                         T.C. Memo. 2003-85



                       UNITED STATES TAX COURT



                  WILLIAM MAHER, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 1884-01.                Filed March 25, 2003.


     William Maher, pro se.

     Diana P. Hinton, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION

     VASQUEZ, Judge:    Respondent determined a deficiency of

$34,045 in and additions to tax under sections 6651(a)(1),1

6651(a)(2), and 6654(a) of $2,958.97, $1,117.83, and $491.49,

respectively, on petitioner’s 1998 Federal income tax.


     1
        Unless otherwise indicated, 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.
                              - 2 -

     After concessions,2 the issues for decision are:    (1) How

much of an alimony deduction petitioner is entitled to for 1998;

(2) whether petitioner is entitled to claim dependency exemptions

for his children for 1998; (3) whether petitioner is entitled to

claim head of household filing status for 1998; (4) whether

petitioner is entitled to deduct any amount for unreimbursed

employee business expenses for 1998; and (5) whether petitioner

is liable for the addition to tax pursuant to section 6651(a)(1)

for 1998.

                        FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the attached exhibits are




     2
        Mr. Maher stipulated that he received income in excess of
the amount determined by respondent. Respondent stipulated that
Mr. Maher had total prepaid Federal income tax credits of
$20,894, paid $12,698 in State and local income taxes, and made
$400 in charitable contributions for 1998. Respondent conceded
that Mr. Maher is entitled to an alimony deduction consisting of
one-half of the mortgage payments (principal and interest) he
paid, one-half of the real estate taxes he paid, one-half of the
homeowners insurance he can prove he paid, and the health and
automobile insurance he can prove he paid on behalf of his wife.
Respondent conceded that Mr. Maher is entitled to deduct as an
itemized deduction the other half of the mortgage interest and
real estate taxes paid.

     At trial and on brief, Mr. Maher did not address the
additions to tax pursuant to secs. 6651(a)(2) and 6654(a).
Therefore, we find that Mr. Maher abandoned these issues. See
Petzoldt v. Commissioner, 92 T.C. 661, 683 (1989); Money v.
Commissioner, 89 T.C. 46, 48 (1987).
                                - 3 -

incorporated herein by this reference.    At the time he filed his

petition, William Maher (Mr. Maher) resided in Staten Island, New

York.

Mr. Maher’s Separation From His Wife

     In August 1983, Mr. Maher and Donna Maher (Mrs. Maher)

purchased a home located at 305 Livermore Avenue, Staten Island,

New York (305 Livermore).    Mr. Maher and Mrs. Maher have two

children:    Kristen Maher (Kristen), born October 21, 1984, and

William Maher, Jr. (Billy), born December 18, 1986.

     In May 1996, Mr. Maher moved out of 305 Livermore.    During

1998, he lived at 966 Clove Road, Staten Island, New York (966

Clove).

     On or about the date he moved out of 305 Livermore, Mr.

Maher filed for divorce from Mrs. Maher.    As of the time of

trial, Mr. Maher and Mrs. Maher were separated but not divorced.

     On October 17, 1996, the Supreme Court of the State of New

York issued an order, pendente lite (1996 order), requiring Mr.

Maher to pay:    (1) The existing first mortgage, real estate

taxes, and homeowner’s insurance on 305 Livermore, (2) the

unreimbursed medical and prescription drug expenses of Mrs. Maher

and their two children, (3) the automobile insurance on two cars,

(4) $651 per week of child support, and (5) his children’s school

tuition.    The 1996 order gave Mrs. Maher exclusive use and

occupancy of 305 Livermore.
                                - 4 -

     The 1996 order gave Mr. Maher and Mrs. Maher joint legal

custody of both children and gave Mrs. Maher primary physical

custody of both children.    The 1996 order ordered that Mr. Maher

was to have physical custody of both children every weekend from

Friday evening at 7 p.m. through Sunday evening at 7:30 p.m.

Mrs. Maher had the right to have both children on the third

weekend of each month, but she was not required to have them on

that weekend.   Additionally, the 1996 order ordered that Mr.

Maher was to have physical custody of both children from 6:30

p.m. to 8:30 p.m. on every Wednesday.

     On June 9, 1998, the Supreme Court of the State of New York

issued a decision and order in response to a motion for change in

custody of both children (1998 order).    The court stated that

“Clearly, the joint custody arrangement has failed.”    The court

painted an extremely unflattering portrait of Mrs. Maher and

noted that the court-appointed expert recommended that Mr. Maher

have sole custody of both children.     The court, however, decided

that Mr. Maher should have sole physical custody of Kristen only.

The court granted sole physical custody of Kristen to Mr. Maher

effective July 12, 1998.

     Neither the 1996 order nor the 1998 order states who is

entitled to claim the dependency exemptions for Kristen or Billy.

Mrs. Maher did not sign a release of dependency exemption for

Kristen or Billy for 1998.
                                - 5 -

     During 1998, Kristen lived with Mr. Maher at 966 Clove

virtually the whole year.    During 1998, Billy lived with Mr.

Maher at 966 Clove for most of the year.

Payments Made by Mr. Maher

     In 1998, Mr. Maher paid the following amounts:     (1) Mortgage

payments on 305 Livermore totaling $9,271.80 in principal,

$4,086.33 in interest, and $1,546.39 in real estate taxes; (2)

$812 in homeowners insurance on 305 Livermore; (3) $2,688 in

health insurance premiums; and (4) $2,364 in automobile

insurance.   Thirty percent of Mr. Maher’s health insurance

premiums were for the benefit of Mrs. Maher.

     During 1998, Mr. Maher owned a 1990 model year car, and Mrs.

Maher owned a 1996 model year car.      Mr. Maher paid for collision

coverage on Mrs. Maher’s car but not on his car.

Mr. Maher’s Professional Background

     Mr. Maher has been a certified public accountant for

approximately 15 years.   In 1977, he received a B.A. in

accounting from New York University.     In 1983, he received an

M.S. in tax from Long Island University.

     From 1977 through 1978, Mr. Maher worked as a financial

consultant for AT&T.   During 1979, he performed tax work for the

City of New York.   During 1980, he worked for the Internal

Revenue Service as a revenue agent.     From 1980 through 1983, he

was an auditor at Deloitte, Haskins & Sells.     From 1983 through
                                 - 6 -

1996, Mr. Maher worked in the tax department of the New York

Times.   When he left the New York Times in 1996, Mr. Maher was

its tax director.     From 1997 through September 2001, Mr. Maher

performed financial consulting and tax work for Coopers & Lybrand

and its successor (Coopers).     In 1998, he was a manager at

Coopers and worked in the Stamford, Connecticut, office.      Since

September 2001, Mr. Maher has been a financial consultant and tax

return preparer for individuals.

Mr. Maher’s 1998 Tax Return

     Mr. Maher received a Form W-2, Wage and Tax Statement, from

Coopers for 1998 reporting $121,145 in wages.      He also received

Forms 1099-DIV and 1099-INT for 1998 reporting dividends and

interest.

     Before 1998, Mr. Maher filed all of his required tax

returns.    He did not file a Federal individual income tax return

for 1998.   Mr. Maher knew that he was required to file a tax

return for 1998 by April 15, 1999.       In 2001, he provided a copy

of an unfiled return for 1998 to respondent.

                                OPINION

     Deductions are a matter of legislative grace, and the

taxpayer has the burden of showing that he is entitled to any

deduction claimed.3    Rule 142(a); New Colonial Ice Co. v.



     3
        Mr. Maher does not contend that sec. 7491(a) is
applicable to this case.
                                - 7 -

Helvering, 292 U.S. 435, 440 (1934).    Mr. Maher’s testimony was

credible, and the testimony of other witnesses and documentary

evidence corroborated his testimony.    Under the circumstances

presented here, we will rely on Mr. Maher’s testimony to sustain

his burden of establishing error in respondent’s determinations.

Alimony

     Section 215(a) permits a deduction for the payment of

alimony which is includable in the gross income of the recipient

under section 71.   Section 71(b)(1) defines alimony or separate

maintenance as any cash payment meeting the four criteria

provided in subparagraphs (A) through (D) of that section.

     Respondent concedes that Mr. Maher is entitled to an alimony

deduction consisting of one-half of the mortgage payments

(principal and interest) he paid, one-half of the real estate

taxes he paid, one-half of the homeowners insurance he paid, and

the health and automobile insurance he paid on behalf of Mrs.

Maher.    Mr. Maher does not argue that he is entitled to an amount

greater than that conceded by respondent.    The parties simply

dispute the total amount.

     We found that Mr. Maher paid principal and interest for the

mortgage, and real estate taxes on 305 Livermore totaling

$9,271.80, $4,086.33, and $1,546.39, respectively.    Accordingly,

one-half of the principal, interest, and real estate taxes equals
                                 - 8 -

$4,635.90, $2,043.17, and $773.20, respectively.    We conclude

that Mr. Maher is entitled to deduct these amounts as alimony.

     We found that Mr. Maher paid homeowners insurance on 305

Livermore totaling $812.   Accordingly, one-half of the homeowners

insurance equals $406.   We conclude that Mr. Maher is entitled to

deduct this amount as alimony.

     We found that Mr. Maher paid $2,688 in health insurance

premiums in 1998 and that 30 percent of Mr. Maher’s health care

premiums were for the benefit of Mrs. Maher.    Accordingly, we

conclude that Mr. Maher is entitled to deduct $806.40 of the

health care premiums as alimony.

     The evidence establishes that Mr. Maher paid $2,364 in

automobile insurance in 1998.    When a taxpayer establishes that

he has incurred a deductible expense but is unable to

substantiate the exact amount, we can estimate the deductible

amount, but only if the taxpayer presents sufficient evidence to

establish a rational basis for making the estimate.    See Cohan v.

Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930); Vanicek v.

Commissioner, 85 T.C. 731, 742-743 (1985).     On the basis of the

record presented, we estimate that one-half of the automobile

insurance was attributable to Mrs. Maher.    Accordingly, we

conclude that Mr. Maher is entitled to deduct $1,182 of the

automobile insurance as alimony.
                               - 9 -

      Accordingly, Mr. Maher is entitled to an alimony deduction

of $9,846.67 in 1998.

Dependency Exemptions

      Section 151(c) allows taxpayers an annual exemption for each

“dependent” as defined in section 152.   Section 152(a) defines

dependents as certain individuals, including sons and daughters,

“over half of whose support, for the calendar year in which the

taxable year of the taxpayer begins, was received from the

taxpayer (or is treated under subsection (c) or (e) as received

from the taxpayer)”.

      The support test in section 152(e)(1) applies if:   (1) A

child received over of half his support during the calendar year

from his parents; (2) the parents are (a) divorced or legally

separated under a decree of divorce or separate maintenance, (b)

separated under a written separation agreement, or (c) living

apart at all times during the last 6 months of the calendar year;

and (3) such child is in the custody of one or both of his

parents for more than one-half of the calendar year.   If these

requirements are satisfied, as is the case herein, the “child

shall be treated, for purposes of subsection (a), as receiving

over half of his support during the calendar year from the parent

having custody for the greater portion of the calendar year”.

Id.   This parent is referred to as the “custodial parent”.   Id.

      To decide who has custody, section 1.152-4(b), Income Tax
                              - 10 -

Regs., provides that custody is “determined by the terms of the

most recent decree of divorce or separate maintenance, or

subsequent custody decree, or, if none, a written separation

agreement.”   In the event of so-called split custody, as is the

case herein, custody is “deemed to be with the parent who, as

between both parents, has the physical custody of the child for

the greater portion of the calendar year.”    Id.

     We have repeatedly held that we look to where the child

resided to determine which parent had physical custody for

purposes of section 152(e)(1).   Neal v. Commissioner, T.C. Memo.

1999-97; Otmishi v. Commissioner, T.C. Memo. 1980-472; Dumke v.

Commissioner, T.C. Memo. 1975-91, affd. without published opinion

524 F.2d 1230 (5th Cir. 1975); see also Meyer v. Commissioner,

T.C. Memo. 2003-12; Horn v. Commissioner, T.C. Memo. 2002-290;

Nieto v. Commissioner, T.C. Memo. 1992-296.    Even if the custody

decree grants physical custody to one parent, we have held that

this parent is not entitled to a dependency exemption when the

children did not live with this parent for most of the year.

Otmishi v. Commissioner, supra; Dumke v. Commissioner, supra.

     We found as a fact that Kristen and Billy resided with Mr.

Maher for most of 1998.   Therefore, for purposes of section

152(e), Mr. Maher is the custodial parent.    Accordingly, Mr.

Maher is entitled to claim exemptions for both Kristen and Billy

for 1998.
                              - 11 -

Head of Household

     An individual qualifies as a head of household if the

individual is not married at the close of the taxable year and

maintains as his home a household that constitutes for more than

one-half of the taxable year the principal place of abode of an

individual who qualifies as the taxpayer’s dependent within the

meaning of section 151.   Sec. 2(b)(1)(A)(ii).   An individual who

is legally separated from his spouse under a decree of divorce or

separate maintenance shall not be considered married.    Sec.

2(b)(2)(B).

     Respondent concedes that if Mr. Maher is entitled to one

exemption, he is entitled to claim head of household status.    We

concluded that Mr. Maher is entitled to claim dependency

exemptions for Kristen and Billy.   Accordingly, Mr. Maher is

entitled to claim head of household status.

Unreimbursed Employee Expenses

     Mr. Maher claims he is entitled to deduct $9,160 in

unreimbursed employee business expenses.    This amount comprises

$6,910 of vehicle expenses and $2,250 of business expenses that

do not include meals, entertainment, and travel expenses.

     Mr. Maher testified that in 1998 he drove “maybe 50--60

thousand miles on my car” for work.    Mr. Maher, however,

submitted no documentation or receipts to substantiate any of the

employee business expenses he claims he incurred or paid in 1998.
                               - 12 -

He also testified that his employer has a reimbursement policy

for employee business expenses.   Mr. Maher, however, did not

submit any evidence that his employer did not reimburse him for

his alleged business expenses.

     Pursuant to section 162(a), a taxpayer may deduct all of the

ordinary and necessary expenses paid or incurred during the

taxable year in carrying on a trade or business including a trade

or business as an employee.    Lucas v. Commissioner, 79 T.C. 1, 6

(1982).   An employee cannot deduct trade or business expenses to

the extent that the employee is entitled to reimbursement from

his or her employer for expenditures related to his or her status

as an employee.   Id. at 7; Kennelly v. Commissioner, 56 T.C. 936,

943 (1971), affd. without published opinion 456 F.2d 1335 (2d

Cir. 1972); Stolk v. Commissioner, 40 T.C. 345, 356 (1963), affd.

326 F.2d 760 (2d Cir. 1964).

     Mr. Maher was entitled to reimbursement for his claimed

unreimbursed employee expenses.   Accordingly, Mr. Maher is not

entitled to deduct any of these expenses.4


     4
        Mr. Maher is not entitled to deduct his unreimbursed
automobile expenses for an additional reason. Certain categories
of expenses must satisfy the strict substantiation requirements
of sec. 274(d) in order for a deduction to be allowed. The
expenses to which sec. 274(d) applies include automobile
expenses. Secs. 274(d)(4), 280F(d)(4)(a)(i) and (ii). We may
not use the Cohan doctrine to estimate expenses covered by sec.
274(d). 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).
                                                   (continued...)
                                - 13 -

Failure To Timely File

     Section 6651(a)(1) imposes an addition to tax for failure to

file a return on the date prescribed (determined with regard to

any extension of time for filing), unless such failure is due to

reasonable cause and not due to willful neglect.    Section 7491(c)

provides that the Commissioner shall bear the burden of

production with respect to the liability of any individual for

additions to tax.   “The Commissioner’s burden of production under

section 7491(c) is to produce evidence that it is appropriate to

impose the relevant penalty”.    Swain v. Commissioner, 118 T.C.

358, 363 (2002); see also Higbee v. Commissioner, 116 T.C. 438,

446 (2001).   If a taxpayer files a petition alleging some error

in the determination of the penalty, the taxpayer’s challenge

will succeed unless the Commissioner produces evidence that the

penalty is appropriate.    Swain v. Commissioner, supra at 364-365.

The Commissioner, however, does not have the obligation to

introduce evidence regarding reasonable cause or substantial

authority.    Higbee v. Commissioner, supra at 446-447.

     Mr. Maher stipulated that he did not file his return for


     4
      (...continued)
     To substantiate a deduction attributable to automobile
expenses, a taxpayer must maintain adequate records or present
corroborative evidence to show the following: (1) The amount of
the expense; (2) the time and place of use of the listed
property; and (3) the business purpose of the use. Sec. 1.274-
5T(b)(6), Temporary Income Tax Regs., 50 Fed. Reg. 46016 (Nov. 6,
1985). Mr. Maher did not maintain adequate records or present
corroborative evidence regarding his automobile expenses.
                               - 14 -

1998.    Mr. Maher testified that he knew that he was required to

file a tax return for 1998 by April 15, 1999.    We conclude that

respondent satisfied his burden of production regarding this

issue.

     Mr. Maher claims he had reasonable cause for not filing

because he was overwhelmed by his job, the custody battle for his

children, and his divorce.    Mr. Maher is an experienced tax

professional.    He knew of his obligation to file, and he simply

chose to make other matters a priority over filing his return for

1998.    He has to live with the consequences of his decision.

Accordingly, we hold that Mr. Maher is liable for the addition to

tax pursuant to section 6651(a)(1) for 1998.

     To reflect the foregoing,

                                          Decision will be entered

                                     under Rule 155.
