                  T.C. Summary Opinion 2011-51



                      UNITED STATES TAX COURT



                REGINALD L. MOORE, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8657-10S.             Filed April 18, 2011.



     Reginald L. Moore, pro se.

     Priscilla A. Parrett, for respondent.



     GERBER, Judge:   This case was heard pursuant to the

provisions of section 74631 of the Internal Revenue Code in

effect when the petition was filed.   Pursuant to section 7463(b),

the decision to be entered is not reviewable by any other court,



     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for 2007, the taxable year in
issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
                                - 2 -

and this opinion shall not be treated as precedent for any other

case.

     Respondent determined a $5,900 income tax deficiency and a

$1,180 section 6662(a) accuracy-related penalty for petitioner’s

2007 tax year.    The income tax deficiency is attributable to

respondent’s disallowance of various deductions petitioner

claimed on Schedule A, Itemized Deductions, and Schedule C,

Profit of Loss From Business.    We consider whether petitioner has

substantiated the expenses for which the deductions were claimed

and/or whether they are ordinary and necessary business expenses.

We also consider whether petitioner is liable for the section

6662(a) accuracy-related penalty.

                             Background

     Petitioner resided in California at the time his petition

was filed.   During 2007 petitioner was a high school teacher

working for the Inglewood Unified School District (Unified).

Petitioner also worked in Unified’s afterschool program tutoring

special needs students in their homes.    He would tutor students

in various subjects.   Some of the students were not motivated to

learn, and petitioner used unique teaching aids to motivate them.

He would purchase contemporary music CDs and ask the student to

write the words of the songs or, in some way, to vary the words

of the songs.    Another approach he used was to rent movies and
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provide them to the student with an assignment to watch the movie

and write some type of report.

     Petitioner tutored every school day and drove from the high

school to the student’s home to perform his tutoring function.

He was paid by Unified for his extracurricular tutoring, but he

received no reimbursement for his expenses, including travel.

     Petitioner’s 2007 Federal income tax return included two

Schedules C and one Schedule A.    On the Schedules C petitioner

reported two ostensibly separate activities--one involving his

tutoring activity and business (first Schedule C) and the other

involving the development of Portugese language aids (second

Schedule C).    The Schedules C were denominated “Curriculum Design

Services”.    The first Schedule C reflected no income and a

$17,192 loss comprising the following categories and amounts of

expenses:

Advertising             $256             Office expense        $150
Car & truck            1,882             Rent                   276
Depreciation             384             Repairs                401
Other                    469             Travel               4,956
Legal & prof.          3,204             Meal & entertainment 2,160
Supplies               1,598             Utilities            1,456

In the notice of deficiency, respondent did not make any

adjustments regarding the expenses claimed on the first

Schedule C.

     The second Schedule C reflected negative gross income of

$2,600 and expenses of $7,843 as follows:       Supplies--$1,245,

travel and entertainment--$6,241, meals and entertainment--$357,
                               - 4 -

for a total loss of $10,443.   Respondent disallowed substantially

all of the deductions petitioner claimed on the second Schedule

C.   Petitioner’s Portugese language activity involved his

regularly traveling to Brazil and accumulating colloquial and

street phrases on 3- by 5-inch cards in order to make a

compendium of cards to be used as an aid for travelers to Brazil.

When in Brazil he was a tourist (not on a business visa), and he

would record colloquial phrases during his visit.   Petitioner was

not fluent in Portugese.   He also communicated with individuals

in Brazil by means of the Internet and by telephone.   His goal

was to put together a complete set of cards that he would market

to individuals who traveled to Brazil or in other ways

communicated with Brazilians for social or business purposes.

Through the 2007 tax year petitioner had not reported any income

or sales from this activity.

     The disputed deductions on the Schedule A attached to

petitioner’s 2007 tax return included $11,839 of unreimbursed

employee expenses, consisting of $4,894 and $3,638 for vehicle

expenses, $136 for business expenses, $540 for parking fees,

$65 for travel while away from home, $1,574 for business

expenses, $42 for meals, and $950 for qualified educator

expenses.   Also claimed were a $135 tax preparation fee and other

expenses of $3,100 for a total of $15,074.   Because of the

2 percent of adjusted gross income threshold, petitioner deducted
                                 - 5 -

$13,502 of the disputed Schedule A deductions.    In the notice of

deficiency, respondent allowed the $135 for tax preparation and

disallowed the remaining $14,939 of deductions as being

duplicative of amounts petitioner claimed and respondent allowed

on the first Schedule C.

                            Discussion

     Petitioner claimed business and employee expenses on two

Schedules C and a Schedule A.    Respondent allowed all of the

expenses on the first Schedule C and disallowed substantially all

of the business and employee deductions claimed on the second

Schedule C and the Schedule A.    Respondent contends that the

disallowed amounts are unsubstantiated and/or duplications of

amounts claimed on the first Schedule C.    Alternatively, to the

extent that petitioner can show that the amounts on the second

Schedule C are not duplications, respondent contends that

petitioner’s Portugese language activity was not a trade or

business and/or that petitioner’s expenditures were personal.

     In the case of claimed deductions, taxpayers bear the burden

of showing that the Commissioner’s determination is in error.

Rule 142.2   Petitioner has supplied extensive documentation in

the form of receipts and other materials reflecting his

expenditure of various amounts for specific purposes.    The



     2
      No question was raised by either party regarding the
shifting of the burden of proof under sec. 7491(a).
                                 - 6 -

question remains as to whether petitioner duplicated those

expenditures in his return and/or whether they are otherwise

deductible.   We have carefully reviewed the evidence and compared

the various schedules and must conclude and hold that, with the

exception of the Brazilian travel expenses, petitioner has

claimed duplicate amounts on the second Schedule C and the

Schedule A that were already claimed and that respondent allowed

on the first Schedule C.   One such example is the $3,204 of legal

and professional services expenses claimed on the first Schedule

C and the $3,100 claimed on the Schedule A.     Another example is

that petitioner claimed $1,882 in travel expenses on his first

Schedule C for his tutoring business, and he also claimed $4,894

of travel expenses as unreimbursed employee expenses on his

Schedule A.   Petitioner was not able to provide an adequate

explanation for these duplications.      We also found petitioner’s

explanation of the $2,600 of “negative gross income” to be

curious and without substance.    During the trial petitioner’s

explanation of some of the adjustments reflected his propensity

to exaggerate or duplicate expenditures.     This aspect is also

reflected by the documentation.    For example, he claimed to have

supplied tutoring students with various items, but on closer

examination these items were actually and obviously for

petitioner’s personal consumption.
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        Taxpayers are allowed deductions for ordinary and necessary

expenses paid or incurred in the carrying on of a trade or

business or for the production of income.       Secs. 162(a), 212(1).

A taxpayer, however, is not engaged in a trade or business or an

income-producing activity until the business or activity begins

to function as a going concern.       Additionally, deductions are not

allowed for personal expenses.       Sec. 262(a).   We find these

principles especially applicable with respect to the travel and

other deductions claimed in connection with petitioner’s

Portugese language activity.

        Petitioner’s Portugese language activity was not a going

concern, and his trips to and expenditures concerning Brazil were

personal.       Accordingly, even if petitioner could show that any of

the claimed amounts were not duplicated, they would not be

deductible.3      See secs. 195, 262(a).

     Finally, we consider whether petitioner is liable for a

section 6662(a) accuracy-related penalty for negligence or

disregard of rules or regulations and/or a substantial

understatement of income tax under section 6662(b)(1) and (2) for

2007.       Respondent bears the burden of production with respect to

the penalty, see sec. 7491(c), but petitioner has the burden of



        3
      It is noted that our comparison of petitioner’s
substantiation with the amounts claimed on the Schedules C
reflect that respondent may have been generous in the allowance
of all of the amounts claimed.
                                - 8 -

proof with respect to reasonable cause, etc., see Higbee v.

Commissioner, 116 T.C. 438, 446-447 (2001).      A taxpayer may be

liable for a 20-percent penalty on any underpayment of tax

attributable to negligence or disregard of rules or regulations

or a substantial understatement of income tax.      Sec. 6662(a) and

(b)(1) and (2).   “Negligence” is any failure to make a reasonable

attempt to comply with the provisions of the Internal Revenue

Code, and “disregard” means any careless, reckless, or

intentional disregard.   Sec. 6662(c).     An underpayment is not

attributable to negligence or disregard to the extent that the

taxpayer shows that the underpayment is due to reasonable cause

or good faith.    Sec. 6664(c); Neonatology Associates, P.A. v.

Commissioner, 115 T.C. 43, 98 (2000), affd. 299 F.3d 221 (3d Cir.

2002); see also secs. 1.6662-3(a), 1.6664-4(a), Income Tax Regs.

A substantial understatement of income tax is an understatement

that exceeds the greater of 10 percent of the tax required to be

shown on the tax return or $5,000.      Sec. 6662(d)(1)(A).

     Petitioner is an educator who uses creative means to

motivate his students.   For that, he must be admired.     He is also

entrepreneurial and is attempting to develop businesses and

business models related to tutoring that can provide him with a

livelihood after he retires from public education.      That is also

admirable.   His tax return preparation and recordkeeping,

however, are not models of precision.      Petitioner used a
                                 - 9 -

computerized tax return program to prepare his 2007 tax return,

and he supplied the information that the program, in turn, placed

on the tax return and the appurtenant schedules.       In that

process, however, he is not relieved from reviewing the

information on the tax return to determine whether it is correct.

     Petitioner is well educated, and we cannot accept as

reasonable his explanation that he merely puts in the numbers and

relies completely on the computer program.       That explanation is

not sufficient to permit petitioner to avoid the penalty.        That

is so because of the amount of obviously duplicated expenditures

and the personal nature of the Brazilian travel and related

expenditures.   Petitioner’s treatment of that activity as a

business is nothing less than hyperbole.

     We accordingly hold that petitioner is liable for the

section 6662(a) accuracy-related penalty.

     To reflect the foregoing,


                                              Decision will be entered

                                         for respondent.
