                      T.C. Summary Opinion 2005-2



                        UNITED STATES TAX COURT



     RODOLFO GARCIA, JR. AND PENNY A. GARCIA, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 16010-03S.             Filed January 3, 2005.


     Rodolfo Garcia, Jr. and Penny A. Garcia, pro sese.

     Thomas L. Fenner, for respondent.



     KROUPA, Judge:    This case was heard pursuant to the

provisions of section 74631 of the Internal Revenue Code in

effect at the time of trial.    The decision to be entered is not

reviewable by any other court, and this opinion should not be

cited as authority.


     1
      All 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, unless otherwise
indicated.
                                 - 2 -

     Respondent determined a deficiency of $7,9772 in petitioners’

2000 Federal income tax and an accuracy-related penalty under

section 6662 of $1,595 that resulted from respondent disallowing

certain of the $26,3563 of expenses petitioners claimed were

ordinary and necessary business expenses under section 162(a)

regarding petitioner Penny Garcia’s (Mrs. Garcia) employment as a

high school English teacher and for petitioner Rodolfo Garcia’s

(Mr. Garcia) employment as a high school golf coach.   The parties

filed a stipulation of settled issues in which respondent

conceded additional amounts beyond the expenses respondent

allowed in the statutory notice of deficiency.   After these

concessions,4 the issues for decision are:

     (1) Whether Mrs. Garcia’s claimed expenses of $2,657 for

movies, theater tickets, videos, supplies, film and film

developing, books, drycleaning, periodicals, gifts, and travel

qualify as ordinary and necessary business expenses under section

162(a).   We hold they do not.




     2
      All dollar amounts are rounded to the nearest dollar.
     3
      Petitioners claimed the $26,356 as employee business
expenses before application of the 2-percent limitation in sec.
67. All dollar amounts of the expenses petitioners claimed are
without regard to the 2-percent limitation.
     4
      The agreed adjustments result in a deficiency of $3,791.
The remaining adjustments still in dispute total $4,467. If we
hold in favor of respondent on all these amounts, there will be a
deficiency of $5,051.
                                 - 3 -

     (2) Whether section 274(a)(3) precludes Mr. Garcia from

deducting golf club membership fees5 as ordinary and necessary

business expenses under section 162(a).     We hold it does.

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

The stipulation of facts and accompanying exhibits are

incorporated by this reference.     Petitioners resided in La Porte,

Texas, at the time they filed the petition.

     In 2000, Mrs. Garcia was an English teacher, and Mr. Garcia

was the head golf coach at Deer Park High School in Houston,

Texas.     Petitioners claimed deductions for employee business

expenses on Schedule A, Itemized Deductions, of their 2000

Federal income tax return in connection with Mrs. Garcia’s

employment as a high school English teacher and Mr. Garcia’s

employment as a high school golf coach.

     Mrs. Garcia claimed expenses for movies, theater tickets,

videos, supplies, film and film developing costs, drycleaning,

book and periodical subscriptions, gifts, and travel.     The $365

movie expense included movie theater admission tickets for Mrs.

Garcia to see 73 movies she deemed relevant in teaching English.


     5
      In the stipulation of settled issues, the parties still
dispute $144 for supplies, $35 for cell phone expenses and $3 for
meals regarding expenses Mr. Garcia claimed in addition to the
country club membership fees of $1,628. Because petitioners
failed to address the expenses other than the country club fees
during trial or on brief, petitioners are deemed to have conceded
these disputed amounts. The only expenses still at issue
regarding expenses Mr. Garcia claimed are the $1,628 country club
membership fees.
                               - 4 -

She also claimed $57 in theater expense for tickets to see

“Camelot”, and to visit the Houston Museum of Natural Science and

the Houston Arena Theater.   She claimed a $31 video expense for

video rentals she viewed at home, not in the classroom.   She also

claimed $533 for supplies, which included costs for a flashlight,

camera batteries, reading glasses, Hawaiian shirts, stamps,

hangers, dish detergent, photo albums, and lotion.   Mrs. Garcia’s

supplies expense also included valet parking for the school prom

and a donation to the school’s booster club.

     Mrs. Garcia took pictures of her students and claimed $113

in film and photo development expenses.   She claimed $55 in

cleaning expenses for the cost of dry cleaning clothes she wore

while teaching and claimed $474 in subscription expenses for

books and periodicals she kept in her classroom.   These included

a newspaper subscription to the Houston Chronicle daily newspaper

and magazine subscriptions to Glamour, Ski, and Prevention.    Mrs.

Garcia also claimed $696 in gift expenses, which included costs

to purchase birthday cards, wedding gifts, and graduation gifts

for both high school and college graduations.   In addition, Mrs.

Garcia claimed $631 in travel expenses, which consisted of the

cost of Mrs. Garcia’s Britrail pass on petitioners’ trip to

England in 2000, her admission to see the Roman baths in England,

hotel accommodations in Reading, England, and tours and

entertainment on a Scandinavian cruise.
                                 - 5 -

     Because the school did not provide a facility where Mr.

Garcia or his golf team could practice and maintain their golf

skills, Mr. Garcia claimed expenses for membership dues to the

Baywood Country Club.6    The country club allowed the team to use

its practice putting green three times a week free of charge

because Mr. Garcia was a member.     Mr. Garcia also had unlimited

access as a member to the club’s facilities to practice and

maintain his golf skills.

         Petitioners timely filed a petition for a redetermination

of the expenses respondent disallowed in a statutory notice of

deficiency dated July 17, 2003.     After concessions, we must

decide whether these claimed expenses still in dispute are

ordinary and necessary business expenses under section 162(a).

     The Commissioner's determinations are generally presumed

correct, and the taxpayer bears the burden of proving otherwise.

Rule 142(a).     Although section 7491(a) shifts the burden of proof

to the Commissioner in certain situations involving examinations

commenced after July 22, 1998, as here, petitioners do not assert

that section 7491(a) shifts the burden to respondent.     Moreover,

the burden of proof remains with petitioners because they did not

keep records to establish the business purpose of the employee


     6
      Although petitioners claimed other expenses Mr. Garcia paid
to the Baywood Country Club, respondent conceded all expenses
other than the membership dues expense of $1,628, which is still
in dispute.
                                  - 6 -

business expenses they claimed on their return.        Petitioners

conceded in the stipulation of settled issues most of the

employee business expenses claimed on their return.        They

therefore bear the burden of proving they are entitled to a

greater deduction than that allowed by respondent.

        Taxpayers may deduct ordinary and necessary expenses paid or

incurred during the taxable year in carrying on a trade or

business.     Sec. 162(a).   The term “ordinary and necessary

business expenses” means only those expenses that are ordinary

and necessary and are directly attributable to the trade or

business.     Sec. 1.162-17(a), Income Tax Regs.     The term does not

include personal, living, or family expenses.        Id.; see sec.

262(a).     Simply because an expense would not have been incurred

but for the taxpayer’s engaging in a trade or business is

insufficient to allow a deduction.        The nature of the expense

must not be personal or otherwise nondeductible.        Drake v.

Commissioner, 52 T.C. 842, 844 (1969).

        There are many expenses that are helpful, even essential, to

one's business, but which are not deductible in our tax system.

See Carroll v. Commissioner, 51 T.C. 213, 215 (1968), affd. 418

F.2d 91 (7th Cir. 1969).     Expenses of driving to and from work,

for example, are not deductible.     Sec. 1.162-2(e), Income Tax

Regs.     Expenses for clothing worn in a taxpayer's trade or

business, and the costs of laundering the clothing, are not
                               - 7 -

deductible if the clothing is adaptable for nonbusiness wear.

See, e.g., Hawbaker v. Commissioner, T.C. Memo. 1983-665 (car

salesman not entitled to deduct costs of cleaning suits that were

easily soiled with grease and dirt).   In addition, to claim a

deduction for teaching supplies it is not enough that the

supplies are helpful to the students and appropriate for use in

the classroom; they must also be directly related to the

taxpayer’s job as a teacher and a necessary expense of being a

teacher.   Wheatland v. Commissioner, T.C. Memo. 1964-95.

     Respondent argues, and we agree, that petitioners’ claimed

expenses relating to Mrs. Garcia’s employment as a high school

English teacher are personal in nature and not ordinary and

necessary business expenses.   Giving birthday cards and wedding

presents, renting movies, visiting the Museum of Natural Science,

contributing to a holiday party, subscribing to periodicals of

general interest, and purchasing tissues, lotion, and cleaning

supplies are not directly attributable to the performance of the

duties of a high school English teacher.     These are personal

expenses and are thus not deductible under section 162(a) as

ordinary and necessary business expenses.7    Sec. 262(a); Noland v.


     7
      Effective for tax years beginning after Dec. 31, 2001,
elementary and secondary school teachers may deduct certain
school supplies up to $250 from their gross income. Sec.
62(a)(2)(D), (d)(1). As the year at issue is 2000, this
provision is not at issue. Respondent nonetheless allowed Mrs.
Garcia and Mr. Garcia each an amount in excess of $250.
                                  - 8 -

Commissioner, 269 F.2d 108 (4th Cir. 1959).

     We next address whether petitioners may deduct expenses

relating to Mrs. Garcia’s European travels.       Mrs. Garcia claims

that her experiences during her travels gave her new insights

into some of the topics she taught in her English class.       She

only deducted the costs of her travels to places she argues were

relevant to classroom material.

     No deduction is allowable for expenses for travel as a form

of education.   Sec. 274(m)(2).    Moreover, expenditures by a

taxpayer for education are deductible only if the education

maintains or improves skills required in the individual’s

employment, or the education meets the express requirements of

the individual’s employer imposed as a condition of employment.

Sec. 1.162-5(a), Income Tax Regs.     The taxpayer must establish

that there is a direct relationship between the costs incurred

and the skills required in his or her employment.        Jorgensen v.

Commissioner, T.C. Memo. 2000-138.        See Carroll v. Commissioner,

supra (simply because the education is helpful in the performance

of the taxpayer’s employment does not establish that its cost is

deductible).    While we recognize that Mrs. Garcia may have gained

insights during her travels that were helpful to her role as a

high school English teacher, she has not established a direct

relationship between her travels and the specific skills required

of her as a high school English teacher.       Nor has she shown that
                                 - 9 -

the travels were expressly required by her employer.

Accordingly, petitioners are not entitled to deduct the expenses

related to Mrs. Garcia’s European travels.

     We next address whether the amount Mr. Garcia paid for

country club dues is deductible.    Section 274 contains several

exceptions to the deductibility of ordinary and necessary

expenses incurred in carrying on a trade or business.      Expenses

paid or incurred for membership in any club organized for

business, pleasure, recreation, or other social purpose are not

deductible.   Sec. 274(a)(3).   More specifically, expenses paid

for golf and country club dues are not deductible.      Sec. 1.274-

2(a)(2)(iii)(a), Income Tax Regs.    In addition, the legislative

history to section 274(a)(3) emphasizes that it is a strict

nondeductibility rule.   See H. Rept. 103-111, at 646 (1993),

1993-3 C.B. 167, 222.    No one, including golf professionals or

instructors, may deduct club dues.       Congress explained that the

non-deductibility rule eased compliance with former law that

required determining whether the primary purpose of belonging to

the country club was personal.     Id.    Accordingly, petitioners are

not entitled to deduct $1,628 that they paid in 2000 for Mr.

Garcia’s membership in the Baywood Country Club.

     We find that petitioners failed to establish that they were

entitled to deduct these disputed expenses as ordinary and

necessary expenses for their respective teaching positions.
                              - 10 -

Accordingly, we sustain respondent’s determination as to the

claimed expenses still in dispute.

     We turn now to whether petitioners are liable for the

accuracy-related penalty under section 6662(a).     Respondent has

the burden of production under section 7491(c) and must come

forward with sufficient evidence that it is appropriate to impose

the penalty.   See Higbee v. Commissioner, 116 T.C. 438, 446-447

(2001).

     Respondent determined that petitioners are liable for the

accuracy-related penalty for a substantial understatement of

income tax under section 6662(b)(2).     There is a substantial

understatement of income tax if the amount of the understatement

exceeds the greater of either 10 percent of the tax required to

be shown on the return, or $5,000.     Sec. 6662(d)(1)(A).

     Petitioners reported taxable income of $44,474 and Federal

income tax of $8,156.   Respondent determined in the statutory

notice of deficiency that petitioners’ taxable income was $77,955

and that petitioners had an income tax deficiency of $7,977.8     We

are satisfied that petitioners substantially understated the

income tax required to be shown on their return and that

respondent has met his burden of production with respect to the

accuracy-related penalty.

     8
      As we discussed supra note 4, because we find for
respondent on all amounts still in dispute, petitioners’
deficiency is $5,051.
                              - 11 -

     The accuracy-related penalty under section 6662(a) does not

apply to any portion of an underpayment, however, if it is shown

that there was reasonable cause for, and that the taxpayer acted

in good faith with respect to, that portion.    Sec. 6664(c)(1);

sec. 1.6664-4(b), Income Tax Regs.     The determination of whether

the taxpayer acted with reasonable cause and in good faith

depends on the pertinent facts and circumstances, including the

taxpayer’s efforts to assess his or her proper tax liability and

the knowledge and experience of the taxpayer.    Sec.

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

     Petitioners argue that the penalty should not apply because

they should be able to deduct expenses as other professionals are

able to deduct business-related expenses.    Petitioners contend

that they incurred these expenses because the school district

lacked the funds necessary to develop and improve their teaching

abilities as an English teacher and a golf coach.    While the

Commissioner bears the burden of production under section

7491(c), taxpayers bear the burden of proof with regard to

reasonable cause.   Higbee v. Commissioner, supra at 446.

     We find that petitioners failed to establish that there was

reasonable cause for the underpayment.    We recognize that Mr.

Garcia may have had good intentions when he joined the country

club to give his team a place to practice golf and that some of

Mrs. Garcia's expenses were incurred with her students' best
                              - 12 -

interests in mind.   The fact remains, however, that petitioners

failed to establish how the expenses at issue were directly

related to either petitioner’s trade or business of earning

income as an educator, and were, in certain instances, explicitly

not deductible by operation of statute.   See sec. 274(a)(3),

(m)(2); sec. 1.274-2(a)(2)(iii)(a), Income Tax Regs.   Petitioners

also did not consult a professional tax advisor.   While

apparently motivated by a desire to enhance the education of

their students, petitioners have failed to show reasonable cause

for the underpayment caused by petitioners’ claimed expenses.   We

therefore sustain respondent's determination regarding the

accuracy-related penalty under section 6662(a).

     To reflect the concessions of the parties,


                                          Decision will be entered

                                    under Rule 155.
