T.C. Summary Opinion 2021-18

UNITED STATES TAX COURT

PAUL WARQUE AND MARIE WARQUE, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 6076-19S. Filed July 8, 2021.

Paul Warque and Marie Warque, pro sese.

Michael T. Garrett and Gretchen W. Altenburger, for respondent.

SUMMARY OPINION

COPELAND, Judge: This case was heard pursuant to the provisions of

section 7463

1

 of the Internal Revenue Code in effect when the petition was filed.

1Unless otherwise indicated, all section references are to the Internal

Revenue Code (Code) in effect for the years in issue, and all Rule references are to

the Tax Court Rules of Practice and Procedure. All dollar amounts are rounded to

the nearest dollar.

Served 07/08/21
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Pursuant to section 7463(b), the decision to be entered is not reviewable by any

other court, and this opinion shall not be treated as precedent for any other case.

In a notice of deficiency issued February 10, 2019, the Internal Revenue

Service (IRS or respondent) determined the following deficiencies in Federal

income tax and section 6662(a) accuracy-related penalties for petitioners Paul and

Marie Warque:

Year Deficiency

Penalty

sec. 6662

2015 $1,680 $336

2016 2,010 402

2017 277 55

After concessions, the issue for decision is whether the Warques are entitled

to deduct unreimbursed employee business expenses for their 2015, 2016, and

2017 taxable years.

2

Background

Some facts have been stipulated and are so found. The stipulation of facts

and the attached exhibits are incorporated by this reference. When the petition

was timely filed, the Warques were residents of Nevada.

2Respondent conceded the sec. 6662 accuracy-related penalties in his

simultaneous opening brief. Nevertheless, respondent asks us to rule that the

Warques were negligent. We decline to do so.
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I. Mrs. Warque’s Employment

During the years in issue Mrs. Warque was a homemaker. She has an

accounting degree earned in the Philippines; however, she has never taken any

classes on U.S. income tax laws.

II. Mr. Warque’s Employment

Mr. Warque has a bachelor’s degree in accounting earned from the

University of Nevada, Las Vegas. In 2009 he began working as a revenue agent

for the IRS. His “post of duty” was the IRS examination office in Laguna Niguel,

California; it was a permanent, not seasonal, position. Mr. Warque remained

employed in this position through the years in issue. He worked in the Tax

Exempt and Government Entities examination division. His duties included

examining employee pension and retirement plans to determine whether the plans

met the qualifications of section 401(a). He was also charged with making

“discrepancy adjustments,” which are adjustments to Federal income tax returns to

correct a discrepancy between facts developed during an examination of an

employer’s pension or retirement plan return3

 and the line items on related income

3Such as Form 5500, Annual Return/Report of Employee Benefit Plan, or

other forms in the 5500 series.
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tax returns.

4

 EP Examination Process Guide--Discrepancy Adjustments,

https://www.irs.gov/retirement-plans/ep-examination-process-guide-discrepancyadjustments (last updated Mar. 4, 2021). In performing his duties as a revenue

agent, Mr. Warque had access to many tax law research resources, including

Westlaw, that would enable him to research tax laws. During the years in issue,

and from at least 2009, the Warques’ personal residence was in Nevada; though

Mr. Warque was generally not entitled to work from there.

III. Hardship Transfer

In 2014 Mr. Warque applied for a hardship transfer from the IRS

examination office in Laguna Niguel to the IRS examination office in Las Vegas,

Nevada. Although the request was approved on April 11, 2014, he was never

transferred. The request approval did not guaranty a new job placement or

transfer. The approval was for hardship eligibility. When approved, hardship

eligibility puts the individual’s name on a list for consideration. Mr. Warque’s

approval letter stated:

This is to inform you that your hardship application has been

approved. Your name has been updated in the Special Programs

database on 04/11/2014. This does not mean you have a job

4Such as Form 1040, U.S. Individual Income Tax Return, or Form 1120,

U.S. Corporation Income Tax Return.
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placement offer at this time. However, you will be considered for

future vacancies in your desired post of duty with the status of a

hardship eligible.

Essentially if a job vacancy became available in the IRS examination office in Las

Vegas, the relevant IRS employment office would first check the Special

Placement Programs Report for any matches. If Mr. Warque’s application was a

match, the relevant employment office would request and receive his application. 

There was no guaranty that he would then receive the requested change to his post

of duty location; further action was required.

Mr. Warque reapplied through the same process in 2015 and was again

approved for hardship eligibility and placed on the list for consideration. Mr.

Warque also applied in 2016, but that application was not approved. In 2017 he

was temporarily authorized to change his post of duty to Las Vegas for a couple of

months to care for his wife and newborn child. However, Mr. Warque never

received a full-time hardship transfer to Las Vegas.

IV. Business Expenses

Both Mr. and Mrs. Warque kept track of Mr. Warque’s expenses. When he

would travel between his residence in Nevada and his post of duty in Laguna

Niguel, Mr. Warque kept track of his mileage using his phone. He would begin

tracking miles when he left his personal residence in Nevada on Sunday and then
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record his mileage again when he returned Friday mornings. Mr. Warque would

then manually transfer the phone recorded mileage onto a sheet of notebook paper. 

At the end of the year he would summarize the mileage from the handwritten sheet

or sheets for use in preparing a tax return for the year. The Warques also collected

receipts for gasoline and car repairs. When Mr. Warque worked from his

residence in Nevada on weekends, he would buy his work supplies as part of his

family’s grocery shopping. Because of the combined nature of the shopping trips,

Mrs. Warque would estimate the amounts for Mr. Warque’s work supplies. For

rent expenses, Mrs. Warque would track the amounts that Mr. Warque told her he

had paid for renting a room in Costa Mesa, California, which was near his post of

duty in Laguna Niguel.

V. The Returns

The Warques’ Form 1040 tax return for each year in issue included

Schedule A, Itemized Deductions, on which they reported various deductions

including, as relevant here, unreimbursed employee business expenses. Included

in that category were expenses for mileage, gas, meals and entertainment, and

personal effects. Those expenses were further delineated on Form 2106-EZ,

Unreimbursed Employee Business Expenses.
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More specifically on the Forms 2106-EZ, for 2015 the Warques reported

$14,205 as a mileage expense and $9,170 of business expenses; for 2016 they

reported $12,132 as a mileage expense and $13,191 of business expenses; and for

2017 they did not report mileage expense but reported $14,148 of business

expenses.

Mr. Warque would give Mrs. Warque some of the documentation related to

his unreimbursed employee business expenses. Mrs. Warque would supplement

that with expense information she maintained on spreadsheets she created. The

Warques used TurboTax to complete the returns. Mrs. Warque would allow the

TurboTax software prompts to guide her in reporting expenses as she was

preparing each return. Mr. Warque would then skim through the completed

returns before filing.

VI. Notice of Deficiency

After an examination and an appeal to the IRS Office of Appeals, the IRS

issued a statutory notice of deficiency disallowing itemized deductions of $23,797,

$25,991, and $14,562 for 2015, 2016, and 2017, respectively. These

disallowances consisted of the reported unreimbursed employee business

expenses.
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Discussion

I. Burden of Proof

Generally, the Commissioner’s determinations in a notice of deficiency are

presumed correct. Rule 142(a) places the burden of proof on the taxpayer unless

otherwise provided by statute or determined by the Court. See Welch v.

Helvering, 290 U.S. 111, 115 (1933). A taxpayer claiming a deduction on a

Federal income tax return must demonstrate that the deduction is allowable

pursuant to a statutory provision and must further substantiate that the expense to

which the deduction relates has been paid or incurred. Sec. 6001; Hradesky v.

Commissioner, 65 T.C. 87, 89-90 (1975), aff’d per curiam, 540 F.2d 821 (5th Cir.

1976); Meneguzzo v. Commissioner, 43 T.C. 824, 831-832 (1965); sec. 1.6001-

1(a), Income Tax Regs.

The burden of proof shifts to the Commissioner under certain circumstances

to the extent that a taxpayer comes forth with credible evidence with respect to a

factual issue relevant to ascertaining the taxpayer’s liability. Sec. 7491(a)(1). The

Warques do not contend, nor does the evidence establish, that the burden shifts to

respondent under section 7491(a) as to any issue of fact.
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II. Unreimbursed Employee Business Expenses

As we have observed in countless opinions, deductions are a matter of

legislative grace, and the taxpayer bears the burden of substantiating his claimed

deductions by keeping and producing records sufficient to enable the 

Commissioner to determine the correct tax liability. Sec. 6001; INDOPCO, Inc. v.

Commissioner, 503 U.S. 79, 84 (1992); sec. 1.6001-1(a), (e), Income Tax Regs.

As relevant here, section 162(a) allows deductions for all ordinary and

necessary business expenses paid or incurred during the taxable year in carrying

on a trade or business. Boyd v. Commissioner, 122 T.C. 305, 313 (2004). This

includes performing services as an employee. See Primuth v. Commissioner, 54

T.C. 374, 377-378 (1970). To be ordinary the expense must be of a common or

frequent occurrence in the type of business involved. Deputy v. du Pont, 308 U.S.

488, 495 (1940). To be necessary an expense must be appropriate and helpful to

the taxpayer’s business. Welch v. Helvering, 290 U.S. at 113. If, as a condition of

employment, an employee is required to incur certain expenses, then the employee

is entitled to a deduction for those expenses unless entitled to reimbursement from

his or her employer. See Fountain v. Commissioner, 59 T.C. 696, 708 (1973);

Spielbauer v. Commissioner, T.C. Memo. 1998-80. An employee business

expense is not “ordinary and necessary” if the employee is entitled to
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reimbursement from his or her employer but fails to seek reimbursement. See

Podems v. Commissioner, 24 T.C. 21, 22-23 (1955); Noz v. Commissioner, T.C.

Memo. 2012-272. Section 262(a), on the other hand, provides that personal,

living, or family expenses are not deductible unless “expressly provided” in the

Code. Wirt v. Commissioner, T.C. Memo. 1988-329, 55 T.C.M. (CCH) 1369,

1371 (1988).

Keeping in mind these guiding principles, we turn our attention to the

deductions in dispute here.

A. Traveling Expenses

On their 2015 and 2016 returns, as travel expenses, the Warques reported

unreimbursed employee business expenses for, among other things, Mr. Warque’s

mileage, car repair and maintenance, meals, gas, car inspection costs, and room

rental. The main issue regarding these travel-related expenses is whether Mr.

Warque’s principal place of employment was Las Vegas, Nevada, or Laguna

Niguel, California. The Warques assert that approval of Mr. Warque’s application

for hardship relocation led to his reasonable belief that the work performed at the

IRS office in Laguna Niguel was temporary.

5

5Mr. and Mrs. Warque make this argument despite the fact that they

reported similar expenses on prior years’ tax returns.
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Section 162(a)(2) expressly provides that expenses related to travel can be

deducted if ordinary and necessary and incurred while the taxpayer is away from

“home” in the pursuit of a trade or business. See Barone v. Commissioner, 85

T.C. 462, 465 (1985), aff’d without published opinion, 807 F.2d 177 (9th Cir.

1986).6

 Traveling expenses, including amounts expended for meals and lodging

and the use of “listed property” (as defined in section 280F(d)(4) and including

passenger automobiles) may be deducted under section 162(a)(2) if they are:

(1) ordinary and necessary; (2) incurred while away from home; and (3) incurred

in pursuit of a trade or business. Commissioner v. Flowers, 326 U.S. 465, 470

(1946). The purpose of the “away from home” provision is to mitigate the burden

of a taxpayer who, because of his or her trade or business, must maintain two

places of abode and incur additional and duplicate living expenses. Kroll v.

Commissioner, 49 T.C. 557, 562 (1968). For the purpose of section 162(a)(2),

“home” is defined as the vicinity of a taxpayer’s principal place of employment

rather than the location of the taxpayer’s personal residence (i.e., the “tax home”

6We also note that the deductions for expenses attributable to travel under

sec. 162(a), if otherwise allowable, are subject to strict rules of substantiation. See

sec. 274(d); Sanford v. Commissioner, 50 T.C. 823, 827 (1968), aff’d per curiam,

412 F.2d 201 (2d Cir. 1969); sec. 1.274-5T(a), Temporary Income Tax Regs., 50

Fed. Reg. 46014 (Nov. 6, 1985). Because we decide this issue on the basis of Mr.

Warque’s tax home, the strict substantiation rules are not separately addressed.
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might be in different locale from the residence). Mitchell v. Commissioner, 74

T.C. 578, 581 (1980). However, where the employment is for a temporary rather

than indefinite or permanent period, taxpayers may use their personal residence

locale as their tax home. See Peurifoy v. Commissioner, 358 U.S. 59, 60 (1958);

Kroll v. Commissioner, 49 T.C. at 562-563. A business locale is considered

temporary if the employment is such that “termination within a short period could

be foreseen.” Albert v. Commissioner, 13 T.C. 129, 131 (1949). Even if it is

known that the employment will terminate within a fixed time, it is not temporary

if it is expected to last for a substantial or indefinite duration. See Wirt v.

Commissioner, 55 T.C.M. (CCH) at 1371.

The Court of Appeals for the Ninth Circuit

7

 established a test to determine

whether a taxpayer’s employment is temporary or permanent in Harvey v.

Commissioner, 283 F.2d 491, 495 (9th Cir. 1960), rev’g and remanding 32 T.C.

1368 (1959). The test looks at whether “there is a reasonable probability known to

* * * [the taxpayer] that he may be employed for a long period of time at his new

7As stated supra p. 2, pursuant to sec. 7463(b) our decision in this case is

not reviewable by any other court. However, absent the small case designation

any appeal would lie in the Court of Appeals for the Ninth Circuit. See sec.

7482(b)(1)(A), (2). Thus, even in cases subject to sec. 7463(b), we generally

apply the law in a manner consistent with the holding of the Court of Appeals to

which an appeal of our decision would otherwise lie. See Golsen v.

Commissioner, 54 T.C. 742, 757 (1970), aff’d, 445 F.2d 985 (10th Cir. 1971).
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station.” Id. What constitutes a “long period of time” varies with the

circumstances of each case. Id.

On this record, applying either the test of this Court or that of the Court of

Appeals for the Ninth Circuit, we hold that Mr. Warque was not “away from

home” within the meaning of section 162(a)(2). Mr. Warque traveled from his

personal residence in Las Vegas to his place of employment in Laguna Niguel. 

Mr. Warque began working in Laguna Niguel in 2009 knowing that it was a fulltime nontemporary position. This situation did not change when he applied for the

hardship relocation. The hardship relocation approval letter clearly stated that

there was no certainty that his duty station would be changed to Las Vegas. The

approval was one of eligibility. The letter clearly stated that there was no guaranty

he would be transferred. In fact he was not transferred. There could be no

reasonable belief that the Laguna Niguel duty station changed to a temporary one

in 2015 or earlier. Mr. Warque’s tax home for purposes of section 162(a)(2) was

his Laguna Niguel place of employment. It was Mr. Warque’s personal preference

to maintain a personal residence in Las Vegas. Consequently, the traveling

expenses Mr. Warque incurred for mileage, rent, car repair and maintenance, car

inspection, and meals were not covered by the exception in section 162(a)(2) and

are not deductible. See Wirt v. Commissioner, 55 T.C.M. (CCH) at 1371-1372.
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In addition, expenses that a taxpayer incurs in commuting between a tax

home and his place of business/employment are personal and nondeductible. See

Commissioner v. Flowers, 326 U.S. at 473-474; Heuer v. Commissioner, 32 T.C.

947, 951 (1959), aff’d per curiam, 283 F.2d 865 (5th Cir. 1960); secs. 1.162-2(e),

1.262-1(b)(5), Income Tax Regs. Here, Mr. Warque rented a room in Costa Mesa,

California, which is near Laguna Niguel. His commuting expenses for travel

between his rented room and his place of business are likewise nondeductible.

B. Other Business Expenses

To deduct employee business expenses, a taxpayer must not have received

reimbursement and must not have had the right to obtain reimbursement from his

employer. See Orvis v. Commissioner, 788 F.2d 1406, 1408 (9th Cir. 1986), aff’g

T.C. Memo. 1984-533. The Warques bear the burden of proving that they are not

entitled to reimbursement from Mr. Warque’s employer for such expenses. See

Fountain v. Commissioner, 59 T.C. at 708.

Other than mileage, the Warques did not delineate their business expenses

on the Forms 2106-EZ filed with their returns. At trial they produced spreadsheets

and a sampling of actual receipts. The spreadsheets set forth the following

categories of unreimbursed employee business expenses: clothing, dry cleaning,

union dues, office supplies, and personal effects. The receipts were for Mr.
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Warque’s clothing (including a suit and shoes), dry cleaning, haircuts, groceries,

union dues, and personal items such as deodorant, mouthwash, and floss. The

Warques did not provide any information establishing whether Mr. Warque would

have been entitled to reimbusement for business expenses incurred on behalf of

his employer, the IRS, nor did they provide a reimbursement plan.

Clothing expenses are deductible if the clothing is of a type specifically

required as a condition of employment, not adaptable for general use as ordinary

clothing, and not worn as ordinary clothing. Yeomans v. Commissioner, 30 T.C.

757, 767 (1958). A suit and shoes are certainly adaptable as ordinary clothing. 

Therefore, the amounts reported for clothing, and their upkeep, were personal and

as such are not deductible. See sec. 262(a).

Similarly, grooming expenses are inherently personal and are not deductible

even if an employer requires an employee to be well groomed. Hynes v.

Commissioner, 74 T.C. 1266, 1292 (1980). Consequently, the Warques are not

entitled to a deduction for haircuts and personal hygiene products.

For 2017 only, the Warques reported office supplies as part of their

unreimbursed employee business expenses. Mr. Warque purchased supplies for

use when he was working from home. He admitted that the IRS would provide

him with office supplies for his job. However, he was working from home for at
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least part of 2017 to help care for his wife and child. As previously stated,

taxpayers bear the burden of establishing entitlement to a deduction. Hradesky v.

Commissioner, 65 T.C. at 89-90; Meneguzzo v. Commissioner, 43 T.C. at 831-

832; sec. 1.6001-1(a), Income Tax Regs. The Warques did not provide any

documentation to substantiate the reported unreimbursed employee business

expenses for office supplies beyond the self-prepared spreadsheets. Nor did they

provide information about whether these expenses were reimbursable by the IRS

or how they were connected with Mr. Warque’s position at the IRS. 

Consequently, they did not meet their burden of showing these expenses were

deductible. 

III. Conclusion

We hold that the Warques are not entitled to deduct their reported

unreimbursed employee business expenses for their 2015, 2016, and 2017 taxable

years. In reaching our decision, we have considered all arguments made, and to

the extent not mentioned above, we conclude they are moot, irrelevant, or without

merit.
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To reflect the foregoing,

Decision will be entered for

respondent as to the deficiencies and for

petitioners as to the accuracy-related

penalties under section 6662(a).