T.C. Memo. 2000-268
UNITED STATES TAX COURT
BARRY AND PENNY KNELMAN, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 8397-99. Filed August 24, 2000.
Barry and Penny Knelman, pro sese.
Erica Y. Wu, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
VASQUEZ, Judge: Respondent determined a deficiency of
$11,790 and an accuracy-related penalty of $2,358 on petitioners’
1994 Federal income tax. After concessions,1 the issues for
1
In the notice of deficiency, respondent determined that
petitioners had underreported their income by $17,753. After
respondent conceded $3,198, petitioners stipulated that they had
received but failed to report $14,555 of operating income from
(continued...)
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decision are:
(1) Whether petitioners failed to report $14,555 of Schedule
C, Profit or Loss From Business, income for the 1994 tax year;
(2) whether petitioners are entitled to deduct $2,035 for
travel expenses and $1,330 for meals under section 162 as
Schedule C business expenses; and
(3) whether petitioners are liable for the accuracy-related
penalty under section 6662(a).2
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulated facts and the related exhibits are incorporated
herein by this reference. At the time of filing the petition in
this case, petitioners resided in Irvine, California.
(...continued)
their landscaping business. They dispute, however, that this
income is subject to tax.
Respondent also determined that petitioners had overstated
their Schedule C, Profit or Loss From Business, deductions
relating to their landscaping business by $18,456. Respondent,
however, conceded $2,235 of these deductions, reducing the
overstated amount to $16,221. Petitioners then conceded $12,856
of that amount, leaving $3,365 in dispute.
Before the parties’ concessions, respondent determined that
petitioners were subject to additional self-employment income
taxes of $6,908 and entitled to an additional self-employment tax
deduction of $2,558. Petitioners presented no evidence at trial
regarding this issue and failed to address it on brief.
Petitioners are therefore liable for any self-employment income
taxes due on the additional self-employment income found by the
Court. See Petzoldt v. Commissioner, 92 T.C. 661, 698 (1989).
2
All section references are to the Internal Revenue Code
in effect for the year in issue, and all Rule references are to
the Tax Court Rules of Practice and Procedure.
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During the mid-1980's, Barry Knelman began operating a
landscaping business in southern California named “Barry Knelman
Plant Company”. Mr. Knelman operated the landscaping business as
a sole proprietorship, selling and maintaining indoor plants for
business offices in the Los Angeles County area. In 1991,
petitioners decided to move to Ohio so that their children could
be closer to the rest of their family. Instead of selling,
relocating, or closing the landscaping business, Mr. Knelman
decided to continue operating the business in California.
Throughout 1994, petitioners maintained their residence in
Ohio. During this period, the only business petitioners owned or
operated was the landscaping business in southern California.
Because Mr. Knelman could not afford to hire a full-time employee
to manage the landscaping business, he traveled to California
every month. During 1994, Mr. Knelman spent more than 6 months
in California, with each stay lasting approximately 14 days.
Petitioners filed a joint Federal income tax return for the
taxable year ending December 31, 1994. On their return,
petitioners failed to report $14,555 from the landscaping
business. Petitioners also claimed $3,365 in Schedule C
deductions for the costs Mr. Knelman incurred traveling between
his residence in Ohio and his landscaping business in southern
California. The disputed deductions involve $2,035 for travel
expenses and $1,330 for meals and entertainment expenses.
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OPINION
Gross Income
Under section 61, Congress defined gross income as all
income from whatever source derived. See Commissioner v.
Glenshaw Glass Co., 348 U.S. 426, 430 (1955); Abrams v.
Commissioner, 82 T.C. 403, 407 (1984). This includes income from
a business. See sec. 61(a)(2). Petitioners do not challenge
respondent’s calculation of petitioners’ income. Petitioners, in
fact, stipulate that during 1994, Mr. Knelman received, but
failed to report, $14,555 of income from the landscaping
business.
Notwithstanding the express language of section 61,
petitioners contend that they are not required to pay any Federal
income tax on this income. Petitioners advance shopworn
arguments characteristic of tax-protester rhetoric that has been
universally rejected by the courts. See Williams v.
Commissioner, 114 T.C. 136, 138-139 (2000); Boyce v.
Commissioner, T.C. Memo. 1996-439, affd. without published
opinion 122 F.3d 1069 (9th Cir. 1997); Fair v. Commissioner, T.C.
Memo. 1994-276, affd. without published opinion 60 F.3d 833 (9th
Cir. 1995). Petitioners allege: (1) There are no provisions in
the Internal Revenue Code requiring U.S. citizens to pay Federal
income tax on income earned in the United States; (2) the income
which the landscaping business earned was not gross income and
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thus not taxable; (3) the deficiency was not a legally
enforceable deficiency; and (4) petitioners were denied their
Sixth Amendment right to confront and cross-examine respondent’s
employees who audited their return. We shall not painstakingly
address petitioners’ assertions “with somber reasoning and
copious citation of precedent; to do so might suggest that these
arguments have some colorable merit.” Crain v. Commissioner, 737
F.2d 1417, 1417 (5th Cir. 1984); Williams v. Commissioner, supra
at 139. Accordingly, we sustain respondent’s position that
petitioners underreported their income by $14,555 with regard to
the landscaping business.
Travel and Meals and Entertainment Expenses
Petitioners claim that they paid $2,035 for travel expenses
and $2,660 for meals and entertainment expenses.3 The travel
expenses represent the airfare costs Mr. Knelman incurred flying
between his residence in Ohio and his place of business in
California, whereas the meals and entertainment expenses
represent the cost of meals Mr. Knelman incurred during his trips
to California. Respondent disallowed the deductions relating to
both expenditures, contending that the travel and the meals and
entertainment expenses were nondeductible personal expenses and
3
Their claim to the meals and entertainment deduction
equals $1,330 after the 50-percent reduction pursuant to sec.
274(n).
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not ordinary and necessary expenses incurred in the pursuit of a
business.
Deductions are strictly a matter of legislative grace, and
taxpayers bear the burden of proving that they are entitled to
any deductions claimed on their return. See Rule 142(a);
INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). Section
162 permits deductions for ordinary and necessary expenses
incurred in carrying on a trade or business, such as travel
expenses and meals and entertainment expenses. See sec. 162(a).
Section 262, however, precludes deductions for personal,
living, or family expenses not otherwise expressly allowed. For
example, commuting expenses between a taxpayer’s home and place
of business are personal expenses and thus not deductible. See
Commissioner v. Flowers, 326 U.S. 465, 469-470 (1946); Sanders v.
Commissioner, 439 F.2d 296, 297 (9th Cir. 1971), affg. 52 T.C.
964 (1969); Roy v. Commissioner, T.C. Memo. 1997-562, affd.
without published opinion 182 F.3d 927 (9th Cir. 1999); secs.
1.162-2(e), 1.262-1(b)(5), Income Tax Regs. The fact that a
taxpayer chooses to live a substantial distance from his place of
business provides no exception to this general rule. See
Commissioner v. Flowers, supra at 470, 473; Sisson v.
Commissioner, T.C. Memo. 1994-545, affd. without published
opinion 108 F.3d 339 (9th Cir. 1996). In addition, the living
expenses incurred as a result of this decision are also
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nondeductible personal expenses. See Commissioner v. Flowers,
supra at 472-474; Tucker v. Commissioner, 55 T.C. 783, 786
(1971).
The rationale behind this rule is that a taxpayer is free to
choose the location of his personal residence. See Anderson v.
Commissioner, 60 T.C. 834, 835 (1973). If we allowed the
taxpayer to deduct the commuting expenses, we would be permitting
the taxpayer to take a deduction for what is an inherently
personal expense. See id.; Alexander v. Commissioner, T.C. Memo.
1979-436.
In the instant case, we find that Mr. Knelman’s primary
motivation in traveling between Ohio and California was to
commute between the locations of his chosen residence and
business. Had petitioners remained in southern California, their
traveling expenses between work and home would also have been
nondeductible commuting expenses. The distance traveled, no
matter how far, does not change the character of the commuting
expense. See Commissioner v. Flowers, supra at 473.
Furthermore, petitioners have not presented any evidence
refuting respondent’s determination that the meals petitioners
deducted were nondeductible living expenses incurred as a result
of their decision to live outside the State where their
landscaping business is located. In the instant case, the
taxpayers, for personal reasons, wanted to reside in Ohio and
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maintain their landscaping business in California. We hold that
the costs of the airfare and meals cannot be deducted as ordinary
and necessary business expenses under section 162. Therefore, we
sustain respondent’s determination on this issue.
Accuracy-Related Penalty
Pursuant to section 6662(a), respondent determined that
petitioners are liable for an accuracy-related penalty due to an
underpayment of tax attributable to negligence or disregard of
rules or regulations. Because respondent determined that
petitioners had failed to report income, failed to maintain
proper records to substantiate the Schedule C deductions, and
deducted personal expenses, respondent computed the accuracy-
related penalty based upon the entire underpayment.
Petitioners bear the burden of proving that section 6662
does not apply. See Rule 142(a); Tweeddale v. Commissioner, 92
T.C. 501, 506 (1989). Petitioners have neither offered any
evidence regarding this issue nor provided a reasonable
explanation why we should not hold them liable for the accuracy-
related penalty. Accordingly, we sustain respondent’s
determination of the accuracy-related penalty with regard to the
underpayment associated with petitioners' concessions and this
Court's redeterminations.
In reaching our holdings herein, we have considered all of
petitioners’ arguments, and, to the extent not mentioned above,
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we find them to be irrelevant or without merit.
To reflect the foregoing,
Decision will be entered
under Rule 155.