                                 T.C. Memo. 2013-198



                           UNITED STATES TAX COURT



                KENNETH DELANO HUMPHREY, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 1508-12.                           Filed August 28, 2013.



      Kenneth Delano Humphrey, pro se.

      Karen J. Lapekas and Derek P. Richman, for respondent.



               MEMORANDUM FINDINGS OF FACT AND OPINION


      GOEKE, Judge: Respondent determined an $8,5971 deficiency in

petitioner’s 2009 Federal income tax. Respondent also determined a $1,719




      1
          All dollar amounts are rounded to the nearest dollar.
                                         -2-

[*2] section 6662(a)2 accuracy-related penalty for 2009. After concessions,3 the

issues for decision are:4

       (1) whether petitioner is entitled to deductions for medical expenses for

2009. We hold that he is entitled in part;

       (2) whether petitioner is entitled to a deduction for cash charitable

contributions in excess of respondent’s concessions for 2009. We hold that he is

not;

       (3) whether petitioner is entitled to claimed miscellaneous itemized

deductions for 2009. We hold that he is not; and

       (4) whether petitioner is liable for an accuracy-related penalty for 2009.

We hold that he is.

                               FINDINGS OF FACT

       Petitioner resided in Florida when the petition was filed. In 2009 petitioner

was an officer employed with the U.S. Department of Homeland Security.


       2
       Unless otherwise indicated, all section references are to the Internal
Revenue Code (Code) in effect for the year in issue, and all Rule references are to
the Tax Court Rules of Practice and Procedure.
       3
       Respondent concedes $2,264 in medical expenses, $650 in charitable
contributions, and $548 in miscellaneous business expenses.
       4
       All other issues either have been conceded or need not be decided because
they follow from our holdings or are computational.
                                        -3-

[*3] Petitioner held the position of “AT Set Officer” from January through March

of 2009 and the title “Customs and Border Protection Officer” from April through

December 2009.

I. Deductions Claimed on Schedule A, Itemized Deductions

      Petitioner deducted various medical and business expenses, among others.

The 2009 deductions include:

                  Item                                  Amount
       Medical expense                                   $5,910
       Charitable contribution                            6,365
       Vehicle expense                                    5,309
       Parking, tolls, and transportation                   925
       Travel expense                                     3,956
       Other business expenses                            7,307
       Meal and entertainment expense                     1,430
       Tax preparation fees                                 110
       Other expenses                                     4,850

      Petitioner deducted medical expenses consisting of health plan payments

which were reflected on his Form W-2, Wage and Tax Statement. Petitioner also

claimed Medicare taxes in his medical expenses. As part of phytotherapy,

petitioner claimed as medical expenses the purchase of various natural

supplements (green supplements, flax seeds, and D-3) to alleviate his prostate
                                          -4-

[*4] cancer. The regimen was based on medical guidelines by Johns Hopkins

Medical Urology, Harvard Medical School, and the Mayo Clinic. Petitioner has

been under the care of two doctors since 2008. Petitioner also included a gym

membership and various dental procedures in his medical expense deduction.

      Petitioner deducted a charitable contribution of $6,365. Respondent

conceded that petitioner is entitled to deduct $650 of charitable contributions

claimed on his Federal income tax return for amounts withheld from his wages.

Petitioner made cash contributions to the Seventh Day Adventist Church, St. Jude,

and other local charities.

      Petitioner’s deducted vehicle expense included maintenance expenses for

his vehicle, insurance, vehicle payments, and gasoline. The claimed travel

expense included petitioner’s expenses incurred commuting to and from work and

from different jobsites.

      The deducted meal and entertainment expense included lunches with

coworkers that he paid for voluntarily.

      Petitioner deducted $4,850 in legal fees relating to an Equal Employment

Opportunity Commission (EEOC) lawsuit against the Department of Homeland

Security. His claimed legal deduction included fees for consultation with

attorneys and the copying and mailing of documents.
                                        -5-

[*5] Petitioner deducted other business expenses including home cable charges,

Dell computer payments, computer software, electricity, and home insurance.

Petitioner used his home computer for monitoring payroll and benefits online.

Petitioner’s workplace had computers for limited employee use. The Department

of Homeland Security did not require petitioner to perform duties at his home.

II. Notice of Deficiency

      Respondent issued a notice of deficiency disallowing the Schedule A

unreimbursed business expenses and determining a section 6662(a) penalty.

Petitioner timely filed a petition with this Court contesting respondent’s

determinations.

                                     OPINION

I. Burden of Proof

      The Commissioner’s determinations are generally presumed correct, and

taxpayers bear the burden of proving that the Commissioner’s determinations are

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

Deductions are a matter of legislative grace, and taxpayers bear the burden of

proving that they are entitled to claimed deductions. INDOPCO, Inc. v.

Commissioner, 503 U.S. 79, 84 (1992). In addition, a taxpayer must keep

sufficient records to substantiate deductions claimed. Sec. 6001; New Colonial
                                        -6-

[*6] Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). Petitioner has neither alleged

that section 7491(a) applies nor established his compliance with its requirements.

Therefore, the burden of proof remains with petitioner.

II. Medical Expense

      Respondent contends that petitioner improperly claimed a deduction for and

failed to substantiate his medical expenses. A taxpayer may deduct expenses not

compensated for by insurance or otherwise that are paid during the taxable year for

the medical care of the taxpayer, his spouse, and his dependents. Sec. 213(a);

Estate of Smith v. Commissioner, 79 T.C. 313, 318 (1982). The deduction is

allowed only to the extent it exceeds 7.5% of adjusted gross income (AGI). Sec.

213(a); sec. 1.213-1(a)(3), Income Tax Regs. The taxpayer must substantiate

medical expense deductions with “the name and address of each person to whom

payment for medical expenses was made and the amount and date of the payment

thereof in each case.” Sec. 1.213-1(h), Income Tax Regs.

      Petitioner’s reported AGI for 2009 was $84,291. Accordingly, petitioner

must have deductible medical expenses of more than $6,321. Petitioner reported

$12,232 in medical expenses. Respondent concedes the aggregate amount of

$2,264 as deductible medical expenses. Petitioner cannot deduct more than

$5,911 of medical expenses.
                                         -7-

[*7] A. Medicare Taxes

      Petitioner deducted Medicare taxes as a medical expense. Medicare taxes

are not a deductible medical expense. Sec. 213(a); Saunders v. Commissioner,

T.C. Memo. 2002-143, aff’d, 75 Fed. Appx. 494 (6th Cir. 2003); sec. 1.213-

1(e)(4)(i)(a), Income Tax Regs. Therefore, petitioner is not entitled to deduct his

Medicare taxes.

      B. Supplements and Health Foods

      Petitioner seeks to deduct supplements and health foods as a medical

expense. Medical care deductions are not strictly limited to traditional medical

procedures but include amounts paid for affecting the structure of the body. Sec.

213(d)(1); Dickie v. Commissioner, T.C. Memo. 1999-138. Medical expenses for

nontraditional medical care may be deductible under the broad view of medical

care. See Crain v. Commissioner, T.C. Memo. 1986-138; Tso v. Commissioner,

T.C. Memo. 1980-399. The term “medical care” includes amounts paid “for the

diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose

of affecting any structure or function of the body”. Sec. 213(d)(1)(A); Estate of

Smith v. Commissioner, 79 T.C. at 318-319. To claim medical care deductions, a

taxpayer must furnish the name and address of each person to whom payment for

medical expenses was made and the amount and date of the payment thereof in
                                          -8-

[*8] each case. Sec. 1.213-1(h), Income Tax Regs. Moreover, we have found that

special foods are deductible in special cases when prescribed by a doctor. Neil v.

Commissioner, T.C. Memo. 1982-562, aff’d without published opinion, 730 F.2d

768 (9th Cir. 1984).

      To prevail, petitioner must show that the health foods and supplements cure,

mitigate, treat, or prevent his prostate cancer or affect any structure or function of

his body. To be deductible, the treatment must be for the specific purpose of

alleviating the prostate cancer, rather than for the general well-being of petitioner.

Sec. 1.213-1(e)(1)(ii), Income Tax Regs. It is difficult to determine the difference,

but here we feel petitioner has proven that the health foods and supplements were

for alleviating his prostate cancer rather than just for general health.

      Petitioner provided receipts from a discount health food store to substantiate

purchases of green supplements, flax seeds, and D-3. It is pertinent to determine

whether the health foods and supplements were prescribed by a doctor. From the

record we find that the expenses for health foods and supplements have been

substantiated. Petitioner provided credible testimony that his doctors suggested

the health foods and cited medical guidelines by Johns Hopkins Medical Urology,

Harvard Medical School, and the Mayo Clinic. Therefore, we will allow the
                                       -9-

[*9] deduction for the health foods and supplements to the extent the total amount

of medical expenses exceeds the threshold for deductibility.

      C. Various Other Expenses

      Petitioner claimed various other expenses including a gym membership and

multiple dental procedures. To deduct gym membership as a medical expense, a

taxpayer must show the expenses were in excess of or different from what he

would normally spend for personal purposes. Fred W. Amend Co. v.

Commissioner, 55 T.C. 320 (1970), aff’d, 454 F.2d 399 (7th Cir. 1971); Sutter v.

Commissioner, 21 T.C. 170 (1953). Petitioner failed to show the gym membership

to Bally Total Fitness was in excess of or different from what he would normally

spend. Petitioner is not entitled to a medical expense deduction for his gym

membership.

      Petitioner provided carbon copies of checks and billing statements with no

corresponding bank statements for various dental services. Petitioner must furnish

the name and address of each person to whom payment for medical expenses was

made and the amount and date of the payment to substantiate the dental services.

See sec. 1.213-1(h), Income Tax Regs. Given the lack of credibility of petitioner’s

records, the carbon copies of checks fail the substantiation requirements. See
                                        - 10 -

[*10] Miller v. Commissioner, T.C. Memo. 1996-402 (carbon copies of checks

without corroborating bank statements or testimony from payees may not be

enough to meet the substantiation requirements).

III. Charitable Contributions

      No deduction is allowed for any contribution of $250 or more unless the

taxpayer substantiates the contribution with a contemporaneous written

acknowledgment of the contribution by the donee organization. Sec. 170(f)(8)(A).

The acknowledgment must contain the following information: (1) the amount of

cash and a description (but not value) of any property other than cash contributed;

(2) whether the donee organization provided any goods or services in

consideration, in whole or in part, for any property contributed; and (3) a

description and good-faith estimate of the value of any goods or services provided

to the taxpayer in exchange for the contribution. Sec. 170(f)(8)(B). The

acknowledgment is contemporaneous if it is obtained by the taxpayer by the

earlier of the date on which the taxpayer files a return for the taxable year in which

the contribution was made, or the due date, including extensions, of the return.

Sec. 170(f)(8)(C).

      Respondent concedes petitioner is entitled to deduct $650 in charitable

contributions. Petitioner is not entitled to deduct the remainder of the charitable
                                        - 11 -

[*11] contributions because he failed to provide documentation to meet the

substantiation requirements.

IV. Section 162

      Respondent contends that petitioner improperly claimed deductions for and

failed to substantiate his miscellaneous business expenses. A taxpayer is entitled

to deduct “all the ordinary and necessary expenses paid or incurred during the

taxable year in carrying on any trade or business”. Sec. 162(a). Such expenses

must be directly connected with or pertain to the taxpayer’s trade or business. Sec.

1.162-1(a), Income Tax Regs. An expense is ordinary if it is normal, usual, or

customary within a particular trade, business, or industry or arises from a

transaction “of common or frequent occurrence in the type of business involved.”

Deputy v. du Pont, 308 U.S. 488, 495 (1940). An expense is necessary if it is

appropriate and helpful for the development of the business. Commissioner v.

Heininger, 320 U.S. 467, 471 (1943). In contrast, except where specifically

enumerated in the Code, no deductions are allowed for personal, living, or family

expenses. Sec. 262(a). The determination of whether an expenditure satisfies the
                                        - 12 -

[*12] requirements of section 162 is a question of fact. Commissioner v.

Heininger, 320 U.S. at 475.5

      A. Substantiating Expenses

      Taxpayers must “keep such permanent books of account or records * * * as

are sufficient to establish the amount of gross income, deductions, credits, or other

matters required to be shown by such person in any return of such tax or

information.” Sec. 1.6001-1(a), Income Tax Regs. When a taxpayer establishes

that he or she has incurred deductible expenses but is unable to substantiate the

exact amounts, we can estimate the deductible amount but only if the taxpayer

presents sufficient evidence to establish a rational basis for making the estimate.

See Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930); Vanicek v.

Commissioner, 85 T.C. 731, 742-743 (1985). In estimating the amount allowable,

we bear heavily against the taxpayer where the inexactitude of the record is of his

or her own making. See Cohan v. Commissioner, 39 F.2d at 544.

      Moreover, deductions relating to travel, meals and entertainment, and

certain listed property defined in section 280F(d)(4), including passenger



      5
       A taxpayer is entitled to deduct unreimbursed employee expenses only to
the extent the taxpayer demonstrates that he or she could not have been
reimbursed by his or her employer. See, e.g., Podems v. Commissioner, 24 T.C.
21, 23 (1955); Riley v. Commissioner, T.C. Memo. 2007-153.
                                         - 13 -

[*13] automobiles, computers, and cellular phones, are subject to strict rules of

substantiation that supersede the doctrine in Cohan v. Commissioner, 39 F.2d at

544. See sec. 274(d); sec. 1.274-5T(c)(2), Temporary Income Tax Regs., 50 Fed.

Reg. 46017 (Nov. 6, 1985).

      For deductions to which section 274 applies, a taxpayer must substantiate

certain elements of the deductible activity or use through either adequate records

or sufficient evidence corroborating the taxpayer’s own statement. Sec. 274(d).

At a minimum, a taxpayer must substantiate: (1) the amount of the expense; (2)

the time and place the expense was incurred; (3) the business purpose of the

expense; and (4) the business relationship of the taxpayer to other persons

benefited by the expense, if any. Id.; Shea v. Commissioner, 112 T.C. 183, 187

(1999). If a taxpayer cannot satisfy the substantiation burden imposed by section

274(d) with respect to a deduction to which it applies, he fails to carry his burden

of establishing that he is entitled to deduct that expense, regardless of any equities

involved. Sec. 274(d); Nicely v. Commissioner, T.C. Memo. 2006-172; sec.

1.274-5T(a), Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6, 1985).
                                         - 14 -

[*14] B. Meals and Entertainment, Travel, Vehicle Expenses, Gifts, Cellular
         Phone, and Computer Expenses

      Passenger automobiles and any other property used as a means of

transportation are generally “listed property” as defined by section 280F(d)(4).

Secs. 274(d)(4), 280F(d)(4)(A)(i) and (ii). Accordingly, with certain exceptions

(none of which petitioner has shown he meets), deductions for car expenses must

satisfy the strict substantiation requirements of section 274. The heightened

substantiation requirements of section 274 also apply to meals and entertainment

expenses as well as travel expenses. Sec. 274(d); Bogue v. Commissioner, T.C.

Memo. 2011-164, aff’d, __ Fed. Appx. __, 2013 WL 2382310 (3d Cir. June 3,

2013).

             1. Vehicle and Travel Expense

      While petitioner did introduce some records and receipts to substantiate his

car expense deductions, these records fail to state the business purpose of the

expenses. Petitioner did not maintain a mileage log for his travel but estimated

that he traveled over 18,000 miles. Moreover, the records he provided included

only information regarding where the expenses were incurred and their amounts.

Petitioner failed to introduce any records or receipts for parking, tolls, or any other

travel expenses, and in his testimony he could not recall any specific travel
                                         - 15 -

[*15] expenses he paid. Therefore, we find that petitioner has failed to prove his

entitlement to any deductions for these expenses.

         Petitioner claims that he was in “on duty” status the hour before work and

the hour after work according to a handbook he was provided and the Portal-to-

Portal Act, which qualified him to deduct travel and car expenses. At trial,

respondent’s witness testified that the handbook guidelines petitioner relied on are

in reference to overtime policies, not to petitioner’s being “on duty” during these

times.

         Petitioner’s daily travel from work to home was not in the course of work

but was incident to employment. See 29 C.F.R. sec. 785.35 (2011). He did not

provide any business reason why expenses of this travel should be deducted other

than that they were incurred while he was “on duty” commuting to and from work.

These expenses are not deductible as a travel expense, nor are petitioner’s vehicle

and maintenance expenses deductible.

               2. Meal and Entertainment Expenses

         The heightened substantiation requirements of section 274 apply to meal

and entertainment expenses. Petitioner failed to introduce any records or receipts

substantiating his claimed expenses for meals and entertainment to meet the
                                         - 16 -

[*16] requirements of section 274(d). Accordingly, we find that petitioner has

failed to prove his entitlement to any deductions for these expenses.

             3. Gifts

       Petitioner seeks to deduct $165.14 for business gifts. A taxpayer may not

deduct under section 162 any expenses for gifts made directly or indirectly to any

individual to the extent the value of the gifts exceeds $25. Sec. 274(b). To

substantiate expenses relating to gifts, a taxpayer must provide adequate records or

corroborating evidence showing the costs of the gifts, the dates the gifts were

made, descriptions of the gifts, the business purposes of the gifts, and the business

relationships between the taxpayer and the gift recipients. Sec. 274(d); sec. 1.274-

5T(b)(5) and (c), Temporary Income Tax Regs., 50 Fed. Reg. 46016-46017 (Nov.

6, 1985).

      Petitioner introduced evidence showing the dates of the gifts but provided

only vague, uncorroborated testimony regarding the business purposes of the gifts

and his relationships with the recipients. Therefore, we agree with respondent that

petitioner is not entitled deduct the costs of the business gifts for 2009.
                                         - 17 -

[*17]         4. Cellular Phone Expense

        The heightened substantiation requirements of section 274 apply to cellular

telephone expenses incurred during 2009. Sec. 280F(d)(4);6 Bogue v.

Commissioner, T.C. Memo. 2011-164. Petitioner did not provide evidence that

such expenses were actually paid as part of a trade or business, as required by

section 162(a). Moreover, he provided only one AT&T cellular phone bill for

charges. Accordingly, petitioner has failed to meet the substantiation requirements

of section 274(d) with respect to the cellular phone expenses and is not entitled to

corresponding deductions. See Trupp v. Commissioner, T.C. Memo. 2012-108

(monthly cellular phone statements were not enough to meet substantiation

requirements).

              5. Legal Fees

        In general, legal fees are deductible under section 162 only if the fees paid

originated in the taxpayer’s trade or business and only if the claim is sufficiently

connected with that trade or business. See United States v. Gilmore, 372 U.S. 39

(1963); Kenton v. Commissioner, T.C. Memo. 2006-13.

        6
       Sec. 280F(d)(4) was amended by the Small Business Jobs Act of 2010,
Pub. L. No. 111–240, sec. 2043(a), 124 Stat. at 2560, which removed cellular
phones and other similar telecommunications equipment from “listed property”
subject to sec. 274(d). However, that amendment is effective only for tax years
beginning after December 31, 2009. Id. sec. 2043(b).
                                        - 18 -

[*18] To deduct legal fees, petitioner must maintain adequate records to

substantiate the deduction. Sec. 6001. Petitioner testified that the legal fees were

paid in conjunction with an EEOC lawsuit he commenced against his former

employer in relation to his application and denial for multiple employment

positions. He claimed a deduction for legal fees totaling $2,275 in his pretrial

memorandum but testified at trial that the legal fees reported on his Schedule A

were $4,850. Petitioner submitted five carbon copies of checks which he claimed

were payments for legal fees incurred during the lawsuit but failed to submit any

corresponding receipts or bank statements. Therefore, we find that petitioner

failed to substantiate his legal fees for consultations. See Miller v. Commissioner,

T.C. Memo. 1996-402 (carbon copies of checks without corroborating bank

statements did not meet substantiation requirements); Burrell v. Commissioner,

T.C. Memo. 1994-574 (carbon copies of uncanceled checks and self-made receipts

did not meet substantiation requirements).

      Petitioner also provided receipts totaling $400 for payments to make copies

and mail documents for the EEOC lawsuit. We find that these costs are

substantiated. However, even with these costs and the amount conceded by
                                         - 19 -

[*19] respondent, petitioner’s miscellaneous itemized deductions total only $948,7

below the 2% floor of $1,685.8

      C. Home Office

      No deduction otherwise allowable shall be allowed with respect to the

business use of a taxpayer’s residence. Sec. 280A(a). However a deduction may

be claimed by an employee to the extent it is allocable to a portion of a dwelling

unit which is exclusively used on a regular basis for the convenience of the

employer as: (1) the principal place of business for any trade or business of the

taxpayer; or (2) a place of business which is used by patients, clients, or customers

in meeting or dealing with the taxpayer in the normal course of his trade or

business. Sec. 280A(c)(1)(A) and (B).

      Petitioner maintains that he used a section of his home as a home office.

The evidence concerning this point is limited to petitioner’s testimony stating that

he would use his computer to check personnel files. Petitioner failed to show the

nature or extent of the work performed in the alleged office or that it was for the

convenience of his employer. Petitioner had access to a computer at his worksite


      7
       Respondent conceded $484 in union dues and $64 in tax preparation fees.
These amounts along with $400 in mailing and copying equals the total itemized
deduction.
      8
          Petitioner’s AGI for 2009, $84,291, multiplied by 2% equals $1,685.
                                        - 20 -

[*20] where he could perform the same duties. Because of petitioner’s limited

record in this case, we cannot find that petitioner validly claimed a home office

deduction.

             1. Computer Expense

      A computer is “listed property” and subject to the strict substantiation

requirements of section 274(d). Sec. 280F(d)(4)(A)(iv). Petitioner offered

receipts for payments to Dell and a renewal notice for security software along with

testimony that he used his computer to check personnel files. Petitioner did not

meet the strict substantiation requirements of section 274(d). Further, petitioner

has not shown that he did not use the computer for personal reasons. Petitioner

has failed to substantiate the deduction relating to the computer.

      Petitioner’s purchase of computer equipment and upgrades to the computer

equipment are not an ordinary and necessary business expense. See Riley v.

Commissioner, T.C. Memo. 2007-153; Wasik v. Commissioner, T.C. Memo.

2007-148.

             2. Utilities

      Personal, living, and family expenses are not deductible unless expressly

allowed. Sec. 262(a). The regulations specify that personal, living, and family

expenses include utilities tied to a taxpayer’s home unless the taxpayer uses a part
                                         - 21 -

[*21] of the home for business. Sec. 1.262-1(b)(3), Income Tax Regs. If part of

the home is used as a place of business, a corresponding portion of the rent and

other similar expenses, such as utilities, properly attributable to such place of

business, is deductible as a business expense. Id.; see Boltinghouse v.

Commissioner, T.C. Memo. 2007-324 (determining the taxpayer could not deduct

cable costs when he provided no evidence establishing use of the home for

business purposes even though a small portion of the taxpayer’s cable use was for

a business purpose). Utility expenses may be deductible under section 162(a) if

the expenses incurred are ordinary and necessary in carrying on a trade or

business. Vanicek v. Commissioner, 85 T.C. at 742. Internet expenses have been

characterized as utility expenses. See Verma v. Commissioner, T.C. Memo. 2001-

132. Taxpayers must provide the Court with a basis to determine what portion of

the utility expenses was allocable to their business. Adler v. Commissioner, T.C.

Memo. 2010-47, aff’d, 443 Fed. Appx. 736 (3d Cir. 2011).

      Petitioner claims that the cable, Internet, and utilities were for his job.

Petitioner presented his monthly Comcast cable bills and testified that he used the

Internet to review various personnel files. We have already found that petitioner

failed to establish that he conducted business-related activities at his home.

Likewise, we find that petitioner failed to establish a business purpose. Petitioner
                                        - 22 -

[*22] is not entitled to the deductions at issue because he has not shown that his

home expenses related to business.

V. Alternative Minimum Tax

      Section 55 imposes an alternative minimum tax, in addition to the regular

tax imposed for the year, equal to the excess of the tentative minimum tax over the

regular tax for the taxable year. This is a computational issue and will be

determined under Rule 155.

VI. Section 6662(a) Accuracy-Related Penalty

      Respondent determined that petitioner is liable for a section 6662(a) and

(b)(1) accuracy-related penalty for 2009 because his underpayment of income tax

resulted from negligence or disregard of rules or regulations.

      Under section 7491(c), the Commissioner bears the burden of production

with regard to penalties and must come forward with sufficient evidence

indicating that it is appropriate to impose penalties. See Higbee v. Commissioner,

116 T.C. 438, 446 (2001). However, once the Commissioner has met the burden

of production, the burden of proof shifts to the taxpayer, including the burden of

proving that the penalties are inappropriate because of reasonable cause under

section 6664. See Rule 142(a); Higbee v. Commissioner, 116 T.C. at 446-447.
                                         - 23 -

[*23] We find that respondent has met the burden of production in the light of

petitioner’s inability to substantiate the deductions he claimed.

      Negligence is defined as any failure to make a reasonable attempt to comply

with the provisions of the Code. Sec. 6662(c). Disregard is defined as any

careless, reckless, or intentional disregard. Id. Disregard of rules or regulations is

careless if the taxpayer does not exercise reasonable diligence to determine the

correctness of a tax return position that is contrary to rules or regulations. Sec.

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

      An underpayment is not attributable to negligence or disregard to the extent

the taxpayer shows that the underpayment is due to the taxpayer’s having

reasonable cause and acting in good faith. Sec. 6664(c)(1); Neonatology Assocs.,

P.A. v. Commissioner, 115 T.C. 43, 98 (2000), aff’d, 299 F.3d 221 (3d Cir. 2002).

Reasonable cause requires that the taxpayer exercise ordinary business care and

prudence as to the disputed item. See United States v. Boyle, 469 U.S. 241

(1985); Estate of Young v. Commissioner, 110 T.C. 297, 317 (1998). Good-faith

reliance on the advice of an independent, competent professional as to the tax

treatment of an item may meet this requirement. See Boyle, 469 U.S. at 241; sec.

1.6664-4(b), Income Tax Regs. The decision as to whether a taxpayer acted with

reasonable cause and in good faith is made on a case-by-case basis, taking into
                                        - 24 -

[*24] account all of the pertinent facts and circumstances. Sec. 1.6664-4(b)(1),

Income Tax Regs.

      Petitioner’s underpayment of tax resulted from negligence and disregard for

rules or regulations. Moreover, petitioner has not shown that his underpayment of

tax was due to reasonable cause and good faith. Petitioner claimed several

deductions on his return on the basis of unreasonable estimates with little to no

supporting documentation. Petitioner did not consult an independent, competent

professional as to his tax treatment of those items. Furthermore, petitioner

supported several of his deductions with receipts that were highly personal with

little business connection. Therefore, we find petitioner is liable for a section

6662(a) accuracy-related penalty for 2009.

      In reaching our holdings herein, we have considered all arguments made,

and, to the extent not mentioned above, we conclude they are moot, irrelevant, or

without merit.

      To reflect the foregoing,


                                                            Decision will be entered

                                                     under Rule 155.
