                  T.C. Summary Opinion 2005-184



                      UNITED STATES TAX COURT



               RICHARD LEWIS FIELD, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 9552-04S.              Filed December 19, 2005.




     Richard Lewis Field, pro se.

     David B. Mora, for respondent.



     DEAN, Special Trial Judge:     This case was heard pursuant to

the provisions of section 7463.     Unless otherwise indicated, all

section references are to the Internal Revenue Code in effect for

the year in issue, and all Rule references are to the Tax Court

Rules of Practice and Procedure.    The decision to be entered is

not reviewable by any other court, and this opinion should not be

cited as authority.
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     Respondent determined for 2000 a deficiency in petitioner’s

Federal income tax of $16,166.57 and an accuracy-related penalty

of $3,233.40 under section 6662(a).

     After concessions,1 the issues for decision are whether

petitioner:   (1) Is entitled to claimed deductions on Schedule C,

Profit or Loss From Business, in excess of those allowed by

respondent, (2) is entitled to charitable contribution deductions

on Schedule A, Itemized Deductions, in excess of those allowed by

respondent, and (3) is liable for an accuracy-related penalty

under section 6662(a).

                            Background

     The stipulation of facts and the exhibits received into

evidence are incorporated herein by reference.   Petitioner

resided in Houston, Texas, at the time the petition was filed.

     During 2000, petitioner was a mechanical engineer employed

by Lockheed Martin Corporation.   Attached to his 2000 Form 1040,


     1
      Respondent concedes that petitioner: (1) Does not need to
include in gross income for 2000 an IRA distribution of $6,365;
(2) is not liable for a 10-percent additional tax for an early
distribution from a qualified retirement plan of $637; (3) is
allowed a deduction for charitable contributions on Schedule A of
$5,993; (4) is allowed a deduction for investment interest on
Schedule A of $1,145; and (5) is allowed an adjustment to gross
receipts of $4,052 for cost of goods sold. Respondent also
concedes that petitioner is allowed additional deductions of $246
and $176 on Schedule C, but it is unclear to what expenses these
additional deductions relate. Petitioner concedes in his
petition that interest of $15,267 and utilities of $650 should be
deleted from Schedule C. The parties also agree that petitioner
must include as income dividends of $765 for 2000.
                                - 3 -

U.S. Individual Income Tax Return, was a Schedule C which listed

seven different activities:    (1) Richard L. Field, Ph.D,

Consulting Engineer; (2) Sol Pub Co.; (3) Field Investment

Management; (4) Field Oil and Gas; (5) Field Vehicle Sales; (6)

Field Real Estate; and (7) Field Entertainment.

     Petitioner was also a volunteer with the Houston Symphony

Chorus (Chorus).   From July 8 through 17, 2000, he traveled with

the Chorus on a tour of England and Wales at a cost of $1,545.93.

Petitioner deducted the travel expenses related to this tour as

charitable contributions on Schedule A.

                              Discussion

     Generally, the Commissioner’s determinations in a notice of

deficiency are presumed correct, and the taxpayer has the burden

of proving that those determinations are erroneous.    See Rule

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

cases the burden of proof with respect to relevant factual issues

may shift to the Commissioner under section 7491(a).     Petitioner

did not present evidence or argument that he satisfied the

requirements of section 7491(a).    Therefore, the burden of proof

does not shift to respondent.

A.   Deductions Claimed on Schedule C

     Tax deductions are a matter of legislative grace with a

taxpayer bearing the burden of proving entitlement to the

deductions claimed.   Rule 142(a)(1); INDOPCO, Inc. v.
                                - 4 -

Commissioner, 503 U.S. 79, 84 (1992).   Taxpayers bear the burden

of substantiating the amount and purpose of any claimed

deduction.    See Hradesky v. Commissioner, 65 T.C. 87 (1975),

affd. per curiam 540 F.2d 821 (5th Cir. 1976).   Taxpayers are

required to maintain sufficient records to establish the amounts

of income and deductions.   Sec. 6001; Higbee v. Commissioner, 116

T.C. 438, 440 (2001); sec. 1.6001-1(a), Income Tax Regs.

     Both sections 162 and 212 allow deductions for ordinary and

necessary expenses paid or incurred during the taxable year.

Section 162(a) requires that the expenses be paid or incurred in

carrying on a trade or business.   Section 212 requires only that

the expenses be paid or incurred for the production or collection

of income, or for the management, conservation, or maintenance of

property held for the production of income.   Sec. 212(1) and (2).

     For 2000, petitioner listed seven activities on his Schedule

C: (1) Richard L. Field, Ph.D., Consulting Engineer, a solar

energy consulting activity; (2) Sol Pub Co., which involved sales

of solar books; (3) Field Investment Management; (4) Field Oil

and Gas; (5) Field Vehicle Sales; (6) Field Real Estate; and (7)

Field Entertainment.   Petitioner admits that he had no income or

expenses for the oil and gas, real estate, and entertainment

activities in 2000 and that he should not have included them on

Schedule C.   The parties agree that Sol Pub Co. and Field Vehicle
                                 - 5 -

Sales are businesses.2    The parties disagree on whether Field

Investment Management is a business and whether the associated

expenses are ordinary and necessary.

     The Court finds, after a review of the record, that

petitioner’s activities with respect to Field Investment

Management amount to personal investment management and not a

trade or business.   Petitioner was employed full time as a

mechanical engineer.     He did not have a written business plan for

his alleged investment advisory service.    In his credit card

accounts, petitioner did not segregate his personal expenses from

his business expenses.    Although petitioner had been involved in

his investment activity for 40 years, petitioner had not earned

any income from the investment activity prior to 2001.     Thus,

Field Investment Management had no income for the year 2000.

     Petitioner further testified that he did not have any

clients for whom he invested or managed money.    All investment

accounts were held in his name.    During 2000, he had never

charged any person a commission or fee for his alleged investment

advisory service.    Petitioner conceded that the totality of the

commissions and fees claimed as expenses on his Schedule C were

related to his own personal investment activities.


     2
      Although petitioner listed “Richard L. Field, Ph.D.,
Consulting Engineer” on Schedule C, he correctly reported the
wages from his employer, Lockheed Martin Corporation, on line 7
of his return. Petitioner did not argue that any of the expense
deductions claimed on Schedule C were related to his employment.
                                - 6 -

       Personal investment management does not constitute the

carrying on of a trade or business, irrespective of the extent of

the investments or the amount of time required to perform the

managerial functions.    Whipple v. Commissioner, 373 U.S. 193,

199-200 (1963); Higgins v. Commissioner, 312 U.S. 212, 216

(1941); Wilson v. United States, 376 F.2d 280, 293 (1967).

Petitioner’s investment activities, as a whole, are not

sufficient to constitute the carrying on of a trade or business

within the meaning of section 162.      Consequently, any deduction

allowable in connection with activities relating to personal

investment management must meet the requirements under section

212.    See Commissioner v. Groetzinger, 480 U.S. 23, 30 n.9

(1987).

       “Ordinary and Necessary” Expenses Under Section 212

       Section 212 allows as a deduction all ordinary and necessary

expenses paid or incurred during the taxable year for the

production or collection of income, or for the management,

conservation, or maintenance of property held for the production

of income.    Sec. 212(1) and (2).   “Ordinary and necessary” means

that the expenses must be reasonable in amount and must bear a

reasonable and proximate relation to the production or collection

of taxable income.    Bingham’s Trust v. Commissioner, 325 U.S.

365, 370 (1945); sec. 1.212-1(d), Income Tax Regs.
                                 - 7 -

     Generally, no deduction is allowed for personal, living, or

family expenses.    See sec. 262.   A taxpayer must show that any

claimed business expenses were incurred primarily for business

rather than personal reasons.    See Rule 142(a).   To show that an

expense was not personal, the taxpayer must show that the expense

was incurred primarily to benefit his business, and there must

have been a proximate relationship between the claimed expense

and the business.    See Walliser v. Commissioner, 72 T.C. 433, 437

(1979).

     1.    Traveling Expenses

     On Schedule C, petitioner claimed a deduction of $2,073.50

for traveling expenses.    Petitioner made a total of 54 trips in

year 2000 for the purpose of “business development” in connection

with Field Investment Management.     He produced a copy of the

pages from his day planner which set forth the name of the

“client”, the mileage traveled, the date, and the alleged

business purpose of each trip.      On the 54 trips taken, petitioner

met with a total of four different persons.     Petitioner’s day

planner shows that he met with a Ms. Hurd, a person whom he

identified as an employee of Comerica Bank, on 38 of the trips.

He testified that he met with her to give investment advice.       He

did not provide any information regarding the other three

persons.
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     Petitioner’s investment activities do not constitute a trade

or business.   Petitioner has failed to show that the traveling

expenses are related to the production of income or the

conservation of property held for the production of income.    The

Court finds that petitioner’s trips were personal in nature.

Under section 262, petitioner’s deduction for traveling expenses

is disallowed.

     2.   Meals and Entertainment

     For 2000, petitioner claimed deductions of $4093 for meals

and entertainment expenses.    Petitioner produced a spreadsheet

that summarily listed the date, the amount of the meal, the miles

traveled, the name of the “client”, and the alleged business

purpose of each meal.    The alleged business purpose was described

broadly, such as “bank investment”, “mortgages”, “real estate

investment”, and “bond market”.    None of the alleged business

purposes related to petitioner’s personal investment management.

     The Court has already found that petitioner did not carry on

a trade or business.    Therefore, petitioner must show that the

meals are sufficiently related to the production of income or the

conservation of property held for the production of income in

connection with his personal investment management.    Petitioner




     3
      At trial, petitioner testified that he claimed $219 for
meals and entertainment expenses incurred during the trips. It
is unclear as to which activity the remaining expenses relate.
                                - 9 -

has failed to meet his burden of proof, and the deductions are

accordingly disallowed.

       3.   Other Expenses Reported on Schedule C

       For 2000, petitioner claimed deductions for the following

expenses paid by Field Investment Management: (1) $2,056 for

commissions and fees; (2) $692 for office expenses; (3) $225 for

office supplies; (4) $103 for computer repair and maintenance;

and (5) $514 for a computer.

       Petitioner provided copies of miscellaneous checks,

receipts, and invoices to substantiate the office expenses, the

cost of the computer and its repair and maintenance, and supplies

for 2000.    Petitioner’s evidence sufficiently documents the

amount of the expenses incurred.    However, he has not

sufficiently shown that such expenses were incurred primarily to

benefit his investment activities rather than for personal

reasons.    Therefore, the deductions are disallowed under section

262.

       As for the commissions and fees, petitioner provided a stack

of statements from numerous credit card companies to substantiate

their deductibility.    He contends that the cash advance charges

and the annual fees charged by the banks were used to fund

demonstration stock portfolios for Field Investment Management.

However, petitioner has not presented any evidence with respect
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to the status or existence of such demonstration stock

portfolios.

     When the fees and the items charged to the credit cards are

analyzed as a whole, it appears that the credit cards were used

primarily for personal reasons, and the fees are proximately

related to the personal use.    The fees shown in the credit card

statements can be roughly categorized as annual fees, cash

advance finance charges, general finance charges, late fees,

over-the-limit fees, check transaction fees, and Internet

connection charges.   Some of the statements included charges for

personal items.   When questioned at trial, petitioner admitted

that charges from merchants such as “drugstore.com”, “Kroger”,

and “York Photo Labs” were personal.     Therefore, the commissions

and fees deductions are disallowed under section 262.

     In sum, the Court sustains respondent’s determination, to

the extent not conceded by him, that petitioner is not entitled

to the deductions for traveling expenses, meals and entertainment

expenses, and other expenses claimed on Schedule C.

B.   Charitable Contributions

     Section 170(a) allows as a deduction a charitable

contribution, payment of which is made within the taxable year.

A charitable contribution includes a contribution or gift to or

for the use of a corporation, trust, community chest, fund, or

foundation organized and operated exclusively for religious,
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charitable, scientific, literary, or educational purposes.      Sec.

170(c)(2)(B).   No deduction is allowed under section 170 for a

contribution of services.   However, unreimbursed expenditures

made incident to the rendition of services to a charitable

organization may constitute a deductible contribution.      Sec.

1.170A-1(g), Income Tax Regs.    Allowable deductions include

transportation expenses and reasonable expenses for meals and

lodging necessarily incurred while away from home.    Id.

     Section 170(j) prohibits a deduction for, inter alia,

unreimbursed traveling expenses incurred incident to the

rendition of charitable services, “unless there is no significant

element of personal pleasure, recreation, or vacation in such

travel.”   The meaning of a “significant element of personal

pleasure, recreation, or vacation” is far from self-evident.       An

inquiry into the legislative history of this provision provides

some insight.   The House report states:

     In determining whether travel away from home involves a
     significant element of personal pleasure, recreation,
     or vacation, the fact that a taxpayer enjoys providing
     services to the charitable organization will not lead
     to denial of the deduction. * * * A taxpayer who only
     has nominal duties relating to the performance of
     services for the charity, or who for significant
     portions of the trip is not required to render
     services, is not allowed any deduction for travel
     costs. [H. Rept. 99-426 (1985); 1986-3 C.B. (Vol. 2)
     129].
                                - 12 -

The example makes clear that the relevant inquiry is the extent

and duration of the charitable services provided by the taxpayer,

and not some quantum measure of pleasure derived by the taxpayer.

     Petitioner traveled to England and Wales with the Chorus and

deducted his travel expenses as charitable contributions on

Schedule A.    Respondent contends that petitioner’s trip expenses

are not deductible because the trip involved elements of personal

pleasure, recreation, or vacation.

     The record contains an itinerary of petitioner’s trip.     An

examination of the itinerary reveals that approximately 25 hours

of rehearsal and performance time were required.    The itinerary

also reveals that each day provided opportunities for scheduled

or independent sightseeing trips.    There were scheduled

sightseeing trips on 4 days of the 8-day trip.    On 2 of the

remaining days, opportunities for independent sightseeing were

provided.     The blocks of time set aside for sightseeing, either

scheduled or independent, totaled approximately 37 hours.

     Petitioner testified that he did not take advantage of the

independent sightseeing opportunities.    “You can be sure at my

age I was either reading, sleeping, or resting from jet lag

during those times and not sightseeing.”    It is well established

that the Court is not required to accept petitioner’s self-

serving testimony in the absence of corroborating evidence.
                                - 13 -

Niedringhaus v. Commissioner, 99 T.C. 202, 219 (1992); Tokarski

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

     The Court finds that elements of personal pleasure,

recreation, or vacation constituted a significant element of

petitioner’s trip.   The Court concludes that section 170(j)

prohibits a deduction for the traveling expenses incurred on his

trip to England and Wales.   Accordingly, respondent is sustained

on this issue to the extent not conceded by him.

C.   Accuracy-Related Penalty

     Under section 7491(c), the Commissioner has the burden of

production in any court proceeding with respect to the liability

of any individual for any penalty or addition to tax.       Higbee v.

Commissioner, 116 T.C. at 446-447.       In order to meet his burden

of production, the Commissioner must come forward with sufficient

evidence indicating that it is appropriate to impose the

accuracy-related penalty.    Id. at 446.     Once the Commissioner

meets his burden of production, the taxpayer bears the burden of

proving that the Commissioner’s determination is incorrect.          Id.

at 446-447.

     Respondent determined that petitioner is liable for the

accuracy-related penalty under section 6662(a).      Section 6662(a)

imposes a 20-percent penalty on the portion of an understatement

attributable to any one of various factors, including negligence

or disregard of rules or regulations and a substantial
                                - 14 -

understatement of income tax.    See sec. 6662(b)(1) and (2).

“Negligence” includes any failure to make a reasonable attempt to

comply with the provisions of the Internal Revenue Code,

including any failure to keep adequate books and records or to

substantiate items properly.    See sec. 6662(c); sec.

1.6662-3(b)(1), Income Tax Regs.    A “substantial understatement”

includes an understatement of tax that exceeds the greater of 10

percent of the tax required to be shown on the return or $5,000.

See sec. 6662(d); sec. 1.6662-4(b), Income Tax Regs.

     Section 6664(c)(1) provides that the penalty under section

6662(a) shall not apply to any portion of an underpayment if it

is shown that there was reasonable cause for the taxpayer’s

position and that the taxpayer acted in good faith with respect

to that portion.   The determination of whether a taxpayer acted

with reasonable cause and in good faith is made on a case-by-case

basis, taking into account all the pertinent facts and

circumstances.   Sec. 1.6664-4(b)(1), Income Tax Regs.   The most

important factor is the extent of the taxpayer’s effort to assess

his proper tax liability for the year.    Id.

     Petitioner failed to keep adequate books and records to

substantiate the deductions he claimed.    See sec. 6662(c); sec.

1.6662-3(b)(1), Income Tax Regs.    There is also an understatement

of tax greater than $5,000.    The Court concludes that respondent

has produced sufficient evidence to show that the
                                - 15 -

accuracy-related penalty under section 6662 is appropriate.

Nothing in the record indicates petitioner acted with reasonable

cause and in good faith.   The Court holds that the record

supports respondent’s determination that petitioner is liable for

the accuracy-related penalty.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect the foregoing,

                                          Decision will be

                                     entered under Rule 155.
