                       T.C. Memo. 1997-378



                     UNITED STATES TAX COURT



         RICHARD G. AND PATRICIA A. COOK, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent


     Docket No. 26918-95.               Filed August 19, 1997.


     Richard G. Cook, pro se.

     David W. Sorensen, for respondent.



                       MEMORANDUM OPINION



     COUVILLION, Special Trial Judge:     This case was heard

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

     1
          Unless otherwise indicated, section references are to
the Internal Revenue Code in effect for the years at issue. All
Rule references are to the Tax Court Rules of Practice and
Procedure. The petition was filed pursuant to sec. 7463. At the
commencement of trial, petitioners orally moved that the case be
heard pursuant to sec. 7443A(b)(3). The Court granted
                                                   (continued...)
                                - 2 -


     Respondent determined deficiencies in Federal income taxes

of $1,061 and $408 and accuracy-related penalties of $212 and $82

under section 6662(a), respectively, for petitioners' 1991 and

1992 tax years.

     The issues for decision are:    (1) Whether home office

expenses incurred by Richard G. Cook (petitioner) in a trade or

business activity are allowable as deductions under section

280A(c)(1), and (2) if such expenses are not allowable, whether

petitioners are liable for the accuracy-related penalties under

section 6662(a).    If the Court holds that the expenses at issue

are not deductible pursuant to section 280A(c)(1), the Court must

then consider petitioner's contention that the disallowance of

the subject expenses as deductions constitutes invidious

discrimination and a violation of due process under the U.S.

Constitution.

     Some of the facts were stipulated.    Those facts, with the

exhibits attached thereto, are so found and are incorporated

herein by reference.    At the time the petition was filed,

petitioners' legal residence was Salt Lake City, Utah.

     Petitioner is an attorney at law and, during the years at

issue, was engaged in the practice of law at Salt Lake City,

Utah.    For the year 1991 and for the first 5 months of 1992,

     1
      (...continued)
petitioners' motion.    Respondent thereafter filed an answer of
general denial.
                                - 3 -


petitioner's law practice was conducted out of petitioners'

personal residence at Salt Lake City, Utah.   For the remaining 7

months of 1992, petitioner conducted his law practice at a

downtown Salt Lake City office.

     The expenses at issue involve the home office expenses

incurred by petitioner for the periods noted in 1991 and 1992,

which petitioners deducted as trade or business expenses on their

1991 and 1992 Federal income tax returns.   Respondent has not

questioned the substantiation of these expenses.   Respondent,

however, has questioned the percentage amount petitioners claim

constituted the portion of their home that was used for

petitioner's law practice.

     Petitioners' home consisted of an upstairs and a downstairs,

totaling 3,200 square feet.   During 1991, petitioners and four

children lived in the home.   During 1992, petitioners and three

children lived in the home.   Petitioners contend that 75 percent

of the total floor space of their home was used for the law

practice; however, this space was used only two-thirds of the

time for the law practice.    For the remainder of the time, when

the space was not used for law practice, the space was available

and was in fact used by petitioners and their children as their

residence for personal purposes.   On their income tax returns,

consistent with the recited percentages, petitioners claimed 50

percent of their home expenses as deductible home office expenses
                               - 4 -


(2/3 X 3/4 = 1/2).   Although respondent did not seriously dispute

that 75 percent of the home's floor space was used at some time

for the law practice, respondent questioned petitioners'

contention that this floor space was used two-thirds of the time

for the law practice.

     As noted, the facts necessary to decide this case are not in

dispute--the principal place of business for petitioner's law

practice was petitioners' personal residence, and it was the

place used by petitioner's clients in meeting or dealing with

petitioner in the normal course of petitioner's trade or business

as a lawyer.   Petitioner's law practice, therefore, was carried

on or conducted exclusively at his home.   Petitioner was not an

employee, nor was his law practice conducted in a separate

structure from petitioners' home.   A very crucial fact of this

case, however, is that the portions of petitioners' home used for

the law practice were not used exclusively for the law practice;

i.e., after business hours, and presumably on weekends and

holidays, the portions of the home used for the law practice were

also used by petitioners for their personal purposes.2

     Generally, under section 280A(a) no deduction otherwise

allowable shall be allowed with respect to the use of a dwelling


     2
          As an example, the living room where petitioner's
clients were interviewed, or the kitchen table used for
conferences, was also used by the family as their residence
during off-business hours.
                              - 5 -


unit that is used by a taxpayer as a residence during the taxable

year, except, under section 280A(b) for interest, taxes, and

casualty losses, which would otherwise be allowable.   Section

280A(c)(1) provides certain limited and specific exceptions to

this general rule, which are, in pertinent part, as follows:


          SEC. 280A(c). Exceptions for Certain Business or
     Rental Use; Limitation on Deductions for Such Use.--

               (1) Certain business use.--Subsection (a) shall
          not apply to any item to the extent such item is
          allocable to a portion of the dwelling unit which is
          exclusively used on a regular basis--

                    (A) [as] the principal place of business for
               any trade or business of the taxpayer,

                    (B) as 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, or

                    (C) in the case of a separate structure which
               is not attached to the dwelling unit, in
               connection with the taxpayer's trade or business.

     In the case of an employee, the preceding sentence shall
     apply only if the exclusive use referred to in the preceding
     sentence is for the convenience of his employer.


Therefore, for a deduction to be allowed under section

280A(c)(1), the taxpayer must establish that a portion of the

dwelling unit is (1) exclusively used, (2) on a regular basis,

(3) for the purposes enumerated in subparagraphs (A), (B), or (C)

of section 280A(c)(1), and (4) if the taxpayer is an employee,

the office is maintained for the convenience of the employer.
                                - 6 -


See Hamacher v. Commissioner, 94 T.C. 348, 353-354 (1990).     On

the facts of this case, the sole question is whether petitioner's

home was used exclusively for his trade or business.    It was not

so used.   Even though petitioner's trade or business was

exclusively conducted in his home, the portion of his home in

which he conducted his trade or business was not used exclusively

for that purpose.    That factual circumstance precludes

petitioners' entitlement to a deduction of the home office

expenses at issue.   This Court has previously passed upon this

same question.   In Gomez v. Commissioner, T.C. Memo. 1980-565,

this Court stated:


                Exclusive use of a portion of a taxpayer's
           dwelling unit means that the taxpayer must use a
           specific part of a dwelling unit solely for the purpose
           of carrying on his trade or business. The use of a
           portion of a dwelling unit for both personal purposes
           and for the carrying on of a trade or business does not
           meet the exclusive use test. Thus, for example, a
           taxpayer who uses a den in his dwelling unit to write
           legal briefs, prepare tax returns, or engage in similar
           activities as well for personal purposes, will be
           denied a deduction for the expenses paid or incurred in
           connection with the use of the residence which are
           allocable to these activities. [Emphasis added.]

     S. Rept. No. 94-938 (1976), 1976-3 C.B. (Vol. 3) 49, 186; H.
     Rept. No. 94-658 (1975), 1976-3 (Vol. 2) 695, 853; Joint
     Committee Explanation, 1976-3 C.B. (Vol. 2) 1, 152.


Since petitioners' home (or the portion thereof used for the law

practice) was not used exclusively for petitioner's trade or

business, it follows that the home office expenses claimed for
                                 - 7 -


that home office are not deductible under section 280A(c)(1).

Respondent is sustained on this issue.

     Petitioners next contend that such an interpretation of

section 280A(c)(1) is unconstitutional.    Petitioner argues that

it is irrational not to allow the matching of costs against

revenues as it not only deviates from generally accepted

accounting principles but it also requires taxpayers to pay taxes

on gross income with no benefit of the deduction for the expenses

incurred to produce that income.    Such a result, petitioners

contend, violates due process principles.

     To the extent that petitioners' claim is based on the

Fourteenth Amendment of the U.S. Constitution, this Court has

held that the Fourteenth Amendment does not apply to Federal tax

statutes.   Labay v. Commissioner, 55 T.C. 6, 14 (1970), affd. per

curiam 450 F.2d 280 (1971).    Thus, the Equal Protection and Due

Process Clauses of the Fourteenth Amendment do not operate as a

limitation on the taxing power of the Federal government.

Hamilton v. Commissioner, 68 T.C. 603, 606 (1977).

     In general, a Federal tax law is not violative of the Due

Process Clause of the Fifth Amendment of the U.S. Constitution

unless the statute classifies taxpayers in a manner that is

arbitrary and capricious.     Hamilton v. Commissioner, supra at

606; Shaffer v. Commissioner, T.C. Memo. 1994-618.    Here,

petitioners have not shown that section 280A(c)(1) classifies
                              - 8 -


taxpayer in a manner that is arbitrary and capricious.    In

Hamacher v. Commissioner, supra at 354, the Court recited the

background for the enactment of section 280A's restriction upon

deduction of home office expenses and pointed out that one of the

reasons for the enactment of section 280A was a response by

Congress to numerous cases, particularly those decided by this

Court, which used a liberal standard to allow deduction of home

office expenses that were "appropriate and helpful" to the

taxpayer's business under the circumstances.   Congress was

concerned that, under such a standard, personal, living, and

family expenses attributable to the home that are not otherwise

deductible were being allowed as deductions.   The purpose of

section 280A was to restrict what Congress considered too liberal

a standard in this area of tax law.   The restrictive provisions

of section 280A, therefore, apply to all taxpayers.   The Court,

therefore, rejects petitioners' contention that section

280A(c)(1) violates the Due Process Clause of the Fifth

Amendment.

     Respondent determined that petitioners were liable for

penalties under section 6662(a) for negligence or disregard of

rules or regulations under section 6662(b)(1).

     Section 6662(a) provides that, if it is applicable to any

portion of an underpayment in taxes, there shall be added to the

tax an amount equal to 20 percent of the portion of the
                               - 9 -


underpayment to which section 6662 applies.    Under section

6664(c), no penalty shall be imposed under section 6662(a) with

respect to any portion of an underpayment if it is shown that

there was a reasonable cause for such portion, and that the

taxpayer acted in good faith with respect to such portion.

     Section 6662(b)(1) provides that section 6662 shall apply to

any underpayment attributable to negligence or disregard of rules

or regulations.   Section 6662(c) provides that the term

"negligence" includes any failure to make a reasonable attempt to

comply with the provisions of the Internal Revenue laws, and the

term "disregard" includes any careless, reckless, or intentional

disregard of rules or regulations.     Negligence is the lack of due

care or failure to do what a reasonable and ordinarily prudent

person would do under the circumstances.     Neely v. Commissioner,

85 T.C. 934, 947 (1985).   It is well established that the

taxpayer bears the burden of proof on this issue.     Bixby v.

Commissioner, 58 T.C. 757, 791 (1972).

     Petitioners have not met their burden of proof on this

issue.   Section 280A(c)(1) explicitly provides that the deduction

for home office expenses applies only to a portion of a home used

exclusively for a trade or business.    Such expenses are not

allowed if the portion of the home is used for any nonqualifying

purpose.   Several cases have interpreted section 280A(c)(1) in

this manner and have elaborated on differing factual situations
                             - 10 -


that, in some instances, met the standards of section 280A and,

in other cases, did not satisfy those standards.   Petitioners did

not show any reasonable cause as to how and why their factual

situation was such that their expenses should be allowed.   The

Court, therefore, sustains respondent on this issue.



                                        Decision will be entered

                                   for respondent.
