h e TD Am eri trad e acco u n ti n M s . Sh am ’ s n am e was n o t i n factat tri b u t ab l e t o M s . Sh am , th e cap it al l o s s
res u l ti n g fro m

th e TD Am eri trad e acco un ti s n otal l owedo n h er ret u rn . 2 0 1 5 It em Retu rn Ag reed Ad ju s t m en t Sch edu l e C g ro s s recei p ts $3 6 ,0 0 0 $ 36 ,0 0 0 -0
- Cap i t al g ai n o r (l o s s ) (3 ,0 0 0 ) -0
- -0
- Oth er i nco m e (8 ,8 2 8 ) -0
- TBD Th es e am o un t s refl ectth e Co m m i s s i o n er’ s co nces s i o n o f $ 4 5 i n u nrep o rt ed i n t eres td et erm i n ed i n th e SNOD. Th e Sch edu l e C g ro s s recei p t s o f $ 3 6 ,0 0 0 rep res en tth e Co m

m i s si o ner’ s co n ces s i o n o f $ 3 6 ,8 0 0 o f t h e $ 7 2,8 0 0 d et erm i n edi n th e SNOD. Th e ! $ 8 , 8 2 8 n eto p erat i n g l os s carry o v er rep o rt edas “ Oth er i n co m e” wi l l n eedt o b e ad

ju s t edi n acco rd an ce wi th th e fi n d i n g s fo r 2 0 1 0 thro u gh 2 0 1 4
. Fu rt h er, co n s i s t en twi th o u r fi n d i n g th atthe act i v i ty i n the TD Am eri trad e acco u n t- 8 6 -

[* 8 6 ] i n M s. Sh am ’ s n am e was n o ti n factat tri b ut ab l e t o M s. Sh am , th e cap i t al l o s s res u l t i n g fro m

th e TD Am eri trad e Acco u n ti s n o t al l o wedas a d edu ct io n o n h er ret u rn (b u tth e cap it al l os s o f $ 3 5 ,5 42 res u l t i n g fro m h er o wnacco u n ti s al l o wed ).- 8 7 -

[* 8 7 ] APPENDIX B: DEDUCTIONS Th e fo l l o w i n g t ab l es d i s pl ay , fo r each o f t h e y ears 2 01 0 th ro u g h 2 01 5 , (i ) th e am o u n t o f t h e ex p en s es fo r wh ich p et i ti o n er s eek s d edu ct i o n s o n Sch edu l e A 2 5 o r Sch edu l e C o f h er ret u rn fo r v ari o u s i tem s ati s s ue (b utwi th o u t
an y co rres po n d i ng co m

p u t at i o nal ad

ju s t m en t s ); (i i ) t h e am o u n t s t o wh i ch th e p art i es h av e ag reedo r t h e Co m m i s s i o ner h as co n ced edp et i t i o n er i s en ti t ledt o d educt ; an d(i i i ) ad d i t i o nal am o u n t s th at , aft er t ri al , we fi n dp et i t io n er p ai dan dfo r wh i ch s h e ad equ at el y

s ub st an t iat ed th e req u i s i t e b u s i n es s p urp o s e o r u s e: 2 0 1 0 Ex p en s e Retu rn Ag reed Ad d i t i o n al am o u n t Sch A m ed i cal 1 $ 61 ,2 3 0 $ 3 9 ,6 98 $ 4 ,5 5 7 Sch A em pl oy ee b u s i n es s ex pen s es Park i n g , t ol ls , tran s p o rt 1 ,2 2 0 -0
- -0
- Trav el away

fro m h o m e 3 ,4 6 1 -0
- -0
- M eal s an den tert ai nm en t 4 ,2 2 1 -0
- -0
- Oth er 25 ,6 6 1 6 ,2 10 -0
-

2 5 Fo r each y ear Sch edu l e A m ed i cal ex p en s es are s t at ed , th e fi n d in g i s th e am ou n to f M s . Sh am ’ s u n rei m b u rs edm ed i cal ex p en s es b efo re ap p l y i n g th e l i m i tat i on o f s ect i o n 2 1 3 (a).- 8 8 -

[* 8 8 ] W e h o l dthatM s . Sh am i s en t i t l edt o th e fo reg o i n g d edu ct i o n s fo r 2 0 1 0 . W e
m ak e n o ad

ju s tm en tt o th e fo l l o wi n g Sch edu l e A d edu ct i o n s th ats h e cl ai m edan d th atwere n o td i sal lo w edi n th e SNOD o r o th erwi s e d i s p ut edb y th e Co m m i s s i o n er: $ 1 8 ,5 4 8 fo r St at e an dl o cal t ax es an d $ 8 4 5 fo r g i ft s t o ch ari ty . To th e ex t en tth e
co m p u t at i o n req u i res M s. Sh am t o b e l i ab l e fo r AM T, h er i n co m e i t em s fo r 2 0 1 4 wi l l n o ti n cl u d e t h e St at e t ax refu n do f $ 1 2 ,0 22
.

2 0 1 1 Ex p en s e Retu rn Ag reed Ad d i t i o n al am o u n t s Sch A m ed i cal 1 $ 21 ,2 7 2 $ 2 1 ,2 72 -0
- Sch C-2 ren t/ leas e 29 ,0 7 8 -0
- -0
- Sch C-1 ren t/ leas e 6 ,9 2 2 -0
- -0
- Sch C-1 d ep reci at i o n 1 ,2 4 6 -0
- -0
- Sch C-1 trav el 10 ,0 8 3 -0
- -0
- Sch C-1 o ffi ce 8 ,0 8 5 -0
- -0
- Sch C-1 car/ v eh i cl e 9 ,8 2 1 -0
- -0
- Sch C-1 o th er (l o cal tran s po rt ) 1 ,9 9 8 -0
- -0
- Sch C-1 o th er (du es an d s ub s cri p t i o n s ) 7 7 3 -0
- -0
- Sch C-1 o th er (IT an dt ech n o l o g y ) 4 5 0 -0
- -0
- Sch C-1 o th er (s t o rag e) 2 1 ,5 0 0 -0
- -0
- Sch C-1 o th er (t el ep h on e an d i nt ern et ) 3 ,2 5 4 -0
- -0
-- 8 9 -

Sch C-1 o th er (b u s i n es s res earch an des t ab l i sh m en t ) 4 ,7 9 0 -0
- -0
-
1 Th i s am o u n ti n cl u ded$ 1 4 ,5 8 1 o f s el f-em p l o y edh eal th i n s uran ce p rem i u m s th atwere n o trep o rt ed o n l i ne 2 9 o f t h e ret u rn .

2 M s . Sh am

co n ced edth is i ss u e fo r al l y ears attri al . Sh e l at er as s ert ed cl ai m s fo r each of 2 0 1 2 an d2 0 1 3 o f $ 2 3 9 an dfo r each o f 2 0 1 4 an d 2 0 1 5 o f $ 2 4 0, n o n e o f wh i ch s h e s ub st an t i at ed
. W e h o l dth atM s. Sh am

i s en t i t l edt o th e fo reg o i n g d educt i o n s fo r 2 0 1 1. W e m ak e
n o ad ju s tm en tt o th e fo l l o wi n g d edu ct i o ns th ats h e cl ai m edan d t h atwere n o t d i s al lo wedi n th e SNOD o r o th erwi s e d i s p ut edb y th e Co m m i s s i o n er: o n Sch edu l e A, $ 2 9 3 fo r St at e an dl o cal t ax es , an d$ 2 ,6 6 2 fo r g i ft s t o ch ari ty ; o n Sch edu l e C, $ 1 ,2 23 fo r ad v ert is i n g, $ 37 5 fo r co n tractl ab o r, $ 1 , 7 7 5 fo r l eg al an d p ro fes s i on al s erv i ces , $ 1 7 5 fo r v eh icl es , m ach i n ery , an dequi p m en t, $ 7,2 7 0 fo r rep ai rs an dm ai n t en an ce, $ 1,8 7 1 fo r s up pl i es , $ 4 54 fo r t ax es an dl i cen ses , $ 4 ,6 3 1 fo r d edu ct i b l e m eal s an den t ert ai n m en t , an d$ 1 ,1 3 0 fo r u t i l i t i es . Th e n et o p erat i ng l o s s d edu ct i o n cl ai m edb y M s . Sh am

fo r 2 0 1 1 m

u s t b e reco m

p ut ed
. 2 0 1 2 Ex p en s e Retu rn Ag reed Ad d i t i o n al am o u n t s Sch A m ed i cal 1 $ 26 ,5 8 2 $ 2 6 ,5 82 -0
- Sch A co n tri b u t i o n s 2 2 ,3 7 0 -0
- -0
- Sch C-2 ren t/ leas e 28 ,6 2 8 -0
- -0
- [* 8 9 ]- 9 0 -

Sch C-1 ren t/ leas e 7 ,3 7 2 -0
- -0
- Sch C-1 d ep reci at i o n 2 ,1 6 4 -0
- -0
- Sch C-1 trav el 12 ,4 0 3 -0
- -0
- Sch C-1 o ffi ce 6 ,1 3 0 -0
- -0
- Sch C-1 car/ v eh i cl e 7 ,3 7 2 -0
- -0
- Sch C-1 d edu ct i bl e m eal s an d en t ert ai n m en t 4 ,0 6 2 4 ,0 62 -0
- Sch C-1 o th er (l o cal tran s po rt ) 4 ,6 4 7 -0
- -0
- Sch C-1 o th er (du es an d s ub s cri p t i o n s ) 7 4 4 -0
- $ 1 0 0 Sch C-1 o th er (IT an dt ech n o l o g y ) 7 4 2 -0
- -0
- Sch C-1 o th er (s t o rag e) 1 ,8 2 4 -0
- -0
- Sch C-1 o th er (t el ep h on e an d i nt ern et ) 3 ,2 5 4 -0
- -0
- Sch C-1 o th er (p ro fes s i o n al d ev el o p m en t ) 6 ,8 2 5 5 ,9 81 -0
-
1 Th i s am o u n ti n cl u ded$ 2 2 ,6 2 6 o f s el f-em p l o y edh eal th i n s uran ce p rem i u m s th atwere n o trep o rt ed o n l i ne 2 9 o f t h e ret u rn .

2 Ev en th o u g h o u r fi n d i n g s reg ard i n g t h e i n co m e i t em s wi l l rai s e M s . Sh am ’ s co n tri b u t i o n b as e fo r 2 0 12 , we n o n et h el es s fi n d th ats h e i s n o ten t it l edt o t h e co n tri b u t i o n d edu ct i o n b ecau s e s h e d i dn o ts ub s t an t i at e i t . W e h o l dth atM s. Sh am

i s en t i t l edt o th e fo reg o i n g d educt i o n s fo r 2 0 1 2. W e m ak e
n o ad ju s tm en tt o th e fo l l o wi n g Sch edu l e C d edu ct i o n s th ats h e rep o rt edan dth at
were n o t d i s al lo w edi n th e SNOD o r o th erwi s e d i s p u t edb y th e Co m m i s s i o n er: $ 1 ,7 3 0 fo r ad v ert i s i n g ; $ 4 ,4 7 9 fo r rep ai rs an d m ai n ten an ce; $ 1 ,3 7 7 fo r s up p l i es ; [* 9 0 ]- 9 1 -

[* 9 1 ] $ 4 5 9 fo r t ax es an dl i cen ses ; an d$ 1 ,2 1 6 fo r u t il i t i es . Th e n eto p erat i n g l o s s d educt i o n cl ai m edb y

M s . Sh am

fo r 2 0 1 2 m

u s tb e reco m

p u t ed
. 2 0 1 3 Ex p en s e Retu rn Ag reed Ad d i t i o n al am o u n t s Sel f-em p l o y edh eal th i n s u ran ce 1 $ 1 2 ,5 61 $1 2 ,5 6 1 $ 6 ,4 3 5 Sch A m ed i cal 1 6 ,5 52 1 6 ,5 5 2 -0
- Sch A t ax p rep arat i on fees -0
- -0
- 3 0 0 Sch A co n tri b u t i o n s 3 ,1 00 -0
- -0
- Sch C-2 ren t/ leas e 2 9 ,3 98 -0
- -0
- Sch C-1 ren t/ leas e 9 ,0 02 -0
- -0
- Sch C-1 d ep reci at i o n 5 ,5 27 -0
- -0
- Sch C-1 trav el 1 1 ,5 17 -0
- -0
- Sch C-1 d edu ct i bl e m eal s an d en t ert ai n m en t 4 ,1 49 4 ,1 4 9 -0
- Sch C-1 o ffi ce 6 ,2 93 -0
- -0
- Sch C-1 car/ v eh i cl e 7 ,5 77 -0
- -0
- Sch C-1 o th er (l o cal tran s po rt ) 2 ,3 19 -0
- -0
- Sch C-1 o th er (du es an d s ub s cri p t i o n s ) 7 94 -0
- 1 0 2 Sch C-1 o th er (IT an dt ech n o l o g y ) 5 79 -0
- -0
- Sch C-1 o th er (s t o rag e) 1 ,8 23 -0
- -0
- Sch C-1 o th er (t el ep h on e an d i nt ern et ) 3 ,2 79 -0
- -0
-- 9 2 -

Sch C-1 o th er (p ro fes s i o n al d ev el o p m en t ) 7 ,8 60 2 ,0 0 0 -0
-
1 Th e Co m m i ss i o n er d i dn o td i s al l o w i n t h e SNOD M s . Sh am ’ s s el fem pl o y edh eal th i n s u ran ce d edu ct i o n o f $ 12 ,5 6 1 , th e “ ag reed ” am o u n t . Attri al M s . Sh am

s ub s t an t iat ed$ 1 8 ,9 9 6 i n p aym en t s fo r s el f-em p l o y edh eal th i n s u ran ce. Th e Co m m i ss i o n er arg u edth atth e ad d i ti o n al am o u n ts h o u l db e co u n t edt o ward M s . Sh am ’ s i t em i zedu n rei m b u rs edm ed i cal ex p en s es (wh i ch h e d i dch al l en g e i n th e SNOD); b u tb ecau s e t h es e are d i s t i n cti t em s , we fi n dth atM s . Sh am en t i t l edt o d eductan ad d i t i o n al $ 6 , 4 3 5 fo r s el f-em pl o y edh eal th i n s u ran ce. W e h o l dth atM s. Sh am

i s en t i t l edt o th e fo reg o i n g d educt i o n s fo r 2 0 1 3. W e m ak e
n o ad ju s tm en tt o th e fo l l o wi n g Sch edu l e C d edu ct i o n s th ats h e rep o rt edan dth at
were n o t d i s al lo w edi n th e SNOD o r o th erwi s e d i s p u t edb y th e Co m m i s s i o n er: $ 1 ,8 9 0 fo r ad v ert i s i n g ; $ 3 ,4 6 6 fo r rep ai rs an d m ai n ten an ce; $ 1 ,2 2 0 fo r s up p l i es ; $ 1 2 9 fo r t ax es an dl i cen s es ; $ 1 ,1 7 0 fo r u ti li t i es . Inacco rd an ce wi th o ur fi n d i n g s i n p ri o r y ears , th e n eto p erat i n g l o s s carry fo rwardthatM s . Sh am carri edt o 2 0 1 3
m u stb e reco m

p ut ed
. 2 0 1 4 Ex p en s e Retu rn Ag reed Ad d i t i o n al am o u n t s Sel f-em p l o y edh eal th i n s u ran ce $ 8 ,6 05 $ 8 ,6 05 -0
- Sch A m ed i cal 1 2 ,0 17 3 ,3 00 -0
- Sch A St at e an d l o cal s al es t ax 2 48 2 48 -0
- Sch A t ax p rep arat i on fees -0
- -0
- $ 8 0 0 [* 9 2 ]- 9 3 -

Sch A co n tri b u t i o n s 1 ,0 72 -0
- -0
- Sch C-1 ren t/ leas e 2 0 ,0 00 -0
- -0
- Sch C-1 d ep reci at i o n 1 ,2 02 -0
- -0
- Sch C-1 trav el 1 ,3 56 -0
- -0
- Sch C-1 d edu ct i bl e m eal s an d en t ert ai n m en t 1 ,2 55 6 28 -0
- Sch C-1 o th er (co n feren ces ) 7 ,7 01 1 0 ,7 43 -0
- Sch C-1 o th er (co n ti n ui n g edu cat i o n ) 7 ,8 23 -0
- -0
- Sch C-1 o th er (du es an d s ub s cri p t i o n s ) 1 ,4 12 -0
- 1 6 5 Sch C-1 o th er (o u t s i d e s erv i ces ) 8 00 -0
- -0
- Sch C-1 o th er (p ro fes s i o n al d ev el o p m en t ) 7 ,5 24 2 ,0 00 -0
- Sch C-1 o th er (p ro m o t i o n ) 7 17 -0
- -0
- Sch C-1 o th er (t el ep h on e) 2 ,8 48 -0
- -0
- In acco rd an ce wi th o u r fi n d i n gs fo r p ri o r y ears , th e n eto p erat i n g l os s carry fo rward th atM s . Sh am

carri ed t o 2 0 1 4 m

u s t b e reco m

p u t ed
. [* 9 3 ]- 9 4 - 2 0 1 5 Ex p en s e Retu rn Ag reed Ad d i t i o n al am o u n t s Sel f-em p l o y edh eal th i n s u ran ce $ 8 ,8 31 $ 8 ,8 31 -0
- Sch A m ed i cal -0
- 6 75 -0
- Sch C-1 l eg al an dp ro fes s io n al s erv ices 6 54 -0
- -0
- Sch C-1 trav el 7 94 -0
- -0
- Sch C-1 d edu ct i bl e m eal s an d en t ert ai n m en t 4 33 5 00 -0
- Sch C-1 o th er (co n feren ces ) 5 54 5 54 -0
- Sch C-1 o th er (co n ti n ui n g edu cat i o n ) 9 ,6 47 -0
- -0
- Sch C-1 o th er (du es an d s ub s cri p t i on s ) 1 ,1 72 -0
- -0
- Sch C-1 o th er (p ro fes s i o n al d ev el o p m en t ) 6 ,2 74 -0
- -0
- Sch C-1 o th er (g i ft s ) 2 97 -0
- -0
- Sch C-1 o th er (t el ep h on e) 2 ,2 01 -0
- -0
- In acco rd an ce wi th o u r fi n d i n gs fo r p ri o r y ears , th e n eto p erat i n g l os s carry fo rward th atM s . Sh am

carri ed t o 2 0 1 5 m

u s t b e reco m

p u t ed
. [* 9 4 ]