                        T.C. Memo. 1999-184



                      UNITED STATES TAX COURT



          JOHN ALLEN AND GLENNA A. LYLE, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 18428-97.                       Filed June 7, 1999.



     John Allen Lyle and Glenna A. Lyle, pro sese.

     Gerald L. Brantley, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION

     GERBER, Judge:   Respondent, by means of a statutory notice

of deficiency, determined a deficiency in petitioners' 1995

income tax of $8,938 and a section 6662(a)1 penalty of $1,788.




     1
       Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year under
consideration, and all Rule references are to this Court's Rules
of Practice and Procedure.
                               - 2 -


      The issues for our consideration are:   (1) Whether the

correspondence in this case from respondent's employee estopped

respondent from determining a deficiency in petitioners' 1995

Federal income tax; (2) whether respondent correctly determined

that petitioners must recognize income from Social Security

benefits in the amount of $7,643 for the taxable year 1995; (3)

whether petitioners are entitled to deduct $11,282 in alleged

job-hunting expenses; (4) whether petitioners are entitled to

deduct temporary living expenses of $5,240; (5) whether

petitioners' gambling losses are limited to their income from

gambling for taxable year 1995; and (6) whether petitioners are

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

Separate Findings of Fact and Opinion are hereafter set forth

with respect to each of the first five issues.    Those portions of

the Stipulation of Facts that pertain to a particular issue are

incorporated by this reference in the Findings of Fact for the

issue to which they relate.

I.   1994 Refund Letter

                          FINDINGS OF FACT

      At the time of the filing of the petition in this case,

petitioner John Allen Lyle resided in El Paso, Texas.    Petitioner

Glenna A. Lyle resided in Nashville, Tennessee.    Glenna A. Lyle

is a petitioner in this case because she joined in filing Federal

income tax returns with her husband John Allen Lyle (petitioner).
                               - 3 -


     On November 21, 1995, petitioners sent a letter to the

Problem Resolution Office of the Internal Revenue Service

concerning the status of their request for refund on their

additional amended income tax return filed for 1994.    The Problem

Resolution caseworker replied, in a letter dated June 11, 1996,

that the refund had been allowed and indicated that it would be

used to offset petitioners' 1995 tax account.    The letter further

indicated that "Since only $1,314 of the $1,682 [refund] from

1994 was needed to full pay the 1995 account, you will also

receive a refund for 1995 of $371.54."

                              OPINION

     We must decide whether the letter from respondent's

caseworker estops respondent from determining a deficiency for

petitioners' 1995 Federal income tax.    Petitioners assert that

because the letter indicated that only $1,314 was needed to "full

pay" petitioners' 1995 Federal tax liability, respondent has

forfeited the right to determine a deficiency for petitioners'

1995 Federal income tax.   Respondent contends that the doctrine

of equitable estoppel should not be applied in this case.    We

agree with respondent.

     The doctrine of equitable estoppel is applied against the

Government only with utmost caution and restraint.   See Kronish

v. Commissioner, 90 T.C. 684, 695 (1988).    Taxpayers must prove

at least the following elements before courts will apply
                               - 4 -


equitable estoppel against the Government:    (1) A false

representation or wrongful, misleading silence by the party

against whom the estoppel is claimed; (2) an error in a statement

of fact and not in an opinion or statement of law; (3) the

taxpayer's ignorance of the true facts; (4) the taxpayer's

reasonable reliance on the acts or statements of the one against

whom estoppel is claimed; and (5) adverse effects suffered by the

taxpayer from the acts or statements of the one against whom

estoppel is being claimed.   See Norfolk S. Corp. v. Commissioner,

104 T.C. 13, 60 (1995), supplemented by 104 T.C. 417 (1995).

     Petitioners have failed to establish that all of the

elements for equitable estoppel have been satisfied.   The

correspondence which petitioner relies on to support his

contention simply described how the allowed refund for 1994 would

be applied to petitioners' tax account.   The correspondence did

not make any representation that petitioners owed no additional

1995 tax.   Therefore, petitioners have failed to establish that

there has been a false representation by respondent.

     Moreover, it was not reasonable for petitioners to rely on

the letter from respondent's caseworker for the proposition that

petitioners owed no additional income tax for 1995.    The letter

was written in response to petitioners' request for refund on an

amended income tax return filed for 1994.    The letter does not

purport to be a determination regarding petitioners' 1995 return
                                  - 5 -


and does not state that petitioners' 1995 income tax return has

been accepted as filed, nor does it address any of the specific

issues encompassed in the notice of deficiency.     Accordingly,

respondent is not estopped from determining a deficiency in

petitioners' 1995 income tax.

II.   Social Security Benefits

                         FINDINGS OF FACT

      Petitioners reported receiving Social Security benefits of

$8,993 on their 1995 income tax return.     Petitioners did not,

however, compute the taxable portion of their Social Security

benefits to be included in their gross income.     Respondent

treated their failure to enter the taxable portion as a

computational adjustment and determined that the taxable portion

of the benefits was $7,643.

                                 OPINION

      Section 86 governs the taxability of Social Security

benefits.   Applying that section, respondent determined that the

taxable portion of the benefits was $7,643.     Petitioners do not

dispute the accuracy of respondent's calculation.     Rather,

petitioners argue that the taxation of Social Security benefits

is an ex post facto law in violation of Article I of the

Constitution.   Their position has no merit.    The prohibition

against ex post facto laws applies only to penal legislation that

imposes or increases criminal punishment for conduct predating
                                 - 6 -


its enactment.    See Harisiades v. Shaughnessy, 342 U.S. 580, 594

(1952).    The Ex Post Facto Clause is not applicable in a civil

context.    See Johannessen v. United States, 225 U.S. 227, 242

(1912).    Accordingly, section 86 does not violate the Ex Post

Facto Clause of the Constitution.

III.    Job-Hunting Expenses

                           FINDINGS OF FACT

       In August 1994 petitioners moved to Nashville, Tennessee,

from El Paso, Texas, after Mrs. Lyle accepted a job in Nashville.

Petitioner, who had 10 years of experience as an El Paso public

school teacher, attempted to find employment in the Nashville

area.    From January to March 1995, petitioner had three

interviews with the following prospective employers:     Three

Springs Wilderness program; a Christian academy; and the Metro

Nashville school district.     At the time of the interviews,

petitioner was living in an apartment in Nashville.     Petitioner

drove the following distances (one way) for his three interviews:

70 miles for the first interview, 5 miles for the second

interview, and 30 miles for the third interview.     None of the

interviews resulted in employment.

       On April 1, 1995, petitioner left Nashville for Las Vegas,

Nevada, for the joint purposes of gambling and finding a job in

the teaching profession.    Mrs. Lyle remained in Nashville.

Petitioner drove to Las Vegas from Nashville, a distance of about
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1,311 miles.    Petitioner had three job interviews while in Las

Vegas.   The first job interview was in Bull Head City, Arizona, a

distance of about 100 miles from the hotel that petitioner was

residing in.    The record does not disclose the distances

petitioner traveled for his second and third interviews.

Petitioner was unable to secure a teaching position in the Las

Vegas area.    While in Las Vegas, petitioner contacted a high

school principal he knew in El Paso, Texas, who hired petitioner

over the telephone.

     Petitioner gambled every day from his arrival in April until

he left Nevada for El Paso, Texas, in late July 1995.

Petitioners claimed $9,764 in job-hunting expenses on their 1995

Federal income tax return.    Respondent disallowed the claimed

expenses.

                               OPINION

     Section 162(a)(2) permits a deduction for ordinary and

necessary expenses incurred in carrying on a trade or business,

including traveling expenses (which include amounts expended for

meals and lodging other than amounts that are lavish or

extravagant under the circumstances) while away from home in the

pursuit of a trade or business.    In addition to deducting

expenses relating to temporary employment away from home, a

taxpayer may also deduct expenses incurred in seeking employment.

See Primuth v. Commissioner, 54 T.C. 374 (1970).    These
                                - 8 -


expenditures are deductible under section 162(a) regardless of

whether employment is obtained.    See Cremona v. Commissioner, 58

T.C. 219 (1972).    Deductible job-seeking expenses can include

travel expenses while away from home.     See Kozera v.

Commissioner, T.C. Memo. 1986-604.      The deduction for expenses

incurred away from home is intended to mitigate the burden of a

taxpayer who, because of the travel requirements of his trade or

business, must maintain two places of abode and therefore must

incur duplicate living expenses.    See Barone v. Commissioner, 85

T.C. 462, 466 (1985), affd. without published opinion 807 F.2d

177 (9th Cir. 1986).

     In order to be allowed as a deduction under section 162, a

taxpayer must establish that the travel expenses were:     (1)

Reasonable and necessary; (2) incurred while away from home; and

(3) incurred in pursuit of a trade or business.     See Horton v.

Commissioner, 86 T.C. 589, 593 (1986).     Petitioners claimed

substantial amounts attributable to lodging, food, travel,

postage, long-distance telephone calls, and car insurance as job-

hunting expenses.    These expenses were incurred during the period

January through July 1995.

     Respondent has two alternative theories for denying the job-

hunting expenses.    First, respondent contends that petitioner had

no tax home in 1995, and therefore none of the traveling expenses

can be deducted because they were not incurred "while away from
                                   - 9 -


home".   Id.   In the alternative, respondent contends that, even

if petitioner's tax home was Nashville, only the portion of the

expenses directly attributable to job hunting are deductible.

     Generally, a taxpayer's "home", for purposes of section

162(a), is the city or location of his or her principal place of

business and not where his or her personal residence is located.

See Mitchell v. Commissioner, 74 T.C. 578, 581 (1980).     However,

an employee without a principal place of business may treat a

permanent place of residence at which he incurs substantial

continuing living expenses as his tax home.     See Sapson v.

Commissioner, 49 T.C. 636, 640 (1968).     Nevertheless, where a

taxpayer has neither a principal place of business nor a

permanent place of residence, a taxpayer has no tax home from

which to be away.    Such taxpayers' "homes" are wherever they

happen to be.    See Brandl v. Commissioner, 513 F.2d 697, 699 (6th

Cir. 1975), affg. T.C. Memo. 1974-160; Barone v. Commissioner,

supra.

     While the subjective intent of taxpayers is to be considered

in determining whether they have tax homes, this Court and others

consistently have held that the objective financial criteria bear

a closer relationship to the underlying purpose of the deduction.

See Barone v. Commissioner, supra at 465.     Whether petitioner had

a tax home is a factual question, and the burden of proof is on

petitioner.     See Rule 142(a).
                                - 10 -


     In the present case, petitioner's testimony pertaining to

these objective factors was vague at best.    Petitioner testified

concerning his expenditures in Nashville and Las Vegas; however,

his explanations were lacking in meaningful detail.    Although

petitioner did not have a principal place of business during much

of 1995, several objective factors indicate that Nashville,

during the period from January through July 1995, was

petitioner's permanent place of residence.    First, petitioners

resided in Nashville from August 1994 through March 1995, a

period of 8 months.   Second, during the period beginning January

and until August 1995, petitioners paid rent on an apartment in

Nashville, a substantial living expense.

     A.   Job-Hunting Expenses in Nashville

     Since Nashville was petitioner's permanent place of

residence, he was not away from home during his job-searching in

Nashville, and therefore the expenditures for lodging in

Nashville are not deductible.    Petitioner drove a total of 210

miles to various job interviews in the Nashville area, and is

entitled to a travel deduction of $63 as a job-hunting expense

(210 miles times 30 cents per mile).     See Rev. Proc. 94-73, 1994-

2 C.B. 816.    No amount for meals, postage, long-distance

telephone calls or car insurance is allowable because petitioner

has not substantiated that these expenses were related to his

job-hunting.
                                - 11 -


     B.   Job-Hunting Expenses in Las Vegas

     Petitioner also claimed significant travel expenses for the

period beginning April through July 1995.     Since we have

determined that petitioner's tax home was Nashville, the expenses

must be allocated between petitioner's gambling and job-hunting

activities.   It is difficult to discern the amount of time

petitioner spent on his gambling versus his job-hunting

activities.   Considering all of the facts and circumstances, we

conclude petitioner spent approximately one-quarter of his time

job-hunting in Las Vegas.   Accordingly, petitioner is entitled to

a $700 deduction for food and lodging.   No amount for postage,

long-distance telephone calls, or car insurance is allowable

because petitioner has not substantiated that these expenses were

related to his job-hunting.

     If an employee travels to an area to seek new employment and

also engages in personal activities, traveling expenses are

deductible only if the trip is related primarily to seeking new

employment.   See sec. 1.162-2(b), Income Tax Regs.    The amount of

time during the period of the trip that is spent on personal

activity compared to the amount of time spent on seeking new

employment is important in determining whether the trip is

primarily personal.   See id.   Petitioner spent most of his time

in Las Vegas gambling, rather than seeking new employment.

Accordingly, petitioner is not entitled to deduct his travel
                              - 12 -


expenses from Nashville to Las Vegas.     Petitioner drove a total

of 200 miles to his job interview in Bull Head City, Arizona, and

is entitled to a travel deduction of $60 as a job-hunting expense

(200 miles times 30 cents per mile).     See Rev. Proc. 94-73, 1994-

2 C.B. 816.

IV.   Temporary Living Expenses

                         FINDINGS OF FACT

      After accepting a teaching position in El Paso, Texas, over

the telephone, petitioner left Las Vegas in late July 1995.

Petitioner's job commenced on August 1, 1995.     As of September 8,

1997, 2 years after the job commenced, petitioner continued to

reside in El Paso, and his wife continued to reside in Nashville.

                              OPINION

      Petitioner asserts that he is entitled to deduct $5,240 in

living expenses as "temporary living expenses".     These expenses

were incurred during the period from August through December

1995.   Petitioner contends that he is entitled to deduct his

living expenses during this period because he lived in El Paso

for less than 6 months during 1995.     We find petitioner's

argument to be flimsy and farfetched.

      The fact that petitioner lived at a certain address for less

than 6 months during the taxable year is not necessarily relevant

or important to the question of whether he is entitled to deduct

living expenses.   An employee employed temporarily at a distance
                               - 13 -


from his home is allowed to deduct the costs of meals and lodging

at his temporary job site on the theory that he is "away from

home".   Tucker v. Commissioner, 55 T.C. 783, 786 (1971).     As

discussed previously, the purpose of this rule is to mitigate the

hardship suffered by taxpayers who must maintain two places of

abode and therefore incur duplicate living expenses.     See Barone

v. Commissioner, supra.    However, an employee who accepts

employment of an indefinite duration cannot deduct living costs

at the distant job site.   See Peurifoy v. Commissioner, 358 U.S.

59 (1958).   In addition, when a husband and wife are employed or

conduct business indefinitely in two widely separated locations,

they cannot deduct living expenses incurred at either site.        See

Foote v. Commissioner, 67 T.C. 1 (1976).

     Petitioner has not established that his job in El Paso was

temporary.   He offered no evidence that the teaching position was

for a limited time after which he intended to return to

Nashville.   On the contrary, the entire record indicates that El

Paso had become petitioner's principal place of business

following his move from Las Vegas.      Petitioner arrived in El Paso

in late July for a job commencing on August 1, 1995.     As of

September 8, 1997, 2 years after the job commenced, petitioner

continued to reside in El Paso.   Accordingly, petitioners are not

entitled to deduct the $5,420 in living expenses as temporary

living expenses.
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V.   Gambling Losses

                           FINDINGS OF FACT

      Petitioner gambled every day from April until he left Las

Vegas in late July 1995.    Petitioners claimed "gaming wins" of

$1,200 and gambling expenses and losses of $35,034 on their 1995

Federal income tax return.    Respondent disallowed petitioners'

gambling expenses and losses in excess of gambling winnings.

                               OPINION

      Petitioners maintain that, pursuant to section 162(a), the

net wagering losses represented a deductible trade or business

expense.   Respondent contends that the deduction of net wagering

losses is precluded by section 165(d).    We agree with respondent.

Section 165(d) provides that "Losses from wagering transactions

shall be allowed only to the extent of the gains from such

transactions."    In other words, a taxpayer is not entitled, as a

matter of law, to deduct a net gambling loss.

      Petitioner relies on Commissioner v. Groetzinger, 480 U.S.

23 (1987), for the proposition that net gambling losses are

properly deductible in full as trade or business expenses under

section 162(a).   Petitioners' discussion of Groetzinger ignores

the fact that the section 165(d) restriction was not at issue in

Groetzinger.   The issue in Groetzinger was whether a full-time

gambler, who made wagers solely on his own account, was engaged

in a trade or business under section 162 for purposes of treating
                              - 15 -


his gambling losses as a tax preference item under the minimum

tax scheme governed by sections 55 and 56.     See Valenti v.

Commissioner, T.C. Memo. 1994-483.     Petitioners are not entitled

to gambling losses in excess of their income from gambling.2

VI.   Accuracy-Related Penalty Under Section 6662

      Respondent also determined that petitioners were negligent

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

Section 6662(a) and (b)(1) imposes an accuracy-related penalty

equal to 20 percent of the portion of an underpayment that is

attributable to negligence or disregard of rules or regulations.

      In determining whether petitioners were negligent in the

preparation of their returns, we take into account petitioner's

tax experience.   Petitioner, a self-proclaimed "trained tax

specialist", should have realized that the deduction of 7 months

of living expenses as job-hunting expenses after a limited job-

hunting effort was not reasonable.     Combining that with

petitioner's gambling losses presents a situation that was "too




      2
      Petitioners made several other arguments which we found to
be outlandish, such as their request for $15 billion in punitive
damages. To the extent we have not addressed petitioners' other
arguments we find them to be without merit.
                                - 16 -


good to be true" within the meaning of section 1.6662-

3(b)(1)(ii), Income Tax Regs.    Accordingly, petitioners are

liable for the section 6662(a) penalty.

     To reflect the foregoing,

                                          Decision will be entered

                                     under Rule 155.
