                  T.C. Summary Opinion 2007-80



                      UNITED STATES TAX COURT



                DUYET MINH NGUYEN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 4073-06S.               Filed May 23, 2007.



     Duyet Minh Nguyen, pro se.

     Nhi T. Luu, for respondent.



     GERBER, 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.   Pursuant to section

7463(b),1 the decision to be entered is not reviewable by any




     1
       All section references are to the Internal Revenue Code in
effect during the period at 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.

     On November 28, 2005, respondent mailed a notice of

deficiency to petitioner determining a $10,086 deficiency in

petitioner’s 2002 Federal income tax.   Respondent also determined

additions to tax under section 6651(a)(1) and (2) and under

section 6654(a) in the amounts of $2,203.20, $1,468.80, and

$326.11, respectively.   The deficiency determined by respondent

was attributable to the determination that petitioner failed to

file a return and/or report income from the categories of wages,

interest, dividends, pension, miscellaneous income in the amount

of $11,015 and self-employment income in the amount of $30,811.

Petitioner has agreed to the $30,811.00 of self-employment income

and $3,371.38 of wages determined by respondent but contends that

he is entitled to deductions and exemptions that were not allowed

or determined by respondent.

     The parties’ stipulated facts and exhibits are found and

incorporated by this reference.   Petitioner, Duyet Minh Nguyen,

resided in Portland, Oregon, at the time his petition was filed

in this case.   During 2002 petitioner was married, and he engaged

in real estate sales as an independent contractor for Oregon

First, Inc. (Oregon First), a mortgage lender in Beaverton,

Oregon.   Petitioner was licensed to sell real estate in Oregon.

During 2002, petitioner earned self-employment income in the
                               - 3 -

amount of $30,811.50, comprising real estate sales commissions in

connection with his association with Oregon First.    Under an

expense reimbursement agreement with Oregon First, $17.51 of

office expenses was deducted from the real estate commissions

that petitioner received from Oregon First during 2002 so that he

received net commissions of $30,793.99.

     During 2002, petitioner was also employed as a loan officer

by Columbia Resources, Inc. (Columbia), of Warrenton, Oregon.

Petitioner received $3,371.382 in wages from Columbia for the

2002 taxable year, from which $294.00 of income tax was withheld.

     Petitioner did not make estimated tax payments for the 2002

tax year, and he failed to file a Federal income tax return for

that year.   Respondent prepared a substitute return for

petitioner’s 2002 tax year under section 6020(b).

     Respondent concedes that petitioner incurred ordinary and

necessary business expenses for the taxable year 2002 for member

fees and real estate listing fees in the amounts of $300 and

$420, respectively.   In reaching his determination of

petitioner’s 2002 income tax deficiency, respondent allowed a

personal exemption and a standard deduction in the amounts of

$3,000 and $3,925, respectively.    During 2002, petitioner resided

with his wife and two children.    There remains for our


     2
       Petitioner also had real estate rental income and
deductions, but this adjustment was not pursued and is considered
conceded by respondent.
                                - 4 -

consideration additional Schedule C, Profit or Loss From

Business, expenses claimed by petitioner in connection with his

self-employment income involving the sale of real estate.

     We are convinced from the record of this case that

petitioner incurred expenses in the conduct of his real estate

business in excess of the amount allowed by respondent.    In such

circumstances, even though petitioner has not fully satisfied the

substantiation requirements, there is a basis on which to

estimate the expenses incurred.   See Cohan v. Commissioner, 39

F.2d 540 (2d Cir. 1930).

     During the year 2002, petitioner incurred expenses operating

an automobile in the conduct of his real estate business.

Petitioner had sufficient records for us to find that he operated

his automobile at least 100 miles per week, or 5,200 miles for

the year, in the pursuit of his real estate business.   For the

taxable year 2002, taxpayers, who were entitled to claim use of

an automobile for business purposes, could use the standard

allowance of 36 cents per mile in lieu of claiming depreciation

and operating expenses.    Accordingly, petitioner is entitled to

deduct $1,872 as a Schedule C business expense for 2002.

     During the year 2002 petitioner maintained a room in his

home as his office, which represented one-seventh of his

residence.   Petitioner’s brother also slept in that same room,

which contained a bed, computer, and related office equipment.

Petitioner seeks to deduct one-seventh of the cost of maintaining
                                - 5 -

his home as a home office expense.      Such deductions are governed

by section 280A which generally disallows such deductions, unless

petitioner’s situation falls within one of the following three

exceptions:    (1) A portion of the dwelling unit is used

exclusively on a regular basis as the taxpayer’s principal place

of business; (2) a portion of the dwelling unit is used

exclusively on a regular basis as a place of business which is

used by patients, clients, or customers in meeting or dealing

with the taxpayer in the normal course of his trade or business;

or (3) the office is a separate structure not attached to the

dwelling unit and that structure is used in connection with the

taxpayer’s trade or business.    The record is clear that

petitioner’s home office was not in a structure separate from his

residence.    Accordingly, petitioner must establish either that

his home office was used exclusively as his principal place of

business or as a location for petitioner to meet with clients in

the normal course of his business.

     Petitioner admitted that his brother used the “office room”

for purposes of sleeping.    Even though such use is tangential and

does not, as a practical matter, detract from the use of the room

as an office, the statutory language requires that the usage be

exclusive.    Petitioner also stated that he used the offices of

Oregon First to meet real estate clients.     Under these

circumstances we are compelled by the statute to deny

petitioner’s claim for a home office expense deduction.     See
                               - 6 -

generally Frankel v. Commissioner, 82 T.C. 318 (1984)

     Petitioner used his cell phone in the conduct of his real

estate business during the taxable year 2002.   During 2002,

petitioner paid $53 per month for his cell phone service.     He is,

therefore, entitled to a $636 deduction as a Schedule C business

expense for 2002.   Petitioner also sought to deduct 70 percent of

the cost of his home telephone as being for business use.

Petitioner’s home phone is not deductible.   See sec. 262(b).

     During 2002 petitioner paid $199 for education and/or

educational materials in connection with his real estate business

activity.   We find and hold that petitioner is entitled to a $199

educational deduction as a Schedule C business expense for 2002.

     During 2002 petitioner incurred expenses for advertising in

newspapers and periodicals in order to attract customers for his

real estate business.   He incurred $230 quarterly to place his

advertisement in a local periodical and he ran eight

advertisements in a local newspaper at a cost of $25.00 each, and

he had one additional advertisement that cost $8.09.    We,

accordingly, hold that petitioner is entitled to a Schedule C

business deduction in the amount of $1,128.09 for advertising

during 2002.

     Petitioner owned a computer that cost $1,048, and he used it

in his real estate business during 2002.   Petitioner is entitled

to a $209 depreciation business deduction for his 2002 tax year.
                                - 7 -

       Petitioner also claimed dependency deductions for his two

children, but he was unable to show that he paid over one-half of

their support for the 2002 year or that he was otherwise entitled

to claim them as his dependents.    Finally, petitioner claimed

meals and entertainment expenses, but he was unable to identify

the names of the clients and other essential information required

for the allowance of a deduction under section 274(d).

       Although petitioner may have incurred additional expenses in

the conduct of his real estate business, the record is

insufficient to enable the Court to allow any deductions beyond

those we have decided.

       Respondent determined that petitioner was liable for

additions to tax under section 6651(a)(1) and (2), and section

6654(a).    Section 6651(a) provides for an addition to tax of 5

percent per month, up to 25 percent, for failure to file that is

not due to reasonable cause.    Petitioner has not shown reasonable

cause for failing to file a return.     See Bebb v. Commissioner, 36

T.C. 170, 173 (1961).    Petitioner’s reason for not filing or

paying the tax was that he could not afford to pay.     Section

6654(a) imposes an addition to tax for failure to pay estimated

tax.    That addition to tax is mandatory, unless a taxpayer falls

within one of the exceptions in section 6654(e).     Petitioner has

not shown that his situation falls within those exceptions.

       With respect to the additions to tax, respondent bears a

burden of production.    See sec. 7491(c).   The record in this
                                 - 8 -

case, including petitioner’s admission that he did not file,

satisfies respondent’s burden as to the additions to tax under

the statute.   Upon petitioner’s failure to file a return,

respondent caused a “Substitute for a Return” to be prepared

under section 6020(b).   Accordingly, petitioner is liable for

additions to tax under section 6651(a)(1) and (2), and section

6654(a).

     To reflect the foregoing,

                                         Decision will be entered

                                 under Rule 155.
