                  T.C. Summary Opinion 2001-104



                     UNITED STATES TAX COURT



          JOHN MOSIER AND SARAH SPAIN, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 9492-99S.                      Filed July 13, 2001.



     John Mosier, pro se.

     Scott T. Welch, for respondent.



     DINAN, Special Trial Judge:    This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed.   The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority.   Unless otherwise indicated,

subsequent section references are to the Internal Revenue Code in
                               - 2 -

effect for the years in issue, and all Rule references are to the

Tax Court Rules of Practice and Procedure.

     Respondent determined deficiencies in petitioners’ Federal

income taxes of $1,756, $8,480, and $6,059 for the taxable years

1993, 1994, and 1995, and an addition to tax under section

6651(a)(1) in the amount of $287 for taxable year 1995.

     The issue for decision is whether petitioners have

substantiated various business expense deductions and itemized

deductions.1

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

The stipulations of fact and the attached exhibits are

incorporated herein by this reference.   Petitioners resided in

Jefferson, Louisiana, on the date the petition was filed in this

case.

     The following concessions were made by the parties in the

Stipulation of Facts.   Respondent concedes the addition to tax

under section 6651(a)(1).   Petitioners concede that (1) they are

not entitled to deductions in 1994 for bad debt expense and legal

expense of $22,950 and $4,338, respectively, and (2) a State




     1
      Adjustments in the notice of deficiency to medical expense
deductions in 1994 and 1995, and the application of the floor on
miscellaneous itemized deductions in each of the years in issue,
are computational and will be resolved by the Court’s holding on
the issue in this case.
                               - 3 -

income tax refund of $494 is includable in their gross income in

1995.2

     Other concessions were made or modified outside the

stipulation.   The first concerns the interest expense deducted by

petitioners with respect to their writing/lecturing business.

Petitioners deducted interest expenses for this business in the

amounts of $5,342, $6,845, and $11,303, for 1993, 1994, and 1995.

Of these amounts, respondent disallowed (i.e., made adjustments

of) $1,417, $4,256, and $10,206.   In his trial memorandum,

respondent concedes that the notice of deficiency should have

allowed as deductions expenses of $3,878, $2,774, and $1,061 for

the years 1993, 1994, and 1995, respectively.   Respondent made

conflicting statements at trial, stating that the adjustments in

the notice of deficiency should be reduced by the amounts of

(rather than result in allowances of) $3,878, $2,774, and $1,061

for the years in issue, respectively.   Because it is clear from

the record that respondent’s counsel misspoke at trial, we accept

the trial memorandum’s version as respondent’s concession.

However, we will disregard the conceded amounts in 1993 and 1995

because these amounts actually decrease the amount of allowable


     2
      The stipulation also contained a purported concession in
respondent’s favor concerning petitioners’ travel/writing/
consulting business. The concession names “other interest”, an
expense not at issue in this case with respect to that business.
Although we assume the parties meant to refer to travel expenses,
which are at issue, we do not need to resolve the ambiguity in
this concession due to our holding on the issue in this case.
                                - 4 -

interest expense in those years from what was reflected in the

notice of deficiency.3   Respondent bears the burden of proving

increased deficiencies pursuant to Rule 142(a) and has not

presented sufficient evidence to support such a finding.       Thus,

under respondent’s limited concession, petitioners are entitled

to deductions for interest expenses of $3,925 in 1993, $2,774 in

1994, and $1,097 in 1995.

     The next concession concerns the travel expenses deducted by

petitioners with respect to the writing/lecturing business.

Petitioners deducted expenses of $4,094, $6,355, and $6,7904 in

1993, 1994, and 1995.    Respondent allowed in the notice of



     3
      Respondent’s concession doubles the interest expense
reflected in the notice of deficiency as actually having been
paid in each individual year. The decreases in the amounts
allowed as deductions are due to the notice’s capitalization of
the interest expenses under sec. 263A, which would have resulted
in the dispersion of the expenses across the span of several
years, also drawing into the years in issue expenses incurred
prior thereto. However, contrary to respondent’s position in the
notice of deficiency (which he now concedes), sec. 263A does not
apply to writers. Sec. 263A(h)(1). The parties’ intentions are
unclear with respect to the interrelationship of the concession
concerning capitalization and the concessions of specific amounts
of various expenses. We assume that the parties intended the
conceded amounts to reflect the changes caused by the switch from
capitalization, and that the amounts remaining at issue are those
amounts which petitioners argue were incurred in the individual
years in issue (not in prior years).
     4
      In 1995, petitioners claimed deductions of $3,301 in
“travel expenses” and $3,489 in “other expenses”. The latter
were capitalized travel expenses from prior years. See supra
note 3. Respondent classified all these expenses as “travel
expenses” in the notice of deficiency. We follow this
classification.
                                          - 5 -

deficiency deductions of $1,551, $3,553, and $2,563.                                Respondent

concedes in his trial memorandum that petitioners should have

received current-year expense deductions5 of $3,102, $3,242, and

$1,992 in the notice of deficiency.                   Respondent concedes in the

stipulation that petitioners are entitled to additional

deductions of $992, $1,244, and $2,738.                       Finally, respondent

conceded at trial the initial adjustment to the travel expenses

in 1993, thereby conceding that petitioners were entitled to a

deduction of $4,094 in the notice of deficiency.                            Thus, under

respondent’s multiple concessions, petitioners are entitled to

deductions for travel expenses of $5,086 in 1993, $4,486 in 1994,

and $4,730 in 1995.

         The following table reflects items which remain at issue in

this case after the various concessions.                       The amounts of

deductions claimed by petitioners on their Federal income tax

returns are shown, along with the total allowances and

concessions by respondent.
                                                 1993                  1994               1995
                                                   Allowed/              Allowed/
Allowed/
                                        Claimed Conceded Claimed Conceded Claimed
Conceded

         Business expenses (Sch. C)
            Writing/lecturing
               Interest expense         $5,342      $3,925    $6,845      $2,774    $11,303
$1,097
               Travel expense                                  6,355       4,486      6,790
4,730
            Travel/writing/consulting
               Travel expense                                                         2,676      -0-
               Other expense                                                            725      -0-
         Itemized deductions (Sch. A)
            Mortgage interest expense   12,853       8,6531
            Miscellaneous               10,202         856 11,998          5,626      9,147
1,709



         5
          See supra note 3 regarding the issue of capitalization.
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          1
            The notice of deficiency states that petitioners had already consented
     to the assessment of a $1,207 deficiency resulting from this $4,200
     adjustment. This previously assessed tax was subtracted from the corrected
     tax liability in arriving at the amount of the deficiency at issue in this
     case. See sec. 6211(a)(1)(B). Petitioners nevertheless dispute this
     adjustment. Due to our holding on the issue in this case we need not address
     the relevancy of any consent by petitioners to an assessment.

     We now turn to the issue for decision.              As a general rule,

ordinary and necessary business expenses are deductible, but

personal, family, and living expenses are not.               Secs. 162(a),

262(a).

     A taxpayer generally must keep records sufficient to

establish the amounts of the items reported on his Federal income

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

However, in the event that a taxpayer establishes that a

deductible expense has been paid but is unable to substantiate

the precise amount, we generally may estimate the amount of the

deductible expense bearing heavily against the taxpayer whose

inexactitude in substantiating the amount of the expense is of

his own making.     Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d

Cir. 1930).    We cannot estimate a deductible expense, however,

unless the taxpayer presents evidence sufficient to provide some

basis upon which an estimate may be made.             Vanicek v.

Commissioner, 85 T.C. 731, 743 (1985).

     Section 274(d) supersedes the Cohan doctrine.                Sanford v.

Commissioner, 50 T.C. 823, 827 (1968), affd. 412 F.2d 201 (2d

Cir. 1969).    Section 274(d) provides that, unless the taxpayer

complies with certain strict substantiation rules, no deduction
                               - 7 -

is allowable (1) for traveling expenses, (2) for entertainment

expenses, (3) for expenses for gifts, or (4) with respect to

listed property.   Listed property includes passenger automobiles

and other property used as a means of transportation.    Sec.

280F(d)(4).   To meet the strict substantiation requirements, the

taxpayer must substantiate the amount, time, place, and business

purpose of the expenses.   Sec. 274(d); sec. 1.274-5T, Temporary

Income Tax Regs., 50 Fed. Reg. 46006 (Nov. 6, 1985).

     Petitioners presented evidence of numerous credit card

interest payments made during the years in issue, purportedly in

connection with the writing/lecturing business.    They dispute

respondent’s determination of the percentage of these expenses

that was business rather than personal.   However, they did not

provide the Court with a more reliable method of ascertaining the

correct percentage, and they did not otherwise show more interest

to be deductible than that which was determined to be so by

respondent.

     Petitioners presented no evidence to substantiate the

claimed itemized deductions.   They testified that some of their

substantiating documents had been destroyed when repair work had

been done on or around their condominium apartment.    However,

petitioners did not provide the Court with any reliable method by

which we could estimate any deductible expenses.
                                 - 8 -

     Petitioners presented as evidence receipts for travel

expenses for the writing/lecturing business in 1994.       However,

respondent’s concessions took into account this additional

substantiation.   No evidence was presented for the travel

expenses for this business in 1995.

     Petitioners presented a credit card statement showing costs

relating to a Caribbean cruise, purportedly a travel expense

related to the travel/writing/consulting business.       However, they

failed to provide an adequate explanation as to how this expense

was a business expense, and in its absence we find instead that

it was a nondeductible personal expense.       Finally, petitioners

presented no evidence substantiating the deduction for “other

expenses” claimed for this business.

     We sustain respondent’s determinations with respect to the

items at issue, as modified by the various concessions.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect the foregoing,

                                         Decision will be entered

                                 under Rule 155.
