                          T.C. Memo. 1996-308



                     UNITED STATES TAX COURT



                HARRY T. CAVALARIS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent


     Docket No. 849-95.                         Filed July 9, 1996.


     Richard Eugene Marsh, Jr., for petitioner.

     Jeanne Gramling, for respondent.



                          MEMORANDUM OPINION

     POWELL, Special Trial Judge:     This case was assigned

pursuant to the provisions of section 7443A(b)(3) and Rules 180,

181, and 182.1




     1
         Unless otherwise indicated, section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
                               - 2 -


     Respondent determined deficiencies in petitioner's Federal

income taxes for the taxable years 1990 and 1991 in the

respective amounts of $4,946 and $6,665, and accuracy-related

penalties pursuant to section 6662(a) in the amounts of $989 and

$1,333, respectively.   At the time of filing the petition,

petitioner resided in Charlotte, North Carolina.

     The substance of the dispute focuses on the deductibility of

a large number of relatively small items.    After concessions,2

the issues are:   (1) Whether petitioner is entitled to certain

claimed unreimbursed employee business expense deductions for the

years in issue; (2) whether petitioner is entitled to certain

claimed charitable contribution deductions for the years in

issue; and (3) whether petitioner is liable for penalties

pursuant to section 6662(a) for the years in issue.    Each issue

is discussed separately.

     We note at the outset that deductions are a matter of

legislative grace and petitioner bears the burden of proving his

entitlement to and the amount of deductions.    Rule 142(a); Welch

v. Helvering, 290 U.S. 111, 115 (1933).     If the record provides

sufficient evidence to show that a taxpayer incurred a deductible

     2
         Respondent concedes that petitioner is entitled to
charitable contribution deductions, in excess of the amounts
allowed in the notice of deficiency, for the taxable years 1990
and 1991 in the amounts of $4,182 and $6,719, respectively.
Petitioner concedes that he is not entitled to deduct any portion
of a $55 expenditure ($38 of which was deducted) made for spa
services on August 13, 1990, as a charitable contribution.
                                 - 3 -


expense, but the taxpayer has failed to substantiate the precise

amount, in some situations the Court may estimate the amount of

the expense.     Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d

Cir. 1930).    In so doing, our estimate may be weighted against

petitioner whose inexactitude is of his own making.       Cohan v.

Commissioner, supra at 544.    For ease of discussion, we have

combined our findings of fact and opinion with respect to each

issue.

Employee Business Expenses

     For the past 20 years petitioner has been involved in real

estate and recreation businesses in Charlotte, North Carolina.

Petitioner owns between 25 and 50 percent of several businesses

(the corporations), organized primarily as S corporations, that

own and lease commercial real estate.       The corporations' tenants

included three businesses that operate roller skating rinks, a

Family Dollar store, a Circle K gas station and convenience

store, and a BoJangles restaurant.       Petitioner served as an

officer, typically secretary, in each of the corporations during

1990 and 1991.    Petitioner received no compensation from the

corporations during 1990 or 1991 for his services as an officer

and employee.    Petitioner also served as president of Skate

Palace, Inc. (Skate Palace), an entity that operates a roller

skating rink.    Skate Palace leases the rink from Rex Annex
                               - 4 -


Billiards, Inc., one of the corporations in which petitioner owns

an interest.

     Petitioner performed many duties for the corporations

including:   (1) Frequently visiting the properties for

maintenance or general supervision; (2) traveling to Skate Palace

to assist in the operations of the roller skating rink; and (3)

traveling to schools and radio stations to market the roller

skating rinks.   In the course of performing these duties,

petitioner incurred traveling expenses, entertainment expenses,

and other expenses that were not reimbursed by the corporations.

Petitioner could have received reimbursement for these expenses

from the corporations, but he failed to ask.

     On his 1990 and 1991 Federal income tax returns, petitioner

claimed miscellaneous itemized deductions in the amounts of

$12,831 and $11,629, respectively.     These amounts primarily

represent what petitioner characterized as unreimbursed employee

business expenses incurred on behalf of the corporations.     The

1991 miscellaneous itemized deductions include expenditures in

the amounts of $579 for tax return preparation fees and $25 for a

real estate license.

     In the notice of deficiency, respondent disallowed

petitioner's 1990 and 1991 claimed unreimbursed employee expenses

in the amounts of $11,404 and $11,050, respectively.     For the
                               - 5 -


taxable year 1991, respondent disallowed the deductions for the

tax return preparation fees and the real estate license fee.

     Section 162(a) allows a deduction for "all the ordinary and

necessary expenses paid or incurred during the taxable year in

carrying on any trade or business".    An employee, however, is not

entitled to a deduction for an expense if the employee has a

right of reimbursement from his employer, because the employee's

expenditure is not "necessary".   Heidt v. Commissioner, 274 F.2d

25, 28 (7th Cir. 1959), affg. T.C. Memo. 1959-31; Lucas v.

Commissioner, 79 T.C. 1, 7 (1982).

     Petitioner is not entitled to deduct the expenses he

incurred as an employee under section 162.   As we stated in Stolk

v. Commissioner, 40 T.C. 345, 356 (1963), affd. per curiam 326

F.2d 760 (2d Cir. 1964): "These charges were business expenses of

the * * * [corporations] and petitioner cannot convert * * * [the

corporate] expenses into his own by failing to claim repayment,

even though paid by him."   See also Orvis v. Commissioner, 788

F.2d 1406 (9th Cir. 1986), affg. T.C. Memo. 1984-533; Coplon v.

Commissioner, 277 F.2d 534 (6th Cir. 1960), affg. T.C. Memo.

1959-34.   Petitioner argues, in the alternative, that the

employee business expenses are deductible pursuant to section 212

as expenses incurred in his capacity as an investor.   A

shareholder, however, is not entitled to a deduction from his

individual income for the payment of corporate expenses.     Deputy
                               - 6 -


v. du Pont, 308 U.S. 488, 494 (1940).   We also note that

petitioner may face other bars to deductibility; for instance,

substantiation.   It appears as if an automobile mileage log

allegedly prepared contemporaneously with petitioner's business

travel was actually prepared in preparation for litigation.

Accordingly, we hold for respondent with respect to the

deductions for unreimbursed employee business expenses.

     Petitioner failed to introduce any evidence to show that he

renewed a real estate license in 1991, and there is no basis upon

which we can sustain a deduction for this expense.

     Petitioner failed to substantiate the amount expended for

tax return preparation fees during 1991.    A bill from the

accounting firm of Cherry, Bekaert & Holland indicated that

petitioner spent $599 during 1990 for the preparation of his 1989

tax return.   Petitioner's 1990 tax return indicates that Cherry,

Bekaert & Holland also prepared this return.    The return is

complicated and voluminous.   Accordingly, it appears certain that

petitioner incurred tax preparation fees in 1991, and we allow

petitioner a deduction on his 1991 Federal income tax return in

the amount of $450 for tax return preparation fees.    See Cohan v.

Commissioner, 39 F.2d 540 (2d Cir. 1930).

Charitable Contribution Deductions

     Petitioner has been active in the Greek Orthodox Church for

many years.   He served on the local parish board and later on the
                                - 7 -


diocese board.   Petitioner also served on the five-member

national executive committee of the St. Photios Foundation (St.

Photios).   St. Photios is an organization established to maintain

a shrine honoring early Greek immigrants.     St. Photios has

expanded and now hosts youth retreats, workshops, and seminars

featuring prominent speakers.    St. Photios also houses the

mission program of the Greek Orthodox Church.

     In addition to his other charitable activities, petitioner

has been active in the American Hellenic Educational Progressive

Association (AHEPA).    AHEPA is a national organization created in

1922 to help Greek immigrants obtain citizenship, learn the

English language, and assimilate into society.     Without

abandoning its original purpose, AHEPA has expanded and now

operates to preserve Hellenistic roots through cultural and

educational programs.    AHEPA is organized on the local, district,

and national levels.    Petitioner served on all three levels of

AHEPA's organization.

     During 1990 and 1991 petitioner served on the diocesan

council for the Greek Orthodox Church, the national executive

committee of St. Photios, and as secretary and treasurer for the

AHEPA district lodge.    Petitioner traveled extensively to various

organizational meetings and events.     The locations of the

meetings included:   Washington, D.C.; Atlanta, Georgia;

Knoxville, Tennessee; Baltimore, Maryland; Fort Lauderdale,
                               - 8 -


Florida; Miami Beach, Florida; Richmond, Virginia; Jacksonville,

Florida; Virginia Beach, Virginia; Nassau, Bahamas; St.

Augustine, Florida; Montgomery, Alabama; Birmingham, Alabama;

Athens, Greece; and Istanbul, Turkey.

     On his 1990 and 1991 Federal income tax returns petitioner

deducted charitable contributions in the amounts of $29,105 and

$40,603,3 respectively.   The bulk of these amounts consisted of

unreimbursed expenses incurred during the above listed trips.

Petitioner asserts that these expenditures were incurred in the

process of providing services to the Greek Orthodox Church, St.

Photios, and AHEPA.   Typically, the amounts claimed as expenses

for any given trip include airfare, lodging at a deluxe hotel,

meals, other travel expenses, and generous tips (occasionally

exceeding $100).   Petitioner generally included, as an expense

for meals, the bill from an expensive lunch or dinner at which

petitioner treated numerous people attending the meeting.   The

1990 figure includes a $1,000 deduction for clothing donated to

the Crossnore School.

     In the notice of deficiency, respondent disallowed

charitable contribution deductions for the taxable years 1990 and

1991 in the amounts of $11,177 and $14,492, respectively.   After

concessions, the amount of charitable contribution deductions in

     3
        The deduction claimed in 1991 was reduced to $37,074
pursuant to sec. 170(b), which limits the amount a taxpayer can
deduct as a charitable contribution for any taxable year.
                                  - 9 -


dispute involves only (1) the valuation of clothing donated to

Crossnore School, and (2) unreimbursed travel expenses claimed by

petitioner.   Respondent does not dispute the tax exempt status of

any of the organizations involved.

1.   Crossnore School Deduction

      Section 170(a) allows a deduction for charitable

contributions.   If the contribution is made in property other

than money, the amount of the contribution is the fair market

value of the property.   Sec. 1.170A-1(c)(1), Income Tax Regs.

      On his 1990 Federal income tax return petitioner claimed a

charitable contribution deduction in the amount of $1,000 for

clothing donated to Crossnore School.     A handwritten list of the

items donated filled the majority of a sheet of looseleaf paper.

The items of greatest value on the list include eight three-piece

suits, four sport coats, one tuxedo, two overcoats, four pairs of

shoes (one new), one leather coat, and two pairs of lizard skin

boots.   Respondent determined that the fair market value of the

property was $353.

      Petitioner's testimony focused on the cost of some of the

items but, with the exception of the new shoes, no evidence was

introduced to show the condition or the fair market value of the

property.   Accordingly, we conclude petitioner has failed to meet

his burden of proving that the fair market value of the donated

items was $1,000.    On the other hand, we conclude that the value
                                 - 10 -


respondent placed on the donated items is low, and therefore,

find the value of the items donated to Crossnore School to be

$500.     See Cohan v. Commissioner, 39 F.2d at 543-544.

2.   Unreimbursed Travel Expenses

        As previously noted, section 170(a) allows a deduction for

charitable contributions.     Section 170(c) requires that a

charitable contribution, inter alia, be made "to or for the use

of" the charitable organization.     No deduction is allowed under

section 170 for a contribution of services.     However,

unreimbursed expenditures made incident to the rendition of

services to a charitable organization may constitute a deductible

contribution.     Sec. 1.170A-1(g), Income Tax Regs.   Allowable

deductions include transportation expenses and reasonable

expenses for meals and lodging necessarily incurred while away

from home.     Id.   The phrase "while away from home" has the same

meaning as when used for purposes of section 162.      Id.

Therefore, a taxpayer's unreimbursed expenses for meals incurred

while rendering services are only deductible if the nature of the

travel requires the taxpayer to sleep or rest ("sleep or rest

rule").     See United States v. Correll, 389 U.S. 299 (1967);

Saltzman v. Commissioner, 54 T.C. 722, 725 (1970).

        A taxpayer making a charitable contribution is required to

keep a canceled check, a receipt from the donee organization, or

other reliable written record showing the name of the donee, the
                                - 11 -


date of the contribution, and the amount of the contribution.

Sec. 1.170A-13(a)(1), Income Tax Regs.      The reliability of a

written record is to be determined based on all the facts and

circumstances of a particular case.      Sec. 1.170A-13(a)(2)(i),

Income Tax Regs.    Factors indicating that a written record is

reliable include the contemporaneous nature of the writing and

the regularity of the taxpayer's recordkeeping procedure.      Id.

Travel expenses incurred by a person while rendering services on

behalf of a charitable organization are not subject to the strict

substantiation requirements of section 274(d).      Sec. 274(d);

Francis v. Commissioner, T.C. Memo. 1988-226.

     Respondent disallowed certain deductions claimed by

petitioner for unreimbursed travel expenses for the taxable years

1990 and 1991.     According to the stipulation of facts, after

concessions, the amount of unreimbursed travel expenses at issue

for 1990 and 1991 are $5,859.94 and $9,400, respectively.

Respondent disallowed these deductions for one or more of the

following reasons:     (1) Petitioner failed to substantiate the

deductions; (2) certain expenses were deducted twice; (3) certain

meal expenses are not deductible because they were not associated

with overnight travel; (4) some expenditures were lavish or

extravagant; (5) some expenditures were not necessary; and (6)

section 170(j) disallows the expenses from certain trips

involving personal pleasure, recreation, or vacation.      Respondent
                              - 12 -


has phrased many of these arguments generally, without reference

to specific deductions.   We have considered these arguments with

regard to each deduction, but in the interest of brevity have

also chosen to speak generally whenever possible.

     With respect to his charitable activities, petitioner

maintained fairly detailed records of his expenditures.    While

traveling, petitioner collected receipts from each of his

expenditures and placed them in an envelope.   If petitioner was

unable to obtain a receipt for an expenditure, he made a

contemporaneous notation of the expenditure.   Upon returning from

a trip, petitioner would put the envelope containing the receipts

for that trip in a file marked with the name of the charitable

organization to which the trip related.   This system ensured that

the name of the organization, the date (at least to within a few

days), and the amount of each expenditure was recorded.

Accordingly, we conclude, with the exception of items

specifically mentioned below, petitioner has substantiated his

charitable contribution deductions.    In light of this conclusion,

and the volume of transactions at issue, we shall only address

those contentions about which there appears to be a genuine

dispute, and we hold for petitioner with respect to any of the

disputed deductions not specifically mentioned herein.

     Respondent asserts that petitioner deducted several

expenditures twice.   Specifically, respondent asserts that an
                                - 13 -


expenditure in the amount of $1,116 paid by petitioner to finance

two banquets was allowed as a deduction for a trip to Birmingham,

Alabama, on May 29-31, 1991, and also claimed as a cash

contribution to the Diocese of Atlanta (see paragraphs 21 and 33

of the stipulation of facts and corresponding exhibits).4    Based

on our review of the relevant stipulation of facts and exhibits,

we conclude that the banquet expenses were claimed twice.

Accordingly, the $1,215 cash contribution to the Diocese of

Atlanta described in paragraph 21 of the stipulation of facts

must be reduced by $1,116.   Additionally, respondent asserts that

several meal deductions relating to a trip to Washington, D.C.,

on July 7-12, 1990, were deducted as meal expenses and also

deducted as lodging expenses.    A review of paragraph 14 of the

stipulation of facts and Exhibit 9 shows that expenses for

several meals totaling $67.695 were claimed twice.   Accordingly,

we find $67.69 of the disputed meal expenses referred to in

paragraph 14 of the stipulation of facts should be disallowed.




     4
         The stipulation of facts sets forth the amount of
deductions claimed, allowed, and disallowed with respect to each
trip and the date of each trip. This information is voluminous
and unnecessary to an understanding of the issues; accordingly,
we have not reproduced it. However, in an effort to simplify the
parties' task of making computations under Rule 155, we have
referenced our discussion of the issues to the stipulation of
facts.
     5
         This amount is the sum of individual meals in the
amounts of $11.26, $4.73, $4.73, $36.25, and $10.72.
                               - 14 -


     On the morning of February 21, 1990, petitioner flew to

Atlanta, Georgia, for a diocese meeting.   Petitioner returned to

his home in Charlotte, North Carolina, later that evening.

Because the trip did not require sleep or rest, petitioner is not

entitled to a deduction for meals on this trip.   Accordingly, the

meal expenses claimed in the amount of $25, listed in paragraph

17 of the stipulation of facts, are not deductible.   See United

States v. Correll, supra; Saltzman v. Commissioner, supra at 725;

sec. 1.170A-1(g), Income Tax Regs.

     Respondent asserts that some expenses were lavish or

extravagant and that some expenses were not required to be paid

by petitioner.   Both assertions raise the question whether the

expenses were reasonable and/or necessary.   Section 1.170A-1(g),

Income Tax Regs., provides, in relevant part:

     Similarly, out-of-pocket transportation expenses necessarily
     incurred in performing donated services are deductible.
     Reasonable expenditures for meals and lodging necessarily
     incurred while away from home in the course of performing
     donated services also are deductible.

A requirement of reasonableness is inherent in the concept of

necessary.   Boser v. Commissioner, 77 T.C. 1124, 1133 (1981).

Thus, expenses for travel, meals, and lodging must be both

reasonable and necessary.    With these guidelines in mind we turn

to petitioner's expenditures for meals, lodging, transportation,

and other travel expenses.
                              - 15 -


     Petitioner typically stayed at "deluxe" hotels during his

travels.   For instance, on a trip to Baltimore, Maryland

(paragraph 9 of the stipulation of facts), petitioner stayed at

the Peabody Court at a rate of $180 per night.   Similarly, on an

11-day AHEPA trip to Fort Lauderdale and Miami Beach, Florida

(paragraph 10 of the stipulation of facts), petitioner stayed at

the Sheraton Bonaventure Resort and Spa and the Doral Ocean Beach

Resort, respectively, incurring lodging charges of $1,602.69.

Respondent does not dispute the need for lodging on these or

similar trips, but rather the reasonableness of the expenditures.

While few would characterize petitioner's choices of

accommodations as frugal, they were generally convenient.

Petitioner often stayed at the hotel hosting the meeting he was

attending.   When petitioner could not obtain a room at the hotel

hosting the meeting he would stay at a similarly priced hotel in

the vicinity.   This practice saved petitioner additional travel

costs.   In addition, petitioner held relatively prestigious

positions in large charitable organizations, such that staying in

quality lodgings may have been acceptable practice.    Bearing in

mind that reasonableness is a relative term, we conclude that

petitioner's expenditures for lodging were reasonable.

     Respondent also contends that expenses incurred for the

rental of a suite during a trip to Washington, D.C. (paragraph 14

of the stipulation of facts), in excess of the ordinary room
                                - 16 -


charge should be disallowed because this expenditure was

unreasonable.    We hold that the rental of a suite was reasonable

on this occasion because the travel at issue involved a week long

stay and petitioner used the suite as a meeting place at which

petitioner and officials of the Greek Orthodox Church could

discuss their affairs.

     We reach a different conclusion with respect to certain

expenditures made by petitioner for tips6 during 1990.

Petitioner apparently had a habit of generously tipping hotel

employees, such as valets, bellboys, and maids.    On separate 3-

day trips to Washington, D.C. (paragraph 8 of the stipulation of

facts), and Baltimore, Maryland (paragraph 9 of the stipulation

of facts), petitioner claimed a deduction of $100 per trip for

such expenses.   On an 11-day trip to Fort Lauderdale and Miami

Beach, Florida (paragraph 10 of the stipulation of facts),

petitioner claimed deductions in the respective amounts of $260

and $80.99 for such expenses.    Similarly, on a 4-day trip to

Richmond, Virginia (paragraph 11 of the stipulation of facts),

petitioner claimed a deduction in the amount of $200 for such

expense.   We are cognizant of the fact that the defining

characteristics of a reasonable tip vary with the nature and

quality of the services provided.    However, we regard the


     6
         On the four trips mentioned below petitioner listed the
expenses for tips as "misc." in the stipulation of facts.
                               - 17 -


reasonableness of a tip as within the ambit of "experience with

the mainsprings of human conduct".      See Commissioner v.

Duberstein, 363 U.S. 278, 289 (1960).     We conclude that the

amount petitioner deducted as tips was in excess of a reasonable

amount, and, accordingly, allow $15 per day for such expenses on

each of these four trips.

     We next consider whether any of the expenses claimed by

petitioner constitute nondeductible personal or living expenses

pursuant to section 262.    Petitioner claimed $161.60 as a

deduction for expenses incurred for gratuities and taxes relating

to the purchase of a 4-day spa plan while on the 11-day Fort

Lauderdale/Miami Beach, Florida, trip (paragraph 10 of the

stipulation of facts).   The actual cost of the spa plan was not

deducted.   This expenditure was personal and unrelated to

petitioner's performance of charitable services.

     On a trip to Atlanta, Georgia (paragraph 15 of the

stipulation of facts), petitioner deducted expenditures for

gasoline.   Petitioner's receipts show that he filled the gas tank

before he left his home in Charlotte, North Carolina, and again

when he returned.   The second tank of gas was used for

petitioner's personal affairs at home in Charlotte rather than

the trip to Atlanta.   Accordingly, we sustain respondent's

disallowance of $15 of the amount claimed for gasoline on this

trip.
                              - 18 -


     Petitioner claimed a deduction of $100 for repairs to his

car incurred on a trip to Richmond, Virginia (paragraph 11 of the

stipulation of facts).   Petitioner used his car for charitable,

business, and personal purposes.   In order to deduct such an

expense petitioner must show that the repair was necessitated by

petitioner's charitable travel as opposed to his personal or

business travel.   Orr v. United States, 343 F.2d 553, 558 (5th

Cir. 1965).   Petitioner has failed to meet his burden of proof on

this matter, and, therefore, the $100 repair expense is not

deductible.   See Smith v. Commissioner, 60 T.C. 988, 995 (1973).

     Respondent contends that petitioner's expenditures for the

following items were not necessary:    (1) Expenditures made for

the meals of others; (2) the rental of a limousine in Nassau,

Bahamas, to transport petitioner and other officials of AHEPA to

and from the airport; and (3) registration fees of others paid by

petitioner at an AHEPA conference in Virginia Beach, Virginia.

These three items involve the payment by petitioner of expenses

attributable to other individuals.

     Petitioner argues that his payment for the expenses of

others are deductible on two grounds.   First, petitioner argues

that these expenses are deductible pursuant to section 170(a)

because they were made "to or for the use of" a charitable

organization.   Second, petitioner contends that the payments are
                              - 19 -


deductible as unreimbursed expenditures incurred incident to his

rendition of charitable services.

     The phrase "or for the use of" was added after the word "to"

in section 170(c) by Congress to allow a deduction for gifts made

in trust for a charitable organization or under a similar legal

arrangement.   Davis v. United States, 495 U.S. 472, 485 (1990).

None of petitioner's expenditures were made in trust for a

charitable organization or under a similar arrangement.      Thus,

for petitioner to prevail on his first argument, the expenditures

must have been made "to" a charitable organization.     In order for

a payment to be considered as made "to" a charity, the charity

must have control over the funds donated.     Davenport v.

Commissioner, T.C. Memo. 1975-369.     However, a donor's assertion

that the charity would have spent the funds in the same manner

does not vest the charity with control; the charity must have the

ability to choose how the funds are spent.     Id.   In this regard,

"Charity begins where certainty in beneficiaries ends".      Thomason

v. Commissioner, 2 T.C. 441, 443 (1943).

     Petitioner, rather than the charitable organizations,

controlled the disposition of the funds expended for the meals of

others, the limousine, and the AHEPA conference registration

fees.   Further, none of these expenditures were made at the

request of any of the charitable organizations.      Therefore, the
                              - 20 -


expenditures made by petitioner for other individuals do not

constitute payments "to" a charitable organization.

     As noted above, section 1.170A-1(g), Income Tax Regs.,

allows a taxpayer a deduction for unreimbursed expenses incurred

incident to the rendition of charitable services.   In Davis v.

United States, supra, the Supreme Court held that the taxpayers

were not entitled to deduct amounts paid to their sons to finance

the expenses of their sons' Mormon missions.   In rejecting the

taxpayers' claim that the expenses were deductible as

unreimbursed expenses the Supreme Court noted that the taxpayers

did not render the services, their sons did.   Id. at 487.

Petitioner's situation is slightly different, in that he did

independently render charitable services.   Nonetheless, we

conclude the expenses paid on behalf of others are more

accurately characterized as nondeductible gifts made to specific

individuals rather than expenses incurred by petitioner incident

to his rendering of charitable services.

     Petitioner cites Rockefeller v. Commissioner, 676 F.2d 35

(2d Cir. 1982), affg. 76 T.C. 178 (1981), Smith v. Commissioner,

60 T.C. 988 (1973), and McCollum v. Commissioner, T.C. Memo.

1978-435, for the proposition that a taxpayer may deduct payments

made for the expenses of others pursuant to section 1.170A-1(g),

Income Tax Regs.   McCollum and Smith involved situations where

parents and their children incurred expenses while both rendered
                               - 21 -


charitable services.    This Court held that the parents could

deduct their own unreimbursed expenses and their childrens'

unreimbursed expenses.    Both cases were distinguished by the

Supreme Court in Davis v. United States, supra, on the ground

that the parents were being assisted by their children in

rendering the services.    Id. at 488.   That is clearly not the

situation here.

     Rockefeller v. Commissioner, supra, involved the question

whether certain incidental charitable expenses were deductible

under section 170(b)(1)(C) and (g) in effect during the years

1969, 1970, and 1971.    These provisions are not involved in this

case, and the holding and reasoning in Rockefeller is inapposite.

We conclude, therefore, that petitioner is not entitled to deduct

expenditures made for meals, a limousine, and registration fees

attributable to other individuals, but we are left with the task

of discerning the portion of those expenses that related to other

individuals.

     Petitioner deducted $300 on a trip to Virginia Beach,

Virginia, as registration fees (paragraph 24 of the stipulation

of facts), $175 of which related to registration fees of others

paid by petitioner.    Accordingly, we hold petitioner is not

entitled to deduct $175 of these expenses.

     Petitioner claimed $640 as a deduction for a limousine on

the Nassau, Bahamas, trip (paragraph 26 of the stipulation of
                              - 22 -


facts).   Petitioner rented the limousine to transport himself and

three other executives of AHEPA to and from the airport.    Three-

fourths of this expenditure is attributable to other individuals

and is not deductible.   However, respondent also asserts that the

rental of a limousine was not a reasonable expense.   Petitioner

cites Denison v. Commissioner, T.C. Memo. 1977-430, for the

proposition that the rental of a chauffeur driven car may

constitute a deductible expense.   Denison was decided under

section 162.   We agree that in certain circumstances the rental

of a limousine may constitute a deductible expense under section

162, and we do not foreclose the possibility under section 170.

However, in Denison, the taxpayers established that the expense

benefited their business by impressing wealthy European clients.

Petitioner has not shown that the rental of the limousine in

Nassau benefited AHEPA, and, indeed, the expense has decidedly

personal overtones.   See Seed v. Commissioner, 57 T.C. 265, 276

(1971).   Accordingly, we hold the rental of a limousine as

transportation to and from an airport is not a reasonable expense

in the rendition of charitable services.   Despite this

conclusion, petitioner is entitled to some deduction for

transportation to and from the airport.    We will allow $40 of the

claimed $640 as a deduction for his transportation to and from

the airport in Nassau.   Cohan v. Commissioner, 39 F.2d at 543-

544.
                               - 23 -


     The task of discerning petitioner's portion of each meal

expenditure is more troublesome because petitioner's testimony

regarding the number of people present at each meal is

incomplete.    Further, simply knowing the number of people present

at a dinner does not necessarily provide a sufficient basis for

allocating the bill among them.    Respondent allowed petitioner a

deduction for meal expenses equal to the standard allowance for

each trip.    Based on our review of the record, we conclude that

petitioner purchased meals for others on the following trips:

                                            Stipulation of Facts
             Location             Date                Paragraph

     Washington, D.C.       Apr. 21-23, 1990         8
     Baltimore, MD          May 18-19, 1990          9
     Richmond, VA           Sept. 14-17, 1990       11
     Washington, D.C.       July 7-12, 1990         14
     Knoxville, TN          Nov. 23-26, 1990        18
     Washington, D.C.       May 10-13, 1991         23
     Virginia Beach, VA     June 13-15, 1991        24
     Nassau, Bahamas        Aug. 11-16, 1991        26
     Washington, D.C.       Sept. 27-29, 1991       27
     Birmingham, AL         May 29-31, 1991         33

     In light of the evidentiary problems associated with the

allocation of meal expenses we adopt the standard allowance as a

reasonable approximation of petitioner's expenditures for his own

meals on the above listed trips.    Accordingly, on trips on which

petitioner purchased meals for others, petitioner will be allowed

a deduction for meals (and banquet expenses) equal to the amount
                             - 24 -


allowed by respondent in the stipulation of facts.7   On all other

trips, for which we conclude petitioner is entitled to a

deduction for travel expenses, petitioner is entitled to deduct

the amount claimed for meals as set forth in the stipulation of

facts.

     Respondent contends that the expenses of certain entire

trips are not deductible because they involved elements of

personal pleasure, recreation, or vacation.   Respondent

particularly takes issue with petitioner's trips to Virginia

Beach, Virginia; Nassau, Bahamas; Fort Lauderdale, Florida;

Athens, Greece; and Istanbul, Turkey.   Respondent notes:   (1) A

letter describing the activities planned for the Virginia Beach

AHEPA conference compared the trip to a "mini-vacation"; (2)

petitioner received a facial and massage while in Nassau; and (3)

petitioner enjoyed the use of a spa while in Fort Lauderdale.

The trips to Athens and Istanbul require more explanation.

     Petitioner traveled to Athens on August 28, 1991 (first

trip); Athens and Istanbul on October 4, 1991 (second trip); and


     7
         In making their Rule 155 computations, the parties
should note: (1) We disallowed $67.69 of meal expenses relating
to the Washington, D.C., trip on July 7-12, 1990 (par. 14 of the
stipulation of facts) for duplication; (2) "meals" includes the
board dinner listed in par. 18 of the stipulation of facts; and
(3) respondent conceded a deduction of $1,116 for two "banquets"
relating to the Birmingham, AL, trip on May 29-31, 1991 (par. 33
of the stipulation of facts). Accordingly, as applied to the
Birmingham trip, the disallowance relates only to the item listed
as "meals".
                                - 25 -


Istanbul on October 29, 1991 (third trip).    Petitioner recounts

the reasons for these three trips (paragraph 34 of the

stipulation of facts) as follows.    Centuries ago the Roman

Catholic Church and the Greek Orthodox Church split.    Control of

the Greek Orthodox Church has since rested in Istanbul (formerly

Constantinople).    The Patriarch of the Greek Orthodox Church is

the equivalent of the Pope to the Roman Catholic Church.      Prior

to the first trip the Patriarch fell terminally ill.    It became

apparent that a successor would have to be named.    The Archbishop

of North and South America had the potential to ascend to the

position.    Turkish citizenship is a prerequisite for becoming a

Patriarch.   Unfortunately, the Archbishop's Turkish citizenship

had been revoked.   Petitioner embarked on the first trip, a 7-day

stay in Athens, to petition the Turkish government to reinstate

the Archbishop's citizenship.    The trip was unsuccessful.    As

expected, the Patriarch passed away shortly after the first trip.

Petitioner took the second trip to attend the funeral of the

Patriarch.   Finally, petitioner embarked on the third trip, as

the official representative of his diocese, to witness the

installation of the new Patriarch.

     Respondent disallowed all the expenses of the first trip and

disallowed expenses for gifts, meals, and lodging on the second

trip.   On the third trip, respondent disallowed only meal

expenses.
                              - 26 -


     Section 170(j) prohibits a deduction for, inter alia,

unreimbursed traveling expenses incurred incident to the

rendition of charitable services, "unless there is no significant

element of personal pleasure, recreation, or vacation in such

travel."   The meaning of a "significant element of personal

pleasure, recreation, or vacation" is far from self-evident.8    An

inquiry into the legislative history of this provision provides

some insight.   The House report states:

          In determining whether travel away from home involves a
     significant element of personal pleasure, recreation, or
     vacation, the fact that a taxpayer enjoys providing services
     to the charitable organization will not lead to denial of
     the deduction. For example, a troop leader for a tax-exempt
     youth group who takes children belonging to the group on a
     camping trip may qualify for a charitable deduction with
     respect to his or her own travel expenses if he or she is on
     duty in a genuine and substantial sense throughout the trip,
     even if he or she enjoys the trip or enjoys supervising
     children. By contrast, a taxpayer who only has nominal
     duties relating to the performance of services for the
     charity, or who for significant portions of the trip is not
     required to render services, is not allowed any deduction
     for travel costs. [H. Rept. 99-426, 129 (1985).]

The example makes clear that the relevant inquiry is the extent

and duration of the charitable services provided by the taxpayer,

and not some quantum measure of pleasure derived by the taxpayer.

With this in mind we turn to the facts of this case.

     With regard to petitioner's domestic travel and travel to

Nassau, Bahamas, a review of the evidence reveals that petitioner

     8
         There is some case law interpreting this phrase in the
context of sec. 213(d)(2)(B). See, e.g., Commissioner v. Bilder,
369 U.S. 499 (1962).
                              - 27 -


did not enjoy a "significant element of personal pleasure,

recreation, or vacation" within the meaning of the statute.      The

exhibits often contain itineraries detailing the activities

scheduled at a particular conference.    These itineraries

corroborate petitioner's testimony and, together, establish that

petitioner routinely spent a full day attending meetings or

otherwise providing services while attending conferences.      The

Virginia Beach, Virginia, trip provides a good example.      A letter

describing the activities scheduled during this AHEPA conference

indicated that golf and tennis tournaments were scheduled.

However, petitioner served on the national executive committee.

The letter shows that committee meetings lasted all day,

precluding participation in the recreational activities.

Accordingly, we conclude that section 170(j) does not prohibit

petitioner from deducting expenses related to his domestic travel

or his travel to Nassau, Bahamas.

     We reach a different conclusion with regard to petitioner's

travel to Athens and Istanbul.    Petitioner has provided no

evidence to establish the specific activities he undertook on

either the first or third trip.    Regarding the third trip

petitioner asserts that he was an official representative of the

church, however, this in and of itself is not enough to satisfy

section 170(j).   Therefore, we are unable to conclude that

elements of personal pleasure, recreation, or vacation did not
                              - 28 -


constitute a significant element of the first and third trips.

Petitioner provided an itinerary for the second trip showing the

activities he undertook while attending the funeral of the

Patriarch.   However, petitioner has failed to establish that he

provided any charitable services while on this sojourn.    We

conclude that petitioner attended the funeral as an observer.      In

sum, we find that section 170(j) prohibits a deduction for the

traveling expenses incurred on petitioner's three trips to Athens

and Istanbul. Compare Seed v. Commissioner, 57 T.C. 265 (1971).

     While the gifts petitioner made to the Greek Orthodox Church

on the second trip could be viewed as traveling expenses, they

may also be viewed as independent charitable contributions.

Thus, these expenses must be analyzed separately.    Petitioner

claimed a deduction for gifts on the second trip in the amount of

$873.   A review of the exhibits reveals that petitioner has only

substantiated $37.30 of this amount.    The evidence consists of

two receipts, one for silver polish in the amount of $15.30 and

one for tequila in the amount of $22.    Petitioner failed to

explain, and we fail to see, the usefulness of a bottle of

tequila to the Greek Orthodox Church.    We conclude that the

tequila was, more likely than not, purchased for personal

consumption or as a nondeductible gift to a specific individual.

Accordingly, petitioner is entitled to a deduction in the amount

of $15.30 for gifts made on the second trip.
                               - 29 -


Accuracy-Related Penalties

     Section 6662(a) imposes a penalty equal to 20 percent of any

portion of the underpayment attributable to, inter alia,

negligence or disregard of rules or regulations.   Sec.

6662(b)(1).   Negligence is defined as the lack of due care or

failure to do what a reasonable and ordinarily prudent person

would do under the circumstances.    Neely v. Commissioner, 85 T.C.

934, 947 (1985).   Negligence includes any failure to make a

reasonable attempt to comply with the law.   Sec. 6662(c).

Failure to maintain adequate records constitutes negligence.

Schroeder v. Commissioner, 40 T.C. 30, 34 (1963); Johnson v.

Commissioner, T.C. Memo 1991-346, affd. without published opinion

8 F.3d 811 (3d Cir. 1993).   Similarly, adopting a position that

lacks a reasonable basis constitutes negligence.   Sec. 1.6662-

3(b)(1), Income Tax Regs.    Disregard of the rules or regulations

includes any careless, reckless, or intentional disregard.     Sec.

6662(c).   Disregard of the 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 a rule

or regulation.   Sec. 1.6662-3(b)(2), Income Tax Regs.

     No penalty may be imposed under section 6662(a) for any

portion of an underpayment with respect to which the taxpayer

acted with reasonable cause or in good faith.   Sec. 1.6664-4(a),

Income Tax Regs.   The determination of whether a taxpayer acted
                              - 30 -


with reasonable cause or in good faith is made on a case-by-case

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

computational or transcriptional errors are not inconsistent with

reasonable cause and good faith.   Id.

     Generally, with respect to the portion of the understatement

attributable to petitioner's disallowed charitable contribution

deductions, petitioner's errors did not rise to the level of

negligence.   With few exceptions, petitioner substantiated the

deductions claimed.   The disallowance of many of the deductions

turned on the resolution of a difficult factual question, such as

valuation, reasonableness, or the meaning of "personal pleasure,

recreation, or vacation".

     Despite our general finding, we conclude that petitioner was

negligent with respect to certain items deducted as charitable

contributions.   The "sleep or rest rule" is well settled law.

Accordingly, we conclude petitioner carelessly disregarded the

rules and regulations by deducting $25 for meal expenses on a 1-

day trip in violation of this rule.    The prohibition on the

deduction of personal expenses is equally well settled.     We again

conclude petitioner carelessly disregarded the rules and

regulations by deducting personal expenses.    This finding relates

to petitioner's deductions for gratuities and taxes attributable

to spa services and the extra tank of gasoline, discussed above.

We exclude from this finding the $100 petitioner paid for an auto
                               - 31 -


repair, because this deduction was disallowed as a result of

petitioner's inability to prove the repair was caused by

charitable use of the automobile, not a disregard of the rules or

regulations.   We further conclude that the penalties should apply

to the disallowed portion of the expenditures made for "gifts" on

the second trip to Athens, Greece, and Istanbul, Turkey, because

the disallowance of this deduction related to petitioner's

failure to keep records and the attempt to deduct the cost of

tequila as a gift to the Greek Orthodox Church.    Finally, we note

that we have not applied the penalties to the meal expenses that

were deducted twice, as these can be fairly characterized as

isolated transcriptional errors.

     We sustain the penalties with respect to petitioner's

disallowed employee business expense deductions.    Several grounds

existed to justify the disallowance of these deductions.     In

addition, petitioner's substantiation left something to be

desired.   The large majority of these deductions involved

traveling expenses.   Petitioner made no attempt to establish the

business purpose for any of the deductions as required by section

274(d).    Petitioner failed to specify the corporation to which

these expenses were attributable.    Furthermore, a colloquy at

trial between respondent and petitioner revealed that

petitioner's travel log was patently erroneous and most likely

prepared in preparation for litigation.    The log contained
                              - 32 -


numerous mileage entries that conflicted with mileage records on

auto repair bills.   Moreover, the pagination of the mileage log

indicated that the entries in the 1991 log may have been written

prior to the entries in the 1990 log.   Accordingly, we find

petitioner is liable for the penalties under section 6662(a) for

1990 and 1991 on the portion of the understatements attributable

to the disallowed unreimbursed employee business expenses.

                                    Decision will be entered

                               under Rule 155.
