                         T.C. Memo. 1998-80



                       UNITED STATES TAX COURT



               THOMAS J. SPIELBAUER, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 13903-96.            Filed February 25, 1998.



     Thomas J. Spielbauer, pro se.

     G. Michelle Ferreira, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION

     VASQUEZ, Judge:    Respondent determined a $6,371 deficiency

in petitioner's 1992 Federal income tax, an addition to tax of

$4,972 for failure to file a timely return, and an accuracy-

related penalty of $1,274.
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     After concessions,1 we must decide:    (1) Whether petitioner

may deduct any of his unreimbursed employee expenses in 1992; (2)

whether petitioner failed to timely file his Federal income tax

return for the 1992 tax year; and (3) whether petitioner is

liable for the accuracy-related penalty.

     All section references are to the Internal Revenue Code in

effect for the year in issue.   All Rule references are to the Tax

Court Rules of Practice and Procedure.

                         FINDINGS OF FACT

     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 San Jose, California, at the time he

filed the petition.   Petitioner filed his 1992 Federal income tax

return on February 14, 1995 (the return).    On the return,

petitioner deducted $19,781 in unreimbursed employee expenses.2




     1
        At trial, the parties entered into an oral stipulation of
settled issues. In that stipulation, respondent concedes that
$746 of interest which respondent determined to be income to
petitioner was not taxable. Petitioner concedes the following:
(1) A $1,493.44 deduction for clothing expenses; (2) a telephone
expense deduction of $606.79; (3) a $150 educational expense
which petitioner's employer reimbursed him for; and (4) a $15.32
expense incurred at the Santa Anita Firing Range that was
inadvertently deducted twice.
     2
        The parties have stipulated that petitioner has
substantiated all of his unreimbursed employee expenses.
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     Petitioner is a senior deputy public defender and has worked

as an employee of the Santa Clara County (the county) Public

Defender's Office (the public defender's office) since 1981.    In

October of 1989, petitioner was assigned to work in the juvenile

dependency unit of the public defender's office.   Sometime during

1992, the dependency unit was physically separated from the

public defender's office.

     During 1992, petitioner prepared two discretionary writ

petitions.   Petitioner was the only public defender in his office

to file discretionary writ petitions during that year.

Petitioner prepared these writ petitions with materials which he

purchased from his personal funds.

     During 1992, petitioner retained three law students

attending Loyola University Law School to help him prepare a

master brief in which petitioner argued for the constitutional

right to a jury trial in dependency proceedings.   Petitioner flew

to Los Angeles several times during 1992 to supervise the law

students.

     Petitioner deducted the actual costs he incurred for the use

of three automobiles on his 1992 Federal income tax return.

Petitioner used each of the three cars for both business and

personal use.   The county reimbursed its employees for all

required automobile travel at the rate of $0.29 per mile.     County

employees must submit requests for reimbursement in order to
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receive reimbursement for required travel.   Petitioner did not

submit requests for reimbursement to the county during 1992 for

the expenses he incurred with his use of any of the automobiles.

     Petitioner deducted $933.50 in educational expenses on the

return.   Other than an expense for the Rutter Group for a writs

seminar in the amount of $150, the county did not reimburse

petitioner, nor did he request reimbursement.   During 1992,

public defenders could receive reimbursement from the county for

mandatory continuing legal education from the MCLE Fund in the

amount of $150 per year per attorney and for educational training

from the Tuition Reimbursement Fund in the amount of $450 per

year per attorney.   These funds reimbursed the deputy public

defender requesting reimbursement for 100 percent of the costs

associated with the training.   Public defenders also were

eligible to receive reimbursement from the county for educational

training from the Professional Development Fund.   Petitioner's

office had $10,000 available for reimbursement from this fund.

The Professional Development Fund reimbursed the deputy public

defender for 50 percent of the costs associated with training.

The county also reimbursed deputy public defenders' travel to

training programs.

     In 1992, in order to be reimbursed by the county from the

MCLE Fund, the Tuition Reimbursement Fund, or the Professional
                                - 5 -


Development Fund, deputy public defenders had to submit requests

for reimbursement, via an office form, to Mr. Grant Armstrong.

     On the return, petitioner deducted “other” business

expenses.    Some, but not all, of the other expenses petitioner

deducted were for items such as computer expenses, research

materials, candy and flowers for secretaries and clerks,

petitioner's home and rented office telephone bills, office

stationery, video rental, cable television, magazine and

newspaper subscriptions, parking and parking citations, various

club dues and expenses, T-shirts, and photographs.    Petitioner

asserted that it was necessary for him to keep abreast of the

local news for his job as a deputy public defender.    Petitioner,

however, conceded that both cable television and the local

newspaper have personal elements of pleasure to them.

     The public defender's office provided office supplies, such

as pens, paper, legal pads, etc., for its deputy public

defenders.    The public defender's office maintained a law library

for its deputy public defenders.    Furthermore, the public

defender's office had a research assistant, Barbara Fargo,

available to its attorneys.    Additionally, there is a county law

library near petitioner's office.

     During 1992, petitioner purchased computerized research

materials and deducted their cost on the return.    The county

allocates a portion of the Professional Development Fund to
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reimburse public defenders who purchase their own computer

equipment.    Deputy public defenders are entitled to reimbursement

for computer equipment up to $500, assuming the cost of the

computer exceeds $1,000.    County employees, however, must request

reimbursement for computer equipment under this policy.

     Petitioner deducted costs for telephone expenses for four

telephone lines.3   Petitioner deducted costs associated with a

telephone line located in his apartment which he used as a modem

line.    Petitioner sometimes used his modem as a fax modem.   The

public defender's office had a fax machine in 1992.    Petitioner

deducted costs associated with a telephone line located in an

office petitioner rented.    Petitioner also deducted costs of a

telephone line located in petitioner's prior residence.

     Petitioner deducted $1,944.08 in meals and entertainment at

restaurants located in Santa Clara County.    Petitioner did not

deduct expenses for any meals with clients.    The meals whose

costs he deducted were with petitioner's co-workers.    Petitioner

discussed business and personal matters at these meals.    The

county reimbursed its employees for all meals associated with

county required travel, including educational training.    Deputy

public defenders must, however, submit requests for reimbursement

for such meals to receive reimbursement.

     3
        Petitioner conceded that he is not entitled to any
deductions with respect to one of the telephone lines which was
located in his home.
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     In 1992, petitioner purchased a book on Federal taxation

from Prentice Hall for $142 and deducted this expense on the

return.   Petitioner reviewed the book, which covers deductions

and exemptions.

                               OPINION

     Section 162(a) allows a deduction for all ordinary and

necessary expenses incurred in carrying on a trade or business.

The performance of services as an employee constitutes a trade or

business.   O'Malley v. Commissioner, 91 T.C. 352, 363-364 (1988).

An ordinary expense is one that is common and acceptable in the

particular business.    Welch v. Helvering, 290 U.S. 111, 113-114

(1933).   A necessary expense is an expense that is appropriate

and helpful in carrying on the trade or business.    Heineman v.

Commissioner, 82 T.C. 538, 543 (1984).    An employee's trade or

business is earning his compensation, and generally only those

expenses that are related to the continuation of his employment

are deductible.   Noland v. Commissioner, 269 F.2d 108, 111 (4th

Cir. 1959), affg. T.C. Memo. 1958-60.    Deductions are a matter of

legislative grace, and petitioner bears the burden of proving

that he is entitled to the deductions claimed.   Rule 142(a);

INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992).

Reimbursable Expenses

     When an employee has a right to reimbursement for

expenditures related to his status as an employee, but fails to
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claim such reimbursement, the expenses are not deductible because

they are not “necessary”; i.e., it is not necessary for an

employee to remain unreimbursed for expenses to the extent he

could have been reimbursed.     Orvis v. Commissioner, 788 F.2d 1406

(9th Cir. 1986), affg. T.C. Memo. 1984-553; Lucas v.

Commissioner, 79 T.C. 1,7 (1982); Kennelly v. Commissioner, 56

T.C. 936, 943 (1971), affd. without published opinion 456 F.2d

1335 (2d Cir. 1972).   Furthermore, the mere failure of an

employee to seek reimbursement cannot convert the employer's

expenses into the employee's.    Kennelly v. Commissioner, supra.

The employee has the burden of establishing that the employer

would not reimburse the expense had the employee requested

reimbursement.    Podems v. Commissioner, 24 T.C. 21, 23 (1955).

Moreover, the prohibition of deductions for reimbursable expenses

is a “bright line rule” and applies even when the employee is

unaware that the expenses are reimbursable.     Orvis v.

Commissioner, supra at 1408.

     Respondent called Mr. Armstrong to testify as to the public

defender's policy regarding reimbursement of expenses.     During

1992, Mr. Armstrong oversaw public defenders' requests for

reimbursements.   During 1992, the county reimbursed public

defenders for 100 percent of their expenses for educational

training up to $600 per year per attorney ($150 from the MCLE

Fund and $450 from the Tuition Reimbursement Fund), and 50
                                 - 9 -


percent of their expenses from the Professional Development Fund

up to $10,000 among all of the attorneys in petitioner's office.

Petitioner claimed $933.50 for educational expenses in 1992, of

which $150 was reimbursed by the county.    Therefore, it appears

that petitioner, if he had requested reimbursement, could have

been reimbursed another $616.75 ($450 + 166.75), leaving $166.75

as unreimbursed educational expenses.    Educational expenses are

considered ordinary and necessary business expenses if the

education maintains or improves skills required by the taxpayer

in his employment, or meets the express requirements of an

employer, imposed as a condition for the taxpayer's continued

employment, status, or rate of compensation.    Sec. 1.162-5(a),

Income Tax Regs.    Personal expenses are not deductible.    Sec.

262.

       Petitioner's educational expenses were for various legal

seminars and training courses.    This is the type of education

designed to maintain or improve petitioner's skills as a public

defender.    Petitioner, therefore, is entitled to deduct his

educational expenditures to the extent he could not have been

reimbursed--$166.75.

       The county also reimbursed public defenders for any required

travel.    Petitioner has failed to show that he requested

reimbursement for any of his travel expenses; therefore, we

sustain respondent on this issue.
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Required Expenses

     In general, a taxpayer may not deduct expenses incurred for

the benefit of another.   Deputy v. DuPont, 308 U.S. 488, 493

(1940); Noland v. Commissioner, 269 F.2d at 109; Westerman v.

Commissioner, 55 T.C. 478, 482 (1970).   If, as a condition of

employment, an employee is required to incur expenses on behalf

of his employer, the employee is entitled to a deduction for

those expenses that are ordinary and necessary to his business as

an employee to the extent such expenses are not subject to

reimbursement.   Schmidlapp v. Commissioner, 96 F.2d 680 (2d Cir.

1938); Eder v. Commissioner, T.C. Memo. 1981-408.

     Respondent argues that many of the expenses deducted by

petitioner do not constitute ordinary and necessary employee

business expenses within the meaning of section 162(a) because

petitioner, as a deputy public defender, incurred the expenses

voluntarily, and the public defender's office did not require him

to do so as a condition of his employment.   We agree.

     Petitioner deducted expenses for office items.   The public

defender's office supplied attorneys with office supplies.

Petitioner, therefore, was not required to purchase his own

office supplies, and his desire to have his own supplies, even if

they were of better quality than those supplied, does not convert

the expense into a deduction.
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     Respondent determined that petitioner was not entitled to

deductions for expenses related to interns petitioner had hired

to help him with various legal projects.    Petitioner has shown

that by hiring these interns he was able to be a better public

defender than if he had not hired them.    Petitioner has not,

however, shown that he was required by the public defender's

office to hire these interns or that the expense of hiring them

was otherwise ordinary and necessary to his employment.4

     Respondent also determined that petitioner was not entitled

to various other expenses such as automobile expenses,5 meals and

entertainment,6 travel,7 and other business expenses.8   Petitioner

has failed to establish that these expenses were ordinary and

necessary expenses for his trade or business as an employee with

the public defender's office.


     4
        On cross-examination, petitioner stated “They [the public
defender's office] didn't require me to contact these students.
* * * They didn't require me to set up the research project.”
     5
        Petitioner deducted automobile expenses which included
gasoline, DMV renewal, registration fees, repairs, and tires.
     6
        Petitioner deducted meals and entertainment expenses
which included meals with co-workers to discuss case strategy.
Mr. Armstrong testified that such expenses would not have been
reimbursable.
     7
        Petitioner's travel expenses included luggage which
petitioner admitted had elements of personal use.
     8
        Petitioner deducted, among other items, expenses for
candy, flowers, cable television, computer supplies, books,
plaques, an answering machine, telephone bills, and a magazine
rack.
                              - 12 -


     Petitioner deducted $142 for a book on Federal taxation.    We

find that this expense was incurred in connection with

petitioner's 1992 income tax and is, therefore, deductible.     Sec.

212(3); sec. 1.212-1(l), Income Tax Regs.

     To the extent that we have not addressed a specific item

which petitioner deducted, we find that petitioner has failed to

prove that it was ordinary and necessary within the meaning of

section 162.9   While we recognize that petitioner vigorously

advocated on behalf of his clients and that many of his expenses

benefited those clients, we do not have the authority to

disregard the legislative mandate that only ordinary and

necessary expenses be deducted.   Alexander v. Commissioner, T.C.

Memo. 1995-51, affd. 72 F.3d 938, 946-947 (1st Cir. 1995).

Accordingly, we sustain respondent's determination regarding the

deductions to the extent discussed above.

Delinquency




     9
        While we found petitioner generally to be a credible
witness, his arguments were of a general nature rather than
related to specific deductions. The responsibility for any
omissions in the record or in the arguments raised lies with
petitioner. Given that petitioner has the burden of proof, such
omissions weigh against him. Petitioner had a few hundred
itemized deductions. Some of these included video tapes, a
battery, a Sony tape player, a magazine rack, a P.D. t-shirt, new
parking cards, candy, and flowers. To the extent not addressed
within a specified category or individually, petitioner has
failed to prove that these expenses are anything but
nondeductible personal expenses under sec. 262.
                                - 13 -


     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 it is shown that such

failure is due to reasonable cause and not due to willful

neglect.   The taxpayer has the burden of proof to show the

addition is improper.    Rule 142(a); United States v. Boyle, 469

U.S. 241, 245 (1985).

     Respondent has determined that petitioner's 1992 Federal

income tax return was due, after extension, on August 15, 1993.

Petitioner filed his Federal income tax return for 1992 on

February 14, 1995.10    Petitioner's only argument against the

delinquency addition is that he felt that he had no taxes owing.

We have already found that petitioner did owe tax; therefore,

respondent is sustained on this issue.

Negligence

     Section 6662(a) imposes a penalty in an amount equal to 20

percent of the portion of the underpayment of tax attributable to

one or more of the items set forth in section 6662(b), including

negligence or disregard of rules or regulations.    Respondent

determined that a portion of the underpayment of petitioner's tax

was due to negligence or intentional disregard of rules or

     10
        Petitioner's Federal income tax return which was
submitted at trial is stamped “Feb 14 1995", and this is the date
argued in respondent's brief. The date used in the statutory
notice of deficiency, however, is Mar. 3, 1995. This discrepancy
does not affect the amount of the addition to tax.
                              - 14 -


regulations.   Sec. 6662(b)(1).   Petitioner bears the burden of

proof on the penalty issue.   Rule 142(a); ASAT, Inc. v.

Commissioner, 108 T.C. 147, 175 (1997).

     The accuracy-related penalty of section 6662 does not apply

with respect to any portion of an underpayment if it is shown

that there was reasonable cause for such portion and the taxpayer

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

6664(c)(1).

     Petitioner has offered no evidence that he was not negligent

in his deductions or that he had reasonable cause for them.    In

fact, petitioner's briefs fail to address the negligence issue.

We cannot be sure that petitioner intended to abandon the issue,

but in any case we sustain respondent's determination of the

applicable penalty with respect to the underpayment for the

improper deductions as petitioner has not met his burden of proof

on this matter.

     To reflect the foregoing,

                                                Decision will be

                                          entered under Rule 155.
