                         T.C. Memo. 2009-228



                       UNITED STATES TAX COURT



                ERNESTINE FORREST, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 23122-07.               Filed October 5, 2009.



     Ernestine Forrest, pro se.

     Michael K. Park, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     VASQUEZ, Judge:    Respondent determined a $1,882 deficiency

in petitioner’s 2003 Federal income tax.   After concessions,1 the

issue for decision is whether petitioner is entitled to deduct


     1
        Petitioner concedes respondent’s adjustment to
alternative minimum tax liability and that her expense for
airfare to an American Bar Association (ABA) meeting cannot be
deducted because the ABA reimbursed her.
                                - 2 -

certain business expenses under section 162(a).2   We hold that

she is not.

                         FINDINGS OF FACT

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

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.   Petitioner resided in

California at the time she filed her petition.

     Petitioner was admitted to practice law in California in

1974 and in Colorado in 1986.   Before 1988 petitioner worked as a

contract attorney performing various legal services, e.g.,

researching legal issues, attending hearings, etc., on behalf of

other attorneys.   She represented her own clients on occasion,

but this was rare.   In some cases petitioner became an employee

of the attorney or law firm she worked for.   From 1988 until her

employment was terminated in 2000 she worked as a securities

regulator for the California Department of Corporations (the

department).   Petitioner worked as a contract attorney again in

2000 but not at all during 2001 and 2002.

     In 2003 petitioner decided once again to try to work as a

contract attorney.   She attended the ABA 2003 Midyear Meeting in

Seattle, Washington, on February 8-11.   While there she attended



     2
        Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
                               - 3 -

a women’s caucus luncheon, a solo and small firm lawyers

breakfast caucus, and seminars on securities law.   Petitioner

networked with colleagues and informed them she was available as

a contract attorney to perform various legal services on their

behalf.

     Petitioner also purchased various supplies, including a

computer, printer, paper products, etc., as well as telephone,

fax, and Internet services between January and March 2003.

Petitioner attempted to be reinstated as a securities regulator

by the department and eventually filed suit against the

department in 2003.   She used some of the supplies she had

purchased to assist in her reinstatement efforts.   Before

petitioner secured any clients or earned any income as a contract

attorney in 2003, she was reinstated by the department and

returned to work on or around March 25.

     On October 15, 2006, petitioner filed Form 1040, U.S.

Individual Income Tax Return, for 2003 (2003 return).   She

included with her 2003 return Schedule A, Itemized Deductions.

On Schedule A petitioner claimed $19,192.52 in deductions for

other expenses, which the IRS did not question.   Petitioner

attached to Schedule A a listing of these expenses summarized as

follows:
                              - 4 -

Business travel to professional conventions       $3,303.84
Professional fees, dues, education costs, etc.     3,384.13
Mail and photocopy costs                             835.73
Computer, Internet, and supplies                   2,146.84
Business telephone and fax                           725.00
Litigation expenses and attorney’s fees            7,496.98
Business use of car                                1,300.00
  Total                                           19,192.52

Petitioner did not include Schedule C, Profit or Loss From

Business, or Form 6251, Alternative Minimum Tax--Individuals,

with her 2003 return.

     Respondent determined a $1,882 deficiency in petitioner’s

2003 Federal income tax arising from petitioner’s failure to

report alternative minimum tax (AMT) liability.   Petitioner

timely filed a petition with this Court.   She concedes the AMT

adjustment but asserts that $1,761 of her expenses reported on

Schedule A should be recast as Schedule C business expense

deductions.3

                             OPINION

     Petitioner has neither claimed nor shown that she satisfied

the requirements of section 7491(a) to shift the burden of proof

to respondent with regard to any factual issue.   Accordingly, the


     3
        The $1,761 of expenses petitioner claims she paid in
connection with the alleged trade or business consist of the
following: $211.81 to Costco for office supplies and
miscellaneous items; $129.45 to Office Depot; $493.14 to the
Seattle Hilton hotel; $35 to the Commission on Women in the
Profession; $195 to the Clerk of the Supreme Court; $18.15 to
Federal Express for the ABA; $73.94 to Pacific Bell; $140 to the
Los Angeles County Bar Association for dues; $315 to the State
Bar of California; $115 to the ABA; and $34.35 to Staples for
paper and other supplies.
                               - 5 -

burden of proof is on petitioner to show that respondent’s

determination set forth in the notice of deficiency is incorrect.

See Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 (1933).

     Deductions are a matter of legislative grace; petitioner has

the burden of showing that she is entitled to any deduction

claimed.    See Rule 142(a); New Colonial Ice Co. v. Helvering, 292

U.S. 435, 440 (1934).

     Petitioner argues that during 2003 she carried on a trade or

business, i.e., she worked as a contract attorney providing legal

services to other attorneys, and that she paid certain expenses

in connection with this alleged trade or business.    Respondent

argues petitioner was not engaged in a trade or business because

she admittedly had no clients and reported no income related to

the activity during 2003.

     Section 162(a) allows a deduction for ordinary and necessary

expenses paid during the taxable year in carrying on any trade or

business.   In order for the expenses to be deductible under

section 162, the expenses must relate to a trade or business

functioning at the time the expenses were incurred.    Hardy v.

Commissioner, 93 T.C. 684, 687 (1989), affd. in part and remanded

in part on another issue per order (10th Cir., Oct. 29, 1990);

sec. 1.162-1(a), Income Tax Regs.   Whether a taxpayer’s

activities constitute the carrying on of a trade or business

requires an examination of the facts and circumstances of each
                                 - 6 -

case.   Commissioner v. Groetzinger, 480 U.S. 23, 36 (1987);

Higgins v. Commissioner, 312 U.S. 212 (1941); O’Donnell v.

Commissioner, 62 T.C. 781, 786 (1974), affd. without published

opinion 519 F.2d 1406 (7th Cir. 1975).

      The U.S. Court of Appeals for the Ninth Circuit, the court

to which this case would be appealable, has held that to

constitute a trade or business, “‘the taxpayer’s primary purpose

for engaging in the activity must be for income or profit.’”

Smith v. Commissioner, 182 F.3d 927 (9th Cir. 1999) (quoting

Commissioner v. Groetzinger, supra at 35), affg. without

published opinion T.C. Memo. 1997-503; Warden v. Commissioner,

111 F.3d 139 (9th Cir. 1997), affg. without published opinion

T.C. Memo. 1995-176; Barter v. Commissioner, 980 F.2d 736 (9th

Cir. 1992), affg. without published opinion T.C. Memo. 1991-124.

An income-producing activity also must be regular and continuous

to be a trade or business.     Finnegan v. Commissioner, T.C. Memo.

1997-486 (adopting the reasoning of the Tax Court), affd. without

published opinion 168 F.3d 498 (9th Cir. 1999).    Thus, for a

taxpayer to be engaged in a trade or business, the taxpayer’s

involvement in the activity must be regular and continuous and

the taxpayer’s primary purpose for engaging in the activity must

be for income or profit.     Commissioner v. Groetzinger, supra at

35.
                                 - 7 -

     Petitioner argues that her activity was a continuation of a

trade or business carried on previously; i.e., in the 1980s and

in 2000.   However, even if her activities in the past amounted to

a trade or business, which we do not decide, there was a

substantial lack of continuity between her prior work and her

efforts in 2003.   Petitioner did not work as a contract attorney

between 1988 and 2000 while she worked for the department.    She

also did not work as a contract attorney in 2001 or 2002, and her

activity in 2003 was sporadic.    Accordingly, under the facts of

this case petitioner’s activity in 2003 was not a continuation of

a trade or business carried on in any previous period.

     Petitioner did not decide to work as a contract attorney

until mid-January of 2003, and she returned to work with the

department on or around March 25 of that year.    Therefore, the

alleged trade or business existed only from mid-January to late

March, or just over 2 months.    This is not a substantial time

period.4

     Even though petitioner expended some time and effort in an

attempt to find work as a contract attorney during this period,

her involvement was not regular and continuous.    Her only

activity was her attendance at the ABA meeting for 4 days in

February, at which petitioner marketed herself to other


     4
        We do not decide whether a trade or business could be
found in a 2-month period under a different set of facts and
circumstances.
                               - 8 -

attorneys.   She did not negotiate for or perform any legal

services as a contract attorney for any party during this period.

Finally, she abandoned her efforts upon returning to the

department in late March.   Accordingly, her activity was neither

regular nor continuous.

     We conclude that petitioner’s activity as a contract

attorney in 2003 was not regular and continuous.   Having so

decided, we need not decide whether petitioner’s primary purpose

for engaging in the activity was to earn a profit.   See Finnegan

v. Commissioner, supra (holding real estate activity was not a

trade or business because time and effort devoted to it was not

regular and continuous and declining to decide whether there was

a profit motive).   Therefore, we hold that petitioner’s activity

in 2003 did not amount to a trade or business.

                            Conclusion

     After reviewing all of the facts and circumstances, we

conclude that petitioner failed to prove the existence of a trade

or business as a contract attorney in 2003.   Accordingly, she is

not entitled to deduct business expenses under section 162(a).

     In reaching all of our holdings herein, we have considered

all arguments made by the parties, and to the extent not

mentioned above, we find them to be irrelevant or without merit.
                            - 9 -

To reflect the foregoing,


                                         Decision will be entered

                                    for respondent.
