                     T.C. Summary Opinion 2012-1



                       UNITED STATES TAX COURT



         ROBERT L. HAND AND TINA A. MEILLEUR, Petitioners v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 13039-10S.              Filed January 3, 2012.



     John J. Weiler and Christian N. Weiler, for petitioners.

     Emile L. Hebert III, for respondent.



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

the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed.1      Pursuant to section

7463(b), the decision to be entered is not reviewable by any



     1
        Unless otherwise indicated, all subsequent 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.
                                 - 2 -

other court, and this opinion shall not be treated as precedent

for any other case.

     Respondent determined a deficiency in petitioners’ 2007

Federal income tax of $38,586 and an accuracy-related penalty of

$7,717.2    After concessions by the parties, the issues for

decision are:

     (1) Whether petitioners are entitled to a business expense

deduction under section 162(a) for expenses paid for flight

lessons.     We hold that they are not; and

     (2) whether petitioners are liable for the accuracy-related

penalty under section 6662(a).     We hold that they are.

                              Background

     Some of the facts have been stipulated, and they are so

found.     We incorporate by reference the parties’ stipulation of

facts and accompanying exhibits.

     Petitioners resided in the State of Louisiana when the

petition was filed.     All references to petitioner in the singular

are to petitioner Robert L. Hand.

     Petitioner is licensed as a financial adviser by the

National Association of Securities Dealers.     He has worked in the

financial industry for approximately 20 years and received a

master of business administration (M.B.A.) degree in 1994.     In

addition, petitioner is an associate commercial real estate


     2
         All dollar amounts are rounded to the nearest dollar.
                                - 3 -

broker (commercial realtor) licensed by the State of Louisiana

Real Estate Commission.    Petitioner Tina A. Meilleur is a

certified public accountant (C.P.A.) and attends continuing

education classes necessary to maintain her license.    She was

also a highly compensated director of a supply chain unit at

Entergy Corp. in 2007.3

     As a commercial realtor, petitioner identifies large

properties to list for sale and crafts detailed marketing

brochures for prospective buyers.    Sometime shortly after August

2005, petitioner began chartering airplanes to find and evaluate

properties from the air.    Petitioner continued this practice

throughout 2006 and 2007.    During each flight, a licensed pilot

flew the airplane while petitioner took aerial photographs of

properties to include in the marketing brochures that he

presented to prospective buyers.

     In late 2007, petitioner began taking flight lessons so that

he could obtain a private pilot’s license and pilot his own

plane.   In December of 2007, petitioner purchased a Cessna 172S

aircraft.   Petitioners filed a joint Federal income tax return

for 2007 and deducted the cost of the flight lessons as a

business expense on their Schedule C, Profit or Loss From

Business.   Petitioner is unable to provide any receipts or



     3
        Entergy Corp. is a utility company that, inter alia,
delivers electricity to utility customers in Louisiana.
                                 - 4 -

invoices from the original vendors for his flight lesson

expenses, and petitioners have conceded that they are not

entitled to deduct over $33,000 of other disallowed business

expenses.

                              Discussion

A.   Burden of Proof

      Generally, the Commissioner’s determinations are presumed

correct, and the taxpayer bears the burden of proving that those

determinations are erroneous.4    Rule 142(a); Welch v. Helvering,

290 U.S. 111, 115 (1933).     Deductions, in particular, are a

matter of legislative grace and are narrowly construed.     Rule

142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992);

New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).

Consequently, the taxpayer bears the burden of proving that he or

she is entitled to any deduction claimed.     Interstate Transit

Lines v. Commissioner, 319 U.S. 590, 593 (1943).

B.   Flight Lessons

      Under section 262, no deduction is allowed for personal,

living, or family expenses.    Section 1.262-1(b)(9), Income Tax

Regs., provides that a taxpayer’s expenditures for obtaining or



      4
        Pursuant to sec. 7491(a), the burden of proof as to
factual matters may shift to the Commissioner under certain
circumstances. Petitioners have neither alleged that sec.
7491(a) applies nor established their compliance with its
requirements. Accordingly, petitioners bear the burden of proof.
See Rule 142(a).
                               - 5 -

furthering education are not deductible unless they qualify as

business expenses under both section 162 and section 1.162-5,

Income Tax Regs.   Raines v. Commissioner, T.C. Memo. 1983-125.

     This Court has held that expenditures for flight training

constitute education expenses subject to section 1.162-5, Income

Tax Regs.   Lee v. Commissioner, T.C. Memo. 1981-26, affd. 723

F.2d 1424 (9th Cir. 1984).   Section 1.162-5(a), Income Tax Regs.,

provides that expenditures made by an individual for education

may be deductible as business expenses if the education maintains

or improves skills required by the individual’s trade or

business.   Whether education maintains or improves skills

required by a taxpayer’s trade or business is a question of fact.

Boser v. Commissioner, 77 T.C. 1124, 1131 (1981) (citing Baker v.

Commissioner, 51 T.C. 243, 247 (1968)), affd. without published

opinion (9th Cir., Dec. 22, 1983).     The burden of proof is on

petitioners to show that there was a direct and proximate

relationship between the flight lessons petitioner received and

the skills required to be a commercial realtor.     See id. at 1131

(citing Schwartz v. Commissioner, 69 T.C. 877, 889 (1978), and

Lund v. Commissioner, 46 T.C. 321, 331-332 (1966)).     On the

record before us, we are unable to conclude that petitioners have

satisfied their burden of proof.

     Petitioners contend that the cost of the flight lessons at

issue is an education expense directly related to petitioner’s
                                - 6 -

business as a commercial realtor.5      We are not convinced,

however, that the flight lessons petitioner received maintained

or improved the skills required to be a commercial realtor.     Sec.

1.162-5(a)(1), Income Tax Regs.    Petitioner is skilled at finding

properties and creating marketing brochures for prospective

buyers.    A disconnect exists, however, between these skills and

the flight lessons taken by petitioner.      Admittedly, evaluating

properties from the air and placing aerial photographs in

marketing brochures may be helpful to petitioner’s business.

However, in 2005, 2006, and 2007, petitioner was able to evaluate

properties and acquire aerial photographs without piloting a

plane.    Petitioner presented no evidence to explain why flying

lessons were now required in order for him to view properties or

obtain aerial photographs.    Although the correlation need not be

precise, petitioner has failed to persuade us that a direct or

proximate relationship exists between the flight lessons he

received and the skills required to be a commercial realtor.

Boser v. Commissioner, supra at 1131.

     Petitioners not only failed to carry their burden of proof

with respect to the requirements under section 1.162-5(a), Income

Tax Regs.; they also failed to prove that the flight lesson

expenses were ordinary and necessary as required by section



     5
        Petitioners do not contend that the flight lessons are
related to petitioner’s business as a financial adviser.
                                 - 7 -

162(a).   See Boser v. Commissioner, supra at 1132; Raines v.

Commissioner, supra.    Whether an expenditure is ordinary and

necessary is a question of fact.     Commissioner v. Heininger, 320

U.S. 467, 470 (1943).   In general, an expense is ordinary if it

is considered normal, usual, or customary in the context of the

particular trade or business out of which it arose, Deputy v. du

Pont, 308 U.S. 488, 495 (1940), and an expense is necessary if it

is appropriate and helpful to the operation of the taxpayer’s

trade or business, Commissioner v. Tellier, 383 U.S. 687, 689

(1966); Carbine v. Commissioner, 83 T.C. 356, 363 (1984), affd.

777 F.2d 662 (11th Cir. 1985).

      Petitioners provided no evidence to suggest that it was

normal, usual, or customary for commercial realtors to take

flight lessons.   Consequently, petitioners are not entitled to

deduct the flight lesson expenses under section 162(a).6

C.   Section 6662(a) Accuracy-Related Penalty

      Section 6662(a) and (b)(1) imposes a penalty equal to 20

percent of the amount of any underpayment attributable to

negligence or disregard of rules or regulations.    The term

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



      6
        Because we hold that petitioner’s expenditures for flight
lessons were not ordinary and did not maintain or improve his
skills as a commercial realtor, we need not decide whether those
lessons qualify him for a new trade or business, thus making the
expenditures nondeductible under sec. 1.162-5(b)(3), Income Tax
Regs.
                                - 8 -

comply with tax laws, and “disregard” includes any careless,

reckless, or intentional disregard of rules or regulations.      Sec.

6662(c).    Negligence also includes any failure to keep adequate

books and records or to substantiate items properly.    Sec.

1.6662-3(b)(1), Income Tax Regs.

       Section 6664(c)(1) provides an exception to the imposition

of the accuracy-related penalty if the taxpayer establishes that

there was reasonable cause for, and the taxpayer acted in good

faith with respect to, the underpayment.    Sec. 1.6664-4(a),

Income Tax Regs.    The determination of whether the taxpayer acted

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

basis, taking into account the pertinent facts and circumstances.

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

       With respect to a taxpayer’s liability for any penalty,

section 7491(c) places on the Commissioner the burden of

production, thereby requiring the Commissioner to come forward

with sufficient evidence indicating that it is appropriate to

impose the penalty.    Higbee v. Commissioner, 116 T.C. 438, 446-

447 (2001).    Once the Commissioner meets his burden of

production, the taxpayer must come forward with persuasive

evidence that the Commissioner’s determination is incorrect.     See

id. at 447; see also Rule 142(a); Welch v. Helvering, 290 U.S. at

115.
                               - 9 -

     Respondent has proven, and has therefore discharged his

burden of production under section 7491(c), that petitioners

failed to keep adequate records and properly substantiate the

flight lesson expenses and the amounts of disallowed business

expenses petitioners ultimately conceded.    See sec. 1.6662-

3(b)(1), Income Tax Regs.

     Petitioners have not met their burden of persuasion with

respect to reasonable cause and good faith.    Circumstances that

may indicate reasonable cause and good faith include an honest

misunderstanding of fact or law that is reasonable in light of

the experience, knowledge, and education of the taxpayers.      Sec.

1.6664-4(b)(1), Income Tax Regs.; see Higbee v. Commissioner,

supra at 449 (citing Remy v. Commissioner, T.C. Memo. 1997-72).

Petitioners are sophisticated taxpayers.    Petitioner Tina A.

Meilleur is a highly compensated department head of Entergy Corp.

and a C.P.A. who attends continuing education classes to maintain

her C.P.A. license.   Petitioner is a commercial realtor and a

licensed financial adviser who has worked in the financial

industry for over 20 years and holds an M.B.A. degree.

     Petitioner testified that he did not know he needed to

retain receipts or invoices for his business expenses.    However,

we are skeptical of this testimony, see Tokarski v. Commissioner,

87 T.C. 74, 77 (1986), and we are unable to conclude, given

petitioners’ experience, knowledge, and education, that this
                              - 10 -

alleged lack of knowledge is indicative of reasonable cause and

good faith.

     Petitioner alleges on brief that his tax preparer advised

him he did not need to retain receipts and invoices to

substantiate his expenses.   Statements in briefs, however, do not

constitute evidence.   Rule 143(c); see Tokarski v. Commissioner,

supra at 77.   The record itself contains insufficient evidence

for us to conclude that petitioner ever received such advice, and

petitioner never even called his preparer as a witness.    See

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

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

that petitioner received such advice, petitioner’s “Reliance on

* * * the advice of a professional tax advisor * * * does not

necessarily demonstrate reasonable cause and good faith.”    Sec.

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

     Thus, on the record before us, we are unable to conclude

that petitioners acted with reasonable cause and in good faith

within the meaning of section 6664(c)(1).   Accordingly,

petitioners are liable for the accuracy-related penalty under

section 6662(a) on that part of the underpayment attributable to

their deductions for (1) flight lessons and (2) the business

expenses they conceded.
                             - 11 -

                           Conclusion

     We have considered all of the arguments made by petitioners,

and, to the extent that we have not specifically addressed them,

we conclude they are unpersuasive.

     To reflect the foregoing, as well as the parties’

concessions,


                                     Decision will be entered

                              under Rule 155.
