                       T.C. Memo. 1996-402



                     UNITED STATES TAX COURT



         RONALD L. AND DEBORAH L. MILLER, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7132-94.                     Filed August 27, 1996.


     Ronald L. Miller, pro se.

     Alvin A. Ohm, for respondent.


                       MEMORANDUM OPINION

     GOLDBERG, Special Trial Judge:   This case was heard pursuant

to section 7443A(b)(3) and Rules 180, 181, and 182.1   Respondent

determined a deficiency in petitioners' 1990 Federal income tax

in the amount of $2,786.   The issue is whether petitioners are


1
     Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for 1990, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
                                 2

entitled to deduct various expenses claimed on their Schedule C

in excess of the amounts allowed by respondent.   Petitioners

resided in Dallas, Texas, at the time their petition was filed.

     Ronald L. Miller (petitioner) is engaged in the business of

tax preparation and consulting, doing business under the name of

Express Tax Service.   He holds an associate degree in arts and

science with an accounting emphasis from Eastfield College, and a

bachelor of science degree in accounting from the University of

Texas at Dallas.   On January 15, 1989, petitioner commenced a 1-

year lease of an office located at 8541 Ferguson Road in Dallas,

Texas.   The terms of the lease provided for a monthly rent of

$535, to be increased to $650 if the lease was renewed, and

utilities to be paid by petitioner.   According to petitioner, at

the conclusion of the lease, he and his landlord, referred to in

the record only as Dr. Cantrell, orally agreed to renew the lease

for 1 year and to maintain the rent payments of $535.   There is

no written documentation of this agreement.

     On the Schedule C filed with his 1990 return, petitioner

claimed deductions for various business expenses including $1,188

for rental of a printer, $6,420 for rent of the office space,

$2,544 for utilities, and $2,764 for the cost of a software

program.   In the notice of deficiency, respondent disallowed each

of the above deductions for lack of substantiation.

     We begin by noting that, as a general rule, the

Commissioner's determinations are presumed correct, and the
                                   3

taxpayer bears the burden of proving that those determinations

are erroneous.    Rule 142(a); Welch v. Helvering, 290 U.S. 111,

115 (1933).    Moreover, deductions are a matter of legislative

grace, and the taxpayer bears the burden of proving that he or

she is entitled to any deduction claimed.     New Colonial Ice Co.

v. Helvering, 292 U.S. 435, 440 (1934).     This includes the burden

of substantiation.    Hradesky v. Commissioner, 65 T.C. 87, 90

(1975), affd. per curiam 540 F.2d 821 (5th Cir. 1976).     All

taxpayers are required to keep sufficient records to enable

respondent to determine their correct tax liability.    Sec. 6001.

     If the record provides sufficient evidence that a taxpayer

has incurred a deductible expense, but the taxpayer is unable to

adequately substantiate the amount of the deduction to which he

or she is otherwise entitled, the Court may, under certain

circumstances, estimate the amount of such expense and allow the

deduction to that extent.    Cohan v. Commissioner, 39 F.2d 540,

543-544 (2d Cir. 1930).    However, in order to estimate the amount

of an expense, we must have some basis upon which an estimate may

be made.    Vanicek v. Commissioner, 85 T.C. 731, 743 (1985).

Without such a basis, any allowance would amount to unguided

largesse.     Williams v. United States, 245 F.2d 559, 560 (5th Cir.

1957).

     Section 162(a) generally allows a deduction for all ordinary

and necessary expenses paid or incurred during the taxable year

in carrying on any trade or business.    The regulations
                                   4

promulgated under section 162 clarify that only those ordinary

and necessary business expenses "directly connected with or

pertaining to the taxpayer's trade or business" may be deducted.

Sec. 1.162-1(a), Income Tax Regs.      In addition, under section

262(a) no portion of the expenditures attributable to personal,

living, or family expenses may be deducted, except as otherwise

expressly provided in the Code.

     Petitioner testified that he paid $1,188 during 1990 for the

use of a laser printer.   He explained that he rented the printer

from January through April 1990 because he could not afford to

purchase the equipment outright.       In support of his deduction, at

trial petitioner presented two canceled checks written in January

and March, each in the amount of $297, which respondent agreed

would be allowable.   Petitioner was unable to produce any

documentation to support the remainder of his deduction.

     In light of his profession as an income tax return preparer,

petitioner should have been well aware of the requirement of a

taxpayer to maintain adequate records to substantiate his income

and deductions.   Petitioner claims that he is unable to provide

documentation because he was locked out of his office in June

1991 for failure to pay his rent, and all of his records were in

the office.   Petitioner presented no evidence to support his

claim of eviction, nor did he explain why he did not request

supporting statements from his bank to establish that the monies

had in fact been paid.    Moreover, we found petitioner's testimony
                                 5

less than credible and his attitude regarding compliance with the

Internal Revenue Code and the regulations and the Tax Court Rules

of Practice and Procedure to be, at best, cavalier.       Therefore,

we find no grounds upon which we may properly estimate an

allowable deduction in excess of the amount allowed by

respondent.

     We next consider petitioner's deduction for monthly rental

payments for his office space in the aggregate amount of $6,420.

Immediately prior to trial, respondent conceded that four

payments for rent for January through April, totaling $2,140,

were allowable.

     Petitioner was unable to locate a canceled check for the

rent payment he allegedly made in May, and was also unable to

produce receipts of money orders he allegedly purchased to pay

his rent from June through September.        For the remainder of the

year, petitioner presented the following carbon copies of checks

written:

     Date            Check No.       Amount            Payee

     10/10/96           335           $535      Dr. Cantrell
     11/10/96           338            535      East Dallas Veterinary
   12/9/96            406            535      Unknown1
     1
        Petitioner withdrew several exhibits during the trial for
     the purpose of making copies and was informed by the Court
     of his responsibility to return the copies for inclusion in
     the record. To date, petitioner has failed to return the
     documents.

There is no evidence in the record that the checks were, in fact,

issued to the payees or negotiated at all.       Moreover, respondent
                                  6

raised valid concerns regarding the authenticity of the carbon

copies.    Petitioner did not produce corroborating statements from

his bank or testimony from payees to support his position.    Based

on the above discussion regarding petitioner's credibility and

lack of substantiation, we find that we have no basis upon which

to estimate an allowable deduction in excess of the amounts

allowed by respondent.

     For similar reasons, we find that petitioners are not

entitled to deduct expenses for utilities in excess of the amount

allowed by respondent.   Petitioner claimed a deduction for

utility expenses in the aggregate amount of $2,544, all of which

respondent disallowed in the notice of deficiency.   At trial,

counsel informed this Court that respondent would accept

petitioner's substantiation of the utility expenses in the amount

of $731.51, leaving $1,812.49 in dispute.   Petitioner produced

additional canceled checks and money order receipts totaling only

$502.64.   The documents presented fail to establish that the

payments were credited to the utility and/or telephone accounts

of Express Tax Service, as opposed to petitioners' account for

their personal residence.    Accordingly, we find for respondent on

this issue.

     With respect to the deduction for the expense of a tax

software program, we again have no evidence, other than the self-

serving testimony of petitioner, to substantiate that such an

expense was incurred.    Petitioner offered to present the manuals
                                7

of the software program and some correspondence with the company,

but was unable to produce any form of receipt, canceled check, or

shipping invoice for the program which he claims was mailed by

     the manufacturer "Collect on delivery".   For the reasons

cited above, we find for respondent on this issue.

                                         Decision will be entered

                                    under Rule 155.
