                          T.C. Memo. 2005-259



                        UNITED STATES TAX COURT



                  STEVE J. WORK, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 11458-02, 17265-02.      Filed November 2, 2005.


     Steve J. Work, pro se.

     Robert A. Varra, for respondent.



                MEMORANDUM FINDINGS OF FACT AND OPINION


     VASQUEZ, Judge:     Respondent determined deficiencies of

$3,737, $4,162, and $13,994 for 1998, 1999, and 2000,

respectively.    The issues for decision are whether (1) petitioner

failed to report $9,031 of wages from Plastec Products, Inc.

(Plastec), in 2000, (2) petitioner substantiated deductions in

excess of amounts respondent allowed or conceded for 1998, 1999,
                                - 2 -

and 2000, and (3) petitioner is liable for additional self-

employment tax in 1999 and 2000.

     Unless otherwise indicated, all 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.

     Confronted with petitioner’s refusal to work toward a

stipulation of facts, on September 3, 2004, respondent filed a

motion to show cause why proposed facts and evidence should not

be accepted as established pursuant to Rule 91(f).    Respondent

attached to his motion a proposed stipulation of facts and

exhibits.    On September 7, 2004, the Court issued an order to

show cause under Rule 91(f), requiring petitioner to file a

response on or before September 27, 2004, as to why matters set

forth in respondent’s motion should not be deemed admitted.    On

October 12, 2004, petitioner filed a response to the Court’s

order to show cause.    On October 20, 2004, the Court made

absolute its order to show cause under Rule 91(f), finding that

petitioner’s response was evasive and not fairly directed to

respondent’s proposed stipulation of facts and ordering that the

facts and evidence set forth in respondent’s proposed stipulation

of facts were deemed established, and the exhibits in the

proposed stipulation of facts were received into evidence and

made a part of the record of the cases.    More than 2 months after
                                  - 3 -

the trial of these cases, petitioner filed a motion to vacate the

October 20, 2004, order, which we denied.

                          FINDINGS OF FACT

      Accordingly, pursuant to Rule 91(f), the facts set forth in

the Rule 91(f) motion are deemed stipulated and are so found.

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.    At the time he filed the

petitions, petitioner resided in Monument, Colorado.

I.   Additional Income for 2000

      On his 2000 Federal income tax return, petitioner reported

wages totaling $87,254.   Petitioner attached to his 2000 return a

Form W-2, Wage and Tax Statement, from Synthes USA reflecting

wages of $69,404.38 and an earnings statement from Plastec for

the pay period ending May 27, 2000, and a pay date of June 1,

2000, reflecting year-to-date wages of $17,850.   Petitioner also

attached a statement to his 2000 return reflecting that he had

not yet received a Form W-2 from Plastec and that he planned to

file an amended return when he received the Form W-2 from Plastec

reflecting the correct amount of the total wages he earned from

Plastec during 2000.   Plastec paid petitioner $26,881 in wages in

2000.1




      1
        The record does not contain an amended income tax return
for 2000 for petitioner.
                                     - 4 -

II.   Disallowed Deductions Claimed by Petitioner

      A.   1998

      On his 1998 Federal income tax return, petitioner claimed a

$14,000 deduction for moving expenses.

      During 1998, Teledyne Water Pik (Teledyne) reimbursed

petitioner for “1998 Relocation and Moving Expenses”.         An

attachment to a November 20, 1998, memorandum from an employee of

Teledyne regarding petitioner’s “1998 Relocation and Moving

Expenses” lists the expenses as follows:

  Type of Payment            Payee            Date     Amount of Expense

  Temp housing        Carousel Properties     3/2/98        $960.00
  Temp housing        Carousel Properties     3/2/98         731.91
  Storage             Golden Transfer Co      6/4/98       1,997.00
  Storage             Golden Transfer Co      7/1/98         483.19
  Storage             Golden Transfer Co     7/31/98         483.19
  Realty close        Work                   2/20/98       8,569.00
  Relocation allow    Work                   2/20/98       4,154.00

Respondent disallowed petitioner’s moving expenses in full.

      B.   1999

      On his 1999 Federal income tax return, petitioner claimed a

$2,528 deduction for gifts to charity by cash or check, a $960

deduction for gifts to charity other than by cash or check, and

“job expenses and most other miscellaneous deductions” totaling

$8,157.    On his Schedule C, Profit or Loss From Business,

petitioner claimed $9,273 in total expenses and listed $23 for

cost of goods sold.

      In the notice of deficiency, respondent disallowed all of

these amounts in full.
                                - 5 -

     C.   2000

     On his 2000 Federal income tax return, petitioner claimed an

$11,792 deduction for home mortgage interest, a $1,520 deduction

for gifts to charity by cash or check, and “other miscellaneous

deductions” totaling $9,184.   On his Schedule C, petitioner

claimed $19,690 in total expenses.

     In the notice of deficiency, respondent disallowed $6,862 of

petitioner’s home mortgage interest deduction and disallowed

petitioner’s charitable contribution deduction, other

miscellaneous deductions, and Schedule C expenses in full.2

                               OPINION

     Generally, respondent’s deficiency determinations set forth

in the notices of deficiency are presumed correct, and petitioner

bears the burden of showing the determinations are in error.

Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).

Section 7491(a), however, shifts the burden of proof to the

Commissioner with respect to a factual issue affecting the tax

liability of a taxpayer who meets certain preliminary conditions.

Petitioner failed to cooperate with respondent, and he did not

claim that section 7491(a) applies.      Accordingly, section 7491(a)




     2
        Respondent disallowed $20,279 in Schedule C expenses.
Petitioner, however, claimed only $19,690 in Schedule C expenses.
This discrepancy can be accounted for in the Rule 155
computation.
                                  - 6 -

does not apply in these cases, and petitioner bears the burden of

proof.

I.   Additional Income for 2000

      Petitioner claimed he reported the additional $9,031

($26,881 earned minus $17,850 reported as wages) of wages from

Plastec on his Schedule C attached to his 2000 return.     The

Schedule C lists petitioner’s business as “Quality Consulting”

and reports gross receipts of $3,604.     Petitioner also claimed

that the $9,031 of additional income reported by Plastec was an

error by Plastec.

      Petitioner’s claims are not credible and are contradicted by

the record.    Petitioner is deemed to have admitted that Plastec

paid him $26,881, and not $17,850, in 2000.     The amount of gross

receipts listed on the 2000 Schedule C ($3,604) bears no relation

to the additional $9,031 of income petitioner earned from Plastec

in 2000.    Furthermore, petitioner attached a statement to his

2000 return admitting that the amount of income he reported from

Plastec was incorrect and that he would need to amend his 2000

return because he had not yet received from Plastec a Form W-2

for 2000.

      Accordingly, we conclude that petitioner failed to report

$9,031 of wages from Plastec in 2000.
                                - 7 -

II.   Substantiation of Deductions

      Taxpayers are required to maintain records that are

sufficient to enable the Commissioner to determine their correct

tax liability.    See sec. 6001; sec. 1.6001-1(a), Income Tax Regs.

In addition, the taxpayer bears the burden of substantiating the

amount and purpose of the item for the claimed deduction.      See

Hradesky v. Commissioner, 65 T.C. 87, 90 (1975), affd. per curiam

540 F.2d 821 (5th Cir. 1976).

      A.   1998 (Moving Expenses)

      Section 217(a) allows a deduction for moving expenses paid

or incurred during the taxable year in connection with the

commencement of work by the taxpayer as an employee or as a self-

employed individual at a new principal place of work.    Respondent

concedes that petitioner satisfied the conditions for allowance

imposed by section 217(c).    Section 217(b)(1) provides, in

relevant part:

      the term “moving expenses” means only the reasonable
      expenses--

                 (A) of moving household goods and personal
            effects from the former residence to the new
            residence, and

                 (B) of traveling (including lodging) from the
            former residence to the new place of residence.

Section 217(b) was amended to read as above by the Omnibus Budget

Reconciliation Act of 1993 (OBRA), Pub. L. 103-66, sec.

13213(a)(1), 107 Stat. 473.    The amendments made by OBRA section
                                - 8 -

13213 apply to expenses incurred after December 31, 1993.   OBRA

sec. 13213(e), 107 Stat. 475.   Before its amendment by OBRA,

former subparagraphs (D) and (E) of section 217(b)(1) allowed

deductions for expenses of meals and lodging while occupying

temporary quarters and qualified residence sale or purchase

expenses.

     Petitioner incurred his moving expenses after December 31,

1993.   Accordingly, any expenses for temporary housing, for the

sale of his former residence, and for the purchase of a new

residence are not deductible pursuant to section 217.

Furthermore, section 217 does not allow a deduction for

relocation allowances.

     Section 1.217-2(b)(3), Income Tax Regs., provides:

     Expenses of moving household goods and personal effects
     include expenses of transporting such goods and effects
     from the taxpayer’s former residence to his new
     residence, and expenses of packing, crating, and in-
     transit storage and insurance for such goods and
     effects. * * * Expenses of storing and insuring
     household goods and personal effects constitute in-
     transit expenses if incurred within any consecutive 30-
     day period after the day such goods and effects are
     moved from the taxpayer’s former residence and prior to
     delivery at the taxpayer’s new residence. * * *
     Expenses of moving household goods and personal effects
     do not include, for example, storage charges (other
     than in-transit) * * * .

     On May 22, 1998, petitioner sold his house in Northglenn,

Colorado.   On May 27, 1998 petitioner purchased a house in Fort

Collins, Colorado.   Petitioner, however, presented no evidence

regarding whether the items in storage were moved from his former
                                 - 9 -

residence or when the stored items were delivered to his new

residence.    Some of the dates associated with the storage--July 1

and 31, 1998--raise further questions regarding whether the

storage was associated with in-transit expenses.    Petitioner’s

testimony regarding moving expenses related solely to 2000.

     After reviewing the evidence, we would have sustained

respondent’s determination disallowing petitioner’s moving

expenses for 1998.    On brief, however, respondent concedes that

petitioner is entitled to a $483.19 deduction for moving expenses

(related to storage costs) for 1998.     We accept this concession

and conclude that petitioner is not allowed a deduction for

moving expenses for 1998 in excess of the amount respondent

conceded.

     B.   1999 and 2000

            1.   Charitable Contributions

     Respondent concedes that donations petitioner made to the

Denver Museum of Natural History (DMNH) may qualify as deductions

pursuant to section 170.    Respondent concedes that petitioner is

entitled to deduct cash contributions to the DMNH of $687.50 and

$675.81 for 1999 and 2000, respectively.    These concessions

reflect petitioner’s membership fee of $100 each year and mileage

(based on noncontemporaneous summaries) for petitioner’s trips to

the DMNH.    Respondent’s concession for 1999 also appears to

reflect a $50 donation petitioner testified that he made in 1999
                                - 10 -

($100 membership fee plus $537.50 mileage deduction equals

$637.50 plus $50 donation, per petitioner’s testimony, equals

$687.50 concession).

     Petitioner testified that in 1999 he donated an antique

medicine bag (bag) to the DMNH.     Petitioner valued the bag at

$960 and claimed a deduction for a gift to charity of $960 other

than by cash or check on his 1999 return.     On his 1999 return,

petitioner stated that he inherited the bag in 1987 and that the

donor’s cost or adjusted basis in the bag was zero dollars.

     Petitioner attached to his 1999 return an “inspection

request” he had submitted on November 29, 1998, to the DMNH.

Petitioner stated the item to be valued was a “Medicine Bag”.

Petitioner estimated the value of the bag to be “$101-$500”.

Petitioner wrote:    “Requester may donate bag to DMNH if can be

displayed.”   (Emphasis added.)

     On May 24, 1999, Joyce Herold, Curator of Ethnology,

Department of Anthropology, noted on the inspection request that

the bag was “probably of Jicarilla Apache origin” and dated the

bag circa 1890.     In a separate memorandum dated May 24, 1999, Ms.

Herold advised petitioner:     “If you want to donate the pouch, we

would be delighted.    * * *   You can take as an IRS charitable

deduction the full appraised value of the piece.      However, the

promise of exhibition is not possible, * * * . Thanks for leaving

the piece for my inspection”.     (Emphasis added.)
                              - 11 -

     Petitioner testified that Joe Stevens appraised the bag at

$1,900.   Petitioner testified that he donated the bag to the

DMNH, and Ms. Herold could confirm this.    Petitioner did not call

Mr. Stevens or Ms. Herold as a witness.    We infer that their

testimony would not have been favorable to petitioner.     See

Wichita Terminal Elevator Co. v. Commissioner, 6 T.C. 1158, 1165

(1946), affd. 162 F.2d 513 (10th Cir. 1947).

     To the extent that petitioner relies on his own testimony to

establish that he donated the bag, we found petitioner’s

testimony to be conclusory and contradictory of the documentary

evidence.   Petitioner stated the value of the bag to be $101-

$500--far less than the $960 he claimed.    Petitioner wrote that

he might donate the bag if it would be displayed (suggesting he

would not donate the bag if it was not displayed), and petitioner

was informed that the bag would not be displayed.     Furthermore,

Ms. Herold’s memorandum dated May 24, 1999, makes clear that

petitioner had not yet donated the bag.

     The Court is not required to accept petitioner’s

unsubstantiated testimony.   See Wood v. Commissioner, 338 F.2d

602, 605 (9th Cir. 1964), affg. 41 T.C. 593 (1964).    Under the

circumstances presented here, we are not required to, and

generally do not, rely on petitioner’s testimony to sustain his

burden of establishing error in respondent’s determinations.     See

Lerch v. Commissioner, 877 F.2d 624, 631-632 (7th Cir. 1989),
                               - 12 -

affg. T.C. Memo. 1987-295; Geiger v. Commissioner, 440 F.2d 688,

689-690 (9th Cir. 1971), affg. per curiam T.C. Memo. 1969-159;

Tokarski v. Commissioner, 87 T.C. 74, 77 (1986).    Accordingly, we

conclude that petitioner has failed to establish that he donated

the bag in 1999, and we sustain respondent’s determination to

disallow this deduction.   See also sec. 1.170A-13, Income Tax

Regs. (regarding record-keeping requirements for deductions for

charitable contributions).

     Petitioner also deducted as charitable contributions the

amounts he spent purchasing lunches while volunteering at the

DMNH during 1999 and 2000.   Reasonable expenditures for meals

incurred while away from home in the course of performing donated

services are deductible.   Sec. 1.170A-1(g), Income Tax Regs.

“While away from home” has the same meaning in section 1.170A-

1(g), Income Tax Regs., as in section 162 and the regulations

thereunder.   Id.   Under section 162, a taxpayer can deduct the

cost of meals when “away from home” only when the travel in

question involves an overnight stay.    United States v. Correll,

389 U.S. 299, 302, 304 (1967).

     Petitioner presented no evidence of lodging or overnight

stays associated with the lunch expenses he deducted.   Petitioner

also submitted no documents to substantiate the costs of his

meals.   See sec. 1.170A-13, Income Tax Regs. (regarding

recordkeeping requirements for deductions for charitable
                                - 13 -

contributions).    Accordingly, we sustain respondent’s

determination to disallow the costs of petitioner’s lunches at

the DMNH as deductions for 1999 and 2000.

     Petitioner also claimed that he made charitable

contributions to the Northern Colorado Woodcarvers Association

(NCWA) and the Buffalo Creek Gun Club (BCGC).    Petitioner

presented no evidence of the amounts he gave to NCWA or BCGC.

See id.   Additionally, there is no evidence that contributions to

NCWA or BCGC qualify as “charitable contributions” under section

170(c).   Accordingly, we sustain respondent’s determinations to

disallow the remainder of petitioner’s charitable contribution

deductions for 1999 and 2000 that respondent did not concede.

            2.   Home Mortgage Interest

     Respondent allowed petitioner $4,930 of home mortgage

interest as a deduction for 2000.    At trial, petitioner submitted

a settlement statement concerning a house he purchased in 2000 in

Monument, Colorado.    The settlement statement listed:   (1)

$370.65 of interest paid from October 17 to November 1, 2000; (2)

$611.50 for a loan origination fee; and (3) $2,446 for a broker

discount.    Assuming arguendo that the $370.65 in interest equals

a daily interest rate of $24.71 ($370.65 divided by 15 days),

petitioner paid $24.71 in interest per day on the mortgage from

October 17 through December 31, 2000 (76 days), and the “total

interest” would be $1,877.96 ($24.71 times 76).    This “total
                              - 14 -

interest” ($1,877.96) plus the a loan origination fee ($611.50)

plus the broker discount ($2,446) equals $4,935.46.   The $5.46

difference is probably attributable to the declining amount of

interest charged as the principal of the mortgage was paid down.

Accordingly, we conclude that the settlement statement is

insufficient evidence to allow petitioner a deduction greater

than the $4,930 respondent allowed.

     Petitioner testified that he paid mortgage interest on a

house other than the house he purchased in Monument, Colorado.

Petitioner presented no documentary evidence to support this

assertion.

     When a taxpayer establishes that he has incurred deductible

expenses but is unable to substantiate the exact amounts, we can

estimate the deductible amounts, but only if the taxpayer

presents sufficient evidence to establish a rational basis for

making the estimates.   See Cohan v. Commissioner, 39 F.2d 540,

543-544 (2d Cir. 1930); Vanicek v. Commissioner, 85 T.C. 731,

742-743 (1985).   In estimating the amounts allowable, we bear

heavily upon the taxpayer whose inexactitude is of his own

making.   See Cohan v. Commissioner, supra at 544.

     Petitioner relies on his own testimony.   The Court is not

required to accept petitioner’s unsubstantiated testimony.     See

Wood v. Commissioner, supra at 605.    We found petitioner’s

testimony to be general, vague, and conclusory.   Under the
                               - 15 -

circumstances presented here, we are not required to, and

generally do not, rely on petitioner’s testimony to sustain his

burden of establishing error in respondent’s determinations.       See

Lerch v. Commissioner, supra at 631-632; Geiger v. Commissioner,

supra at 689-690; Tokarski v. Commissioner, supra at 77.

     We shall not rely on the Cohan rule as petitioner has not

presented sufficient evidence to establish a rational basis for

making an estimate.    Accordingly, we conclude that petitioner has

failed to establish that he paid any mortgage interest on a house

other than his house in Monument, Colorado.

     Petitioner testified that he borrowed against a life

insurance policy to pay “home mortgage interest” during 2000.

Petitioner further testified that he borrowed this money for a

downpayment on a house and the company that lent him this money

did not place a mortgage on the house.

     Section 163(h)(1) generally disallows a deduction for

personal interest.    An exception to this rule is “qualified

residence interest”.    Sec. 163(h)(2)(D).   Qualified residence

interest includes “acquisition indebtedness” and “home equity

indebtedness”.   Sec. 163(h)(3)(A).     Acquisition indebtedness and

home equity indebtedness must be secured by a residence.     Sec.

163(h)(3)(B)(i)(II) and (C)(i).
                                - 16 -

       The amount petitioner borrowed against his insurance policy

was not secured by his house.    We conclude that any interest paid

on this loan is not deductible.    Sec. 163(h).

       Accordingly, we sustain respondent’s determination to

disallow $6,862 of petitioner’s home mortgage interest deduction

for 2000.

            3.   Miscellaneous Deductions and Schedule C Items

       Petitioner presented no evidence regarding his “job expenses

and most other miscellaneous deductions” for 1999, his “other

miscellaneous deductions” for 2000, and his Schedule C expenses

and cost of goods sold for 1999 and 2000.    Accordingly, we

sustain respondent’s determinations regarding these amounts.     See

Rule 142(a); Welch v. Helvering, 290 U.S. at 115.

III.    Self-Employment Tax

       At trial, petitioner briefly disputed respondent’s

determination of self-employment tax.    Respondent determined, on

the basis of the disallowed Schedule C deductions and cost of

goods sold, that petitioner had additional self-employment income

during 1999 and 2000.

       Section 1401 imposes self-employment tax on self-employment

income.     Section 1402 defines net earnings from self-employment

as the gross income derived by an individual from the carrying on

of any trade or business by such individual less allowable

deductions attributable to such trade or business.
                              - 17 -

      We conclude in accordance with section 1401 that petitioner

is liable for additional self-employment tax in 1999 and 2000 on

his additional self-employment income from the disallowed

Schedule C deductions and cost of goods sold.

IV.   Conclusion

      To reflect respondent’s concessions at trial and on brief,

Rule 155 computations will be necessary.

      To reflect the foregoing,



                                           Decisions will be entered

                                    under Rule 155.
