                        T.C. Memo. 1996-104



                      UNITED STATES TAX COURT



             SUSAN J. BOKHARI O'NEIL, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 3952-94.             Filed March 6, 1996.



     Susan J. Bokhari O'Neil, pro se.

     Elaine L. Sierra, for respondent.



                           MEMORANDUM OPINION

     DAWSON, Judge:   This case was assigned to Special Trial

Judge John F. Dean pursuant to the provisions of section

7443A(b)(4) and Rules 180, 181, and 183.1       The Court agrees with



     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year at issue. All
Rule references are to the Tax Court Rules of Practice and
Procedure.
                              - 2 -

and adopts the Special Trial Judge's opinion, which is set forth

below.

               OPINION OF THE SPECIAL TRIAL JUDGE

     DEAN, Special Trial Judge:   Respondent determined a

deficiency in petitioner's 1991 Federal income tax in the amount

of $10,610 and an accuracy-related penalty under section 6662(a)

in the amount of $2,122.2

     After concessions,3 the issues for decision are:   (1)

Whether petitioner has substantiated various itemized deductions

claimed on Schedule A of her 1991 Federal income tax return; and

(2) whether petitioner is liable for an accuracy-related penalty

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

regulations.


     2
      Petitioner originally elected to have her case heard as a
small tax case under Rule 172 and sec. 7463. However, in
reviewing the record, we have determined that the sum of the
deficiency disputed by petitioner and the penalty stipulated as
an issue in this case ($2,122) is in excess of the $10,000
statutory limit for small tax cases. Rule 171(a); sec. 7463(a).
The "S" designation of this case was therefore removed pursuant
to our own motion. Rule 173; sec. 7463(d).
     3
      For the year at issue, for which petitioner and her husband
filed a joint income tax return, petitioner has conceded that
she: (1) Is not entitled to Schedule C deductions in the amount
of $13,125 claimed with respect to her husband's export-import
business, and (2) failed to report taxable interest income in the
amount of $190. Respondent has conceded that petitioner is
entitled to Schedule C deductions in the amount of $17,575 with
respect to her husband's taxi cab business. To the extent
indicated below, respondent has also made concessions with
respect to certain deductions claimed on petitioner's Schedule A.
Finally, respondent acknowledges that, to the extent petitioner
is liable for self-employment tax under sec. 1401, she will be
allowed a corresponding deduction under sec. 164(f).
                                 - 3 -

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

The stipulation of facts and attached exhibits are incorporated

herein by this reference.    Although petitioner filed a joint

Federal income tax return with her husband for the taxable year

1991, she alone filed a timely petition in this matter.      At the

time the petition in this case was filed, petitioner resided in

San Mateo, California.

Background

     Petitioner worked as an outside salesperson for Bay Area

Cellular Telephone Company (Bay Area) during the taxable year

1991.    The Form W-2 provided to petitioner by Bay Area reflects

that she was reimbursed $4,200 for employee business expenses,

the equivalent of $350 monthly as a car allowance.      Respondent

concedes that petitioner is entitled to a deduction for this

amount.4   To the extent indicated below, however, respondent

contests, for lack of substantiation, deductions claimed by

petitioner for unreimbursed employee expenses and other

miscellaneous expenses on Schedule A of her 1991 Federal income

tax return:


     Unreimbursed Employee Expenses

         Item                      Claimed    Allowed       Disputed

         Car Transportation        $7,150        $0          $7,150
         Parking                      200         0             200
         Meals & Entertainment      1,7281        0           1,728

     4
      As this reimbursement was reported on petitioner's Form
W-2, it appears that the payment was made under a nonaccountable
plan. See sec. 1.62-2(c)(5).
                                  - 4 -

           Total                      9,078          0          9,078
                1
                 80% of the reported expense of $2,160.

     Other Expenses5

         Item                       Claimed       Allowed      Disputed

         Referral Fees               $130           $0           $01
         Gifts                        854          216          638
         Continuing Education         350          350            0
         Tax Preparation              160            0          160

           Total                    1,494          566          798
            1
           Petitioner concedes that she can not substantiate
     expenditures for referral fees, and does not dispute
     respondent's disallowance of this deduction.

Schedule A Deductions

     Deductions are strictly a matter of legislative grace, and a

taxpayer bears the burden of proving entitlement to any deduction

claimed.    Rule 142(a); New Colonial Ice Co. v. Helvering, 292

U.S. 435 (1934); Welch v. Helvering, 290 U.S. 111, 115 (1933).

Moreover, a taxpayer is required to maintain records that are

sufficient to substantiate her deductions.       Sec. 6001.

     Ordinary and necessary business expenses incurred by an

employee that are not reimbursed by her employer are generally

deductible under section 162(a), which allows a deduction for all

ordinary and necessary expenses paid or incurred during the

taxable year in carrying on a trade or business.         Primuth v.

Commissioner, 54 T.C. 374, 377 (1970).        Section 274(d) provides,


     5
      We note that deductions claimed for "gifts" and "continuing
education" should have been claimed as "unreimbursed employee
expenses" rather than as "other expenses" on petitioner's
Schedule A.
                              - 5 -

however, that no deductions shall be allowed:   (1) For any

traveling expense, including meals and lodging while away from

home, (2) for any item with respect to an activity which is of a

type generally considered to constitute entertainment, amusement,

or recreation, (3) for any expense for gifts, or (4) with respect

to any "listed property" as defined in section 280F(d)(4), unless

substantiated in accordance with the strict requirements of

section 274(d) and the regulations promulgated thereunder.

Included in the items defined as listed property in section

280F(d)(4) is any passenger automobile.   Sec. 280F(d)(4)(A)(i).

     To substantiate a deduction under section 274(d), a taxpayer

must maintain adequate records or present other corroborative

evidence to show, among other things, the business purpose and

business relationship of the expense.   Sec. 1.274-5T(b),

Temporary Income Tax Regs., 50 Fed. Reg. 46014-46016 (Nov. 6,

1985).

     In order to substantiate a deduction by means of adequate

records, a taxpayer generally must maintain a diary, a log, or a

similar record, and documentary evidence, which, in combination,

are sufficient to establish each element of each expenditure or

use, including business purpose and relationship.   Sec. 1.274-

5T(c)(2)(i), Temporary Income Tax Regs., 50 Fed. Reg. 46017

(Nov. 6, 1985).

     Although petitioner produced various receipts and charts in

support of her deductions for unreimbursed employee business
                               - 6 -

expenses, a record of a business purpose and relationship for

these items is conspicuously absent.    Furthermore, petitioner's

testimony in this regard was vague and unhelpful.    Thus, we find

that, other than as allowed by respondent, petitioner has failed

to substantiate the deductions claimed for car transportation,

parking, meals and entertainment, and gifts, as required by

section 274 and the regulations thereunder.

     We also find that, although a deduction for tax preparation

fees is generally available to taxpayers under section 212,

petitioner has failed to present any evidence to corroborate the

deduction claimed for such an expense on her Schedule A.

Section 6662(a) Penalty

     Respondent determined an accuracy-related penalty under

section 6662(a) with respect to petitioner's 1991 Federal income

tax return for negligence or disregard of rules or regulations.

     In pertinent part, section 6662 imposes an accuracy-related

penalty equal to 20 percent of the portion of an underpayment of

tax that is attributable to negligence or disregard of rules or

regulations.   Sec. 6662(a), (c).   Section 6662(c) defines

"negligence" as including any failure to make a reasonable

attempt to comply with the provisions of the Internal Revenue

Code, and defines "disregard" as including any careless,

reckless, or intentional disregard.

     Petitioner failed to offer any evidence to rebut

respondent's determination of an accuracy-related penalty in this
                                 - 7 -

matter.   Accordingly, she has not met her burden of proof on this

matter, and respondent's determination will be sustained.

     To reflect the foregoing,


                                              Decision will be entered

                                         under Rule 155.
