TAX COURT OPINION

Case: Richard B. Silverstein & Colleen L. Carter
Docket Number: 19932-08
Judge: Colvin
Opinion Type: bench
Filed: 10/19/2009
Pages: 20

UNITED STATES TAX COUR T WASHINGTON , DC 2021 7 RICHARD B . SILVERSTEIN AND: COLLEEN) L . CARTER, Petitioners, v . Docket No . 19932-08 . COMMISSIONER OF INTERNAL REVENUE , Respondent . . O R D E R Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it i s ORDERED that the Clerk of the Court shall transmit herewith to petitioners and to respondent a copy of the pages .of the transcript of the trial in the above case before Judge David Gustafson at St . Paul, Minnesota, on September 17, 2009, containing his oral findings of fact and opinion rendered at the conclusion of the trial . In accordance with the oral findings of fact and opinion, decision will be entered entered under Rule 155 . (Signed) David Gustafson Judge Dated : Washington, D .C . October 19, 2009 SERVED Oct 20 2009 1 Bench Opinion by Judge David Gustafson September 17, 200 9 3 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Silverstein & Carter v . Commissioner Docket No .19932-0 8 THE COURT : The Court has decided to render ora l Findings of Fact and opinion in this case, and the followin g represents the Court's oral Findings of Fact and Opinion . The oral Findings of Fact and opinion shall not be relied o n as precedent in any other case . This Bench Opinion is made pursuant to th e authority granted by Section 7459(b) of the Internal Revenu e Code of 1986, as amended, and Rule 152 of the Tax Cour t Rules of Practice and Procedure . By a statutory notice of deficiency dated May 15 , 2008, the Internal Revenue Service determined deficiencie s in the Federal income tax of petitioners Richard B . Silverstein and Colleen L . Carter for the years 2003, 2004 , and 2005, plus additions to tax under section 6662 . Trial of this case was conducted on September 16 , 2009, in St . Paul, Minnesota . Dr . Silverstein and Dr . Carter gave their testimony, as did their certified publi c accountant (CPA), Paul Strot . The parties' Stipulation o f Facts, with Exhibits 1-J through 21-P, was admitted int o evidence . Petitioners' veterinary practic e FINDINGS OF FAC T Dr . Silverstein and Dr . Carter are both Heritage Reporting Corporation (202) 628-4888 4 1 veterinarians . Dr . Carter had a particular interest in 2 horses and in equine veterinary practice . After they 3 married, they wanted to start their own veterinary clinic . 4 They moved to Minnesota, west of Minneapolis, with a plan to 5 do so . They made a map showing the locations of othe r 6 veterinary clinics, looking for a "void" on the map wher e 7 there was no clinic, found one, chose a residence near that 8 area, and found nearby a good rental location for th e 9 clinic . Consistent with Dr . Carter's interest, the location 10 was in an area with many horses and "hobby farms . " 11 Dr . Silverstein took principal responsibility for 12 starting up the clinic, which they established as a 13 Subchapter S corporation called "Heritage Animal Hospital ." 14 It was a small animal practice, but Dr . Carter hoped that it 15 could someday expand to include horses . To help support the 16 family while Dr . Silverstein worked at starting up the new 17 business, Dr . Carter worked in an equine veterinary clinic 18 for 14 months . When she left that practice, . she signed a 3- 19 year non-compete agreement with her former employer, an d 20 this meant that her next jobs were at non-equine clinics 21 that (like Heritage) treated small animals . When their 22 first child was born, Dr . Carter left that employment to 23 raise her child . She did occasional relief wor k 24 substituting for absent veterinarians at other clinics , 25 where she was paid $30 per hour for her temporary work . She Heritage Reporting Corporatio n (202) 628-4888 5 1 became pregnant with her second child, stopped work again 2 briefly, and then began working with Dr . Silverstein a t 3 Heritage, where the two of them did the "tag team" routine 4 that young parents sometimes do to juggle work and children . 5 She did not commence an equine practice until sometime after 6 the years in suit, when she started a separate equine clinic 7 of her own . 8 In Heritage's early years, Dr . Silverstei n 9 experimented with various kinds of advertising, including 10 direct mail and "Val-Pak" mailings that offered coupons for 11 free exams . He found this unsatisfactory, since the people 12 it attracted were interested in free service but tended not 13 to be returning customers whose business could support the 14 clinic . He also ran advertisements in telephone "yellow 15 page" books, but found that they tended to reach callers who 16 would telephone for advice, and some of whom would even make 17 appointments, but who lived so far away that they wer e 18 unlikely to become good, regular customers . In the three 19 years at issue, Heritage spent $18,029, $18,642, and $19,580 20 on advertising . 21 The horse activit y 22 In 2001 Dr . Carter began the activity o f 23 purchasing, training, and selling horses, which were owned 24 by Heritage, and the expense of which was paid by Heritage . 25 She hoped to purchase young horses for a lower price, train Heritage Reporting Corporatio n (202) 628-4888 6 1 them, and then sell them for a higher price (on Heritage' s 2 account) . She had as many as five horses at one time in the 3 suit years . At any given time, one of the horses would b e 4 housed in a nearby training stable (at Heritage's expense), 5 and the other horses were kept at a barn and pasture on the 6 property where the petitioners lived . Dr . Carter hope d 7 eventually to develop a horse-breeding operation, but she 8 later determined it was not cost effective . Petitioners 9 offered no evidence of profiting on the sale of horses . 10 Dr . Carter showed the horses at about six shows 11 per year, usually four in Minnesota and two at "national" 12 shows in more remote locations . At such competitions, the 13 winning horses are publicly announced by name, owner, an d 14 rider ; and when her horses placed, Heritage was announced as 15 owner . (Dr . Carter testified that programs printed fo r 16 larger shows also included each owner's name, but she did 17 not offer any such program into evidence .) Approximately 18 three times a year, Dr . Silverstein and the children took 19 one of the horses and rode it in a town parade, with a 20 Heritage banner on display . 21 The cost of the horse activity was reported on the 22 Form 1120-S tax return for Heritage under "Other deductions" 23 as "Equestrian (horse) expenses ." The amounts were $25,673 24 in 2003, $19,189 in 2004, and $41,006 in 2005 . Petitioners 25 explained their reporting these as an expense of Heritage by Heritage Reporting Corporatio n (202) 628-4888 7 1 alleging that they intended the horse activity to publicize 2 Heritage's name and bring to the clinic A-list clients . 3 They observed that horse owners (and others who attend horse 4 shows) own not only horses but also other animals as well , 5 and they hoped that people who saw Heritage horses at shows 6 would use Heritage's veterinary services . However, they did 7 not identify any customer of Heritage who ever came as a 8 result of the horse activity . They gave general testimony 9 about their belief that the horse activity had generated 10 enough revenue to pay for itself, but they did not present 11 any evidence or analysis to show whether that was actually 12 true . We find that the petitioners did not use, in 13 undertaking the horse activity, the same sort of critica l 14 effort that they had used in choosing the location for their 15 clinic . We find that they did not subject the horse expense 16 to the same scrutiny to which they subjected thei r 17 advertising expense . Rather, we find that the hors e 18 activity arose from Dr . Carter's personal interest in it, 19 and that any angle of the activity related to Heritage was 20 incidental to undertaking the horse activity in the first 21 place and maintaining it over time . Dr . Carter owned n o 22 horses of her own, and the Heritage horses filled that role 23 in her life . The petitioners did not carry their burden to 24 prove that the horse activity was undertaken with th e 25 purpose of promoting Heritage's business . Heritage Reporting Corporation (202) 628-4888 8 1 After the years in suit, the horses were 2 transferred for no consideration from Heritage to Dr . 3 Carter's new equine practice . 4 Income from Heritage 5 During 2003 through 2005, Dr . Silverstein worked 6 29 hours per week, and Dr . Carter worked 17 hours per week ; 7 and they had to decide how much to pay themselves . Dr . 8 Silverstein, as 100 percent owner of Heritage, owned the net 9 income of the business ; and, because Heritage was an S 10 corporation, all its income flowed through to him and was 11 taxable to him, so that for Federal income tax purposes the 12 characterization of the money was not important . However, 13 he was also entitled to compensation for his labor, on which 14 Heritage was obliged to pay employment tax . Any money going 15 to petitioners as compensation incurred an employment ta x 16 liability to Heritage ; and all money going to Dr . 17 Silverstein as owner's profit did not incur that liability . 18 Therefore, he had a Federal tax obligation not to underpay 19 his compensation . 20 Each year Dr . Silverstein discussed the issue of 21 his compensation with his CPA and return preparer . In that 22 consultation, he decided, with his CPA's concurrence, to pay 23 both himself and his wife an hourly rate of $30 - the same 24 amount his wife had been paid for her relief work . Whil e 25 they were proprietors and not temporary workers, they Heritage Reporting Corporatio n (202) 628-4888 9 1 believed the relief-vet rate to be reasonable because their 2 compensation at that rate was better for them than for the 3 independent-contractor relief vet, for two reasons : First, 4 in their case Heritage bore the employer's share of Federal 5 Insurance Contribution Act (FICA) and Federal Unemployment 6 Tax Act (FUTA) tax, whereas the relief vet pays the entire 7 burden of self-employment tax . Second, Heritage also paid 8 each of them a deferred compensation benefit of $12,000 in 9 2003, $13,000 in 2004, and $14,000 in 2005 . (Stip . paras . 10 15-17 . ) 11 Respondent offered no evidence of rates of pay for 12 veterinarians . 13 Because he owned the net income of Heritage, Dr . 14 Silverstein from time to time took "draws" from the company 15 funds and recorded them on its books . However, in both 2003 16 and 2004, he withdrew amounts that exceeded his equity in 17 the business . Theoretically such draws would give Dr . 18 Silverstein negative equity in the business, which is 19 illogical as a matter of accounting . Consequently, i n 20 December of each year, the CPA made correcting entries to 21 characterize a portion of the draws as "Due from Officer" -- 22 i .e ., a loan from Heritage to Dr . Silverstein . Then in the 23 next year when earnings had been taken in, entries were made 24 to satisfy the loans . Dr . Silverstein did not report these 25 excess draws as income . Heritage Reporting Corporation (202) 628-4888 10 1 There were no loan agreements between Heritage and 2 Dr . Silverstein, nor any other documents memorializin g 3 loans . There were no contemporaneous entries made on the 4 company's books when an excess draw was made . Rather, the 5 entries were made after the fact by the CPA to balance the 6 books -- not to reflect any intentional act of lending . At 7 the time the excess draw was made , Dr . Silverstein. did not 8 even realize that he was exceeding his equity . 9 The notice of deficiency makes adjustments for 10 these excess draws in the amount of $3,199 for 2003 and 11 $12,626 for 2004 . Although the excess draws seem to be 12 larger in certain exhibits in the record , we assume the 13 numbers in the notice of deficiency . 14 Vehicle expens e 15 Expenses for the cars that Dr . Silverstein drove . 16 were reported on the tax returns .of Heritage . The record 17 does not show whether Heritage actually owned the cars . Dr . 18 Silverstein used them for his personal and busines s 19 transportation . He drove one of his cars to Heritage every 20 work day, and there is no dispute that the expense thi s 21 generated was a personal, non-deductible commuting expense . 22 However, Dr . Silverstein also drove on business-relate d 23 errands -- to make deposits at the bank, to pick up animals, 24 to purchase supplies, and so on . During 2003 through 2005, 25 he did not keep any log or other record to record hi s Heritage Reporting Corporation (202) 628-4888 1 1 1 mileage . 2 When preparing his returns each year, he discussed 3 vehicle expense with his CPA . He gave an estimate d 4 percentage or total of business miles, and his CPA accepted 5 that and used those estimates for computing deductibl e 6 vehicle expense on the multiple cars for Heritage's tax 7 return . (That is, the CPA included on the statement of 8 "Other deductions" a negative entry for "Personal Use of 9 Company Vehicles .") The record does not show how he mad e 10 these estimates, nor any detail about these discussions 11 between Dr . Silverstein and the CPA . In 2004 Heritag e 12 deducted, among other things, the entire $41,834 purchase 13 price of a 2004 Chevy Suburban as a section 179 expense . 14 That year's reduction for "Personal Use of Company Vehicles" 15 was only $3,542 . 16 Dr . Silverstein did not present at trial any 17 attempted reconstruction of his driving history for the 18 years in suit (using, for example, his calendar or day 19 planner from those years) . He did keep a mileage log for 20 February 2007, which showed that his business mile s 21 accounted for 50 .35 percent of his driving in that month in 22 one vehicle . He did not give testimony about his use o f 23 multiple vehicles, and did not eliminate the possibility 24 that his other vehicle would have had a much lower business 25 percentage in that month . More important, he did not give Heritage Reporting Corporatio n (202) 628-4888 1 testimony that would justify extrapolating the percentages 2 in February 2007 to each month and each car in all of 2003 1 2 3 through 2005 . 4 The issues in disput e 5 For each of the years 2003 through 2005, th e 6 petitioners filed their own Form 1040 returns and the .Form 7 1120-S returns for Heritage, all as prepared by their CPA , 8 reflecting the treatments of the matters as described above . 9 By its notice of deficiency issued May 15, 2008, the IR S 10 determined deficiencies and additions to tax arising fro m 11 those matters . The petitioners then timely filed their suit 12 here on August 13, 2008, at which time they resided i n 13 Minnesota . After the trial in this case, the issues for 14 decision are : 15 1 . Whether the expenses of the horse activity 16 were deductible ordinary and necessary business expenses of 17 Heritage . We hold that they were not . 18 2 . Whether the salaries paid to the petitioners 19 by Heritage were reasonable . We hold that they were . 20 3 . Whether the excess draws taken by Dr . 21 Silverstein from Heritage were loans or capital gains . We 22 hold that they were capital gains . 23 4 . Whether petitioners substantiated thei r 24 business use of Heritage's vehicles . We hold that they did 25 not . Heritage Reporting Corporation (202) 628-4888 1 3 1 5 . Whether, for any portion of the underpayment 2 resulting from issues 1, 3, and 4 above, the petitioner s 3 avoid liability for additions to tax under section 666 2 4 because, under section 6664(c)(1), "there was a reasonable 5 cause for such portion and * * * the taxpayer acted in good 6 faith ." We hold that they do avoid liability for th e 7 addition to tax as to issue 3 but not as to issues 1 and 4 . 8 OPINION 9 I . Burden of proo f 10 As a general rule, the IRS's determinations are 11 presumed correct, and the petitioners have the burden of 12 establishing that the determinations in the notice o f 13 deficiency are erroneous . See Rule 142(a) ; Welch v . 14 Helvering , 290 U .S . 111, 115 (1933) . However, petitioners 15 argue that this generality does not apply because of section 16 7491, which provides that the burden of proof shifts to the 17 IRS where "a taxpayer introduces credible evidence wit h 18 respect to any factual issue relevant to ascertaining the 19 liability of the taxpayer ." However, as indicated above, 20 the taxpayers here did not maintain records to show th e 21 business purpose and justification of their horse activity, 22 nor to show their business use of the vehicles, nor to show 23 the alleged loan character of the excess draws, so no shift 24 occurred as to those issues . As for the reasonabl e 25 compensation issue, we find that their evidence was Heritage Reporting Corporatio n (202) 628-4888 14 1 credible, and the IRS presented no counter-evidence . 2 However, it could as well be said that petitioners proved 3 their case by the preponderance of the evidence, so th e 4 shift of burden appears to have little consequence here . 5 II . Horse activit y 6 The horse expenses were deductible, if at all, as 7 promotional or advertising expenses for Heritage, in which 8 event they would be deductible under section 162 a s 9 "ordinary and necessary" business expense . But the record 10 will not support a serious contention that they were . On 11 the contrary, they were evidently personal expenses fo r 12 which deductions are disallowed by section 262 . Petitioners 13 were not able at trial to demonstrate that the hors e 14 expenses had generated revenue, nor were they able to show 15 that, in deciding to commence the activity, they had made 16 any plans or projections of business revenue . The evidence 17 showed that, by counter-example, they reviewed thei r 18 advertising expenses to see if the benefits justified the 19 costs, but this same business-minded analysis was absent 20 from the horse activity . The only question they seem t o 21 have entertained was whether they could deduct the expenses ; 22 they showed no signs of ever having asked whether -- from 23 the point of view of Heritage's business -- they shoul d 24 incur the expenses . It seems, rather, that Dr . Carter's 25 equine hobby was a given, and that the only analytical Heritage Reporting Corporatio n (202) 628-4888 1 energy they exerted was to figure out how to fit it onto th e 1 5 2 tax return . 3 III . Reasonable salary 4 The question of what a proprietor should pay 5 himself as a worker and what he should pay himself as an 6 owner can be a difficult one, with variables that includ e 7 the profitability of the business, the value of the services 8 performed, and the standards of the relevant industry . T o 9 get a sophisticated answer to this question, the parties to 10 a lawsuit could hire competing experts to do comple x 11 analyses -- and in doing so could easily spend multiples of 12 the amounts of tax at issue here . The petitioners chose a 13 rate ($30 per hour) that one of them had actually been paid 14 for work that was at least roughly equivalent to the work 15 they were both performing in the years in suit . The IRS 16 presented no information at all about what a veterinarian 17 should be paid . The petitioners' $30 figure may have been 18 on the low end of reasonable ; but on the record before us it 19 does not appear to be any lower than the low end o f 20 reasonable . For that reason, we hold that no more of the 21 earnings of Heritage should be recharacterized as wages, for 22 purposes of FICA and FUTA liabilities under sections 3101, 23 3111, and 3301 . 2 4 25 IV . Excess draw s As long as Dr . Silverstein's draws from Heritage Heritage Reporting Corporatio n (202) 628-4888 16 1 were taken from his equity, they consisted either of capital 2 that he had contributed or of earnings on which he had paid 3 tax but which Heritage had retained . However, to the extent 4 Heritage had money in excess of those amounts, it consisted 5 of an increase in value that the business had experienced -- 6 i .e ., capital gain to the owner . 7 We assume it was proper, as a matter of goo d 8 accounting, for the excess draws to be recorded as "Due from 9 officer" -- i .e ., as a liability and not as negative equity . 10 Nonetheless, this accounting convention cannot be relied on 11 to create a fictitious loan when none occurred . There is no 12 evidence that Dr . Silverstein was even aware of the excess 13 draws, much less that he took any steps to effectuate a 14 loan . He does not even allege that he did . Consequently, 15 the year-end accounting entries cannot impede the operation 16 of section 1368(b)(2), which provides : "If the amount of 17 the distribution exceeds the adjusted basis of the stock, 18 such excess shall be treated as gain from the sale o r 19 exchange of property ." The capital gains adjustments in the 20 notice of deficiency must be sustained . 21 V . Vehicles 22 Deductions are strictly a matter of legislative 23 grace, and taxpayers must satisfy the specific requirements 24 for any deduction claimed . See INDOPCO, Inc . v . 25 Commissioner , 503 U .S . 79, 84 (1992) ; New Colonial Ice Co . Heritage Reporting Corporatio n (202) 628-4888 1 7 1 v . Helvering , 292 U .S . 435, 440 (1934) . Furthermore , 2 taxpayers are required to maintain records sufficient t o 3 substantiate their claimed deductions . See sec . 6001 ; sec . 4 1 .6001-1(a), Income Tax Regs . (26 C .F .R .) . A taxpaye r 5 claiming deductions for vehicle expense must satisfy not 6 just the general requirement of substantiation but th e 7 heightened rule of section 274(d) : "No deduction or credit 8 shall be allowed * * * with respect to any listed property 9 (as defined in section 280F(d)(4)), unless the taxpaye r 10 substantiates by adequate records or by sufficient evidence 11 corroborating the taxpayer's own statement * * * th e 12 business purpose of the expense ." This rule applies to "any 13 passenger automobile," which is "listed property" unde r 14 section 280F(d)(4)(A)(i) . Under this provision any 15 deduction claimed with respect to the use of a passenger 16 automobile will be disallowed unless the taxpaye r 17 substantiates specified elements of the use by adequate 18 records or by sufficient evidence corroborating th e 19 taxpayer's own statement . See sec . 274(d) ; sec . 1 .274- 20 5T(c)(1), Temporary Income Tax Regs . 21 The elements that must be substantiated to deduct 22 the business use of an automobile include : the mileage for 23 each business use of the automobile and the total mileage 24 for all uses of the automobile during the taxable period ; 25 the date of the business use ; and the business purpose o f Heritage Reporting Corporation (202) 628-4888 1 8 1 the use of the automobile . See sec . 1 .274-5T(b)(6), 2 Temporary Income Tax Regs . 3 Thus, petitioners were obliged to prove not jus t 4 the $41,834 amount that they paid for the Chevy Suburban but 5 also the business purpose of the expense . They failed to do 6 so, and the disallowance in the notice of deficiency must be 7 sustained . 8 VI . "Reasonable cause " 9 If the parties' computation under Rule 1 .55 10 confirms (as it now appears) that the petitioners ' 11 understatement of income tax exceeds 10 percent of the tax 12 required to be shown on their return, then the accuracy- 13 related penalty of section 6662(a) is mandatory -- that is, 14 the statute says it "shall be added" -- unless petitioners 15 show that the understatement was due to "reasonable cause 16 * * and that * * * [they] acted in good faith ." Sec . 17 6664(c)(1) . Assuming that the computation shows that the 10 18 percent trigger has been met, respondent will have carried 19 the burden of production imposed by section 7491(c), leaving 20 petitioners with the burden of proving reasonable cause . 21 See Higbee v . Commissioner , 116 T .C . 438, 446-447 (2001) . 22 Therefore, petitioners will be liable for the sectio n 23 6662(a) accuracy-related penalty unless they can show that 24 their substantial understatement of Federal income tax was 25 due to reasonable cause and that they acted in good faith . Heritage Reporting Corporation (202) 628-4888 19 1 The determination of whether a taxpayer acted with 2 reasonable cause and in good faith is made on a case-by-case 3 basis, taking into account all pertinent facts an d 4 circumstances, including the extent of the taxpayer's 5 efforts to assess his or her proper tax liability ; th e 6 taxpayer's education, knowledge, and experience ; and th e 7 taxpayer's reasonable reliance on a tax professional . Sec . 8 1 .6664-4(b)(1), Income Tax Regs . (26 C .F .R .) . The extent of 9 the taxpayer's efforts to assess the proper tax liability i s 10 generally the most important factor . Good-faith reliance on 11 professional advice concerning tax laws may be a defense to 12 section 6662(a) penalties . United States v . Boyle , 469 U .S . 13 241, 250-251 (1985) ; see also sec . 1 .6664-4(b)(1), Incom e 14 Tax Regs . Reliance on professional advice is not a n 15 absolute defense to the section 6662(a) penalty, F reytag v . 16 Commissioner , 89 T .C . 849, 888 (1987), affd . 904 F .2d 1011 17 (5th Cir . 1990), affd . 501 U .S . 868 (1991) ; but reasonable 18 cause exists where a taxpayer relies in good faith on the 19 advice of a qualified tax adviser and the taxpayer provided 20 the adviser with all necessary and accurate information, se e 21 Neonatology Associates, P .A . v . Commissioner , 115 T .C . 43, 22 99 (2000), affd . 299 F .3d 221 (3d Cir . 2002) . 23 In the case of the portion of the underpaymen t 24 attributable to capital gains from the excess draw, we hold 25 that Dr . Silverstein's reliance on the advice of his CPA Heritage Reporting Corporation (202) 628-4888 2 0 1 constituted reasonable cause for the underpayment . The 2 treatment called for by section 1368(b) is certainl y 3 sensible, but it is hardly intuitive and surely no t 4 inevitable . A veterinarian can hardly be expected to know 5 that negative equity yields capital gain ; and when he 6 consults and follows the advice of a CPA who knows all the 7 relevant facts, as Dr . Silverstein did, he has done all he 8 could . 9 The portions of the underpayment attributable to 10 the disallowed horse expense and vehicle expense present a 11 different circumstance . It is true that Dr . Silverstein 12 consulted a CPA, but the circumstances giving rise to the 13 underpayments were matters that fell not within the CPA's 14 expertise but Dr . Silverstein's : The deductibility of the 15 horse activity turned not on an accounting question but on 16 the factual question of the non-business purpose of th e 17 activity . The purpose of the activity was something that 18 the CPA learned (or mis-learned) from Dr . Silverstein . The 19 problem was not an accounting rule for which Dr . Silverstein 20 had to depend on the CPA's expertise but a fact about th e 21 petitioners' lives as to which they were the experts . The 22 item was mis-reported because Dr . Silverstein gave bad 23 information to the CPA -- i .e ., a business purpose that did 24 not really exist . 25 Similarly, Dr . Silverstein talked with his CPA Heritage Reporting Corporatio n (202) 628-4888 2 1 1 about vehicle expense, but it was Dr . Silverstein, and not 2 the CPA, who came up with the unverifiable busines s 3 percentages . It was Dr . Silverstein's burden to prove that 4 he relied on professional advice, but when he was aske d 5 whether the CPA had told him to keep a mileage log, he first 6 answered "probably yes" and then said that he did not know . 7 Petitioners' examination of the CPA did not inquire on that 8 point . Thus, Dr . Silverstein is unable to show whether o r 9 not he did follow his CPA's advice : He may have been told 10 to keep a log, but he did not do so . We hold that he has 11 not established reasonable cause for the underpayment s 12 attributable to vehicle expense and horse expense . 13 Decision will be entered under Rule 155, to allow 14 recomputation of the liabilities at issue in accordance with 15 this opinion . 16 This concludes the Court's oral Findings of Fact 17 and Opinion in this case . 18 (Whereupon, at 9 :40 a .m ., the bench opinion in the 19 above-entitled matter was concluded . ) 20 21 22 23 24 25 Heritage Reporting Corporation (202) 628-4888