this opinion appears as amended by order dated july tcmemo_1999_131 united_states tax_court ralph louis vitale jr petitioner v commissioner of internal revenue respondent docket no filed date ralph louis vitale jr pro_se william j gregg and judith c cohen for respondent memorandum findings_of_fact and opinion fay judge respondent determined deficiencies in peti- tioner's and federal income taxes in the respective amounts of dollar_figure and dollar_figure and accuracy-related_penalties -2 - under sec_6662 in the respective amounts of dollar_figure and dollar_figure the issues for decision are whether petitioner was in the trade_or_business of being an author during the years in issue if so whether expenses that petitioner incurred are deductible as ordinary and necessary under sec_162 and whether he has adequately substantiated under sec_274 his travel_expenses and whether petitioner is liable for penalties for negligence or substantial_understatement of tax under sec_6662 in the notice_of_deficiency respondent disallowed petitioner's medical_expense_deduction for because of the increase in the amount of adjusted_gross_income determined the correctness of this adjustment depends upon our resolution of the issues stated above findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and second stipulation of facts together with the exhibits attached thereto and exhibits offered ‘all section references are to the internal_revenue_code in effect for the taxable years in issue and all rule references are to the tax_court rules_of_practice and procedure unless otherwise indicated although respondent did not raise the substantiation issue under sec_274 in the notice_of_deficiency or in the pleadings it was tried by both parties and without objection by petitioner see rule b at trial are incorporated herein by this reference petitioner resided in arlington virginia when he filed his petition petitioner holds a bachelor's degree in marketing and adver- tising from the university of maryland towards completion of that degree he earned more than credit hours of study in english journalism and speech petitioner worked hours per week for the u s department of the treasury hereinafter treasury as a budget analyst until date when he retired after more than years_of_service he had been employed at a gs-12 pay grade as part of his job he was reguired to write budget justifications procedures and other written material by applying professional level writing ability to create high quality written work in an office staffed mostly by this describes one of the six critical elements of peti- tioner's job as a budget analyst at the u s department of the treasury ina report of petitioner's performance for the period jan to date he was given a rating of outstanding in meeting this element the level of performance required for an outstanding rating exceeds the requirements for an excellent rating a rating of excellent was described in the report as follows writes budget justifications statistical reports procedures guidelines and other written materials in a manner that is clear concise and correct particu- lar attention must be given to grammar spelling etc the written product must be able to communicate ideas in an effective manner demonstrates a special talent for writing narratives ideas are concise and clear in their presentation as indicated by few follow-up questions being asked by recipients grammar and spelling are excellent paragraphs and sentences are continued accountants petitioner was often the one delegated to perform writing-based tasks such as contributing to the federal managers' financial integrity act report in which agencies evaluate their internal control and accounting systems at some point during his employment petitioner also served as editor of an in-house newsletter of the treasury in approximately years before petitioner became eligible to retire he began writing outside of his full-time job at trial petitioner testified that he was fearful of the concept of retirement and began writing in with the hope of making it his second career the first book-length manuscript he began writing was a fictional piece titled lightning at dawn later that same year petitioner wrote a collection of short stories called boys and girls together before marketing these manuscripts for publication petitioner had an idea for another book-a story about the experiences of two men who travel cross-- country to patronize a legal brothel in nevada in early continued correctly structured works independently in drafting all material and seeks guidance only when goals have changed the employee's success at this level is also measured in the ability of justifications to be well received and acted upon no more than revision is required for the finished product emphasis added by signing the report petitioner acknowledged its contents including the mark of outstanding that he received for his writing ability on the job - petitioner wrote an big_number word draft of this basic story line which he submitted for copyright protection in june in order to authenticate the story and develop characters for the book petitioner visited numerous legal brothels in nevada by acting as a customer for prostitutes in a journal describing his experiences at the brothels petitioner recorded the brothels he visited the dates and sometimes the hours of his visits the prostitutes he met and the amount of cash he paid each one for each entry petitioner wrote about his visit with the prostitute and about the happen- ings at brothels in general for example he described the manner in which he selected her the house rules of the brothel the manner in which he negotiated a price for her time their dialogue and the type of clothing worn by her he also included personal information on the prostitute including her age physical characteristics city or state of residence religious background ethnicity level of education and the name and age of her offspring if any the journal indicates that at some point during these meetings petitioner told the prostitutes that he was writing a book about nevada's legal brothels and that he wished to use them as characters in his book the journal shows that during petitioner spent on average days per month petitioner's two previous works lightning at dawn and boys and girls together were also copyrighted in -6- except during the months of february may and december meeting with prostitutes at the brothels using the material that he gathered during these meetings hereinafter sometimes referred to as interviews petitioner produced a manuscript called searchlight nevada which he submitted for publication on date petitioner entered into an agreement for its publication with northwest publishing inc northwest in pertinent part the agreement provided that petitioner was to pay northwest dollar_figure to publish big_number copies of his book -before submitting his manuscript to northwest publishing inc northwest petitioner consulted writer's market '93 a publication describing various publishers in it northwest is described as a book publisher that publishes hardcover trade paperback and mass market originals and reprints publishes titles year receives queries and manuscripts year of manuscripts from first-time authors from unagented writers pays royalty on retail price publishes book months after acceptance of manuscript ‘in a letter to petitioner confirming receipt of this pay- ment rick devey the marketing director of northwest described it as a joint-venture payment in another letter to peti- tioner jim perkins northwest's operations officer explained that the payment you made of dollar_figure your share of the joint_venture represents approximately one fourth of the total cost_of_producing and marketing ten thousand copies of your book _7- of the big_number copies printed northwest would a give free copies to petitioner b give away copies to major bookstores and book reviewers c sell big_number copies through its test market program and d sell the remaining books in the retail marketplace petitioner would be paid of the retail amount of each book sold through the test market program anda royalty equal to of the retail price of any remaining books sold to bookstores and wholesalers northwest was to pay royalties on january and july of each year along with interest penalties for late payments northwest was to do a certain amount of sales promotion advertising and publicity and northwest was to have exclusive rights to the book representatives of northwest had told petitioner that his book would probably earn him at least dollar_figure in royalties searchlight nevada was published by northwest and released in date at a retail price of dollar_figure the book i sec_131 pages long and has an international standard book number it was available for immediate purchase at barnes noble book- sellers in boynton beach florida and falls church virginia and at super crown books store the book could also be oe purchased by special order at borders books and music in baileys crossroads virginia prior to the book's being released petitioner played an active role in all stages of its publication in after reviewing the first galley proofs petitioner inquired about adding two additional chapters to the novel then by letter dated date petitioner made detailed suggestions for the book's cover design and attached pictures of how he thought the characters on the cover should look petitioner closed the letter with the following words any additional assistance i can provide will be done gladly i realize that the cover design is as important as the story on the inside it doesn't matter if the story is good if we fail to motivate the reader into purchasing sic the book perhaps with our joint_venture on searchlight nevada we can adda hot seller to northwest's catalog i'd like us to sell over big_number copies petitioner also actively participated in the promotion of his book ’ he provided northwest's public relations department with mailing lists and telephone numbers of bookstores news-- papers magazines and radio and motion picture companies petitioner on his own mailed about complimentary copies of ‘a marketing plan distributed by northwest to its authors advises that the more effort you are willing to put forth in promoting your book the more successfully your book will sell -9- his book along with individualized letters to bookstores newspapers magazines and hotels he worked with a marketing expert at northwest to get his book stocked by distributors and to set up book signings at major bookstores when petitioner was unhappy with the contents of his press release he rewrote it and sent his changes to northwest moreover when petitioner became dissatisfied with northwest's marketing efforts he wrote a letter demanding that the publishing company comply with the terms of its agreement by letter dated date northwest's account executive informed petitioner that big_number copies of his book had been ordered and shipped and that another big_number copies had been ordered by the books by millions chain the letter also stated that northwest's royalty statements would be mailed in approxi- mately weeks on his federal_income_tax return peti- tioner reported dollar_figure in gross royalties from his writing activity in late after petitioner had signed an agreement with northwest to have searchlight nevada published he began research on another book nevada nights san joaquin dawn he wanted to document the difficulties that women face in their attempt to break free from a life of prostitution because as ‘the letter failed to identify who placed the order s for these books or to whom they were shipped --10- the story's never been done before to any degree of authentic-- ity he thought it commercially viable after discovering that the rooms at the brothels were equipped with listening devices he began meeting the women at other locations on out calls which he paid for by personal credit card in during the months of january february april may june and july peti- tioner spent anywhere from to days per month in nevada on out calls with prostitutes he successfully encouraged prosti- tutes to leave their profession as of the trial date peti- tioner had not yet completed nevada nights san joaquin dawn some time after a contract had been signed for the publica- tion of searchlight nevada petitioner submitted another manuscript to northwest for consideration ie lightning at dawn which was about pages in length he was under the impression that northwest required a joint_venture payment for first novels only and that if northwest agreed to publish lightning at dawn he would have to pay nothing petitioner also attempted to market boys and girls together but he ceased his efforts when he was told that there was no need or market for short stories at that time on date months after searchlight nevada had been on the market northwest filed for bankruptcy protection ’ northwest filed for reorganization under ch of the u s continued --11- the corporation had been the subject of a continuing investiga- tion by state authorities on date petitioner filed a proof_of_claim with the u s bankruptcy court for the district of utah in the amount of dollar_figure for unpaid royalties and breach of contract after securing the return of his rights in searchlight nevada petitioner began soliciting other publishing houses to have his book published a second time petitioner received several responses including a request by the president of regnery publishing inc and an invitation by the editor-in- chief of farrar straus giroux inc to submit his manuscript for review he also began to send letters to literary agents soliciting their interest in his book at the time of trial petitioner had since rewritten parts of searchlight nevada and had sent his revised manuscript to paladin press of boulder colorado at its request petitioner also received a letter from continued bankruptcy code the bankruptcy court had since converted the case to a ch liquidation titerary agents act on behalf of authors to get publishers to buy the rights to their clients' works in exchange agents usually collect a commission based on what the author earns from his work's eventual sales petitioner did not engage a literary agent for the first publication of searchlight nevada instead he chose to study the book market and identify publishers which he thought might be interested in his work for the book's second publication though petitioner did attempt to have an agent represent him --12 - neal sperling a hollywood script agent requesting that he submit a plot summary of his book for consideration as a made- for-television movie or feature film petitioner is presently a member of washington independent writers the authors guild poets and writers and writers market book club during the years in issue petitioner spent approximately hours per week on his writing activity apart from that activity petitioner reported the following income on his federal_income_tax returns wages dollar_figure dollar_figure dividend income big_number big_number state local_tax refund capital_gain loss big_number big_number total big_number big_number in petitioner began treating his writing activity as a trade_or_business from that year on he began filing a schedule c profit or loss from business in which he listed his princi- pal business or profession as author as of the date of trial petitioner's writing activity had not resulted in a profit for any year as reflected in the following table year net_loss dollar_figure big_number big_number big_number --13- for the years in issue petitioner reported no income from his writing activity but claimed the following as deductible expenses on his schedules c advertising -- dollar_figure commissions and fees sec_40 office expense supplie sec_150 --- travel big_number big_number meals and entertainment big_number utilities -- other expenses big_number big_number total big_number big_number for the item denominated other expenses consists of a dollar_figure joint_venture payment to northwest and dollar_figure in cash payments to prostitutes for other expenses consist of the following dollar_figure for the purchase of a computer supplies and furniture dollar_figure for mailing expenses dollar_figure for membership dues dollar_figure for credit card expenses on out calls dollar_figure for tuition and books dollar_figure for sponsoring a race car team and dollar_figure for miscellaneous other expenses petitioner's travel and meal deductions include expenditures_for airfares rental car expenses food and lodging in petitioner filed two amended returns form sec_1040x for tax_year one on date and the other on date bach amended_return had a new schedule c attached in which petitioner adjusted the amount of expenses that he claimed in connection with his profession as an author the figures for represented in the table reflect the schedule c expenses on the amended_return filed date -14- connection with his travels to nevada for the years in issue the record contains documentary_evidence of petitioner's travel and meal expenses ie airline tickets and travel schedules and hotel restaurant rental car and credit card receipts with respect to petitioner's interviews he characterized the amounts he paid to the prostitutes as business related depending upon whether information gleaned from the interviews was used in his books petitioner has personal credit card receipts for supporting the expenditures he incurred to interview prostitutes away from the brothels petitioner does not have receipts of his cash expenditures in for the interviews that took place at the brothels nor does petitioner have records supporting his deductions for advertising commis-- sions and fees office expenses supplies utilities or those expenses comprising other expenses for with the exception of the interviews around the time of the parties' preparation of a stipulation of facts petitioner prepared a five-page reconstruction of his expenditures using information reflected on airline tickets and itineraries hotel and rental car bills credit card receipts and petitioner's own memory this included summary statements for and a flight log and a log of his interviews in the notice_of_deficiency respondent disallowed under sec_162 and sec_183 all of the expenses claimed on petitioner's --15- schedules c for the years in issue because it has not been shown that petitioner either started a trade_or_business or entered into an activity for profit nor has he estab- lished that any amount was for an ordinary and necessary business_expense opinion sec_162 generally allows a deduction for all ordinary and necessary business_expenses paid_or_incurred during the taxable_year in carrying on any trade_or_business to be engaged in a trade_or_business within the meaning of sec_162 the taxpayer must be involved in the activity with continuity and regularity and the taxpayer's primary purpose for engaging in the activity must be for income or profit 480_us_23 we are satisfied that petitioner's writing activity was conducted with continuity and regularity during the years in issue nevertheless in order for an activity to be considered a trade_or_business within the meaning of sec_162 a taxpayer must conduct the activity with the requisite profit_motive or intent see id petitioner argues that he engaged in his writing activity with the intent to make a profit and that his schedule c expenses for tax years and were ordinary and necessary to his endeavor as an author respondent does not dispute that amounts -1 were in fact expended but rather contests their deductibility respondent maintains petitioner was not engaged in the trade_or_business of being an author and accordingly expenses_incurred for the writing and publication of one of his books are not business_expenses deductible under sec_162 rather he argues they are deductible only to the extent of the income derived from the activity under sec_183 ' alternatively if the activity is found to have been entered into for profit respondent asserts that the claimed expenses were not properly deductible as ordinary and necessary under sec_162 and that certain expenses were not adequately substantiated under sec_274 at trial respondent conceded that with respect to sec_274 the only element of substantiation lacking in this case is business_purpose petitioner bears the burden of proving by a preponderance_of_the_evidence that he was engaged in writing for profit rule a the test of whether a taxpayer engaged in an activity for profit is whether he entered into or continued the activity with an actual and honest objective of making a profit see 78_tc_642 affd without 25ec was enacted to codify the distinction between a business and a hobby and to prohibit a taxpayer from obtaining a loss from an activity considered to be a hobby which was then used to offset other income see s rept pincite 1969_3_cb_423 --l17- opinion 702_f2d_1205 d c cir although the taxpayer's expectation of profit need not be reasonable it must be bona_fide as determined from all the surrounding facts and circum-- stances see 94_tc_41 dreicer v commissioner supra pincite thus whether the requisite profit_motive exists is a factual question that must be determined upon the record see 63_tc_375 with more weight given to objective facts than to petitioner's statement of intent see 72_tc_659 sec_1_183-2 income_tax regs the treasury regulations list nine factors as an aid in making the profit objective determination they include the manner in which the taxpayer carried 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 the assets used in the 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 loss with respect to the activity the amount of occasional profits that are earned the financial status of the taxpayer and whether elements of personal pleasure or recreation are involved no one factor is conclu- sive and we do not reach our decision herein by merely counting --18- the factors that support each party's position see sec_1 b income_tax regs moreover certain factors are given more weight than others because they are more meaningfully applied to the facts in this case respondent concedes that the fourth element the expectation that assets used in the activity may appreciate in value is inapplicable to the present case taking into account the above factors and considering the record as a whole we conclude that during the years in issue petitioner had a bona_fide intention to derive a profit from his writing activity in addition to petitioner's testimony which we found to be credible and forthright the evidence in the record shows an intent and effort by petitioner to engage in and continue in the writing field with the purpose of producing income and a livelihood we first look to the manner in which petitioner carried on the activity petitioner managed some aspects of this activity in a businesslike fashion he kept bills receipts and sched- ules for his traveling expenses and he kept a contemporaneous journal to substantiate cash expenditures that he incurred to interview prostitutes at the brothels for which receipts were not available petitioner was able to use his records including credit card statements to compile logs for and showing his travel dates the dates times and places of his interviews the names of the prostitutes he interviewed the per -1 q- hour charges he negotiated and his method of payment while petitioner may not have kept a separate checking account or a well-organized set of books he did attempt to keep an accurate account of the expenses he incurred to research his books ' the record also indicates that after signing a contract for the publication of searchlight nevada petitioner made concerted efforts to promote his book he took steps to gain maximum personal benefit from northwest by working closely with its public relations department to ensure that his book was widely advertised and readily available in bookstores petitioner then supplemented northwest's efforts by adopting various methods of his own while at the same time remaining active as an author by writing other manuscripts furthermore when northwest filed for bankruptcy protection petitioner did not abandon his writing activity rather he sought the return of his rights in searchlight nevada and began an extensive search for a new publisher he had rewritten and revised his manuscript in an effort to make it more salable to the public and thus more attractive to prospective publishers as an alternative marketing technique petitioner also made attempts to engage a literary agent in sum although petitioner could have been more 3a comparison of petitioner's journal entries to the contents of searchlight nevada reveals that indeed the book is based almost entirely on real people and events - organized in keeping track of his expenditures his efforts to make a financial success of hiss writing activity show a profit objective the fact that petitioner did not seek expert advice on how to start or maintain a business as a fiction writer does weigh against his argument that he carried on the activity ina businesslike manner while petitioner had writing skills it appears that they were mainly in the technical field of budget analysis however it is important to consider that petitioner used his writing skills extensively in his job at treasury where he worked for more than years moreover by virtue of his job assignments and performance rating petitioner was led to believe that writing was his strong point although his success at treasury is not a reasonable predictor of his success as a fiction writer his prior writing experience is not unrelated to his anticipated performance as a writer in another field we also note that petitioner has a bachelor's degree in marketing and advertising which suggests that he has more than a basic familiarity with the business side of his writing activity it is apparent from the record that petitioner took great interest in the commercial aspects of his endeavor the third factor in the regulations focuses on the time and effort expended by the taxpayer in carrying on the activity there is little guestion that during the years at issue - petitioner spent numerous hours per week on his writing activity i1 e doing research writing manuscripts soliciting publishers and conferring in the early stages of publication respondent emphasizes that petitioner worked hours per week as a budget analyst and suggests that his writing activity could not rise to the level of a trade_or_business because he also had a full-time job we disagree with respondent petitioner's employment at treasury does not preclude the possibility that his writing activity constituted a separate trade_or_business we have recognized that a taxpayer may engage in more than one trade_or_business at any one time see 74_tc_525 affd without published opinion 681_f2d_805 3d cir 16_tc_332 it is also well settled that the term trade_or_business includes the arts 674_f2d_1359 10th cir furthermore as we stated in dickson v commis-- sioner tcmemo_1986_182 taxpayer's maintaining a full- time job in addition to his profit-seeking activities is a positive factor reflecting his motivation rather than respon- dent's attempt at negative inference from the fact that peti- tioner devoted time to other activities the fifth factor the success of the taxpayer in carrying on other similar or dissimilar activities does not influence our analysis because petitioner has not previously engaged in a -22 -- writing activity we accept petitioner's testimony at trial that he was best known at treasury for his writing ability and that he was often called upon to perform writing-based tasks this may have contributed to petitioner's belief that he could make money as an author moreover we are convinced that petitioner viewed his agreement with northwest as offering a real potential for generating profit the next two factors the taxpayer's history of income or losses with respect to the activity and the amount of occasional profits if any which are earned are examined in tandem respondent argues that petitioner's continuous record of losses from his activity is persuasive evidence that he was not engaged in this activity for profit petitioner argues that while his efforts as an author have not proved profitable up to this time his hard work will be rewarded with substantial income when his search for a new publisher proves successful it is undisputed that petitioner did report a loss in each year of operation however there are two important facts in this case which should be considered with respect to these losses first sec_1_183-2 income_tax regs states that losses_incurred during the startup phase of a business are not necessarily indicative of a lack of profit_motive because petitioner did not begin treating his writing activity as a trade -23- or business until the tax years in issue mark the initial stages of his activity a significant amount of petitioner's total deductions for and were travel_expenses which he incurred to collect material for his books now that such material has been amassed and incorporated in the manuscripts petitioner as a published author expects his writing activity to be profitable to remedy the unforeseeable circumstance of his publisher's going bankrupt petitioner has demonstrated that he has ideas and plans for future publications which would enable him to recoup not only his expenses but also to make a profit see 72_tc_411 the goal must be to realize a profit on the entire operation which presupposes sufficient net_earnings to recoup the losses quoting 45_tc_261 affd 379_f2d_252 2d cir affd without published opinion 647_f2d_170 9th cir second these losses should be viewed in the context of the nature of petitioner's activity works of fiction are difficult to write and to market we are persuaded by petitioner's state- ment that first-time authors are not normally offered cash advances it is not surprising then that for the first years of his writing activity petitioner sustained losses this advances are payments to an author before publication - 4a-- field appears to pay large amounts of money to those who succeed in it and an opportunity to earn a substantial ultimate profit in a highly speculative venture is ordinarily sufficient to indicate that the activity is engaged in for profit even though losses or only occasional small profits are actually generated sec_1_183-2 income_tax regs likewise we are not inclined to give much weight to the seventh factor the amount of occasional profits if any that are earned because only the first years of petitioner's writing activity are in issue respondent argues that the next factor the financial status of the taxpayer negates petitioner's profit_motive because his independent sources of income are such that the writing activity generated tax benefits for him we disagree with respondent we do not believe that petitioner's income was so high as to make tax savings his primary objective we also do not find it unlikely that petitioner aware of his upcoming retirement and of the change in his pre and postretirement income would choose to embark on something new no doubt the fact that he began his writing activity during his preretirement years contributed to his ability to try his hand at it nothing in the record however indicates that writing then became a hobby for him rather we find it clear from his testimony and from the objective evidence that petitioner was a writer who desired success and who intended to make a profit from his work -2 the last factor looks to elements of personal pleasure or recreation it is obvious that petitioner enjoyed writing and derived personal satisfaction in helping prostitutes seek a new way of life nevertheless 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 sec_1_183-2 income_tax regs petitioner has succeeded in proving that he engaged in his writing activity with a profit objective there are admittedly some factors in this case which indicate the absence of a profit_motive petitioner has a history of losses he did not seek any expert advice and arguably there is a recreational element in his writing these factors however are outweighed by the facts demonstrating that petitioner did engage in writing for profit and though his writing venture may have been speculative and his expectation of profit unreasonable that alone does not preclude us from finding that petitioner was in the trade_or_business of being an author during the years before us respondent next asserts that for and peti- tioner's claimed expenses were not ordinary and necessary -- business_expenses ’ sec_162 allows a deduction for all ordinary and necessary expenses_incurred in carrying_on_a_trade_or_business whether an expense is deductible under sec_162 is ultimately a question of fact see 320_us_467 an ordinary_and_necessary_expense is one which is appropriate or helpful to the taxpayer's business and which results from an activity which is a common and accepted practice see 77_tc_1124 affd by order 9th cir no deduction however is allowed for personal living or family_expenses even if related to one's occupation see sec_262 55_tc_320 affd 454_f2d_399 7th cir deductions are strictly a matter of legislative grace and petitioner bears the burden of providing supporting evidence to substantiate the claimed deductions see rule a 503_us_79 a taxpayer must keep sufficient records to establish their amount see sec_6001 except in the case of expenses subject_to sec_274 if the taxpayer's records are inadequate or there are no records the tax_court may still allow a deduction based on a reasonable estimate see 39_f2d_540 2d ‘respondent makes no claim that these amounts if otherwise allowable must be capitalized rather than deducted currently - cir provided the taxpayer establishes that he is entitled to some deduction see 245_f2d_559 5th cir 85_tc_731 in making an estimate the court may bear heavily against the taxpayer whose inexactitude is of his own making cohan v commissioner supra pincite on his schedules c for the years in issue petitioner claimed deductions for advertising commissions and fees office expense supplies and utilities petitioner presented no proof such as bills receipts or canceled checks or offered any testimony to establish that he incurred these expenses the record does show however that during and petitioner completed one manuscript and submitted it for publication the court is satisfied that petitioner incurred office expenses in this respect applying cohan v commissioner supra and bearing heavily against petitioner we allow an office expense deduction of dollar_figure for each of the years in question petitioner is not entitled to deductions for advertising commissions and fees supplies and utilities for and petitioner claimed other expenses not included above in the amounts of dollar_figure and dollar_figure respectively for and ‘ sec_280a limits the deductibility of expenses of a home_office respondent however did not raise the applicability of that section we therefore do not consider it -2 the amount for consists of a joint_venture payment to northwest and cash payments to prostitutes at nevada's legal brothels petitioner produced a canceled check reflecting his payment to northwest and a contemporaneous journal supporting his deductions for amounts paid to prostitutes to research his book the amount for consists of a variety of expenses for which petitioner has provided no documentary or testimonial evidence with the exception of his expenses to interview prostitutes on out calls which he substantiated by personal credit card receipts we allow petitioner to deduct the joint_venture payment of dollar_figure for however no deduction is allowed for the interview expenses we find that the expenditures incurred by petitioner to visit prostitutes are so personal in nature as to preclude their deductibility in evaluating whether certain expenses are personal or qualify as business_expenses under sec_162 the court has found that some expenses are so inherently_personal that they almost invariably are held to come within the ambit of sec_262 ’ fred w amend co v commissioner supra all the other items constituting other expenses for and are disallowed for lack of sub- stantiation sec_262 provides that no deduction shall be allowed for personal living or family_expenses -- q- respondent next asks us to find that petitioner has not adequately substantiated under sec_274 his travel_expenses sec_274 overrides the cohan doctrine with respect to expenses of travel away from home including meals_and_lodging see 50_tc_823 affd per curiam 412_f2d_201 2d cir sec_1 5t a temporary income_tax regs fed reg date a taxpayer must substantiate the amount time place and business_purpose of the expenditures using adequate_records or sufficient evidence corroborating his own statement see sec_1_274-5t temporary income_tax regs fed reg date respondent conceded at trial that petitioner substantiated the amount time and place but not the business_purpose of his travel_expenses in view of our holding that petitioner's inter- view expenses are nondeductible personal expenses we find that his trips to nevada served a dual purpose this dual purpose warrants an allocation of travel_expenses between business and nonbusiness use while the evidence in this case does not permit an exact allocation there is a basis for some allowance-if necessary by drawing upon petiitoner’s own method of allocating his interview expenses petitioner characterized the money he paid to prostitutes as business related if he incorporated the material from the interviews in his book according to - petitioner’s figures approximately three fifths of the total amount that he paid for interviews was deducted as business_expenses although the court disallows any part of these interview expenses we find that petitioner’s allocation might well apply in determining the portion of his travel_expenses attributable to business accordingly for and we allow petitioner to deduct three fifth of his claimed travel_expenses including meals_and_lodging under sec_274 we sustain respondent’s disallowance of the claimed deductions to the extent of two fifths thereof finally under sec_6662 respondent determined that petitioner was liable for a negligence_penalty for anda substantial_understatement_of_income_tax_penalty for as relevant herein sec_6662 imposes an accuracy-related_penalty equal to percent of any underpayment that is attributable to negligence or a substantial_understatement_of_income_tax an underpayment for purposes of this section is essentially the same as a deficiency compare sec_6664 with sec_6211 although the instant case presents many issues the only one giving rise to respondent's determination of penalties under sec_6662 relates to whether petitioner properly deducted expenses that he incurred while writing books negligence under sec_6662 is the lack of due care or failure to do what a reasonable and ordinarily prudent person -31- would do under the circumstances see 85_tc_934 it includes the failure to make a reason- able attempt to comply with the internal_revenue_code see sec_6662 in claiming deductions for expenses related to his writing activity petitioner has failed to establish his entitlement to certain expenses on the basis of the record though we are satisfied that petitioner's underpayment for was not due to negligence but rather solely to an honest misunderstanding of the law petitioner has demonstrated that he made a reasonable attempt to comply with the internal revenue laws he had sought the advice of internal_revenue_service representatives and of professional tax preparers on how to deduct expenses_incurred as an author petitioner was a credible witness and it 1s our opinion that he acted reasonably and in good_faith for these reasons we decline to impose the negligence_penalty for for the deficiency_notice determined an accuracy- related penalty against petitioner for the substantial under- statement of income_tax respondent did not pursue the matter at the trial or on brief and we presume that respondent has aban- doned it accordingly we hold for petitioner on this issue to reflect the foregoing decision will be entered under rule