                        T.C. Memo. 2011-248



                      UNITED STATES TAX COURT



                   ELIANA FARIAS, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 13357-10.                Filed October 24, 2011.



     Eliana Farias, pro se.

     Priscilla A. Parrett, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     COHEN, Judge:   Respondent determined a deficiency of $5,178

in petitioner’s Federal income tax and an accuracy-related

penalty of $1,035.60 for 2007.   After concessions by both

parties, the issues remaining for decision are whether petitioner

is entitled to additional itemized deductions beyond those

conceded by respondent and whether petitioner is liable for the
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accuracy-related penalty under section 6662(a).   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.

                          FINDINGS OF FACT

     Some of the facts have been stipulated, and the stipulated

facts are incorporated in our findings by this reference.

Petitioner resided in California at the time she filed her

petition.   During 2007 petitioner’s primary employment was as an

elementary school teacher with the Los Angeles Unified School

District (LAUSD), where she taught classes including health,

nutrition, and fitness.   During 2007, under LAUSD’s policy,

teachers were provided with basic supplies for classroom use, and

purchases of anything beyond basic supplies were left to the

teacher’s discretion.   Petitioner was not reimbursed by LAUSD for

any items that she purchased for her classroom.   LAUSD did not

have a continuing education requirement that applied to

petitioner in 2007.

     Petitioner also had two part-time jobs in 2007:   (1)

Aerobics instructor and personal trainer at Spectrum Club Holding

Co. (Spectrum) and (2) workshop facilitator and liaison for

schools at The EduCare Foundation (EduCare).   EduCare’s

reimbursement policy for 2007 outlined that mileage would be

reimbursed at a rate of 20 cents per mile and that employees
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would be reimbursed for “very basic office supplies” if they

presented receipts.   Petitioner received Forms W-2, Wage and Tax

Statement, for 2007 reporting earnings from EduCare of $13,489

and from Spectrum of $1,577.50.

     In April 2007 petitioner went on a 10-night cruise, sailing

from Venice, Italy, to various locations in the Mediterranean.

Including airfare, spa visits and other onboard expenses, and a

passport and a visa, the total cost was $8,516.73.    Petitioner

did not take classes related to her employment while on the

cruise.

     Petitioner’s 2007 tax return was prepared by a return

preparer who received from petitioner the total expenses to claim

as deductions on the return without receipts and/or other

supporting documents.   On the 2007 tax return, petitioner claimed

itemized deductions including unreimbursed employee expenses of

$23,268, consisting of qualified educator expenses of $18,378

(including the cost of her April 2007 trip), union and

professional dues of $2,223, tax preparation fees of $350, and

other education expenses of $2,317.    In the notice of deficiency

dated March 23, 2010, the Internal Revenue Service (IRS)

disallowed these claimed deductions.

     Thereafter, petitioner supplied to the IRS documents,

including numerous receipts, that were separated into the

following categories:   Clothing, personal wellness, food, travel,
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classes, field trips, and supplies.     Petitioner has conceded that

she is not entitled to claim deductions for the expenses in the

categories identified as clothing, personal wellness, and food

items.   Respondent has conceded that petitioner is entitled to

deductions for some of the claimed expenses, including the union

and professional dues fees and the tax preparation fees.

                              OPINION

     The deductions petitioner claimed on her tax return for 2007

that remain at issue are unreimbursed employee expenses

consisting of:   (1) $4,299 for classes/education; (2) $8,516.73

for travel and $990.47 for field trips; and (3) $8,779.51 for

supplies.

     A taxpayer bears the burden of proving that he or she is

entitled to any deductions claimed.     See New Colonial Ice Co. v.

Helvering, 292 U.S. 435, 440 (1934); Rockwell v. Commissioner,

512 F.2d 882, 886 (9th Cir. 1975), affg. T.C. Memo. 1972-133.

Generally, a taxpayer must keep records sufficient to establish

the amounts of the items reported on his or her Federal income

tax return.   Sec. 6001; sec. 1.6001-1(a), (e), Income Tax Regs.

Personal expenses are not deductible.    Sec. 262.

     A taxpayer may deduct unreimbursed employee expenses as an

ordinary and necessary business expense under section 162.       Lucas

v. Commissioner, 79 T.C. 1, 6 (1982).     The expenses must be

directly or proximately related to the taxpayer’s trade or
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business.   Deputy v. du Pont, 308 U.S. 488, 493-495 (1940); sec.

1.162-1, Income Tax Regs.    An employee’s trade or business is

earning his or her compensation, and generally only those

expenses that are related to the continuation of employment are

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

1959), affg. T.C. Memo. 1958-60.    A trade or business expense

deduction is not allowable to an employee to the extent that the

employee is entitled to reimbursement from an employer.      Orvis v.

Commissioner, 788 F.2d 1406, 1408 (9th Cir. 1986), affg. T.C.

Memo. 1984-533.    Along with other miscellaneous itemized

deductions, unreimbursed employee expenses are subject to the 2-

percent limitation of section 67(a).

Claimed Classes/Education Expenses

     Education expenses are considered ordinary and necessary

business expenses if the education maintains or improves skills

required by the taxpayer in his or her 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.

     Petitioner produced one receipt that showed that she paid

$2,250 to Morter Health Systems New for a “Professional B.E.S.T.

Program” in April 2007.    Petitioner testified that this was a

health course but supplied no other evidence regarding this

program or how it related to her employment.    Petitioner also
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produced a receipt showing that she paid $52 for a beach

volleyball course that met on Mondays from April 9 to June 4,

2007.   Petitioner did not show that she was required to teach

beach volleyball or acquire these skills as a condition of her

employment.   Because petitioner has failed to fulfill the burden

of proving that she is entitled to these purported education

expenses, we sustain respondent’s disallowance.

     Petitioner also contends that she is entitled to the

deduction that she claimed for a “WarriorSage, Inc. Illumination

Intensive” seminar that she paid for and attended in 2008.

Because this expense was not incurred in 2007 it was properly

disallowed by respondent.

Claimed Travel Expenses

     Under section 274(m)(2), no deduction is allowed “for

expenses for travel as a form of education.”     However, taxpayers

may deduct expenses incurred while traveling away from home if

the trip is primarily to obtain education that has the requisite

relation to the taxpayer’s business.      Sec. 1.162-5(e)(1), Income

Tax Regs.   If as an incident of such trip the taxpayer engages in

some personal activity such as “sightseeing, social visiting, or

entertaining, or other recreation”, the portion of the expenses

attributable to such personal activities is not deductible

pursuant to section 262.    Id.
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     To deduct expenses incurred for travel, meals, and lodging

while away from home on job-related education, a taxpayer must

satisfy the strict substantiation requirements of section 274(d).

Section 274(d) disallows deductions for traveling expenses,

including meals and lodging, unless the taxpayer substantiates by

adequate records or by sufficient evidence corroborating the

taxpayer’s own statement:    (1) The amount of such expense, (2)

the time and place such expense was incurred, and (3) the

business purpose for which such expense was incurred.    See sec.

1.274-5T(b)(2), Temporary Income Tax Regs., 50 Fed. Reg. 46014

(Nov. 6, 1985).   Adequate records generally must be written and

must be prepared or maintained such that a record of each element

of an expenditure or use that must be substantiated is made at or

near the time of the expenditure or use when the taxpayer has

full present knowledge of each element.    See sec. 1.274-

5T(c)(2)(ii)(C), Temporary Income Tax Regs., 50 Fed. Reg. 46018

(Nov. 6, 1985).   In the alternative, each element of an

expenditure or use must be established by the taxpayer’s own

written or oral statement “containing specific information in

detail as to such element” combined with corroborative evidence

to establish such element.    Sec. 1.274-5T(c)(3)(i), Temporary

Income Tax Regs., 50 Fed. Reg. 46020 (Nov. 6, 1985).    Neither a

taxpayer nor the Court may estimate permissible deductions that

do not satisfy the strict substantiation requirements of section
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274(d).    See Sanford v. Commissioner, 50 T.C. 823, 827-828

(1968), affd. per curiam 412 F.2d 201 (2d Cir. 1969).

     Petitioner produced receipts for the 10-day Mediterranean

cruise, including receipts for airfare to and from Italy, onboard

expenses, and the costs of obtaining a passport and a visa.      The

cruise involved sightseeing, spa visits, and other recreation.

The receipts do not show any business purpose behind the expenses

and do not satisfy the strict substantiation requirements of

section 274(d).   We conclude that the cruise and the associated

expenses are nondeductible personal expenses.

     Petitioner produced receipts that she claims are for weekend

field trips that served as “incentives” for her students.      The

receipts are primarily for gasoline purchases and recreational

activities, such as movie tickets and two Disneyland admission

tickets.   Another receipt, from IMAX California ScienCenter,

lists the recipient as “Hooper Avenue Elementary School”.      The

receipt shows the payment was made by check, but no information

about the payor is listed.

     Petitioner has neither shown that the expenses for field

trips were an ordinary and necessary expense for any of her

employers nor submitted evidence sufficient to substantiate these

claimed expenses as required by section 274(d).
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Claimed Expenses for Supplies

     The first $250 of deductions for expenses paid or incurred

in connection with books, supplies, computer equipment, other

equipment, and supplementary materials used by an eligible

educator in the classroom is subtracted from gross income to

determine the taxpayer’s adjusted gross income.     Sec.

62(a)(2)(D).   Any substantiated expenses after the first $250

that relate to a taxpayer’s employment as a teacher will be

allowed as unreimbursed employee expenses.    Id.   To claim a

deduction for teaching supplies, it is not enough that the

supplies be helpful to the students and appropriate for use in

the classroom; they must also be directly related to the

taxpayer’s job as a teacher and a necessary expense of being a

teacher.   See Welch v. Helvering, 290 U.S. 111, 113-114 (1933);

Wheatland v. Commissioner, T.C. Memo. 1964-95.

     Petitioner produced receipts for supplies totaling $9,361.

Respondent has conceded that petitioner is entitled to claim

$581.59 of these expenses.   Some of the receipts were dated in

years other than 2007 and are not relevant for petitioner’s 2007

tax return.    The remaining claimed expenses, totaling $8,779.51,

are divided into the following categories:   (1) Student

“incentives”; (2) computer; (3) classroom improvement and

maintenance; (4) specialty chair and related items; and (5)

fitness items.
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     1.   Claimed Student Incentives Expenses

     Petitioner claimed that as a teacher she occasionally used

“candy and sugar” as student incentives.   A number of the

receipts she offered to substantiate these expenses also include

other food items and household goods.   Petitioner also testified

that she purchased a U.S. savings bond that was presented to a

student in recognition of community service provided to the

school.

     There is no evidence that the school required the purchase

of the candy or the savings bond for petitioner’s students.

These expenses were not necessary to petitioner’s job; and no

matter how well intentioned, gifts to students are not deductible

as business expenses.   See Patterson v. Commissioner, T.C. Memo.

1971-234.

     Petitioner also produced receipts for purchases of several

audio players and testified that they “related” to her fifth-

grade classes.   However, petitioner did not explain how the

purchase of the audio players for her students was related to the

classes she was teaching, whether they were used in the

classroom, or whether they were given as gifts to the students.

Accordingly, we sustain respondent’s determination that

petitioner is not entitled to claim deductions for these

expenses.   See Tesar v. Commissioner, T.C. Memo. 1997-207;

Wheatland v. Commissioner, supra.
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     2.    Claimed Computer Expense

     Petitioner produced a receipt for the purchase of a laptop

computer.    Petitioner testified that she used it both at home and

at work.

     Section 274(d) requires substantiation of any expense

incurred or paid with respect to certain listed property.     Listed

property includes computers.    Sec. 280F(d)(4).   Petitioner did

not provide adequate substantiation of the business use of the

computer.    Accordingly, we sustain respondent’s disallowance of

the deduction for the claimed computer expense.

     3.    Claimed Classroom Improvement and Maintenance Expenses

     Petitioner produced receipts purportedly for various

improvements to and maintenance of her classroom.     Petitioner

testified that items listed on the receipts from home improvement

stores were for supplies to post materials in the classroom and

that “we had a sink issue in the classroom that the school was

taking too long to fix so then I had to do something about it”.

These receipts list items such as batteries, a vacuum, switch

plates, door locks, and floor tiles.    Such purchases are not

ordinary or necessary expenses for teaching for LAUSD.     See

Deputy v. du Pont, 308 U.S. at 494-495; Welch v. Helvering, supra

at 113-114.    Petitioner’s testimony as to these items was vague

and uncorroborated.    She has not shown that the expenses are

related to the continuation of her employment.     See Noland v.
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Commissioner, 269 F.2d at 111.     Thus, we agree with respondent’s

determination that these claimed expenses are disallowed.

       4.   Claimed Cost of Specialty Chair and Related Items

       Petitioner produced a receipt from Relax The Back store for

$2,179.99 for items including a specialty chair, an adjustable

headrest, a pillow, and ice/heat pads.     Petitioner testified that

these items were purchased because of a back injury that she

sustained when relocating her classroom from one room to another.

These expenses were not an ordinary and necessary expense of her

job.    See Deputy v. du Pont, supra at 494-495; sec. 1.162-1,

Income Tax Regs.     (Even if the cost of these items qualified as a

medical expense reportable on Schedule A, Itemized Deductions,

the total expense is not enough to overcome the 7.5-percent

adjusted gross income limitation.     See sec. 213(a).)

       5.   Claimed Expenses for Fitness Items

       Petitioner produced receipts from sports and dance stores

and testified that these expenses were specifically related to

the fitness classes that she taught.     Some of the receipts do not

describe the item purchased, and petitioner did not explain these

items in her testimony.     Other receipts identify clothing items.

       For the cost of clothing and maintaining such clothing to be

deductible as an ordinary and necessary business expense, it must

(1) be required or essential in the taxpayer’s employment,
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(2) not be suitable for general or personal wear, and (3) not be

so worn.   Yeomans v. Commissioner, 30 T.C. 757, 767 (1958).

     Petitioner testified that she purchased the fitness clothing

for work, but she never stated (and there is no evidence) that

the clothing was unsuitable for general or personal wear or that

it was not used away from work.    We conclude that petitioner is

not entitled to deduct the expenses claimed for fitness items.

Accuracy-Related Penalty

     Section 6662(a) and (b)(1) and (2) imposes a 20-percent

accuracy-related penalty on any underpayment of Federal income

tax attributable to a taxpayer’s negligence or disregard of rules

or regulations or substantial understatement of income tax.

Section 6662(c) defines negligence as including any failure to

make a reasonable attempt to comply with the provisions of the

Internal Revenue Code and defines disregard as any careless,

reckless, or intentional disregard.    Disregard of rules or

regulations is careless if the taxpayer does not exercise

reasonable diligence to determine the correctness of a return

position that is contrary to the rule or regulation.    Sec.

1.6662-3(b)(2), Income Tax Regs.   A substantial understatement of

income tax exists if the understatement exceeds the greater of 10

percent of the tax required to be shown on the return or $5,000.

Sec. 6662(d)(1)(A).
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     Under section 7491(c) the Commissioner bears the burden of

production with regard to penalties and must come forward with

sufficient evidence indicating that it is appropriate to impose

penalties.   See Higbee v. Commissioner, 116 T.C. 438, 446 (2001).

However, once the Commissioner has met the burden of production,

the burden of proof remains with the taxpayer, including the

burden of proving that the penalties are inappropriate because of

reasonable cause or substantial authority.    See Rule 142(a);

Higbee v. Commissioner, supra at 446-447.     Because of

respondent’s concessions, petitioner’s deficiency will not be a

substantial understatement; however, respondent asserts that the

penalty is applicable because of petitioner’s negligence and

disregard of rules and regulations.

     Respondent has met the burden of production that

petitioner’s underpayment of tax is attributable to negligence or

disregard of rules or regulations.     Claiming personal expenses as

business expenses and failing to maintain records substantiating

any valid deductions constitute negligence for purposes of

section 6662(a) and (b)(1).   See Higbee v. Commissioner, supra at

449; sec. 1.6662-3(b)(1), Income Tax Regs.

     The accuracy-related penalty under section 6662(a) is not

imposed with respect to any portion of the underpayment as to

which the taxpayer acted with reasonable cause and in good faith.

Sec. 6664(c)(1); Higbee v. Commissioner, supra at 448.     The
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decision as to whether a taxpayer acted with reasonable cause and

in good faith is made on a case-by-case basis, taking into

account all of the pertinent facts and circumstances.     See sec.

1.6664-4(b)(1), Income Tax Regs.   Reliance on professional advice

may constitute reasonable cause and good faith, but only if,

under all the circumstances, such reliance was reasonable.

Hansen v. Commissioner, 471 F.3d 1021, 1032 (9th Cir. 2006),

affg. T.C. Memo. 2004-269; Freytag v. Commissioner, 89 T.C. 849,

888 (1987), affd. 904 F.2d 1011 (5th Cir. 1990), affd. 501 U.S.

868 (1991); sec. 1.6664-4(b)(1), Income Tax Regs.

     Petitioner testified that she relied on a medical

professional and information presented at an LAUSD meeting with

respect to expenses that she claimed as unreimbursed employee

expenses.   Petitioner has failed to provide evidence that those

whom she relied on were competent professionals with sufficient

expertise or that it was reasonable for her to rely on their

purported advice.   See Neonatology Associates, P.A. v.

Commissioner, 115 T.C. 43, 99 (2000), affd. 299 F.3d 221 (3d Cir.

2002).   Further, any reliance upon petitioner’s tax return

preparer was not reasonable because petitioner provided the

return preparer with only the total expenses to be claimed on her

return, not the receipts and/or other supporting documents.    We

sustain the application of the accuracy-related penalty under

section 6662.
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To reflect concessions and the foregoing,


                                   Decision will be entered

                              under Rule 155.
