                   T.C. Summary Opinion 2010-127



                      UNITED STATES TAX COURT



         SVEND F. AND MISCHELLE T. STENSLET, Petitioners v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 23402-05S.               Filed August 30, 2010.



     Svend F. and Mischelle T. Stenslet, pro sese.

     Beth A. Nunnink, for respondent.



     CARLUZZO, Special Trial Judge:     This case was heard pursuant

to the provisions of section 7463.1   Pursuant to section 7463(b),

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




     1
      Unless otherwise indicated, subsequent section references
are to the Internal Revenue Code of 1986, as amended, in effect
for the relevant period. 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.

     In a notice of deficiency dated November 7, 2005, respondent

determined the following deficiencies in, and penalties with

respect to petitioners’ Federal income taxes:

                                             Penalty
             Year          Deficiency      Sec. 6662(a)

             2002            $6,366         $1,273.20
             2003             6,184          1,236.80
             2004             8,977          1,795.40

     After concessions, the issues for decision are as follows:

(1) Whether petitioners were engaged in the trade or business of

farming during any of the years in issue; (2) whether for 2003

and/or 2004 certain expenditures incurred by Mischelle T.

Stenslet to qualify her as a massage therapist are deductible as

trade or business expenses; (3) whether certain expenditures

incurred by Svend F. Stenslet in connection with his employment

as a commercial pilot are nondeductible personal expenses or

deductible as unreimbursed employee business expenses; (4)

whether petitioners are entitled to a deduction for the

mechanical failure of a lawnmower during 2004; and (5) whether

petitioners are liable for section 6662(a) accuracy-related

penalties for any of the years in issue.
                               - 3 -

                            Background

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

the time the petition was filed and at all times relevant here,

petitioners resided in Tennessee.

Petitioners’ Employment Backgrounds

     1. Svend F. Stenslet (Petitioner)

     At all times relevant to this proceeding petitioner was

employed full time as a pilot for United Express Airlines

(Airlines).   In connection with that employment he performed

services as both a pilot and a flight simulator trainer.

Petitioner’s flight assignments during the years in issue

originated and terminated at Dulles International Airport

(Dulles) in Sterling, Virginia.   In connection with his flight

assignments he routinely drove from his residence in Tennessee to

a nearby airport and then flew to Dulles in order to arrive in

sufficient time for his flight assignment.    Upon returning to

Dulles when his flight assignment terminated, he returned to his

home in Tennessee.

     Sometimes petitioner’s flight assignments required that he

spend the night near Dulles.   Accordingly, from 2002 through 2004

petitioner incurred expenses for lodging in Sterling.    He also

incurred lodging expenses in Sterling for the period that he

remained in the area for training purposes.    From time to time

petitioner kept a car in the Dulles area.
                                - 4 -

     As an Airlines pilot, petitioner was entitled to and

received a per diem allowance in connection with his flight

assignments.   The per diem allowance began accruing 1 hour before

the check-in time at Dulles and stopped accruing 1-1/2 hours

after arrival back at Dulles.   Most of petitioner’s flight

assignments began and ended on the same day.    If petitioner’s

flight assignment required that he spend a night away from the

Dulles area, then Airlines paid the expense of the overnight

lodging.

     2. Mischelle T. Stenslet (Mrs. Stenslet)

     As best as can be determined from the record, Mrs. Stenslet

was employed as a registered nurse during each year in issue.     At

some point in her career as a registered nurse, Mrs. Stenslet

became interested in becoming a licensed massage therapist.

Starting in 2003 she began to pursue that interest.

Petitioners’ Farming Activity

     In the early 1990s Mrs. Stenslet’s mother purchased 78 acres

in Tennessee described by petitioners as “untouched land”

consisting of fields and wooded areas covered in blackberry

bushes (the property).   In 1997 petitioners, who expected that

they would “inherit at least a quarter” of the property, decided

to locate their residence there.   They first began to live on the

property in a mobile home.   Over the years they transformed the
                                - 5 -

property from what was essentially undeveloped land to land

suitable to support a permanent residence.

     During 2002 petitioners purchased approximately 20 chickens

and 2 emus.   From time to time during that year they sold chicken

eggs for $1 a dozen.    They also sold unspecified amounts of emu

feathers, apparently used to make lures for fly fishing purposes.

     In 2003 petitioners purchased a goat and a horse.   The goat

was sold soon after it was purchased because, according to

petitioners, it was “scary”.

     Although it is not entirely clear from the record, during

2004 petitioners might have purchased another horse.   During that

year electric fencing was installed on the property.

     Petitioners did not maintain formal books of account with

respect to any income generated from, or expenses incurred in

connection with, the chickens, horse(s), emus, and (if only for a

brief period) the goat maintained on the property.   They did,

however, keep receipts evidencing the purchase of feed, fencing,

and various other supplies used or consumed in connection with

the maintenance of those animals.

Petitioners’ Federal Income Tax Returns

     For each year in issue petitioners’ timely filed joint

Federal income tax return was prepared by a paid income tax

return preparer.   As relevant here, the contents of each return

are summarized below.
                               - 6 -

     1. 2002

     Petitioners’ 2002 return includes:    (1) A Schedule A,

Itemized Deductions; (2) a Form 2106, Employee Business Expenses,

relating to petitioner’s employment as a pilot; and (3) a

Schedule F, Profit or Loss From Farming.

     On the Schedule A petitioners claimed an employee business

expense deduction2 of $17,469 attributable to various expenses

(the majority of which are identified on the Form 2106)

petitioner incurred for lodging, meals, and the use of a vehicle

while he was working as an Airlines pilot and away from his

residence in Tennessee.

     The Schedule F lists the principal product as “other

animal”.   Income of $250 is reported and deductions totaling

$12,389 are claimed on the Schedule F.    The resultant loss,

$12,139, is taken into account in the adjusted gross income shown

on the return.

     2. 2003

     Petitioners’ 2003 return includes:    (1) A Schedule A; (2) a

Form 2106 relating to petitioner’s employment as a pilot; (3) a

Schedule F; and (4) a Schedule C, Profit or Loss From Business,

showing Mrs. Stenslet as the proprietor.




     2
      Amounts shown for this item each year are before the
application of sec. 67(a).
                                - 7 -

     On the Schedule A petitioners claimed an employee business

expense deduction of $16,303 attributable to various expenses

(the majority of which are identified on the Form 2106)

petitioner incurred for lodging, meals, and the use of a vehicle

while he was working as an Airlines pilot and away from his

residence in Tennessee.

     The Schedule F lists the principal product as “other poultry

produc”.   Income of $636 is reported and deductions totaling

$15,219 are claimed on the Schedule F.    The resultant loss,

$14,583, is taken into account in the adjusted gross income shown

on the return.

     The Schedule C identifies the “principle [sic] business or

profession” as “other personal care”.    No income is reported on

the schedule.    Deductions are claimed for depreciation and

supplies expenses totaling $1,124, which is the amount of the

resultant loss taken into account in the adjusted gross income

shown on the return.    As best as can be determined from the

record, the expenses relate to expenses Mrs. Stenslet incurred in

pursuit of her intention to become a massage therapist.

     3. 2004

     Petitioners’ 2004 return includes:    (1) A Schedule A; (2) a

Form 2106 relating to petitioner’s employment as a pilot; (3) a

Schedule F; (4) a Schedule C, showing Mrs. Stenslet as the

“proprietor”; and (5) a Form 4797, Sales of Business Property.
                                - 8 -

     On the Schedule A petitioners claimed an employee business

expense deduction of $17,308 attributable to various expenses

(the majority of which are identified on the Form 2106)

petitioner incurred for lodging, meals, and the use of a vehicle

while he was working as an Airlines pilot and away from his

residence in Tennessee.

     The Schedule F lists the principal product as “horses and

other equ”.   Income of $750 is reported and deductions totaling

$19,889 are claimed on the Schedule F.    The resultant loss,

$19,139, is taken into account in the adjusted gross income shown

on the return.

     The Schedule C identifies the “principle [sic] business or

profession” as “other personal care”.    No income is reported on

the schedule.    Deductions are claimed for depreciation and

utilities expenses totaling $2,459, which is the amount of the

resultant loss taken into account in the adjusted gross income

shown on the return.    As best as can be determined from the

record, the expenses relate to Mrs. Stenslet’s intention to

become a massage therapist.

     The Form 4797 shows a loss of $1,075 relating to a

mechanical failure of a lawnmower, which loss is taken into

account in the adjusted gross income shown on the return.
                                - 9 -

The Notice of Deficiency

     Some of the adjustments made in the above-referenced notice

of deficiency have been agreed to between the parties or

conceded, and other adjustments are computational.   Those

adjustments will not be discussed.

     In the notice of deficiency respondent disallowed:     (1) With

minor exceptions, the employee business expense deduction claimed

for each year; (2) the net losses shown on the Schedules F for

2002 and 2003; (3) all of the deductions claimed on the Schedule

F for 2004; (4) all of the deductions claimed on the Schedules C

for 2003 and 2004; and (5) the loss claimed on the Form 4797 for

2004.    Respondent also imposed a section 6662(a) accuracy-related

penalty for each year in issue.

                             Discussion

     As we have observed in countless opinions, deductions are a

matter of legislative grace, and the taxpayer bears the burden of

proof to establish entitlement to any claimed deduction.3    Rule

142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992);

New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).

This burden requires the taxpayer to substantiate deductions

claimed by keeping and producing adequate records that enable the

Commissioner to determine the taxpayer’s correct tax liability.



     3
      Petitioners do not claim that the provisions of sec.
7491(a) are applicable, and we proceed as though they are not.
                              - 10 -

Sec. 6001; Hradesky v. Commissioner, 65 T.C. 87, 89 (1975), affd.

per curiam 540 F.2d 821 (5th Cir. 1976); Meneguzzo v.

Commissioner, 43 T.C. 824, 831-832 (1965).     A taxpayer claiming a

deduction on a Federal income tax return must demonstrate that

the deduction is allowable pursuant to some statutory provision

and must further substantiate that the expense to which the

deduction relates has been paid or incurred.     See sec. 6001;

Hradesky v. Commissioner, supra; sec. 1.6001-1(a), Income Tax

Regs.

     The types of deductions here in dispute are allowable, if at

all, under section 162(a).   That section generally allows a

deduction for ordinary and necessary expenses paid or incurred

during the taxable year in carrying on any trade or business.

The term “trade or business” as used in section 162(a) includes

the trade or business of being an employee.     Primuth v.

Commissioner, 54 T.C. 374, 377-378 (1970); Christensen v.

Commissioner, 17 T.C. 1456, 1457 (1952).     The determination of

whether an expenditure satisfies the requirements for

deductibility under section 162 is a question of fact.       See

Commissioner v. Heininger, 320 U.S. 467, 475 (1943).     On the

other hand, section 262(a) generally disallows a deduction for

personal, living, or family expenses.

     Set against these fundamental principles, we turn our

attention first to the deductions here in dispute.
                                - 11 -

Schedule F and Schedule C Deductions

     Consistent with the manner in which petitioners filed their

2002, 2003, and 2004 returns, they contend that the deductions

claimed on the Schedules F and Schedules C are allowable as trade

or business expenses.    Respondent argues that those deductions

are not allowable under section 162(a) because, according to

respondent, neither petitioners’ farming activity nor Mrs.

Stenslet’s massage therapist activity constitute a trade or

business during the years in issue.

     1. Schedule F Deductions

     Giving petitioners the benefit of the doubt, it appears that

the property very well might have been suitable for some farming

activity.   We also note that the animals that they owned and

maintained over the years might be generally classified as “farm

animals”.   Living on property suitable for farming and owning a

few farm animals, however, does not, without more, establish that

petitioners were in the trade or business of farming during any

of the years in issue.

     We recognize that for purposes of deductions allowable under

section 162(a), the term “trade or business” is not precisely

defined in the Internal Revenue Code.    Nevertheless, in

considering whether an activity constitutes a trade or business

for purposes of section 162(a), we apply a “common-sense”

approach to examine whether the activity was conducted “with
                                - 12 -

continuity and regularity” for the “purpose of a livelihood or

profit”.   Commissioner v. Groetzinger, 480 U.S. 23, 28, 35

(1987).

In so doing we find the record to be sorely lacking in the

details necessary to consider petitioners’ farming activity to be

a trade or business.4   Petitioners’ generalized explanation of

the property and the animals maintained there does little more

than describe a family that resides in a rural setting.   Their

description hardly suggests, much less establishes, that they

were engaged in a farming trade or business during any of the

years in issue.   Respondent’s disallowances of the losses shown

on the Schedules F for 2002 and 2003 are sustained, as are

respondent’s disallowances of all of the deductions claimed on

the Schedule F for 2004.5

     2. Schedule C Deductions

     Although the expenses are not so described on either

Schedule C, Mrs. Stenslet testified that the Schedule C



     4
      Little point would be served by including a detailed
analysis of the factors normally taken into account in
considering a taxpayer’s profit motive. See sec. 1.183-2(b),
Income Tax Regs. The lack of evidence on many of the factors
leads to the inescapable conclusion that petitioners’ farming
activity was not conducted with an objective intent to profit
during any of the years in issue. See Golanty v. Commissioner,
72 T.C. 411, 426 (1979), affd. without published opinion 647 F.2d
170 (9th Cir. 1981).
     5
      Deductions up to the amount of income shown on the Schedule
F for 2004 should be allowed. See sec. 183(a) and (b).
                               - 13 -

deductions reported on petitioners’ 2003 and 2004 returns relate

to educational expenses incurred in pursuit of her certification

as a massage therapist.   The record does not allow for an

informed finding on whether the expenses are accurately described

on the returns or by the testimony of Mrs. Stenslet.    Be that as

it may, as of the close of 2004 she had not obtained that

certification and she was not performing services as a massage

therapist.   Because Mrs. Stenslet was not yet in a trade or

business of being a massage therapist at the time the expenses

were incurred, petitioners may not deduct the expenses under

section 162(a).   See Richmond Television Corp. v. United States,

345 F.2d 901, 907 (4th Cir. 1965), vacated and remanded on other

grounds 382 U.S. 68 (1965).    Furthermore, if the expenses were

educational, petitioners would not be entitled to a deduction for

the expenses because the expenses were incurred as part of a

program designed to qualify Mrs. Stenslet for a new trade or

business.    See sec. 1.162-5(b)(3), Income Tax Regs.

Schedule A Deductions

     The employee business expense deduction petitioners claimed

for each year in issue relates to petitioner’s employment with

Airlines.    In general, the deductions consist of the following

items:   (1) Vehicle expenses; (2) parking fees and tolls

expenses; (3) meals and lodging; (4) union dues; (5) uniforms for
                              - 14 -

work; (6) small tools for work; (7) job supplies; and (8) other

business expenses not specifically identified or explained.

     1. Vehicle Expenses, Parking Fees and Tolls, and Meals and
        Lodging

     The expenses in this category relate to the amounts expended

by petitioner in traveling back and forth from his residence in

Tennessee to Sterling, Virginia, and for expenses incurred for

meals, lodging, and vehicle expenses while present in Sterling.

According to petitioners, those expenses are properly deductible

as travel expenses petitioner incurred while traveling away from

home as an employee of Airlines.    According to respondent, those

expenses represent nondeductible personal, living, or family

expenses.

     In general, expenses incurred for a taxpayer’s meals,

lodging, and for commuting between the taxpayer’s residence and

the taxpayer’s place of business are nondeductible personal

expenses.   Sec. 262(a); see, e.g., Commissioner v. Flowers, 326

U.S. 465, 472-473 (1946); see also secs. 1.162-2(e),

1.262-1(b)(5), Income Tax Regs.    On the other hand, traveling

expenses, including amounts expended for meals and lodging (other

than amounts that are lavish or extravagant under the

circumstances), may be deducted if they are incurred while away

from home in connection with employee’s employment.    Sec.

162(a)(2); Primuth v. Commissioner, 54 T.C. at 377.     The word

“home” in section 162(a)(2) means the taxpayer’s tax home.
                              - 15 -

Mitchell v. Commissioner, 74 T.C. 578, 581 (1980); Foote v.

Commissioner, 67 T.C. 1, 4 (1976); Kroll v. Commissioner, 49 T.C.

557, 561-562 (1968).

     The dispute between the parties reduces to their

disagreement regarding the location of petitioner’s tax

home during the years in issue.   According to petitioners,

petitioner’s tax home was defined by the location of their

residence in Tennessee, and traveling expenses incurred in

connection with traveling to, or remaining in, Sterling are

deductible under section 162(a)(2).    According to respondent,

petitioner’s tax home was Sterling, and expenses incurred to

travel there and any expenses incurred for meals, lodging, and

vehicle expenses while present in Sterling are not deductible

because the expenses are personal in nature.    For the following

reasons, we agree with respondent.

     Generally, a taxpayer’s tax home is determined by the

location of the taxpayer’s regular or principal (if more than one

regular) place of business.   Mitchell v. Commissioner, supra at

581; Kroll v. Commissioner, supra at 561-562; cf. sec. 1.911-

2(b), Income Tax Regs.

     As an Airlines employee, petitioner was based at Dulles

during each year in issue and his flight assignments began and

ended there.   It follows that Dulles was petitioner’s regular or

principal place of business, and Sterling was his tax home during
                                - 16 -

those years.   Consequently, expenses for meals and lodging

incurred in Sterling may not be deducted under section 162(a)

because those expenses were not incurred while petitioner was

away from home.   Furthermore, because a taxpayer’s cost of

commuting between the taxpayer’s personal residence and place of

employment, no matter how far, is a nondeductible personal

expense, Commissioner v. Flowers, supra at 473-474; secs.

1.162-2(e), 1.262-1(b)(5), Income Tax Regs., petitioner is not

entitled to a deduction for amounts incurred to travel between

petitioner’s residence in Tennessee and Sterling, or for vehicle

expenses incurred while in Sterling.

     2. Union Dues, Uniforms, Small Tools, Job Supplies,
        and Other Business Expenses

     Respondent has conceded that petitioners have substantiated

and are otherwise entitled to deduct various amounts for each

category of the above-listed expenses.   Petitioners have failed

to establish that they are entitled to additional amounts for

these expenses to the extent necessary to exceed the limitations

imposed by section 67(a).6   Respondent’s adjustments with respect

to these items are sustained.




     6
      Sec. 67(a) provides that unreimbursed employee business
expenses otherwise deductible may only be deducted to the extent
that the expenses exceed 2 percent of the taxpayers’ adjusted
gross income.
                               - 17 -

Loss Attributable to Lawnmower

     Petitioners’ 2004 return includes a Form 4797 on which

petitioners reported a capital loss of $1,075 attributable to a

lawnmower purchased in 2002.   According to petitioners, the

mechanical failure of the lawnmower should be treated as a loss

resulting from the involuntary conversion of property used in a

trade or business.   See secs. 165(a), (c)(1) and (2),

1231(a)(4)(B).   According to respondent, petitioners are not

entitled to any loss deduction because the lawnmower was not used

in a trade or business or held in connection with a transaction

entered into for profit.

     As relevant here, a loss from the destruction, in whole or

in part, of property used in the taxpayer’s trade or business, or

held in connection with a transaction entered into for profit,

shall be treated as loss from an involuntary conversion.   Sec.

1231(a)(4)(B).   According to petitioners, the lawnmower was used

in their farming activity, which they considered to be a trade or

business.

     Because we have found that petitioners’ farming activity did

not constitute a trade or business for purposes of section

162(a), and because there is no support in the record for a

finding that petitioners’ farming activity was entered into for
                               - 18 -

profit, it follows that petitioners are not entitled to a

deduction for the loss from the destruction of the lawnmower.7

The Accuracy-Related Penalties

     Lastly, we consider whether petitioners are liable for a

section 6662(a) accuracy-related penalty for any of the years in

issue.

     Various grounds for the imposition of that penalty are set

forth in the notice of deficiency.      Nevertheless, if it is shown

that petitioners acted in good faith and there is reasonable

cause for the underpayment of tax for each year, then the section

6662(a) accuracy-related penalty is not applicable to any of

those years.    See sec. 6664(c); Higbee v. Commissioner, 116 T.C.

438, 446-447 (2001).

     For each year in issue, petitioners relied upon a paid

income tax return preparer to prepare their Federal income tax

return and to compute the Federal income tax liability shown on

the return.    We are satisfied that petitioners had reasonable

cause and acted in good faith with respect to the underpayment of

tax that will remain for each year.     See sec. 6664(c).   They are

not liable for the section 6662(a) accuracy-related penalty for

any year in issue.




     7
      There is insufficient evidence in the record to allow us to
consider whether the loss resulted from a “casualty”. See sec.
165(c)(3).
                        - 19 -

To reflect the foregoing,


                                 Decision will be entered

                            under Rule 155.
