                        T.C. Memo. 1999-156



                      UNITED STATES TAX COURT



               EDWARD M. FONTANILLA, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 2384-98.                        Filed May 5, 1999.



     Edward M. Fontanilla, pro se.

     Peter C. Rock, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     PARR, Judge:   Respondent determined an income tax deficiency

of $8,612 and an accuracy-related penalty of $1,722 for

petitioner's 1995 taxable year.

     Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the taxable year in
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issue, and all Rule references are to the Tax Court Rules of

Practice and Procedure.   All dollar amounts are rounded to the

nearest dollar, unless otherwise indicated.

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

Whether petitioner may deduct uniform expenses as unreimbursed

employee expenses.   We hold he may to the extent set out below.

(2) Whether petitioner is entitled to a deduction for charitable

contributions.   We hold he is to the extent set out below.      (3)

Whether petitioner may deduct travel expenses as unreimbursed

employee expenses.   We hold he may not.    (4) Whether petitioner

may deduct expenses he claimed that he incurred in a retail sales

activity.   We hold he may to the extent set out below.    (5)

Whether petitioner is liable for an accuracy-related penalty for

the underpayment of income tax attributable to negligence or

disregard of rules or regulations.     We hold he is.




     1
      Petitioner concedes that, having deducted $1,910 for real
estate taxes paid, it was improper to also deduct the same amount
as home mortgage interest, and that he received $17 of unreported
interest income. Respondent concedes that petitioner paid
$13,470 of home mortgage interest, $1,910 of real estate taxes,
$3,460 of State and local income taxes, and $283 for vehicle
registration. In addition, respondent concedes that petitioner
paid $338 and $112 of dues to the California Nurses Association
and Union Local 250, respectively. Finally, petitioner claimed
$1,200 as a deduction for personal property taxes for which he
had no substantiation or recollection of the circumstances of
payment. We consider this amount conceded by petitioner.
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                        FINDINGS OF FACT

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

The stipulated facts and the accompanying exhibits are

incorporated into our findings by this reference.    At the time

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

City, California.

     Petitioner is a registered nurse and is required to wear a

nurse's white uniform while on duty at the hospitals.    For the

year at issue, petitioner claimed $2,850 as a miscellaneous

deduction for work shoes, uniforms, and union dues.

     Petitioner worked at three hospitals in the San Francisco

Bay area for several months during the year at issue.    On days

that he worked at more than one hospital, petitioner would work

for a few hours at one hospital and then drive to another

hospital where he would work for a few more hours.    Petitioner

claimed $3,750 as an unreimbursed employee expense for job

travel.

     Petitioner is a devout Catholic and regularly attends San

Pedro Holy Angel Church in Daly City.   Petitioner claimed a

deduction of $260 for cash contributions to this church.

Petitioner also claimed a $500 deduction for a contribution of

old clothes to the Salvation Army.

     During the year at issue, petitioner engaged in a retail

sales activity of selling magnets that were supposed to promote
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the relief of pain.   Petitioner reported $580 of gross receipts

from this activity on Schedule C, Profit or Loss From Business,

and claimed $174 as the cost of goods sold and $5,167 of

business-related expenses.

                              OPINION

     Respondent determined that petitioner was not entitled to

the deductions he claimed on his return because petitioner did

not provide any substantiation for the amounts reported.

Petitioner asserts that he is entitled to the claimed deductions;

however, he offered no books or records to prove that he actually

expended the amounts at issue.

     Respondent's determinations are presumed correct, and

petitioner bears the burden of proving otherwise.   See Rule

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

do not have an inherent right to take tax deductions.   Deductions

are a matter of legislative grace, and a taxpayer bears the

burden of proving entitlement to any deduction claimed.    See

Deputy v. du Pont, 308 U.S. 488, 493 (1940); New Colonial Ice Co.

v. Helvering, 292 U.S. 435, 440 (1934).   Moreover, a taxpayer is

required to maintain records that are sufficient to substantiate

his deductions.   See sec. 6001.
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Issue 1.    Uniforms

     Petitioner claimed $2,400 as a miscellaneous deduction for

the cost of his work shoes and nurse's uniforms.2

     Section 162(a) allows a deduction for the ordinary and

necessary expenses paid or incurred during the taxable year in

carrying on any trade or business.    Whether an expenditure is

ordinary and necessary is a question of fact.    See Commissioner

v. Heininger, 320 U.S. 467, 475 (1943).    However, no deduction

shall be allowed for personal, living, or family expenses.     See

sec. 262.

     The cost of acquisition and maintenance of uniforms is

deductible generally if (1) the clothing is of a type

specifically required as a condition of employment, (2) it is not

adaptable to general usage, and (3) it is not so worn.   See

Yeomans v. Commissioner, 30 T.C. 757, 767 (1958).

     While we do not doubt that nurse's uniforms and shoes may be

deductible, see, e.g., Harsaghy v. Commissioner, 2 T.C. 484

(1943); Meier v. Commissioner, 2 T.C. 458 (1943), petitioner

provided scant evidence that he actually spent $2,400 on uniforms




     2
      Petitioner claimed $2,850 as the total cost of shoes,
uniforms, and union dues. Respondent agrees that petitioner paid
a total of $450 for union dues. Thus, the difference between
these amounts is equal to the cost petitioner claimed for the
acquisition and maintenance of his work shoes and uniforms.
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and special shoes.   This is particularly troubling as the amount

claimed appears to be large.

     If a taxpayer has established that deductible expenses were

incurred but has not established the amount of such expenses, we

may estimate the amount allowable, bearing heavily if we so

choose upon the taxpayer whose inexactitude is of his own making.

See Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930).

However, there must be evidence in the record that provides a

rational basis for our estimate.   See Vanicek v. Commissioner, 85

T.C. 731, 742-743 (1985).

     Although petitioner testified that he purchased two pairs of

shoes for work during the year at issue, he also testified that

he preferred athletic shoes of the type that is suitable for use

outside of his work environment.   This type of shoe in this

circumstance does not satisfy the tripartite test for deduction.

Petitioner testified that he spent "at least $50 every two to

three months" on uniform acquisition.   He also testified that,

because he was required to wear a clean uniform every day, he

spent "$15 to $20" every 2 weeks on laundry.

     The amounts that petitioner testified to at trial do not add

up to $2,400.   Nonetheless, we are satisfied that petitioner did

incur some deductible expenses for acquiring and maintaining his

uniforms and, using our judgment, allow a deduction in the amount
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of $380.   See Cohan v. Commissioner, supra.   However, this amount

is subject to the limitations of section 67.

Issue 2.   Charitable Contributions

     Petitioner testified that he attends church at least once

every week and that he contributed $5 to $10 every Sunday.

Petitioner claimed a deduction on his return for $260 for cash

gifts that he made to the church that he attends.   Section 170

allows a deduction for charitable contributions made during the

taxable year.   We find that petitioner is entitled to this

deduction.   See Cohan v. Commissioner, supra.

     Petitioner also claimed a charitable contribution deduction

of $500 for some old clothes and uniforms that he donated to the

Salvation Army.   Where a charitable contribution is made in

property other than money, section 170 allows a deduction of the

fair market value of the property at the time of contribution.

See sec. 1.170A-1(c)(1), Income Tax Regs.   Petitioner bears the

burden of proving both the fact that the contribution was made

and the fair market value of the contributed property.   See Rule

142(a); Zmuda v. Commissioner, 79 T.C. 714, 726 (1982), affd. 731

F.2d 1417 (9th Cir. 1984).

     Petitioner offered only a general description of the

articles of old clothing that he donated.   While we believe that

petitioner actually did donate some old clothes, petitioner's

testimony that the value of the clothing was $500 was vague and
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unconvincing.   Petitioner, therefore, has failed to prove the

value of this contribution.   Using our judgment, we find that the

fair market value of the donated property was $15.   Thus,

petitioner is entitled to a deduction in this amount.   See Cohan

v. Commissioner, supra; Zmuda v. Commissioner, supra.

Issue 3.   Transportation Expenses

     Petitioner claimed a deduction of $3,750 for unreimbursed

employee travel expenses for the miles that he drove between

hospitals on the days that he worked at more than one hospital.3

     Section 274(d) imposes stringent substantiation requirements

for the deduction of travel expenses, entertainment expenses,

gift expenses, and expenses of certain listed property defined

under section 280F(d)(4) such as an automobile.   See sec.

274(d)(1); sec. 1.274-5T(a), Temporary Income Tax Regs., 50 Fed.

Reg. 46014 (Nov. 6, 1985).    If an expense item comes within the

requirements of section 274(d), this Court cannot rely on Cohan

v. Commissioner, supra, to estimate the taxpayer's expenses with

respect to that item.   See Sanford v. Commissioner, 50 T.C. 823,

827 (1968), affd. per curiam 412 F.2d 201 (2d Cir. 1969); sec.

1.274-5T(a)(4), Temporary Income Tax Regs., 50 Fed. Reg. 46014

(Nov. 6, 1985).




     3
      Petitioner reported that he drove 12,500 business miles and
claimed the standard mileage deduction of 30 cents per mile.
                               - 9 -


     In order to claim deductions, taxpayers must substantiate by

adequate records certain items such as the amount and place of

each separate expenditure, the property's business and total use,

the date of the expenditure or use, and the business purpose for

an expenditure or use.   See sec. 274(d); sec. 1.274-5T(b),

Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6, 1985).

In addition, section 274(d)(1) requires the same substantiation

for any deduction claimed "under section 162 or 212 for any

traveling expense".

     To substantiate a deduction by means of adequate records, a

taxpayer generally must maintain an account book, diary, log,

statement of expense, trip sheets, or similar record, and

documentary evidence which, in combination, are sufficient to

establish each element of each expenditure or use, including

business purpose and relationship.     See sec. 1.274-5T(c)(2)(i),

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

     Petitioner provided this Court with no records with respect

to his use of an automobile.   Thus, we find that petitioner has

failed to substantiate the deduction claimed for automobile

transportation as required by section 274(d) and the regulations

thereunder.   Respondent is sustained on this issue.

Issue 4.   Retail Sales Activity Deductions

     During the year at issue, petitioner was engaged in selling

magnets that were supposed to promote the relief of pain.
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Petitioner reported $580 of gross receipts from this activity on

Schedule C, Profit or Loss From Business, and claimed $174 as the

cost of goods sold and $5,167 of business-related expenses, for a

net loss of $4,761.   Of the claimed expenses, $5,135 is for the

use of petitioner's automobile, including mileage, insurance, and

repairs.   Respondent disallowed these expenses in their entirety

because petitioner did not establish that the expenses were paid

or incurred during the taxable year and that they were ordinary

and necessary.

     As discussed above, a passenger automobile is listed

property, and to substantiate a deduction attributable to listed

property a taxpayer must comply with the strict substantiation

requirements of section 274(d) and the regulations thereunder.

Petitioner did not provide this Court with any records related to

the use of his automobile.   Respondent is sustained on this item.

     Petitioner claimed $174 as the cost of goods sold.   Gross

income does not include the cost of goods sold.   See sec. 1.61-

3(a), Income Tax Regs.   We think that it is very unlikely that

petitioner could have realized $580 of gross profits without

incurring some cost for the magnets that he sold.   Thus, we allow

$100 as the cost of goods sold.   See Cohan v. Commissioner,

supra.
                               - 11 -


     As to the other disallowed Schedule C expense, petitioner

presented no evidence to substantiate that expense.   Respondent,

therefore, is sustained on that item.

Issue 5.   Accuracy-Related Penalty

     We have found that petitioner deducted $1,910 that he paid

for real estate taxes and that he also claimed the same expense

as home mortgage interest, and that he claimed deductions for

items that he could not substantiate.   Furthermore, petitioner

conceded that he received $17 of unreported interest income.

     Respondent determined that petitioner is liable for the

accuracy-related penalty for negligence or intentional disregard

of rules or regulations pursuant to section 6662.

     Section 6662 provides for the imposition of a penalty equal

to 20 percent of the portion of the underpayment which is

attributable to negligence or disregard of rules or regulations.

See sec. 6662(a) and (b)(1).   For purposes of this section, the

term "negligence" includes any failure to make a reasonable

attempt to comply with the internal revenue laws, a failure to

exercise ordinary and reasonable care in the preparation of a tax

return, or a failure to keep adequate books and records or to

substantiate items properly.   Sec. 1.6662-3(b)(1), Income Tax

Regs.   Negligence is defined as a lack of due care or failure to

do what a reasonable and ordinarily prudent person would do under

the circumstances.   See Neely v. Commissioner, 85 T.C. 934, 947
                               - 12 -


(1985).   The term "disregard" includes any careless, reckless, or

intentional disregard of rules or regulations.   Sec. 6662(c).

     Just as with respondent's deficiency determination, his

determination of negligence or intentional disregard of rules or

regulations is prima facie correct, with the burden of proof to

the contrary on petitioner.   See Neely v. Commissioner, supra.

     Petitioner did not address the section 6662 penalty issue at

trial.    Petitioner has failed to carry his burden of proof, and

we sustain respondent's determination of the penalty.

     To reflect the foregoing,

                                          Decision will be entered

                                     under Rule 155.
