Court Opinion

ID: 4339530
Source: CourtListenerOpinion
Date Created: 2018-11-14 04:29:37.192169+00
Date Added: 2024-06-11T14:47:14.382052
License: Public Domain

VLADIMIR GOROKHOVSKY, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, RespondentGorokhovsky v. Comm'rDocket No. 24015-10United States Tax CourtT.C. Memo 2013-65; 2013 Tax Ct. Memo LEXIS 79; 105 T.C.M. 1419; February 28, 2013, FiledGorokhovsky v. Comm'r, T.C. Memo 2012-206, 2012 Tax Ct. Memo LEXIS 208">2012 Tax Ct. Memo LEXIS 208 (T.C., 2012)2013 Tax Ct. Memo LEXIS 79">*79 Decision will be entered under Rule 155.Vladimir Gorokhovsky, Pro se.Frederic J. Fernandez and Mark J. Miller, for respondent.GOEKE, Judge.GOEKEMEMORANDUM FINDINGS OF FACT AND OPINIONGOEKE, Judge: Respondent determined deficiencies and accuracy-related penalties under section 6662(a)1 for petitioner's taxable years 2006, 2007, and 2008 as follows:*66 YearDeficiencyAccuracy-related penalty sec. 6662(a)2006$55,153$11,030.60200789,56717,913.40200855,93811,187.60The deficiencies stem from respondent's disallowance of various expenses and costs of goods sold petitioner reported on his Schedule C, Profit or Loss From Business, for each of the years at issue. Respondent also adjusted petitioner's income to account for certain alleged unreported items of income for each of the years at issue. We must determine: 2(1) whether petitioner may deduct Schedule C expenses, related to his law practice, of $132,162, $145,536, and $112,164 for taxable years 2006, 2007, and 2008, respectively. 32013 Tax Ct. Memo LEXIS 79">*81  We hold that petitioner may deduct some of those expenses;*67  (2) whether petitioner may deduct Schedule C expenses related to his then wife's sale of skin care products 4 of $4,477 and $4,018 for taxable years 2006 2013 Tax Ct. Memo LEXIS 79">*80 and 2007, respectively. We hold that he may not;(3) whether petitioner may deduct Schedule C depreciation related to his import-export business, Gorokhovsky Imports, of $7,807 and $7,863 for taxable years 2006 and 2007, respectively. We hold that he may not;(4) whether petitioner failed to report gross receipts from his law practice of $40,894, $122,425, and $88,779 for taxable years 2006, 2007, and 2008, respectively. 5 We hold that petitioner failed to report some of those receipts;(5) whether petitioner failed to report interest income of $5, $4, and $49 for taxable years 2006, 2007, and 2008, respectively. We find that respondent conceded this issue on brief; and,(6) whether petitioner is liable for accuracy-related penalties under section 6662(a) for taxable years 2006, 2007, and 2008. We hold that petitioner is so liable.*68  FINDINGS OF FACTAt the time petition was filed, petitioner resided in Wisconsin.Petitioner, an attorney since 2002, has maintained a solo practice in Wisconsin and the Northern District of Illinois. Specializing in criminal defense and aviation law, petitioner practices out of an office subleased from a law firm in Milwaukee, Wisconsin, and, purportedly, in a home office in Mequon, Wisconsin. He also maintains a condominium in Chicago which he uses primarily to facilitate his Federal law practice in a nearby Federal court. In addition to his law degree, petitioner has undergraduate degrees in accounting and business administration.During the years at issue petitioner was married to Larissa Ocheretner. 2013 Tax Ct. Memo LEXIS 79">*82 Ms. Ocheretner allegedly operated a skin care product business in 2006 and 2007. Petitioner managed his import-export business, Gorokhovsky Imports, during those two years as well.Petitioner filed his taxable year 2006 and 2007 returns with three separate Schedules C: the first (Schedule C1) related to Gorokhovsky Imports; the second (Schedule C2) related to his law practice; and the third (Schedule C3) related to Ms. Ocheretner's skin care product business. Petitioner filed his taxable year 2008 return with only a Schedule C2.*69  I. Schedule C1—Gorokhovsky ImportsOn petitioner's 2006 and 2007 Schedules C1, he claimed depreciation and cost of goods sold deductions for his import business in the following amounts:Item20062007Depreciation and sec. 179 expense deduction$807$527Cost of goods sold7,0007,336Respondent disallowed all petitioner's claimed deductions.II. Schedule C2—Petitioner's Law PracticeIn connection with his law practice, petitioner claimed a $139,199 business expense deduction on his 2006 Schedule C2. Respondent disallowed $132,162 of this amount. Respondent also disallowed all of petitioner's claimed business expense deductions totaling $146,536 and $112,164 reported on 2013 Tax Ct. Memo LEXIS 79">*83 his 2007 and 2008 Schedules C2, respectively. The following table demonstrates the composition of respondent's negative adjustments:*70 Expense200620072008Travel$6,664$9,493$2,270Taxes and licenses6,384-0--0-Repairs and maintenance7,1688,1232,276Interest—other3402,129139Insurance (other than health)4,3594,75210,050Advertising1,3037009,932Business use of home10,4457,61511,954Office21,58322,99620,099Depreciation and sec. 17917,4458,3924,557Car and truck2,99018,5346,975Other—tools1,105-0--0-Other—telephone3,1383,1245,396Other—storage1,0861,099-0-Other—printing1,4561,587-0-Other—postage4691,9701,154Other—parking5,2114,3282,918Other—outside services18,0185,369-0-Other-misc.1,562-0--0-Other—license4005050Other—laundry7741,316-0-Other—filing fees3691,4483,902Other—education10,1261,4052,016Other—client3,6758,7831,356Other—books935-0--0-Other—bank charges8206741,207Accounting265300350Meals and entertainment4,3721,8172,511Utilities-0-1,880-0-*71  Supplies-0-10,7152,078Legal and professional services-0-2,7374,388Other—dues-0-2,8533,497Rent/lease—other business property-0-11,0908,484Other—janitorial-0--0-1,164Other—client settlements-0--0-2,597At trial petitioner produced Excel spreadsheets listing the 2013 Tax Ct. Memo LEXIS 79">*84 monthly sums for each category of expense reported on his Schedules C2. Petitioner meticulously and contemporaneously maintained these documents so that he could monitor the financial health of his law practice. The spreadsheets, however, neither itemize expenses nor provide details as to the nature of any expenditure. Petitioner also offered at trial monthly bank statements, credit card statements, and copies of canceled checks and check registers.Regarding his car and truck expenses, petitioner produced coded mileage logs which list the starting point and destination of each of his business trips and the distance traveled between such points.Respondent also determined that petitioner had unreported income from his law practice for each of the years at issue and correspondingly adjusted result of several unidentified deposits in petitioner's bank accounts during those years.*72  III. Schedule C3—Ms. Ocheretner's Skin care Product BusinessOn his taxable year 2006 and 2007 Schedules C3, petitioner claimed business expense deductions of $4,477 and $4,018, respectively, for his then wife's skin care product business. Respondent disallowed those claimed deductions. The following table demonstrates 2013 Tax Ct. Memo LEXIS 79">*85 the composition of respondent's negative adjustments:Expense20062007Other expenses$118-0-Taxes and licenses149-0-Supplies387-0-Rent/lease—other business property1,381-0-Car and truck1,363-0-Cost of goods sold699$3,638Depreciation and sec. 179380380As with his attempt to substantiate his law practice expenses, petitioner produced Excel spreadsheets listing the monthly sum of each category of expense reported on his Schedules C3 at trial. The spreadsheets again neither itemized expenses nor provided details as to the nature of any of petitioner's expenditures.*73  IV. Interest IncomeRespondent adjusted petitioner's interest income to purportedly reflect amounts shown on Forms 1099-INT, Interest Income. These adjustments resulted in increases in interest income of $5, $4, and $49 for taxable years 2006, 2007, and 2008, respectively.V. Procedural MattersPetitioner produced several documents at trial in an attempt to substantiate his claimed deductions and evidence that certain items of income were not earned during the years at issue. We repeatedly apprised petitioner of the importance of correlating the expenses listed on such documents with the deductions claimed on his tax returns and fully 2013 Tax Ct. Memo LEXIS 79">*86 articulating on brief his position regarding the alleged unreported items of income. At trial petitioner requested and was granted additional time to prepare his posttrial briefs. We also advised petitioner that absent unforseen circumstances we would not further extend the filing deadline. Following trial, petitioner filed a posttrial motion to extend time to file a trial brief citing his health as interfering with his ability to meet set deadlines. We granted petitioner's motion; however, he failed to file a posttrial brief on the ensuing extended filing date or at any point thereafter.*74  OPINIONThe Commissioner's determinations in a notice of deficiency are presumed correct, and taxpayers bear the burden of proving that the Commissioner's determinations are incorrect. Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111">290 U.S. 111, 290 U.S. 111">115, 54 S. Ct. 8">54 S. Ct. 8, 78 L. Ed. 212">78 L. Ed. 212, 1933-2 C.B. 112 (1933). 62013 Tax Ct. Memo LEXIS 79">*88  Under section 7491(a), if the taxpayer produces credible evidence with respect to any factual issue relevant to ascertaining the taxpayer's liability for tax and meets other requirements, the burden of proof shifts from the taxpayer to the Commissioner as to that factual issue. Petitioner has neither alleged that *75 section 7491(a) applies nor established 2013 Tax Ct. Memo LEXIS 79">*87 his compliance with its requirements: Therefore, the burden of proof remains on petitioner. 7I. DeductionsSection 162(a) provides a deduction for certain business-related expenses. In order to qualify for the deduction under section 162(a), "an item must (1) be 'paid or incurred during the taxable year', (2) be for 'carrying on any trade or business', (3) be an 'expense', (4) be a 'necessary' expense, and (5) be an 'ordinary' expense." Commissioner v. Lincoln Sav. & Loan Ass'n, 403 U.S. 345">403 U.S. 345, 403 U.S. 345">352, 91 S. Ct. 1893">91 S. Ct. 1893, 29 L. Ed. 2d 519">29 L. Ed. 2d 519 (1971); Deputy v. du Pont, 308 U.S. 488">308 U.S. 488, 308 U.S. 488">495, 60 S. Ct. 363">60 S. Ct. 363, 84 L. Ed. 416">84 L. Ed. 416, 1940-1 C.B. 118 (1940) (to qualify as "ordinary", the expense must relate to a transaction "of common or frequent occurrence in the type of business involved"). Whether an expense is ordinary is determined by time, place, and circumstance. Welch v. Helvering, 290 U.S. 111">290 U.S. at 113-114. 2013 Tax Ct. Memo LEXIS 79">*89 Taxpayers also must maintain sufficient records to substantiate their deductions. See sec. 6001; Petzoldt v. Commissioner, 92 T.C. 661">92 T.C. 661, 92 T.C. 661">686 (1989); see also Hradesky v. Commissioner, 65 T.C. 87">65 T.C. 87 (1975), aff'd, 540 F.2d 821">540 F.2d 821 (5th Cir. 1976).*76 Certain expenses described in section 274 are subject to strict substantiation rules. No deductions are allowed for, among other things, traveling expenses (including meals and lodging away from home), entertainment expenses, gifts, and expenses with respect to "listed property" defined in section 280F(d)(4) "unless the taxpayer substantiates by adequate records or by sufficient evidence corroborating the taxpayer's own statement": (1) the amount of the expense or other item; (2) the time and place of the travel, entertainment or use, or date and description of the gift; (3) the business purpose of the expense or other item; and (4) in the case of entertainment or gifts, the business relationship to the taxpayer of the recipients or persons entertained. Sec. 274(d). If a taxpayer cannot satisfy the substantiation burden imposed by section 274(d) with respect to an expense to which it applies, he fails to carry his burden of establishing that he is 2013 Tax Ct. Memo LEXIS 79">*90 entitled to deduct that expense, regardless of any equities involved. Id.; Nicely v. Commissioner, T.C. Memo. 2006-172, 2006 Tax Ct. Memo LEXIS 174">2006 Tax Ct. Memo LEXIS 174, at *2006 Tax Ct. Memo LEXIS 174">7-*8; sec. 1.274-5T(a), Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6, 1985).Nonetheless, with respect to expenses not covered by section 274(d), this Court may estimate the amount of allowable deductions where there is evidence *77  that deductible expenses were incurred. Cohan v. Commissioner, 39 F.2d 540">39 F.2d 540, 39 F.2d 540">543-544 (2d Cir. 1930). In order to do so, however, we must have some rational basis upon which to make such an estimate. Vanicek v. Commissioner, 85 T.C. 731">85 T.C. 731, 85 T.C. 731">742-743 (1985). In estimating the amount allowable, we bear heavily against the taxpayer where the inexactitude of the record is of his or her own making. See Cohan v. Commissioner, 39 F.2d 540">39 F.2d at 544.A. Schedule C2: Petitioner's Law Practice1. General Business DeductionsPetitioner produced numerous bank statements, canceled checks, check registers, contemporaneous personal records, credit card statements, and Excel spreadsheets in an attempt to substantiate his reported business expenses. We indicated the probative limitations of petitioner's isolated, nonitemized Excel 2013 Tax Ct. Memo LEXIS 79">*91 spreadsheets in a previous, similar matter before the Court. See Gorokhovsky v. Commissioner, T.C. Memo 2012-206, 2012 Tax Ct. Memo 208, at *11-*13. In the present case, however, petitioner supplemented his Excel spreadsheets with further supportive documentation. Nonetheless, petitioner made no attempt to use the evidence in the record to brief his legal position following trial. While we need not undertake the work of sorting through every piece of evidence petitioner provided in an attempt to find support for his ultimate legal positions, see, e.g., *78 Hale v. Commissioner, T.C. Memo. 2010-229, 2010 WL 4120880">2010 WL 4120880, at *2010 WL 4120880">2 (refusing to sort through 317 pages of disorganized evidence in an attempt to determine whether a taxpayer provided adequate substantiation when that taxpayer failed to file a brief), petitioner's canceled checks and/or check registers clearly substantiate certain business expenses he incurred for his law practice in the taxable years at issue. In particular, petitioner's Continental Bank account records evidence substantiated expenses of $12,066.18 for taxable year 2006, see infra app. A, $7,405 for taxable year 2007, see infra app. B), and $5,544.97 for taxable year 2013 Tax Ct. Memo LEXIS 79">*92 2008, see infra app. C. Petitioner's Wells Fargo account records also evidence additional substantiated expenses of $4,269.38 for taxable year 2006. See infra app. D. 8 Petitioner may correspondingly deduct these amounts pursuant to section 162.*79  Notwithstanding this finding, most of petitioner's general business deductions remain unsubstantiated. Though we may estimate additional expenses if we have a rational basis to do so, see Vanicek v. Commissioner, 85 T.C. 731">85 T.C. 742-743, the record before us does not permit us to formulate reasoned 2013 Tax Ct. Memo LEXIS 79">*93 conclusions as to petitioner's incurred expenses.2. Home Office DeductionSection 280A generally provides that no deduction otherwise allowable shall be allowed with respect to the business use of a taxpayer's residence. Sec. 280A(a). However, as relevant to this case, a deduction may be allowed to the extent it is allocable to a portion of a dwelling unit which is exclusively used on a regular basis as: (1) the principal place of business for any trade or business of the taxpayer; or (2) a place of business which is used by patients, clients, or customers in meeting or dealing with the taxpayer in the normal course of his trade or business. Sec. 280A(c)(1)(A) and (B).Petitioner maintains that he used an office located in the basement of his home as his principal place of business. 9 The evidence concerning this point is *80  limited to petitioner's testimony that the office has a law library and "four computers". No evidence was submitted demonstrating the nature or extent of the work performed in the basement, whether petitioner met clients there, or any other facts which might shed light on the purported business use of the area. Furthermore, petitioner admitted that he subleased a separate 2013 Tax Ct. Memo LEXIS 79">*94 office in Milwaukee for his law practice and offered no evidence to negate the inference that office functioned as his principal place of business. According to the limited record in this case, we cannot find that petitioner is entitled to home office deductions pursuant to section 280A(c)(1) for the years at issue. 103. Meal and Travel ExpensesPetitioner's reported meal and travel 2013 Tax Ct. Memo LEXIS 79">*95 expenses are subject to heightened substantiation requirements, noted supra. Seesec. 274(d)(1). Petitioner failed to adduce any evidence purporting to substantiate his meal expenses for the years at issue. Without any corroborative documentation, we find that petitioner has failed to substantiate these expenses.*81  However, petitioner meticulously maintained coded travel logs which superficially support his travel expense deductions. 11 Following trial, petitioner submitted additional documentation which supplements his logs and expressly articulates the business purpose of each of his business trips. Each entry in petitioner's submitted records is categorized into one of three codes. At trial petitioner explained that "code 1" represented travel from his home to his subleased office in Milwaukee or the Milwaukee county courthouse; "code 2" represented travel from his condo in Chicago to the Daley Center or to a Federal courthouse; and, "code 3" represented all other business travel neither originating nor concluding at his home. We find that petitioner's entries labeled "code 2" 12 and "code 3" in Exhibits 58-J, 60-J, and 66-J specify the time, place, and business *82  purpose of petitioner's 2013 Tax Ct. Memo LEXIS 79">*96 business travels and, accordingly, satisfy the heightened substantiation requirements of section 274(d)(1).Code 1, however, represents travel to or from petitioner's home. As a general rule, expenses for traveling between one's home and one's 2013 Tax Ct. Memo LEXIS 79">*97 place of business or employment constitute commuting expenses and are, consequently, nondeductible personal expenses. Seesec. 262(a); Fausner v. Commissioner, 413 U.S. 838">413 U.S. 838, 93 S. Ct. 2820">93 S. Ct. 2820, 37 L. Ed. 2d 996">37 L. Ed. 2d 996 (1973); Commissioner v. Flowers, 326 U.S. 465">326 U.S. 465, 66 S. Ct. 250">66 S. Ct. 250, 90 L. Ed. 203">90 L. Ed. 203 (1946); Feistman v. Commissioner, 63 T.C. 129">63 T.C. 129, 63 T.C. 129">134 (1974). Three jurisprudential or administrative exceptions to this rule have developed over time: (1) the home office exception; (2) the temporary distant worksite exception; and (3) the regular work location exception. See Bogue v. Commissioner, T.C. Memo. 2011-164, 2011 Tax Ct. Memo LEXIS 164">2011 Tax Ct. Memo LEXIS 164, at *2011 Tax Ct. Memo LEXIS 164">16-*17. We address the applicability of each to petitioner's "code 1" travel.a. The Home Office ExceptionThe first judicially created exception permits taxpayers to deduct expenses incurred traveling between their residence and a place of business if the residence has a home office which serves as the taxpayer's principal place of business. See Strohmaier v. Commissioner, 113 T.C. 106">113 T.C. 106, 113 T.C. 106">113-114 (1999); Wis. Psychiatric Servs., Ltd. v. Commissioner, 76 T.C. 839">76 T.C. 839, 76 T.C. 839">849 (1981); Curphey v. Commissioner, 73 T.C. 766">73 T.C. 766, 73 T.C. 766">777-778 (1980)*83 . We have consistently equated the "principal place of business" requirement for the home office exception 2013 Tax Ct. Memo LEXIS 79">*98 with the "principal place of business" requirement under section 280A. See Walker v. Commissioner, 101 T.C. 537">101 T.C. 537, 101 T.C. 537">546 (1993); Curphey v. Commissioner, 73 T.C. 766">73 T.C. 777.As noted supra, we found that petitioner's purported basement office in Mequon, Wisconsin, did not qualify as a "principal place of business" pursuant to section 280A. Accordingly, the home office exception is not applicable regarding petitioner's expenses incurred during his "code 1" travel.b. The Temporary Distant Worksite ExceptionTaxpayers are entitled to deduct travel and lodging expenses stemming from work at a series of temporary worksites during the year, all of which were distant from the taxpayer's residence. Schurer v. Commissioner, 3 T.C. 544">3 T.C. 544 (1944). 13 The IRS has memorialized the temporary distant worksite exception in Rev. Rul. 99-7, 1999-1 C.B. 361, stating: "A taxpayer * * * may deduct daily transportation expenses incurred in going between the taxpayer's residence and a temporary work location outside the metropolitan area where the taxpayer lives and normally works." The revenue ruling thereafter defines a temporary work location as one *84  that "is realistically expected to last (and does in fact last) 2013 Tax Ct. Memo LEXIS 79">*99 for 1 year or less". Id.Petitioner lives in Wisconsin and has maintained his law practice there for almost a decade. Consequently, petitioner's code 1 travel does not fit within this exception.c. The Regular Work Location ExceptionThe regular work location exception was originally articulated by the Commissioner in Rev. Rul. 90-23, 1990-1 C.B. 28. The current iteration is found in Rev. Rul. 99-7, 1999-1 C.B. at 362, which states: "If a taxpayer has one or more regular work locations away from the taxpayer's residence, the taxpayer may deduct daily transportation expenses incurred in going between the taxpayer's residence and a temporary work location in the same trade or business, regardless of the distance." 14As noted supra, petitioner has not suggested that any of his travel was to a temporary 2013 Tax Ct. Memo LEXIS 79">*100 work location. Therefore, petitioner's code 1 travel does not fit within this exception.*85  d. ConclusionIn sum, we conclude that petitioner has failed to establish that his "code 1" travel meets any exception to the general rule treating commuting expenses as nondeductible personal expenses.B. Petitioner's Schedules C1 and C3Petitioner provided no documentation regarding expenses reported on his Schedules C1 and C3 for the years at issue. Accordingly, we find that petitioner failed to substantiate those expenses.II. Unreported IncomeSection 61(a)(1) defines gross income as all income from whatever source derived, including compensation for services, such as wages, salaries, and bonuses. See alsosec. 1.61-2(a)(1), Income Tax Regs. Bank deposits serve as prima facie evidence of income. Tokarski v. Commissioner, 87 T.C. 74">87 T.C. 74, 87 T.C. 74">77 (1986) (citing Estate of Mason v. Commissioner, 64 T.C. 651">64 T.C. 651, 64 T.C. 651">656-657 (1975), aff'd, 566 F.2d 2">566 F.2d 2 (6th Cir. 1977)); see also Clayton v. Commissioner, 102 T.C. 632">102 T.C. 632, 102 T.C. 632">645 (1994).In a posttrial brief respondent itemized unidentified deposits to petitioner's various bank accounts for the taxable years at issue and determined that those deposits totaled $40,894.17, $90,295.89, 2013 Tax Ct. Memo LEXIS 79">*101 and $72,500 for taxable years 2006, *86  2007, and 2008, respectively. Respondent's totals on brief for taxable years 2006 and 2008 are consistent with his assertions following posttrial concessions; however, the itemized totals on brief for taxable year 2007 differ from those following concessions by approximately $25,095 ($115,391 following concessions and $90,295.89 on brief). We construe respondent's position on brief as an additional concession in this case.At trial petitioner identified various deposits at issue as nontaxable balance transfers or payments relating to his wife's business. Nonetheless, petitioner never submitted any credible evidence establishing that such transfers were legitimately effected nor explained how his wife's alleged payments were reported on the relevant tax returns.Petitioner also indicated that separate deposits of $5,000 and $11,000 from taxable year 2007 represent payments from a debtor on a loan he had previously advanced. Petitioner supplemented the record following trial with an undated, unsigned "commercial promissory note" purporting to memorialize his $15,000 advance. Nonetheless, petitioner failed to submit any financial documents evincing either 2013 Tax Ct. Memo LEXIS 79">*102 the actual transfer of $15,000 or payments of interest on the alleged loan. We find that the record is insufficient to support petitioner's position.*87  Petitioner further referenced a deposit of $55,000 in taxable year 2008, testifying that the deposit represented a retainer from a Chinese company that had hired him to perform a "due diligence and feasibility study" regarding the potential importation of their products. However, petitioner did not submit a copy of the alleged retainer agreement to the Court nor provide any probative evidence pertaining to his alleged work on the project. 15 We decline to accept petitioner's self-serving, unverified, and undocumented testimony. See Tokarski v. Commissioner, 87 T.C. 74">87 T.C. 77.In sum, we find that petitioner failed to report income in the itemized amounts represented by respondent in his posttrial brief.III. Interest IncomeIn the introductory statement of issues in respondent's posttrial brief, he indicated that the question of whether petitioner failed to report interest income of $5, $4, and $49 for taxable years 2006, 2007, 2013 Tax Ct. Memo LEXIS 79">*103 and 2008, respectively, remained unresolved. However, at no point in the remainder of his brief did he address this issue. Indeed, the Forms 1099 upon which respondent purportedly made his *88  determinations were never offered into evidence. Accordingly, we find that respondent has conceded the issue.IV. Section 6662(a) PenaltySection 6662(a) and (b)(1) and (2) provides for an accuracy-related penalty of 20% of the portion of any underpayment attributable to, among other things, negligence or intentional disregard of rules or regulations or any substantial understatement of income tax. 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. Sec. 6662(c); sec. 1.6662-3(b)(1), Income Tax Regs. A substantial understatement of income tax exists for an individual if the amount of the understatement exceeds the greater of 10% of the tax required to be shown on the return or $5,000. Seesec. 6662(d)(1)(A). We will focus our inquiry on whether petitioner exhibited negligence or intentional disregard of rules or regulations for the years at issue. 162013 Tax Ct. Memo LEXIS 79">*104 Section 6664(c)(1) provides that the penalty shall not be imposed with respect to any portion of an underpayment if the taxpayer shows that there *89  was reasonable cause for, and that he acted in good faith with respect to, that portion.The determination of whether a taxpayer acted with reasonable cause and in good faith is made on a case-by-case basis, taking into account all pertinent facts and circumstances. * * * Circumstances that may indicate reasonable cause and good faith include an honest misunderstanding of * * * law that is reasonable in light of all the facts and circumstances, including the experience, knowledge, and education of the taxpayer. * * *Sec. 1.6664-4(b)(1), Income Tax Regs.Respondent bears the burden of production with respect to the penalty. Sec. 7491(c). The burden imposed by section 7491(c) is "only to come forward with evidence regarding the appropriateness of applying a particular addition to tax or penalty to the taxpayer." 2013 Tax Ct. Memo LEXIS 79">*105 Good v. Commissioner, T.C. Memo. 2008-245, 2008 WL 4756483">2008 WL 4756483, at *2008 WL 4756483">9. Once that burden is met, petitioner bears the burden of proving that he is entitled to relief under section 6664(c)(1). Higbee v. Commissioner, 116 T.C. 438">116 T.C. 438, 116 T.C. 438">446 (2001).Respondent submits that petitioner's background as an attorney with undergraduate accounting degrees and a degree in business administration demonstrates that he should have recognized the importance of maintaining adequate records and substantiating all items reported on his return. While petitioner did meticulously maintain records evidencing certain expenses, he failed *90  to offer records supporting many claimed expenses as well as credible documentation which might shed light on the unidentified deposits at issue. As a result, we find that respondent met his burden of production on this issue.Petitioner did not address the section 6662 penalties at trial and failed to file a posttrial brief. However, petitioner's tax returns for the taxable years at issue were prepared by an accountant. 17Good-faith reliance on the advice of an independent professional, such as an accountant, may demonstrate reasonable cause. United States v. Boyle, 469 U.S. 241">469 U.S. 241, 469 U.S. 241">251, 105 S. Ct. 687">105 S. Ct. 687, 83 L. Ed. 2d 622">83 L. Ed. 2d 622 (1985); 2013 Tax Ct. Memo LEXIS 79">*106 Canal Corp. & Subs. v. Commissioner, 135 T.C. 199">135 T.C. 199, 135 T.C. 199">218 (2010); sec. 1.6664-4(b), Income Tax Regs. To prevail in this effort, however, the taxpayer must show that he: (1) selected a competent adviser with sufficient expertise to justify reliance; (2) supplied the adviser with necessary and accurate information; and (3) actually relied in good faith on the adviser's judgment. Neonatology Assocs., P.A. v. Commissioner, 115 T.C. 43">115 T.C. 43, 115 T.C. 43">99 (2000), aff'd, 299 F.3d 221">299 F.3d 221 (3d Cir. 2002); see Sanford v. Commissioner, T.C. Memo. 2008-158, 2008 Tax Ct. Memo LEXIS 159">2008 Tax Ct. Memo LEXIS 159, at *2008 Tax Ct. Memo LEXIS 159">17. Petitioner offered no testimony or other evidence concerning the expertise of his *91  accountant, the information he allegedly provided to his accountant, or his actual good-faith reliance on his accountant's advice. Accordingly, we find that petitioner has failed to satisfy his burden.V. ConclusionIn reaching our holdings herein, we have considered all arguments 2013 Tax Ct. Memo LEXIS 79">*107 made, and, to the extent not mentioned above, we conclude they are moot, irrelevant, or without merit.To reflect the foregoing,Decision will be entered under Rule 155.*92  APPENDIX A—2006 Continental BankCheck No.Transaction descriptionAmount1252Business Cards$211.001257Sarah Decorah1146.911258Fred Tabak2400.001274Sarah Decorah113.001275Fred Tabak400.001276Clerk of Court259.001279Citi Business Card701.311284Clerk of Federal Court250.001288Office Depot36.091298Fred Tabak400.001305Cook County Sheriff33.401310Clerk of U.S. Dist. Court250.001312Office Depot126.671321Fred Tabak400.001323Sarah Decorah1,020.631330Clerk of Circuit Court175.001333Sarah Decorah444.591334Sarah Decorah115.081335Sarah Decorah106.561346Home Depot166.401347Clerk of City Court250.00*93  1349Fred Tabak400.001359Home Depot201.501361Wis. Legal Forms5.251379Fred Tabak400.001380State Bar of Wis.25.001383Sarah Decorah237.891384Sarah Decorah179.561390Clerk of Circuit Court259.501396Sarah Decorah245.921397Sarah Decorah128.201398State Bar199.001399Sarah Decorah217.361400Clerk of Court122.001402Fred Tabak400.001407Clerk of Court5.001408Attorney Assist39.801409Attorney Assist82.741410Attorney Assist334.341411Attorney Assist1225.961415Attorney Assist216.091418Dr. S. Lisowski3300.001426Office Depot65.43*94  1432Attorney Assist427.861433Attorney Assist129.121434Attorney Assist206.481437Office Depot6.54Total12,066.1812013 Tax Ct. Memo LEXIS 79">*108 Ms. Decorah worked for Attorney Assist.2 Petitioner subleased his Milwaukee office from Mr. Tabak.3 Petitioner consulted Dr. Lisowski regarding various cases.*95  APPENDIX B—2007 Continental BankCheck No.ITranscript descriptionAmount1431Suzanne Lisowski$81.251432Attorney Assist527.861433Attorney Assist206.481436Clerk of Traffic Court236.401437Office Depot6.541440Fred Tabak450.001441Supreme Court of Wis.6.001442V. Publishing350.001447Fred Tabak450.001452Clerk of Court158.501468Clerk of Federal Court250.001469Fred Tabak450.001482Attorney Assist1,254.531484Clerk of Court of Appeal150.001520Fred Tabak450.001541State Bar of Wis.25.001546Office Depot201.561555Francine L. O'Claire118.501556Fred Tabak450.001558Clerk of Court524.00*96  1563Lake County Sheriff44.101608Fred Tabak500.001610Clerk of Court5.001611Clerk of Court5.001629Ref. and Info. Service79.001631Fred Tabak500.001660Lowe's25.28Total7,405.001 This payment was for a copy of a transcript.*97  APPENDIX C—2008 Continental BankCheck No.Transaction descriptionAmount1690Clerk of Court189.501691Fred Tabak500.001714Fred Tabak500.001721Office Depot43.221745Luxury Furnishings950.001746Clerk of Milwaukee Cty.158.501748Office Dept Credit Plan50.681760Office Depot15.841823V. Publishing450.001829Fred Tabak500.001830Clerk of Cook County319.001831Clerk of Cook County319.001843Office Dept. Credit Plan458.771869Clerk of Circuit Court123.501870Fred Tabak500.001906Sarah Decorah73.891912Office Depot269.571933Clerk of Circuit Court123.50Total5,544.97*98 2013 Tax Ct. Memo LEXIS 79">*109 APPENDIX D—2006 Wells FargoCheck No.Transaction descriptionAmount1001State Bar of Wis.$441.001018Fred Tabak400.001039Wash. County Sheriff22.571047Office Depot69.661055Fred Tabak400.001071Office Depot47.271078Fred Tabak750.001090Office Depot9.701103Fred Tabak450.001108Home Depot1,229.181109Fred Tabak450.00Total4,269.38Footnotes1. Unless otherwise indicated, all section references are to the Internal Revenue Code (Code) in effect for the years at issue. All Rule references are to the Tax Court Rules of Practice and Procedure.↩2. Our determinations result in corresponding computational adjustments to petitioner's self-employment tax liability.↩3. Following trial, respondent conceded $400 in supply expenses for petitioner's taxable year 2006 and $257 in office expenses for taxable year 2007. Respondent also conceded $844 in either supply expenses or office expenses for taxable year 2008; the exact item is unclear from respondent's posttrial brief.4. Petitioner jointly filed his tax returns for the taxable years at issue.↩5. Following trial, respondent conceded that petitioner accurately reported deposits of $7,034.29 and $16,279.47 for taxable years 2007 and 2008, respectively.↩6. On rare occasions this Court has recognized an exception to these rules in cases involving unreported income where the Commissioner introduces no substantive evidence but relies solely on the presumption of correctness. Jackson v. Commissioner, 73 T.C. 394">73 T.C. 394, 73 T.C. 394">401 (1979). In such cases, if the taxpayers challenge the notice of deficiency on the ground that it is arbitrary, then the determination is treated as a "naked" assessment and the presumption of correctness does not attach. Id. However, this is a limited exception, and it does not apply when the Commissioner has provided a minimal evidentiary foundation. Petzoldt v. Commissioner, 92 T.C. 661">92 T.C. 661, 92 T.C. 661">687-688 (1989); Fankhanel v. Commissioner, T.C. Memo. 1998-403, 1998 Tax Ct. Memo LEXIS 424">1998 Tax Ct. Memo LEXIS 424, aff'd without published opinion, 205 F.3d 1333">205 F.3d 1333 (4th Cir. 2000).Presently, respondent relies on bank deposits to determine petitioner's unreported income for the years in issue. "A bank deposit is prima facie evidence of income and respondent need not prove a likely source of that income." Tokarski v. Commissioner, 87 T.C. 74">87 T.C. 74, 87 T.C. 74">77 (1986) (citing Estate of Mason v. Commissioner, 64 T.C. 651">64 T.C. 651, 64 T.C. 651">656-657 (1975), aff'd, 566 F.2d 2">566 F.2d 2↩ (6th Cir. 1977)). Accordingly, the limited exception does not apply in this case.7. As noted supra, petitioner failed to file a posttrial brief. Accordingly, it is within our discretion to dismiss this case entirely. See Rules 123, 151(a); Stringer v. Commissioner, 84 T.C. 693">84 T.C. 693, 84 T.C. 693">704-708 (1985), aff'd without published opinion, 789 F.2d 917">789 F.2d 917 (4th Cir. 1986). However, we will decide the case on the merits. See, e.g., D'Errico v. Commissioner, T.C. Memo. 2012-149, 2012 Tax Ct. Memo LEXIS 149">2012 Tax Ct. Memo LEXIS 149, at *2012 Tax Ct. Memo LEXIS 149">17↩-*18.8. Petitioner submitted a Wells Fargo account check register for his taxable year 2007 which superficially demonstrates that he made certain expenditures during that year; however, the corresponding canceled checks were not offered into evidence. While we find elsewhere that various other check registers showing expenditures in other years supported deductions even though certain canceled checks were not before the Court, those other registers on a whole were congruous with the catalog of canceled checks from the corresponding accounts. We cannot ascribe the same credibility to the 2007 Wells Fargo account check register without any correlative documentation.↩9. Petitioner did not assert at trial that expenses related to his condominium in Chicago qualified as a deduction pursuant to sec. 280A(c)(1)↩. Furthermore, it is unclear from the record whether petitioner ever claimed an expense deduction related to the Chicago condominium.10. The flush language of sec. 280A↩ indicates that the term "principal place of business" includes "a place of business which is used by the taxpayer for the administrative or management activities of any trade or business of the taxpayer if there is no other fixed location of such trade or business where the taxpayer conducts substantial administrative or management activities of such trade or business." There is no evidence in the record indicating that petitioner performed any administrative or management activities in his home basement.11. When respondent questioned petitioner about two random items on the 2006 mileage spreadsheet, petitioner, unable to quickly cross-reference other documentation immediately available, admitted that those specific mileage log entries were in error; however, we do not believe such minor errors infect the entirety of the logs.↩12. A taxpayer may deduct travel expenses that are reasonable, necessary, and directly attributable to the taxpayer's business. Sec. 162(a)(2); sec. 1.162-2(a), Income Tax Regs. If a trip is undertaken for both business and personal reasons, travel expenses are deductible only if the primary purpose of the trip is business. Seesec. 1.162-2(b)(1), Income Tax Regs.↩ Petitioner convincingly testified that he used his Chicago condominium "primarily" for his practice in Federal court. The credibility of this testimony is amplified by petitioner's meticulous records evidencing the business purpose of his "code 2" travel in Chicago.13. Our decision in Schurer v. Commissioner, 3 T.C. 544">3 T.C. 544, 3 T.C. 544">547↩ (1944), was based in part on the fact that the taxpayer had no "principal place of business" during the taxable year at issue.14. We have previously questioned the rationale of this exception and have simply treated it as a concession by the Commissioner. See Bogue v. Commissioner, T.C. Memo. 2011-164, 2011 Tax Ct. Memo LEXIS 164">2011 Tax Ct. Memo LEXIS 164, at *2011 Tax Ct. Memo LEXIS 164">16↩-*17.15. The only evidence in the record regarding this study is petitioner's vague self-created timesheet labeled "Shanghai".↩16. Only one accuracy-related penalty may be applied with respect to any given portion of an underpayment, even if that portion is subject to the penalty on more than one of the grounds set forth in sec. 6662(b). Sec. 1.6662-2(c), Income Tax Regs.↩17. At trial petitioner indicated that the expense of having his Wisconsin-based accountant travel to the place of trial in Chicago was prohibitive. Nonetheless, petitioner requested that the trial take place in Chicago and should have anticipated the expense at that time.↩