                  T.C. Summary Opinion 2011-28



                     UNITED STATES TAX COURT



                   HAROLYN TARR, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 1787-10S.               Filed March 9, 2011.



     Harolyn Tarr, pro se.

     Katy S. Lin, for respondent.



     ARMEN, Special Trial Judge:    This case was heard pursuant to

the provisions of 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



     1
        Unless otherwise indicated, all subsequent section
references are to the Internal Revenue Code in effect for the
taxable years in issue, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
                                 - 2 -

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

for any other case.

     Respondent determined the following deficiencies in, and

accuracy-related penalties under section 6662(a) on, petitioner’s

Federal income taxes:

                                           Penalty
               Year      Deficiency      Sec. 6662(a)
               2007        $2,681          $536.20
               2008         2,654           530.80

     After various concessions described hereinafter, and without

regard to purely mechanical matters related to certain credits,

the issues for decision are as follows:

     (1) Whether for 2007 petitioner is entitled to a Schedule C

deduction for “other expenses” aggregating $10,339;

     (2) whether for 2008 petitioner is entitled to Schedule C

deductions for travel of $3,254, meals and entertainment of $790,

and certain “other expenses” aggregating $4,925; and

     (3) whether petitioner is liable for the accuracy-related

penalty under section 6662(a).

                              Background2

         Petitioner resided in the State of Michigan when the

petition was filed.

     At all relevant times petitioner was married, and she and

her husband filed joint Federal income tax returns for 2007 and



     2
          None of the facts have been stipulated.
                              - 3 -

2008, the 2 taxable years at issue in this case.3   On those

returns, petitioner and her husband each reported their wage

income.

Form 1040 for 2007

     On the 2007 return, petitioner did not report any taxable

refund of State or local income tax.

     Petitioner itemized deductions for 2007, and she attached to

the return a Schedule A, Itemized Deductions.   On the Schedule A,

petitioner claimed total itemized deductions of $39,456, which

included miscellaneous itemized deductions (principally employee

business expenses) of $22,591 (net of the 2-percent floor on such

deductions prescribed by section 67(a)).

     Petitioner also attached to the return (1) a Schedule C,

Profit or Loss From Business, for her “statistician” activity and

(2) a Schedule C for her husband’s “financial services” activity.

On petitioner’s Schedule C, which reflected a net loss, no gross

receipts or sales were reported.   On petitioner’s husband’s

Schedule C, which also reflected a net loss, various deductions



     3
        The deficiencies and penalties at issue in this case were
determined by respondent in a joint notice of deficiency issued
to petitioner and her husband. The caption of the petition filed
with the Court bore the name of petitioner’s husband; however,
the petition bore the original signature of only petitioner. At
the trial session, petitioner’s husband was repeatedly invited to
ratify the petition by executing an amendment to petition and the
necessary form was furnished to him. After he steadfastly
declined to do so, the Court issued an order dismissing this case
as to him for lack of jurisdiction.
                                - 4 -

were claimed, among them “other expenses” of $10,339, consisting

of the following:

            communication expense         $2,250
            transportation expense         3,199
            moving expense                 1,875
            vehicle expense                3,015
                                         $10,339

Form 1040 for 2008

     Petitioner itemized deductions for 2008, and she attached to

her return a Schedule A.    On the Schedule A, petitioner claimed

total itemized deductions of $19,325, consisting of taxes paid of

$3,510, gifts to charity of $2,971, and miscellaneous itemized

deductions (principally employee business expenses) of $12,844

(net of the 2-percent floor on such deductions prescribed by

section 67(a)).

     Petitioner also attached to her return a Schedule C, which

reflected a net loss, for her husband’s “financial services”

activity.    Various deductions were claimed on this Schedule C,

including the following:

            travel                                 $3,254
            meals & entertainment                     790
            “other expenses”:                       5,675
                communication expense     $1,425
                transportation expense     3,500
                moving expense               750

Notice of Deficiency

     For 2007, respondent determined that petitioner failed to

report (1) gross receipts of $3,558 on her “statistician”

Schedule C and (2) a taxable refund of State income tax of $52.
                               - 5 -

Also for that year, respondent disallowed in full Schedule A

miscellaneous itemized deductions and the deduction for “other

expenses” claimed on the “financial services” Schedule C.

     For 2008, respondent disallowed all of the Schedule A

itemized deductions and allowed instead the standard deduction

applicable to petitioner’s filing status (married filing

jointly).   Also for that year, respondent disallowed in full

Schedule C deductions claimed for travel expenses, meals and

entertainment expenses, and “other expenses”.

     For each year, respondent determined that petitioner was

liable for the accuracy-related penalty under section 6662(a).

Stipulation of Settled Issues and Other Concessions

     Prior to trial, petitioner executed a Stipulation Of Settled

Issues.

     For 2007, petitioner conceded that she failed to report

gross receipts of $3,558 and a taxable refund of $52 and that she

was not entitled to any miscellaneous itemized deductions on

Schedule A.

     For 2008, petitioner conceded $14,871 of the $19,325 of

total itemized deductions claimed on the Schedule A.4   Petitioner


     4
        The difference between the amount claimed by petitioner
on her return ($19,325) and the amount conceded by petitioner in
the Stipulation Of Settled Issues ($14,871) is $4,454. At trial,
respondent conceded that difference; however, respondent’s
concession was obviously motivated by the fact that it had no tax
effect because $4,454 is less than the standard deduction
                                                   (continued...)
                                - 6 -

also conceded the “moving expense” deduction of $750 claimed as a

component of “other expenses” on her husband’s “financial

services” Schedule C.

                             Discussion

A.   Burden of Proof

      In general, the Commissioner’s determinations in a notice of

deficiency are presumed correct, and the taxpayer bears the

burden of showing that those determinations are erroneous.    Rule

142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).

      Pursuant to section 7491(a)(1), the burden of proof as to

factual matters may shift from the taxpayer to the Commissioner

under certain circumstances.   Petitioner did not allege that

section 7491 applies, nor did she either introduce the requisite

evidence, see sec. 7491(a)(1), or satisfy the substantiation,

recordkeeping, and other requirements of that section, see sec.

7491(a)(2)(A) and (B).    Therefore, petitioner bears the burden of

proof.    See Rule 142(a).

B.   Substantiation of Deductions

      Deductions are allowed solely as a matter of legislative

grace, and the taxpayer bears the burden of proving his or her

entitlement to them.    Rule 142(a); INDOPCO, Inc. v. Commissioner,

503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292



      4
      (...continued)
($10,900) that respondent allowed in the notice of deficiency.
                               - 7 -

U.S. 435, 440 (1934).   This includes the burden of

substantiation.   Sec. 6001; Hradesky v. Commissioner, 65 T.C. 87,

89 (1975), affd. per curiam 540 F.2d 821 (5th Cir. 1976); sec.

1.6001-1(a), (e), Income Tax Regs.

     The fact that a taxpayer lists a deduction on the taxpayer’s

return is not sufficient to substantiate the deduction.

Wilkinson v. Commissioner, 71 T.C. 633, 639 (1979); Roberts v.

Commissioner, 62 T.C. 834, 837 (1974).   This is because a tax

return is merely a statement of the taxpayer’s claim, and the

return is not presumed to be correct.    Wilkinson v. Commissioner,

supra at 639; Roberts v. Commissioner, supra at 837; see Lawinger

v. Commissioner, 103 T.C. 428, 438 (1994) (“Tax returns do not

establish the truth of the facts stated therein.”); Seaboard

Commercial Corp. v. Commissioner, 28 T.C. 1034, 1051 (1957) (a

taxpayer’s income tax return is a self-serving declaration that

may not be accepted as proof for the deduction or exclusion

claimed by the taxpayer); Halle v. Commissioner, 7 T.C. 245

(1946) (a taxpayer’s return is not self-proving as to the truth

of its contents), affd. 175 F.2d 500 (2d Cir. 1949); Taylor v.

Commissioner, T.C. Memo. 2009-235 (“A tax return is not evidence

of the truth of the facts stated in it.”).

     As a general rule, if, in the absence of required records, a

taxpayer provides sufficient evidence that the taxpayer has

incurred a deductible expense, but the taxpayer is unable to
                                  - 8 -

adequately substantiate the amount of the deduction to which he or

she is otherwise entitled, the Court may estimate the amount of

such expense and allow the deduction to that extent.     Cohan v.

Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930).     However, the

Court may bear heavily against the taxpayer, whose inexactitude is

of his or her own making.   Id.    Further, in order for the Court to

estimate the amount of an expense, we must have some basis upon

which an estimate may be made.     Vanicek v. Commissioner, 85 T.C.

731, 743 (1985).   Without such a basis, any allowance would amount

to unguided largesse.   Williams v. United States, 245 F.2d 559,

560 (5th Cir. 1957).

     In the case of certain expenses, section 274(d) expressly

overrides the so-called Cohan doctrine.     Sanford v. Commissioner,

50 T.C. 823, 827 (1968), affd. per curiam 412 F.2d 201 (2d Cir.

1969); sec. 1.274-5T(a), Temporary Income Tax Regs., 50 Fed. Reg.

46014 (Nov. 6, 1985).   Specifically, and as pertinent herein,

section 274(d) provides that no deduction is allowable for

traveling expenses (including meals and lodging while away from

home) or with respect to listed property as defined in section

280F(d)(4), unless the deduction is substantiated in accordance

with the strict substantiation requirements of section 274(d) and

the regulations promulgated thereunder.    Included within the

definition of listed property in section 280F(d)(4) is any

passenger automobile or other property used as a means of
                                - 9 -

transportation and any cellular telephone.     Sec. 280F(d)(4)(A)(i),

(ii), (v), (5); sec. 1.280F-6(b) and (c), Income Tax Regs.; see,

e.g., Murata v. Commissioner, T.C. Memo. 1996-321; Golden v.

Commissioner, T.C. Memo. 1993-602.      In other words, in the absence

of adequate records or sufficient evidence corroborating the

taxpayer’s own statement, any deduction that is subject to the

stringent substantiation requirements of section 274(d) is

proscribed.

      Applying the foregoing principles to the instant case, we are

unable to conclude, given the absence of relevant testimony and

meaningful records, that petitioner has proven entitlement to any

of the Schedule C deductions remaining in issue.     We therefore

sustain respondent’s determination in this regard.

C.   Accuracy-Related Penalty

      Section 6662(a) imposes a penalty equal to 20 percent of the

amount of any underpayment attributable to negligence or disregard

of rules or regulations.   Sec. 6662(b)(1).    The term “negligence”

includes any failure to make a reasonable attempt to comply with

tax laws, and the term “disregard” includes any careless,

reckless, or intentional disregard of rules or regulations.     Sec.

6662(c).   Negligence also includes any failure by the taxpayer to

keep adequate books and records or to substantiate items properly.

Sec. 1.6662-3(b)(1), Income Tax Regs.
                               - 10 -

     Section 6664(c)(1) provides an exception to the imposition of

the accuracy-related penalty if the taxpayer establishes that

there was reasonable cause for, and the taxpayer acted in good

faith with respect to, the underpayment.   See sec. 1.6664-4(a),

Income Tax Regs.   The determination of whether the taxpayer acted

with reasonable cause and in good faith is made on a case-by-case

basis, taking into account the pertinent facts and circumstances.

Sec. 1.6664-4(b)(1), Income Tax Regs.   The taxpayer bears the

burden of proving that he or she did not act negligently or

disregard rules or regulations.   Rule 142(a); Welch v. Helvering,

290 U.S. at 115; Higbee v. Commissioner, 116 T.C. 438, 446 (2001).

But see sec. 7491(c) (regarding the Commissioner’s burden of

production).

     For 2007, petitioner failed to report any of the gross

receipts of her “statistician” Schedule C activity; she also

failed to report a refund of State income tax, albeit modest in

amount.   Also for that year, petitioner grossly overstated her

itemized deductions, conceding that she was not entitled to nearly

60 percent of the deductions claimed on Schedule A ($22,591 ÷

$39,456).

     For 2008, petitioner also grossly overstated her itemized

deductions, conceding that she was not entitled to over 75 percent

of the deductions claimed on Schedule A ($14,871 ÷ $19,325).
                              - 11 -

     In view of the foregoing, we conclude that respondent

satisfied his burden of production.    However, we are unable to

conclude that petitioner proved that there was reasonable cause

for, and that she acted in good faith with respect to, the

underpayment of tax for either 2007 or 2008.    Thus, in addition to

the unexplained failure to report gross income and the gross

overstatement of itemized deductions, no persuasive explanation

was provided regarding the disallowed Schedule C deductions.    We

therefore hold for respondent on this issue.

                            Conclusion

     We have considered all of the arguments made by petitioner,

and, to the extent that we have not specifically addressed any of

them, we conclude that they are irrelevant or without merit.

     To reflect our disposition of the disputed issues, as well as

petitioner’s concessions,


                                           Decision will be entered

                                      for respondent.
