                        T.C. Memo. 2000-385



                      UNITED STATES TAX COURT



                JAMES L. CHRISTIAN, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 23902-97.                  Filed December 20, 2000.



     James L. Christian, pro se.

     Yvonne M. Peters, for respondent.


                        MEMORANDUM OPINION


     BEGHE, Judge:   Respondent determined a deficiency of $10,776

in petitioner’s 1993 Federal income tax.     After concessions, the

issues remaining for decision are whether petitioner is entitled

to deduct expenses claimed in excess of the amounts allowed by

respondent with respect to the following three items or types of

items:   (1) Of $2,332 claimed as a deduction for depreciation in

connection with writing and retreat activities, any more than the
                               - 2 -

$79 allowed by respondent for “research and development”; (2) a

$5,328 rent deduction claimed out of $6,660 paid for use of an

apartment in connection with petitioner’s writing activity; and

(3) of $4,369 claimed as a deduction for supplies in connection

with petitioner’s retreat activity, any more than the $666

allowed by respondent.1   By reason of petitioner’s failure to

substantiate the deductions claimed, we sustain respondent’s

determinations.

     Section references are to the Internal Revenue Code in

effect for the year in issue, and Rule references are to the Tax

Court Rules of Practice and Procedure.

     For clarity and convenience, following a short initial

background statement, the findings of fact and discussion with

respect to the separate issues have been combined under separate

headings.

                            Background

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

The stipulations of fact and the accompanying exhibits are

incorporated by this reference.   Petitioner resided in Hemet,

California, at the time he filed his petition in this case.




     1
       It is not clear from the record whether the deduction for
supplies allowed by respondent was over and above the amount
respondent allowed as an offset to the $2,336 of gross income
that petitioner received from retreat participants. This
question should be resolved in the Rule 155 computation.
                                - 3 -

     In 1993, the tax year in issue, petitioner’s home and place

of business in Hemet, California, was a small ranch that he had

inherited from his father in 1987.      Petitioner lived in the main

house on the ranch, which also includes a guest house and a

separate office building.

     In 1992, petitioner had retired from a teaching career in

Orange, California.    During 1993, petitioner continued his prior

second career as a writer for profit and did his writing at the

ranch, which was both his home and his primary place of business

for his writing activity.

     In 1992, petitioner also began to make the ranch available

as a retreat center.   Petitioner did not maintain a separate bank

account for the retreat activity, which generated $2,336 of gross

income for 1993.

     In addition to the activities in dispute, petitioner also

carried on farming activities at the ranch, raising figs and

dogs.   The farming activities generated $1,325 of gross income

and $25,588 of expense deductions, with respect to which

respondent made no adjustments.

Issue 1. Depreciation in Connection With Writing and Retreat
Activities

     Neither when petitioner inherited the ranch from his father

in 1987, nor at any later time, did he attempt to allocate the

basis of the ranch between land and buildings or between

buildings and furnishings, nor did he claim any deductions with
                               - 4 -

respect to the inherited basis of the buildings or furnishings.

The $2,332 of depreciation petitioner claimed for 1993 consisted

of $79 for “research and development”, which respondent allowed,

and $537 for research furnishings and $1,716 for improvements,

which respondent disallowed.   Petitioner was unable to remember

what specific items were being depreciated and had no records to

show basis.   Respondent’s determination on these items must be

upheld on account of petitioner’s failures to identify the items

on which depreciation was claimed and to substantiate the cost of

such items.

Issue 2.   Apartment Rental

     During 1993, petitioner rented an apartment at 251 N. Olive,

Orange, California, which he had begun renting in 1988.

Originally, petitioner had used the apartment when he was

teaching in Orange.   Orange is approximately 80 miles from

petitioner’s ranch; it takes petitioner approximately 1-1/2 to 2

hours to drive to Orange from his ranch.   During 1993, petitioner

used the apartment for personal and business purposes.    When

petitioner was using the apartment for business purposes in 1993,

he performed research at several libraries and met with friends

and colleagues.

     During 1993, petitioner’s friend and assistant Lori used the

apartment when she was teaching in Orange.   Lori did not pay rent

to petitioner for use of the apartment.    Petitioner paid a total
                                - 5 -

of $6,660 to rent the apartment during 1993 and deducted $5,328

as rent expense for other business property.

     Petitioner’s claimed deduction of apartment rent must be

disallowed because he failed to provide the substantiation

required by section 274(d).

     Taxpayers are permitted to deduct the expenses of a second

residence as travel expenses where the expenses are reasonable

and necessary, incurred while away from home, and incurred in

pursuit of business.    See sec. 162(a)(2); Commissioner v.

Flowers, 326 U.S. 465, 470 (1946).      Travel expense deductions are

permitted under section 162 only if the substantiation

requirements of section 274(d) are met.     This includes deductions

for lodging while away from home.    See sec. 274(d)(1); Shea v.

Commissioner, 112 T.C. 183, 188 (1999).      The minimum requirements

include substantiating the amount of the expense, the time and

place of the travel or use of the facility or property, and the

business purpose of the expense.    See sec. 274(d).   A taxpayer

must substantiate each individual expenditure by producing (1)

adequate records or (2) sufficient evidence to corroborate his or

her own statements.    See sec. 1.274-5T(c)(1), Temporary Income

Tax Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985).

     To meet the adequate records standard, the taxpayer must

maintain an account book, diary, log, statement of expenses, or

other similar record in which entries are made at or near the
                                - 6 -

time of the expenditure.   See sec. 1.274-5T(c)(2), Temporary

Income Tax Regs., 50 Fed. Reg. 46017 (Nov. 6, 1985).   In

addition, the taxpayer must supply documentary evidence such as

receipts or paid bills.    See sec. 1.274-5T(c)(2)(iii), Temporary

Income Tax Regs., 50 Fed. Reg. 46019 (Nov. 6, 1985).   A taxpayer

who is unable to meet the adequate records standard may be able

to substantiate travel expenses with his own statements

containing specific details of each element, in conjunction with

other corroborative evidence of each element.   See sec. 1.274-

5T(c)(3), Temporary Income Tax Regs., 50 Fed. Reg. 46020 (Nov. 6,

1985).

     Although the parties agreed at trial that petitioner paid

rent for the apartment in Orange, California, petitioner failed

to substantiate the rent payments as travel expenses related to

his business.   He failed to provide any records indicating the

dates of travel or the specific purpose for each trip.    In

failing to provide an account book, diary, log, or any other

specific record of his travel and expenditures, petitioner failed

to meet the adequate records standard.

     Petitioner also flunked the alternative test.   His testimony

failed to set forth with any particularity the dates and times of

his travel or the specific business purpose for each trip.     Nor

did petitioner produce any witnesses or any other evidence to

corroborate when and how often he used the apartment and that
                                - 7 -

each use was for business purposes.     Instead, petitioner

estimated that he used the apartment 80 days during 1993.     An

approximation of travel expenses, however, is not sufficient.

The Cohan rule, see Cohan v. Commissioner, 39 F.2d 540, 543, 544

(2d Cir. 1930), providing for the Court’s approximation of the

amount of general business expenses, does not apply to travel

expenses, see Sanford v. Commissioner, 50 T.C. 823, 827 (1968),

affd. per curiam 412 F.2d 201 (2d Cir. 1969).     Inasmuch as travel

expenses may not be approximated and petitioner failed to meet

either the adequate records standard or the alternative test, the

deduction for apartment rent must be denied in its entirety.

       At trial, petitioner argued that he should be permitted to

calculate his deduction for business use of the apartment by

using per diem rates.    For the reasons discussed below,

petitioner is not entitled to calculate his deduction by using

per diem rates.

       Section 274(d) and the regulations thereunder vest the

Secretary with authority to promulgate regulations that prescribe

alternative methods of substantiating expenses covered by section

274.    See sec. 1.274-5T(j), Temporary Income Tax Regs., 50 Fed.

Reg. 46032 (Nov. 6, 1985).    Pursuant to this authority, the

Secretary has issued a series of revenue procedures providing

rules under which the amount of an employee’s ordinary and

necessary business expenses for lodging, meals, and incidental

expenses incurred while traveling away from home will be deemed
                                - 8 -

substantiated for purposes of section 274(d).   Rev. Proc. 92-17,

1992-1 C.B. 679, and Rev. Proc. 93-21, 1993-1 C.B. 529, apply for

the taxable year 1993.    These revenue procedures also provide an

optional method for employees and self-employed individuals to

substantiate the amounts of business meal and incidental expenses

incurred while traveling away from home.

     While Rev. Proc. 92-17, sec. 4.01, 1992-1 C.B. at 680, and

Rev. Proc. 93-21, sec. 4.01, 1993-1 C.B. at 531, authorize the

use of the per diem method to substantiate the amount of lodging,

meal, and incidental costs, this method of reporting is available

only to employees whose employers pay a per diem allowance in

lieu of reimbursing the actual expenses incurred by the employee

while traveling away from home.    However, petitioner’s expenses

for lodging are not covered by this provision because he was

self-employed.    Although petitioner, as a self-employed

individual, would have been entitled to use the per diem method

allowed under Rev. Proc. 92-17, sec. 4.03, 1992-1 C.B. at 680,

and Rev. Proc. 93-21, sec. 4.03, 1993-1 C.B. at 531, those

provisions are limited to meals and incidental expenses.

Accordingly, petitioner’s away-from-home lodging expenses are not

deductible because they have not been otherwise substantiated

pursuant to section 274(d).    See Duncan v. Commissioner, T.C.

Memo. 2000-269.

     Petitioner’s failure to satisfy the substantiation

requirements under section 274(d) makes it unnecessary to
                                - 9 -

consider his other arguments.    We therefore need not expatiate on

petitioner’s substantive failure to persuade us of the business

necessity for maintaining the apartment or otherwise to supply

sufficient evidence that would have enabled us to apply the Cohan

rule in his favor.

Issue 3.    Supplies Expense in Connection With Retreat Activity

     Petitioner promoted the ranch as a retreat center called

East/West Retreat, to be used for field trips, classes, getaway

weekends, philosophy seminars, astronomy groups, weddings, and

meditation for personal renewal.

     Petitioner estimated that the ranch was used for retreats

approximately 20 times during 1993.     Petitioner charged retreat

guests $10 to $25 for 1 day at the ranch and $120 for a full week

at the ranch.

     Petitioner deducted $4,369 for supplies for his retreat

activities.    Petitioner provided receipts to respondent, which,

however, were not introduced into evidence, for groceries, office

supplies, party favors, and wine.    Respondent allowed $666 as a

reasonable estimate of expenses for retreat supplies.2

     In the absence of petitioner’s showing at trial that the

claimed expenditures were in fact incurred and were ordinary and

necessary to his activities as a retreat host, respondent’s

determination on this issue is sustained.




     2
         See supra note 1.
                        - 10 -



To reflect the parties’ concessions,


                                   Decision will be entered

                              under Rule 155.
