                  T.C. Summary Opinion 2008-105



                      UNITED STATES TAX COURT



              HASAN HUSEYIN BABATURK, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 9950-06S.               Filed August 19, 2008.



     Hasan Huseyin Babaturk, pro se.

     Bradley C. Plovan, for respondent.



     GOLDBERG, Special Trial Judge:    This case was heard pursuant

to the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed.   Pursuant to section

7463(b), the decision to be entered is not reviewable by any

other court, and this opinion shall not be treated as precedent

for any other case.   Unless otherwise indicated, subsequent

section references are to the Internal Revenue Code in effect for
                              - 2 -

the years in issue, and all Rule references are to the Tax Court

Rules of Practice and Procedure.

     Respondent determined deficiencies of $34,890 and $6,985,

and accuracy-related penalties under section 6662(a) of $6,978

and $1,397, in petitioner’s Federal income tax for 2003 and 2004,

respectively.

     The deficiencies resulted from:    (1) Respondent’s

disallowance of $106,710 and $14,850 of business expense

deductions claimed on Schedule C, Profit or Loss From Business,

for 2003 and 2004, respectively; (2) respondent’s disallowance of

dependency exemption deductions petitioner claimed for his

girlfriend, Arlene Makris (Ms. Makris), in 2003 and 2004; and (3)

$650 of unreported income for 2004.    In the deficiency

computations, respondent also made adjustments to petitioner’s

self-employment income, itemized deductions, and alternative

minimum taxes based on the aforementioned disallowances and

income adjustment.

     After concessions,1 the issues for decision are:      (1)

Whether petitioner is entitled to certain business expense

deductions for 2003 and 2004; (2) whether petitioner is entitled



     1
      The parties agree that petitioner received $650 in
nonemployee compensation from Erdman Medical Center, Inc., in
2004 which was reported on the Schedule C for Erdman Medical
Center, Inc. However, petitioner’s deduction of a $650 insurance
expense resulted in zero business income. Respondent allowed
this expense.
                              - 3 -

to dependency exemption deductions for Ms. Makris for 2003 and

2004; and (3) whether petitioner is liable for accuracy-related

penalties under section 6662(a).

                           Background

     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.

     Petitioner resided in Maryland at the time the petition was

filed.

     During 2003 petitioner was a general practice physician who

provided medical services for seven medical clinics in Baltimore,

Maryland, and the surrounding area.   These were:   Erdman Medical

Center, Inc.; Mount Claire Medical Center, Inc.; Alameda Medical

Center, Inc.; Liberty Medical and Injury Center, Inc.; Slade

Medical Center, Inc.; Northern Medical and Physical Therapy

Center, LLC; and Goodcare Medical Services.    Petitioner also

provided medical services as a telemedicine physician for Medical

Advisory Systems, Inc., in Owings, Maryland.    Petitioner attached

eight Schedules C (one for each clinic where he worked and one

for his work at Medical Advisory Systems, Inc.) to his 2003

Federal income tax return on which he reported combined gross

income of $162,757.46, received from the above sources, and

combined business expenses totaling $106,710.    The business

expenses deducted were as follows:
                                   - 4 -

             Car and truck expenses            $20,100
             Commissions and fees                1,465
             Insurance                          19,910
             Legal and professional
               services                         10,010
                                                 1
             Office expenses                       6,015
             Repairs and maintenance              5,540
             Supplies                             5,010
             Taxes and licenses                   1,050
             Travel                             19,620
             Meals and entertainment            17,990
               Total                           106,710
             1
           Petitioner classified his cellular phone expenses for
     both years as office expenses.

     During 2004 petitioner worked at Medical Advisory Systems,

Inc., Erdman Medical Center, Inc., and MS-HC, L.L.C., a

multispecialty health clinic.       The latter two facilities were in

Baltimore.       Petitioner submitted two Schedules C with his 2004

Federal income tax return:       One for Medical Advisory Systems,

Inc., and the other for Erdman Medical Center, Inc.          On these

Schedules C he reported combined gross income totaling $17,150

and combined business expenses totaling $15,550.           These business

expenses were as follows:

             Car and truck expenses             $5,000
             Insurance                           2,500
             Legal and professional
               services                           3,000
             Office expenses                      2,000
             Travel                               2,000
             Meals and entertainment              1,000
                                               1
               Total                             15,500
         1
          In the notice of deficiency for 2004 respondent
     disallowed $14,850 of business expenses.
                              - 5 -

     Petitioner worked at eight medical facilities in 2003.     He

divided his time between working at medical clinics in and

around Baltimore and the telemedicine facility in Owings,

Maryland, approximately 50 miles from Baltimore.   Petitioner

would often work at more than one of the Baltimore-area clinics

per day.   Petitioner kept regular office hours at each of these

clinics, and support staff employed by the clinic would arrange

his patient schedule.   All supplies and equipment that

petitioner used while at the facility were provided by the

clinic with the exception of personal items limited to his lab

coat and stethoscope.

     Petitioner would occasionally work a full day seeing

patients at one or more of the medical clinics and then travel

to Owings to work at Medical Advisory Systems, Inc.   Owings is

approximately 1 hour from Baltimore by car.   As a telemedicine

physician, petitioner staffed an Internet phone with video

capabilities in order to consult with and treat patients working

overseas as U.S. Department of Defense contractors and oil

workers.   Petitioner would usually arrive at the call center in

the early evening and work his assigned shift through the night.

The facility provided all of the equipment necessary for

petitioner’s work at the call center including a break/sleep

room for him to rest in during and after his shift.   Petitioner
                                 - 6 -

would often go to breakfast with the other call center

physicians before returning to Baltimore.

     On his 2003 and 2004 returns petitioner claimed two

dependency exemptions deductions:        One for his minor child,

B.B.,2 and one for Ms. Makris.    At the time of trial

petitioner’s minor son was 16 years old, and he had been in a

relationship with Ms. Makris, the child’s mother, for 17 years.

Ms. Makris and the child resided with petitioner, and Ms. Makris

did not work outside of the home in either 2003 or 2004.

Respondent disallowed petitioner’s claimed dependency exemption

deductions for Ms. Makris because the “relationship between

(petitioner and Ms. Makris) was in violation of local law.”

     Following notification that his 2003 and 2004 returns had

been selected for examination, petitioner met with a revenue

agent.    On the basis of that meeting, petitioner was convinced

that the revenue agent was biased against him because he is a

Muslim.    Following the meeting, both the revenue agent and an

Appeals officer attempted on several occasions to reschedule

petitioner’s examination and later an Appeals conference.

However, either petitioner’s schedule would conflict with the

time that the revenue agent or the Appeals officer proposed or

petitioner would change his mind about attending the scheduled




     2
      The Court uses initials when referring to a minor child.
                               - 7 -

conference on the basis of “his perception of racial bias”

stemming from his previous meeting with the revenue agent.

                             Discussion

     In general, the Commissioner’s determination as set forth

in a notice of deficiency is presumed correct.      Welch v.

Helvering, 290 U.S. 111, 115 (1933).      In pertinent part, Rule

142(a)(1) provides the general rule that the burden of proof

shall be on the taxpayer.   In certain circumstances, however, if

the taxpayer introduces credible evidence with respect to any

factual issue relevant to ascertaining the proper tax liability,

section 7491 shifts the burden of proof to the Commissioner.

Sec. 7491(a)(1); Rule 142(a)(2).   Respondent argues that

petitioner has not produced sufficient evidence such that the

burden of proof should shift to him.      For the reasons discussed

infra we agree.

Schedule C Expenses

     Deductions are strictly a matter of legislative grace, and

the taxpayer bears the burden of proving entitlement to any

deduction claimed.    INDOPCO, Inc. v. Commissioner, 503 U.S. 79,

84 (1992).   A taxpayer is required to maintain records

sufficient to establish the amount of any deduction claimed.

Sec. 6001; sec. 1.6001-1(a), Income Tax Regs.      With respect to

the Schedule C expenses, petitioner bears the burden of proving

that respondent’s determinations as set forth in the notice of
                                - 8 -

deficiency are erroneous.    See Rule 142(a); Welch v. Helvering,

supra at 115.

     Section 162(a) generally allows a deduction for ordinary

and necessary expenses paid or incurred during the taxable year

in carrying on any trade or business.    The determination of

whether an expenditure satisfies the requirements for

deductibility under section 162 is a question of fact.    See

Commissioner v. Heininger, 320 U.S. 467, 475 (1943).     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.    See Deputy v. du Pont, 308 U.S. 488, 495

(1940).   Ordinarily, an expense is necessary if it is

appropriate and helpful to the operation of the taxpayer’s trade

or business.    See Commissioner v. Tellier, 383 U.S. 687 (1966);

Carbine v. Commissioner, 83 T.C. 356, 363 (1984), affd. 777 F.2d

662 (11th Cir. 1985).    Section 262(a) generally disallows a

deduction for personal, living, or family expenses.

     A taxpayer whose principal place of business is at a

distance from his residence cannot deduct the cost of the

transportation to and from the business or the costs of meals

and lodging at the place of business.    Such expenses are

regarded as personal commuting expenses and under section 262

are not deductible.     Fausner v. Commissioner, 413 U.S. 838

(1973); Commissioner v. Flowers, 326 U.S. 465 (1946).     If a
                               - 9 -

taxpayer has several regular places of work, however, commuting

expenses from the taxpayer’s home to his first work site and

from his last work site to his home are not deductible, but

transportation expenses between the work sites are deductible.

Steinhort v. Commissioner, 335 F.2d 496 (5th Cir. 1964), affg.

T.C. Memo. 1962-233; Feistman v. Commissioner, 63 T.C. 129

(1974).    Travel away from home generally requires that the

taxpayer remain either overnight or for a period requiring sleep

or rest.    United States v. Correll, 389 U.S. 299 (1967).

     For certain kinds of expenses otherwise deductible under

section 162(a), such as expenses related to travel, meals and

entertainment, and “listed property”, as defined in section

280F(d)(4), a taxpayer must satisfy substantiation requirements

set forth in section 274(d) before such expenses will be allowed

as deductions.    See sec. 1.274-5T, Temporary Income Tax Regs.,

50 Fed. Reg. 46014 (Nov. 6, 1985).     As pertinent here, “listed

property” is defined in section 280F(d)(4) to include passenger

automobiles and other property used as a means of transportation

unless excepted by section 280F(d)(4)(C) or (5)(B), and cellular

phones.    See sec. 280F(d)(4)(A)(i), (ii), (v).   With respect to

such “listed property”, a taxpayer must prove:     (1) The amount

of each separate expenditure with respect to such property; (2)

the amount of each business use based on the appropriate

measure; and (3) the business purpose for an expenditure or use
                              - 10 -

with respect to such property.   Sec. 1.274-5T(b)(6), Temporary

Income Tax Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985).

     In order to satisfy his burden of proof, petitioner relies

on the following:   (1) His testimony; (2) certain credit card

statements pertaining to 2003; (3) two calendars, one for 2003

and the other for 2004, that contain abbreviated notes as to his

work assignments; and (4) a document entitled “IRS Review of

Taxpayer’s papers received 10/4/07”, which petitioner prepared

following a meeting with the revenue agent.

     At the outset, we note that petitioner’s testimony as to

his business’s expenses for the years in issue was, at times,

inconsistent, vague, conclusory, and self-serving.    As such, we

are not required to, nor shall we, rely on his testimony to

establish his entitlement to any deductions at issue.    See Shea

v. Commissioner, 112 T.C. 183, 188 (1999).    We are convinced,

however, from petitioner’s testimony that his trips between the

clinics in the Baltimore area would generally qualify as

deductible transportation expenses.    Also, on the basis of

petitioner’s testimony, we do not believe that petitioner’s

overnight work at Medical Advisory Systems, Inc., required a

period of sleep or rest as the nature of his job was to provide

telemedicine services throughout the night.    Irrespective of the

foregoing, and for the reasons discussed infra, we conclude that

petitioner has not complied with the rules and regulations for
                              - 11 -

record keeping that, if satisfied, might entitle him to deduct

certain business expenses at issue.    See sec. 6001; sec. 1.6001-

1(a), Income Tax Regs.

     First, and with respect to the credit card statements

produced, petitioner testified that these statements listed

items purchased both for his business and for personal use and

that since his business and personal lives were “inextricably

connected” it would be impossible to distinguish the two.    In an

attempt to do just this, petitioner placed a check mark on the

statements beside those expenses which were either for his

personal or business use.   Without any testimony to clarify

these marks it is impossible for us to presume their relevance;

and even if we were to know whether petitioner used the check

marks to indicate the expenses as business expenses, we lack

credible evidence of explanation as to why they would be so.

For example, several of the expenses listed are for purchases

from department stores, convenience stores, and drug stores.

Without detailed elaboration it is impossible to determine

whether any of these expenses were business expenses of the type

that petitioner would be entitled to claim a deduction for.

     With respect to the calendars, we note that petitioner

admitted that the notations on the calendars were not always

contemporaneously made.   Additionally, petitioner appears to

have used an abbreviation system to record the number of hours
                             - 12 -

each day that he would work at a particular location.   There is

no record of the number of miles or the total weekly miles that

he drove from location to location.3   Moreover, petitioner did

not testify as to how far each clinic was from the others.

Given the coded nature of the calendars and the lack of any

testimony as to the distances between petitioner’s work sites,

we do not find that the calendars are either credible or of any

assistance to the Court.

     Finally, and with respect to the document entitled “IRS

Review of Taxpayer’s papers received 10/4/07”, petitioner

prepared this document from his recollection following his

meeting with the revenue agent.   As respondent pointed out at

trial, the nature of the expenses and the amounts for those

expenses listed on this document were based on what petitioner

felt that respondent would accept during the appeals process.

In fact, as respondent also pointed out at trial, contrary to

petitioner’s opinion that the revenue agent was racially biased

against him, that agent was willing to allow some of the claimed

expenses despite petitioner’s inability to produce all receipts

and records pertaining to those items.   Therefore, we view the

document as no more than petitioner’s opinion as to the items

that he felt himself entitled to as business expense deductions


     3
      If there is such a record, it is by no means evident from
our examination of the calendar, and petitioner did not testify
to such a notation at trial.
                               - 13 -

at the time of his meeting with the revenue agent or the Appeals

officer.

     On the basis of our review of the entire record, we cannot

allow petitioner any of the claimed expenses for 2003 or 2004.

Petitioner’s glaring lack of substantiation is abundantly clear,

along with his audacious position that it is the Court’s

function to sift through the unclear and incomplete records that

he provided us in order to determine his correct tax liability.

We find neither the calendars nor the credit card statements to

be clear or credible evidence to substantiate any of his claimed

expenses.   With respect to the legal services deductions, the

record is devoid of any invoices from his attorneys that might

permit us to allow those items.   In short, we have no evidence

to approximate, where permissible, a base for any of the items

claimed.    Cohan v. Commissioner, 39 F.2d 540, 544 (2d Cir.

1930).   Where section 274(d) requires strict substantiation for

those items previously mentioned, we lack any evidence to

determine any exact expenses or the business nature of those

items.

     Finally, as to petitioner’s argument that were he to comply

with the substantiation requirements of the Code he would be

constantly recording his expenses, we are unmoved.   Petitioner

characterized almost two-thirds of his gross income for 2003 as

business expense deductions and produced in substantiation only
                                - 14 -

two nearly illegible personal calendars and partial copies of

two credit card statements for those years.       His testimony at

trial that he had “more receipts” and odometer readings was not

supported by the production of any credible, tangible evidence

of such items.    Moreover, we simply do not believe that

petitioner had such documentation.       To wit, respondent’s

counsel, in preparation of this case for trial, sent petitioner

no less than five requests for production in accordance with our

decision in Branerton Corp. v. Commissioner, 61 T.C. 691, 692

(1974).   None of these requests were answered.      Accordingly, for

all of the foregoing reasons, we sustain respondent in full with

respect to his disallowance of petitioner’s business expense

deductions for 2003 and 2004.

Dependency Exemption Deductions

     Petitioner claimed two dependency exemption deductions on

his 2003 and 2004 returns.    Petitioner listed one minor child

and one adult--Ms. Makris--as dependents.       Respondent disallowed

the dependency exemption deductions claimed for Ms. Makris.

     Generally, the burden of proof rests with the taxpayer.

Rule 142(a)(1).    This burden will shift, however, in “respect of

any new matter, increases in deficiency, and affirmative

defenses, pleaded in the answer”.    Id.     A new argument presented

to sustain a deficiency will be treated as a new matter when it

“alters the original deficiency or requires the presentation of
                                  - 15 -

different evidence.”    Wayne Bolt & Nut Co. v. Commissioner, 93

T.C. 500, 507 (1989).    If the new argument merely clarifies or

develops the Commissioner’s original determination it is not a

new matter that will shift the burden to the Commissioner.       Id.

     Respondent disallowed the claimed dependency exemption

deductions for Ms. Makris on the basis that the relationship

between petitioner and Ms. Makris was in violation of local law.

See sec. 152(b)(5).    At trial respondent abandoned this position

and argued that we should sustain respondent’s determination on

the basis that petitioner had failed to show that he had

provided more than one-half of the support for Ms. Makris during

the years in issue.    The evidence required to show that the

relationship between petitioner and Ms. Makris violated local

law is different from the evidence required to establish that

petitioner had failed to show that he had provided more than

one-half of the support for Ms. Makris during the years in

issue.    The latter argument is therefore a new matter.

Accordingly, the burden of proving that petitioner did not

establish that he furnished more than one-half of the total

support for Ms. Makris during the years in issue is on

respondent.    See Rule 142(a).

     Section 151 allows deductions for personal exemptions,

including exemptions for dependents of a taxpayer.    See sec.

151(c).    Section 152(a) defines the term “dependent”, as
                              - 16 -

relevant here, to include an individual who has as his or her

principal place of abode for the taxable year the home of the

taxpayer, if over half of his or her support for the calendar

year was received from the taxpayer.    The term “support”

includes “food, shelter, clothing, medical and dental care,

education, and the like.”   Sec. 1.152-1(a)(2)(i), Income Tax

Regs.

     In determining whether an individual received more than

half of his or her support from a taxpayer, there shall be taken

into account the amount of total support received from the

taxpayer as compared to the entire amount of support which the

individual received from all sources.    Id.

     Petitioner testified that Ms. Makris lived with him

throughout 2003 and 2004, that she did not work outside of the

home, that he provided her with credit cards for her personal

use, and that he asked her to purchase items for himself and

their home.   Petitioner stated that Ms. Makris received only

occasional support from her elderly mother.

     Respondent presented no evidence as to the total amount of

support provided to Ms. Makris from all sources and that Dr.

Babaturk furnished less than 50 percent of her support.

Accordingly, we conclude that respondent has failed to meet his

burden of proof on this issue and hold that Dr. Babaturk is
                                - 17 -

entitled to claim dependency exemption deductions with respect

to Ms. Makris for 2003 and 2004.

Accuracy-Related Penalties

     In the notice of deficiency, respondent determined that

petitioner is liable for accuracy-related penalties under

section 6662(a) for underpayments of taxes.    With respect to any

penalty or addition to tax, section 7491(c) places the burden of

production on the Commissioner.

     Section 6662(a) imposes a 20-percent penalty with respect

“to any portion of an underpayment of tax required to be shown

on a return”.   This penalty applies to underpayments

attributable to any substantial understatement of income tax.

Sec. 6662(a), (b)(2).

     An “understatement” of income tax is defined as the excess

of the tax required to be shown on the return over the tax

actually shown on the return.    Sec. 6662(d)(2)(A).    An

understatement is “substantial” if it exceeds the greater of 10

percent of the tax required to be shown on the return, or

$5,000.   Sec. 6662(d)(1)(A).

     Section 6664 provides a defense to the accuracy-related

penalty if a taxpayer establishes that there was reasonable

cause for any portion of the underpayment and that he or she

acted in good faith with respect to that portion.      Sec.

6664(c)(1); sec. 1.6664-4(a), Income Tax Regs.    Whether a
                              - 18 -

taxpayer acted with reasonable cause and in good faith is

decided on a case-by-case basis, taking into account all the

pertinent facts and circumstances.     Sec. 1.6664-4(b)(1), Income

Tax Regs.   The taxpayer’s education, experience, and knowledge

are considered in determining reasonable cause and good faith.

And, generally, the most important factor is the extent of the

taxpayer’s effort to assess his or her proper tax liability.

Id.

      Respondent determined an accuracy-related penalty under

section 6662(a) to be applicable because petitioner understated

his income tax by $34,890 on his 2003 return and $6,985 on his

2004 return.   Because each understatement of tax was greater

than 10 percent of the tax required to be shown on the return or

$5,000, each understatement was a substantial understatement of

income tax pursuant to section 6662(d)(1)(A).

      Petitioner argues that he should not be held liable for the

penalty because he was in compliance with the applicable rules

and regulations.   For the reasons previously discussed, we

disagree.

      The Commissioner bears the burden of production under

section 7491(c) with respect to the accuracy-related penalty

under section 6662.   To meet that burden, the Commissioner must

come forward with sufficient evidence indicating that it is

appropriate to impose the penalty.     Higbee v. Commissioner, 116
                               - 19 -

T.C. 438, 446 (2001).    Although the Commissioner bears the

burden of production with respect to the penalty, the

Commissioner “need not introduce evidence regarding reasonable

cause * * * or similar provisions.      * * * [T]he taxpayer bears

the burden of proof with regard to those issues.”      Id.

     Petitioner concedes that if we determine that he did not

comply with the rules and regulations with respect to record

keeping for the years in issue, underpayments of taxes would

exist for those years.    Petitioner offered no evidence under

section 6662 with respect to those items raised in the petition.

On the basis of the foregoing, we hold that respondent has

satisfied the burden of production under section 7491(c).

     We further conclude that petitioner has failed to show that

his reliance on the documents produced to substantiate the

claimed expenses was reasonable.    On the entire record before

us, we hold that petitioner has failed to carry his burden of

proving that he is not liable for    accuracy-related penalties

for 2003 and 2004 under section 6662(a).      We accordingly sustain

respondent’s determination with respect to that issue.



                                            Decision will be entered

                                     under Rule 155.
