T.C. Memo. 1996-503
UNITED STATES TAX COURT
LES B. MARTIN AND MILLIE A. MARTIN, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 21214-93. Filed November 7, 1996.
Les B. Martin and Millie A. Martin, pro sese.
T. Keith Fogg and Veena Luthra, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
JACOBS, Judge: In a notice of deficiency, dated August 12,
1993, respondent determined the following deficiencies and
penalties with respect to petitioners' Federal income taxes:
Accuracy-Related Penalty
Year Deficiency Sec. 6662(a)
1989 $12,672 $2,399
1990 9,276 1,855
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Following concessions by the parties, the issues for decision
are: (1) Whether petitioners properly deducted as job expenses and
other miscellaneous deductions on Schedule A (itemized deductions)
of their 1989 tax return: $3,272 in moving expenses, $5,020 for
country club dues and expenses, $14,542 in unreimbursed employee
business expenses, $2,101 in investment expenses, $15,355 in job-
search expenses, and $3,612 for tax-work (audit) expenses; (2)
whether petitioners properly deducted $11,540 as Schedule C
business expenses for 1989; (3) whether petitioners properly
deducted miscellaneous expenses totaling $7,174 on Schedule A of
their 1990 tax return; (4) whether petitioners properly deducted
$12,489 as business expenses on Schedule C of their 1990 tax
return; and (5) whether petitioners are liable for the accuracy-
related penalty under section 6662(a) for 1989 and 1990.
All section references are to the Internal Revenue Code for
the years under consideration. All Rule references are to the Tax
Court Rules of Practice and Procedure. All dollar amounts have
been rounded.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The
stipulation of facts and the attached exhibits are incorporated
herein by this reference.
Petitioners, husband and wife, resided in Charlottesville,
Virginia, at the time they filed their petition. They timely filed
joint returns for 1989 and 1990. They submitted amended 1989 and
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1990 tax returns (Form 1040X) to respondent's counsel on August 26,
1995, which was approximately 10 days prior to trial.
In January 1987, Mr. Martin accepted employment with Woodhead
Industries, Inc. (Woodhead), as president of Aero-Motive Co. (Aero-
Motive), a subsidiary of Woodhead. As such, Mr. Martin was
responsible for overseeing a 250-person, $25 million manufacturing
plant in Kalamazoo, Michigan. He was hired to "do a turnaround and
save the company." Prior to accepting employment with Woodhead,
Mr. Martin worked for Allen Bradley Co. in Cleveland, Ohio.
Mr. Martin was relieved of his duties as president of Aero-
Motive on September 20, 1989; he remained in Woodhead's employ, as
a consultant, until June 8, 1990. As part of Mr. Martin's
severance package, Woodhead agreed to continue paying Mr. Martin
from June 8, 1990, until September 7, 1990, in the event he found
no other employment during that period of time.
Moving Expenses
In January 1987, Mr. Martin moved from Cleveland to Kalamazoo,
living in an apartment made available to him by Woodhead (the
company apartment). Mrs. Martin joined her husband in Kalamazoo
following the sale of their house in Cleveland in April or May of
1987. Because Mrs. Martin brought the family pets (a dog and a
cat) with her to Kalamazoo, petitioners were required to move from
the company apartment to another apartment. The furniture and
personal belongings of the Martins were shipped from Cleveland to
Kalamazoo at the time Mrs. Martin joined her husband; most of the
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furnishings and belongings were placed in storage. Woodhead paid
approximately $1,700 of the expenses of shipping; Mr. Martin paid
the expenses incurred in moving from the company apartment to the
second apartment. The record does not reveal the year in which
Woodhead paid the $1,700, but apparently the $1,700 was reported on
Mr. Martin's Form W-2 in the year paid.
Petitioners purchased a house in Kalamazoo that required
refurbishing. Refurbishing was completed in 1989; thereafter,
petitioners moved into the refurbished house.
On Schedule A of their 1989 return, petitioners claimed $3,272
in moving expenses. The moving expenses were for costs incurred in
1989 in moving petitioners' furniture and belongings from storage
and their apartment to petitioners' newly refurbished house.
Respondent disallowed this deduction claiming (1) the expenses
incurred were not reasonably proximate in time to the commencement
of Mr. Martin's employment with Woodhead, and (2) the storage
expenses were not in-transit storage expenses.
Unreimbursed Employee Business Expenses
On Schedule A of their 1989 return, petitioners claimed
$19,562 in unreimbursed employee business expenses. Of this
amount, $5,020 was for membership fees and expenses in Gull Lake
Country Club (the country club) paid for by Woodhead and reported
on Mr. Martin's 1989 Form W-2.1 Mr. Martin joined the country club
1
Because Woodhead paid the country club fees and
(continued...)
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in July 1989, and resigned in December 1989, when it was apparent
that his position as president of Aero-Motive would be terminated.
Approximately $5,000 of the country club expenses represents an
initiation fee; the balance is for client entertainment.
Respondent disallowed the deduction for country club fees and
expenses claiming (1) the membership fees are a capital expenditure
and (2) they are not ordinary and necessary business expenses.
On petitioners' amended 1989 tax return, the amount claimed as
unreimbursed employee business expenses, other than country club
fees and expenses, was reduced from $14,542 ($19,562 - $5,020) to
$1,936. At trial and in their posttrial brief, petitioners state
they are willing to concede 60 percent of the $1,936, so that now
they claim $774 for unreimbursed employee business expenses.
Respondent disallowed the deduction for unreimbursed employee
business expenses claiming (1) petitioners failed to substantiate
these expenses and (2) petitioners did not prove Mr. Martin's
employer would have denied reimbursement for these expenses had Mr.
Martin sought it.
Investment Expenses
On Schedule A of their 1989 return, petitioners deducted
$2,101 as investment expenses. On petitioners' amended 1989 tax
1
(...continued)
expenses and reported the payment as income to Mr. Martin on his
W-2, the claimed deduction for the country club fees and expenses
should have been characterized as "other expenses" rather than
unreimbursed employee business expenses.
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return, the amount claimed as investment expenses was reduced to
$872. At trial and in their posttrial brief, petitioners state
they are willing to concede 40 percent of the $872, so that now
they claim $349 for investment expenses. The investment expenses
were incurred with respect to Mr. Martin's investigating
petitioners' possible purchase of stock in publicly held companies.
Respondent disallowed this deduction primarily on the basis of
petitioners' failure to substantiate, and on the alternative basis
that even if the expenses are substantiated, they were incurred in
connection with searching for or acquiring new investments and
should be added to the basis of the stock acquired.
Job-Search Expenses
On Schedule A of their 1989 return, petitioners claimed
$15,355 in job-search expenses. These expenses were incurred prior
to and following the termination of Mr. Martin's position as
president of Aero-Motive. At trial and in their posttrial brief,
petitioners state they are willing to concede 40 percent of the
$15,355, so that now they claim $9,213 for job-search expenses.
Respondent disallowed this deduction on the basis of petitioners'
failure to substantiate and petitioners' failure to show the
business purpose of the expenditures.
Tax-Work Expenses
On Schedule A of their 1989 return, petitioners claimed $3,612
in tax-work (audit) expenses. The expenses are for travel to their
attorney's office and related activities relative to prior years'
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taxes. On petitioners' amended 1989 tax return, the amount claimed
for tax-work expenses was reduced to $1,800. At trial and in their
posttrial brief, petitioners state they are willing to concede 60
percent of the $1,800, so now they claim $720 for tax-work
expenses. Respondent disallowed this deduction on the basis of
failure to substantiate.
Schedule C Expenses
After Mr. Martin was relieved of his duties as president of
Aero-Motive, he started a consulting business known as M.L.
Associates.
During 1989 and 1990, and for 6 or 7 years prior thereto, Mrs.
Martin operated a business, known as MAM Leasing-R.E., that leased
2 personal computers which had been acquired in 1983. Starting in
1989, petitioners decided to change the business direction of MAM
Leasing-R.E. to that of real estate development. The Schedules C
filed with petitioners' original returns for 1989 and 1990
aggregated the income and expenses of M.L. Associates and MAM
Leasing-R.E. On petitioners' amended tax returns for 1989 and
1990, the income and expenses of M.L. Associates and MAM Leasing-
R.E. were separately reported on separate Schedules C. The income
and expenses reported on Schedules C of petitioners' original and
amended returns are as follows:
GROSS INCOME EXPENSES
1989 1990 1989 1990
Original Return $ 1,778 -0- $11,540 $12,489
Amended Return 40,840 -0- 21,774 13,297
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The increase in the amount of income for 1989 ($39,062) between
that reported on the amended return and that reported on the
original return is the gain (short-term) from the sale of Woodhead
stock which had originally been reported on Schedule D of
petitioners' 1989 tax return. At trial and in their posttrial
brief, petitioners state they are willing to concede 30 percent of
the expenses claimed on their amended returns, so that now they
claim expenses of $15,241 for 1989 and $9,308 for 1990. The
majority of these expenses represents home office expenses
(including the purchase of furniture) and automobile expenses.
Respondent disallowed this deduction on the ground that the
expenditures were not ordinary and necessary expenditures.
Further, as to those deductions claimed in connection with the use
of petitioners' residence as a home office, the deductions were
disallowed, in part, on the basis that some of the claimed expenses
were personal, and on the basis that petitioners failed to prove
their home office was used exclusively for business purposes.
Miscellaneous Itemized Deductions
On Schedule A of their 1990 return, petitioners claimed $7,174
in miscellaneous itemized expenses. Apparently the majority of the
expenses with regard to this deduction consist of travel and meal
expenses in connection with Mr. Martin seeking new employment. On
petitioners' amended 1990 tax return, the amount of the deduction
was increased to $7,176; no explanation was given for the $2
difference. Respondent disallowed the deduction for lack of
substantiation.
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OPINION
Deductions are a matter of legislative grace. New Colonial
Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). Taxpayers bear the
burden of establishing that they are entitled to the claimed
deductions. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 114
(1933). This includes the burden of substantiating the amount and
purpose of the item claimed. Sec. 6001; Hradesky v. Commissioner,
65 T.C. 87, 90 (1975), affd. per curiam 540 F.2d 821 (5th Cir.
1976); sec. 1.6001-1(a), Income Tax Regs. If claimed deductions
are not adequately substantiated, we may estimate them, provided we
are convinced that the taxpayer has incurred such expenses and we
have a basis upon which to make an estimate. Cohan v.
Commissioner, 39 F.2d 540 (2d Cir. 1930); Vanicek v. Commissioner,
85 T.C. 731, 743 (1985).
Moving Expenses
Section 217 permits a deduction for moving expenses paid or
incurred during the taxable year in connection with the
commencement of work by the taxpayer as an employee at a new
principal place of work. To qualify as being in connection with
the commencement of work, the move must be reasonably proximate
both in time and place to the commencement of work at the new
workplace. In general, moving expenses incurred within 1 year of
the commencement of work are considered to be reasonably proximate
in time to such commencement. Moving expenses incurred after the
1-year period may be considered reasonably proximate in time if
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there are circumstances which prevented the taxpayer from incurring
the expenses of moving within the 1-year period. Sec. 1.217-
2(a)(3), Income Tax Regs. Costs of storage are not deductible
unless incurred in transit, which is defined as within any
consecutive 30-day period after the goods are moved from the
taxpayer's former residence and before delivery at the new
residence. Sec. 1.217-2(b)(3), Income Tax Regs.
Petitioners moved from Cleveland to Kalamazoo in early 1987,
when Mr. Martin began a new job. Petitioners claim a $3,273
deduction for moving expenses that were incurred in 1989. We do
not believe that these expenses were reasonably proximate in time
to the commencement of Mr. Martin's new employment in Kalamazoo.
Petitioners claim that there were circumstances beyond their
control which dictated the amount of time for the move: (1) The
local real estate market was very tight and no houses were
available, and (2) business related job activities required all of
Mr. Martin's time. We have considered these arguments and reject
them. There was no showing that a suitable house in the Kalamazoo
area could not have been acquired within a 1-year period, and
although Mr. Martin's job activities might have required a
substantial portion of his time, there was no showing that Mrs.
Martin could not have looked for suitable housing. Further, the
expenses of moving the goods from storage to petitioners' newly
refurbished house were not incurred in transit, but rather are
storage related expenses. Therefore, respondent's determination
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with respect to the disallowance of the deduction for moving
expenses is sustained.
Employee Business Expenses
We now turn our attention to petitioners' deduction for
employee business expenses. Pursuant to section 162(a), a taxpayer
may deduct all ordinary and necessary expenses paid or incurred
during the taxable year in carrying on a trade or business. In
general, an expense is ordinary if it is considered "normal, usual,
or customary" in the context of the particular business out of
which it arose. Deputy v. duPont, 308 U.S. 488, 495-496 (1940).
The term "ordinary" is also used to distinguish currently
deductible items from capital expenditures. Commissioner v.
Tellier, 383 U.S. 687, 689-690 (1966). An expense is necessary if
it is appropriate and helpful to the operation of the taxpayer's
trade or business. Carbine v. Commissioner, 83 T.C. 356, 363
(1984), affd. 777 F.2d 662 (11th Cir. 1985); Heineman v.
Commissioner, 82 T.C. 538, 543 (1984). Only the portion of an
expense that is reasonable in amount is deductible under section
162. United States v. Haskel Engg & Supply Co., 380 F.2d 786, 788-
789 (9th Cir. 1967).
Petitioners deducted $5,020 for membership fees and expenses
in Gull Lake Country Club. Mr. Martin was an active member of the
country club from July to December 1989. Mr. Martin testified that
he joined the country club only because he was "strongly
encouraged" to do so in connection with his employment. He further
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testified that he and his wife never belonged to a country club
prior to the time he joined Gull Lake Country Club and have not
belonged to one since. He used the country club solely to
entertain business customers, and never on social occasions; his
wife and family never used the facilities of the club. Mr. Martin
further testified:
frankly, Mrs. Martin did not want to join a country club.
We're not country club type people and she was very much
against it, always has been against it, still is against
it * * * But after I received some pressure, I said,
hey, it's going to be one way or the other, so I'll join
and we'll try it. And I finally joined it.
We found Mr. Martin's testimony in this regard to be credible.
Respondent argues that a one-time club membership is not
currently deductible, but is a capital expenditure. Mercantile
Natl. Bank v. Commissioner, 30 T.C. 84 (1958), affd. 276 F.2d 58
(5th Cir. 1960). As a general proposition, we agree that a one-
time club membership fee is a capital expenditure because the
benefits of the payment will last beyond a 1-year period. However,
here, Mr. Martin both joined and terminated his membership in the
country club in 1989.
Because we find that Mr. Martin's expenses and fees in the
country club were business expenses, and because Mr. Martin both
joined and terminated his country club membership in the same year,
we hold that petitioners are entitled to a deduction of $5,020 on
Schedule A of their 1989 tax return.
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Petitioners also claim for 1989 $774 as a deduction for
unreimbursed employee business expenses. These expenses are for
"[taking] employees for refreshments after work to summarize the
events from the day and plan the next day".
Ordinary and necessary business expenses generally may not be
deducted under section 162(a) if reimbursement is available from a
taxpayer's employer. Lucas v. Commissioner, 79 T.C. 1, 7 (1982).
Mr. Martin testified that most of the expenses he incurred for
taking employees for refreshments after work were submitted to and
reimbursed by his employer, but that he was required to "pocket
[the claimed expenses] because of budget constraints". Petitioners
presented no other evidence in this regard.
We are not convinced that had Mr. Martin sought reimbursement
for the claimed "pocketed" expenses in 1989, his request would have
been denied. Accordingly, except for the country club fees and
expenses, we sustain respondent's disallowance of petitioners'
claimed deductions for unreimbursed employee business expenses for
1989.
Investment Expenses
The next matter for our attention is whether petitioners are
entitled to deduct $348 in investment expenses for 1989. The
expenses were incurred in Mr. Martin's investigating publicly held
companies with a view towards the possible purchase of their stock.
Respondent disallowed a deduction for these costs on the ground
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that they are nondeductible capital expenditures, to be added to
the basis of the stock acquired. Wagner v. Commissioner, 78 T.C.
910, 915 (1982). Petitioners failed to show error in respondent's
determination. Thus, we sustain respondent's disallowance of the
deduction for investment expenses.
Job-Search Expenses
Petitioners claim entitlement to deduct in 1989 $9,213 in job-
search expenses. Although respondent argued that petitioners
failed to show the business purposes of these expenditures, Mr.
Martin testified that when he realized that his position with Aero-
Motive was in jeopardy, he began to look for other work. We
believe him, but we do not find that the entire amount of job-
search expenses that petitioners claim is deductible.
A review of petitioners' receipts shows a number of items that
are not ordinary and necessary expenses, as required by section
162(a). For instance, petitioners submitted receipts for the
purchase of People magazine and the Enquirer, and for gifts to
friends visited by petitioners. There is a $65 check payable to
Video Land, with no notation as to its purpose. Petitioners also
submitted receipts for the purchase of insecticide, charcoal, and
charcoal starter.
Based on the record presented, and using our best estimate, we
find, and thus hold, that petitioners are entitled to a deduction
for job-search expenses in the amount of $8,000 for 1989.
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Tax-Work Expenses
Petitioners now claim entitlement to deduct $720 as tax-work
(audit) expenses for 1989. Most of these expenses are for travel
to petitioners' attorney's office and related activities for
earlier years. Respondent argues that petitioners did not
substantiate mileage expenses as required by section 274(d).2 We
agree with respondent; accordingly, we sustain respondent's
disallowance of the deduction for tax-work (audit) expenses.
Schedule C Expenses
Petitioners originally claimed a $9,763 Schedule C business
loss for 1989, that resulted from their claiming $11,540 in
business expenses and $1,778 in income. The statutory notice
disallowed $9,361 of the expenses claimed as a section 179
deduction.3 On their original 1989 return, petitioners claimed
$12,860 in expenses relating to the business of Mr. Martin. On
their amended 1989 return, petitioners claimed $12,860 in expenses
relating to the business of Mr. Martin and $8,914 in expenses
2
The requirements imposed by sec. 274(d) are in addition
to those of sec. 162. Furthermore, in the case of travel
expenses, sec. 274(d) overrides the Court's ability to
approximate a taxpayer's allowable expenses under the Cohan
doctrine. Sanford v. Commissioner, 50 T.C. 823, 826-828 (1968),
affd. per curiam 412 F.2d 201 (2d Cir. 1969).
3
Sec. 179(a), in general, allows a taxpayer to elect to
expense the cost of certain property (known as sec. 179 property)
for the taxable year in which the property is placed in service.
In general, sec. 179 property is tangible property used in the
active conduct of a taxpayer's trade or business that would be
subject to depreciation but for the election.
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relating to the business of Mrs. Martin. Thus, the total expenses
petitioners claimed for 1989 on their amended return for both
businesses was $21,774. Respondent contends that petitioners
should be allowed no Schedule C expenses for the year 1989 other
than those expenses already allowed by respondent in the statutory
notice.
Petitioners originally claimed a $12,489 Schedule C business
loss for 1990 that resulted from their claiming $12,489 in business
expenses and no gross receipts. The statutory notice disallowed
all of the claimed expenses. On their amended 1990 return,
petitioners claimed $8,349 in expenses relating to the business of
Mr. Martin, and $4,948 in expenses relating to the business of Mrs.
Martin. Thus, the total expenses petitioners claimed for 1990 on
their amended return for both businesses was $13,297. Respondent
contends that petitioners are entitled to no Schedule C expenses
for 1990.
Petitioner and Mrs. Martin each claimed a home office
deduction. Respondent contends that with respect to 1989, Mr.
Martin used his office until September 20, 1989, both for his
consulting business and as an employee, thus violating the
exclusive-use requirement of section 280A(c)(1) because his use of
a home office as an employee was not for the convenience of his
employer.4
4
Mr. Martin used his claimed home office in connection
with his work as president of Aero-Motive until Sept. 20, 1989.
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Respondent also argues that many of the expenses petitioners
are claiming for business appear to be household expenses, and that
they did not prove that these expenses are ordinary and necessary
business expenses. For example, Mr. Martin claimed expenses for
plumbing, installing a fireplace door, snow removal, pest spraying,
and repair and maintenance of a deck. Mrs. Martin claimed expenses
for sewage and garbage collection and stress training. Respondent
also argues that most of the furniture Mr. Martin purchased for his
home office was more of a personal nature than for business.
Respondent notes that Mr. Martin had no income from his Schedule
C activity during 1989 and 1990.
Section 262 denies a deduction for any personal, living, or
family expenses. With respect to deductions under section 162, the
taxpayer bears the burden of proving that an expense was incurred
for business, rather than personal reasons. Walliser v.
Commissioner, 72 T.C. 433, 437 (1979). Specifically, the taxpayer
must show that the expense was incurred primarily to benefit
his/her business, and there must be a proximate, rather than a
remote or incidental, relationship between the claimed expenses and
the taxpayer's business. Id. In the instant case, petitioners
failed to substantiate that some of the claimed expenses were
incurred primarily to benefit their Schedule C businesses.
Further, we do not find that petitioners used (as required by sec.
280A(c)) that portion of their residence claimed as a home office
either (a) as the principal place of business for their claimed
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business activities, or (b) as a place of business to meet or deal
with clients. Moreover, petitioners have not satisfied the
limitation of section 280A(c)(5), which provides that the amount of
the home office deduction is limited to the excess of the gross
income generated from the business activity conducted in the home
office, less all other deductible expenses attributable to such
activity which are not allocable to the use of the home office
itself. In other words, the deduction may not create or increase
a net loss from the business activity to which it relates.
Grinalds v. Commissioner, T.C. Memo. 1993-66 (citing H. Rept. 99-
426, at 134-135 (1985), 1986-3 C.B. (Vol. 2) 135). In the instant
case, Mr. Martin derived no income from his consulting business in
1989 or 19905 and Mrs. Martin only derived $1,778 in 1989 from her
Schedule C activity and no income for 1990.
Petitioners also claim entitlement to a business deduction for
the use of their 1988 Honda Accord for business activities.
Petitioners both testified that their 1988 Honda was used almost
exclusively for business. However, on the application for the
insurance policy on the automobile, petitioners stated the car was
used for pleasure and not for business. In this regard, we do not
find petitioners' testimony credible. In sum, petitioners are not
5
Mr. Martin contends his income from Woodhead from the
time he was relieved as president of Aero-Motive in September
1989 until September 1990, should be characterized as Schedule C
income. We disagree. Mr. Martin received a W-2 with respect to
his income, which petitioners reported as wages on their original
1989 and 1990 tax returns.
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entitled to a deduction for any of the claimed Schedule C expenses
for 1989 or 1990, except to the extent allowed in the statutory
notice of deficiency.
Miscellaneous Itemized Deductions
For 1990, petitioners claimed $7,176 of miscellaneous itemized
deductions. Petitioners provided no documentary evidence to
support their conclusory testimony that they incurred these
deductions. Although sworn testimony may suffice as proof, when it
is so general and conclusory in character (as it was here), it will
not be sufficient to satisfy petitioners' burden of proof. See
Hearn v. Commissioner, 36 T.C. 672, 673-674 (1961), affd. 309 F.2d
431 (9th Cir. 1962).
In addition, since the majority of these expenses are for
travel and entertainment, they are subject to the special
substantiation provisions of section 274(d), and hence normally can
not be substantiated by testimony alone. Consequently, we sustain
respondent's disallowance of petitioner's claimed deduction in 1990
for miscellaneous itemized deductions.
Accuracy-Related Penalty
Finally, we must decide whether petitioners are liable for the
accuracy-related penalty under section 6662(a) for 1989 and 1990.
Section 6662 imposes a penalty equal to 20 percent of the portion
of the underpayment that is attributable to negligence or disregard
of rules or regulations. Sec. 6662(a) and (b)(1).
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Negligence is defined as the failure to exercise the due care
that a reasonable, prudent person would exercise under similar
circumstances. Zmuda v. Commissioner, 731 F.2d 1417, 1422 (9th
Cir. 1984), affg. 79 T.C. 714 (1982); Neely v. Commissioner, 85
T.C. 934, 947 (1985). A taxpayer has the burden of proving that
respondent's determination is in error. Rule 142(a); Luman v.
Commissioner, 79 T.C. 846, 860-861 (1982).
Petitioners claimed numerous Schedule A and Schedule C
expenses on their 1989 and 1990 returns. At trial, they
substantially reduced the amount of the deduction for most of these
expenses. For the most part, their documentation to substantiate
these expenses was lacking. Indeed, petitioners presented no
documentary evidence to support their claim of $7,174 in
miscellaneous itemized deductions for 1990.
Considering all the facts, we find that petitioners were
negligent and disregarded rules and regulations in preparing their
1989 and 1990 returns. Thus, we sustain respondent's determination
that petitioners are liable for the accuracy-related penalty on the
amount of the underpayment for 1989 and 1990.
To reflect the foregoing,
Decision will be entered
under Rule 155.
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