t c summary opinion united_states tax_court walter l and carol l selph petitioners v commissioner of internal revenue respondent docket no 25700-07s filed date walter l and carol l selph pro sese john r bampfield for respondent goeke judge this case was heard pursuant to the provisions of section of the internal_revenue_code in effect at the time the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any 1unless otherwise indicated all section references are to the internal_revenue_code and all rule references are to the tax_court rules_of_practice and procedure other court and this opinion shall not be treated as precedent for any other case respondent issued to petitioners a notice_of_federal_tax_lien nftl and a notice_of_intent_to_levy levy notice to collect outstanding income_tax liabilities and additions to tax under sec_6651 and for the tax periods date date and date the issues for decision are whether petitioners are entitled to challenge their underlying tax_liabilities for the years at issue and if so whether petitioners are liable for additions to tax under sec_6651 and for the reasons stated herein we find that petitioners are entitled to challenge their underlying tax_liabilities and are liable for the sec_6651 additions to tax for but not for and background the stipulation of facts and the accompanying exhibits are incorporated by this reference petitioners resided in florida at the time of filing their petition in date petitioner wife was employed by the new york times petitioner husband was employed by publix supermarket during petitioner wife suffered from a variety of health problems such as sleep deprivation as a result petitioner wife filed for short-term disability benefits later in petitioner wife started seeing a psychiatrist in date petitioner wife lost consciousness and was taken to a local hospital in date petitioner wife suffered a rash that caused another visit to the hospital later petitioner wife filed for social_security disability benefits due to continuous health issues which required her to visit doctors frequently petitioners did not timely file income_tax returns for and however tax was withheld from their pay respondent did not prepare substitutes for returns for petitioners pursuant to sec_6020 on date petitioners filed their income_tax returns for and showing their tax_liabilities for each of these years petitioners’ withholding was less than the amount of tax reported thus petitioners’ untimely filed returns reported balances due on date respondent issued petitioners an nftl for the balances due and additions to tax in the nftl respondent listed petitioners’ unpaid tax_liabilities for tax years through as dollar_figure dollar_figure and dollar_figure respectively on date a notice_of_intent_to_levy was issued to petitioners in response to both notices on date petitioners requested a collection_due_process cdp hearing sometime in date petitioners contacted the taxpayer_advocate_service tas for assistance in dealing with the internal_revenue_service irs petitioners informed the tas that they had reasonable_cause for not paying their balances and had since paid all of their delinquent taxes including interest petitioners’ transcripts do not show full payment of their delinquent taxes however respondent did not contest petitioners’ claim of having paid the balances on date the appeals_office transferred petitioners’ cdp hearing to a settlement officer on date the settlement officer recorded in her administrative case file that petitioners were seeking financial relief from their taxes on date respondent sent by facsimile to petitioners a letter informing them of an opportunity to indicate collection alternatives petitioners did not offer any collection alternatives on date respondent faxed petitioners a letter informing them that their case was being transferred from the appeals_office to a settlement officer in addition respondent informed petitioners that the deadline to submit any additional information was date on date petitioners faxed a request to respondent asking for an extension of their deadline because of a tropical depression affecting their region two days later and without a response from respondent petitioners faxed a document to the tas requesting additional time to submit the additional information respondent eventually responded to petitioners after the date deadline but did not address their previous request for additional time on date respondent mailed to petitioners notices of determination upholding the collection actions petitioners filed a petition for redetermination on date and an amended petition on date a trial was held on date in tampa florida i petitioners’ underlying liabilities discussion sec_6320 pertaining to liens and pertaining to levies were enacted as part of the internal_revenue_service restructuring and reform act of publaw_105_206 112_stat_746 in order to afford taxpayers new procedural protections with regard to collection matters sec_6320 and b generally provide that the secretary cannot proceed with collection_of_taxes by way of a lien on a taxpayer’s property until the taxpayer has been notified in writing and provided within a 30-day period an opportunity for an administrative hearing before an impartial officer of the commissioner’s appeals_office generally hearings under sec_6320 are conducted in accordance with the procedural requirements set forth in sec_6330 sec_6320 at the hearing the appeals officer shall obtain verification that the requirements of any applicable laws and administrative procedures have been met sec_6330 a taxpayer may raise at the hearing any relevant issue with regard to the commissioner’s collection activities such as appropriate spousal defenses challenges to the appropriateness of the intended collection action and offers of alternative means of collection including offers-in-compromise sec_6330 in certain circumstances a taxpayer may also challenge his underlying tax_liability at the hearing if the taxpayer did not receive a notice_of_deficiency or did not have an opportunity to dispute the tax_liability sec_6330 sec_6331 authorizes the secretary to levy upon property and property rights of any taxpayer liable for taxes who fails to pay those taxes after notice_and_demand for payment is made sec_6331 provides that the levy authorized by sec_6331 may be made with respect to any unpaid tax only if the secretary has given written notice to the taxpayer days before the levy sec_6330 further requires that the notice advise the taxpayer of the amount of the unpaid tax and of the taxpayer’s right to a hearing if a hearing is requested the hearing is to be conducted by an officer_or_employee of the commissioner’s appeals_office with no prior involvement with respect to the unpaid tax at issue sec_6330 the appeals officer shall at the hearing obtain verification that the requirements of any applicable law or administrative procedure have been met sec_6330 the taxpayer may raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy sec_6330 the taxpayer may also raise challenges to the existence or amount of the underlying tax_liability at the hearing if the taxpayer did not receive a statutory_notice_of_deficiency with respect to the underlying tax_liability or did not otherwise have an opportunity to dispute that liability sec_6330 amounts reported as due on the taxpayer’s original return may also be challenged 122_tc_1 at the conclusion of the hearing the appeals officer must determine whether and how to proceed with collection and shall take into account the verification that the requirements of any applicable law or administrative procedure have been met the relevant issues raised by the taxpayer challenges to the underlying tax_liability by the taxpayer where permitted and whether any proposed collection action balances the need for the efficient collection_of_taxes with the legitimate concern of the taxpayer that the collection action be no more intrusive than necessary sec_6330 pursuant to the pension_protection_act of publaw_109_ sec_855 120_stat_1019 this court has exclusive jurisdiction to review notices of determination issued pursuant to sec_6320 and sec_6330 effective for determinations made after date generally as described under sec_6330 failure of the taxpayer to raise an issue during the sec_6330 hearing will preclude our consideration of that issue 129_tc_107 118_tc_488 however the appeals officer’s mandated verification under sec_6330 that the requirements of any applicable law or administrative procedure have been met is subject_to review without regard to a challenge by the taxpayer at the hearing hoyle v commissioner t c ___ ___ slip op pincite where the underlying tax_liability is properly at issue the court will review the matter de novo where the underlying tax is not properly at issue however the court will review the commissioner’s determination for abuse_of_discretion see eg 114_tc_176 respondent argued at trial that petitioners had an opportunity to dispute their underlying tax_liabilities with the appeals officer and failed to do so thus pursuant to the court’s decision in giamelli v commissioner supra petitioners cannot raise it here petitioners argued that they did dispute their underlying tax_liabilities at trial the court ruled that petitioners did properly challenge the underlying liabilities regarding the additions to tax during communications with the appeals officer and thus could raise it before the court therefore the additions to tax for through are properly at issue and we review them de novo ii sec_6651 addition_to_tax respondent determined that petitioners are liable for additions to tax under sec_6651 and for and petitioners did not challenge the amounts of their tax_liabilities but claimed at trial that they had paid balances due petitioners are challenging only their liability for the sec_6651 and additions to tax pursuant to sec_7491 the commissioner’s initial burden of production is to introduce evidence that the returns were filed late 116_tc_438 the commissioner however is not obligated to introduce evidence regarding reasonable_cause or substantial_authority id pincite once the commissioner meets his burden of production a taxpayer bears the burden of proving that the late filing was due to reasonable_cause and not willful neglect and must provide evidence sufficient to persuade the court that the commissioner’s determination is incorrect id sec_6651 imposes an addition_to_tax for failure to timely file a federal_income_tax return by its due_date with extensions the sec_6651 addition_to_tax is equal to percent of the amount of tax required to be shown on the return if the failure is not for more than month with an additional percent for each month or partial month during which the failure_to_file continues not to exceed percent in the aggregate the addition_to_tax does not apply if it can be established that such failure was due to reasonable_cause and not willful neglect id willful neglect means a conscious intentional failure or reckless indifference 469_us_241 sec_301_6651-1 proced admin regs provides that if a taxpayer exercises ordinary business care and prudence in providing for payment of his tax_liability and is nevertheless unable to file on time then the delay is due to reasonable_cause because petitioners concede that they failed to timely file federal_income_tax returns for the years at issue respondent has met his burden of production with respect to the additions to tax petitioners however claim they had reasonable_cause on account of numerous health issues petitioners presented evidence indicating that their failure_to_file was due to severe medical issues that plagued petitioner wife during and petitioner wife filed for both short- and long-term disability benefits between and as a result of hospital visits and doctor’s appointments for mental and physical health issues though petitioner wife did file for short-term disability and visited psychiatrists before petitioners’ tax_return filing_date she admitted to the court that a contributing factor to not filing their tax_return was a major project at work in addition petitioner husband was still employed and working throughout and it was not until november of when petitioner wife was taken to the hospital because she had lost consciousness that she missed work because of her health problems petitioner wife filed for long-term disability benefits in thereafter petitioner husband decided to cut back on work so he could take care of their children as petitioner wife was unable to care for them by herself petitioners had reasonable_cause for not filing their income_tax returns for and on account of petitioner wife’s serious health problems however petitioners have failed to explain how these issues prevented them from exercising ordinary reasonable care and prudence in filing their tax_return on date petitioners worked during and up to november of months after the return was due even taking into account petitioner wife’s seeing a psychiatrist in early there is insufficient basis to find that the failure to timely file the return was reasonable accordingly we sustain respondent’s imposition of the addition_to_tax under sec_6651 for but not and respondent imposed a sec_6651 addition_to_tax for and sec_6651 imposes an addition_to_tax for failure to pay the amount shown on the return on or before the date prescribed for payment of the tax the amount of the addition is equal to percent per month up to a maximum of percent for failure to make timely payment of the tax shown on a return the addition_to_tax applies only when an amount of tax is shown on a return see 120_tc_163 sec_6651 provides for an addition_to_tax where payment of the amount reported as tax on a return is not timely unless it is shown that such failure is due to reasonable_cause and not due to willful neglect petitioners claim that petitioner wife’s medical issues were responsible for their not paying their balance due we agree with petitioners for the reasons stated above we sustain respondent’s imposition of the addition_to_tax under sec_6651 for but not for or in conclusion petitioners have demonstrated that there was reasonable_cause for not timely filing their and tax returns therefore we sustain respondent’s imposition of the addition_to_tax under sec_6651 and only for at trial petitioners claimed that they had paid their entire outstanding balance respondent did not address this statement because of the uncertainty of a balance due we will order respondent to prepare a rule computation to determine whether petitioners have any outstanding balance and the amounts of the additions to tax to reflect the foregoing decision will be entered under rule


t c summary opinion united_states tax_court nicholas garrett ray and michelle shere ray petitioners v commissioner of internal revenue respondent docket no 17674-07s filed date nicholas garrett and michelle shere ray pro sese chong s hong for respondent gerber judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any 1unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure other court and this opinion shall not be treated as precedent for any other case respondent determined a dollar_figure income_tax deficiency for petitioners’ tax_year and a sec_6662 accuracy-related_penalty of dollar_figure the issues we consider are whether petitioners are entitled to their claimed deductions for educational expenses and or charitable deductions and whether they are liable for an accuracy-related_penalty background3 petitioners are nicholas ray mr ray and michelle johnson petitioners filed a joint form_1040 u s individual_income_tax_return for with the filing_status married_filing_jointly petitioners resided in california at the time their petition was filed on their form_1040 petitioners claimed charitable cash or check contributions of dollar_figure and contributions other than cash of dollar_figure for total contributions of 2at the opening of the trial respondent’s counsel advised the court that all adjustments had been resolved with the exception of the educational expenses and the charitable_contributions respondent’s counsel did not say whether the accuracy-related_penalty remained in dispute however the outcome of the case has obviated the need to address the penalty 3no questions were raised in this case about sec_7491 and the burden_of_proof or the burden of production 4although this case is captioned in the name of nicholas garrett and michelle shere ray michelle ray prefers use of the surname johnson dollar_figure respondent disallowed dollar_figure of charitable_contribution deductions an amount dollar_figure more than the amount petitioners claimed during petitioners belonged to a church that was qualified as a nonprofit organization under sec_501 to which contributions would normally be tax deductible petitioners did not receive any goods or services from their church petitioners regularly made contributions to their church for tithing building fund and other purposes during petitioners paid dollar_figure to their church petitioners produced copies of checks totaling dollar_figure and additional evidence from their bank that two more checks totaling dollar_figure had been issued during petitioners are entitled to charitable_contribution deductions of dollar_figure for mr ray is a teacher who received his bachelor of arts degree with a major in history during mr ray was teaching under a so-called emergency credential which in effect meant that he did not have tenure in the school system he began teaching on date under the emergency credential which would expire in year there were educational requirements for the extension of the emergency credential which could be extended for additional year the next level of teaching status was a so-called preliminary credential which also was not a tenured position in all other respects mr ray had the obligations rights and privileges of a tenured teacher he had a voice vote in all faculty decisions the school system made contributions to his retirement_plan and there were continuing education requirements to maintain his emergency credentials and his teaching position for a second year during mr ray incurred expenses for educational courses to maintain his teaching status for or mr ray’s courses might also have qualified him to obtain a preliminary credential which although not a tenured position was a more permanent position in the school system once mr ray obtained a preliminary credential he had years to obtain a permanent teaching certificate mr ray’s courses did not lead to a master’s or other advanced educational degree there were also educational requirements on a 5-year cycle for all teachers irrespective of whether their teaching position was permanent ms johnson is also a teacher and she attended college during and to earn her bachelor of science degree in liberal studies ms johnson received her bachelor’s degree in date during date ms johnson had received an associate degree in the science of child development and family relations ms johnson had a regular year teaching credential valid date through date enabling her to teach in the care development and instruction of children in a child development program respondent conceded that ms johnson’s educational expenses were deductible and did not qualify her for a new position even though the courses taken would result in extending her associate degree to a bachelor’s degree discussion sec_162 generally allows as a deduction all the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business expenditures made by an individual for education are deductible as ordinary and necessary business_expenses if the education maintains or improves skills required by the individual in her employment or other trade_or_business sec_1_162-5 income_tax regs the general_rule under sec_1_162-5 income_tax regs however does not apply if the expenditures fall within either of two specified categories ie they are nondeductible expenditures if they are incurred to meet the minimum educational requirements for qualification in a taxpayer’s trade_or_business or they qualify the taxpayer for a new trade_or_business see 78_tc_550 sec_1_162-5 income_tax regs an individual who through education improves his or her skills in an existing trade_or_business may also become qualified for a new trade_or_business thompson v commissioner tcmemo_2007_174 if the education in question qualifies the taxpayer to perform significantly different tasks and activities than he or she could perform before the education then the education is deemed to qualify the taxpayer for a new trade_or_business robinson v commissioner supra pincite citing 73_tc_723 70_tc_1067 affd without published opinion 607_f2d_995 2d cir 62_tc_270 and 52_tc_1106 affd 443_f2d_29 9th cir the mere capacity to engage in a new trade_or_business is sufficient to disqualify the expenses for the deduction weiszmann v commissioner supra pincite respondent agrees that ms johnson is entitled to claim her educational expenses so there is no need to address her circumstances with respect to mr ray however respondent contends that his educational expenditures were to meet the minimum requirements for a job and therefore are not deductible mr ray contends however that he had met the requirements to teach on an emergency credential petitioner did not know at the end of whether he had qualified for a preliminary credential accordingly at the end of mr ray was merely able to show that he was attempting to seek a preliminary credential and that he was attempting not to lose his teaching status under the emergency credential in a substantially_similar case involving a california teacher with emergency credentials we held that the taxpayer’s educational expenses were deductible orr v commissioner tcmemo_1992_566 in that case we held that the taxpayer who has already obtained a baccalaureate degree has met the minimum educational requirements for qualification as an elementary or secondary school teacher in the state of california therefore the educational costs incurred to meet additional requirements of the employer are deductible that holding was in view of a thorough analysis of federal tax statutes and regulations and california law governing teaching positions respondent however argues that a change in california law would change the outcome because of the requirements set forth in sec_1_162-5 income_tax regs that regulation was referenced and discussed in orr v commissioner supra accordingly we consider whether respondent’s argument is correct sec_1_162-5 income_tax regs states that the minimum educational requirements for qualification of a particular individual in a position in an educational_institution is the minimum level of education in terms of aggregate college hours or degree which under the applicable laws or regulations is normally required of an individual initially being employed in such a position respondent argues that a change in california law since orr v commissioner supra was decided would change the application of the above-quoted regulation in this case the change referenced by respondent is that at the time of orr to acquire a teaching credential california law required a bachelor’s degree and completion of years of total study within years from the date_of_issuance of an emergency credential see cal educ code sec west current california law does not allow a 5-year period to complete the postbachelor professional education courses see cal educ code sec a west instead the current law provides for a staging process beginning with an emergency credential for and up to years and then a preliminary credential leading to a permanent credential with respect to preliminary and permanent credentials california requires continuing education in order to remain certified to teach in either category the difference cited by respondent is without a distinction it merely changes the form reduces the 5-year period to a 2-year period and not the substance or effect of the prior california requirements under either the or the version of the california statute a bachelor’s degree is the threshold for a teaching credential see sec_1_162-5 example income_tax regs mr ray had a teaching credential and he had therefore met the minimum educational requirements for qualification so that his educational expenditures were for the purpose of maintaining and improving his skills and not for qualification there is no actual or rational difference between a teacher on an emergency or regular credential being required to take educational courses in order to be retained even though the interval may be different accordingly we hold that mr ray and ms johnson are entitled to deduct dollar_figure in educational expenses and related expenses for we have found that petitioners have substantiated dollar_figure of charitable_contributions and accordingly hold that they are entitled to deduct them for their tax_year in view of our holding that petitioners are entitled to all of their claimed educational expense deductions and because they have shown entitlement to more than percent of their claimed charitable_contribution deductions there will not be a substantial_understatement of tax large enough to trigger the application of the sec_6662 and b accuracy-related_penalty accordingly we hold that petitioners are not liable for an accuracy-related_penalty sec_6662 requires that an understatement exceed the greater of percent of the tax required to be shown on the return or dollar_figure to be substantial and thus to trigger the accuracy-related_penalty to reflect the foregoing decision will be entered under rule


internal_revenue_service number release date index number ------------------------------------------ ---------------- ---------------------------------------------- ---------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------- telephone number --------------------- refer reply to cc psi b02 plr-149728-07 date date legend x ---------------- ------------------------------------ state ------------- date1 ------------------------- date2 ---------------------- dear ------------------ this responds to a letter dated date and subsequent correspondence submitted on behalf of x requesting relief under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on date1 under the laws of state it was intended for x to be an s_corporation effective date2 however no form_2553 election by a small_business_corporation was timely filed for x sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective sec_1362 provides in relevant part that if an s election is made within the first two and one-half months of a corporation’s taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made under sec_1362 however if an s election is made after the first two and one-half months of a plr-149728-07 corporation’s taxable_year then that corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is filed sec_1362 provides that if a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year based solely on the facts submitted and the representations made we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective date2 accordingly provided that x makes an election to be an s_corporation by filing a complete form_2553 effective date2 along with a copy of this letter with the appropriate service_center within days from the date of this letter then such election will be treated as timely made for date2 except as expressly provided herein no opinion is expressed or implied concerning the federal_income_tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code 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 with this office a copy of this letter is being sent to your authorized representative sincerely melissa c liquerman senior technician reviewer branch office of associate chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes


t c memo united_states tax_court robin s trupp petitioner v commissioner of internal revenue respondent docket no filed date wallace b anderson jr for petitioner laura a price for respondent memorandum findings_of_fact and opinion goeke judge petitioner did not file a tax_return for and respondent prepared a substitute for return sfr under sec_6020 according to the 1unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure sfr respondent determined a deficiency of dollar_figure for petitioner contests the deficiency in part claiming that he is entitled to various deductions not included on the sfr the parties have made several concessions including petitioner’s concession that he is liable for additions to tax under sec_6651 and sec_6654 on the basis of his taxable_income as determined by this court the issues remaining for decision are whether petitioner is entitled to a sec_162 business_expense deduction of dollar_figure for cellular phone expenses we hold that he is not whether petitioner is entitled to a sec_162 business_expense deduction of dollar_figure for expenses_incurred in storing client case files we hold that he is whether petitioner is entitled to a sec_162 business_expense deduction of dollar_figure for travel_expenses we hold that he is not whether petitioner is entitled to a sec_162 business_expense deduction of dollar_figure for an accounting expense we hold that he is and whether petitioner is entitled to a sec_162 business_expense deduction of dollar_figure for equestrian-related expenses_incurred as part of petitioner’s claimed equine industry law marketing campaign we hold that he is not findings_of_fact at the time the petition was filed petitioner resided in florida petitioner’s background during the 1970s petitioner competed in equestrian events all over the country and was at one point considered for the u s olympic equestrian team he retired from riding shortly before entering law school at tulane university from which he graduated in he was admitted to the florida bar in and began to practice law as a litigator petitioner’s son austin trupp began to ride in equestrian shows in the mid- 1990s around the age of as a result of his son’s riding petitioner was drawn back into the sport becoming president of an equestrian organization for two years and attending shows petitioner also began to represent clients in the equine industry petitioner’s law firm at the time did not favor representation of equine industry clients and as a result petitioner left the firm in the late 1990s to develop his own practice robin s trupp p a after several years of solo practice in petitioner joined the law firm of arnstein lehr llp arnstein lehr and continued his practice of equine industry law as a nonequity partner while petitioner does not practice solely equine industry law it accounted for most of the fees he earned for arnstein lehr during in petitioner worked in arnstein lehr’s tampa florida office and received dollar_figure in gross_income from the firm the tampa office was the same office petitioner had used for his solo practice petitioner and his legal assistant were the only people who worked out of that office upon joining arnstein lehr petitioner signed a term sheet which discussed certain aspects of petitioner’s and the firm’s obligations to one another including information on reimbursement of certain business_expenses incurred by petitioner arnstein lehr had an accountable_plan through which petitioner could request reimbursement for business-related expenses petitioner’s budget for reimbursement of business_expenses through the accountable_plan was dollar_figure in and dollar_figure in one of petitioner’s accountable_plan expenses in was a dollar_figure advertisement in a winter equestrian festival magazine touting petitioner’s experience in dealing with equine industry law matters the advertisement brought in no new business for petitioner in petitioner requested and received a total of dollar_figure in reimbursed business_expenses in petitioner requested and was granted a six-month extension to file his tax_return as of date petitioner had not filed a tax_return and respondent filed the sfr on date respondent issued a notice_of_deficiency to petitioner for according to the sfr petitioner timely filed a petition for redetermination of the deficiency and the additions to tax as determined by respondent on date petitioner filed a joint tax_return with his wife for at some later point petitioner also provided respondent with an unsigned and undated form 1040x amended u s individual_income_tax_return cellular phone expenses petitioner had a cellular phone plan with verizon wireless which had four phone numbers associated with it on the tax_return petitioner prepared he claimed a business_expense deduction of dollar_figure for cellular phone expenses resulting from his verizon wireless plan on the unsigned and undated form 1040x petitioner reduced this claimed deduction to dollar_figure and then to dollar_figure on brief as a result of including only two of the four numbers on the plan as business numbers petitioner introduced verizon wireless monthly account statements from into evidence these account statements are for a family shareplan with four numbers associated with it one of which is austin trupp’s number the account statements do not detail the individual calls made to or from each number during each month nor do they identify any numbers as business numbers storage expenses over years of legal practice petitioner accumulated voluminous client files dating back to which were in storage during petitioner introduced copies of checks and bank account statements which reflected dollar_figure in payments made to hyde park storage from petitioner and his wife’s joint personal bank account in petitioner did not seek to have arnstein lehr reimburse him for the storage expenses out of the accountable_plan ray warner chairman of arnstein lehr’s executive committee testified at trial regarding whether arnstein lehr would have reimbursed petitioner’s storage expenses had he made such a request mr warner stated that arnstein lehr tried as a matter of policy to have lawyers maintain their own pre-joinder files travel_expenses petitioner testified that he incurred expenses traveling on firm business during according to petitioner those expenses included hotels rental cars and airplane tickets petitioner introduced copies of bank account statements from and his diner’s club statements the bank account was a joint account shared between petitioner and his wife the diner’s club card was issued through arnstein lehr but petitioner was personally liable on it and made the payments most of the expenses on both statements are personal expenses and any business_expenses are not so identified both statements show various travel_expenses incurred and the diner’s club statement shows airplane tickets purchased for petitioner his wife and his daughter petitioner testified that the only expenses he seeks to deduct were those resulting from business travel without his family petitioner did not seek to have arnstein lehr reimburse his travel_expenses and did not bill these expenses to clients accounting fee petitioner introduced an invoice from judy a palmer p a judy palmer and a copy of a dollar_figure check dated date for the preparation of various federal tax forms for petitioner’s solo practice robin s trupp p a the check was written on petitioner and his wife’s joint bank account equestrian-related expenses petitioner attended equestrian shows with his son throughout his son’s childhood usually arriving thursday night or friday morning and leaving on sunday the number of shows austin trupp rode in during was not established but it was at least five shows at the shows austin trupp rode horses owned by other people petitioner testified that when he attended shows in which his son rode petitioner was known as the attorney father of austin trupp petitioner testified that potential clients would approach him at the shows because of his ready availability to deal with their equine industry matters and that he had developed over clients by going to shows from to the time of trial petitioner did not purchase ringside banner advertisements or set up a table at the shows he testified that only corporations bought banners and that he found the costs of a table outweighed the benefits instead of formally advertising petitioner would stay ringside and watch his son or others riding he also relied on word of mouth spreading when his son would place in the top in an event which resulted in austin trupp’s name being announced over the loudspeakers to the entire event petitioner believed that when people heard austin trupp’s name they put two and two together and thought of robin trupp the equine industry attorney he testified that when he attended shows in which his son was not riding people wondered why he was there and no new clients approached him petitioner testified that potential clients most often approached him while austin trupp was riding or else would leave messages for him at the stables he testified that much of his time at the shows was spent doing legal work negotiating horse sales or leases and drafting the contracts and that austin trupp sometimes had to call petitioner to tell him when the show was over petitioner testified that he would keep track of the time he spent with clients at each show on a notepad and fill in time sheets to bill clients when he returned to the office he was also in contact with his legal assistant susan samhoury during weekday shows so that she could provide him with any needed information or complete forms petitioner was working on ms samhoury has worked as petitioner’s legal assistant since date she testified that petitioner often came back from the shows with new clients for whom she would draft retainer letters or arrange meetings she estimated that between date and date petitioner brought back approximately new clients as a result of attending shows ms samhoury did not work on weekends petitioner agreed to pay certain equestrian-related expenses to people who allowed austin trupp to ride their horses at shows petitioner now claims dollar_figure in deductible business promotion expenses as a result including payments made for horse shoes boarding feeding grooming transportation housing for the horses and various people on the farms supplements lessons and insurance petitioner did not request that arnstein lehr reimburse him for any of the equestrian-related expenses in petitioner collected dollar_figure in legal fees from four equine industry clients of the dollar_figure dollar_figure was from a case petitioner had been working on since jes case and dollar_figure was from another case which petitioner had been working on since before he joined arnstein lehr molly ashe case no direct information was provided about the other two equine industry clients although one of them appears to have retained petitioner to assist in the purchase of a horse named kolgani one of the two unknown clients possibly the same one involved in the purchase of kolgani is listed as a horseshoe contact on a summary of fees collected the client in the jes case mike gallagher had known petitioner when they were teenagers and they were reacquainted in at one of the shows in which austin trupp rode the personal connection led mr gallagher to hire petitioner to litigate the jes case mr gallagher did not hire petitioner because of austin trupp’s horse-riding activities the jes case involved an antitrust action and was litigated for several years the molly ashe case involved the breakup of a partnership which owned a number of top horses this case was also litigated for several years ms samhoury testified that the molly ashe case was one of the cases petitioner had secured_by going to austin trupp’s equestrian events and that the case had generated over dollar_figure in legal fees for petitioner in petitioner collected dollar_figure in legal fees from equine industry clients of this amount dollar_figure was from the jes case and dollar_figure was from the molly ashe case the remaining dollar_figure was from a horseshoe contact presumably the same client from although the matter numbers are different about which no information was provided opinion i burden_of_proof generally taxpayers bear the burden of proving by a preponderance_of_the_evidence that the determinations of the commissioner in a notice_of_deficiency are incorrect rule a 290_us_111 deductions are a matter of legislative grace and a taxpayer bears the burden of proving entitlement to any claimed deductions rule a 503_us_79 petitioner claims that respondent bears the burden_of_proof under sec_7491 sec_7491 provides that if in any court_proceeding the taxpayer introduces credible_evidence with respect to factual issues relevant to ascertaining the taxpayer’s liability for a tax the burden_of_proof with respect to such factual issues will be placed on the commissioner credible_evidence is the quality of evidence which after critical analysis a court would find sufficient to decide the issue on if no contrary evidence were submitted 122_tc_143 quoting 116_tc_438 after a review of the evidence presented we find that petitioner did not introduce credible_evidence with respect to the business cellular phone business travel and equestrian-related expenses therefore the burden_of_proof does not shift to respondent on those issues we decide the remaining issues on the preponderance_of_the_evidence and therefore do not address the burden_of_proof 124_tc_95 citing 394_f3d_1030 8th cir aff’g tcmemo_2003_212 and estate of stone v commissioner t c memo ii whether petitioner is entitled to business_expense deductions for cellular phone storage travel accounting and equestrian-related expenses sec_162 allows a deduction for all ordinary and necessary business_expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business the determination of whether an expenditure satisfies the requirements of sec_162 is a question of fact 320_us_467 a whether petitioner is entitled to a dollar_figure deduction for cellular phone expenses respondent argues that petitioner has not provided sufficient evidence to substantiate his claimed cellular phone business_expense deduction respondent alternatively argues that petitioner is not entitled to the deduction because he failed to request reimbursement for the expenses under arnstein lehr’s accountable_plan see 79_tc_1 a trade_or_business expense deduction is not allowable to an employee to the extent that the employee is entitled to reimbursement from his or her employer for an expenditure related to his or her status as an employee petitioner argues that he provided sufficient evidence to substantiate the expenses and that arnstein lehr would not have reimbursed his cellular phone expenses we find that petitioner did not provide sufficient evidence to substantiate the cellular phone expense deduction under sec_274 no deduction is allowed under sec_162 for cellular telephone expenses for unless the taxpayer substantiates by adequate_records or by sufficient evidence corroborating the taxpayer’s own statement the amount of the expense and the business_purpose of the expenditure sec_280f bogue v commissioner tcmemo_2007_150 petitioner produced no evidence except verizon wireless monthly account statements for a family shareplan with four numbers associated with it petitioner claims two of the four numbers were business numbers however the account statements do not identify any numbers as business numbers nor do they detail the individual calls made to or from each number during the month considering the evidence we find that petitioner has failed to substantiate the business_purpose of his cellular phone expenses we therefore hold that petitioner is not entitled to a deduction for these expenses b whether petitioner is entitled to a dollar_figure deduction for storage expenses respondent argues that petitioner has not provided sufficient evidence to substantiate his claimed storage business_expense deduction respondent alternatively argues that petitioner is not entitled to the deduction because petitioner failed to request reimbursement for the expenses under arnstein lehr’s accountable_plan petitioner argues that he provided sufficient evidence to sec_280f was amended by the small_business jobs_act of pub_l_no sec_2043 sec_124 stat pincite which removed cellular phones and other similar telecommunications equipment from listed_property subject_to sec_274 however that amendment is effective only for tax years beginning after date id sec_2043 substantiate the expenses and that arnstein lehr would not have reimbursed the storage expenses we agree with petitioner after considering the payments made to hyde park storage and the testimony we find that petitioner did substantiate the storage expenses we also believe mr warner’s testimony that arnstein lehr tried as a matter of policy to have lawyers maintain their own pre-joinder files and that arnstein and lehr would not allow petitioner to be reimbursed for the storage expenses we hold that petitioner is entitled to a business_expense deduction for the storage costs c whether petitioner is entitled to a dollar_figure deduction for travel_expenses respondent argues that petitioner has not provided sufficient evidence to substantiate his claimed travel business_expense deduction respondent alternatively argues that petitioner is not entitled to the deduction because petitioner failed to request reimbursement for the expenses under arnstein lehr’s accountable_plan petitioner argues that he provided sufficient evidence and claims he did not request reimbursement of the travel_expenses because he was saving the money in his accountable_plan for other uses we find that petitioner did not provide sufficient evidence to substantiate the travel expense deduction under sec_274 no deduction is allowed under sec_162 for travel_expenses unless the taxpayer substantiates by adequate_records or by sufficient evidence corroborating the taxpayer’s own statement the amount of the expense the time and place of the travel and the business_purpose of the expenditure petitioner introduced no evidence and gave little of his own testimony regarding the business_purpose of his travel_expenses we therefore hold that petitioner is not entitled to a business_expense deduction for the travel_expenses d whether petitioner is entitled to a dollar_figure deduction for an accounting fee we are satisfied that the invoice from judy palmer and the copy of the check written on petitioner and his wife’s joint bank account proves petitioner’s entitlement to a dollar_figure deduction for the accounting fee paid on behalf of petitioner’s solo practice robin s trupp p a e whether petitioner is entitled to a dollar_figure deduction for equestrian- related expenses deductions are not allowable under sec_162 for activities which are carried on primarily as a sport or hobby or for recreation sec_1_183-2 income_tax regs sec_183 and the regulations thereunder provide rules to determine whether an activity is engaged in for profit an activity is engaged in for profit if the taxpayer entertained an actual and honest profit objective in engaging in the activity 78_tc_642 aff’d without opinion 702_f2d_1205 d c cir sec_1_183-2 income_tax regs the taxpayer’s expectation of profit must be in good_faith 72_tc_28 citing sec_1_183-2 income_tax regs respondent argues that petitioner’s equestrian-related expenses stem from activities which were not engaged in for profit and are therefore not deductible under sec_162 see sec_1_183-2 income_tax regs deductions are not allowable under sec_162 for activities which are carried on primarily as a sport or hobby or for recreation petitioner argues that the equestrian activities were engaged in for profit under sec_183 either because his equestrian activities and his legal practice constituted a single activity or under factors enumerated in sec_1_183-2 income_tax regs and that sec_162 does not otherwise preclude a deduction we find that petitioner’s equestrian activities were not engaged in for profit and therefore no expenses relating to them are deductible under sec_162 whether petitioner’s equestrian activities and legal practice constituted a single activity for purposes of sec_183 petitioner first argues that his equestrian activities and his equine industry legal practice constituted a single activity and that the equestrian activities were therefore engaged in for profit in support of his argument petitioner relies heavily on our decision in topping v commissioner tcmemo_2007_92 the taxpayer in topping was an experienced equestrian who formed a company which provided interior design services for horse barns and recreational homes to promote her business and meet clients at an exclusive equestrian club the taxpayer began riding in events held at the club which caused her name to be announced over loudspeaker whenever she began to ride or advanced in the competition in addition the taxpayer paid several thousand dollars each season to reserve a table at the equestrian events where she would converse with potential clients after competing we held that the taxpayer in topping was entitled to a deduction for her equestrian-related expenses in reaching this holding we found that sec_183 did not preclude a deduction because the equestrian and interior design activities constituted a single activity which was profitable in each of the years at issue multiple undertakings of a taxpayer may be treated as one activity if the undertakings are sufficiently interconnected sec_1_183-1 income_tax regs the most important factors in making this determination are the degree of organizational and economic interrelationship of the undertakings the business_purpose served by carrying on the undertakings separately or together and the similarity of the undertakings id the commissioner generally accepts the taxpayer’s characterization of two or more undertakings as one activity unless the characterization is artificial or unreasonable id other factors considered in determining whether a taxpayer’s characterization is unreasonable include whether the undertakings are conducted at the same place whether the undertakings were part of the taxpayer’s efforts to find sources of revenue from his or her land whether the undertakings were formed as separate activities whether one undertaking benefited from the other whether the taxpayer used one undertaking to advertise the other the degree to which the undertakings shared management the degree to which one caretaker oversaw the assets of both undertakings whether the taxpayer used the same accountant for the undertakings and the degree to which the undertakings shared books_and_records mitchell v commissioner tcmemo_2006_145 citing 94_tc_41 tobin v commissioner tcmemo_1999_328 estate of brockenbrough v commissioner tcmemo_1998_454 hoyle v commissioner tcmemo_1994_592 de mendoza v commissioner tcmemo_1994_314 and scheidt v commissioner t c memo in topping we found that a close organizational and economic relationship existed between the taxpayer’s equestrian and design undertakings that the taxpayer formed the equestrian and design undertakings as a single integrated business and that the evidence in that case demonstrated that the taxpayer’s involvement in the equestrian world is the cornerstone of her cultivation of relationships with her clientele however the facts in this case do not show such a sufficient interconnectedness between petitioner’s equine industry legal practice and his equestrian activities in topping the taxpayer made herself visible to the crowd at the equestrian events by riding in the events and spent money to reserve a table so that she could converse with potential clients after competing despite her unconventional means of advertising we found that her equestrian activities significantly benefited her design business noting that the evidence showed her equestrian contacts made up over of the client base of her profitable business we therefore found a significant business_purpose for the combination of her equestrian and design undertakings in this case petitioner did not ride horses himself and did nothing to increase his own exposure to potential clients petitioner stayed ringside while his son and others were riding believing that when they heard his son’s name announced over the loudspeakers that they would think of petitioner and his equine industry law practice we might overlook the lack of advertising if petitioner could show he honestly believed his equestrian activities would generate profits for his legal practice topping v commissioner tcmemo_2007_92 the question is not whether a particular mode of doing business is wise but whether the taxpayer honestly believed the method employed would turn a profit for him citing dreicer v commissioner t c however we believe petitioner failed to show a profit_motive for his equestrian activities 3petitioner testified that his traditional advertisement in an equestrian magazine brought in no new business this is similar to testimony in topping v commissioner tcmemo_2007_92 that traditional advertising was not effective in garnering new business from people attending the equestrian shows as a result of the testimony in topping we overlooked the lack of traditional advertising when the taxpayer was able to show that by introducing evidence comparing her expenses with resulting business revenue she believed her method of advertising would help her business turn a profit in topping we found that the taxpayer showed a profit_motive for her equestrian activities by introducing evidence which showed her equestrian contacts comprised over of the client base of her profitable business on brief petitioner frequently makes the point that his equestrian expenses of dollar_figure were small in comparison with the dollar_figure in equine-related legal fees petitioner earned in however dollar_figure of these fees was from the jes case the client in that case mr gallagher hired petitioner because he knew petitioner personally and not because of austin trupp’s horse-riding even if we accept ms samhoury’s uncorroborated testimony that the client in the molly ashe case was one of petitioner’s equestrian contacts and assume that the remaining two equine industry clients were also equestrian contacts and no evidence or testimony was provided that they were petitioner’s equestrian-related expenses are still dollar_figure more than the fees generated by his equestrian contacts in the numbers look worse for petitioner when the amount of the equestrian- related expenses is compared to the amount of legal fees from new equestrian contacts in it was established that two of petitioner’s four fee paying equine industry clients mr gallagher and the molly ashe client had been his clients since before these two clients accounted for dollar_figure of the dollar_figure in equine industry legal fees petitioner earned in even if we assume that the remaining two equine industry clients were new equestrian contacts in these two clients still paid only dollar_figure in legal fees to petitioner compared to dollar_figure petitioner spent on equestrian-related expenses in in addition to equestrian-related expenses exceeding resulting equine industry client fees in petitioner provided no evidence and only vague testimony relating to the effects those expenses had on his legal fees generated in other years petitioner introduced evidence that he collected dollar_figure in legal fees from equine industry clients in however petitioner did not establish the amount of his equestrian-related expenses in making a comparison to any resulting legal fees impossible petitioner testified that he had developed over clients by going to shows from to the time of trial and ms samhoury estimated in her testimony that between date and date petitioner brought back approximately new clients as a result of attending shows ms samhoury also estimated that the 4compare the taxpayer in topping who provided her gross_income and expenses for each of the years through inclusive even though and were the only years in issue 5of this dollar_figure dollar_figure was from the jes case and dollar_figure was from the molly ashe case the remaining dollar_figure was from a horseshoe contact about which no information was provided molly ashe case generated over dollar_figure in legal fees for petitioner however no evidence was provided to substantiate these claims other than evidence which showed that fees petitioner earned from the molly ashe case in and totaled dollar_figure we note that ms samhoury’s estimate of new clients between date and date seems excessive given that petitioner had only four fee-paying equine industry clients in of which at most two were new equestrian clients in that year petitioner and ms samhoury also testified that petitioner often did legal work at equestrian events and kept time on notepads before filling in timesheets upon returning to his office however no records were produced to substantiate these claims we believe the facts described above weigh against petitioner’s contention that his participation in the equestrian activities was driven by the desire to turn a profit after consideration of the facts and applicable factors listed above we find that petitioner’s characterization of his equestrian activities and his legal practice as one activity is unreasonable sec_1_183-2 income_tax regs petitioner argues that even if his equestrian activities and his legal practice do not constitute a single activity his equestrian activities were still engaged in for profit under the factors enumerated in sec_1_183-2 income_tax regs the enumerated factors include the manner in which the taxpayer carries on the activity the expertise of the taxpayer or his advisers the time and effort expended by the taxpayer in carrying on the activity the expectation that assets used in activity may appreciate in value the success of the taxpayer in carrying on other similar or dissimilar activities the taxpayer’s history of income or losses with respect to the activity the amount of occasional profits if any which are earned the financial status of the taxpayer and elements of personal pleasure or recreation id no one factor is determinative and more weight is accorded to proven objective facts than to mere statements of intent 85_tc_557 78_tc_659 72_tc_411 aff’d without published opinion 647_f2d_170 9th cir sec_1_183-2 income_tax regs a manner in which the taxpayer carries on the activity the fact that a taxpayer carries on an activity in a businesslike manner and maintains complete and accurate books_and_records may indicate that the activity is engaged in for profit sec_1_183-2 income_tax regs petitioner claims that he was in constant contact with his office while at the equestrian events kept businesslike records of the hours he billed while at the events and kept businesslike records of his equestrian-related expenses we disagree and find this factor favors respondent petitioner testified that he usually arrived at equestrian events thursday night or friday morning and left on sundays it would therefore have been impossible for him to be in constant contact with his office because he and ms samhoury were the only two people who worked in that office and ms samhoury did not work weekends ms samhoury’s testimony indicated she was not otherwise in contact with petitioner on weekends petitioner claims to have kept adequate business records of the hours he billed at the equestrian events but provided only his and ms samhoury’s testimony on the subject petitioner provided no organized business records pertaining to what shows he attended or the work he performed at those shows while petitioner provided invoices for several of the equestrian-related expenses the primary records he kept of his expenses were voluminous personal bank account and credit card statements which did not contain information such as the purpose of the expenditures b expertise of the taxpayer or his advisers preparation for an activity by extensive study of its accepted business and economic practices or consultation with those who are expert therein may indicate that a taxpayer has a profit_motive where the taxpayer carries on the activity in accordance with such practices sec_1_183-2 income_tax regs while petitioner did not consult with advisers or study the relationship between his equestrian activities and his law practice he was by all accounts already an expert in both areas we find this factor favors petitioner c time and effort expended by the taxpayer in carrying on the activity the fact that the taxpayer devotes much of his personal time and effort to carrying on an activity may indicate an objective to derive a profit particularly if the activity does not have substantial personal or recreational aspects sec_1_183-2 income_tax regs we have previously found that maintaining a full-time job in addition to conducting a purported business activity can be a positive factor reflecting the taxpayer’s motivation dickson v commissioner tcmemo_1986_182 in this case it was not established how much time petitioner spent on his equestrian activities only that austin trupp rode in at least five shows during although petitioner had a full-time job working for arnstein lehr the equestrian activities had substantial personal and recreational aspects for him not only did petitioner presumably enjoy watching equestrian shows as an accomplished former equestrian but his minor son was competing in the events petitioner claimed to have spent much of his time during the events doing legal work but produced no evidence to this effect we find this factor favors respondent d expectation that assets used in the activity may appreciate in value petitioner argues that his expanding client list and the experience he gained in representing his equine industry clients are assets used in the activity that may appreciate in value by benefiting petitioner’s law practice in the future however sec_1_183-2 income_tax regs contemplates only physical assets such as land used in the activity petitioner has cited and we have found no authority for the proposition that sec_1_183-2 income_tax regs includes his client list or experience gained indeed we have previously rejected the position that an increase in a taxpayer’s experience is tantamount to capital appreciation kraettli v commissioner tcmemo_1988_413 racecar driver’s experience gain not an appreciating asset to be considered under sec_1_183-2 income_tax regs because petitioner did not own the horses which austin trupp rode or any other equestrian-related assets we find this factor does not apply in this case e success of the taxpayer in carrying on other similar or dissimilar activities the fact that a taxpayer has engaged in similar activities in the past and converted them from unprofitable to profitable enterprises may indicate that he is engaged in the present activity for profit even though the activity is presently unprofitable sec_1_183-2 income_tax regs no evidence was presented that petitioner has previously attempted to bring in business to his law firm by engaging in other activities we find this factor does not apply in this case f taxpayer’s history of income or losses with respect to the activity where losses continue to be sustained beyond the period which customarily is necessary to bring an operation to profitable status such continued losses if not explainable as due to customary business risks or reverses may be indicative that the activity is not being engaged in for profit sec_1_183-2 income_tax regs in petitioner earned dollar_figure in equine industry legal fees however dollar_figure of these fees was from the jes case the client in that case mr gallagher knew petitioner personally and did not hire him because of austin trupp’s horse-riding activities even if we accept ms samhoury’s testimony that the molly ashe case client was one of petitioner’s equestrian contacts and assume that the remaining two equine industry clients were also equestrian contacts petitioner’s equestrian-related expenses are still dollar_figure more than the fees generated by his equestrian clients in in petitioner collected dollar_figure in legal fees from equine industry clients of this dollar_figure dollar_figure was from the jes case and dollar_figure was from the molly ashe case the remaining dollar_figure was from a horseshoe contact about which no information was provided however the amount of petitioner’s equestrian-related expenses in was not established making it impossible to determine whether they were potentially larger than the equine industry legal fees they generated we find this factor favors respondent g amount of occasional profits the amount of profits in relation to the amount of losses_incurred and in relation to the amount of the taxpayer’s investment and the value of the assets used in the activity may provide useful criteria in determining the taxpayer’s intent sec_1_183-2 income_tax regs an occasional small profit from an activity generating large losses or from an activity in which the taxpayer has made a large investment would not generally be determinative that the activity is engaged in for profit id because petitioner provided information on both his equine industry legal fees and his equestrian-related expenses only for it is impossible to tell whether the equestrian-related expenses were less than or greater than the resulting legal fees in years other than we therefore find this factor is neutral in this case h financial status of the taxpayer the fact that the taxpayer does not have substantial income or capital from sources other than the activity may indicate that an activity is engaged in for profit sec_1_183-2 income_tax regs substantial income from sources other than the activity particularly if the losses from the activity generate substantial tax benefits may indicate that the activity is not engaged in for profit especially if there are personal or recreational elements involved id petitioner earned dollar_figure in gross_income from his legal practice in a potential loss from the equestrian activities if allowed as a deductible sec_162 business_expense would generate substantial tax benefits for petitioner moreover there were personal and recreational elements involved with the equestrian activities petitioner claims that the equestrian-related expenses contributed to his legal practice gross_income of dollar_figure however little evidence was presented to support this claim we find this factor favors respondent i elements of personal pleasure or recreation the presence of personal motives in carrying on an activity may indicate that the activity is not engaged in for profit especially where there are recreational or personal elements involved sec_1_183-2 income_tax regs on the other hand a profit motivation may be indicated where an activity lacks any appeal other than profit id it is not however necessary that an activity be engaged in with the exclusive intention of deriving a profit id an activity will not be treated as not engaged in for profit merely because the taxpayer has purposes or motivations other than solely to make a profit id also the fact that the taxpayer derives personal pleasure from engaging in the activity is not sufficient to cause the activity to be classified as not engaged in for profit if the activity is in fact engaged in for profit as evidenced by other factors whether or not listed in sec_1_183-2 income_tax regs id given his background as a distinguished equestrian petitioner presumably enjoyed attending equestrian events his attendance at the events also allowed him to take part in the activities of his minor son considering these facts alongside the previously considered factors we find this factor favors respondent j conclusion regarding sec_1_183-2 income_tax regs petitioner has not argued and we do not believe any additional facts outside of those considered in the factors enumerated in sec_1_183-2 income_tax regs apply in this case considering the factors discussed above we find that petitioner’s equestrian activities were not engaged in for profit and the related expenses are therefore not deductible under sec_162 conclusion on equestrian-related expenses we find that petitioner’s equestrian activities and legal practice did not constitute a single activity and that the equestrian activities were not otherwise engaged in for profit as a result the equestrian-related expenses are not deductible as business_expenses under sec_162 see sec_1_183-2 income_tax regs deductions are not allowable under sec_162 for activities which are carried on primarily as a sport or hobby or for recreation f conclusion we hold that petitioner is not entitled to deductions for cellular phone travel or equestrian-related expenses we further hold that petitioner is entitled to deductions for storage and accounting expenses of dollar_figure and dollar_figure respectively to reflect the foregoing and concessions by the parties decision will be entered under rule


t c summary opinion united_states tax_court frank gibson petitioner v commissioner of internal revenue respondent docket no 14758-12s l filed date frank gibson pro_se john f driscoll and thomas a friday for respondent summary opinion lauber judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code pursuant to sec_7463 the decision to all statutory references are to the internal_revenue_code in effect at the relevant times and all rule references are to the tax_court rules_of_practice and procedure be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case in this collection_due_process cdp case petitioner seeks review pursuant to sec_6330 of the determination by the internal_revenue_service irs or respondent to uphold a notice_of_intent_to_levy respondent has moved for summary_judgment under rule contending that there are no disputed issues of material fact and that his action in sustaining the levy was proper as a matter of law we agree and accordingly will grant the motion background petitioner has offered no rebuttal to the facts respondent outlined the following uncontroverted facts are therefore based on the petition respondent’s motion for summary_judgment and respondent’s other filings in this case see eg ulloa v commissioner tcmemo_2010_68 petitioner resided in alabama when he filed his petition with this court for the years and petitioner did not timely file his federal_income_tax returns on date the irs prepared a substitute for return for each year and on date mailed petitioner a notice_of_deficiency for both tax years it is unclear from the record whether petitioner received that notice on date having received no payment from petitioner the irs issued a notice_of_intent_to_levy with respect to petitioner’s tax_liabilities for both years petitioner timely submitted form request for a collection_due_process or equivalent_hearing on date the irs mailed petitioner an acknowledgment letter and scheduled a cdp hearing for date the acknowledgment letter informed petitioner that the irs at this hearing could consider whether you owe the amount due the letter also informed petitioner that if he sought a collection alternative he needed to supply financial information to the irs including a completed form 433-a collection information statement for wage earners and self-employed individuals and signed tax returns for and petitioner provided no documentation and proposed no collection alterna- tive before the scheduled cdp hearing he failed to participate in that hearing and did not request that it be rescheduled the irs then mailed petitioner a last chance letter requesting that he submit financial information if he wished the irs to consider a collection alternative petitioner submitted no information and failed to contact the irs regarding his case accordingly on date the irs is- sued a notice_of_determination to petitioner sustaining the proposed levy peti- tioner timely sought review in this court on date respondent filed a motion for summary_judgment and the court ordered petitioner to file a response to this motion by date the order advised petitioner that under tax_court rule d judgment may be entered against a party who fails to respond to a motion for summary_judgment petitioner has not responded either to respondent’s motion or to the court’s order a summary_judgment discussion the purpose of summary_judgment is to expedite litigation and avoid costly time-consuming and unnecessary trials fla peach corp v commissioner 90_tc_678 under rule the court may grant summary_judgment when there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law rule b 98_tc_518 aff’d 17_f3d_965 7th cir in deciding whether to grant summary_judgment we construe factual materials and inferences drawn from them in the light most favorable to the nonmoving party sundstrand corp t c pincite however the nonmoving party may not rest upon mere allegations or denials but instead must set forth specific facts showing there is a genuine dispute rule d see sundstrand corp t c pincite because petitioner failed to respond to respondent’s motion for summary_judgment the court could enter a decision against him for that reason alone see rule d we will nevertheless consider the motion on its merits we conclude that there are no material facts in dispute and that this case is appropriate for summary adjudication b standard of review sec_6330 does not prescribe the standard of review that this court should apply in reviewing an irs administrative determination in a cdp case the general parameters for such review are marked out by our precedents where the validity of the underlying tax_liability is at issue the court will review the commissioner’s determination de novo 114_tc_176 where there is no dispute concerning the underlying tax_liability the court reviews the irs decision for abuse_of_discretion id pincite abuse_of_discretion exists when a determination is arbitrary capricious or without sound basis in fact or law see 125_tc_301 aff’d 469_f3d_27 1st cir in seeking tax_court review of a notice_of_determination the taxpayer can challenge his underlying tax_liabilities for the years at issue only if he properly raised such a challenge at his cdp hearing see sec_301_6330-1 q a-f3 proced admin regs an issue is not properly raised if the taxpayer fails to request consideration of that issue by appeals or if he requests consideration but fails to present evidence to appeals concerning that issue after being given a reasonable opportunity to do so id see 140_tc_173 a taxpayer is precluded from disputing the underlying liability if it was not properly raised in the cdp hearing although petitioner had an opportunity to raise questions concerning his underlying tax_liabilities at his cdp hearing he failed to do so because he did not participate in that hearing or request that it be rescheduled he likewise failed to make any subsequent attempt to contact the irs or provide the information it had requested because petitioner failed to raise his underlying tax_liabilities at his cdp hearing he is precluded from disputing them now we will therefore review the irs’ determination only for abuse_of_discretion see goza t c pincite c analysis the only question before us is whether the irs properly sustained a levy to collect petitioner’s liabilities we review the record to determine whether the appeals officer properly verified that the requirements of any applicable law or administrative procedure have been met any issues raised by the taxpayer have merit and any proposed collection action balances the need for the efficient collection_of_taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary sec_6330 from our review of the record we conclude that the appeals officer verified that the requirements of applicable law and administrative procedure were followed and that in sustaining the levy the appeals officer properly balanced the need for the efficient collection_of_taxes with the legitimate concern of petitioner that any collection action be no more intrusive than necessary see id the only issue left for us to decide is whether petitioner has raised any issue that has merit in his petition to this court petitioner asserted that he timely filed his and tax returns and had a refund due for that would be sufficient to cover his deficiency petitioner failed to raise either of these issues before the appeals officer because he neglected to participate in his cdp hearing in his petition petitioner does not dispute that he missed his cdp hearing and failed to provide any information to the appeals officer because we cannot consider claims that petitioner failed to advance at the cdp hearing he has failed to present any claim that is reviewable by this court see 129_tc_107 118_tc_488 in any event it is clear that the appeals officer did not abuse his discretion once a taxpayer has been given a reasonable opportunity for a hearing but fails to avail himself of it the commissioner may proceed to make a determination based on the case file see eg oropeza v commissioner tcmemo_2008_94 aff’d 402_fedappx_221 9th cir 130_fedappx_934 9th cir sec_301_6330-1 q a-d7 proced admin regs the irs scheduled a telephone cdp hearing with petitioner and when he failed to call in gave him a final opportunity to contest the levy by mailing him a last chance letter still petitioner failed to contact the irs to schedule an alternative conference date or provide any information or docu- mentation on the basis of the record before us we find that petitioner was given a reasonable opportunity for a hearing but failed to avail himself of it finding no abuse_of_discretion in any respect we will grant summary_judgment for respondent and in a separate order affirm the proposed collection action to reflect the foregoing an appropriate order and decision will be entered


t c summary opinion united_states tax_court derrolyn steele and terry steele petitioners v commissioner of internal revenue respondent docket no 29279-07s filed date derrolyn steele and terry steele pro sese angela b friedman for respondent armen special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any unless otherwise indicated all subsequent section references are to the internal_revenue_code in effect for the taxable_year in issue and all rule references are to the tax_court rules_of_practice and procedure other court and this opinion shall not be treated as precedent for any other case respondent determined a deficiency in petitioners’ federal_income_tax for the taxable_year of dollar_figure after concessions the central issue for decision is whether the dollar_figure received by petitioners from the state of illinois to care for their granddaughter is subject_to self-employment_tax under sec_1401 for the reasons discussed below we hold that it is not background at the time the petition was filed petitioners resided in the state of illinois during the taxable_year at issue petitioners cared for their young granddaughter petitioners received dollar_figure from the state of illinois for providing that care petitioners do not contend and there is nothing in the record to suggest that the payments were qualified_foster_care_payments because the record indicates only that petitioners were caring for their granddaughter under a state-sponsored childcare program we take judicial_notice of the fact that in addition to its foster care program the state of illinois offers a child qualified_foster_care_payments are excludable from gross_income pursuant to sec_131 see also sec_7491 rule a 290_us_111 6_tc_1158 affd 162_f2d_513 10th cir care assistance program ccap to low-income working families to provide them access to affordable childcare so they might continue working or participating in eligible education programs see http www dhs state il us page aspx item see also fed r evid according to the mechanics of the program the state of illinois makes payments directly to a childcare provider chosen by the parents or legal guardian of the child the childcare provider receives a form 1099-misc miscellaneous income from the state of illinois at the end of the year reflecting the ccap payments both petitioners received forms from the state of illinois for payments made during the year at issue and the income reflected therein is includable in petitioners’ gross_income see sec_61 as petitioners have conceded that they received dollar_figure in income from the state of illinois in for the care of their granddaughter the only issue that remains is whether that income is also subject_to self-employment_tax pursuant to sec_1401 discussion3 sec_1401 imposes a tax on the self-employment_income of individuals sec_1402 provides that the income subject_to the self-employment_tax is derived from a taxpayer’ sec_3 we decide the disputed issue without regard to the burden_of_proof participation in a trade_or_business carried on by the taxpayer sec_1402 explains that the term trade_or_business in the self-employment context has the same meaning as when used to apply the expense provisions of sec_162 see 118_tc_138 affd 353_f3d_595 8th cir see also sec_1_1402_c_-1 income_tax regs trade_or_business under sec_162 has been interpreted to mean an activity conducted with continuity and regularity and with the primary purpose of making income or a profit 480_us_23 bot v commissioner supra pincite whether a taxpayer is engaged in a trade_or_business is a question of fact 312_us_212 there is no question that petitioners regularly provided care for their granddaughter and that they were compensated for doing so but they were not carrying_on_a_trade_or_business as groetzinger explains not every income-producing and profit- making endeavor constitutes a trade_or_business u s pincite the primary purpose for engaging in the activity must be for income or profit id the carrying on of a trade_or_business for purposes of self-employment_tax generally does not include the performance of services as an employee sec_1402 117_tc_308 petitioners were providing care for their granddaughter because their daughter was unable to do so there has been no allegation that they were running a daycare center and their granddaughter was one of the children being cared for the money they received from caring for their granddaughter was not their main source_of_income nor did petitioners seek to deduct expenses against the money they received from the state of illinois although the record is sparse it is clear that petitioners’ primary purpose in caring for their granddaughter was not profit such that they were engaged in a trade_or_business accordingly petitioners are subject_to income_tax on the amounts received from the state of illinois yet those amounts are not subject_to self-employment_tax under sec_1401 accordingly and to reflect the foregoing decision will be entered under rule petitioners reported dollar_figure in wages on line of their form_1040 u s individual_income_tax_return


internal_revenue_service department of the treasury index number washington dc person to contact telephone number refer reply to cc dom fi p plr-111145-99 date date legend trust state x association a association b association c association d federation f l u this is in response to a letter dated date requesting a ruling concerning the exclusion of income of trust from gross_income under sec_115 of the internal_revenue_code trust also has requested a ruling under sec_509 of the code pursuant to section of revproc_99_1 1999_1_irb_6 that ruling will be addressed in a separate response facts trust was created by five organizations affiliated with public school entities in state x to pool health care risks and to provide health care insurance and benefits to public school entities the purpose of trust is to provide health care coverage to various public school entities within state x public school districts intermediate units vocational-technical schools and community colleges the existence of each of these entities is authorized and established by specific provisions under the statutes of state x trust has fourteen trustees appointed as follows six voting trustees are appointed by association a six voting trustees are appointed by association b and federation f as determined by those organizations one non-voting trustee is appointed by association c and one non-voting trustee is appointed by association d all trustees must be affiliated with public schools plr- trust will receive its funds from the contributions of participating employers and will use the funds to purchase and or provide health care benefits for employees and their dependents of public school entities trust anticipates that its start-up expenses will be covered by a one-time grant from a private_foundation described in sec_501 and sec_509 however trust anticipates that its on-going expenses will be funded solely by contributions made by participating employers trust essentially operates for the purposes of establishing and operating an insurance risk_pool the agreement and declaration of the trust provide that no part of the net_earnings inure to the benefit of or are distributable to any trustee officer employee agent or other private individual person group or association net_earnings are used exclusively to acquire and deliver health insurance and health insurance benefits to the organization's permitted participants upon dissolution of trust any remaining assets are distributed to public school entities within state x law and analysis sec_115 provides that gross_income does not include income derived from any public_utility or the exercise of any essential_governmental_function and accruing to a state or political_subdivision of a state when determining if sec_115 applies the service considers all the facts and circumstances relating to the organization to determine whether the organization performs an essential_governmental_function and whether the income of the organization accrues to a state or a political_subdivision of the state revrul_90_74 1990_2_cb_34 concerns an organization formed operated and funded by political subdivisions to pool their casualty risks and other risks arising from their obligations concerning public liability workers’ compensation or employees’ health obligations the ruling states that the income of such an organization is excluded from gross_income under sec_115 so long as private interests do not participate in the organization or benefit more than incidentally from the organization the benefit to the employees of the insurance coverage obtained by the member political subdivisions was deemed incidental to the public benefit revrul_77_261 1977_2_cb_45 holds that income from a fund established under a written declaration of trust by a state for the temporary investment of positive cash balances of a state and its political subdivisions is excludable from gross_income under sec_115 of the code the ruling reasons that the investment of positive cash balances by a state or political_subdivision in order to receive some yield on the funds until needed to meet expenses is a necessary incident of the power of the state or political_subdivision to collect taxes and raise revenue trust provides health and medical insurance coverage for its members and their dependents all of whom are employed by or affiliated with public school entities recognized under state x law based upon revrul_90_74 and revrul_77_261 trust performs an essential_governmental_function within the meaning of sec_115 of the code plr-111145-99 under sec_115 of the code income of the trust must accrue to states or their political subdivisions no part of trust's net_earnings inures to the benefit of any private person in addition upon distribution or liquidation trust's remaining assets must be distributed to public school entities thus the income of the company accrues to political subdivisions of states and entities whose income is excludable from gross_income under sec_115 holdin' based on the information and representations submitted by trust we hold that the income of trust is excludable from gross_income under sec_115 except as specifically ruled upon above no opinion is expressed or implied as to the federal tax consequences of the transaction described above under any other provision of the internal_revenue_code this 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 in accordance with the provisions of a power_of_attorney currently on file we are sending a copy of this ruling letter to your authorized representative sincerely assistant chief_counsel financial institutions and products by ble mw kant alice m bennett chief branch enclosures copy of letter for sec_6110 purposes


internal_revenue_service department of the treasury index number washington dc number release date person to contact telephone number refer reply to cc dom p si br 1-plr-119151-99 date dec legend x d1 this letter responds to the ruling_request dated date which requests relief under sec_1362 of the internal_revenue_code facts x was incorporated on d1 x intended to be treated as an s_corporation for federal_income_tax purposes effective on d1 but the s election was not timely filed law and analysis sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides the rule on when an s election will be effective if an s election is made within the first two and one-half months of a corporation’s taxable_year then the corporation will be treated as an s_corporation for the year in which the election is made if the election is made after the first two and one-half months of a corporation’s taxable_year then the corporation will not be treated as an s_corporation until the taxable_year after the year in which the s election is made sec_1362 provides that if no election is made pursuant to sec_1362 or if plr-119151-99 made the election is made after the date prescribed for making such an election and the secretary determines there was reasonable_cause for the failure to timely make the election then the secretary may treat such an election as timely made for such taxable_year and effective as of the first day of that tax_year x did not file a timely election to be treated as an s_corporation under sec_1362 effective on d1 x has however established reasonable_cause for not making a timely election and is entitled to relief under sec_1362 conclusion based solely on the facts submitted and representations made and provided that x otherwise qualifies as a subchapter_s_corporation we conclude that x will be recognized as an s_corporation effective d1 within days from the date of this letter x should submit a properly completed form_2553 with a copy of this letter attached to the relevant service_center except as specifically set forth above no opinion is expressed as to the federal tax consequences of the transaction described above under any other provision of the internal_revenue_code this 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 pursuant to the power_of_attorney on file with this office the original of this letter is being sent to the taxpayer and a copy will be sent to the taxpayer’s representative signed david r haglund sincerely yours david r haglund senior technician reviewer branch office of the assistant chief_counsel passthroughs special industries enclosures copy of this letter copy for sec_6110 purposes