                            T.C. Summary Opinion 2019-14



                            UNITED STATES TAX COURT



                   SUNDERAM KRISHNAN, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 16217-17S.                            Filed July 10, 2019.



      Sunderam Krishnan, pro se.

      Charles A. S. Wiseman, for respondent.



                                 SUMMARY OPINION


      PANUTHOS, 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


      1
          Unless otherwise indicated, all section references are to the Internal
                                                                           (continued...)
                                        -2-

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

for any other case.

      Respondent determined deficiencies and penalties in petitioner’s Federal

income tax for taxable years 2014 and 2015 (years in issue) as follows:

                                                             Penalty
                 Year               Deficiency             sec. 6662(a)
                 2014                  $4,000                 $800
                 2015                   1,957                   391

      The issues for decision are whether petitioner is: (1) entitled to deduct

unreimbursed employee business expenses, (2) entitled to deductions for moving

expenses, and (3) liable for accuracy-related penalties under section 6662(a).

                                    Background

      Some of the facts have been stipulated, and we incorporate the stipulation

and accompanying exhibits by this reference.

      Petitioner lived in California when he timely filed the petition. During the

years in issue petitioner was employed as a systems engineer.




      1
       (...continued)
Revenue Code (Code) in effect for the years in issue, all Rule references are to the
Tax Court Rules of Practice and Procedure, and amounts are rounded to the
nearest dollar.
                                          -3-

I.    Education and Professional Background

      Petitioner entered the United States in 2008 as an international exchange

student. He completed his bachelor’s degree in Milwaukee, Wisconsin, before

commencing graduate studies in San Antonio, Texas, in 2010. Petitioner

graduated with a master’s degree in electrical engineering from the University of

Texas, San Antonio, in 2012.

      In March 2013 petitioner was hired by Cambay Consulting Services, LLC

(Cambay), headquartered in Katy, Texas. A year later petitioner began work for

Cambay’s sister company SoftNice, Inc. (SoftNice), which is headquartered in

Allentown, Pennsylvania.

      Petitioner underwent corporate training in Houston, Texas, beginning in

March 2013 for approximately three months before returning to San Antonio.

Petitioner was offered his first contract project in September 2013. He worked on

the following client contracts until the time of trial:
                                         -4-

              Client                    Dates                 Location
      Siemens Medical           Sept. 2013-May 2014          Malvern, PA
       Solutions
      OneGas                    June 2014-Nov. 2014          Tulsa, OK
      SoftNice (in-house)       Jan. 2015-May 2015       Remote assignment1
      Esurance                  May 2015-Aug. 2015       San Francisco, CA
      Kaiser Permanente              Aug. 2015-            Pleasanton, CA
                                  2019 (trial date)

      1
        Petitioner worked remotely on an in-house project for SoftNice from
January 2015 to May 2015. Petitioner’s estimated time spent in San Antonio was
approximately two weeks during the five-month project. Petitioner spent much of
his remote work time traveling the country visiting friends and family in Kansas
City, Missouri, and Miami and Fort Lauderdale, Florida. Petitioner also worked at
the in-house project site in New Jersey for approximately three months.

      Cambay and SoftNice are consulting companies that contract to provide

technical staff to their clients on a project-by-project basis. In accordance with

corporate policy, neither company reimbursed petitioner for relocation, rent,

meals, telephone, internet, equipment, traveling, or commuting costs while he was

working on contract projects for its clients.

II.   Petitioner’s Living Situation

      From 2010 to 2012 petitioner lived in a room in his uncle’s four-bedroom

house in San Antonio while pursuing a master’s degree. Petitioner’s uncle and

aunt and their two children also lived in the house. Petitioner did not formally

lease the room from his uncle, nor did he pay him rent on a regular schedule. In
                                        -5-

lieu of formal rent payments petitioner purchased gifts for the children living in

the house or sporadically insisted on giving his uncle lump sums in cash.

      After graduation petitioner applied for work and continued to live at his

uncle’s house. Petitioner estimated his contributions to the household in San

Antonio. While petitioner offered vague testimony, no documentary evidence of

estimated household contributions was included in the record.

      Petitioner continued to store his belongings at his uncle’s house in San

Antonio during the years in issue, but he rarely visited or stayed at the house. In

2014 petitioner visited San Antonio for Christmas and New Year’s; he also visited

for other special occasions during the years in issue. Petitioner generally lived and

paid rent where he was stationed for work. From September 2013 until May 2014

he rented a shared apartment for $700 per month in Malvern, Pennsylvania. From

June through November 2014 petitioner paid rent of $522 per month while living

and working in Tulsa, Oklahoma. Although he listed the San Antonio residence as

his address while working remotely for SoftNice from January through May 2015,

petitioner visited the residence twice for an estimated total of two weeks’ time.

The remainder of the assignment was spent visiting friends and relatives in Kansas

City, Missouri, and Miami and Fort Lauderdale, Florida, in addition to three

months spent working at the in-house project site in New Jersey. Petitioner rented
                                         -6-

an apartment in California beginning in May 2015 and has resided and paid rent in

California since that time. Petitioner paid rent ranging from $825 to $900 while

living in California during tax year 2015.

III.   Petitioner’s Income Tax Returns

       Petitioner timely filed his Federal income tax returns for 2014 and 2015. He

hired a tax return preparer for both tax years, reporting the following income and

“above the line” deductions for moving expenses on Form 1040NR, U.S.

Nonresident Alien Income Tax Return, for taxable year 2014 and on Form 1040,

U.S. Individual Tax Return, for taxable year 2015:

                      Income                    2014           2015
            Total income                       $63,357       $44,235
            Moving expenses                     (1,500)       (1,000)
            Adjusted gross income               61,857        43,235

       Petitioner’s tax returns for the years in issue included Schedules A, Itemized

Deductions, on which he claimed various deductions including, as relevant here,

the following unreimbursed employee expenses as reported on Forms 2106,

Employee Business Expenses:
                                        -7-

                           Expenses                        2014       2015
      Parking fees, tolls, and transportation              $840       $880
      Travel expenses                                      7,140      3,000
      Business expenses:1
       Cell phone service                                    600       ---
       Internet service                                      540       ---
       Section 179                                         1,400      ---
         Total business expenses                           2,540     3,410
      Meals and entertainment (after 50% limitation)       5,070     5,290
       Total unreimbursed employee expenses               15,590    12,580

      1
       As shown on statement 1 to his Form 2106 for tax year 2014, petitioner’s
“business expenses” consisted of cell phone expenses, internet expenses, and a
“section 179” expense. Petitioner did not provide further details of his business
expenses on his 2015 tax return.

IV.   Notice of Deficiency

      On May 23, 2017, respondent issued a notice of deficiency to petitioner for

taxable years 2014 and 2015. Respondent disallowed petitioner’s unreimbursed

employee business expense deductions in full for both years, determining that

petitioner did not establish that they were ordinary and necessary to his business or

that the expenses were paid or incurred during the years in issue. Respondent also

disallowed petitioner’s reported moving expenses in full for both years because he

did not substantiate that they were moving expenses or that they were paid during

the years in issue. Petitioner timely petitioned this Court for redetermination.
                                        -8-

                                    Discussion

I.    Burden of Proof

      In general, the Commissioner’s determination set forth in a notice of

deficiency is presumed correct, and a taxpayer bears the burden of proving that the

determination is in error. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115

(1933).2 Deductions are a matter of legislative grace, and a taxpayer bears the

burden of proving that he is entitled to any deduction claimed. INDOPCO, Inc. v.

Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292

U.S. 435, 440 (1934).

      A taxpayer claiming a deduction on a Federal income tax return must

demonstrate that the deduction is provided for by statute and must further

substantiate that the expense to which the deduction relates has been paid or

incurred. Sec. 6001; Hradesky v. Commissioner, 65 T.C. 87, 89-90 (1975), aff’d

per curiam, 540 F.2d 821 (5th Cir. 1976); Meneguzzo v. Commissioner, 43 T.C.

824, 831-832 (1965); sec. 1.6001-1(a), Income Tax Regs. A taxpayer is required

to maintain records sufficient to enable the Commissioner to determine his correct


      2
       Pursuant to sec. 7491(a), the burden of proof as to factual matters shifts to
the Commissioner under certain circumstances. Petitioner has neither alleged that
sec. 7491(a) applies nor established his compliance with its requirements.
Petitioner therefore bears the burden of proof.
                                        -9-

tax liability. Sec. 6001; sec. 1.6001-1(a), Income Tax Regs. Such records must

substantiate both the amount and purpose of the claimed deductions. Higbee v.

Commissioner, 116 T.C. 438, 440 (2001).

II.   Unreimbursed Employee Expenses

      Section 162(a) allows deductions for all ordinary and necessary business

expenses paid or incurred during the taxable year in carrying on a trade or

business. Boyd v. Commissioner, 122 T.C. 305, 313 (2004). Performing services

as an employee constitutes a trade or business. Primuth v. Commissioner, 54 T.C.

374, 377-378 (1970). In order to deduct employee business expenses, a taxpayer

must not have received reimbursement and must not have had the right to obtain

reimbursement from his employer. See Orvis v. Commissioner, 788 F.2d 1406,

1408 (9th Cir. 1986), aff’g T.C. Memo. 1984-533.

      When a taxpayer establishes that he has paid a deductible trade or business

expense but is unable to adequately substantiate the amount, the Court may

estimate the amount and allow a deduction to that extent. Cohan v.

Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930). To apply the Cohan rule,

however, the Court must have a reasonable basis upon which to make an estimate.

Vanicek v. Commissioner, 85 T.C. 731, 742-743 (1985).
                                        - 10 -

      Congress overrode the Cohan rule with section 274(d), which requires strict

substantiation for certain categories of expenses; in the absence of evidence

demonstrating the exact amounts of those expenses, deductions for them are to be

disallowed entirely. Sanford v. Commissioner, 50 T.C. 823, 827-828 (1968), aff’d

per curiam, 412 F.2d 201 (2d Cir. 1969). Expenses subject to section 274(d)

include travel and meal expenses as well as expenses for listed property such as

passenger automobiles. Secs. 274(d), 280F(d)(4). A taxpayer must substantiate

by adequate records or by sufficient evidence corroborating his own statement the

amount, time, place, and business purpose of these expenditures. Sec. 274(d); sec.

1.274-5T(c)(1), Temporary Income Tax Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985).

      Substantiation by adequate records requires the taxpayer to maintain an

account book, a diary, a log, a statement of expense, trip sheets, or a similar record

prepared contemporaneously with the expenditure and documentary evidence

(e.g., receipts or bills) of certain expenditures. Sec. 1.274-5(c)(2)(iii), Income Tax

Regs.; sec. 1.274-5T(c)(2), Temporary Income Tax Regs., 50 Fed. Reg. 46017

(Nov. 6, 1985). Substantiation by other sufficient evidence requires the

production of corroborative evidence in support of the taxpayer’s statement

specifically detailing the required elements. Sec. 1.274-5T(c)(3), Temporary

Income Tax Regs., 50 Fed. Reg. 46020 (Nov. 6, 1985).
                                        - 11 -

      Petitioner reported expenses totaling $15,590 and $12,580 for tax years

2014 and 2015, respectively, in connection with his employment as a systems

engineer. According to respondent, petitioner has failed to establish that the

expenses were paid or, if paid, that the expenses were business related.

      A. Parking Fees, Tolls, and Transportation

      Petitioner deducted $840 for 2014 and $880 for 2015 for parking fees, tolls,

and transportation. Petitioner did not provide any evidence that he owned a

vehicle in either year and in fact provided evidence to the contrary showing that he

rented a car to move from Pennsylvania to Oklahoma in June 2014. Furthermore,

petitioner did not provide a contemporaneous mileage log, toll or parking fee

receipts, or any other evidence to substantiate his claimed deductions.

Accordingly, petitioner is not entitled to parking fee, toll, and transportation

deductions for the years in issue.

      B.   Travel, Meals, and Lodging “Away From Home”

      Expenses incurred by an individual for travel, meals, and lodging are

normally considered nondeductible personal, living, or family expenses. Sec.

262(a); sec. 1.262-1(b)(3), (5), Income Tax Regs. Section 162(a)(2) permits

taxpayers to deduct all ordinary and necessary travel expenses, including meals

and lodging, incurred while “away from home” in the pursuit of a trade or
                                       - 12 -

business. Commissioner v. Flowers, 326 U.S. 465, 470 (1946); sec. 1.162-2,

Income Tax Regs. Such expenses must be incurred while away from home

overnight. United States v. Correll, 389 U.S. 299 (1967). The purpose of the

“away from home” deduction is “to mitigate the burden of the taxpayer who,

because of the exigencies of his trade or business, must maintain two places of

abode and thereby incur additional and duplicate living expenses.” Kroll v.

Commissioner, 49 T.C. 557, 562 (1968).

      The Court has interpreted a taxpayer’s “home” for purposes of section

162(a)(2) to be his principal place of business. Mitchell v. Commissioner, 74 T.C.

578, 581 (1980). If a taxpayer has no principal place of business, a permanent

place of residence may be considered a tax home. Barone v. Commissioner, 85

T.C. 462, 465 (1985), aff’d without published opinion, 807 F.2d 177 (9th Cir.

1986). A taxpayer has a home for this purpose only when he has incurred

substantial continuing living expenses at the permanent place of residence. James

v. United States, 308 F.2d 204, 207-208 (9th Cir. 1962); Barone v. Commissioner,

85 T.C. at 465-466. If a taxpayer fits into neither of the above categories, then he

is considered to be an itinerant with a “tax home” wherever he happens to work.

Deamer v. Commissioner, 752 F.2d 337, 339 (8th Cir. 1985), aff’g T.C. Memo.

1984-63; Hicks v. Commissioner, 47 T.C. 71, 73 (1966); Rev. Rul. 73-529, 1973-2
                                       - 13 -

C.B. 37; see also Hantzis v. Commissioner, 638 F.2d 248, 253 (1st Cir. 1981)

(“[W]here a taxpayer is constantly on the move due to his work, he is never ‘away’

from home.”), rev’g T.C. Memo. 1979-299.

      Following the extensive caselaw on this point, we will deny traveling

expense deductions where a taxpayer is itinerant. Rosenspan v. United States, 438

F.2d 905 (2d Cir. 1971); James, 308 F.2d at 207; Wirth v. Commissioner, 61 T.C.

855 (1974); Chimento v. Commissioner, 52 T.C. 1067 (1969), aff’d per curiam,

438 F.2d 643 (3d Cir. 1971); Hicks v. Commissioner, 47 T.C. 71. Courts have

examined the following objective factors set forth in Rev. Rul. 73-529, supra, to

determine whether a taxpayer has a tax home: (1) whether there exists a business

connection to the location of the alleged tax home, (2) whether the taxpayer incurs

duplicate living expenses while traveling and maintaining the alleged tax home,

and (3) whether personal connections exist to the alleged tax home. See

Henderson v. Commissioner, 143 F.3d 497, 500 (9th Cir. 1998), aff’g T.C. Memo.

1995-559; Minick v. Commissioner, T.C. Memo. 2010-12.

      Petitioner contends that because of the transitory and temporary nature of

his contract work during the years in issue, his uncle’s house in San Antonio was

his tax home. Therefore he asserts that his expenses while working in various

locales should be considered incurred “away from home”. Respondent contends
                                       - 14 -

that petitioner had no tax home during the years in issue and should be considered

an itinerant.

      We first consider whether there was any business connection to San

Antonio. See Rev. Rul. 73-529, supra. Petitioner was not required to live in San

Antonio by his employer after he gained employment in March 2013. Although

petitioner identified his location as San Antonio from January 2015 through May

2015 while working on an in-house project for SoftNice, he spent only a total of

two weeks in San Antonio. For the remainder of the project he chose to work

from various locations around the country. We find that petitioner had no real

business connection to San Antonio.

      Second, we consider whether petitioner incurred duplicate living expenses.

See id. Petitioner has not provided any evidence other than his own testimony that

he paid rent, utilities, or any other household expenses at the house in San Antonio

during the tax years in issue. A letter in the record from petitioner’s uncle merely

confirms that petitioner was an “occupant” at his home starting in August 2011,

not a renter. Although we accept petitioner’s testimony that he made some gifts to

his uncle’s family, he has not proven that he incurred a duplication of living

expenses while working at his contract sites.
                                        - 15 -

      Third, we consider whether petitioner provided sufficient evidence that he

maintained personal connections to San Antonio. See id. Petitioner made

infrequent visits to the San Antonio house after gaining employment, despite the

fact that his uncle’s family continued to live there. Although he stored certain

personal belongings at the house, he did not reside in the house during 2014 and

2015. We find that petitioner did not maintain sufficient personal connections to

San Antonio for the purposes of section 162(a)(2).

      Considering these facts, we find petitioner does not meet the threshold

requirements for his uncle’s house to be deemed his permanent residence.

Petitioner did not have any other permanent residence during 2014 and through

April 2015. For that period, petitioner was an itinerant and was not “away from

home” within the intent and meaning of section 162(a)(2). See Barone v.

Commissioner, 85 T.C. at 465; Wirth v. Commissioner, 61 T.C. at 859. While

petitioner rented an apartment in California beginning in May 2015, it is not at all

clear whether he intended to make California his permanent place of residence

from that time forward. At trial petitioner testified that he did not decide that he

would reside in California permanently until some point in 2016. Even if it was

petitioner’s intention to permanently reside in California from May to December

2015, he has not satisfied any of the criteria for “away from home” expenses with
                                        - 16 -

respect to that period. Thus, if petitioner’s tax home was in California, he had no

business reason to travel to San Antonio; and there is little, if any, evidence of

duplicate expenses paid. See Rev. Rul. 73-529, supra. Accordingly, petitioner is

not entitled to a deduction under section 162 for travel, meals, and lodging

expenses paid or incurred while away from home during the years in issue. See

Commissioner v. Flowers, 326 U.S. 465.

      C.   Business Expenses

      The remaining unreimbursed employee expense items for consideration are

the deductions claimed and identified by petitioner as “business expenses”, $2,540

for 2014 and $3,410 for 2015. Petitioner included a schedule detailing his

business expenses with his 2014 return but did not include a similar schedule with

his 2015 return. His testimony indicates that he reported similar business

expenses for each year. We will use the categories he provided for 2014 as a

guide to our analysis of his deductible expenses for each year. The categories are

cell phone service and internet expenses. Petitioner also reported a $1,400

“section 179” expense related to his laptop computer ($1,200) and cell phone

($200) for tax year 2014.

      Petitioner claimed unreimbursed employee business expense deductions of

$600 ($50 per month) for cell phone service and $540 ($45 per month) for internet
                                        - 17 -

service for 2014. Neither cell phone service nor internet service expenses are

subject to the strict substantiation requirements of section 274(d).3 Therefore,

pursuant to the Cohan rule, the amount of deductible expenses can be estimated by

this Court provided we have a reasonable basis for making an estimate of the

amount of the expenses related to business use. See Vanicek v. Commissioner, 85

T.C. at 742-743 (estimate must have reasonable evidentiary basis). Evidence in

the record regarding the nature of petitioner’s employment and his bank records

support petitioner’s claimed cell phone service and internet service expense

deductions. Petitioner’s bank statements provide evidence that his estimated

business expense of $50 per month for cell phone service and $45 per month for

internet service were only a fraction of his total charges from his service provider,

AT&T. His monthly bill payments ranged from $168 to $491 per month during

the years in issue and were regularly between $200 and $300. Petitioner was

      3
       For taxable years beginning after December 31, 2009, cell phones are no
longer included in the definition of listed property under sec. 280F(d)(4), which
was amended by the Small Business Jobs Act of 2010, Pub. L. No. 111-240, sec.
2043(a), 124 Stat. at 2560. As a result of this amendment, deductions for cell
phone service expenses during the years in issue are not subject to the strict
substantiation rules of sec. 274(d). Internet service expenses have been
characterized as utility expenses rather than as expenses related to the use of listed
property. See Barnes v. Commissioner, T.C. Memo. 2016-212, at *71-*72; Verma
v. Commissioner, T.C. Memo. 2001-132, slip op. at 12. So characterized, internet
service expenses are also not governed by the strict substantiation rules of sec.
274(d).
                                       - 18 -

required to have both cell phone and internet access for his employment as a

systems engineer, and he has provided a reasonable basis to accept his estimated

expenses. Accordingly, we hold that petitioner is entitled to an unreimbursed

employee business expense deduction totaling $1,140 for each of tax years 2014

and 2015.

      Section 167(a)(1) allows depreciation deductions “for the exhaustion, wear

and tear” of property used in a taxpayer’s trade or business which are generally

determined under section 168(a) on the basis of the applicable depreciation

method, convention, and recovery period. For some depreciable property, a

taxpayer can accelerate depreciation by deducting its cost as an expense for the

taxable year in which the property is placed in service. See sec. 179(a). To prove

entitlement to a depreciation deduction, a taxpayer must also establish the

property’s depreciable basis by substantiating its cost, recovery period, and any

previous allowable depreciation. See Cluck v. Commissioner, 105 T.C. 324, 337

(1995). To deduct depreciation on any “listed property”, a taxpayer must meet the

section 274(d) heightened substantiation requirements. See sec. 280F(d)(4); see

also, e.g., WSK & Sons, Inc. v. Commissioner, T.C. Memo. 2015-204, at *12-*13

(outlining section 274(d) requirements for passenger automobiles).
                                         - 19 -

        There is nothing in the record that adequately identifies the assets for which

petitioner claimed the “section 179” deduction for 2014. Petitioner has not

properly substantiated the claimed “section 179” expense deduction nor provided

a basis on which we might estimate the expenses that are not subject to the

substantiation requirements of section 274(d). See Cohan v. Commissioner, 39

F.2d at 543-544. Consequently, we sustain respondent’s determination

disallowing the “section 179” expense deduction for tax year 2014.

III.    Moving Expenses

        Section 217(a) allows as a deduction for “moving expenses paid or incurred

during the taxable year in connection with the commencement of work by the

taxpayer as an employee or as a self-employed individual at a new principal place

of work.” Section 217(b) generally defines the term “moving expenses” as the

reasonable expenses of moving household goods and personal effects from the

former residence to the new residence and related travel including lodging. Only

one trip per taxpayer qualifies for a deduction. Sec. 1.217-2(b)(4), Income Tax

Regs.

        Petitioner moved between multiple locations during the tax years in issue.

See supra pp. 4-6. He claimed $1,500 and $1,000 in moving expense deductions

for tax years 2014 and 2015, respectively. Petitioner provided a single piece of
                                         - 20 -

substantiating evidence to support his moving expense deductions related to his

move from Pennsylvania to Oklahoma in June 2014. The evidence, a rental car

confirmation from Budget car rental, confirms payment of $482 to rent a car with

pickup in Newark, New Jersey, on June 19, 2014, and dropoff in Tulsa on June 21,

2014.4 At trial petitioner testified that he split the cost of the car rental expense

with a friend for an actual rental car payment of $241. The timing of this trip

aligns with petitioner’s June 2014 start date for his contract assignment with

OneGas in Tulsa.

      Section 217(c) imposes conditions that taxpayers must satisfy to be eligible

to deduct moving expenses. The condition at issue in this case requires that,

during the 12-month period immediately following a taxpayer’s arrival in the

general location of his new principal place of work, the taxpayer be employed full

time in that general location for at least 39 weeks. Sec. 217(c)(2)(A). The

condition of section 217(c)(2) shall not apply “if the taxpayer is unable to satisfy

such condition by reason of * * * involuntary separation (other than for willful

misconduct) from the service of, or transfer for the benefit of, an employer after


      4
        It is unclear why petitioner rented a car in New Jersey rather than
Pennsylvania for his move to Oklahoma. This may have been a result of
petitioner’s splitting car rental moving expenses with a friend. However, evidence
in the record and petitioner’s testimony both confirm the time line of the move.
                                       - 21 -

obtaining full-time employment in which the taxpayer could reasonably have been

expected to satisfy such condition.” Sec. 217(d)(1)(B).

      Petitioner has not met his burden of showing that he satisfies the conditions

for allowance of a deduction for moving expenses under section 217(c). Petitioner

fails to meet the condition of section 217(c)(2), as he ended his assignment with

OneGas at some point in November 2014--at most 23 weeks after his arrival on

June 21 of the same year.

      Under section 217(d)(1)(B), the condition of section 217(c)(2) does not

apply in certain circumstances where an employee is transferred after a move to a

new principal place of employment. See Whatley v. Commissioner, T.C. Memo.

1984-444. Section 217(d) was added to the Code by the Tax Reform Act of 1969,

Pub. L. No. 91-172, sec. 231(a), 83 Stat. at 578. Before the addition of subsection

(d), there was no provision for waiving the 39-week requirement imposed by

section 217(c)(2). Section 217(d)(1) was added to eliminate the hardship that

arises when an employee “is prevented from satisfying the test by

circumstances beyond his control, such as his death or an unexpected action of his

employer.” S. Rept. No. 91-552 (1969), 1969-3 C.B. 423, 493; see also H.R. Rept.

No. 91-413 (Part 1) (1969), 1969-3 C.B. 200, 249; J. Comm. on Internal Revenue
                                         - 22 -

Taxation, Summary of H.R. 13270, Tax Reform Act of 1969, at 39 (J. Comm.

Print Nov. 18, 1969).

      The regulations clarify which circumstances are deemed an “unexpected

action” of an employer that would be “beyond * * * [the taxpayer’s] control”.

S. Rept. No. 91-552, 1969-3 C.B. at 493. Section 1.217-2(d)(1)(ii), Income Tax

Regs., provides, in part, as follows: “Thus, for example, if the taxpayer at the time

of transfer was not advised by his employer that he planned to transfer him within

6 months to another principal place of work, the taxpayer could, in the absence of

other factors, reasonably have been expected to satisfy the minimum employment

period condition at the time of the first transfer.”

      Petitioner was informed by SoftNice that his contract was for fewer than 39

weeks. See sec. 217(c) and (d); sec. 1.217-2(d)(1)(ii), Income Tax Regs.

Petitioner “knew, going in, that it was just a six-month project.” Consequently, we

conclude that petitioner does not meet the condition of section 217(c)(2).

      Petitioner has not provided substantiation for his remaining reported

moving expenses for tax years 2014 and 2015. Accordingly, petitioner is not

entitled to moving expense deductions for the tax years in issue.
                                       - 23 -

IV.   Accuracy-related Penalty

      Respondent determined that petitioner is liable for an accuracy-related

penalty for each year in issue under section 6662(a) and (b)(1), asserting that

petitioner’s underpayments result from negligence or disregard of rules and

regulations. A taxpayer may be liable for a 20% accuracy-related penalty on the

portion of an underpayment attributable to negligence or disregard of rules.

Sec. 6662(a) and (b)(1). Pursuant to section 7491(c), the Commissioner bears the

burden of production and must produce sufficient evidence showing that the

imposition of the penalty is appropriate in a particular case.5 Higbee v.

Commissioner, 116 T.C. at 446.




      5
       Respondent’s burden of production for penalties imposed under sec. 6662
includes the burden of producing evidence establishing that the penalties were
“personally approved (in writing) by the immediate supervisor of the individual
making such determination” as required by sec. 6751(b)(1), unless a statutory
exception applies. See Chai v. Commissioner, 851 F.3d 190, 217-218, 221-222
(2d Cir. 2017), aff’g in part, rev’g in part T.C. Memo. 2015-42; Graev v.
Commissioner, 149 T.C. 485 (2017), supplementing and overruling in part 147
T.C. 460 (2016). Written approval of the initial penalty determination under sec.
6751(b)(1) must be obtained before the first formal communication of penalties
giving a taxpayer a right to challenge them. See Clay v. Commissioner, 152 T.C.
__, __ (slip op. at 44) (Apr. 24, 2019). The sec. 6662 accuracy-related penalties
determined in the notice of deficiency were properly approved as required by sec.
6751(b), and respondent has proven sufficient facts to satisfy the burden of
production as to that issue.
                                        - 24 -

      “Negligence” includes any failure to make a reasonable attempt to comply

with the Code and any failure to keep adequate books and records or to

substantiate items properly. Sec. 6662(c); sec. 1.6662-3(b)(1), Income Tax Regs.

Negligence has also been defined as the failure to exercise due care or the failure

to do what a reasonable person would do under the circumstances. See Allen v.

Commissioner, 92 T.C. 1, 12 (1989), aff’d, 925 F.2d 348 (9th Cir. 1991). The

term “disregard” includes any careless, reckless, or intentional disregard. Sec.

6662(c). Disregard of rules or regulations is “careless” if the taxpayer does not

exercise reasonable diligence in determining the correctness of a return position

that is contrary to a rule or regulation. Sec. 1.6662-3(b)(2), Income Tax Regs.

Disregard is “reckless” if the taxpayer makes little or no effort to determine

whether a rule or regulation exists, under circumstances which demonstrate a

substantial deviation from the standard of conduct that a reasonable person would

observe. Id. Disregard is “intentional” if the taxpayer knows of the rule or

regulation that is disregarded. Id. Respondent asserts that petitioner’s improper

claims for deductions for moving expenses and unreimbursed employee expenses

combined with his failure to maintain adequate records indicate petitioner’s

negligence and disregard for rules and regulations. Respondent has satisfied his

burden to show that the penalties are appropriate.
                                          - 25 -

      Once the Commissioner meets his burden, a taxpayer must come forward

with persuasive evidence that the Commissioner’s determination is incorrect.

Rule 142(a); Higbee v. Commissioner, 116 T.C. at 447. To the extent that a

taxpayer shows there was reasonable cause for an underpayment and that he acted

in good faith, section 6664(c)(1) prohibits the imposition of a penalty under

section 6662(a). Sec. 1.6664-4(a), Income Tax Regs. The decision whether a

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

basis, taking into account all pertinent facts and circumstances, including: (1) the

taxpayer’s efforts to assess the proper tax liability, (2) the knowledge and

experience of the taxpayer, and (3) reliance on the advice of a tax professional. Id.

para. (b)(1). Generally, the most important factor is the extent of the taxpayer’s

efforts to assess his or her proper tax liability. Id.

      Reliance on the advice of a tax professional or an honest misunderstanding

of the law that is reasonable in the light of the facts and circumstances may

support a conclusion that a taxpayer acted with reasonable cause and in good faith

with respect to a reported position. Id.; see Higbee v. Commissioner, 116 T.C. at

448-449. Reliance on the advice of a professional must be reasonable under the

circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs.; see also Pasternak v.

Commissioner, 990 F.2d 893, 903 (6th Cir. 1993), aff’g Donahue v.
                                        - 26 -

Commissioner, T.C. Memo. 1991-181; Neonatology Assocs., P.A. v.

Commissioner, 115 T.C. 43, 97-99 (2000), aff’d, 299 F.3d 221 (3d Cir. 2002).

The advice must be based upon an analysis of all pertinent facts and the applicable

law and must not be based on unreasonable factual or legal assumptions. Sec.

1.6664-4(c)(1)(i) and (ii), Income Tax Regs. It cannot be based on an assumption

that the taxpayer knows, or has reason to know, is unlikely to be true. Id.

subdiv. (ii).

       Petitioner engaged a return preparer to prepare his Federal income tax

returns for the years in issue. At trial petitioner testified that he answered a “few

questions” for his tax return preparer but did not explain what information he

provided or how the preparer arrived at the amounts of expenses petitioner

deducted on the returns. On the basis of the record, we conclude that petitioner

knew he was not incurring duplicate expenses. In addition the amounts claimed

on petitioner’s tax returns far exceeded those justified by his testimony. Petitioner

failed to establish reasonable cause for the positions he took on his returns and

good faith in taking those positions within the meaning of section 6664(c)(1).

Petitioner did not make a reasonable good-faith effort to correctly assess his tax

liability, particularly in regard to his claim of duplicate expenses “away from

home” when he was not paying regular or significant rent or utilities at his uncle’s
                                       - 27 -

San Antonio home. On the basis of our findings, we sustain respondent’s

determination to the extent of the underpayments decided for tax years 2014 and

2015.

        In reaching our holdings herein, we have considered all arguments made by

the parties, and to the extent not mentioned above, we find them to be moot,

irrelevant, or without merit.

        To reflect the foregoing,


                                                Decision will be entered under

                                      Rule 155.
