                   T.C. Summary Opinion 2002-5



                     UNITED STATES TAX COURT



    FRANK DE BANÉ AND KATHLEEN NABER-DE BANÉ, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 5200-00S.             Filed January 22, 2002.



     Frank de Bané, pro se.

     Jeremy L. McPherson, 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

effect for the year in issue.
                                - 2 -

     Respondent determined a deficiency in petitioners’ Federal

income tax of $5,277 for the taxable year 1996.    The sole issue

for decision is whether petitioners are entitled to numerous

business expense deductions disallowed by respondent.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

Ukiah, California, on the date the petition was filed in this

case.

     During taxable year 1996, petitioners had combined wage and

salary income of $67,571.    Petitioner husband (petitioner) was

employed full time as a professor of physics and astronomy at

Mendocino College and part time as a professor of astronomy at

Santa Rosa Junior College.    Petitioner wife was employed full

time as a crisis counselor at Jefferson Elementary School in

Cloverdale, California.

     Petitioners filed a joint Federal income tax return for

taxable year 1996.   They filed with the return a Schedule C,

Profit or Loss From Business.    The schedule listed petitioner as



     1
      Respondent’s adjustments to petitioners’ itemized
deductions, self-mployment income tax, and self-employment income
tax deduction are computational and will be resolved by our
holding on the issue in this case. We note that respondent
previously corrected two mathematical or clerical errors with
respect to petitioners’ itemized deductions. The increase in the
tax shown on the return resulting from this correction has been
assessed and paid and is not at issue in this case.
                                 - 3 -

the proprietor of a business called “Schools and Universities

Research Center” which was engaged in the business of “Education

Research and Publication.”     Petitioners reported $1,875 in gross

receipts, and claimed the following deductions for expenses:

          Advertising                              $140
          Bad debts from sales or services           15
          Car and truck                             7301
          Commissions and fees                      340
          Depreciation and sec. 179 expense       5,6822
          Insurance                               1,082
          Interest (other than mortgage)            155
          Legal and professional services           192
          Office                                    460
          Rent or lease of business property         62
          Repairs and maintenance                   390
          Supplies                                  175
          Taxes and licenses                        324
          Travel                                  1,670
          Meals and entertainment                   227
          Utilities                                 620
          Wages                                   5,388
                                                 17,652
               1
                 On the Schedule C, petitioners reported business
          mileage of 19,900, commuting mileage of 1,500, and other
          mileage of 4,400.
               2
                This deduction is related to the use of a computer and
          a Ford Ranger. Petitioners claimed 85 percent business
          usage with respect to both items. Here, with respect to the
          Ford Ranger, petitioners reported business mileage of
          19,900, commuting mileage of 1,500, and other mileage of
          2,000.

In the statutory notice of deficiency, respondent disallowed each

of these deductions in full and increased petitioners’ income by

an additional $3 to correct a mathematical error petitioners made

in totaling the expenses.

     Ordinary and necessary business expenses generally are

deductible in the taxable year in which they are paid.           Sec.

162(a).   An ordinary expense is one that relates to a transaction

“of common or frequent occurrence in the type of business
                                - 4 -

involved”, Deputy v. du Pont, 308 U.S. 488, 495 (1940), and a

necessary expense is one that is “appropriate and helpful” for

“the development of the petitioner’s business,” Welch v.

Helvering, 290 U.S. 111, 113 (1933).    Personal, family, and

living expenses, on the other hand, generally are not deductible.

Sec. 262(a).

     First, we are not convinced that petitioner was engaged in a

trade or business in the year in issue.    The primary evidence

that petitioner was engaged in any business at all is

petitioner’s brief and conclusory testimony.    The testimony was

unclear, but it seems that petitioner’s contention is that the

Schedule C was filed not for one business, but for two--an

antique clock business which was not identified on the return in

addition to the research and publication business which was

identified.    At one point, however, petitioner testified that the

antique clock business was “dead” and that none of the gross

income on the Schedule C was for that business.    As for the

$1,875 of income that was reported, he could not provide

sufficient details concerning its source.    He testified that this

amount was the income he received from activity such as reviewing

manuscripts and selling textbooks, but could not name the

publishing companies from which the income was received.    The

only other evidence which indicates the existence of a business

consists of checks drawn on two bank accounts.    The accounts each
                               - 5 -

identified petitioner as the proprietor of a business, one named

“G.F. de Bané Publishing” and the other “Grandfather Time Antique

Clocks”.   The checks were written for a variety of expenses,

including mortgage, telephone, water, waste, credit card,

insurance, department of motor vehicles, and taxes.    Both

accounts were used alternately for some of the same payees.     It

appears that these were used by petitioners as nothing more than

personal banking accounts.   Neither the existence of these

accounts nor petitioner’s testimony establishes the existence of

any business.

     Even if the record established the existence of a trade or

business, it does not show that the deductions claimed were for

ordinary and necessary business expenses.    In addition to the

checks mentioned above, petitioners provided credit card

statements to substantiate the expenses.    Notations were made

beside some of the charges, and petitioners, in preparation for

trial, summarized some of the charges and checks as belonging to

certain categories of expenses.   From the evidence before the

Court, it appears that, for the most part, petitioner simply

scoured the credit card statements and canceled checks in search

of expenses which could be matched to the amounts on the returns.

For example, with respect to the bad debt expenses of $15,

petitioner testified that:   “I find when I was examining all of

the receipts that I have from the charge card, from the two
                                - 6 -

accounts, I could not find $15 which could qualify for a bad debt

and I do not have recollection of why I put $15 on that tax

return.”   With respect to the advertising expenses of $140, the

summary lists charges of $5.90 at Kmart, $122.13 at Home Depot,

$5.94 at Wal-Mart, and $5.94 at Raley’s.   Petitioner could not

explain how these charges were related to advertising, even

though he prepared the summary listing them as such in

preparation for trial.    Similarly, with respect to the commission

and fee expenses, the summary lists charges made at Chevron,

Scandinavian Design (for furniture), Wal-Mart, Student Book

Exchange, and Jo-Ann Fabrics, along with the annual credit card

fee of $100.

     Finally, certain amounts reported by petitioners on the

return raise suspicion.   For example, petitioners reported

exactly 85 percent business and 15 percent personal use with

respect to both the Ford Ranger and the computer.   Petitioners

also reported bad debt expenses of $15 and business property

rental expenses of $62.   All of these amounts seem to have been

arbitrarily selected by petitioners when filing their tax return.

     Petitioners argue that IRS employees had possession of their

“tax receipts” and refused to return them.   They provide no

reliable evidentiary support for this contention.   In letters

petitioner sent to the IRS in late 1999 and early 2000, he

referred to the existence of missing records which had been given
                                 - 7 -

to the IRS in 1997.    However, an earlier letter, sent in 1998,

made no mention of missing records but stated petitioner would

“come forward with all requested documents and other business

records” upon audit of his return.

     Based on the record, we cannot find that any of the expenses

listed on the return were ordinary and necessary in carrying on a

trade or business.    We therefore sustain respondent’s

disallowance of the business expense deductions.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect the foregoing,

                                         Decision will be entered

                                 for respondent.
