                               T.C. Memo. 2013-191



                         UNITED STATES TAX COURT



                   PAULINE T. GOLIT, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 27383-10.                      Filed August 21, 2013.



      Wilfred I. Aka, for petitioner.

      Paulmikell A. Fabian and Catherine G. Chang, for respondent.



                           MEMORANDUM OPINION


      HALPERN, Judge: By notice of deficiency (notice), respondent determined

a deficiency in petitioner's 2008 Federal income tax of $6,724 and an accuracy-

related penalty of $1,345. Petitioner assigned error to the notice and claimed a

$1,500 overpayment of her 2008 tax.
                                          -2-

[*2] Unless otherwise indicated, all section references are to the Internal

Revenue Code (Code) in effect for 2008, and all Rule references are to the Tax

Court Rules of Practice and Procedure. All dollar amounts have been rounded to

the nearest dollar.

      Some items have been established, and we need not further discuss them.

First, we have made absolute our order of October 25, 2011, to show cause under

Rule 91(f), deeming established the fact that during 2008 petitioner received

unreported income in the following amounts: $299 in ordinary dividends, $166 in

qualified dividends, and $32 in capital gains. Additionally, the parties agree that

petitioner is entitled to a deduction of $186 for interest forfeited.

      The issues remaining for decision are whether petitioner (1) is entitled to a

charitable contribution deduction of $9,024; (2) is entitled to miscellaneous

itemized deductions totaling $6,751; (3) is entitled to a deduction for a

dependency exemption for Albert Salako; (4) is entitled to head of household

filing status; (5) has made an overpayment of tax; and (6) is liable for the

accuracy-related penalty under section 6662(a). We will make some preliminary

findings of fact and then address those issues one by one, making further findings

as we proceed.
                                        -3-

[*3] Petitioner bears the burden of proof. See Rule 142(a).1

Preliminary Findings of Fact

      When she filed the petition, petitioner resided in Norwalk, California.

During 2008, petitioner was employed as a registered nurse by Los Angeles

County-University of Southern California Medical Center.

      Petitioner timely filed Form 1040, U.S. Individual Income Tax Return, for

2008, on which she reported a total tax liability of $21,532. On the Form 1040,

she elected head of household filing status and claimed a dependency exemption

deduction for Mr. Salako, whom she listed as her son. On Schedule A, Itemized

Deductions, attached to her return, petitioner claimed, among other deductions, a

deduction of $9,024 for charitable contributions by cash or check and deductions

totaling $6,751 (before application of the 2% floor) for job expenses and certain

miscellaneous deductions.

      Respondent issued the notice, in which, among other adjustments, he

disallowed petitioner's claimed dependency exemption deduction for Mr. Salako,

changed petitioner's filing status from head of household to single, disallowed the


      1
        Petitioner has not raised the issue of sec. 7491(a), which shifts the burden
of proof to the Commissioner in certain situations. We conclude that sec. 7491(a)
does not apply here because petitioner has not produced any evidence that she has
satisfied the preconditions for its application.
                                        -4-

[*4] charitable contribution deduction, and disallowed the job expense and

miscellaneous deductions. He also determined that petitioner was liable for a

section 6662(a) accuracy-related penalty. Petitioner assigned error to respondent's

determinations, averring, as pertinent, that she had "evidence to support [the]

expenses claimed on Schedule A". She averred nothing in support of her claim of

an overpayment.

Charitable Contribution Deduction

       On Schedule A, petitioner claimed a deduction of $9,024 for a gift of cash

or by check to charity. She testified that during 2008 she made numerous gifts

totaling $10,000 to the Church of the Immaculate Conception (Immaculate

Conception), a Catholic church in Jos, Nigeria, within the Catholic Archdiocese of

Jos.

       Section 170(a)(1) allows a deduction for any charitable contribution,

payment of which is made within the taxable year, subject to certain limitations.

As pertinent to this case, section 170(c) defines "charitable contribution" as a

contribution or gift "to or for the use of" an organization "created or organized in

the United States or in any possession thereof, or under the law of the United

States, any State, the District of Columbia, or any possession of the United States".

Sec. 170(c)(2)(A).
                                        -5-

[*5] Petitioner has failed to prove that Immaculate Conception, in Nigeria, was

created or organized within the United States or any of its possessions, or under

any law of the United States, any State, the District of Columbia, or any

possession of the United States. She has, thus, failed to show that Immaculate

Conception is a qualified organization with the meaning of section 170(c), and

therefore we sustain respondent's disallowance of the deduction.2

Job-Related Expenses

      On Schedule A, petitioner claimed a deduction of $6,751 for what she

testified were job expenses. In a statement attached to her Form 1040, she

described those as expenses as follows: $1,308 in union dues, $1,415 in uniform

and dry cleaning expenses, $2,613 in journals, magazines, and books, and $1,415

in stethoscopes.

      In general, section 162(a) permits as a deduction "all the ordinary and

necessary expenses paid or incurred during the taxable year in carrying on any


      2
       At trial, the Court reserved judgment with respect to respondent's hearsay
objection to Exhibit 15-P, purportedly a letter from Immaculate Conception
offered as substantiation of the claimed contribution, and directed the parties to
address its admissibility on brief. Because petitioner's failure to demonstrate that
Immaculate Conception is a qualified organization under sec. 170(c) is a sufficient
reason to sustain respondent's disallowance of the deduction, we will not rule on
the admissibility of the letter and do not address whether petitioner has shown that
she actually paid the amounts claimed.
                                        -6-

[*6] trade or business". To be deductible, ordinary and necessary expenses must

be "directly connected with or pertaining to the taxpayer's trade or business". Sec.

1.162-1(a), Income Tax Regs. When called upon by the Commissioner, the

taxpayer must substantiate the expense. See sec. 6001; see also Higbee v.

Commissioner, 116 T.C. 438, 440 (2001) ("[T]he taxpayer bears the burden of

substantiating the amount and purpose of the claimed deduction."). We need not

accept the unverified and undocumented testimony of the taxpayer as

substantiation. See, e.g., Good v. Commissioner, T.C. Memo. 2008-245, 2008 WL

4756483, at *6.

      Personal, living, or family expenses are not deductible, except as otherwise

expressly permitted. Sec. 262(a).

      Union Dues

      Petitioner claimed a deduction of $1,308 for union dues. We found

petitioner credible on that point and will allow the deduction.3




      3
       At trial, the Court sustained respondent's hearsay objection to Exhibit 14-P,
purportedly a letter from petitioner's union claiming to provide a breakdown of the
union dues petitioner paid in 2008. We offered petitioner the opportunity to
address on brief whether the exhibit satisfies an exception to the hearsay rule.
Petitioner has not done so. Our ruling stands. Nevertheless, as stated, we will
allow the deduction.
                                         -7-

[*7] Uniforms and Dry Cleaning

      Petitioner claimed a deduction of $1,415 for uniforms and dry cleaning. We

will allow the deduction to the extent of $717, the extent to which her Bank of

America statements show payments to Uniform Advantage and Carlos Uniforms.

      Journals, Magazines, and Books

      Petitioner claimed a deduction of $2,613 for journals, magazines, and

books. Petitioner has submitted credit card statements that indicate that petitioner

spent $3,847 at Borders Books and Barnes & Noble, as well as receipts from

Goodwill listing numerous "Books" among the items she purchased. Petitioner

has not identified the books purchased with any degree of specificity and has not

provided any evidence beyond her own testimony that the purchases were

necessary job expenses, rather than personal purchases. We sustain respondent's

disallowance of the claimed deduction.

      Stethoscopes

      Petitioner claimed a deduction of $1,415 for stethoscopes. Petitioner relies

on her credit card statements showing three transactions at New East-West Corp.

as support of her claimed expense. The credit card statements show only where

the transactions occurred and the amounts paid, but not the items purchased.

Indeed, the statements show that she spent only $958 at New East-West Corp.,
                                         -8-

[*8] and, thus, they do not support her claim on her return that she spent $1,415

for stethoscopes. We have no receipts for stethoscopes and only petitioner's

testimony that that is what she spent $958 for at New East-West Corp. We do not

find that her testimony and the other evidence persuasively support her claim that

she spent either $1,415 or $958, or, indeed, any amount on stethoscopes, and we

sustain respondent's disallowance of the deduction.

Dependency Exemption Deduction

      Section 151 allows a deduction for personal exemptions. An unmarried

individual is entitled to a personal exemption for himself or herself and an

additional exemption for each dependent. See sec. 151(b) and (c). The term

"dependent" is defined in section 152(a) to include either a "qualifying child" or a

"qualifying relative". Those terms are defined in section 152(c) and (d),

respectively. Among other necessary elements, a qualifying child must be the

taxpayer's child, brother, sister, stepbrother, stepsister, or a descendant of any of

them. Sec. 152(c)(1) and (2). A qualifying relative must also bear a specified

relationship to the taxpayer. Sec. 152(d)(1)(A). As pertinent here, those

relationships include a child or a descendant of a child of the taxpayer and an

individual who "for the taxable year of the taxpayer, has the same principal place

of abode as the taxpayer and is a member of the taxpayer's household." Sec.
                                         -9-

[*9] 152(d)(2)(A), (H). In both cases, the term "child" includes a legally adopted

individual. Sec. 152(f)(1).

      Petitioner has failed to show that she is entitled to the dependency

exemption deduction for Mr. Salako. Petitioner claimed on her 2008 return that

Mr. Salako was her son. Mr. Salako was born on January 12, 1961, and was thus

47 years old at the close of 2008. Petitioner, born in 1959, is only two years older

than Mr. Salako. Thus, he cannot be her biological son, and we do not find

credible petitioner's unsubstantiated testimony that Mr. Salako is her adopted son.

Petitioner does not contend, and there is no evidence to find, that she bears any

other familial relationship to Mr. Salako.

      Nor has petitioner shown that Mr. Salako was a member of her household

during 2008. In order for an individual to be considered a member of a taxpayer's

household, both the taxpayer and the individual must occupy the household for the

entire taxable year. Sec. 1.152-1(b), Income Tax Regs.4 Petitioner testified that

Mr. Salako lived with her only "temporarily" during 2008 and with a friend for the

rest of that year. Although a temporary absence from the household will not

      4
       Although sec. 1.152-1, Income Tax Regs., has not been amended to reflect
changes in sec. 152 that were enacted by the Working Families Tax Relief Act of
2004, Pub. L. No. 108-311, sec. 201, 118 Stat. at 1169, we continue to rely on the
regulation to the extent it is not inconsistent with sec. 152, as amended. See, e.g.,
Gaitor v. Commissioner, T.C. Memo. 2010-70, 2010 WL 1407204, at *2 n.9.
                                         - 10 -

[*10] prevent an individual from being considered as living with the taxpayer for

the entire year, see id., there is no evidence as to the actual length of time Mr.

Salako lived with petitioner during 2008. Consequently, petitioner has not shown

that Mr. Salako satisfied the relationship requirements to be considered either a

qualifying child or a qualifying relative.

      Moreover, Mr. Salako does not satisfy other requirements to be claimed as a

dependent. Mr. Salako, who was 47 years old at the end of 2008, is too old to be

petitioner's qualifying child. See sec. 152(c)(3)(A). There is no evidence to

support petitioner's claim on brief that the exception to the age requirement for

individuals who are permanently disabled is applicable to Mr. Salako. See sec.

152(c)(3)(B). Neither is there evidence supporting her testimony that she

provided over one-half of Mr. Salako's support during 2008, see sec. 152(d)(1)(C),

nor has she shown that Mr. Salako did not provide over one-half of his own

support for that year, see sec. 152(c)(1)(D).

      Petitioner has not proven that Mr. Salako was her dependent in 2008. We

sustain respondent's disallowance of the dependency exemption deduction.

Filing Status

      Section 1(b) provides for an advantageous tax rate for an individual who

qualifies as a head of household. Section 2(b) sets forth the requirements for head
                                        - 11 -

[*11] of household filing status. As relevant to this case, an individual claiming

head of household status must have been unmarried at the close of the taxable year

and maintained a household that was the principal place of abode for at least one

dependent for more than one-half of the taxable year. Sec. 2(b)(1)(A). As

discussed above, petitioner has not proven that Mr. Salako was her dependent for

2008. Petitioner does not claim to have had any other dependents for that year.

Therefore, she has failed to prove her entitlement to head of household filing

status for 2008.

Overpayment

      Petitioner has failed to prove that she overpaid her 2008 Federal income tax.

Section 6662(a) Penalty

      Section 6662(a) and (b)(1) and (2) provides for an accuracy-related penalty

of 20% of the portion of any underpayment attributable to negligence or

intentional disregard of rules or regulations (without distinction, negligence) or

any substantial understatement of income tax. The term "negligence" includes

"any failure to make a reasonable attempt to comply with the provisions" of the

Code, including a failure to keep adequate books and records or to substantiate

items properly. See sec. 1.6662-3(b)(1), Income Tax Regs. The term "disregard"

includes "any careless, reckless, or intentional disregard." Sec. 6662(c).
                                        - 12 -

[*12] A substantial understatement of income tax exists for an individual if the

amount of the understatement exceeds the greater of 10% of the tax required to be

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

      Section 6664(c)(1) provides that the penalty shall not be imposed with

respect to any portion of an underpayment if the taxpayer shows that there was

reasonable cause for, and that she acted in good faith with respect to, that portion.

      The determination of whether a taxpayer acted with reasonable cause
      and in good faith is made on a case-by-case basis, taking into account
      all pertinent facts and circumstances. * * * Circumstances that may
      indicate reasonable cause and good faith include an honest
      misunderstanding of * * * law that is reasonable in light of all of the
      facts and circumstances, including the experience, knowledge, and
      education of the taxpayer. * * *

Sec. 1.6664-4(b)(1), Income Tax Regs.

      Respondent bears the burden of production with respect to the penalty. See

sec. 7491(c). The burden imposed by section 7491(c) is "'only to come forward

with evidence regarding the appropriateness of applying a particular addition to

tax or penalty to the taxpayer.'" Good v. Commissioner, 2008 WL 4756483, at *9

(quoting Weir v. Commissioner, T.C. Memo. 2001-184). Once that burden is met,

petitioner bears the burden of proving that she is entitled to relief under section

6664(c)(1). See Higbee v. Commissioner, 116 T.C. at 446.
                                         - 13 -

[*13] Respondent has satisfied his burden of production with respect to

petitioner's negligence. The record in this case clearly establishes that petitioner

failed to report a portion of her taxable income on her return and failed to maintain

records adequately to substantiate many of her claimed Schedule A deductions.

She improperly claimed as her dependent son an individual who was only two

years younger than herself, did not introduce any documentation in support of her

position that he was her son or her adopted son, and improperly claimed head of

household filing status.

         Respondent has also established that petitioner's understatement of income

tax for 2008 is substantial. On her return, petitioner reported her total tax liability

to be $21,532 for 2008. Respondent determined a deficiency of $6,724 and, even

taking into account the $2,025 of disputed deductions we have allowed,

petitioner's understatement still exceeds the greater of 10% of the correct tax

liability or $5,000.5 Therefore, respondent has satisfied his burden of production

with respect to the accuracy-related penalty. To avoid the penalty, petitioner must

come forward with evidence that she acted with reasonable cause and in good

faith.


         5
        As discussed above, we have found that petitioner did properly substantiate
certain job expenses and miscellaneous deductions totaling $2,025.
                                        - 14 -

[*14] Petitioner asserts that she did not understate her income tax because she has

substantiated her claimed deductions and thus should not be liable for the penalty.

For the reasons discussed supra, petitioner's argument fails.

      Petitioner further argues that she should not be liable for the penalty

because she hired a tax return preparer for her 2008 return and provided that

preparer with "all available documents." Reliance on the advice of a professional

tax adviser does not necessarily demonstrate reasonable cause and good faith.

Sec. 1.6664-4(b)(1), Income Tax Regs. Rather, reasonable cause will be found

where the taxpayer selects a competent tax adviser, supplies the adviser with all

relevant information, and, in a manner consistent with ordinary business care and

prudence, relies on the adviser's professional judgment as to the taxpayer's tax

obligations. See United States v. Boyle, 469 U.S. 241, 251 (1985); Neonatology

Assocs., P.A. v. Commissioner, 115 T.C. 43, 99 (2000), aff'd, 299 F.3d 221 (3d

Cir. 2002). Petitioner raises this issue for the first time on her brief. Although

petitioner's 2008 return does bear the signature of a paid return preparer, petitioner

did not testify or introduce any other evidence indicating that she supplied her

return preparer with all relevant information.
                                        - 15 -

[*15] Petitioner has failed to carry her burden of showing that she is entitled to

relief under section 6664(c)(1). Therefore, we sustain respondent's imposition of

the section 6662(a) penalty.

Conclusion

      We sustain respondent's adjustments disallowing petitioner's charitable

contribution deduction, a portion of her job expense deductions, and her

dependency exemption deduction. We find no overpayment of tax. We sustain

respondent's determination that petitioner is not entitled to claim head of

household filing status. We sustain respondent's determination of a section

6662(a) accuracy-related penalty.


                                                      Decision will be entered under

                                                 Rule 155.
