                        T.C. Memo. 2010-152



                      UNITED STATES TAX COURT



                  NATHAN E. LANG, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 20117-08.              Filed July 14, 2010.



     Nathan E. Lang, pro se.

     Michelle Maniscalco, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     WELLS, Judge:   Respondent determined a deficiency in

petitioner’s Federal income tax of $8,153 for 2003, a failure to

file addition to tax pursuant to section 6651(a)(1) of $1,780,

and an accuracy-related penalty pursuant to section 6662(a) of
                               - 2 -

$1,631.1   The issues remaining to be decided relate to

petitioner’s entitlement to deductions that he claimed on

Schedule A, Itemized Deductions, and Schedule C, Profit or Loss

From Business, of his return for the year in issue and whether he

is liable for the failure to file addition to tax pursuant to

section 6651(a)(1) and the accuracy-related penalty pursuant to

section 6662.2

                          FINDINGS OF FACT

     Some of the facts and certain exhibits have been stipulated.

The stipulations of fact are incorporated in this opinion by

reference and are found accordingly.

     At the time the petition was filed, petitioner lived in

Woodside, New York.

     On his 2003 Federal income tax return petitioner listed his

occupation as graphics.   Additionally, petitioner is a performing

artist who engages in “voice-over” and “on-camera” work.3


     1
      Unless otherwise indicated, all Rule references are to the
Tax Court Rules of Practice and Procedure, and all section
references are to the Internal Revenue Code (Code), in effect for
the year in issue. All amounts are rounded to the nearest whole
dollar.
     2
      Respondent determined that petitioner is liable for self-
employment tax and allowed a corresponding self-employment tax
deduction in the notice of deficiency. The self-employment tax
and its corresponding deduction are computational and will depend
on the Court’s resolution of the issues discussed herein.
     3
      On petitioner’s Schedule C, he listed his business as
theater. We interpret “theater” to include petitioner’s voice-
                                                   (continued...)
                               - 3 -

Petitioner finds his voice-over and on-camera work through talent

agencies nationwide.   Normally, petitioner auditions for the

voice-over work by recording the proposed job on his home studio

equipment and then emailing the talent agency the digital files.

     On Schedule A of his 2003 Federal income tax return

petitioner claimed unreimbursed employee expenses of $15,700 as

miscellaneous itemized deductions.     Petitioner also claimed as

miscellaneous itemized deductions expenses for union dues of $202

and tax preparation fees of $425.    Petitioner claimed a total of

$16,327 in miscellaneous itemized deductions on Schedule A.

However, the total amount of petitioner’s itemized deductions was

reduced to $15,313 by the 2-percent-of-adjusted-gross-income

limitation pursuant to section 67(a).     In the notice of

deficiency respondent disallowed petitioner’s claimed

miscellaneous itemized deductions of $15,313.4

     On Schedule C of his 2003 return, petitioner claimed a

deduction for meals and entertainment of $1,600.5    Additionally,



     3
      (...continued)
over and on-camera work.
     4
      On Form 5278, Statement - Income Tax Changes, attached to
the notice of deficiency, respondent disallowed $15,313 of
itemized deductions. However, on Form 886-A, Explanation of
Items, attached to the notice of deficiency, respondent
specifically disallowed the unreimbursed employee expenses of
$15,700.
     5
      On his return, petitioner failed to apply to this amount
the 50-percent limitation of sec. 274(n)(1).
                                - 4 -

petitioner claimed on Schedule C a deduction for other expenses

of $16,275.    Respondent denied all of petitioner’s deductions for

meals and entertainment expenses and other expenses.

     Petitioner timely filed a petition with this Court.

                               OPINION

     Generally, the Commissioner’s determination of a deficiency

is presumed correct, and the taxpayer has the burden of proving

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

(1933).

     Deductions are a matter of legislative grace, and generally

taxpayers bear the burden of proving their entitlement to the

deductions claimed.    Sec. 6001; INDOPCO, Inc. v. Commissioner,

503 U.S. 79, 84 (1992).    Section 162(a) permits “as a deduction

all the ordinary and necessary expenses paid or incurred during

the taxable year in carrying on any trade or business”.     To be

deductible, ordinary and necessary expenses must be “directly

connected with or pertaining to the taxpayer’s trade or

business”.    Sec. 1.162-1(a), Income Tax Regs.   Additionally,

section 212 generally allows deduction of ordinary and necessary

expenses paid or incurred during the tax year for the production

or collection of income.    Sec. 1.212-1(d), Income Tax Regs.     The

deduction for trade or business expenses must be reasonable in

amount and bear a reasonable and proximate relationship to the
                               - 5 -

production or collection of taxable income.    Id.   However, a

taxpayer may not deduct personal expenses.    Sec. 262(a).

     Generally, a taxpayer must keep records sufficient to

establish the amounts of the items reported on his Federal income

tax return.   Sec. 6001; sec. 1.6001-1(a), (e), Income Tax Regs.

In the event that a taxpayer establishes that a deductible

expense has been paid but is unable to substantiate the precise

amount, we generally may estimate the amount of the deductible

expense, bearing heavily against the taxpayer whose inexactitude

in substantiating the amount of the expense is of his own making.

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

generally will not estimate a deductible expense, however, unless

the taxpayer presents sufficient evidence to provide some basis

upon which an estimate may be made.    Vanicek v. Commissioner, 85

T.C. 731, 743 (1985).

     Section 274(d) supersedes the Cohan doctrine for certain

categories of expenses.   Sanford v. Commissioner, 50 T.C. 823,

827-828 (1968), affd. per curiam 412 F.2d 201 (2d Cir. 1969).

Generally, a deduction is disallowed for travel expenses, meals

and entertainment, and listed property unless the taxpayer

properly substantiates:   (1) The amount of such expense; (2) the

time and place of the expense; (3) the business purpose; and (4)

in the case of meals and entertainment, the business relationship

between the taxpayer and the persons being entertained.      Sec.
                                 - 6 -

274(d).   Section 280F(d)(4) includes cellular telephones as

listed property.   Generally, deductions for expenses subject to

the strict substantiation requirements of section 274(d) must be

disallowed in full unless the taxpayer satisfies every element of

those requirements.     Sanford v. Commissioner, supra at 827-828;

Larson v. Commissioner, T.C. Memo. 2008-187; sec. 1.274-5T(a),

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

Deductions for listed property that is used both personally and

in the taxpayer’s business are disallowed unless a taxpayer

establishes the amount of business use of the property.     Kinney

v. Commissioner, T.C. Memo. 2008-287; Olsen v. Commissioner, T.C.

Memo. 2002-42, affd. 54 Fed. Appx. 479 (9th Cir. 2003); sec.

1.274-5T(b)(6)(i)(B), Temporary Income Tax Regs., 50 Fed. Reg.

46016 (Nov. 6, 1985).

     Taxpayers may substantiate their deductions by either

adequate records or sufficient evidence that corroborates the

taxpayer’s own statement.    Sec. 274(d).   To satisfy the adequate

records requirement, a taxpayer must maintain records and

documentary evidence that in combination are sufficient to

establish each element of an expenditure or use.     Larson v.

Commissioner, supra; sec. 1.274-5T(c)(2)(i), Temporary Income Tax

Regs., 50 Fed. Reg. 46017 (Nov. 6, 1985).    A contemporaneous log

is not required, but corroborative evidence used to support a

taxpayer’s reconstruction of the expenditure “‘must have a high
                               - 7 -

degree of probative value to elevate such statement’” to the

level of credibility of a contemporaneous record.   Larson v.

Commissioner, supra (quoting section 1.274-5T(c)(1), Temporary

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

     In the absence of adequate records, a taxpayer may

alternatively establish an element of an expenditure by “his own

statement, whether written or oral, containing specific

information in detail as to such element” and by “other

corroborative evidence sufficient to establish such element.”

Larson v. Commissioner, supra; sec. 1.274-5T(c)(3), Temporary

Income Tax Regs., 50 Fed. Reg. 46020 (Nov. 6, 1985).    However, we

do not estimate under the Cohan doctrine expenses that are

subject to the requirements of section 274(d).   Sanford v.

Commissioner, supra at 827; Larson v. Commissioner, supra.

     Petitioner contends that the burden of proof regarding the

substantiation of his expenses should be placed on respondent

pursuant to section 7491(a).   Section 7491(a) does not alter the

taxpayer’s burden of proof where the taxpayer has not complied

with all substantiation requirements, including those of section

274(d), and where the taxpayer has not maintained all records

required by the Code.   Sec. 7491(a)(2)(A) and (B); see also

Higbee v. Commissioner, 116 T.C. 438, 442-443 (2001).

Additionally, the burden of proof is determinative only when

there is an evidentiary tie.   Knudsen v. Commissioner, 131 T.C.
                                - 8 -

185, 189 (2008).   When there is an evidentiary tie, we consider

whether petitioner introduced credible evidence on that issue in

order to shift the burden of proof.     However, most of the issues

can be decided on the basis of the record in the instant case.6

     Petitioner claimed deductions on Schedule A for union dues

of $202, unreimbursed employee business expenses of $15,700, and

tax preparation fees of $425, for a total miscellaneous itemized

deduction expense of $16,327.   After the 2-percent-of-adjusted-

gross-income limitation was applied pursuant to section 67(a),

the amount deducted was $15,313.   The total amount of $15,313 was

disallowed by respondent in the Form 5278, Statement - Income Tax

Changes, attached to the notice of deficiency.     However, the Form

886-A, Explanation of Items, attached to the notice of

deficiency, mentions only unreimbursed employee expenses.

Additionally, at trial respondent did not dispute the

deductibility of the union dues or the tax preparation fees.

Accordingly, we deem the deductibility of the union dues and the

tax preparation fees conceded by respondent.7


     6
      Petitioner’s claimed deduction for cellular telephone
expenses is subject to the heightened substantiation requirements
of sec. 274(d). Petitioner has offered limited substantiation,
but it does not meet the requirements of sec. 274(d).
Accordingly, sec. 7491(a)(1) does not apply to petitioner’s claim
to this deduction. See sec. 7491(a)(2)(A).
     7
      To the extent that petitioner claimed additional tax
preparation fees at trial, petitioner failed to substantiate any
amount above the $425 that we deem conceded by respondent.
                                                   (continued...)
                               - 9 -

     As to petitioner’s claimed unreimbursed employee business

expenses, they include expenses for uniforms of $920, shoes of

$640, uniform cleaning of $2,250, emergency cab fares of $1,860,

professional books and catalogs of $520, tuition of $2,830,

educational books and supplies of $2,780, supplies and equipment

of $3,760, and telephone service of $740.8   Petitioner testified

that the receipts he offered were for his Schedule C business

expenses.   Petitioner failed to offer testimony or documentary

evidence specifically relating to his unreimbursed employee

business expenses that he claimed on Schedule A.   Accordingly,

we sustain respondent’s determination denying petitioner’s

deduction for unreimbursed employee business expenses claimed on

Schedule A.

     On Schedule C petitioner claimed a deduction for meals of

$1,600.   Petitioner testified that he claimed meals expenses of



     7
      (...continued)
Petitioner provided a receipt for tax preparation fees from 2001
and claimed that his tax preparation fees for 2003 must have been
higher. However, such speculative evidence is inadequate for us
to make an estimate of additional tax preparation expenses beyond
those conceded by respondent for tax year 2003. See Vanicek v.
Commissioner, 85 T.C. 731, 743 (1985).
     8
      As noted above, petitioner listed his occupation on his
Form 1040, U.S. Individual Income Tax Return, as graphics.
Additionally, petitioner is a performing artist who engages in
“voice-over” and “on-camera” work. The record does not establish
that petitioner was employed for purposes of the claimed
expenses; however, even if those expenses should have been
classified as Schedule C expenses, petitioner has failed to show
that he is entitled to any deduction for them.
                                - 10 -

$15 a day relating to a play for which he volunteered his

services.   Petitioner testified that his involvement was for the

3 days that the play was performed, December 12, 13, and 14, and

for 1 hour every Tuesday from September 16 through December 9,

2003 for rehearsals.    Generally, expenses for meals away from

home must meet the heightened substantiation requirements of

section 274(d).    However, unreimbursed expenditures, including

expenses for meals while away from home, made incident to the

rendition of services to a charitable organization may constitute

a charitable contribution deduction.     Sec. 1.170A-1(g), Income

Tax Regs.   Petitioner failed to offer any documentary evidence or

testimony adequate to substantiate his meals expenses that relate

to the play under either section 274(d) or section 1.170A-1(g),

Income Tax Regs.    Petitioner’s testimony does not prove that the

expenses for meals were incurred while he was “away from home” or

prove that his volunteer work was in service to a qualifying

donee of tax-deductible contributions.9    See sec. 274(d); sec.

1.170A-1(g), Income Tax Regs.    Additionally, petitioner failed to

offer any testimony or documentary evidence for meals expenses

greater than those relating to the play.     Accordingly, we sustain




     9
      Petitioner provided an advertisement for the play in which
he was involved. On the advertisement, the organization, the
52nd Street Project, claims to be a “non-profit organization”.
Petitioner failed to prove that the 52nd Street Project meets the
requirements of sec. 170(c)(2).
                                - 11 -

respondent’s denial of a deduction for meals claimed on

petitioner’s Schedule C.

     On Schedule C petitioner also claimed a deduction for other

expenses of $16,275.   Expenses included in that amount are for

postage of $684, books and stationery of $620, supplies of

$1,891, actor’s miscellaneous items of $5,320, telephone and

cellular telephones of $2,670, studio expenses of $3,410, and

training workshops of $1,680.

     Petitioner contends that we can use his limited

substantiation to make an estimation of his Schedule C expenses,

pursuant to the Cohan doctrine.    However, petitioner failed to

specify which of the receipts that he offered substantiate the

particular expenses claimed on Schedule C.    Some of his

substantiation fits neatly into the categories claimed on

Schedule C, such as cellular telephone expenses that fit into his

claimed deduction for telephone and cellular telephones, while

others, such as expenses for trade newspapers, do not fit into a

specific category but could belong in multiple categories, such

as claimed deductions for books and stationery, supplies, actor’s

miscellaneous expenses, or studio expenses.    Accordingly, we will

analyze petitioner’s substantiation by individual receipts and

then determine whether any further estimation, pursuant to the

Cohan doctrine, is warranted.
                                   - 12 -

       According to petitioner’s testimony, he purchased weekly and

monthly trade newspapers that contained detailed industry

information as well as casting calls.         Petitioner testified that

he purchased Ross Reports, monthly for $8 per issue, and

Backstage, weekly for $2 per issue.         Petitioner offered two

receipts for Ross Reports which show a cost of $8 per issue

during tax year 2003.       On the basis of the foregoing, we conclude

that petitioner may deduct $96 for Ross Reports magazine, which

we conclude is an ordinary and necessary business expense.           See

Cohan v. Commissioner, 39 F.2d at 543-544.         However, petitioner

failed to provide evidence substantiating any payments for issues

of Backstage, and we, therefore, sustain respondent’s

disallowance of a deduction for that publication.

       Petitioner offered a receipt for $34 for the transfer of a

recorded audition from video tape to a digital video disc (DVD).

According to petitioner’s testimony, he transferred the audition

to a DVD so that it could be easily viewed by producers and

casting directors.10       On the basis of the foregoing, we conclude

that petitioner’s expenses for the video-to-DVD transfer are

ordinary and necessary expenses of petitioner’s voice-over

business.       Consequently, we hold that petitioner may deduct $34

for the media transfer.



       10
            Petitioner offered the original tape and a copy of the
DVD.
                                - 13 -

     Petitioner also claimed $22 per day for local transportation

expenses for the play, discussed above, for which he volunteered

his services.   Generally, commuting expenses between the

taxpayer’s residence and place of business are personal expenses,

and, therefore, are nondeductible.       Sec. 262(a); sec. 1.262-

1(b)(5), Income Tax Regs.    However, taxpayers are allowed a

deduction for unreimbursed transportation expenses incident to

the performance of charitable services as long as there is not a

significant element of personal pleasure, recreation, or vacation

in such travel.   Sec. 170(j); Cavalaris v. Commissioner, T.C.

Memo. 1996-308; sec. 1.170A-1(g), Income Tax Regs.       As proof of

his eligibility for the transportation expenses, petitioner

offered solely his testimony.    As noted above, petitioner failed

to prove that his services were performed for a qualified donee

of tax-deductible contributions.    We, therefore, sustain

respondent’s disallowance of petitioner’s transportation

expenses.

     Petitioner testified that he spent $700 on the design of his

Internet Web site.    Petitioner offered printouts of his Web site

as proof of the design expenses.    However, petitioner failed to

provide any documentary evidence showing the amount paid, or, if

it was paid, when it was paid.    See Vanicek v. Commissioner, 85

T.C. at 743.    Additionally, given petitioner’s overall lack of

substantiation, we give little credence to his testimony
                                - 14 -

regarding the cost of his Internet Web site.    We, therefore,

sustain respondent’s disallowance of petitioner’s claimed expense

for Internet Web site design.

     As to petitioner’s claimed expenses for cellular telephone,

such expenses are subject to heightened substantiation

requirements.   See secs. 274(d), 280F(d)(4).   Petitioner’s bank

statements reveal monthly charges from AT&T Wireless, and he

testified that 40 percent of his cellular telephone use was for

business purposes, for a total of $453.   However, petitioner

failed to provide adequate records or other sufficient evidence

to corroborate his claimed 40-percent business use.    See sec.

274(d); sec. 1.274-5T(b)(6), Temporary Income Tax Regs., 50 Fed.

Reg. 46016 (Nov. 6, 1985).   We conclude that petitioner has

failed to meet the heightened substantiation requirements for his

cellular telephone expenses and, therefore, sustain respondent’s

determination as to those expenses.

     As to petitioner’s landline telephone and Internet service

provider expenses, according to petitioner’s testimony the

claimed expenses were “70 to 80%” for business purposes.

Additionally, petitioner testified that the total amounts of

landline telephone expenses and Internet service provider

expenses were documented through his bank statements.    However, a

review of petitioner’s bank statements reveals two separate

charges from RCN listed as being for cable, Internet, and phone
                                - 15 -

services for a total of $205.11     Petitioner failed to offer any

evidence of the cost of cable, which would be a nondeductible

personal expense pursuant to section 262(a), as opposed to his

Internet and telephone costs, which would, if anything, be mixed

personal and business expenses.     We will not estimate a

deductible expense unless the taxpayer presents sufficient

evidence to provide some basis upon which an estimate may be

made.     Vanicek v. Commissioner, supra at 743.   Additionally, any

expense for basic local telephone service with respect to the

first telephone line to a residence is treated as a nondeductible

personal expense.    Sec. 262(b).   On the basis of the foregoing,

we sustain respondent’s denial of petitioner’s deduction for

landline telephone expenses and Internet service expenses.

     Petitioner offered pictures of his audio equipment used in

his voice-over business.    However, petitioner failed to provide

testimony or documentation regarding the costs of the audio

equipment.    Accordingly, we sustain respondent’s denial of a




     11
      On Oct. 17, 2003, petitioner paid RCN $94, and on Dec. 10,
2003, petitioner paid RCN $111.

     The Court has characterized Internet service provider
expenses as utility expenses. Verma v. Commissioner, T.C. Memo.
2001-132. Strict substantiation therefore does not apply, and
the Court may estimate a taxpayer’s deductible expenses, provided
that the Court has a reasonable basis for making an estimate.
Vanicek v. Commissioner, 85 T.C. at 743.
                              - 16 -

deduction for his audio equipment.12   See Vanicek v.

Commissioner, supra at 743.

     Petitioner also claimed deductions for various classes.13

According to petitioner’s testimony, he attended Saturday morning

voice-over copy reading classes with Jennifer Duckworth and Kevin

Taylor from 10 a.m. to 12 noon, and Saturday afternoon skill

study and technique concentration classes at HB Studios from 1

p.m. until 5 p.m.   Expenditures made by a taxpayer for education

are deductible, with certain exceptions not relevant here,14 if

the education either:

          (1) Maintains or improves skills required by the
     individual in his employment or other trade or business; or

          (2) Meets the express requirements of the individual’s
     employer, or the requirements of applicable law or
     regulations, imposed as a condition to the retention by the
     individual of an established employment relationship,
     status, or rate of compensation.




     12
      Petitioner’s audio equipment appears to include computers
and computer peripheral equipment. See sec. 280F(d)(4). Such
property would be “listed property” subject to the heightened
substantiation requirements of sec. 274(d). However, because
petitioner’s expenses for audio equipment fail to meet general
substantiation requirements, we need not address whether they
would have met the requirements of sec. 274(d).
     13
      Petitioner testified that these receipts substantiated his
expenses for “performing classes and expenses”; however, this
category does not appear on petitioner’s return.
     14
      The classes do not qualify petitioner for a new trade or
business. Thus, deductions associated with the classes are not
prohibited under sec. 1.162-5(b), Income Tax Regs.
                               - 17 -

Sec. 1.162-5(a), Income Tax Regs.    Whether education maintains or

improves skills required by the taxpayer in his business is a

question of fact.    Boser v. Commissioner, 77 T.C. 1124, 1131

(1982), affd. without published opinion (9th Cir., Dec. 22,

1983); Joseph v. Commissioner, T.C. Memo. 2005-169.     The fact

that a taxpayer’s education is helpful to him in the performance

of his duties does not establish that its cost is a deductible

business expense.    Joseph v. Commissioner, supra.    Taxpayers must

show that there is a direct and proximate relationship between

the education expenses and the skills required in their business;

however, a precise correlation is not necessary.      Boser v.

Commissioner, supra at 1131.

     Petitioner testified that the classes are essential to

continued improvement of skills required in his business as a

performing artist.   According to petitioner:    “one of the

requirements for artists, for continuing employment, is steady

work with auditioning, performing, training, and self-

improvement.”   Accordingly, we conclude that petitioner’s

participation in the classes maintained or improved his skills.

Additionally, petitioner testified that the classes occurred

weekly and that they were helpful.      See Boser v. Commissioner,

supra at 1132-1133; Ford v. Commissioner, 56 T.C. 1300, 1305-1307

(1972), affd. per curiam 487 F.2d 1025 (9th Cir. 1973); sec.
                               - 18 -

1.262-1(b)(9), Income Tax Regs. (“Expenditures * * * are not

deductible unless they qualify under section 162 and § 1.162-5

[, Income Tax Regs.]”).   On the basis of the foregoing, we

conclude that petitioner’s expenses for the classes are ordinary

and necessary business expenses and petitioner should be allowed

a deduction for those expenses to the extent that he has

substantiated them.

     Petitioner offered receipts for the voice-over classes

bearing dates from calendar year 2001.    However, petitioner

failed to offer any documentation that corroborates his testimony

regarding the cost of the voice-over classes for the year in

issue.    We will not estimate deductible expenses unless the

taxpayer offers sufficient evidence to provide some basis upon

which an estimate may be made.    Vanicek v. Commissioner, 85 T.C.

at 743.    Accordingly, we sustain respondent’s determination

regarding the voice-over classes.

     As to the classes at HB Studios, petitioner provided

receipts totaling $248 for the year in issue.    We conclude that

these receipts and petitioner’s testimony are sufficient to

substantiate a deduction of $248.    However, the record contains

no evidence of the costs of individual classes.    Petitioner

testified that he occasionally prepaid for the classes so that he

would not have to pay for them in cash.    We will not estimate

deductible expenses unless the taxpayer offers sufficient
                                 - 19 -

evidence to provide some basis upon which an estimate may be

made.     Id.   Accordingly, on the basis of the foregoing receipts,

we conclude that petitioner may deduct $248 for classes at HB

Studios.

        Petitioner also offered receipts for various acting books

purchased at Drama Books.     According to petitioner’s testimony,

the books were used in the voice-over classes discussed above.

Accordingly, we conclude that petitioner should be allowed to

deduct $67 for books purchased at Drama Books used in his voice-

over classes.

        As to the remaining expenses not specifically discussed

above, petitioner contends that we may use the limited

substantiation he offered to estimate his expenses under the

Cohan doctrine.     However, as discussed above, petitioner failed

to specify which of the receipts that he offered substantiate the

particular expenses claimed on Schedule C.     Indeed, petitioner

failed to provide the Court with any evidence as to how he

arrived at the numbers he claimed as deductions on Schedule C.

We will not estimate deductible expenses unless the taxpayer

offers sufficient evidence to provide some basis upon which an

estimate may be made.      Vanicek v. Commissioner, supra at 743.

Accordingly, we sustain respondent’s denial of deductions for

other expenses claimed on Schedule C beyond those specifically

allowed above.
                                - 20 -

     As to the failure to file addition to tax, section

6651(a)(1) imposes an addition to tax for failure to file a

return by the date prescribed (determined with regard to any

extension of time for filing).    The addition to tax is 5 percent

of the ultimately determined tax if the failure to file does not

exceed 1 month, with an additional 5 percent per month for each

month the failure continues, up to a maximum of 25 percent.     Id.

However, the failure to file addition to tax is not imposed if

the taxpayer can establish that such failure is due to reasonable

cause and not due to willful neglect.    Id.   To prove reasonable

cause, the taxpayer must show that he exercised ordinary business

care and prudence but nevertheless could not file the return when

it was due.   See Crocker v. Commissioner, 92 T.C. 899, 913

(1989).   Respondent bears the burden of production pursuant to

section 7491(c), and petitioner bears the burden of proof.    See

Higbee v. Commissioner, 116 T.C. at 446.

     Petitioner admitted failing to file a timely return.

Accordingly, respondent has met his burden of production.

Petitioner testified that he relied on his tax return preparer to

timely file his return or request an extension.    However,

petitioner’s reliance on his tax return preparer to timely file

his return is not reasonable.    No particular expertise is

necessary to know that returns are due at prescribed times.    See

United States v. Boyle, 469 U.S. 241, 251 (1985).    Consequently,
                              - 21 -

we hold that petitioner is liable for the failure to file

addition to tax pursuant to section 6651(a)(1).

     As to the substantial understatement penalty, section

6662(a) and (b)(2) imposes a penalty of 20 percent on the portion

of an underpayment of tax attributable to a substantial

understatement of income tax.15   A substantial understatement of

income tax is defined as an understatement of tax that exceeds

the greater of 10 percent of the tax required to be shown on the

tax return or $5,000.   Sec. 6662(d)(1)(A).   The understatement is

reduced to the extent that the taxpayer has (1) adequately

disclosed his or her position and has a reasonable basis for such

position or (2) has substantial authority for the tax treatment

of the item.   Sec. 6662(d)(2)(B).

     The accuracy-related penalty is not imposed with respect to

any portion of the underpayment as to which the taxpayer acted

with reasonable cause and in good faith.   Sec. 6664(c)(1).   The

decision as to whether the taxpayer acted with reasonable cause

and in good faith depends upon all of the pertinent facts and

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

factors include the taxpayer’s efforts to assess his proper tax

liability, including the taxpayer’s reasonable and good faith



     15
      “Understatement” means the excess of the amount of the tax
required to be shown on the return over the amount of the tax
imposed which is shown on the return, reduced by any rebate.
Sec. 6662(d)(2)(A).
                                - 22 -

reliance on the advice of a professional such as an accountant.

Id.   Furthermore, an honest misunderstanding of fact or law that

is reasonable in the light of the experience, knowledge, and

education of the taxpayer may indicate reasonable cause and good

faith.     See Remy v. Commissioner, T.C. Memo. 1997-72.

      On his 2003 return petitioner reported total tax due of

$3,321.     The record establishes that the total amount of tax due

from petitioner exceeds the $3,321 reported.    Given the

deductions conceded by respondent and allowed in the instant

proceeding, the understatement may or may not be greater than

$5,000.16    If the understatement is greater than $5,000, as

determined given our holdings above, respondent will have met his

burden of production and petitioner will be liable for the

understatement penalty unless he can show reasonable cause,

reasonable basis, or substantial authority.

      Petitioner testified that he relied on the advice of his tax

return preparer as to his claimed deductions and that his lack of

substantiation was due to the loss of many of his receipts

through no fault of his own.    While a taxpayer’s reliance on the

specific advice of a tax return preparer may constitute

reasonable cause, petitioner has failed to offer testimony or

evidence regarding the qualifications of his tax return preparer



      16
      We therefore order below that the decision will be entered
under Rule 155.
                                - 23 -

or the specific advice he relied upon.     See sec. 1.6664-4(b)(2),

Example (1), Income Tax Regs.    Petitioner’s general statements

that he relied on his tax return preparer are not sufficient to

prove a reasonable basis, substantial authority, or reasonable

cause for his disallowed deductions.     Secs. 6662(d)(2)(B),

6664(c)(1).   Petitioner testified that he lost a portion of his

receipts for his claimed deductions during June 2003.     However,

petitioner provided limited substantiation of expenses incurred

after June 2003.   Additionally, his efforts at re-creating his

expenses incurred before June 2003 were inadequate.

Consequently, we hold that petitioner is liable for the accuracy-

related penalty pursuant to section 6662(a) for taxable year 2003

if the understatement of his income tax exceeds $5,000.

     The Court has considered all other arguments made by the

parties and, to the extent we have not addressed them herein, we

consider them moot, irrelevant, or without merit.

     On the basis of the foregoing,


                                           Decision will be entered

                                      under Rule 155.
