t c no united_states tax_court estate of algerine allen smith deceased james allen smith executor petitioner v commissioner of internal revenue respondent docket nos filed date in a prior opinion we determined that there was a deficiency in estate_tax p filed a timely notice of appeal but did not file a bond to stay assessment or collection during the pendency of the appeal r assessed the deficiency in estate_tax and p paid a portion of the amount assessed the court_of_appeals reversed vacated and remanded for further proceedings the court_of_appeals opinion did not preclude the possibility that further proceedings in this court might result in an estate_tax deficiency in the same amount that was previously decided p fileda motion to restrain collection abate assessment and order a refund of amount collected p’s motion is based on sec_7486 i r c held sec_7486 i r c provides that if the amount of the deficiency determined by the tax_court is disallowed in whole or in part by the court of review the amount so disallowed shall be credited or refunded -- - to the taxpayer where a court_of_appeals reverses and remands for further proceedings without indicating that an ascertainable amount of the previously determined deficiency cannot be properly assessed on remand no part of the amount of the previously determined deficiency has been disallowed for purposes of sec_7486 i r c p’s motion is denied harold a chamberlain for petitioner carol bingham mcclure for respondent opinion ruwe judge this case is before the court on the estate’s motion to restrain collection abate assessment and refund amounts collected by respondent sec_7486 provides that if the amount of the deficiency determined by the tax_court is disallowed in whole or in part by the court of review the amount so disallowed shall be credited or refunded to the taxpayer the sole issue for decision is whether the amount of the deficiency previously determined by this court was disallowed in whole or in part by the court of review within the meaning of sec_7486 when the court_of_appeals reversed vacated and remanded ‘unless otherwise indicated all section references are to the internal_revenue_code in effect as of the date of decedent’s death and all rule references are to the tax_court rules_of_practice and procedure background on date we issued our opinion in the estate’s consolidated cases see 108_tc_412 our prior opinion dealt with respondent’s disallowance of part of a deduction for a claim against the estate under sec_2053 see id pincite we sustained respondent’s estate_tax deficiency determination because we found that the proper valuation of the claim against the estate by exxon corporation exxon required consideration of the settlement of the exxon claim that occurred after decedent’s death see id pincite our holding with respect to the estate_tax deficiency disposed of the need to address respondent’s income_tax deficiency determination see id pincite n pursuant to our opinion the parties filed separate computations under rule on date we issued a supplemental opinion resolving a disagreement between the parties with respect to their computations see estate of smith v commissioner t cc on date the estate paid dollar_figure our original opinion consolidated two cases of the estate one dealing with an income_tax deficiency determination docket no and the other dealing with an estate_tax deficiency determination docket no the asserted income_tax deficiency was an alternate position taken by respondent in the event we rejected his position in the estate_tax deficiency determination we found that the validity and the enforceability of the claim against decedent were uncertain as of the date of death see 108_tc_412 q4e- which was an estimate of the estate_tax deficiency and interest ’ on date the estate filed a timely notice of appeal the estate did not file a bond pursuant to sec_7485 in order to stay the assessment or collection of the deficiency during the pendency of the appeal on date respondent assessed an estate_tax deficiency in the amount of dollar_figure plus interest in the amount of dollar_figure respondent gave the estate credit for the date payment of dollar_figure and also gave the estate credit for an overpayment of income_tax determined in docket no in the amount of dollar_figure resulting in a balance due of dollar_figure collection of the balance due was administratively stayed during the pendency of the estate’s appeal on date the court_of_appeals for the fifth circuit reversed vacated and remanded for further proceedings with respect to the estate_tax deficiency see estate of smith respondent’s appeals_office estimated this amount as part of the estimate respondent allowed a deduction from the estate for estimated interest which would be due on the deficiency determined as of a hypothetical date of payment of date sec_7485 provides that the appeal of a decision of this court does not operate as a stay of assessment or collection of any portion of a deficiency unless a bond is filed by the taxpayer ’respondent has represented that collection of the unpaid assessment remains administratively stayed and that no collection activity 1s currently taking place --- - v commissioner 198_f3d_515 the court_of_appeals held that we had improperly considered the post-death settlement of exxon’s claim against the estate see id pincite the court_of_appeals provided instructions regarding what evidence should be considered for purposes of ascertaining the date-of-death value of the claim against the estate but made no finding as to the correct amount of the claim for purposes of deduction under sec_2053 and did not preclude the possibility that the correct amount of the deficiency might be the same as that determined in our original decision see id discussion the issue for decision is whether the amount of the deficiency previously determined by this court was disallowed in whole or in part by the court of review within the meaning of sec_7486 petitioner argues that the amount of the deficiency in our prior decision was disallowed when that decision was reversed vacated and remanded we disagree sec_7486 provides sec_7486 in cases where assessment or collection has not been stayed by the filing of a bond then if the amount of the deficiency determined by the tax_court is disallowed in whole or in part by the court of review the amount so disallowed shall be credited or refunded to the taxpayer without the making of claim therefor or if collection has not been made shall be abated -- - in the absence of any evidence of legislative purpose warranting a different approach ’ we must assume that congress meant what it said and that the statutory language should be taken at face value 93_tc_181 the language of sec_7486 provides for abatement and refund of the amount of the deficiency determined by this court that has been disallowed in whole or in part by the court of review regardless of whether the taxpayer files a claim for relief the statute simply acts as a procedural device ensuring that the commissioner follows a decision of the court of review in situations where it can be ascertained that all ora part of the amount of the deficiency determined by this court was disallowed where the court of review reverses and remands but does not indicate that any ascertainable amount of the previously determined deficiency has been precluded it cannot be said that the court of review has disallowed in whole or in part the amount of the deficiency determined by the tax_court ‘the legislative_history of sec_7486 originally enacted as sec_1001 by the internal revenue act of ch 44_stat_110 amended by the internal revenue act of ch 45_stat_873 designated as sec in the internal_revenue_code_of_1939 and becoming sec_7486 under the internal_revenue_code of lacks any indication of congressional intent on the issue involved see h rept 69th cong 1st sess c b part s rept 69th cong 1st sess c b part conf rept 69th cong lst sess c b part h rept 83d cong 2d sess a434 s rept 83d cong 2d sess - in the instant case the court_of_appeals reversed and remanded with instructions regarding the proper evidence to consider for valuing exxon’s claim against the estate the court_of_appeals made no finding regarding the correct value of the exxon claim nor did it preclude an ultimate finding of value that would result in the same deficiency amount contained in our prior decision the court_of_appeals simply held that post--death events such as the settlement of the exxon claim should not be considered in making the valuation determination the court_of_appeals remanded with instructions to make the valuation based on facts that existed on the date of decedent’s death the amount of the prior deficiency determination was not disallowed in whole or in part although this court has not previously addressed the issue other courts have held that sec_7486 does not apply in the present situation in tyne v commissioner tcmemo_1966_214 the tax_court allowed the taxpayer to deduct a portion of his travel_expenses the taxpayer appealed but did not post a bond and the commissioner assessed the deficiency the court_of_appeals for the seventh circuit reversed and remanded with instructions to use a different method of allocation for purposes of determining the allowable deduction see 385_f2d_40 7th cir after the tax_court entered new decisions the taxpayer again appealed and the --- - court_of_appeals again reversed and remanded for additional hearings see 409_f2d_485 7th cir the taxpayer then filed a motion with the court_of_appeals for relief under sec_7486 seeking a refund and an abatement the court_of_appeals denied the motion stating although it is arguable logic that the reversal of the decisions which were the foundations of the assessments compelled abatement we consider it a better construction of sec_7486 that reversal with remand for further proceedings as distinguished from reversal and final disallowance of deficiencies did not require abatement until action of the tax_court upon remand tyne v commissioner ustc par 7th cir the court_of_appeals thus held that any abatement and refund would depend on further decision by the tax_court see id the court_of_appeals for the sixth circuit reached the same conclusion in 375_f2d_725 6th cir the tax_court had originally found the taxpayer liable for income_tax deficiencies and fraud penalties see grubb v commissioner tcmemo_1961_153 the taxpayer appealed but did not post a bond and the commissioner assessed the deficiency and penalties the court_of_appeals upheld the tax court’s finding of fraud but reversed and remanded with instructions outlining the appropriate method for determining the deficiency amount see 315_f2d_753 6th cir based on stipulations by the parties the tax_court then entered a new decision as to the correct amount of the deficiencies and the fraud penalties see united_states v bolt supra pincite in a subsequent action to resolve a dispute over the proper computation of interest on the deficiency and fraud penalties the court_of_appeals rejected the taxpayer’s argument that the original assessment made by the commissioner had been invalidated as a result of the reversal and remand see id the court_of_appeals held that the reversal and remand did not vitiate the assessment for purposes of sec_7486 id in denison v commissioner tcmemo_1981_738 the tax_court sustained the commissioner’s deficiency determination because the taxpayer failed to show that the determination was erroneous the taxpayer appealed but did not post a bond and the commissioner assessed the deficiency the court_of_appeals for the eighth circuit reversed and remanded for further proceedings with instructions to require the commissioner to produce evidence establishing the reasonableness of its determination see 689_f2d_771 8th cir the taxpayer then filed an action in district_court seeking declaratory and injunctive relief against the commissioner’s efforts to collect the assessment the district ‘the taxpayer in 375_f2d_725 6th cir appears to have been arguing that the reversal and remand of the tax court’s first decision invalidated the original assessment made by the commissioner and that this in turn affected the amount of interest due on the deficiency and fraud penalties as finally determined on remand - court citing sec_7485 and sec_7486 stated that the assessment and collection efforts of the commissioner may be stayed only by the posting of a bond unless disallowance is made by the court of review see 563_fsupp_263 e d ark the district_court held that no disallowance was made when the court_of_appeals reversed and remanded for further proceedings id in an analogous situation we considered whether a reversal and remand for further proceedings required the commissioner to release a surety bond filed by the taxpayer see 97_tc_425 in jacobson a bond was filed pursuant to sec_7485 in order to stay the assessment and collection of deficiencies during the pendency of the appeal the court_of_appeals reversed and remanded for further consideration and the taxpayer filed a motion for release of the bond see id pincite the surety bond specified in sec_7485 acts as security until payment of the deficiency as finally determined sec_7485 we held that the surety bond could not be released before the proceedings on remand were concluded because the deficiency had not been finally determined jacobson v commissioner supra pincite this interpretation of sec_7485 is consistent with denying relief under sec_7486 when the court of review reverses and remands but does not disallow any ascertainable amount of the tax court’s deficiency determination we note the recent case of wechsler v united_states wl s d n y which granted the taxpayers relief under sec_7486 where a decision of this court was reversed and remanded in that case the tax_court had initially denied the taxpayers’ motion for summary_judgment because the court found that valid waivers were executed which extended the applicable 3-year period of limitations see transpac drilling venture v commissioner tcmemo_1994_26 in doing so the tax_court did not address the commissioner’s alternative argument that the 6-year period of limitations might apply see id the court_of_appeals for the second circuit reversed the tax court’s holding that the waivers were validly executed and remanded for a determination of whether the 6-year period of limitations applied see 147_f3d_221 2d cir the taxpayers’ subsequent motion for relief under sec_7486 was granted in wechsler v united_states wl s d n y and the commissioner’s motion to vacate that judgment was denied in wechsler v united_states wl s d n y the district_court explained that the commissioner’s deficiency determination was unenforceable unless the commissioner could show that the 6-year period of limitations applied but emphasized that the court_of_appeals opinion in no way concludes this litigation wechsler v united_states wl s d n y while wechsler may be distinguishable on its facts it is also clear that the court of appeals’ reversal in that case left open the possibility that the tax_court might determine that the 6-year period of limitations remained open after considering the matter on remand to the extent wechsler is inconsistent with our holding in the instant case we respectfully disagree with wechsler based on the facts before us we hold that the amount of our previous deficiency determination was not disallowed in whole or in part within the meaning of sec_7486 when the court_of_appeals reversed and remanded for further proceedings an appropriate order will be issued denying petitioner’s motion


internal_revenue_service number release date index number ---------------------------- -------------------------------------------------- -------------------------------------- tys---------- tys---------- legend department of the treasury washington dc third party communication date of communication month dd yyyy person to contact ----------------- id no ------------- telephone number -------------------- refer reply to cc intl b02 plr-145930-07 date date taxpayers ------------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------------ --------------------- year year year r s fc country x ------- ------- ------- ------------------ ------------- ------------------------------------------ ------------ accountant o accounting firm p ------------------------------- ------------------------------------------------ dear -------------------------- this is in response to your letter received by our office on date submitted on behalf of taxpayers by their authorized representative requesting the consent of the commissioner of the internal_revenue_service to make a retroactive qualified_electing_fund qef election under sec_1295 of the internal_revenue_code code and sec_1_1295-3 plr-145930-07 the rulings contained in this letter are based upon information and representations submitted by taxpayers and accompanied by a penalty of perjury statement executed by appropriate parties while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination facts taxpayers invested dollar_figurer in s shares of fc an open-end_mutual_fund incorporated as a company in country x in year in year while analyzing information in order to prepare taxpayers’ year federal_income_tax return accountant o discovered that fc has been a pfic since year during the years at issue taxpayers sought tax_advice from accountant o relating to taxpayers’ investment in fc taxpayers are not tax professionals and have no experience in international_taxation taxpayers represent that in all issues related to their investment in fc they relied on the advice of accountant o accountant o was aware of all the facts and circumstances relating to taxpayers’ investment in fc accountant o is a tax professional competent to render advice on u s tax laws and has diligently advised taxpayers on tax matters for over years currently accountant o is a partner with accounting firm p taxpayers have submitted an affidavit signed under penalties of perjury describing the events that led to the failure to make the qef election by the election due_date including the role of accountant o taxpayers have also submitted an affidavit of accountant o corroborating the statements made by taxpayers taxpayers represent that as of the date of this request_for_ruling the pfic status of fc has not been raised by the irs on audit for any of the taxable years at issue ruling requested taxpayers request the consent of the commissioner of the internal_revenue_service to make a retroactive qef election with respect to fc for year under sec_1_1295-3 law and analysis sec_1295 of the code provides that any pfic shall be treated as a qef with respect to a taxpayer if an election by the taxpayer under sec_1295 applies to such company for the taxable_year and the company complies with such requirements as the secretary may prescribe for purposes of determining the ordinary_earnings and net capital_gains of such company plr-145930-07 under sec_1295 a qef election may be made for any taxable_year at any time on or before the due_date determined with regard to extensions for filing the return for such taxable_year to the extent provided in regulations such an election may be made after such due_date if the taxpayer failed to make an election by the due_date because the taxpayer reasonably believed the company was not a pfic under sec_1_1295-3 a taxpayer may request the consent of the commissioner to make a retroactive qef election for a taxable_year if the shareholder reasonably relied on a qualified_tax professional within the meaning of sec_1_1295-3 granting consent will not prejudice the interests of the united_states government as provided in sec_1_1295-3 the request is made before a representative of the internal_revenue_service raises upon audit the pfic status of the corporation for any taxable_year of the shareholder and the shareholder satisfies the procedural requirements of sec_1_1295-3 the first requirement is that the shareholder reasonably relied on a qualified_tax professional within the meaning of sec_1_1295-3 a shareholder will not be considered to have reasonably relied on a qualified_tax professional if the shareholder knew or reasonably should have known that the foreign_corporation was a pfic and knew of the availability of a sec_1295 election sec_1 f i in addition a shareholder cannot claim reliance upon a qualified_tax professional if he know or reasonably should have known that the tax professional relied upon was not competent to render tax_advice with respect to the ownership of shares of a foreign_corporation or did not have access to all the relevant facts and circumstances sec_1_1295-3 and b accountant o was competent to render u s tax_advice with respect to stock ownership of a foreign_corporation and had access to all the relevant facts and circumstances she failed to advise taxpayers that fc was a pfic failed to make a qef election on taxpayers’ year federal_income_tax return and failed to advise taxpayers of the consequences of failing to make such an election thus taxpayers reasonably relied on a qualified_tax professional within the meaning of sec_1_1295-3 and further taxpayers did not know and should not reasonably be expected to have known that fc was a pfic the second requirement of sec_1_1295-3 is that granting consent will not prejudice the interests of the u s government under sec_1 f i the interests of the u s government are prejudiced if granting relief would result in the shareholder having a lower tax_liability taking into account applicable_interest charges in the aggregate for all years affected by the retroactive election other plr-145930-07 than by a de_minimis amount than the shareholder would have had if the shareholder had made the sec_1295 election by the election due_date the time_value_of_money is taken into account for purposes of this computation according to the facts submitted and the representations made the interests of the united_states government are not prejudiced because the granting of relief does not result in taxpayers having a lower tax_liability than taxpayers would have had if they had made the qef election by the election due_date the third requirement under sec_1_1295-3 is that the request must be made before a representative of the irs raises upon audit the pfic status of the corporation for any taxable_year of the shareholder taxpayers have satisfied the third requirement of sec_1_1295-3 because they represent that the request to make a retroactive qef election was made before a representative of the irs raised the pfic status of fc in an audit the final requirement under sec_1_1295-3 is that the procedural requirements set forth in sec_1_1295-3 must be met the procedural requirements include filing a request for consent to make a retroactive election with and submitting a user_fee to the office of the associate chief_counsel international sec_1_1295-3 additionally affidavits signed under penalties of perjury must be submitted that describe the events which led to the failure to make a qef election by the election due_date the discovery of such failure the engagement and responsibilities of the qualified_tax professional and the extent to which the shareholder relied on such professional must be submitted sec_1_1295-3 and iii according to the facts submitted and the representations made taxpayers have filed a completed ruling_request including the correct user_fee and submitted complete and appropriate affidavits thus taxpayers have satisfied the fourth requirement of sec_1_1295-3 conclusion based on the information submitted and representations made consent is granted to taxpayers to make a retroactive qef election with respect to fc for year under sec_1_1295-3 provided that they comply with the rules under sec_1_1295-3 regarding the time and manner for making the retroactive qef election plr-145930-07 this private_letter_ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent a copy of this ruling must be attached to any_tax return to which it is relevant in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to taxpayers’ authorized representative sincerely ethan a atticks senior technical reviewer branch international cc


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division jun - uniform issue list tep pa legend taxpayer a individual c company w company x company y division a plan x month month2 date date date date dear this is in response to your letter dated representative on your behalf requests a waiver of the 60-day rollover requirement contained in sec_402 of the internal_revenue_code the code in which your authorized the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a had been an employee of company w for a number of years company w sponsors plan x which it is represented is qualified within the meaning of sec_401 of the code it has been represented that plan x does not permit employee contributions thereto on date division a of company w advised taxpayer a that he would be eligible to receive a diversification distribution from company w during calendar_year would be eligible to diversify up to of the shares in his employee stock ownership esop account in plan x and that he on or about date individual c of company x gave a presentation to taxpayer a and other similarly situated taxpayers regarding the diversification distribution option and associated federal tax consequences it has been represented that individual c is qualified as an investment_advisor in the area of retirement plans during his presentation individual c advised taxpayer a and other similarly situated taxpayers that net_unrealized_appreciation nua treatment described in sec_402 of the internal_revenue_code was available to them if they received partial distributions of their plan x esop account balances additionally it has been represented that a month summary_plan_description spd applicable to plan x provides that nua treatment would be available to any distribution of esop_stock made from plan x after the above referenced presentation during calendar_year partial_distribution of stock from his esop account under of plan x on the understanding said distribution would be eligible for nua tax treatment taxpayer a received a during month taxpayer a became aware that the information provided during taxpayer c’s presentation and in the plan x spd might be inaccurate on or about date company w e-mailed taxpayer a and other affected plan x participants advising them that individual c’s information concerning the availability of nua treatment was incorrect on or about date company w sent a letter to taxpayer a acknowledging errors made by individual c during his date presentation it has been represented that company y has issued forms 1099-r distributions from pensions annuities retirement or profit-sharing_plans iras insurance contracts etc to taxpayer a and other affected plan x participants which forms in some cases were erroneous however errors in said forms have been corrected and taxpayer a as of the date of this ruling_request was aware that the plan x distribution he received during calendar_year ___ was not eligible for nua treatment it has been represented that taxpayer a lacked the financial knowledge or experience to know the tax consequences associated with the distribution he received from plan x and for that reason relied upon individual c and on plan x’s spd as to the availability of nua treatment this request for letter_ruling was filed with the internal_revenue_service shortly after the occurrence of the last of the above-referenced actions based on the facts and representations you request that the service waive the 60-day rollover requirement with respect to the distribution taxpayer a received during calendar_year such requirement would be a hardship and against equity or good conscience and from plan x because the failure to waive that taxpayer a be granted a period a time not to exceed days as measured from the date of this ruling letter to either contribute the stock he received during calendar_year said stock into an ira set up and maintained in his name from plan x or in the alternative if applicable to roll over the proceeds of sale of with respect to your ruling requests sec_402 of the code provides that except as otherwise provided in sec_402 any amount distributed out of an employees’ trust described in sec_401 that is exempt from tax under sec_501 shall be taxable to the distributee in the taxable_year of the distributee in which distributed in the manner provided under sec_72 of the code relating to annuities sec_402 of the code provides rules governing rollovers of amounts from exempt trusts to eligible retirement plans including iras code sec_402 provides that except as provided in subparagraph b paragraph whioch excludes rolled over amounts from gross_income shall not apply to any transfer of a distribution made after the 60th day following the day on which the distributee received the property distributed code sec_402 provides that the transfer of an amount equal to any portion of the proceeds from the sale of property received in the distribution shall be treated as the transfer of property received in the distribution code sec_402 provides that the excess of the fair_market_value of property on sale over its fair_market_value on distribution shall be treated as property received in the distribution code sec_402 provides that no gain_or_loss shall be recognized on any sale described in subparagraph a to the extent that an amount equal to the proceeds is transferred pursuant to paragraph sec_402 of the code provides that the secretary may waive the 60-day requirement _under sec_402 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_402 of the code sec_402 of the code provides that an eligible_rollover_distribution shall not include any distribution to the extent such distribution is required under sec_401 sec_401 of the code provides that a_trust shall not constitute a qualified_trust under this section unless the plan of which such trust is a part provides that if the distributee of any eligible rollover distribution- i elects to have such distribution paid directly to an eligible_retirement_plan and ii specifies the eligible_retirement_plan to which such distribution is to be paid in such form and at such time as the plan_administrator may prescribe such distribution shall be made in the form of a direct trustee-to-trustee transfer to the eligible_retirement_plan so specified sec_401 of the code provides that for purposes of code sec_401 a the term eligible_retirement_plan has the meaning given such term by sec_402 with an exception not pertinent to this ruling_request thus a direct transfer defined in code sec_401 may be made into an ira sec_1_401_a_31_-1 of the income_tax regulations question and answer-5 provides in relevant part that a direct_rollover described in code sec_401 is a distribution and rollover of the eligible_rollover_distribution and not a transfer of assets and liabilities thus for example the consent and requirements of code sec_401 sec_411 and sec_417 apply to transactions described in code sec_401 revproc_2003_16 r b date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_402 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred taxpayer a submits that his failure to accomplish a timely rollover was caused both by his reliance on advice given him by individual c to the effect the company w stock he received from plan x was eligible for nua tax treatment and by his reliance on plan x’s spd which it has been asserted on his behalf contained similar information however in this case there was no intent to rollover nor was the erroneous advice given regarding a rollover transaction itself rather taxpayer a deliberately chose not to roll over his the portion of his plan x distribution which consisted of shares of company x stock on the mistaken belief that net_unrealized_appreciation was available we do not believe that congress intended to permit the service to retroactively correct_tax treatment choices which do not produce the expected benefits even though in this case these choices were the result of erroneous advice provided to taxpayer a by individual c and arguably also the result of incorrect information found in plan x’s spd thus based on the above pursuant to code sec_402 the service hereby declines to waive the 60-day rollover period found in code sec_402 with respect to the shares of company w stock distributed during calendar_year from plan x to taxpayer a furthermore the service concludes as follows with respect to your additional ruling_request that taxpayer a is not granted any period of time either to contribute either the stock he received during calendar_year roll over the proceeds of sale of said stock into an ira set up and maintained in his name from plan x or in the alternative if applicable to no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with the service the original of this letter_ruling is being sent to you and a copy to your authorized representative if you wish to inquire about this ruling please contact - please address all correspondence to se t ep ra t3 ud at - enclosures deleted copy of letter_ruling notice of intention to disclose sincerely yours cus v rances v sloan manager employee_plans technical group


tcmemo_2004_42 united_states tax_court milton l hildebran and judy w hildebran petitioners v commissioner of internal revenue respondent docket no filed date g paul martin for petitioner veena luthra for respondent memorandum findings_of_fact and opinion chiechi judge respondent determined deficiencies of dollar_figure and dollar_figure in petitioners’ federal_income_tax for taxable years and respectively the issue remaining for decision is whether certain wages that petitioner milton l hildebran mr hildebran received during each of the years at issue are excludable from petition- ers’ gross_income for each such year under sec_112 we hold that they are not finding of facts some of the facts have been stipulated and are so found at the time petitioners filed the petition in this case they resided in lake mary florida during the years at issue mr hildebran’s employer was bay ship management inc bay ship management during those years bay ship management contracted with the united_states navy navy to provide merchant marine3 personnel to work on a ship known as the shughart the shughart was owned by the navy and was operated solely at the expense of the united_states by the military sealift command which is part of the navy navy mili- tary sealift command during the years at issue bay ship management assigned mr hildebran to work for certain periods during those years as a merchant marine on the shughart during mr hildebran 1all section references are to the internal_revenue_code in effect for the years at issue all rule references are to the tax_court rules_of_practice and procedure 2during the years at issue mr hildebran was a member of a union which had contracted with bay ship management regarding certain union member rights 3at all relevant times a professional merchant marine also known as a merchant seaman was a professional mariner who moved products by ship from one port to another port at such times the duties of a merchant marine included loading and unloading ship cargo worked on the shughart from january to february and from june to november during mr hildebran worked on the shughart from march to july during the periods in and when mr hildebran was working on the shughart as a merchant marine employee of bay ship management he was providing support to the navy military sealift command the shughart was operating in a designated combat_zone during the period date to date consequently when mr hildebran served on the shughart as a merchant marine employee of bay ship management during certain periods in and he was in a designated combat_zone for days and days during those respective years during the periods in and when mr hildebran was working on the shughart as a merchant marine employee of bay ship management and was in a designated combat_zone he received imminent danger pay at all relevant times a merchant marine like mr hildebran who worked on a navy military sealift command ship like the shughart was subject_to navy physical standards and navy standards of appearance training and mission completion as a merchant marine working on the shughart during certain periods in the years at issue mr hildebran was required to and did have security clearances wear uniforms receive an anthrax 4it is unclear from the record whether the shughart was operating in a designated combat_zone on date we have assumed that it was vaccination receive training in small arms and antiterrorism and carry a department of defense identification card which showed his ship assignment and speciality at all relevant times before serving on a navy military sealift command ship like the shughart a merchant marine like mr hildebran was required to and did sign articles of engage- ment articles of engagement which set forth the merchant marine’s commitment to follow the orders of the master ie the captain of the ship even in the event of hostilities and regard- less of danger in the event that a merchant marine assigned to work on a navy military sealift command ship were to have refused to sign articles of engagement that individual would not have been allowed to work on such a ship during the years at issue bay ship management also assigned mr hildebran to work for certain periods as a merchant marine on a ship known as the ss sandy bay during and bay ship management paid mr hildebran a total of dollar_figure and dollar_figure respectively for his work as a merchant marine during those respective years on the shughart and on the ss sandy bay petitioners timely filed form_1040 u s individual_income_tax_return for each of their taxable years petitioners’ return and petitioners’ return petitioners filed form 1040x amended u s individual_income_tax_return for taxable_year petitioners’ amended return in peti- tioners’ amended return they claimed that they were enti- tled under sec_112 to exclude from their gross_income dollar_figure of wages that mr hildebran received from bay ship management during for his work as a merchant marine on the shughart in petitioners’ return petitioners claimed that they were entitled under sec_112 to exclude from their gross_income dollar_figure of wages that mr hildebran received from bay ship management during for his work as a merchant marine on the shughart respondent issued to petitioners a notice_of_deficiency notice for taxable years and in the notice respon- dent determined inter alia that petitioners were not entitled under sec_112 to exclude from their gross_income for and the respective wages of mr hildebran that they excluded from gross_income in petitioners’ amended return and peti- tioners’ return opinion we presume that respondent’s examination of petitioners’ return petitioners’ amended return and petitioners’ return began after date and that sec_7491 is applicable in the instant case however the parties do not address whether the burden_of_proof relating to the deficiency determinations at issue should shift to respondent under sec_7491 we need not decide whether that burden shifts to respondent that is because resolution of the issue presented does not depend on who has the burden_of_proof it is petitioners’ position that they are entitled under sec_112 to exclude from their gross_income the wages that mr hildebran received during each of the years at issue for his work as a merchant marine on the shughart in support of their position petitioners argue that petitioner herein mr hildebran experienced substan- tial incidents of military standing including but not limited to a signed agreement committing him to orders from the united_states navy training in small arms and anti-terrorism and required inoculations for various illnesses moreover petitioner wore uniforms and had to have security clearances prior to deployment under the military sealift command these trappings would seem sufficient for petitioner to claim status as an sic uniformed member of the united_states armed_forces pursuant to the definition contained in sec_7701 and therefore eligibility for exclusion of his relevant income under sec_112 it is respondent’s position that petitioners are not enti- tled under sec_112 to exclude from their gross_income the wages that mr hildebran received during each of the years at issue for his work as a merchant marine on the shughart in support of respondent’s position respondent argues that sec_112 provides that gross_income does not include compensation received for active_service as a member of the armed_forces_of_the_united_states for any month during which the taxpayer served in a combat_zone sec_7701 defines the term armed_forces_of_the_united_states as including all active and reserve components of the uniformed_services that are subject_to the jurisdiction of the department of defense the secretary of the army the secretary of the navy or the secretary of the air force as well as the coast guard although petitioner’s mr hildebran’s merchant marine occupation required him to work in support of the united_states navy and to work within a recognized combat_zone petitioner did not serve in the armed_forces_of_the_united_states and therefore is not entitled to exclude any portion of his wages from gross_income under sec_112 in further support of respondent’s position respondent points out that the tax_court has consistently denied the combat_pay exclusion under sec_112 to civilian employees providing support to the united_states mili- tary 61_tc_675 smith v commissioner tcmemo_1972_147 reynolds v commissioner tcmemo_1972_84 fagerland v commis- sioner tcmemo_1971_134 pilots employed by pri- vate airlines flying civilian aircraft under contract with the department of defense in support of the united_states military were found not to be members of the armed services and therefore not entitled to the sec_112 exclusion 61_tc_675 smith tcmemo_1972_147 reynolds tcmemo_1972_84 fagerland tcmemo_1971_134 a taxpayer who has been issued a department of defense identification card is not necessarily a member of the armed_forces_of_the_united_states 61_tc_675 smith tcmemo_1972_147 reynolds tcmemo_1972_84 fagerland tcmemo_1971_134 merchant marines are civilians and are not members of the armed_forces_of_the_united_states therefore they are not entitled to income exclusion under sec_112 favero v commissioner tcmemo_2001_219 petitioners counter respondent’s reliance on the foregoing cases by pointing out certain factual distinctions between those cases and the instant case the distinctions between the cases on which respondent relies and the instant case that petitioners describe are not material and petitioners’ reliance on such distinctions is misplaced sec_112 provides in pertinent part sec_112 certain combat_zone compensation of members of the armed_forces a enlisted personnel --gross income does not include compensation received for active_service as a member below the grade of commissioned_officer in the armed_forces_of_the_united_states for any month during any part of which such member-- served in a combat_zone or was hospitalized as a result of wounds disease or injury incurred while serving in a combat_zone but this paragraph shall not apply for any month beginning more than years after the date of the termination of combatant activi- ties in such zone b commissioned officers --gross income does not include so much of the compensation as does not exceed the maximum_enlisted_amount received for active_service as a commissioned_officer in the armed_forces_of_the_united_states for any month during any part of which such officer-- served in a combat_zone or was hospitalized as a result of wounds disease or injury incurred while serving in a combat_zone but this paragraph shall not apply for any month beginning more than years after the date of the termination of combatant activi- ties in such zone sec_7701 defines the phrase armed_forces_of_the_united_states that is used in sec_112 as follows sec_7701 definitions a when used in this title where not otherwise distinctly expressed or manifestly incompatible with the intent thereof-- military or naval forces and armed_forces_of_the_united_states --the term military_or_naval_forces_of_the_united_states and the term armed_forces_of_the_united_states each includes all regular and reserve components of the uni- formed services which are subject_to the jurisdic- tion of the secretary of defense the secretary of the army the secretary of the navy or the secre- tary of the air force and each term also includes the coast guard the members of such forces in- clude commissioned officers and personnel below the grade of commissioned officers in such forces on the record before us we find that at no time during the years at issue was mr hildebran a member of the armed_forces_of_the_united_states within the meaning of sec_112 and sec_7701 during those years bay ship management employed mr hildebran as a merchant marine assigned him to work as such on inter alia the shughart during certain periods in those years and paid mr hildebran for the work that he performed inter alia while on the shughart the armed_forces_of_the_united_states did not employ and did not pay any wages or compensation to mr hildebran with respect to such work although mr hildebran’s work as a merchant marine on the shughart during certain periods in the years at issue was in support of the navy military sealift command and although he was required to and did carry a department of defense identifica- tion card sign articles of engagement and meet certain navy standards during such periods those facts did not in any way change the status of mr hildebran as a civilian employee of bay ship management on the instant record we hold that petitioners are not entitled under sec_112 to exclude from their gross_income any of the wages that mr hildebran received from bay ship management during each of the years at issue for his work as a merchant marine on the shughart we have considered all of the arguments and contentions of petitioners that are not discussed herein and we find them to be without merit and or irrelevant to reflect the foregoing and the concessions of the parties decision will be entered under rule 5we note that during the years at issue mr hildebran was a member of a union which had contracted with his employer bay ship management members of the armed_forces_of_the_united_states are prohibited from joining labor unions see u s c sec


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom it a 5-plr-118830-99 date date legend taxpayer association bank state county a x year dear this letter is in response to a letter_ruling request received by this office on date specifically you have requested the following ruling whether interest_paid by the association on a secured loan obtained by the association to demolish and restore a portion of the common elements of the association is deductible by taxpayer under sec_163 subject_to any other limitations on the deductibility of qualified_residence_interest the requirement that the loan is secured_by the taxpayer’s qualified_residence and the requirement that the taxpayer’s residence is part of the association facts taxpayer an individual is a homeowner and a member of the association the association is a non-stock corporation that is incorporated under the laws of state the association is comprised of homeowners in a certain geographical location and its purpose is to own and take care of the common elements of all the homeowners including an a in year county condemned the a the association planned to borrow money to demolish and rebuild the a and planned to collect special_assessments from its members to service the mortgage the association obtained a commitment from the bank to loan dollar_figurex to the association to finance the construction_project the collateral for the loan consists of the regular and special homeowners’ assessments a deed_of_trust on the common elements and the assignment of homeowners’ dues taxpayer’s home was not pledged as collateral on the loan law and analysis sec_163 of the internal_revenue_code provides that there shall be allowed as a deduction all interest_paid or accrued within the taxable_year on indebtedness sec_163 of the code provides in part that in the case of a taxpayer other than a corporation no deduction shall be allowed for personal_interest paid_or_accrued during the taxable_year sec_163 of the code provides in part that for purposes of this subsection the term personal_interest means any interest allowable as a deduction other than any qualified_residence_interest sec_163 of the code provides in part that the term qualified_residence_interest means any interest which is paid_or_accrued during the taxable_year on acquisition_indebtedness with respect to any qualified_residence of the taxpayer acquisition_indebtedness is defined in the section as any indebtedness which is incurred in acquiring constructing or substantially improving any qualified_residence of the taxpayer and is secured_by such residence sec_1_163-10t of the temporary income_tax regulations provides that secured debt means a debt that is on the security of any instrument such as a mortgage deed_of_trust or land_contract i ii iii that makes the interest of the debtor in the qualified_residence specific security for the payment of the debt under which in the event of default the residence could be subjected to the satisfaction of the debt with the same priority as a mortgage or a deed_of_trust in the jurisdiction in which the property is situated and that is recorded where permitted or is otherwise perfected in accordance with applicable state law sec_1_163-10t also provides that a debt will not be considered to be secured_by a qualified_residence if it is secured solely by virtue of a lien upon the general assets of the taxpayer or by a security_interest such as a mechanic’s lien or judgment lien that attaches to the property without the consent of the debtor sec_1_163-10t of the regulations provides in part that the term qualified_residence means the taxpayer’s principal_residence within the meaning of former code sec_1034 sec_1_163-10t provides that whether property is a residence shall be determined based on all the facts and circumstances including good_faith of the taxpayer a residence_generally includes a house condominium mobile home boat or house trailer that contains sleeping space and toilet and cooking facilities it is well established that the person entitled to deduct interest is the person who is legally liable to pay the interest see 35_tc_256 acq 1961_2_cb_3 corporation that borrowed money and loaned such money to its primary stockholder was the entity entitled to the interest_deduction on the loan norwood v commissioner t c memo guarantors of indebtedness were entitled to an interest_deduction only when they became primary obligors on the loan and not before revrul_64_31 1964_1_cb_300 condominium purchaser who also assumed in his deed a proportionate share of a mortgage on entire project was entitled to sec_163 interest_deduction the association as a separate taxable entity cannot be ignored for tax purposes see 319_us_436 the association is the borrower on the loan and is the entity responsible for paying the interest although the association intends to satisfy its contractual obligation to the bank by using funds collected in part from taxpayer the taxpayer has not undertaken any personal contractual obligation with the bank as a primary obligor on the loan furthermore taxpayer’s principal_residence is not specific security for the loan the association pledged its own property the regular and special homeowners’ assessments the common elements and the homeowners’ dues as collateral therefore taxpayer does not satisfy the requirements for a deduction of home mortgage interest under sec_163 with respect to the payments at issue conclusion under the facts set forth above interest_paid by the association on a secured loan obtained by the association is not deductible by taxpayer in whole or in part under sec_163 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file in our office a copy of this ruling is being sent to your representative sincerely ___________________________ douglas a fahey acting chief branch income_tax accounting cc


t c memo united_states tax_court thomas j spielbauer petitioner v commissioner of internal revenue respondent docket no filed date thomas j spielbauer pro_se g michelle ferreira for respondent memorandum findings_of_fact and opinion vasquez judge respondent determined a dollar_figure deficiency in petitioner's federal_income_tax an addition_to_tax of dollar_figure for failure_to_file a timely return and an accuracy- related penalty of dollar_figure after concessions we must decide whether petitioner may deduct any of his unreimbursed employee_expenses in whether petitioner failed to timely file his federal_income_tax return for the tax_year and whether petitioner is liable for the accuracy-related_penalty all section references are to the internal_revenue_code in effect for the year in issue all rule references are to the tax_court rules_of_practice and procedure findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference petitioner resided in san jose california at the time he filed the petition petitioner filed his federal_income_tax return on date the return on the return petitioner deducted dollar_figure in unreimbursed employee_expenses at trial the parties entered into an oral stipulation of settled issues in that stipulation respondent concedes that dollar_figure of interest which respondent determined to be income to petitioner was not taxable petitioner concedes the following a dollar_figure deduction for clothing expenses a telephone expense deduction of dollar_figure a dollar_figure educational expense which petitioner's employer reimbursed him for and a dollar_figure expense incurred at the santa anita firing range that was inadvertently deducted twice the parties have stipulated that petitioner has substantiated all of his unreimbursed employee_expenses petitioner is a senior deputy public defender and has worked as an employee of the santa clara county the county public defender's office the public defender's office since in october of petitioner was assigned to work in the juvenile dependency unit of the public defender's office sometime during the dependency unit was physically separated from the public defender's office during petitioner prepared two discretionary writ petitions petitioner was the only public defender in his office to file discretionary writ petitions during that year petitioner prepared these writ petitions with materials which he purchased from his personal funds during petitioner retained three law students attending loyola university law school to help him prepare a master brief in which petitioner argued for the constitutional right to a jury trial in dependency proceedings petitioner flew to los angeles several times during to supervise the law students petitioner deducted the actual costs he incurred for_the_use_of three automobiles on his federal_income_tax return petitioner used each of the three cars for both business and personal_use the county reimbursed its employees for all required automobile travel at the rate of dollar_figure per mile county employees must submit requests for reimbursement in order to receive reimbursement for required travel petitioner did not submit requests for reimbursement to the county during for the expenses he incurred with his use of any of the automobiles petitioner deducted dollar_figure in educational expenses on the return other than an expense for the rutter group for a writs seminar in the amount of dollar_figure the county did not reimburse petitioner nor did he request reimbursement during public defenders could receive reimbursement from the county for mandatory continuing legal education from the mcle fund in the amount of dollar_figure per year per attorney and for educational training from the tuition reimbursement fund in the amount of dollar_figure per year per attorney these funds reimbursed the deputy public defender requesting reimbursement for percent of the costs associated with the training public defenders also were eligible to receive reimbursement from the county for educational training from the professional development fund petitioner's office had dollar_figure available for reimbursement from this fund the professional development fund reimbursed the deputy public defender for percent of the costs associated with training the county also reimbursed deputy public defenders' travel to training programs in in order to be reimbursed by the county from the mcle fund the tuition reimbursement fund or the professional development fund deputy public defenders had to submit requests for reimbursement via an office form to mr grant armstrong on the return petitioner deducted other business_expenses some but not all of the other expenses petitioner deducted were for items such as computer expenses research materials candy and flowers for secretaries and clerks petitioner's home and rented office telephone bills office stationery video rental cable television magazine and newspaper subscriptions parking and parking citations various club_dues and expenses t-shirts and photographs petitioner asserted that it was necessary for him to keep abreast of the local news for his job as a deputy public defender petitioner however conceded that both cable television and the local newspaper have personal elements of pleasure to them the public defender's office provided office supplies such as pens paper legal pads etc for its deputy public defenders the public defender's office maintained a law library for its deputy public defenders furthermore the public defender's office had a research assistant barbara fargo available to its attorneys additionally there is a county law library near petitioner's office during petitioner purchased computerized research materials and deducted their cost on the return the county allocates a portion of the professional development fund to reimburse public defenders who purchase their own computer equipment deputy public defenders are entitled to reimbursement for computer equipment up to dollar_figure assuming the cost of the computer exceeds dollar_figure county employees however must request reimbursement for computer equipment under this policy petitioner deducted costs for telephone expenses for four telephone lines petitioner deducted costs associated with a telephone line located in his apartment which he used as a modem line petitioner sometimes used his modem as a fax modem the public defender's office had a fax machine in petitioner deducted costs associated with a telephone line located in an office petitioner rented petitioner also deducted costs of a telephone line located in petitioner's prior residence petitioner deducted dollar_figure in meals and entertainment at restaurants located in santa clara county petitioner did not deduct expenses for any meals with clients the meals whose costs he deducted were with petitioner's co-workers petitioner discussed business and personal matters at these meals the county reimbursed its employees for all meals associated with county required travel including educational training deputy public defenders must however submit requests for reimbursement for such meals to receive reimbursement petitioner conceded that he is not entitled to any deductions with respect to one of the telephone lines which was located in his home in petitioner purchased a book on federal taxation from prentice hall for dollar_figure and deducted this expense on the return petitioner reviewed the book which covers deductions and exemptions opinion sec_162 allows a deduction for all ordinary and necessary expenses_incurred in carrying_on_a_trade_or_business the performance of services as an employee constitutes a trade_or_business o'malley v commissi91_tc_352 an ordinary_expense is one that is common and acceptable in the particular business 290_us_111 a necessary expense is an expense that is appropriate and helpful in carrying on the trade_or_business 82_tc_538 an employee's trade_or_business is earning his compensation and generally only those expenses that are related to the continuation of his employment are deductible 269_f2d_108 4th cir affg tcmemo_1958_60 deductions are a matter of legislative grace and petitioner bears the burden of proving that he is entitled to the deductions claimed rule a 503_us_79 reimbursable expenses when an employee has a right to reimbursement for expenditures related to his status as an employee but fails to claim such reimbursement the expenses are not deductible because they are not necessary ie it is not necessary for an employee to remain unreimbursed for expenses to the extent he could have been reimbursed 788_f2d_1406 9th cir affg tcmemo_1984_553 79_tc_1 56_tc_936 affd without published opinion 456_f2d_1335 2d cir furthermore the mere failure of an employee to seek reimbursement cannot convert the employer's expenses into the employee's kennelly v commissioner supra the employee has the burden of establishing that the employer would not reimburse the expense had the employee requested reimbursement 24_tc_21 moreover the prohibition of deductions for reimbursable expenses is a bright line rule and applies even when the employee is unaware that the expenses are reimbursable orvis v commissioner supra pincite respondent called mr armstrong to testify as to the public defender's policy regarding reimbursement of expenses during mr armstrong oversaw public defenders' requests for reimbursements during the county reimbursed public defenders for percent of their expenses for educational training up to dollar_figure per year per attorney dollar_figure from the mcle fund and dollar_figure from the tuition reimbursement fund and percent of their expenses from the professional development fund up to dollar_figure among all of the attorneys in petitioner's office petitioner claimed dollar_figure for educational expenses in of which dollar_figure was reimbursed by the county therefore it appears that petitioner if he had requested reimbursement could have been reimbursed another dollar_figure dollar_figure leaving dollar_figure as unreimbursed educational expenses educational expenses are considered ordinary and necessary business_expenses if the education maintains or improves skills required by the taxpayer in his employment or meets the express requirements of an employer imposed as a condition for the taxpayer's continued employment status or rate of compensation sec_1_162-5 income_tax regs personal expenses are not deductible sec_262 petitioner's educational expenses were for various legal seminars and training courses this is the type of education designed to maintain or improve petitioner's skills as a public defender petitioner therefore is entitled to deduct his educational expenditures to the extent he could not have been reimbursed--dollar_figure the county also reimbursed public defenders for any required travel petitioner has failed to show that he requested reimbursement for any of his travel_expenses therefore we sustain respondent on this issue required expenses in general a taxpayer may not deduct expenses_incurred for the benefit of another 308_us_488 noland v commissioner f 2d pincite 55_tc_478 if as a condition_of_employment an employee is required to incur expenses on behalf of his employer the employee is entitled to a deduction for those expenses that are ordinary and necessary to his business as an employee to the extent such expenses are not subject_to reimbursement 96_f2d_680 2d cir eder v commissioner tcmemo_1981_408 respondent argues that many of the expenses deducted by petitioner do not constitute ordinary and necessary employee business_expenses within the meaning of sec_162 because petitioner as a deputy public defender incurred the expenses voluntarily and the public defender's office did not require him to do so as a condition of his employment we agree petitioner deducted expenses for office items the public defender's office supplied attorneys with office supplies petitioner therefore was not required to purchase his own office supplies and his desire to have his own supplies even if they were of better quality than those supplied does not convert the expense into a deduction respondent determined that petitioner was not entitled to deductions for expenses related to interns petitioner had hired to help him with various legal projects petitioner has shown that by hiring these interns he was able to be a better public defender than if he had not hired them petitioner has not however shown that he was required by the public defender's office to hire these interns or that the expense of hiring them was otherwise ordinary and necessary to his employment respondent also determined that petitioner was not entitled to various other expenses such as automobile expenses meals and entertainment travel and other business_expenses petitioner has failed to establish that these expenses were ordinary and necessary expenses for his trade_or_business as an employee with the public defender's office on cross-examination petitioner stated they the public defender's office didn't require me to contact these students they didn't require me to set up the research project petitioner deducted automobile expenses which included gasoline dmv renewal registration fees repairs and tires petitioner deducted meals and entertainment_expenses which included meals with co-workers to discuss case strategy mr armstrong testified that such expenses would not have been reimbursable petitioner's travel_expenses included luggage which petitioner admitted had elements of personal_use petitioner deducted among other items expenses for candy flowers cable television computer supplies books plaques an answering machine telephone bills and a magazine rack petitioner deducted dollar_figure for a book on federal taxation we find that this expense was incurred in connection with petitioner's income_tax and is therefore deductible sec_212 sec_1_212-1 income_tax regs to the extent that we have not addressed a specific item which petitioner deducted we find that petitioner has failed to prove that it was ordinary and necessary within the meaning of sec_162 while we recognize that petitioner vigorously advocated on behalf of his clients and that many of his expenses benefited those clients we do not have the authority to disregard the legislative mandate that only ordinary and necessary expenses be deducted alexander v commissioner tcmemo_1995_51 affd 72_f3d_938 1st cir accordingly we sustain respondent's determination regarding the deductions to the extent discussed above delinquency while we found petitioner generally to be a credible witness his arguments were of a general nature rather than related to specific deductions the responsibility for any omissions in the record or in the arguments raised lies with petitioner given that petitioner has the burden_of_proof such omissions weigh against him petitioner had a few hundred itemized_deductions some of these included video tapes a battery a sony tape player a magazine rack a p d t-shirt new parking cards candy and flowers to the extent not addressed within a specified category or individually petitioner has failed to prove that these expenses are anything but nondeductible personal expenses under sec_262 sec_6651 imposes an addition_to_tax for failure_to_file a return on the date prescribed determined with regard to any extension of time for filing unless it is shown that such failure is due to reasonable_cause and not due to willful neglect the taxpayer has the burden_of_proof to show the addition is improper rule a 469_us_241 respondent has determined that petitioner's federal_income_tax return was due after extension on date petitioner filed his federal_income_tax return for on february dollar_figure petitioner's only argument against the delinquency addition is that he felt that he had no taxes owing we have already found that petitioner did owe tax therefore respondent is sustained on this issue negligence sec_6662 imposes a penalty in an amount equal to percent of the portion of the underpayment_of_tax attributable to one or more of the items set forth in sec_6662 including negligence or disregard of rules or regulations respondent determined that a portion of the underpayment of petitioner's tax was due to negligence or intentional disregard of rules or petitioner's federal_income_tax return which was submitted at trial is stamped feb and this is the date argued in respondent's brief the date used in the statutory_notice_of_deficiency however is date this discrepancy does not affect the amount of the addition_to_tax regulations sec_6662 petitioner bears the burden_of_proof on the penalty issue rule a 108_tc_147 the accuracy-related_penalty of sec_6662 does not apply with respect to any portion of an underpayment if it is shown that there was reasonable_cause for such portion and the taxpayer acted in good_faith with respect to such portion sec_6664 petitioner has offered no evidence that he was not negligent in his deductions or that he had reasonable_cause for them in fact petitioner's briefs fail to address the negligence issue we cannot be sure that petitioner intended to abandon the issue but in any case we sustain respondent's determination of the applicable penalty with respect to the underpayment for the improper deductions as petitioner has not met his burden_of_proof on this matter to reflect the foregoing decision will be entered under rule