Court Opinion

ID: 9949468
Source: CourtListenerOpinion
Date Created: 2024-03-11 19:02:41.571356+00
Date Added: 2024-06-11T14:26:26.627782
License: Public Domain

United States Tax Court

                         T.C. Summary Opinion 2024-2

                            PATRICIA S. CHAPPELL,
                                  Petitioner

                                            v.

               COMMISSIONER OF INTERNAL REVENUE,
                           Respondent

                                      —————

Docket No. 25309-18S.                                          Filed March 11, 2024.

                                      —————

Patricia S. Chappell, pro se.

Evan K. Like and Louis H. Hill, for respondent.

                               SUMMARY OPINION

       COPELAND, Judge: This case was heard pursuant to the
provisions of section 7463 1 of the Internal Revenue Code in effect when
the Petition was filed. Pursuant to section 7463(b), the decision to be
entered is not reviewable by any other court, and this Opinion shall not
be treated as precedent for any other case.

      Petitioner, Patricia Chappell, has worked as a tax return
preparer since 1996. During tax year 2015 she operated a sole
proprietorship called Quik Tax. She had a home office in Maineville,
Ohio, and a business office in Mason, Ohio, about a 15-minute drive
away. The Internal Revenue Service (IRS) audited Ms. Chappell’s 2015
federal income tax return and determined various adjustments to the

        1 Unless otherwise indicated, statutory references are to the Internal Revenue

Code, Title 26 U.S.C. (I.R.C. or Code), in effect at all relevant times, regulation
references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all
relevant times, and Rule references are to the Tax Court Rules of Practice and
Procedure. Some dollar amounts are rounded.

                                  Served 03/11/24
                                   2

expenses she reported on her Schedule C, Profit or Loss From Business.
Specifically, the IRS disallowed $2,310 of expenses that Ms. Chappell
reported for the business use of her home, $1,299 of contract labor
expenses, $2,352 of phone expenses, and $15,385 of transportation
expenses. The Commissioner of Internal Revenue (Commissioner) has
since conceded all of the previously disallowed expenses for business use
of the home and contract labor.            We are therefore left with
Ms. Chappell’s request for us to redetermine her phone and
transportation expenses and to review the Commissioner’s
determination of a negligence penalty under section 6662(a) and (b)(1).

                              Background

       Some of the facts have been stipulated by the parties and are so
found. Ms. Chappell was a resident of Ohio when she timely filed her
Petition.

I.    Quik Tax

       Ms. Chappell began working in tax preparation when she was
hired in 1996 by her brother, Lonnie Bennett, who lived and worked in
Belpre, Ohio, about a three-hour drive from Ms. Chappell’s home in
Maineville. Ms. Chappell worked for Bennett Tax Service for two years
before opening Quik Tax in 1998. However, Ms. Chappell and
Mr. Bennett continued associating professionally and, during 2015, met
and corresponded periodically to collaborate on advertising, prepare
newsletters, attend educational seminars, and discuss tax questions.

       Ms. Chappell’s son, Chadrick Travis, worked for Quik Tax as an
independent contractor during 2015. Ms. Chappell and Mr. Travis
signed an “Independent Contractors [sic] Agreement” on January 2,
2015, specifying (among other things) that Mr. Travis agreed to “pay all
expenses incurred by [him] . . . in procuring and furnishing of the above
referenced [tax preparation] services to customers.” Ms. Chappell
compensated Mr. Travis in part by allowing him to pay certain of his
personal expenses with her credit and debit cards. Some other relatives
of Ms. Chappell also worked for Quik Tax in 2015, at least some of whom
Ms. Chappell compensated in part by allowing them use of her credit
cards for personal expenses.

II.   Business Phones

       Ms. Chappell paid a total of $3,418 to AT&T in 2015 for phone
“service charges” and “wireless equipment.” The AT&T monthly billing
                                        3

statements for these expenses listed the respective charges for each
device, but all devices were part of a single wireless phone plan with a
single monthly payment (i.e., Ms. Chappell received only one invoice
each month).

       A.      Service Charges

       The phone “service charges” related to AT&T’s billing covering
five different devices at various times during the year: (1) an Apple cell
phone for Ms. Chappell, (2) a Samsung cell phone for Mr. Travis, (3) an
iPad, (4) a tablet, and (5) a cell phone used for scheduling client
appointments. The service charges for Ms. Chappell’s Apple cell phone
were particularly high in the February–March billing cycle, when she
incurred $266 of roaming fees during a cruise in Florida with
Mr. Bennett. Other than those roaming fees, each of the five devices
had a set monthly fee that did not vary with the amount of use.

       B.      Wireless Equipment Charges

       The AT&T billing statements also included installment charges
for “wireless equipment” purchases. AT&T billed Ms. Chappell $31.25
monthly beginning in March for the purchase of a $750 Apple cell phone,
a device she used during 2015. AT&T likewise charged Ms. Chappell
$22.84 monthly beginning in June for a $685 Samsung cell phone
purchased for Mr. Travis.

III.   Business Transportation

       Beginning on March 23, 2015, Ms. Chappell used a cell phone
application called MileIQ to record most or all of her car trips during the
year. 2 She took most of these trips in her Toyota Prius. MileIQ used
GPS technology on Ms. Chappell’s phone to track starting points,
stopping points, and transit mileage. At the end of each trip,
Ms. Chappell would identify the trip as business or personal. MileIQ
then compiled this information into a spreadsheet (MileIQ log) listing
the following information for each recorded trip: date and starting time,
category (business or personal), starting and ending locations, distance

        2 Ms. Chappell did not use MileIQ or any other contemporaneous

recordkeeping for her trips between January 1 and March 22, 2015, nor did she offer
any alternative substantiation for those trips.
                                           4

(in miles), and vehicle. 3 The MileIQ log shows a total of 15,204.8 miles
driven between March 23 and December 31, 2015, of which 13,585.8
were labeled “business” and 1,619.0 “personal.”

       At some point before trial, Ms. Chappell prepared an edited
version of the MileIQ log (modified mileage log). The total number of
business miles listed in the modified mileage log is less than the
comparable figure in the MileIQ log: 11,598.2 versus 13,585.8. 4 Despite
the reduction in overall miles, 63 of the trips marked “personal” on the
MileIQ log were changed to “business” on the modified mileage log,
collectively accounting for 1,190.4 miles. The modified mileage log
includes a short “purpose” description for each trip (e.g., “Between
Offices,” “Supplies,” “Staff Recruiting,” “[Office] Location Prospecting”);
those descriptions were not recorded on the original MileIQ log.

       Ms. Chappell’s driver’s license was suspended for about six
months in the middle of 2015. For at least some of that time,
Ms. Chappell employed a driver named Melissa Wright, who drove
Ms. Chappell as a passenger in one or more vehicles and also drove those
vehicle(s) by herself at times, for instance to purchase gas.

IV.    Tax Return and Examination

      Ms. Chappell filed a Schedule C with her 2015 tax return. She
reported gross receipts for Quik Tax of $152,521 and expenses totaling
$140,768, which included (among other things) vehicle expenses of
$15,385 and utilities expenses of $20,519 (including phone expenses of
$3,360).

      After the IRS examined Ms. Chappell’s 2015 return, the
Commissioner issued a notice of deficiency dated September 28, 2018,
in which he disallowed deductions for all of her reported vehicle
expenses and $2,352 of her reported utilities expenses. 5       The

        3 The Vehicle field of the MileIQ report lists “Missing Vehicle” from March 23

through June 2 and lists “Prius” thereafter. Most of the trips tagged with “Missing
Vehicle” were taken in the Prius, but Ms. Chappell did not see the appropriate field to
enter the vehicle information into MileIQ until June 3.
       4 Ms. Chappell’s tally of business miles, listed at the top of the modified mileage

log, is 11,591.5. The Court arrived at 11,598.2 miles through its own review of the
modified mileage log.
        5 In the notice of deficiency the Commissioner also disallowed deductions for

$1,299 of her reported contract labor expenses and all expenses for business use of her
                                          5

Commissioner also determined an accuracy-related penalty under
section 6662(a) and (b)(1). The immediate supervisor of the IRS revenue
agent who made the initial determination to impose this penalty
approved that determination before its first communication to
Ms. Chappell. After concessions by the Commissioner, Ms. Chappell
requests that we increase her reported phone expenses from $3,360 to
$3,418, and she requests that $10,615 of vehicle expenses be allowed
(although she concedes that her vehicle expenses should be decreased
from $15,385).

                                    Discussion

I.     Burden of Proof

       Generally, the Commissioner’s determinations in a notice of
deficiency are presumed correct, and the taxpayer bears the burden of
proving that those determinations are erroneous. See Rule 142(a);
Welch v. Helvering, 290 U.S. 111, 115 (1933). Further, a taxpayer is
required to maintain sufficient permanent records to substantiate all
components of reported net income, including deductible business
expenses. See I.R.C. § 6001; Treas. Reg. § 1.6001-1(a). The burden of
showing entitlement to a claimed deduction is on the taxpayer. See Rule
142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). 6

       If a taxpayer clearly shows that she incurred a deductible expense
but is unable to substantiate the exact amount, the “Cohan rule” permits
the Court to estimate the amount of the expense, provided there is a
reasonable basis for doing so. See Cohan v. Commissioner, 39 F.2d 540,
543–44 (2d Cir. 1930); Vanicek v. Commissioner, 85 T.C. 731, 742–43
(1985); Goldsmith v. Commissioner, 31 T.C. 56, 62 (1958). In making an
estimate under the Cohan rule, the Court “bear[s] heavily if it chooses
upon the taxpayer whose inexactitude is of his own making.” Cohan v.

home; however, before trial he conceded those two adjustments. All of the remaining
disallowed utility expenses in the notice of deficiency relate to phone expenses;
however, the Commissioner allowed 80% of the aggregate of (1) the $70 monthly
“Mobile Share Value 6GB with Rollover Data” fee for Ms. Chappell’s multiline cell
phone plan, (2) the $25 monthly “Mobile Share Value iPhone on 4G LTE w/VVM” fee
for Ms. Chappell’s Apple cell phone, and (3) the $10 monthly “Mobile Share Value for
Tablet 4G LTE” fee for the iPad and tablet. That is, the Commissioner allowed 80% of
$105 per month, or $1,008 of phone expenses. Because Ms. Chappell claimed $3,360
in total for phone expenses, the Commissioner disallowed the remaining $2,352.
        6 Ms. Chappell does not contend, and the record does not establish, that the

burden of proof should shift to the Commissioner as to any factual issue under section
7491(a).
                                   6

Commissioner, 39 F.2d at 544. The Court may not use the Cohan rule
to estimate expenses covered by the strict substantiation requirements
of section 274(d), which apply to most transportation expenses. Sanford
v. Commissioner, 50 T.C. 823, 827–28 (1968), aff’d, 412 F.2d 201 (2d Cir.
1969).

II.   Phone Expenses

      Section 162(a) generally allows a deduction for the ordinary and
necessary expenses of carrying on a business while section 262 prohibits
a deduction for personal expenses.

       Ms. Chappell produced AT&T statements showing monthly
billing charges for phone and other wireless service during 2015. The
statements provide a breakdown of charges by device for each of
Ms. Chappell’s five devices, as well as monthly installment billing for
the Apple and Samsung cell phones used in the business in 2015, listed
on the statements as “wireless equipment” charges. Likewise, the
statements reflect the additional roaming fees incurred by Ms. Chappell
during her cruise in February.

       From the AT&T statements, Ms. Chappell created a phone
expense spreadsheet listing each of her five devices as headings across
the top and the monthly charges by device in the rows below the
heading. She then totaled these monthly amounts for the year. The
spreadsheet includes separate columns for monthly payments made and
payment dates. The spreadsheet lists $3,166 as the total billed for all
five devices in 2015 and $3,418 as the total paid. Of the $3,166 billed,
$97 (approximately two-thirds) of the 12/12/14 to 1/11/15 billing related
to the 2014 tax year and $78 (approximately one-third) of the 12/12/15
to 1/11/16 billing related to the 2016 tax year.

      A.     Ms. Chappell’s Cell Phone

       Ms. Chappell offered evidence that she used her cell phone
extensively for business purposes during tax season, including while on
the cruise. In addition, while the volume of tax work slowed during
other times of the year, it seems appropriate that she would have needed
to keep her and Mr. Travis’s cell phones, the iPad, the tablet, and the
company cell phone active all year. While her phone expense
spreadsheet did not account for personal use, pursuant to the Cohan
rule this Court can estimate the amount of deductible expenses. We
accept Ms. Chappell’s position that her cell phone use was substantial
during tax season and allow 80% of the charges for her Apple cell phone
                                            7

during tax season, which lasted roughly from January through May
2015. For the remainder of the year we will allow 50% as business
related. Accordingly, on the basis of the AT&T billing statements we
hold that the total business-related cell phone charges for her personal
phone were $1,296. This amount includes $313 of installment payments
on the phone purchase.

        B.      Mr. Travis’s Cell Phone

       Ms. Chappell provided a cell phone to Mr. Travis for Quik Tax
business use. She testified that in addition to the cell phone she paid
for on his behalf, Mr. Travis also had a personal cell phone and two work
phones during 2015. Ms. Chappell indicated that she paid for the
additional phone so that Mr. Travis could perform client tax work on her
behalf and so that she could “bypass everybody else” and always reach
Mr. Travis. We found this testimony credible. Because Ms. Chappell
provided the phone to her independent contractor for tax preparation
work, we will allow Samsung cell phone expenses of $555 incurred in
2015. 7 This amount includes $160 of installment payments made
toward the phone purchase.

        C.      Other Devices

       Ms. Chappell also provided sufficient records for us to calculate
the sum of the remaining phone expenses, relating to service for the
iPad, tablet, and appointment-scheduling phone, and certain service
charges. We therefore will allow these expenses to the extent they relate
to the 2015 tax year. Specifically, we will allow $15 for the iPad, $167
for the tablet, $161 for the appointment-scheduling phone and $55 of
service charges, a total of $398.

         7 The Commissioner would have us rule that Ms. Chappell cannot deduct the

cost of Mr. Travis’s cell phone service simply on the grounds that the Independent
Contractors Agreement specifies that Mr. Travis will “pay all expenses incurred by
[him] . . . in procuring and furnishing of the above referenced [tax preparation] services
to customers.” However, the record clearly shows that Ms. Chappell, not Mr. Travis,
made all payments on the Samsung cell phone and it is not unusual to provide cell
phones to independent contractors in order for them to speak to the business’ owner
and its clients. Accordingly, in redetermining Ms. Chappell’s income tax we look to
the charges she actually incurred and paid for, regardless of the strict terms of the
Independent Contractors Agreement.
                                          8

       D.      Wireless Equipment

       The Commissioner takes issue with the monthly AT&T billing
statement charges related to the installment purchase of the Apple and
Samsung cell phones costing $750 and $685, respectively. Again, these
costs were referred to by the parties and in billing statements as
“wireless equipment.” While such amounts might have been capitalized
under section 263(a) and Treasury Regulation § 1.263(a)-2(d), 8 they
could also have been immediately deducted under section 179. Because
Ms. Chappell is a cash basis taxpayer, we allow the monthly
installments on the Apple and Samsung cell phones (as included in the
monthly phone charges detailed above) to be deducted under section
179.

       E.      Summary of Phone and Wireless Expenses Allowed

       In sum, we will allow phone and wireless equipment expenses of
$2,249 ($1,296 + $555 + $398), rather than the $3,360 Ms. Chappell
included as a utilities expense on her return, making the downward
adjustment $1,111 rather than the $2,352 determined in the notice of
deficiency.

III.   Vehicle Expenses

       Under section 274(d), taxpayers must meet strict substantiation
requirements to deduct certain expenses under section 162, including
expenses for the use of “listed property” as defined in section 280F(d)(4),
such as passenger automobiles. To meet these strict requirements with
respect to listed property, taxpayers must substantiate by adequate
records, or by sufficient evidence corroborating their own statements,
(1) the amount of the expense, (2) the amount of total use and of business
use of the listed property during the relevant tax year, (3) the date of
each expense or use of the listed property, and (4) the business purpose
of the expense or use. See I.R.C. § 274(d); Temp. Treas. Reg. § 1.274-
5T(b)(6). 9

       8 We note that the exception under Treasury Regulation § 1.162-3 that allows

a business deduction for “materials and supplies” does not apply here, since (among
other reasons) both pieces of wireless equipment cost more than $200. See Treas. Reg.
§ 1.162-3(c)(1)(iv).
        9 Section 7805(e)(2) provides that temporary regulations expire within three

years after the date of issuance. However, that rule applies only to regulations issued
                                          9

       To substantiate vehicle expenses by way of adequate records,
taxpayers must maintain a contemporaneous log, trip sheet, or similar
record, as well as corroborating documentary evidence, to establish each
of the four required elements listed above. See Temp. Treas. Reg.
§ 1.274-5T(c)(2)(i) and (ii). In the absence of adequate records, taxpayers
may establish each required element by providing both “[their] own
statement, whether written or oral, containing specific information in
detail as to such element” and “other corroborative evidence sufficient
to establish such element.” Id. subpara. (3)(i).

       Treasury Regulation § 1.274-5(j)(2) authorizes the Commissioner
to provide an alternative, simplified method for calculating vehicle
expenses that requires neither adequate records of actual costs nor
sufficient corroborating evidence of actual costs:

       The Commissioner may establish a method under which a
       taxpayer may use mileage rates to determine the amount
       of the ordinary and necessary expenses of using a vehicle
       for local transportation and transportation to, from, and at
       the destination while traveling away from home in lieu of
       substantiating the actual costs. . . . The taxpayer will not
       be relieved of the requirement to substantiate the amount
       of each business use (i.e., the business mileage), or the time
       and business purpose of each use.

Revenue Procedure 2010-51, § 4.01, 2010-51 I.R.B. 883, 884, clarifies
that

       [a] taxpayer may use the business standard mileage rate
       (published in an annual notice) to substantiate the amount
       of a deduction for an automobile that a taxpayer either
       owns or leases. A taxpayer generally may deduct an
       amount equal to either the business standard mileage rate
       times the number of business miles traveled or the actual

after November 20, 1988. See Technical and Miscellaneous Revenue Act of 1988, Pub.
L. No. 100-647, § 6232(b), 102 Stat. 3342, 3735. Temporary Treasury Regulation
§ 1.274-5T was first issued in 1985, see T.D. 8061, 1985-2 C.B. 93, 100–09, and none of
the provisions of that regulation relied upon here has since been amended.
                                     10

       costs (both fixed and variable) the taxpayer pays or incurs
       that are allocable to traveling those business miles . . . .[10]

I.R.S. Notice 2014-79, § 3, 2014-53 I.R.B. 1001, 1001, set out a business
standard mileage rate for 2015 of 57.5 cents. Ms. Chappell asks the
Court to allow her actual vehicle expenses as business deductions or, in
the alternative, to allow a standard mileage rate deduction.

       A.     Actual Vehicle Expenses

       Ms. Chappell did not keep any records of her vehicles’ business
use percentages between January 1 and March 22, 2015, so we cannot
allow any of her reported vehicle expenses for that period in any event.
See I.R.C. § 274(d); Temp. Treas. Reg. § 1.274-5T(b)(6).

       As for the period of March 23 to December 31, Ms. Chappell
provided bank records and some receipts for her vehicle expenses and
relied on the MileIQ log and/or the modified mileage log for her business
use percentage. However, much of her offered substantiation is not
sufficiently reliable.

       Ms. Chappell’s receipts for fuel, insurance, interest on a car loan,
repairs, licensing fees, and depreciation are flawed in that several other
people had use of her debit and credit cards during 2015 and may have
made personal use of those cards. For example, Ms. Chappell’s remarks
at trial suggest that Ms. Wright may have used the cards for filling up
her personal vehicle rather than a car used for Ms. Chappell’s business
needs. If that is so, calculating the business use percentage from either
of the mileage logs, see Temp. Treas. Reg. § 1.274-5T(b)(6)(i)(B), would
not be reliable. (This business percentage is needed for prorating the
total actual vehicle costs to determine the deductible portion.)

       Moreover, the likelihood that some indeterminate portion of
Ms. Chappell’s reported vehicles costs was actually incurred for
nonbusiness uses is exacerbated by the fact that her receipts show two
or three same-day gas purchases on at least ten different days—days on
which neither of the mileage logs shows an excessive number of miles
driven. At trial, the Commissioner’s counsel confronted Ms. Chappell
with ten instances where, in the receipts she submitted to the Court, she
identified two separate purchases on the same day as having been made

       10 Revenue Procedure 2010-51 has been superseded by Revenue Procedure

2019-46, 2019-49 I.R.B. 1301. However, Revenue Procedure 2010-51 was in effect
during Ms. Chappell’s 2015 tax year.
                                          11

for fuel. (In one case the number of purported same-day fuel purchases
was three.) 11 Ms. Chappell’s records also identify a purchase for gas in
Kings Mill, Ohio, on July 9, 2015, a date when both the MileIQ log and
the modified mileage log indicate that she was in the Washington, D.C.,
area for a conference hosted by the IRS. In response to these various
incongruities, Ms. Chappell speculated that Ms. Wright may have
sometimes purchased gas using one of Ms. Chappell’s debit or credit
cards for a car owned by Ms. Wright or a third party, without
Ms. Chappell’s knowledge or permission. For these reasons we decline
Ms. Chappell’s invitation to rely on actual expenses and turn to the
standard mileage rate to determine whether vehicle expenses can be
allowed.

       B.      Standard Mileage Rate

       We hold that Ms. Chappell qualifies for a deduction using the
business standard mileage rate pursuant to Revenue Procedure 2010-
51, in lieu of actual expenses, for the period of March 23 to December
31, 2015. Such a deduction required Ms. Chappell to substantiate the
number, time, and purpose of her business miles under either the
“adequate records” standard or the “sufficient evidence” standard of
section 274(d) and Temporary Treasury Regulation § 1.274-5T(c)(2)
and (3). See Treas. Reg. § 1.274-5(j)(2). The MileIQ log was compiled
contemporaneously during the period of March 23 to December 31;
although it did not specify the exact business purpose of any of the trips
listed (the trips are identified simply as “business” or “personal”), she
produced a modified mileage log specifying a particular business
purpose for each of the business-related trips (e.g., “Supplies,” “Staff
Recruiting,” etc.). She corroborated that evidence with credible
testimony at trial.

      In addition, we can allow Ms. Chappell a standard-mileage-rate
deduction for those trips whose business purpose is self-evident from
their starting and ending points. Temporary Treasury Regulation
§ 1.274-5T(c)(2)(ii)(B) provides as follows:

       In order to constitute an adequate record of business
       purpose within the meaning of section 274(d) and this

        11 On none of these ten days does either the MileIQ log or the modified mileage

log show an unduly large number of miles. The maximum daily mileage recorded
among the ten days was 227.5. (This amount was recorded on March 29, 2015, and
was an outlier by far.) Ms. Chappell testified that her Prius had a ten-gallon fuel tank
and a fuel economy of around 40 miles per gallon.
                                    12

      paragraph (c)(2), a written statement of business purpose
      generally is required.        However, the degree of
      substantiation necessary to establish business purpose will
      vary depending upon the facts and circumstances of each
      case. Where the business purpose is evident from the
      surrounding facts and circumstances, a written
      explanation of such business purpose will not be required.

This exception applies to those trips that Ms. Chappell took between her
Maineville home and her Mason office, in light of the Commissioner’s
concession that the Maineville home office qualified as Ms. Chappell’s
principal place of business under section 280A(c)(1)(A). See Curphey v.
Commissioner, 73 T.C. 766, 777–78 (1980) (holding that commuting
expenses between a taxpayer’s home office and a business location may
be deductible if the home office is the taxpayer’s principal place of
business); Rev. Rul. 99-7, 1999-1 C.B. 361 (same). As a result, the
modified mileage log meets the “sufficient evidence” standard, even if it
did not strictly meet the contemporaneous “adequate records” standard.
We thus allow a vehicle expense deduction based on 11,598 business
miles at 57.5 cents per mile, or $6,669 (versus the $15,385 that
Ms. Chappell claimed on her 2015 return and the $10,615 that she
requested in her briefings).

IV.   Accuracy-Related Penalty

       Section 6662 imposes a 20% accuracy-related penalty on an
underpayment of tax attributable to (among other things) negligence or
disregard of rules or regulations. I.R.C. § 6662(a) and (b)(1). Negligence
includes any failure to make a reasonable attempt to comply with the
provisions of the Code, including any failure to maintain adequate books
and records or to substantiate items properly. I.R.C. § 6662(c).
Disregard includes “any careless, reckless, or intentional disregard.” Id.

      Under section 7491(c), the Commissioner bears the burden of
production regarding penalties and must come forward with sufficient
evidence indicating that it is appropriate to impose a penalty in the
absence of available defenses. Higbee v. Commissioner, 116 T.C. 438,
446–47 (2001). As we noted in Graev v. Commissioner, 149 T.C. 485,
493 (2017), supplementing and overruling in part 147 T.C. 460 (2016),
one part of this burden is to show compliance with section 6751(b)(1),
which provides that “[n]o penalty . . . shall be assessed unless the initial
determination of such assessment is personally approved (in writing) by
the immediate supervisor of the individual making such determination.”
                                    13

Here, the parties have stipulated facts and documents substantiating
that the Commissioner met the supervisory approval requirement with
respect to his determination of the penalty under section 6662(a) and
(b)(1).

       We next note that Ms. Chappell was at least careless in claiming
deductions, without adequate substantiation or records, for the full cost
of her cell phone service and for her actual vehicle costs. See I.R.C.
§ 6001 (providing that taxpayers “shall keep such records . . . as the
Secretary may from time to time prescribe”); Treas. Reg. § 1.6001-1(a)
(providing that taxpayers “shall keep such permanent books of account
or records . . . as are sufficient to establish the amount of gross income,
deductions, credits, or other matters required to be shown by such
person in any return of such tax or information”).

       Section 6664(c)(1) grants an exception to a penalty under section
6662 “if it is shown that there was a reasonable cause for such portion
[of an underpayment of tax] and that the taxpayer acted in good faith
with respect to such portion.” The determination as to whether a
taxpayer acted with reasonable cause and in good faith is made on a
case-by-case basis, considering all pertinent facts and circumstances.
Treas. Reg. § 1.6664-4(b)(1). Generally, the most important factor in
determining the existence of reasonable cause is the taxpayer’s effort to
ascertain her correct tax liability. Id. Circumstances that may signal
reasonable cause and good faith include an honest misunderstanding of
fact or law that is reasonable in light of all the facts and circumstances,
including the experience, knowledge, and education of the taxpayer. Id.

       Ms. Chappell contends that she qualifies for a reasonable cause
exception because in 2015 she was caring for her elderly disabled mother
and was herself suffering from a painful tumor. Additionally, her
daughter passed away in November 2015 after a period of injury and
infection beginning in 2014, leaving Ms. Chappell to care for her four
grandchildren while grieving for her daughter.

       We sympathize with Ms. Chappell’s personal difficulties in 2015.
However, she testified that during that year she continued to run a
vibrant tax preparation business, make multiple business trips almost
every day, and work up to 12 hours a day. This Court has consistently
held that taxpayers dealing with personal or family illness, incapacity,
or death do not qualify for a reasonable cause exception if they were able
to continue their business affairs during the relevant period. See, e.g.,
Judge v. Commissioner, 88 T.C. 1175, 1189–91 (1987); Hardin v.
                                  14

Commissioner, T.C. Memo. 2012-162, 103 T.C.M. (CCH) 1861, 1862;
Ruggeri v. Commissioner, T.C. Memo. 2008-300, 96 T.C.M. (CCH) 511,
513 (collecting cases). Moreover, Ms. Chappell was almost surely
familiar with the substantiation requirements for business deductions,
given her professional experience as a tax preparer. Therefore, we hold
Ms. Chappell liable for an accuracy-related penalty under section
6662(a) and (b)(1).

       We have considered all of the arguments made by the parties and,
to the extent they are not addressed herein, we find them to be moot,
irrelevant, or without merit.

      To reflect the foregoing,

      Decision will be entered under Rule 155.