T.C. Summ ary Opi ni on 20 15 -3

UNITED STAT ES TAX COURT

SHALOM JAC OBS, Pet it io ne r v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 21 07 8- 11 S. Fi le d J anuary 20 , 20 15 . Sh al om Jac ob s, p ro se. Ch ris ti naL. Coo k a ndJo hn Sch m it td ie l, fo r res po nd en t.

SUMM ARY OPINION HOLMES, Ju dg e: Sha lo m Jac ob s was a truc k driv er i n 2 00 7 a nd20 09 . He ha d s om e ta xabl e in co m e in bo th y ears th athe adm it s h e d idno t re po rt. He cl ai m s, h owe ve r, th atfor20 09 he is en ti tl edto de du ct io ns forde pr eci at io n a nd tra ve l ex pe ns es th atwou ldoff se t m os t o f hi s i nc om e fo r th aty ear. Th e Co m m is si on er ag rees th atJac ob s was en ti tl edto a de pr eci at io n d educ ti on --jus t n ot- 2 -

fo r 20 09 --b utrefu se d t o a ll ow h im an y de du ct io ns for

tra ve l ex pe ns es be cau se he co nc lu de d t ha t J aco bs was l iv in g o n t he roa d. 1 Bac kg ro un d Sh al om Jac ob s h as be ena truc k driv er s in ce 2 00 2. Hi s trip s wer e m ai nl y lo ng haul “ ov er the roa d” --m ean in g h e sp en t a s ig ni fic an t n um be r of week s an d m on th s o n t he roa d a ndwas p ai d b y th e m il e. So m e o f th is ti m e h e dro ve hi s o wn tru ck , bu t h e so ldth attru ckat t he ve ry en d o f 20 06 . (He di d n otrep ort the sal e o n hi s re tu rneit he r fo r 20 06 (whe n h e so ldit ) or20 07 (whe n h e g otth e m on ey )). He th enst art edto workfora “ tra ve l-t rai le r de li ve ry ” se rv ic e an d re cei ve d ro ug hl y $7 ,00 0 o f in co m e fro m

Meg atru x Tra ns po rta ti on in20 07 th athe als o d idno t rep ort o n h is 20 07 return. In20 08 he m ov edto a tr uc ki ng “ ex pe di te ” se rv ic e, bu t in 20 09 rev ert edto lo ng haul . Lon g h au l was de fin it el y m or e lu crat iv e fo r hi m : He rece iv edgro ss in co m e upwa rd s o f $1 80 ,00 0 i n 2 00 9 re po rte d o n t hr ee 1 09 9s (o f whi chhe rep orte d o nl y $1 35 ,00 0 o n h is 20 09 return) . Whe n h e was n’t o n t he roa d, J aco bs co ns id eredhi s h om e to be inCo tt ag e Gro ve , Min ne so ta , wher e h e st ay edinth e g ue stroo m of h is lo ng ti m e fri en d a nd The c as e was tri edas asm al l ca se un de r In te rn al Rev enue Co de sec ti on 1 74 63 (a) and(b) . (All sec ti oncit at io ns are t o t he Co de as c urren tl y ineffe ct .) Tria l as a sm al l ca se m ean s tha t thi s d eci si on is no t re vi ewab le by any ot he r co urt, an d th is op in io n s ho ul d n otbe cit edas p rece de nt .- 3 -

fel lo w exp at , Shi m on Cas pe r. Cas pe r an d J aco bs were b ot h b orn i n Is rael an d rear edon ki bb ut zi m . Accor di ng to Jac ob s, the Cas pe rs ’ Co tt ag e Gro ve ho m e was anAm eri can -s tyle k ib bu tz , wher e Cas pe r, hi s wi fe an d c hi ldren , andJac ob s recr eat edth e co m

m un al li fe o f th ei r ho m el an d wi th ev eryone co nt rib ut in g ev erythi ng th ey

ha d a ndtak in g o nl y

whateach ne ed ed . Or at l eas t co nt rib ut in g qu it e a b it : J aco bs cla im edhe pu t i n a ro un d $ 10 ,00 0 p er y ear t o the Co tt ag e Gro ve “ ki bb ut z”, tho ug h h e h adno ev id en ce t o s ub st an ti at e h is cla im . Dis cu ss io n Ja co bs m ad e se ve ral co nc es si on s b ot h a t tria l an d i n h is bri ef an d t he se ha ve le ft u s wi th on ly a few is su es to de ci de . W e b eg inwith J aco bs ’s arg um en t tha t h e sh ou ldbe all owe d a n a dd it io na l am ountfor de pr eci at io n fo r 20 09 forth e truc k h e so ldba ckin20 06 . Accor di ng to th e n ot ic e o f de fic ie nc y , th e Co m m is si on er actua ll y in cr ea se d

th e d ep reci at io n d educ ti on forth e 2 00 7 t ax y ear b y m or e th an $7 ,50 0. He d is al lo wed , ho wev er, the am ou nt s tha t J aco bs carr ie d fo rwardto 20 08 an d 2 00 9. A tax pa y er g en eral ly has th e b ur de n o f pr ov in g h e is en ti tl edto a de du ct io n. Ru le 14 2( a). Thi s i nc lu de s s ub st an ti at in g t he am ou nt s h e cl ai m s b y ke ep in g reco rd s. See sec . 60 01 . Jac ob s n ei th er t es ti fie d o r ga ve us any ot he r pr oo f th athe- 4 -

was en ti tl edto de du ctad di ti on al de pr eci at io n fo r ta x year 20 09 on th e truc k t ha t he so ldba ckin20 06 . W e m us t ru le infav orof the Co m m is si on er o n t hi s o ne . Tha t l eav es on ly the qu es ti on of wh ethe r Ja co bs co ul d c la im an y pe r die m m eal ex pe ns es for20 09 . Sect io n 1 62 (a)( 2) let s a t ax pa y er d educ t re as on ab le an d ne ces sa ry tra ve l ex pe ns es in curredwhi le away fro m hi s h om e in th e p ur su itof a tra de or b us in es s, b utsec ti on 26 2( a) d en ie s a d educ ti on foran y pe rs on al , li vi ng , or fam il y ex pe ns es . This canm ak e fo r a fu zzy lin e--p eo pl e li ke Jac ob s s pe ndm on ey on th ei r pe rs on al ex pe ns es ev enwhen th ey are o n t he roa d m ak in g ali vi ng . Over th e y ears , th ou gh , th e ru le s h av e b eco m e cl eare r: A t ax pa y er h as to ha ve

“ ad equa te reco rd s” forall hi s cl ai m edde du ct io ns , andhe ha s t o h av e ex tra ev id en ce fo r so m e d educ ti on s (the on es li st edinsec ti on 27 4( d) ). But m os t im po rta nt ly of al l, h e h as to sh ow tha t h e was actua ll y away fro m ho m e whe n h e in cu rredth e ex pe ns es th athe ’s trying to de du ct . The Co de is a li tt le pe cu li ar i n d efi ni ng a pe rs on ’s “ ho m e.” Norm al pe op le th in k o f th ei r ho m e as th e p la ce wh ere t he y sp en d t he ir p ers on al an d fam il y li ve s, bu t a “ ho m e” i n t ax law i s u su al ly whe re a t ax pa y er h as hi s p rin ci pa l p la ce o f em pl oym en t. Tax law d efi ne s a h om e as th e p erm an en t re si de nc e atwhi cha ta xp ay er i nc ur s s ub st an ti al co nt in ui ng li vi ng ex pe ns es on ly if he do es n’t h av e a pr in ci pa l p la ce o f em

pl oym en t. Bar on e v . Comm is si on er, 8 5 T.C. 4 62 , 46 5- 5 -

(1 98 5) , aff’d wit ho utpubl is he d o pi ni on , 80 7 F .2d17 7 (9 th Cir . 19 86 ). Bu t wh atif a ta xp ay er i s co ns tant ly on the m ov e? Cas es de ci de d o ve r m an y de cad es gi ve us th e an swe r--atax pa y er wh o’s co ns tant ly in m ot io n i s a “ ta x turtl e”-- th atis , so m eo ne with n o fi xe d re si de nc e who carri es hi s “ ho m e” wi th hi m . See, e.g ., Hen de rs on v. Co m

m is si on er, 1 43 F.3d49 7, 5 01 (9t h C ir. 1 99 8) , aff’g T.C. Mem o. 19 95 -5 59 ; Dea m er v . Comm is si on er, 7 52 F.2d33 7, 3 39 (8th C ir. 1 98 5) , aff’g T.C. Mem o. 1 98 4- 63 ; J oh ns on v. Co m m is si on er, 1 15 T.C. 21 0, 2 21 (20 00 ). Suc h a ta xp ay er i s n oten ti tl edto bu si ne ss de du ct io ns fortrave li ng ex pe ns es un de r se ct io n 16 2. Kro ll v. Co m

mis si on er, 4 9 T.C. 5 57 , 56 2 (1 96 8) . The b ur de n o f pr oo f is on th e ta xp ay er i f he di sa gr ees with t he Co m m is si on er, Welch v. Hel ve rin g, 2 90 U.S. 11 1 (1 93 3) , andth atis a hi ghhu rd le fora ta x turtl e to cle ar. Bu t was Jac ob s a t ax turtl e? He cla im s h is res id en ce was inCo tt ag e Gro ve , Mi nn es ot a, on a ki bb ut z wit h t he Cas pe rs an d t ha t h is ex pe ns es are fo r whe n h e was onth e ro adaway

fro m th em . The Co m

mis si on er ar gu es th atJac ob s d idn’t res id e inCo tt ag e Gro ve , bu t was eit he r li vi ng on th e ro adwitho uta pe rm an en t res id en ce o r in Cal ifo rn iadu rin g 2 00 7 a nd20 09 when he was b etweenjob s. Old cas es tel l u s t o l oo k fo r se ve ral fact or s: [T]he u lt im at e al lo wan ce o r di sa ll owa nc e o f a d educ ti on is a func ti on of t he co urt’s as se ss m en t o f th e rea so n fo r a t ax pay er’s m ai nt en an ce o f two ho m es . If th e rea so n i s p erce iv edto be- 6 -

pe rs on al , th e ta xp ay er’s h om e wil l g en eral ly be h el d t o b e h is pl ace of em pl oym en t ra th er tha n h is res id en ce an d t he de du ct io n wi ll be de ni ed . * * * If

th e rea so n i s fe ltto be bu si ne ss ex ig en ci es , th e pe rs on ’s ho m e wil l u su al ly be h el d t o b e h is res id en ce an d t he de du ct io n wi ll be all owe d. * * * Han tz is v. Co m

m is si on er, 6 38 F.2d24 8, 2 53 (1s t Ci r. 19 81 ) (d is al lo win g de du ct io n fo r Bo st on law s tu de ntwith asu m m er job inNew York ), rev ’g T.C. Mem o. 1 97 9- 29 9; Mi ni ckv. Co m m is si on er, T.C. Mem o. 2 01 0- 12 (ap pl y in g Han tz is fact or s) ; Fa rran v. Co m m is si on er, T.C. Mem o. 2 00 7- 15 1 (app lying Han tz is fact or s) . Andth e IRS ha s an ol d re ve nu e ru li ng th athe lp s. Re ve nu e Ru li ng 73 -5 29 , 19 73 -2 C.B. 3 7, d eal s s pe ci fic al ly w ith t ax pa y ers who li ve onth e ro ad . It l is ts th ree e xt ra fa ct or s t o h el p d eci de whet he r a t ax pa y er i s an it in eran t: (i) th e b us in es s co nn ect io n t o t he lo cal e o f th e cl ai m edho m e; (ii ) th e dup li cat iv e na tu re o f th e ta xp ay er’s l iv in g e xp en se s wh il e tr av el in g a ndat t he cla im edho m e; an d (i ii ) pe rs on al att ach m en ts to th e cl ai m edho m e. Rev . Rul . 73 -5 29 , 19 73 -2 C.B. 3 7. So alt ho ug h t he si tu at io n i n Han tz is in vo lv eda la w stud en t wh o h adtwo ho m es , th e sa m e fac to rs ap pl y he re ev enif we are jus t d eal in g wi th th e si ng le Co tt ag e Gro ve “ ki bb ut z.” The cas es an d t he rev enue rul in g t hu s t el l u s wh atqu es ti on s t o a sk : ! DidJac ob s’s tru ck in g b us in es s g iv e h im so m e rea so n t o l iv e in Co tt ag e Gro ve ?- 7 -

! W as Jac ob s ri ng in g up d oubl e ex pe ns es –p ay in g t he ord in ary ex pe ns es of k eep in g aho m e in Co tt ag e Gro ve whi le als o p ay in g t he sa m e k in d o f ex pe ns es whi le on th e ro ad ? ! Wha t k in d o f pe rs on al att ach m en t d idhe ha ve to th e Co tt ag e Gro ve ho m e? W e’ll t ak e th em

inrev ers e o rd er. Ja co bs ’s reco rd s fo r 20 09 in di cat e th athe sp en t m or e ti m e in Cal ifo rn ia , andRan ch o C uc am on gainparti cu lar, th anhe di d i n Co tt ag e Gro ve . W e al so tak e is su e wit h J aco bs ’s cha ract eri zat io n o f th e Cas pe rs ’

“ ho m e” as a “ ki bb ut z.” A ho us e in th e subu rb s o ccupi edby one fam il y with a fri en d wh o s to ps by onc e ina whi le is by no m eas ur e “ a co m m un al farm or se tt le m en t.” J aco bs pro vi de d n o d oc um en ta ti onor t es ti m on y th atass et s o f th e

“ ki bb ut z m em

be rs ” were c omm

un al . Andwe als o fi ndth atJac ob s p ro vi de d n o do cu m en ta ti on or p ro of

of the paym en ts he cla im edto m ak e to Cas pe r as a co nt rib ut io n t o t he ho us eh ol d. We fou nditesp eci al ly tell in g t ha t Ca sp er, i n h is te st im on y , sai d t ha t J aco bs oc cupi edth e “ gu es t ro om ”--t he same roo m othe r vi si to rs us edwhen th ey

vi si te d. Reg ard in g t he sec on d fa ct or , we hav e al ready fou ndth atJac ob s l ack ed ev id en ce t o s ho w he f

in an ci al ly con tri bu te d t o t he Cas pe r ho m e--l etalo ne th at th es e ex pe ns es dupl ic at edth os e th athe in cu rredon th e ro ad .- 8 -

So th e o nl y

is su e le ft f

or us to di sc us s i s wh ethe r Ja co bs ha d abu si ne ss reas onforli vi ng th ere. We can ’t see an y . If Ja co bs us edCas pe r’s ad dr es s fo r m ai l, v ot in g, o r ot he r in ci de nt al s as he cla im ed(bu t p ro vi de d n o e vi de nc e o f), we fin d i t was for

hi s co nv en ie nc e an d a ffec ti on for th e Cas pe rs , no t fo r an y

bu si ne ss reas on . W e fi ndin st eadth atJac ob s i s an it in eran t wo rk er-- a ta x turtl e--wh os e ta x ho m e fo ll owe d h im

on th e ro ad . See Hen de rs on , 14 3 F .3dat 5 00 (ta xp ay er h om e du rin g “ id le ti m e” b utwork edm os t n ig ht s t ou rin g wi th Dis ne y On Ic e). The re’s o ne m or e is su e. The C omm is si on er wan ts to pe na li ze J aco bs un de r se ct io n 6 66 2 fo r be in g n eg li ge ntinpre pa rin g h is tax return o r fo r subs tant ia ll y un de rs ta ti ng hi s t ax bi ll . Negl ig en ce m ean s a l ackof due care or f ai lu re t o d o wha t a r eas on ab le an d o rd in ari ly pru de ntpe rs on wou lddo un de r th e ci rcu m st an ces . Neely v. Co m m is si on er, 8 5 T.C. 9 34 , 94 7 (1 98 5) . This in cl ud es a ta xp ay er’s fai lure t o k eep ad equa te bo ok s an d re co rd s o r to pro pe rly subs tant ia te anit em . Sec. 1 .66 62 -3 (b )(1 ), Pro ced . & Adm in . Reg s. A subs tant ia l un de rs ta te m en t i s d efi ne d a s an un de rs ta te m en t o f ta x e xc eed in g t he gre at er o f 10 % of t he co rrec t l iabi li ty or $5 ,00 0. Se c. 66 62 (d )(1 ). W e’ll g o year by y ear. Fo r 20 07 Jac ob s fa il edto rep ort i nc om e fro m on e o f hi s two p ay or s. His ori gi na l re tu rnsh owe d n o fe de ral in co m e ta x p ai d a ndno ne owi ng . Whi le Jac ob s b la m es hi s 2 00 7 t ax pre pa rer fo r fai li ng to rep ort $ 59 ,00 0- 9 -

fro m th e sa le of t he tru ck , he d idn’t p ro vi de th e p rep arerwith a ny inf orm at io n ab ou t the sal e. Fo r 20 09 Jac ob s fa il edto rep ort o ve r $4 0,0 00 of i nc om e. Ja co bs sh owe d ta x o wedon hi s re tu rnof $ 44 6- -le ad in g t o ade fic ie nc y of m or e th an$1 0,0 00 . Thi s ex ceed s $ 5,0 00 , whi chm ak es ita subs tant ia l u nd ers tate m en t o f ta x. No t o nl y th at , bu t J aco bs di d n ottak e th e ti m e to pro pe rly revi ew hi s t ax returns an d a sk qu es ti on s o f hi s t ax pre pa rers . Thi s al so m ak es hi m ne gl ig en t. 2 Tax pa y ers insi m il ar s itua ti on s ca n avo idth e p en al ty if th ey cansh ow tha t th ey rel ie d o n t he advi ce o f a p ro fes si on al tax advi se r. Sec. 1 .66 64 -4 (b ), In co m e Tax Reg s. Ev enif we a ss um e Ja co bs rece iv ed“ advi ce,” the cas el aw li st s thr ee fact or s we n eedto lo okat t o d eci de whethe r hi s re li an ce o n i t was reas on ab le . Neo na to lo gy Asso cs ., P.A. v. Co m m is si on er, 1 15 T.C. 43 , 99 (20 00 ), aff’d, 2 99 F.3 d 2 21 (3dCir . 20 02 ).

• W as th e advi se r a co m pe te ntpro fes si on al who ha d s uf fic ie nt ex pe rti se to jus ti fy

rel ianc e?

• Didth e ta xp ay er p ro vi de ne ces sa ry an d a ccu rat e in fo rm at io n t o t he advi se r?

• Didth e ta xp ay er ac tu al ly rely ingo odfai th on th e advi se r’s jud gm en t? W e al so po in t o utth athe m ad e n o e st im at edtax pa ym en ts for20 06 , 20 07 , 2 20 08 , or 2 00 9.- 10 -

Ja co bs cla im s h e rel ie d o n qua li fie d l ic en se d p ro fes si on al tax pre pa rers . As pr oo f, he pro vi de d p rin to ut s o f th e adve rti si ng m at eri al of t he pre pa rers he ch os e. He arg ue d t ha t ea chtype o f truc k driv in g (o f whi chwe ha ve lea rn edth ere a re se ve ral ) requi res a di ffer en t ty pe of t ax pre pa rer- -b uthe pro vi de d n o e vi de nc e fo r th is th eo ry . Butou r bi gg es t i ss ue is th atJac ob s co ul d n otpo ss ib ly hav e rel ie d o n advi ce fr om

a ta x p rep arerto who m

he di d n otgi ve th e n eces sa ry in fo rm at io n. He di d n otrep ort al l o f th e in co m e fro m th e Fo rm s 1 09 9- MIS C th athe rece iv ed . Not rep orti ng in co m e fo r whi chon e h as rece iv eda Fo rm 10 99 is a sp eci al si gn of ne gl ig en ce, s ec. 1 .66 62 -3 (b )(1 )(i ), In co m e Tax Reg s., an d i t m ig htno t g eta ta xp ay er o ff the ho okfora pe na lty ev enif h e g iv es th e 1 09 9 t o h is pre pa rer, s ee Met ra Ch em

Co rp . v. Co m

mis si on er, 8 8 T.C. 6 54 , 66 2- 63 (19 87 ) (rel ianc e o n pr ep arerwith c om

pl et e in fo rm at io n n otreas on ab le cau se wher e cu rs ory rev ie w wou ldha ve rev eal ederro rs ); M ag il l v . Comm is si on er, 7 0 T.C. 4 65 , 47 9- 80 (19 78 ) (ta xp ay er s ti ll ha s dut y

to readreturn t o m ak e su re al l i nc om e in cl ud edev enif a ll da tagi ve n t o t ax pre pa rer) , aff’d, 6 51 F.2d12 33 (6th C ir. 1 98 1) . W e can ’t eve n fin d t ha t J aco bs di d t ha t. Bu t atlea stJac ob s u se d ali cen se d p rep arerforhi s 2 00 7 re tu rn . For h is 20 09 return h e u se d o ne Fran k Kat z, anin te rio r de si gn er wh o b ecame a tru ck dr iv er an d t he n a n u nl ic en se d t ax pre pa rer. Kat z’s web si te m at eri al ha s n otbe en- 11 -

up da te d i n n earl y

15 y ears . It was un reas on ab le forJac ob s t o re ly on an un li cen se d t ax pre pa rer wh os e o wn web si te sh ows no tra in in g fo r atlea stni ne y ears . W e d o n otfin d Kat z to be a “ co m pe te ntpro fes si on al ” an d fi ndth atJac ob s co ul d n otreas on ab ly hav e th ou gh t h im to be on e. Deci si on wil l b e en te redfor res po nd en t.