                          T.C. Memo. 2000-254



                        UNITED STATES TAX COURT



     MARVIN L. BARMES AND BARBARA J. BARMES, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11135-98.                       Filed August 11, 2000.



     Marvin L. Barmes and Barbara J. Barmes, pro se.

     Timothy A. Lohrstorfer, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     COLVIN, Judge:     Respondent determined a deficiency in

petitioners’ Federal income tax of $13,821 for 1994 and an

accuracy-related penalty under section 6662(a) of $2,764.

     The issues for decision are:

     1.   Whether petitioners may deduct depreciation for two

automobiles for 1994.    We hold that they may not.
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     2.    Whether petitioners may deduct as a casualty loss for

1994 the cost of improving and restoring their pond and its

surrounding grounds.   We hold that they may not.

     3.    Whether petitioners are liable for the accuracy-related

penalty under section 6662(a) for 1994.     We hold that they are.

     The parties agree that, to the extent that we sustain

respondent’s determinations increasing petitioners’ income shown

on Schedule C, Profit or Loss From Business, a computational

adjustment is required for petitioners’ self-employment tax for

1994.

     Unless otherwise indicated, section references are to the

Internal Revenue Code.   References to petitioner are to Marvin L.

Barmes.   References to Mrs. Barmes are to petitioner Barbara J.

Barmes.

                         FINDINGS OF FACT

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

A.   Petitioners

     Petitioners lived in Fritchton, Indiana (the Fritchton

residence), when they filed their petition.    The Fritchton

residence is located on 17.73 acres of land (the Fritchton

property).   Petitioners acquired the Fritchton residence and

property in 1978.

     There is an old farmhouse located near petitioners’

residence on the Fritchton property.   Mrs. Barmes’ mother lived
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in the farmhouse until she died in 1992.     Petitioners remodeled

the farmhouse and furnished it as an office in 1994.

B.   Barbara’s Gift Shop

     1.    General Business Activities

     In 1994, petitioners operated Barbara’s Gift Shop and Barmes

Wholesale (Barbara’s Gift Shop), the principal place of business

of which was at 120 Main Street in Vincennes, Indiana.     Barbara’s

Gift Shop was a wholesale and retail business.    It is about 6½

miles from the Fritchton residence.

     Petitioners each worked 7 days a week at Barbara’s Gift Shop

in 1994.   Petitioner typically worked 14 hours per day, and Mrs.

Barmes typically worked 10 hours per day.

     During 1994, about 90 percent of the time petitioner spent

working for Barbara’s Gift Shop was at 120 Main Street and about

10 percent was at the farmhouse in Fritchton.    Petitioner had

some business meetings in the farmhouse, and Mrs. Barmes

occasionally did bookwork there.   The farmhouse was not

petitioners’ primary place of business in 1994.

     2.    Petitioners’ Use of Automobiles

     In 1994, petitioners bought a Cadillac for $39,215 and a

Corvette for $30,390.   Petitioner primarily drove the Cadillac,

and Mrs. Barmes primarily drove the Corvette.    During 1994, Mrs.

Barmes drove the Corvette to and from petitioners’ Fritchton

residence and 120 Main Street and for personal purposes.    She
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also used the Corvette for business errands.     Petitioner drove

the Cadillac to and from the Fritchton residence and 120 Main

Street.

     3.      Petitioners’ Apartment

     In 1994, petitioners had an apartment above the shop at 120

Main Street (the apartment).     The apartment has one room (about

22 by 70 feet) with a double bed, kitchen, television, chest of

drawers, dresser, and couch.     Petitioners sometimes used the

apartment as a kitchen for their employees and as a first aid

room.     Petitioners spent about half of their nights at the

Fritchton residence in 1994 and about half at the apartment.

C.   Petitioners’ Cattle

     Petitioners owned cattle (the number of which is not

specified in the record) at the Fritchton property.     When

petitioner was at the Fritchton property, he fed the cattle.

Petitioners’ son, Greg Barmes, also sometimes fed the cattle.

D.   Petitioners’ Pond

     1.      Condition of the Pond Before 1994

     The Fritchton property contained a pond which was built

around 1930.     The trees bordering the pond were primarily willows

and also included red cedars, sycamores, and cottonwoods.

     Petitioners installed a geothermal heat pump in 1984 which

used water in the pond to heat and cool petitioners’ Fritchton

residence and the farmhouse.
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     Eight to ten red cedar trees bordering the pond were damaged

or destroyed by a wet, heavy snowfall that occurred in 1990-91.

The weight of the snow broke many of the trees.    Trees and tree

limbs fell into the pond from 1991 to early 1994.    Petitioners

did not replace those trees.

     In 1992, petitioners caught fish in the pond and ate them.

The pond became stagnant and polluted late in 1993 because trees

had fallen into the pond and had not been removed, sediment had

accumulated in the pond, and the pond was surrounded by brush.

By the summer of 1994, the fish in the pond had died, the pond

was shallow and smelled bad, and its banks had eroded.

     2.     Restoration and Improvement of Petitioners’ Pond

     Petitioners hired Shepard Construction in 1994 to restore

the pond.    Shepard Construction deepened the pond by removing

sediment and trees from the bottom of the pond, rebuilt a road

around the levee, removed two peninsulas from the pond, created

an island in the pond from sediment from the bottom of the pond

and soil from the levee, and removed trees surrounding the pond,

including some trees that had not been damaged.    Shepard

Construction improved the pond beyond its pre-1991 condition and

increased its value.
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E.   Petitioners’ 1994 Tax Return

     1.     Preparation of Petitioners’ Return

     Before 1994, petitioners sometimes used tax preparers and

certified public accountants to prepare their income tax returns.

Petitioners’ daughter-in-law, Susan Barmes, helped them prepare

their 1994 return.    Susan Barmes had worked for petitioners since

1990 and had been married to petitioners’ son Greg since 1994.

She had previously worked two or three tax seasons preparing tax

returns for H&R Block.    In helping to prepare petitioners’ 1994

return, Susan Barmes used a tax return preparation computer

program, IRS Publication 334, Tax Guide for Small Business for

1994, and IRS Publication 534, Depreciation.

     2.     Petitioners’ 1994 Schedule C for Barbara’s Gift Shop

     Petitioners reported gross receipts of $5,445,178 and a net

profit of $859,655 from Barbara’s Gift Shop on a Schedule C

attached to their 1994 income tax return.

     Petitioners deducted the following amounts of depreciation

for the two automobiles they placed in service in 1994:

     Date placed                          Claimed        Claimed
     in service          Vehicle          mileage      depreciation
       8/1/94         1994 Cadillac        3,500          $2,960
      6/18/94         1994 Corvette        3,200           2,960

     Petitioners claimed they used each vehicle 100 percent for

business.    The mileage claimed by petitioners for each vehicle

was taken from odometer readings at the end of 1994.    Petitioners

did not maintain a log or other contemporaneous written records
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of the business use of the two automobiles for 1994.

     Petitioners deducted expenses of $27,187 on the 1994

Schedule C they filed for Barbara’s Gift Shop for restoring and

improving their pond.   These expenses did not relate to Barbara’s

Gift Shop.

     3.   Petitioners’ Schedule F

     Petitioners reported on a Schedule F, Profit or Loss From

Farming, attached to their 1994 return that they had gross income

from their cattle activity of $1,593, total expenses of $3,043,

and a net operating loss of $1,450.

F.   Notice of Deficiency

     Respondent determined that petitioners were not entitled to

deduct the depreciation on the Cadillac and the Corvette.

Respondent also disallowed petitioners’ deduction of expenses

relating to the pond.

                              OPINION

A.   Whether Petitioners May Deduct Depreciation for the Cadillac
     and the Corvette

     For petitioners to be entitled to deduct depreciation on

their automobiles for 1994, they must prove the amount of

business use of each automobile.    See secs. 280F(b)(3),

168(g)(2).   Petitioners must substantiate the business use of

their automobiles by adequate records or other evidence

corroborating their own statement of the amount, time and place,

and business purpose of the automobile use.    See sec. 274(d)(4).
                                - 8 -

     1.   Petitioners’ Contentions

     Petitioners contend that they used their cars almost

exclusively for business purposes, and that their use of the cars

to drive between their Fritchton residence and Barbara’s Gift

Shop was travel between two business offices because their cattle

business was located at their Fritchton residence.   See secs.

274(d)(4), 280F(b)(3).

     2.   Commuting Expenses

     The expenses of traveling between one’s home and place of

business are generally nondeductible, personal expenses.    See

sec. 262; Fausner v. Commissioner, 413 U.S. 838, 839 (1973);

Commissioner v. Flowers, 326 U.S. 465, 473 (1946).   A taxpayer

whose primary business activity is not located at his or her

residence may not deduct expenses of traveling between the

residence and the business merely because the taxpayer conducts a

secondary business at home.    See Mazzotta v. Commissioner, 57

T.C. 427, 429 (1971), affd. 467 F.2d 943 (2d Cir. 1972); Andrews

v. Commissioner, T.C. Memo. 1978-135.

     Petitioners conducted their primary business at 120 Main

Street.   Even though petitioner fed the cattle when he was at the

Fritchton property and he and Mrs. Barmes worked some in the

farmhouse office, petitioners’ primary reason for traveling from

the gift shop to the Fritchton residence was personal.

     Petitioners cite Heape v. Commissioner, T.C. Memo. 1992-660,
                                   - 9 -

for the proposition that the cost of travel between a taxpayer’s

two places of business is business travel.      Petitioners’ reliance

on Heape is misplaced.       In Heape, the taxpayer was a coal miner

who also operated a farm.      We held that, even though the taxpayer

did a considerable amount of work on his farm, he could not

deduct his expenses of traveling between the coal mine and his

home because, as here, the primary purpose for the trips was

personal.

     Petitioners also rely on Gosling v. Commissioner, T.C. Memo.

1999-148, and Genck v. Commissioner, T.C. Memo. 1998-105.

Petitioners’ reliance on Gosling and Genck is misplaced.       In

those cases, we held that the taxpayers could deduct the cost of

travel between a business the principal location of which was at

their home and a second location for the same business.      In

contrast, the Fritchton property was not the principal place of

business of the gift shop.

     We conclude that the primary reason for petitioners’ travel

between their gift shop and the Fritchton residence was personal.

See Commissioner v. Flowers, supra.

     3.     Substantiation

     Petitioners’ only evidence of the amount of business use of

the Cadillac and the Corvette in 1994 was petitioners’ testimony.

Petitioner testified that his use of the Cadillac was 95 percent

business and 5 percent personal.      Petitioners treated the trips
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from petitioners’ Fritchton residence to Barbara’s Gift Shop as

business use.   Petitioners contend that a trip to the shopping

mall or a restaurant is business related if the taxpayer makes a

business-related telephone call while on the trip.   We disagree.

A business telephone call does not change the character of a trip

from personal to business.   See H. Conf. Rept. 98-861, at 1028

(1984), 1984-3 C.B. (Vol. 2) 1, 282.

     Mrs. Barmes used the Corvette for some personal purposes.

She did not estimate the amount of her business use of the

Corvette in 1994.   Petitioners do not have a log, records, or

other corroboration of their testimony relating to their business

use of their automobiles as required by section 274(d)(4).

Petitioners did not establish the percentages of business use of

the two automobiles.   See Rutz v. Commissioner, 66 T.C. 879, 883-

886 (1976); Hradesky v. Commissioner, 65 T.C. 87, 90 (1975),

affd. per curiam 540 F.2d 821 (5th Cir. 1976); Nicholls, North,

Buse Co. v. Commissioner, 56 T.C. 1225, 1235-1236 (1971);

Kennelly v. Commissioner, 56 T.C. 936, 942 (1971), affd. 456 F.2d

1335 (2d Cir. 1972).   Thus, petitioners may not deduct

depreciation of the Cadillac and the Corvette for 1994.

B.   Whether Petitioners May Deduct the Costs of Restoring and
     Improving Their Pond as a Casualty Loss

     Petitioners deducted $27,187 on their Schedule C for

Barbara’s Gift Shop for restoration of their pond.   Petitioners

now contend that they may deduct as a casualty loss for 1994
                              - 11 -

their cost of restoring the pond because heavy snows in the

winter of 1990-91 that caused the cedar trees to fall into and

damage the pond were sudden, unexpected, and unusual.    We

disagree.

     An individual may deduct losses arising "from fire, storm,

shipwreck, or other casualty, or from theft."    Sec. 165(c)(3);

Durden v. Commissioner, 3 T.C. 1, 3 (1944).     A casualty does not

include the "progressive deterioration of property through a

steadily operating cause."   Fay v. Commissioner, 120 F.2d 253,

253 (2d Cir. 1941), affg. per curiam 42 B.T.A. 206 (1940); Durden

v. Commissioner, supra.

     Petitioners contend that the trees fell into their pond from

1991 to 1994 sufficiently suddenly to constitute a casualty loss.

Petitioners cite Bailey v. Commissioner, T.C. Memo. 1983-685, and

Helstoski v. Commissioner, T.C. Memo. 1990-382, to support their

claim that the deterioration of their pond was not from gradual

erosion but was due to a sudden event.   Bailey and Helstoski are

distinguishable from this case.   In Bailey, large portions of the

taxpayers’ backyard fell away in 6 to 8 weeks, exposing the

foundation of their house.   We held that the soil slippage

occurred quickly enough to be a casualty within the meaning of

section 165(a).   Similarly, in Helstoski, we treated as a

casualty loss storm damage to the taxpayers’ pond which

immediately reduced the value of the taxpayers’ property.     In
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contrast, in the instant case, the pond did not deteriorate

suddenly; it deteriorated over a 2-3 year period.     See Heyn v.

Commissioner, 46 T.C. 302, 308 (1966); Durden v. Commissioner,

supra at 4-5.

     Petitioners contend that they properly deducted their loss

in 1994 because that was when they first knew the amount of their

loss.     See Bailey v. Commissioner, supra.   Petitioners’ reliance

on Bailey is misplaced.    In Bailey, the Court held that the

taxpayers sustained their casualty loss in 1974 because they

could not measure their aggregate loss until that year; the

damage to their backyard began in December 1973 and continued

until January 1974.    Thus, in Bailey, unlike the instant case,

the casualty occurred suddenly, even though it occurred in 2

taxable years.    Petitioners may not deduct as a casualty loss the

expenses of restoring their pond in 1994 since the damage to the

pond occurred gradually.

C.   Whether Petitioners Are Liable for an Accuracy-Related
     Penalty for Negligence

     1.     Section 6662(a)

     Respondent contends that petitioners are liable for the

accuracy-related penalty for negligence for 1994.

     A penalty is imposed under section 6662 equal to 20 percent

of the part of the underpayment which is attributable to

negligence or disregard of rules or regulations.     See sec.

6662(a).    A taxpayer is not negligent under section 6662(a) if he
                                - 13 -

or she reasonably relied in good faith on the advice of a

competent, independent expert or tax professional who had all the

information.   See United States v. Boyle, 469 U.S. 241, 250

(1985); Schwalbach v. Commissioner, 111 T.C. 215, 230 (1998);

Freytag v. Commissioner, 89 T.C. 849, 888 (1987), affd. 904 F.2d

1011 (5th Cir. 1990), affd. on other issue 501 U.S. 868 (1991).

     2.   Reliance on Professional Advice

     Petitioners contend that they reasonably relied on the

advice of their daughter-in-law, Susan Barmes.    We disagree.

     Petitioner and Susan Barmes testified that she spent a

substantial amount of time helping petitioner prepare

petitioners’ 1994 tax return.    However, neither petitioners nor

Susan Barmes described any advice that she gave petitioners

regarding the depreciation of their automobiles or the deduction

of their restoration of landscaping expenses.    Thus, there is no

evidence that petitioners relied on Susan Barmes’ advice on those

issues.

     Petitioners contend that they were not negligent because

they and Susan Barmes relied on IRS Publication 334, Tax Guide

for Small Business, and IRS Publication 534, Depreciation, to

prepare petitioners’ return.    We disagree.   Petitioners did not

follow the instructions contained in IRS Publication 334.    For

example, IRS Publication 334, at 77, states:    “If you use your

car for both business and personal purposes, you must divide your
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expenses between business and personal use.”    Petitioners did not

segregate their business and personal use of their automobiles.

     Similarly, IRS Publication 334, at 127, states:   “The cost

of restoring landscaping to its original condition after a

casualty may indicate the decrease in fair market value.”

Petitioners’ reliance on that publication to support their claim

that they are entitled to claim a casualty loss relating to the

pond is unwarranted because the excerpt relied on assumes that

the taxpayer has sustained a casualty loss; it does not indicate

how to determine that a casualty loss has occurred.    Petitioners

do not cite any other language from Publication 334 which

supports their position here.    Thus, the publication is not

authority for petitioners’ deduction of the pond restoration

expenses.

     Petitioners were negligent and disregarded rules and

regulations.   Petitioners did not indicate what advice they

received from Susan Barmes, who helped prepare their 1994 return,

and they did not have reasonable cause for deducting pond

restoration expenses or depreciation on their automobiles without

allocating between their business and personal use.    We conclude

that petitioners are liable for the accuracy-related penalty for

1994.

     To reflect the foregoing,


                                          Decision will be entered

                                     under Rule 155.
