                  T.C. Summary Opinion 2003-57



                     UNITED STATES TAX COURT



        KEITH T. AND GERALDINE A. BOWERS, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 8191-00S,           Filed May 19, 2003.
                10437-01S.


     Kevin G. Vanginderen, for petitioners.

     Karen Nicholson Sommers, for respondent.



     POWELL, Special Trial Judge:   These consolidated cases were

heard pursuant to the provisions of section 7463 of the Internal

Revenue Code in effect at the time the petitions were filed.1




1
     Unless otherwise indicated, subsequent 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 -
The decisions to be entered are not reviewable by any other

court, and this opinion should not be cited as authority.

     By separate notices of deficiency respondent determined

deficiencies of $21,096 and $2,898 in petitioners’ 1997 and 1998

Federal income taxes, respectively.    The issues are:   (1) The

value of a condominium sold by petitioners in the taxable year

1997 to the U.S. Army Corps of Engineers (the Corps) under the

so-called Housing Assistance Program and (2) whether petitioners

are entitled to various deductions claimed on their 1997 and 1998

Federal income tax returns.   Petitioners resided in Paso Robles,

California, at the time they filed the petitions in these cases.

     We note initially that most of the disputed issues concern

petitioner Geraldine A. Bowers (hereinafter petitioner).     Neither

she nor petitioner Keith T. Bowers appeared at the trial.     This

is particularly troublesome here because petitioners have the

burden of establishing that respondent’s determinations are

erroneous.   Rule 142(a); Helvering v. Taylor, 293 U.S. 507

(1935).2   Accordingly, while the parties executed a stipulation

of facts, there are, unfortunately, gaps in the record that are

sometimes crucial.




2
     Petitioners have not satisfied the requirement to shift the
burden of proof to respondent under sec. 7491(a).
                               - 3 -
                            Background

1.   1997 Income

      Petitioner owned a condominium in Garden Grove, California.

On October 30, 1997, she sold the condominium to the Corps under

the Homeowners Assistance Program (HAP).     Petitioner’s mortgage

debt at that time was $147,150.3   HAP is a Federal program,

administered by the Corps, that aids military personnel who own

residences at or near military posts or bases that are being

closed or significantly reduced in size which results in a

significant decline in property values and who are consequently

unable to sell their residences.   See 42 U.S.C. sec. 3374 (2000).

Petitioner’s condominium had a current fair market value of

$85,000, and the Corps paid off the amount of the mortgage debt

of $147,150.   In short, petitioner compromised the debt by

surrendering property that had a fair market value of $85,000.

The fair market value was based on two appraisals.

     For 1997, in addition to her regular Form W-2, Wage and Tax

Statement, the Corps issued petitioner another Form W-2 showing

that petitioner had received income of $62,595 reflecting the

difference between the mortgage debt compromised and the fair

market value of the property surrendered.4    Petitioners disclosed


3
      All figures are rounded to the nearest dollar.
4
     The record does not explain the difference between the
amount shown on the Form W-2 and the amount of the compromised
                                                   (continued...)
                                - 4 -
that amount on their 1997 income tax return, but did not include

it in income.    In the notice of deficiency for 1997, respondent

included the $62,595 in petitioners’ gross income.

2.   1997 and 1998 Miscellaneous Deductions

      During 1997 and 1998, petitioner was employed as a Chief

Warrant Officer with the California Army National Guard and was

on active duty.    On October 17, 1997, she was ordered to attend

flight school at Fort Rucker, Alabama, from November 11, 1997 to

March 6, 1998.    She was then ordered to proceed to Clarksburg,

West Virginia, for further training.

      The amounts claimed by petitioners as miscellaneous

deductions pertaining to petitioner’s employment during 1997 and

1998 and the amounts allowed by respondent are as follows:

                                1997

                                        Claimed   Allowed

           Rent                           $300      -0-
           Uniforms, etc.                2,542    $2,246
           Books and publications           76      -0-
           Flight exams                    282      -0-
           Telephone                       479      -0-
           Educational expenses          3,022      -0-
           Vehicle expenses              1,548      -0-

                                1998

           Books and publications          295       -0-
           Uniforms, etc.                2,929        661
           Telephone                       293       -0-


4
 (...continued)
debt. The notice of deficiency for 1997 uses the Form W-2 amount
and petitioners have not disputed that amount.
                                   - 5 -
            Educational expenses            1,010      -0-
            Office supplies                    90      -0-
            Depreciation                    1,948      -0-
            Vehicle expenses                1,399      -0-
            Travel expenses                   270      -0-

     During 1998, petitioner Keith T. Bowers was a construction

superintendent.    The amounts claimed by petitioners as

miscellaneous deductions pertaining to petitioner Keith T.

Bowers’s employment during 1998 and the amounts allowed by

respondent are as follows:

                                           Claimed   Allowed

            Uniforms                        $236       -0-
            Union dues                       200       -0-
            Tools                            183     $2,100

     With respect to the vehicle expenses pertaining to

petitioner’s employment, it appears that these expenses were

incurred for transportation to and from petitioner’s National

Guard drills.    In this regard, petitioner presented a letter from

the adjutant of her guard unit stating that petitioner was not

entitled to reimbursement from the National Guard for “drill

mileage”.    Petitioner’s orders to go to Fort Rucker, Alabama, and

to proceed then to Clarksburg, West Virginia, provided that she

was entitled to reimbursement for her travel expenses, and there

is no evidence of other expenses pertaining to travel.

     Regarding the educational expenses, it appears that these

expenses were incurred by petitioner in 1997 and 1998 obtaining a

Bachelor of Arts Degree in History from the California State
                                 - 6 -
University at Long Beach.    In a letter to petitioner’s counsel,

petitioner’s former unit commander stated that “Continued

civilian education in the military is necessary for an officer to

retain their current position, improve their skills, and maintain

longevity in the military.”

      The record is devoid of evidence concerning the adjustments

made to the miscellaneous deductions claimed with regard to

petitioner Keith T. Bowers.

3.   1997 Rental Expense

      In 1997, petitioner owned a trailer pad in Stapleton,

Alabama.   On their 1997 income tax return, petitioners deducted

$908 for auto and travel expenses.       Respondent disallowed the

deduction.    Petitioners introduced into evidence a copy of an

airline ticket receipt for $582.72 reflecting travel from

California to Dothan, Alabama.    The record, otherwise, is devoid

of evidence concerning this deduction.

4.   1998 Interest Income

      Respondent determined that petitioners received interest

income of $340 that was not reported on petitioners’ 1998 income

tax return.   The parties stipulated that Forms 1099-INT, Interest

Income, were issued by various financial institutions in this

amount, and petitioners offered no evidence as to the reason the

$340 should not be included in income.
                               - 7 -
5.   1998 Charitable Contribution Deduction

      Petitioners claimed a charitable contribution deduction of

$3,664.   Respondent disallowed $3,144 of the claimed deduction.

Respondent concedes that petitioners are entitled to an

additional deduction in the amount of $250.     There is no

evidence that supports any additional deduction.

6.   1998 Tax Return Preparation and Legal Fees

      Petitioners claimed a miscellaneous deduction of $864 for a

tax return preparation expense.   Respondent disallowed $150 of

the amount claimed.   There is no evidence that supports any

additional deduction.

      Petitioners claimed a deduction of $500 for legal fees.

Respondent disallowed the deduction.      There is correspondence in

the record between John R. McCabe, an attorney representing

petitioner, and the Corps concerning the value of the property

purchased by the Corps discussed above.

                             Discussion

1.   1997 Income

      Petitioners do not dispute that there was income resulting

from the exchange of the house and property for the discharge of

the mortgage indebtedness.   See sec. 61(a)(12).    They question,

however, the determination by the Corps that the fair market

value of the property was $85,000 at the time of the transfer.

Respondent adopted the determination of the Corps.     The
                               - 8 -
determination of value is based on two appraisals by qualified

real estate appraisers--one for $85,000 and the other for

$84,000.   Petitioners have offered no evidence that these

appraisals do not reflect the fair market value of the property,

and we sustain respondent’s determination.

2.   1997 and 1988 Miscellaneous Deductions

      Petitioners contest the disallowance of only two of the

purported deductions--vehicle and educational expenses.   With

regard to the vehicle expenses, these expenses, as we understand,

arise from transportation to and from petitioner’s National Guard

drills, and, as such, are expenses incurred for commuting to and

from work.   Such expenses are not deductible.   See Commissioner

v. Flowers, 326 U.S. 465 (1946).

      With regard to the deductions for educational expenses,

generally, expenses of obtaining an undergraduate degree are

considered personal expenses and, as such, are not deductible.

Sec. 262; see Baker v. Commissioner, 51 T.C. 243, 248 (1968).

The regulations, however, provide that the expenses are

deductible if the education “Meets the express requirements of

the individual’s employer, or the requirements of applicable law

or regulations, imposed as a condition to the retention by the

individual of an established employment relationship, status, or

rate of compensation.”   Sec. 1.162-5(a)(2), Income Tax Regs.
                                - 9 -
       Petitioner contends that she meets these requirements based

on the statement of her former unit commander in a letter that

stated “Continued civilian education in the military is necessary

for an officer to retain their current position, improve their

skills, and maintain longevity in the military.”    Putting aside

the hearsay problems, we do not find that statement persuasive.

Petitioner does not refer to any “applicable law or regulations”

that required her to obtain a college degree as required by the

regulations, and we know of no such requirement.    Rather, it

appears that the National Guard, as do all military

organizations, strongly support and encourage education for its

soldiers.    This, however, does not comply with the requirements

of the Department of Treasury regulations.    See Baker v.

Commissioner, T.C. Memo. 1971-278; Kinch v. Commissioner, T.C.

Memo. 1971-117.    We sustain respondent’s determinations.

     With respect to the remaining miscellaneous deductions

claimed for both taxable years, there simply is no evidence to

indicate that respondent’s determinations are erroneous, and we

sustain those determinations as well.

3.   1997 Rental Expense, 1998 Interest Income, 1998 Charitable

Contribution Deduction, and 1998 Tax Return Preparation and Legal

Fees

       As noted in our statement of facts, with one exception,

petitioners either have not addressed or have offered no evidence
                               - 10 -
contravening respondent’s determinations as to the other

adjustments in the notices of deficiency.   We see no reason to

reiterate each adjustment nor the reason that we sustain each

adjustment.

     The one exception to this concerns the legal fees deducted

in 1998.    It is clear that petitioner retained John R. McCabe, an

attorney, to represent her with respect to the determination of

the value of the property purchased by the Corps.   That value had

a direct impact on the amount of income that she recognized

during 1997.   Furthermore, from the correspondence in the record

it would appear that the amount of fees deducted ($500) was

reasonable for the services performed.   We find, therefore, that

petitioners are entitled to a deduction of $500 for legal fees

under section 212(3).

     Reviewed and adopted as the report of the Small Tax Case

Division.

                                     Decision will be entered for

                                respondent for the taxable year

                                1997 at docket No. 8191-00S, and

                                decision will be entered under Rule

                                155 for the taxable year 1998 at

                                docket No. 10437-01S.
