T.C. Summary Opinion 2011-111
UNITED STATES TAX COURT
PHILLIP DORIS, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 25551-09S. Filed September 19, 2011.
Phillip Doris, pro se.
Audra M. Dineen, for respondent.
HAINES, Judge: This case was heard pursuant to section 7463
of the Internal Revenue Code in effect when the petition was
filed.1 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.
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended for the year at issue, and
Rule references are to the Tax Court Rules of Practice and
Procedure. Amounts are rounded to the nearest dollar.
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Respondent determined a deficiency of $6,824 and an
accuracy-related penalty pursuant to section 6662(a) of $1,365
with respect to petitioner’s 2006 Federal income tax. After
concessions, the issues for decision are: (1) Whether petitioner
is entitled to deductions claimed on Schedule A, Itemized
Deductions, for unreimbursed employee business expenses; (2)
whether petitioner is entitled to deductions claimed on Schedule
C, Profit or Loss From Business, for expenses related to his kart
racing activity; and (3) whether petitioner is liable for the
accuracy-related penalty pursuant to section 6662(a).
Background
Some of the facts have been stipulated and are so found.
The stipulation of facts and the supplemental stipulation of
facts, together with the attached exhibits, are incorporated
herein by this reference. At the time petitioner filed his
petition, he resided in California.
Petitioner is employed as a correctional officer by the
State of California at San Quentin State Prison (San Quentin) and
has held this position since 1982. In 2006 petitioner worked an
average of 60 hours per week at San Quentin, earning wages of
$178,528. As a correctional officer, petitioner is required to
complete 40 hours of annual training covering, among other
things, weapons qualification, use of pepper spray, use of force,
sexual harassment, cell extractions, and gang activity. This
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training is provided by the in-service training department at San
Quentin to teach correctional officers the proper techniques to
use on the job. Petitioner is also required to complete a
quarterly weapons qualifications test. This test is conducted at
San Quentin, and San Quentin provides all necessary weapons and
ammunition for this test.
Correctional officers at San Quentin are required to
purchase two types of uniforms. Class A uniforms, which are
formal dress uniforms, must be worn by a correctional officer for
certain types of activities, such as public posts, court details,
the transportation of inmates, and other special events. Class B
uniforms are more casual and consist of either a pair of jeans
and a shirt or a jumpsuit.
Petitioner enrolled in additional self-defense instruction
and practiced martial arts not required by San Quentin. He also
purchased ammunition for personal use as well as tactical
trousers, a radio holder, pepper spray, a baton, and a lapel.
None of these purchases were required by San Quentin.
Petitioner spent much of his spare time at raceways and
working on race karts (kart racing activity). Petitioner began
racing karts in the early 1980s and enjoyed racing karts and
being around speedways. In 2005 petitioner began offering karts
to customers for rent. He used the name Doris Racing for this
activity and charged $50 for 20-30 minutes of use of his karts.
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Doris Racing was the first time petitioner tried to operate a
kart racing activity or any other activity in this manner.
Petitioner did not advertise Doris Racing in local publications.
Petitioner did not maintain a separate bank account for
Doris Racing. Petitioner’s records consist of handwritten notes
and certain receipts related to Doris Racing. Petitioner’s
records were created at the end of every month. Petitioner did
not keep a log in 2006 tracking his income and expenses from
Doris Racing. Petitioner’s kart racing activity never earned a
profit, and in 2007 petitioner stopped operating Doris Racing.
On July 27, 2009, respondent issued a statutory notice of
deficiency to petitioner denying his Schedule A deductions for
unreimbursed employee business expenses and Schedule C deductions
with respect to Doris Racing. On October 23, 2009, petitioner
timely mailed his petition to this Court.
Discussion
I. Unreimbursed Employee Business Expenses
On his Schedule A, petitioner reported unreimbursed employee
business expenses consisting of the following:
Uniform purchases $3,770
Uniform cleaning 2,360
Subscriptions 640
Self-defense instruction 5,965
Weapons, range fees, and ammunition 7,340
20,075
Deductions are a matter of legislative grace, and the taxpayer
must prove he is entitled to the deductions claimed. Rule
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142(a); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440
(1934). Section 162(a) provides that “There shall be allowed as
a deduction all the ordinary and necessary expenses paid or
incurred during the taxable year in carrying on any trade or
business”. Taxpayers are required to maintain records sufficient
to establish the amounts of allowable deductions and to enable
the Commissioner to determine the correct tax liability. Sec.
6001; Shea v. Commissioner, 112 T.C. 183, 186 (1999). Respondent
disallowed each of petitioner’s above-listed deductions as
personal. We consider each in the order listed.
1. Uniform Purchases and Uniform Cleaning
Petitioner claimed a deduction for uniforms purchased and
uniform cleaning for his job as a correctional officer at San
Quentin. Expenses for work clothing are deductible if the
clothing or uniform is of a type specifically required as a
condition of employment, the uniform is not adaptable to general
use as ordinary clothing, and the uniforms are not worn as
ordinary clothing. Yeomans v. Commissioner, 30 T.C. 757, 767-769
(1958); Wasik v. Commissioner, T.C. Memo. 2007-148; Beckey v.
Commissioner, T.C. Memo. 1994-514.
Petitioner was required to purchase uniforms for his job at
San Quentin, and we are satisfied that at least the class A
uniforms required by San Quentin are not adaptable to general use
and are not worn as ordinary clothing. Nonetheless, petitioner
received a uniform allowance from San Quentin of $530 in 2006. A
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uniform receipt for $309 was the only evidence petitioner
produced outside of his own testimony to substantiate his claimed
uniform purchase expense. Because petitioner received an
allowance in excess of his substantiated costs, he is not
entitled to a deduction.
Petitioner’s only evidence to substantiate his claimed
uniform cleaning expense is a credit card statement showing an
$18 dry cleaning charge. The credit card statement does not
state whether this expense was incurred to clean petitioner’s
uniforms. Further, even if we were to assume this expense was
incurred for that purpose, the $18 fits within petitioner’s
uniform allowance for 2006. Accordingly, we sustain respondent’s
determination with respect to uniform purchases and cleaning.
2. Subscriptions
Petitioner has failed to present any evidence to
substantiate his $640 claimed deduction for subscriptions.
Accordingly, we sustain respondent’s determination with respect
to the subscriptions.
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3. Self-Defense Instruction
Expenditures made by a taxpayer for education are
deductible, with certain exceptions not relevant here,2 if
the education either:
(1) Maintains or improves skills required by the
individual in his employment or other trade or business; or
(2) Meets the express requirements of the individual’s
employer, or the requirements of applicable law or
regulations, imposed as a condition to the retention by the
individual of an established employment relationship,
status, or rate of compensation.
Sec. 1.162-5(a), Income Tax Regs. Whether education maintains or
improves skills required by the taxpayer in his business is a
question of fact. Boser v. Commissioner, 77 T.C. 1124, 1131
(1982), affd. without published opinion (9th Cir., Dec. 22,
1983); Joseph v. Commissioner, T.C. Memo. 2005-169. The fact
that a taxpayer’s education is helpful to him in the performance
of his duties does not establish that its cost is a deductible
business expense. Joseph v. Commissioner, supra. Taxpayers must
show that there is a direct and proximate relationship between
the education expense and the skills required in their business.
Boser v. Commissioner, supra at 1131.
Petitioner conceded at trial that outside self-defense
instruction was not required by San Quentin. He decided to take
2
Otherwise qualifying expenses are not deductible if the
education (1) is required in order to meet the minimum
educational requirements for qualification in the taxpayer’s
employment, or (2) qualifies the taxpayer for a new trade or
business. Sec. 1.162-5(b), Income Tax Regs.
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self-defense classes because he felt that the extra knowledge
would help him deal with the dangers that come with working at a
prison. All correctional officers at San Quentin received 40
hours of annual training, including training on the use of force.
Petitioner has failed to present any evidence describing the
nature of his self-defense instruction and whether such training
is consistent with the training required by San Quentin.
Further, petitioner has not presented any evidence to
substantiate the cost and amount paid for the claimed deduction.
Accordingly, we sustain respondent’s determination with respect
to the self-defense instruction.
4. Weapons, Range Fees, and Ammunition
Petitioner presented four documents to substantiate
miscellaneous weapons expenses totaling approximately $385. The
first document is an invoice for an $85 expense related to
petitioner’s personal firearm. Petitioner has not presented
proof of payment with respect to this expense. Accordingly, we
sustain respondent’s determination with respect to the firearm.
The second and third documents are receipts for purchases
from Quartermaster, a uniform and equipment manufacturing
company. The first receipt, dated August 9, 2006, shows a
payment of $102 with petitioner’s credit card for tactical
trousers, a radio holder, and pepper spray. The second receipt,
dated September 8, 2006, shows a payment of $173 with
petitioner’s credit card for two pairs of tactical pants, a
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baton, and a lapel. Petitioner has substantiated that these
expenses were incurred; however, he has not presented any
evidence outside of his own self-serving testimony to establish
that they were required for his job at San Quentin. Accordingly,
we sustain respondent’s determination with respect to
petitioner’s purchases from Quartermaster.
Next, petitioner presented a $26 receipt from Northbay
Firearms for weapon cleaning. Petitioner conceded that this
expense was incurred to clean his personal firearm. Accordingly,
we sustain respondent’s determination with respect to
petitioner’s expense at Northbay Firearms.
Finally, petitioner has failed to present any evidence of
expenses incurred with respect to range fees or ammunition.
Accordingly, we sustain respondent’s determination with respect
to range fees and ammunition.
II. Petitioner’s Kart Racing Activity
We must next decide whether petitioner’s kart racing
activity for 2006 amounts to a trade or business pursuant to
section 162(a) and, if so, whether petitioner has substantiated
his claimed deductions with respect to this activity. To be
engaged in a trade or business, an individual must be involved in
an activity with continuity and regularity and the primary
purpose for engaging in the activity must be for income or
profit. Commissioner v. Groetzinger, 480 U.S. 23, 35 (1987). A
sporadic activity, a hobby, or an amusement diversion does not
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qualify. Id. Deciding whether an individual is carrying on a
trade or business requires an examination of the facts involved
in each case. Higgins v. Commissioner, 312 U.S. 212, 217 (1941).
Under section 183(b)(2), if an individual engages in an
activity without the primary objective of making a profit,
deductions attributable to the activity are allowable only to the
extent of gross income from the activity. See Allen v.
Commissioner, 72 T.C. 28, 33 (1979). The Court of Appeals for
the Ninth Circuit, to which an appeal in this case would lie
absent stipulation to the contrary, has held that an activity is
engaged in for profit if the taxpayer’s “predominant, primary or
principal objective” in engaging in the activity was to realize
an economic profit independent of tax savings. Wolf v.
Commissioner, 4 F.3d 709, 713 (9th Cir. 1993), affg. T.C. Memo.
1991-212. The taxpayer generally bears the burden of
establishing that the activity was engaged in for profit. See
Rule 142(a).
Section 1.183-2(b), Income Tax Regs., sets forth a
nonexclusive list of factors to be considered in evaluating a
taxpayer’s profit objective: (1) The manner in which the
taxpayer carries on the activity; (2) the expertise of the
taxpayer or his advisers; (3) the time and effort expended by the
taxpayer in carrying on the activity; (4) the expectation that
assets used in the activity may appreciate in value; (5) the
success of the taxpayer in carrying on other similar or
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dissimilar activities; (6) the taxpayer’s history of income or
losses with respect to the activity; (7) the amount of occasional
profits, if any, from the activity; (8) the financial status of
the taxpayer; and (9) elements of personal pleasure or
recreation. Indep. Elec. Supply, Inc. v. Commissioner, 781 F.2d
724, 726-727 (9th Cir. 1986), affg. Lahr v. Commissioner, T.C.
Memo. 1984-472; Antonides v. Commissioner, 91 T.C. 686, 694 n.4
(1988), affd. 893 F.2d 656 (4th Cir. 1990); Golanty v.
Commissioner, 72 T.C. 411, 426 (1979), affd. without published
opinion 647 F.2d 170 (9th Cir. 1981); sec. 1.183-2(b), Income Tax
Regs. No single factor or group of factors is determinative.
Golanty v. Commissioner, supra at 426; Dunn v. Commissioner, 70
T.C. 715, 720 (1978), affd. 615 F.2d 578 (2d Cir. 1980); sec.
1.183-2(b), Income Tax Regs. A final determination is made only
after considering all facts and circumstances. Indep. Elec.
Supply, Inc. v. Commissioner, supra at 727; Antonides v.
Commissioner, supra at 694; Golanty v. Commissioner, supra at
426.
“The proper focus of the test * * * is the taxpayer’s
subjective intent. * * * However, objective indicia may be used
to establish that intent.” Skeen v. Commissioner, 864 F.2d 93,
94 (9th Cir. 1988), affg. Patin v. Commissioner, 88 T.C. 1086
(1987); see also Wolf v. Commissioner, supra at 713; Indep. Elec.
Supply, Inc. v. Commissioner, supra at 726. The expectation of
making a profit need not be reasonable. Beck v. Commissioner, 85
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T.C. 557, 569 (1985); Dreicer v. Commissioner, 78 T.C. 642, 645
(1982), affd. without published opinion 702 F.2d 1205 (D.C. Cir.
1983); Golanty v. Commissioner, supra at 425-426. However,
greater weight is given to objective facts than to a taxpayer’s
self-serving statement of intent. Indep. Elec. Supply, Inc. v.
Commissioner, supra at 726; Antonides v. Commissioner, supra at
694; Thomas v. Commissioner, 84 T.C. 1244, 1269 (1985), affd. 792
F.2d 1256 (4th Cir. 1986). To make our determination, we address
the nine factors found in section 1.183-2(b), Income Tax Regs.
See Lowe v. Commissioner, T.C. Memo. 2010-129.
1. The Manner in Which the Taxpayer Carries On the Activity
The fact that the taxpayer carries on the activity in a
businesslike manner may indicate that the activity is engaged in
for profit. Sec. 1.183-2(b)(1), Income Tax Regs. Three common
inquiries are considered in this context: (1) Whether the
taxpayer maintained complete and accurate books and records for
the activity; (2) whether the taxpayer conducted the activity in
a manner substantially similar to those of other comparable
activities that were profitable; and (3) whether the taxpayer
changed operating procedures, adopted new techniques, or
abandoned unprofitable methods in a manner consistent with an
intent to improve profitability. Giles v. Commissioner, T.C.
Memo. 2005-28; sec. 1.183-2(b)(1), Income Tax Regs.
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Maintaining complete and accurate books and records may
indicate that an activity is engaged in for profit. Rozzano v.
Commissioner, T.C. Memo. 2007-177. Petitioner’s recordkeeping
system was limited to handwritten notes and various receipts in a
file. Petitioner’s handwritten notes were not produced
contemporaneously with his activity but were produced once a
month. Further, petitioner failed to maintain any records of his
income and expenses from Doris Racing. Thus, petitioner has not
shown that he maintained complete and accurate books and records
for Doris Racing.
Conducting an activity “in a manner substantially similar
to other activities of the same nature” can “indicate that the
activity is engaged in for profit.” Remler v. Commissioner, T.C.
Memo. 2005-265. Indicators of such include “advertising,
maintaining a separate business bank account, the development of
a written business plan, and having a plausible strategy for
earning a profit.” Id. Petitioner did not present a written
business plan for Doris Racing. Further, he admitted that he
used his personal bank account and credit cards for purchases
related to Doris Racing. Petitioner did not advertise locally,
but he testified that he paid individuals in foreign countries to
recruit clients. He further testified that he took promotional
pictures of his clients on the racetrack. Petitioner failed,
however, to present any substantive evidence of advertising.
None of the individuals petitioner claims to have hired testified
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at trial, and petitioner failed to present any documentation of
the tasks performed by these individuals or proof that they were
paid. Petitioner also failed to describe how pictures of his
clients on the racetrack were used for promotions or present any
evidence of such promotions. Accordingly, petitioner has failed
to demonstrate that he conducted Doris Racing in a manner similar
to other kart racing businesses.
Changing operating methods, adopting new techniques, or
abandoning “unprofitable methods in a manner consistent with an
intent to improve profitability” may indicate that the activity
is engaged in for profit. Giles v. Commissioner, supra; see also
sec. 1.183-2(b)(1), Income Tax Regs. Doris Racing was never
profitable, yet petitioner never adopted new techniques, such as
local advertising. Petitioner abandoned Doris Racing because it
was unprofitable without attempting to make any substantive
changes to his alleged business model. This does not demonstrate
an intent to improve profitability.
Petitioner has not shown that he carried on Doris Racing in
a businesslike manner. Accordingly, this factor favors
respondent.
2. The Expertise of the Taxpayer or His Advisers
“Preparation for the activity by extensive study of its
accepted business, economic, and scientific practices, or
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consultation with those who are expert therein, may indicate that
the taxpayer has a profit motive where the taxpayer carries on
the activity in accordance with such practices.” Sec. 1.183-
2(b)(2), Income Tax Regs. In analyzing this factor, a
distinction must be drawn between expertise in the mechanics of
an activity and expertise in the business practices of the
activity. Zidar v. Commissioner, T.C. Memo. 2001-200 (citing
Burger v. Commissioner, 809 F.2d 355, 359 (7th Cir. 1987), affg.
T.C. Memo. 1985-523).
In Zidar v. Commissioner, supra, we held that a taxpayer’s
stock car racing activity was an activity not engaged in for
profit where the taxpayer had a longstanding interest in stock
car racing but no expertise in the economics or business of
owning a stock car. The facts of this case are analogous:
petitioner had a longstanding interest in kart racing, but there
is no evidence that he studied or understood the accepted
business practices of kart racing or consulted experts in the
field. Petitioner testified that he had been involved in racing
and had seen “how it works.” He further testified he was
familiar with what people in the kart racing business do.
Petitioner’s self-serving testimony does not establish an
understanding of the kart racing business. Accordingly, this
factor favors respondent.
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3. The Time and Effort Expended by the Taxpayer in Carrying
On the Activity
The time and effort devoted to an activity may indicate that
the activity is engaged in for profit, particularly where the
activity does not have a substantial personal or recreational
aspect. Sec. 1.183-2(b)(3), Income Tax Regs.; see also Sousa v.
Commissioner, T.C. Memo. 1989-581 (amount of time spent on a
fishing and boating activity not necessarily indicative of profit
objective where taxpayer derived great personal pleasure from the
activity). A taxpayer’s withdrawal from another occupation to
devote most of his time to the activity may also indicate that
the activity is engaged in for profit. Sec. 1.183-2(b)(3),
Income Tax Regs.
Although petitioner devoted a substantial amount of his
spare time to his kart racing activity in 2006, the record
reflects that he derived a great deal of personal pleasure from
the activity. Accordingly, the amount of time petitioner spent
on the activity is not necessarily indicative of a profit
objective. Further, petitioner’s primary occupation in 2006 was
as a correctional officer for San Quentin. Petitioner worked at
San Quentin approximately 60 hours per week, and he has not
presented any evidence that his work schedule at San Quentin was
scaled down because of the time he spent working on Doris Racing.
Accordingly, this factor favors respondent.
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4. The Expectation That Assets Used in the Activity May
Appreciate in Value
“The term ‘profit’ encompasses appreciation in the value of
assets, such as land, used in the activity.” Sec. 1.183-2(b)(4),
Income Tax Regs. Petitioner did not argue or produce other
evidence to show that he bought assets for Doris Racing with the
expectation that they would appreciate in value. Accordingly,
this factor favors respondent.
5. The Success of the Taxpayer in Carrying On Other Similar
or Dissimilar Activities
“The fact that the taxpayer has engaged in similar
activities in the past and converted them from unprofitable to
profitable enterprises may indicate that he is engaged in the
present activity for profit, even though the activity is
presently unprofitable.” Sec. 1.183-2(b)(5), Income Tax Regs.
Petitioner does not have a history of carrying on similar
activities. His only other source of income was his job at San
Quentin. Accordingly, this factor favors respondent.
6. The Taxpayer’s History of Income or Losses With Respect
to the Activity
A taxpayer’s history of income or loss with respect to an
activity may indicate the presence or absence of a profit
objective. Sec. 1.183-2(b)(6), Income Tax Regs.; see also
Golanty v. Commissioner, 72 T.C. at 426. A series of losses
during the startup phase of an activity does not necessarily
indicate the activity is not engaged in for profit. Sec. 1.183-
2(b)(6), Income Tax Regs.
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Doris Racing was never a profitable activity. However, lack
of profitability in the startup stage is not unusual for a small
business. Accordingly, we find this factor neutral.
7. The Amount of Occasional Profits, If Any, From the
Activity
“The amount of profits in relation to the amount of losses
incurred, and in relation to the amount of the taxpayer’s
investment and the value of the assets used in the activity, may
provide useful criteria in determining the taxpayer’s intent.”
Sec. 1.183-2(b)(7), Income Tax Regs. “[A]n opportunity to earn a
substantial ultimate profit in a highly speculative venture is
ordinarily sufficient to indicate that the activity is engaged in
for profit even though losses or only occasional small profits
are actually generated.” Id.
As discussed above, Doris Racing was never profitable.
Petitioner did not present a written business plan or demonstrate
any strategic initiative towards making it financially
successful. He has failed to present any evidence, including
speculative evidence, that Doris Racing had the opportunity to
earn a profit. Accordingly, this factor favors respondent.
8. The Financial Status of the Taxpayer
“Substantial income from sources other than the activity
(particularly if the losses from the activity generate
substantial tax benefits) may indicate that the activity is not
engaged in for profit especially if there are personal or
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recreational elements involved.” Sec. 1.183-2(b)(8), Income Tax
Regs. Petitioner earned wage income of $178,528 from his job as
a correctional officer at San Quentin. Because petitioner earned
significant income from a source other than Doris Racing, this
factor favors respondent.
9. Elements of Personal Pleasure or Recreation
“The presence of personal motives in carrying on of an
activity may indicate that the activity is not engaged in for
profit, especially where there are recreational or personal
elements involved.” Sec. 1.183-2(b)(9), Income Tax Regs.
“‘[W]here the possibility for profit is small (given all the
other factors) and the possibility for gratification is
substantial, it is clear that the latter possibility constitutes
the primary motivation for the activity.’” Dodge v.
Commissioner, T.C. Memo. 1998-89 (quoting Burger v. Commissioner,
T.C. Memo. 1985-523), affd. without published opinion 188 F.3d
507 (6th Cir. 1999).
Petitioner conceded that he enjoys being involved in kart
racing. He began racing karts in the early 1980s and has been
around kart racing ever since. It is clear from the record that
petitioner derived significant personal pleasure and recreation
from Doris Racing. Accordingly, this factor favors respondent.
After considering all of the above factors as applied to the
unique facts and circumstances of this case, we conclude that
Doris Racing was an activity not engaged in for profit within the
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meaning of section 183. As a result, we sustain respondent’s
determination with respect to petitioner’s Schedule C deductions.
III. Section 6662(a) Penalty
Section 6662(a) and (b)(1) imposes a penalty equal to 20
percent of the amount of an underpayment attributable to
negligence or disregard of rules or regulations. Negligence
includes any failure to make a reasonable attempt to comply with
the provisions of the Internal Revenue 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.
Petitioner’s failure to produce records substantiating his
Schedule A itemized deductions supports the imposition of the
accuracy-related penalty for negligence with respect to those
deductions for 2006. Further, petitioner’s attempt to deduct
expenses from a personal activity supports the imposition of the
accuracy-related penalty for negligence with respect to his
Schedule C deductions for 2006.
Section 6662(a) and (b)(2) imposes an accuracy-related
penalty upon any underpayment of tax resulting from a substantial
understatement of income tax. The penalty is equal to 20 percent
of the portion of any underpayment attributable to a substantial
understatement of income tax. Id. The term “substantial
understatement” is defined as exceeding the greater of: (1) 10
percent of the tax required to be shown on the return for the
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taxable year or (2) $5,000. Sec. 6662(d)(1)(A). The
applicability of section 6662(b)(2) will depend on the magnitude
of the understatement of income tax as calculated under Rule 155.
If petitioner’s understatement of income tax as calculated under
Rule 155 exceeds the greater of $5,000 or 10 percent of the tax
required to be shown on the return in 2006, respondent will have
met his burden of production under section 7491(c). If not,
respondent will have failed to meet his burden of production
under section 7491(c).
An accuracy-related penalty is not imposed on any portion of
the underpayment as to which the taxpayer acted with reasonable
cause and in good faith. Sec. 6664(c)(1). The taxpayer bears
the burden of proof with regard to those issues. Higbee v.
Commissioner, 116 T.C. 438, 446 (2001). Petitioner has failed to
show reasonable cause, substantial authority, or any other basis
for reducing the penalties. Accordingly, we find petitioner
liable for the section 6662 penalty for 2006 as commensurate with
respondent’s concessions and our holding. See id. at 449.
In reaching our holdings, we have considered all arguments
made, and, to the extent not mentioned, we conclude that they are
moot, irrelevant, or without merit.
To reflect the foregoing,
Decision will be entered
under Rule 155.