                  T.C. Summary Opinion 2003-114



                     UNITED STATES TAX COURT



              MARIE-FRANCINE T. GROW, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 2913-02S.                  Filed August 19, 2003.


     Marie-Francine T. Grow, pro se.

     Lorianne D. Masano, for respondent.



     POWELL, Special Trial Judge:   This case was heard pursuant

to the provisions of section 74631 of the Internal Revenue Code

in effect at the time the petition was filed.    The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority.




1
   Unless otherwise indicated, subsequent section references are
to the Internal Revenue Code in effect for the year in issue.
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     Respondent determined a deficiency and an accuracy-related

penalty under section 6662(a) in petitioner’s 1998 Federal income

tax of $4,247 and $849.40, respectively.      The issues are (1)

whether petitioner is entitled to deductions on Schedule C,

Profit or Loss From Business, for expenses of $21,442, (2)

whether income shown on the Schedule C is understated by $1,597,

(3) whether petitioner is liable for the accuracy-related penalty

under section 6662(a), and (4) whether petitioner is entitled to

relief as an innocent spouse under section 6015.      Petitioner

resided in Lady Lake, Florida, at the time the petition was

filed.

                             Background

     The facts may be summarized as follows.      Petitioner was

divorced in December 1999.    For the taxable year 1998, petitioner

and her former husband filed a joint Federal income tax return.

On Schedule C of that return, they reported income of $3,571 and

deductions of $21,442 from a photography equipment rental

business.    The deductions claimed consisted of:

            Car and truck expenses                    $13,471
            Depreciation                                3,441
            Legal and professional services               175
            Office expense                                 41
            Supplies                                    1,028
            Utilities                                     573
            Computer upgrade                            1,028
            Telephone                                     182
            Work tools                                    321
            Postage                                       118
            Travel expenses                             1,064
                                - 3 -

     As we understand, the business consisted of renting

photographic and audiovisual equipment primarily for conventions.

This aspect of the Schedule C business concerned the activities

of petitioner’s former husband.    The former husband was employed

by Multi-Media Unlimited, which apparently was a similar

business, and High Definition Digital, the nature of which is not

defined in the record.    The former husband owned a Jeep

automobile that he used in his employment, for commuting, and in

his Schedule C activity.    At trial, petitioner could not produce

any record or log as to his use of the Jeep.

     The Schedule C also included a second business described as

“public data research”.    This activity was conducted by

petitioner.    Petitioner performed one research project in this

activity during 1998 and was not paid for that project.

     The 1998 Federal income tax return was prepared by a

certified public accountant using copies and summaries of records

compiled by petitioner.    Respondent disallowed the Schedule C

deductions for failure to substantiate and increased the Schedule

C income based on income of the former husband reported by third

parties on Forms 1099-MISC, Miscellaneous Income.    Petitioner’s

former husband did not file a petition with this Court and,

although notified of petitioner’s claim for relief from liability

as an innocent spouse, he did not seek to intervene in these

proceedings.   When petitioner and her former husband divorced the
                                - 4 -

records pertaining to the Schedule C activities remained with the

former husband.    Petitioner attempted unsuccessfully to obtain

those records.

     The revenue agent who conducted the audit determined that

petitioner was entitled to relief as an innocent spouse under

section 6015(f).    That determination was overruled on review.

The reviewer decided that she had knowledge of the understatement

and had not established any hardship.     The Appeals Officer

adopted that recommendation.

                             Discussion

Schedule C Deductions

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

necessary expenses incurred in carrying on a trade or business.

Section 274(d), however, provides that no deduction is allowed

for certain expenses unless the taxpayer “substantiates by

adequate records or by sufficient evidence corroborating the

taxpayer’s own statement”, inter alia, the time and place of the

travel and the business purpose of an expense.     The deductions

that fall within section 274(d) include travel expenses, sec.

274(d)(1), and deductions “with respect to any listed property

(as defined in section 280F(d)(4)”, sec. 274(d)(4).     Included

within the ambit of “listed property” are passenger automobiles

and “computer or peripheral equipment”.     Sec. 280F(d)(4)(A).

There is an exception for computers and peripheral equipment used
                                - 5 -

exclusively at a regular business establishment.    A portion of a

dwelling may be treated as a regular business establishment if it

meets the requirement of section 280A(c)(1).   Under the latter

provision the portion of the dwelling must be used “exclusively

* * * on a regular basis–-(A) as the principal place of business

for any trade or business of the taxpayer”.    Sec. 280A(c)(1)(A).

Similarly, section 280A(a) prohibits any deduction “with respect

to the use of a dwelling unit which is used by the taxpayer * * *

as a residence.”   This is the same exception that is contained in

section 280A(c)(1)(A).

     Petitioner’s former husband has possession of the business

records, and petitioner was not successful in getting the records

from him.    Accordingly, she presented no evidence concerning the

deduction claimed for travel expenses; therefore, no deduction is

allowable.   Furthermore, as we understand, the computers and

computer equipment involved here were used in petitioner’s

dwelling, and there is no evidence in the record that any part of

the dwelling was used exclusively for business.    Respondent’s

disallowance of these deductions is sustained.    Similarly,

deductions for expenses related to the dwelling are not

allowable.   There is no evidence pertaining to the remaining

deductions, and the deductions claimed with regard to these items

cannot be allowed.
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Unreported Income

     Respondent’s determination of additional Schedule C income

of $1,597 is based on third-party information submitted on Forms

1099-MISC.   Petitioner does not dispute that her former husband

may have received the income reported.    We sustain respondent’s

determination with respect to this issue.

Penalty Under Section 6662(a)

     Relevant here, section 6662(a) imposes a penalty in the

amount of 20 percent of the underpayment due, inter alia, to

negligence or to a substantial understatement of tax.    Neither in

the notice of deficiency nor at trial did respondent specify

which ground applied here.   We do not find that the negligence

penalty is appropriate here with regard to this petitioner, and

therefore, we focus on whether there was a substantial

understatement.   A substantial understatement is defined, inter

alia, as an understatement of tax that exceeds 10 percent of the

tax required to be shown on the return.   Sec. 6662(d)(1)(A)(i).

The understatement here exceeds 10 percent of the tax required to

be shown on the return.   See sec. 6662(d)(2).   Petitioner has not

shown that any of the circumstances contained in section

6662(d)(2)(B) apply.

Innocent Spouse Relief

     A requesting spouse may elect relief from joint and several

liability under section 6015.   There are three types of relief
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available:    (1) Section 6015(b)(1) provides full relief from

joint and several liability; (2) section 6015(c) provides

separate tax liability available to divorced or separated

taxpayers; and (3) section 6015(f) provides equitable relief from

joint and several liability in certain circumstances if section

6015(b) and (c) are unavailable.    For our purposes here we are

willing to assume that petitioner is not eligible for relief

under either section 6015(b) or (c).     We then turn to section

6015(f).

     Section 6015(f) provides:

           SEC. 6015(f). Equitable Relief.–-Under procedures
           prescribed by the Secretary, if--

                (1) taking into account all the facts and
           circumstances, it is inequitable to hold the individual
           liable for any unpaid tax or any deficiency (or any
           portion of either); and

                (2) relief is not available to such individual
           under subsection (b) or (c),

     the Secretary may relieve such individual of such liability.

     To prevail, petitioner must show that respondent’s denial of

equitable relief under section 6015(f) was an abuse of

discretion.    Jonson v. Commissioner, 118 T.C. 106, 125 (2002);

Cheshire v. Commissioner, 115 T.C. 183, 198 (2000), affd. 282

F.3d 326 (5th Cir. 2002); Butler v. Commissioner, 114 T.C. 276,

292 (2000).    As directed by section 6015(f), respondent

prescribed procedures to use in determining whether the

requesting spouse qualifies for relief under section 6015(f).
                                - 8 -

Those procedures are found in Rev. Proc. 2000-15, 2000-1 C.B.

447.2    The revenue procedure includes a partial list of the

positive and negative factors to be considered, including whether

the requesting spouse is divorced, whether the requesting spouse

would suffer undue economic hardship, whether the requesting

spouse “had no reason to know of the items giving rise to the

deficiency”, and whether the requesting spouse significantly

benefited from the items giving rise to the deficiency.     See Rev.

Proc. 2000-15, sec. 4.03(1) and (2), 2000-1 C.B. at 448-449.      We

are at a loss to explain respondent’s comment that petitioner has

not shown undue economic hardship.      In a Statement of

Disagreement as to respondent’s denial of innocent spouse relief

petitioner stated that she suffered from fibromyalgia and could

not work, she had to live at a friend’s house because she could

not afford her own home, her former husband is not paying alimony

as required by the divorce decree, and she did not make “ends

meet.”    This statement has not been questioned by respondent.    It

seems that respondent was exclusively focused on whether she knew

or had reason to know of the items that gave rise to the

deficiency.    But, even if we assume that she did, “No single

factor will be determinative of whether equitable relief will or

will not be granted in any particular case.      Rather all factors


2
   Rev. Proc. 2000-15, sec. 3, 2000-1 C.B. 447, 448, is
applicable for any liability for tax arising on or before July
22, 1998, that was unpaid on that date.
                               - 9 -

will be considered and weighed appropriately.”     Rev. Proc. 2000-

15, sec. 4.03, 2000-1 C.B. at 448.

     Finally, we would be hard pressed to find that petitioner

derived a significant benefit from the items that gave rise to

the deficiency.   The loss from the Schedule C was used to offset

the former husband’s income and not petitioner’s income.

     In sum, we find that all factors considered support the

conclusion that petitioner is entitled to relief under section

6015(f) and that respondent’s denial of relief was an abuse of

discretion.

     Reviewed and adopted as the report of the Small Tax Case

Division.

                                            Decision will be entered

                                       for petitioner.
