                          T.C. Memo. 1996-135



                        UNITED STATES TAX COURT



               DEAN W. AND TAMMY R. MAY, Petitioners v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



        Docket No. 9607-94.                 Filed March 19, 1996.



        Dean W. May, pro se.

        Diane L. Worland, for respondent.



                          MEMORANDUM OPINION

        CARLUZZO, Special Trial Judge:   This case was heard pursuant

to the provisions of section 7443A(b)(3) and Rules 180, 181, and

182.1

        1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue. All
Rule references are to the Tax Court Rules of Practice and
Procedure.
                                 - 2 -

     Respondent determined deficiencies in petitioners' 1990 and

1991 Federal income taxes in the amounts of $3,190 and $2,941,

respectively.   The issues for decision are:   (1) Whether

petitioners are entitled to trade or business expense deductions

for payments to religious organizations made during the years

1990 and 1991; and (2) whether the self-employment tax imposed by

section 1401 is applicable to the earnings from Dean W. May's

piano service and sales business for the years in issue.

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

The stipulation of facts and the exhibits attached thereto are

incorporated herein by this reference.   During the years in

issue, petitioners were husband and wife and filed joint Federal

income tax returns.   At the time the petition was filed,

petitioners resided in Terre Haute, Indiana.    References to

petitioner are to Dean W. May.

Background

     During the years 1990 and 1991 petitioners were members of

the Maryland Community Church, an interdenominational church in

Terre Haute, Indiana.   Also during 1990, petitioners were members

of Sugar Creek Baptist Church in Indianapolis, Indiana.

Petitioners made payments to the Maryland Community Church in the

amounts of $2,220 and $3,545 in 1990 and 1991, respectively.

Petitioners also made payments to Sugar Creek Baptist Church in

the amount of $1,383 in 1990.
                               - 3 -

     During the years in issue, petitioner operated a piano

service and sales business.   Petitioner has been self-employed in

this business since 1990 and has been self-employed in other

unidentified businesses since 1983.    Petitioner reported the

income and expenses attributable to his piano service and sales

business on Schedules C for the years in issue.    For each year,

along with other business expense deductions not in dispute,

petitioner deducted as "other expenses" the payments made to the

aforementioned religious organizations.    Although petitioner

reported net profit on his Schedules C for 1990 and 1991,

petitioner did not file a Schedule SE, Computation of Social

Security Self-Employment Tax, or pay self-employment tax on the

amount of net profit earned from the business for either year.

     On January 6, 1992, petitioner completed a Form 4029,

Application for Exemption from Tax on Self-employment Income and

Waiver of Benefits, and forwarded it to the Internal Revenue

Service.   On the Form 4029 petitioner stated, in part:


     I certify that I am and continuously have been a member
     of Church of Jesus Christ, Terre Haute, Indiana, since
     20 Feb 1977 and as a follower of the established
     teachings of that group, I am conscientiously opposed
     to accept any benefits of any private or public
     insurance that makes payments in the event of death,
     disability, old age, or retirement or makes payments
     toward the cost of, or provides services for, medical
     care. Public insurance includes any insurance system
     established by the Social Security Act.
                                 - 4 -

Petitioner's application for exemption was denied by respondent

on September 20, 1994.

                            Discussion

1. Business Expense Deductions

     As stated, petitioners claimed deductions for payments to

religious organizations on their Schedules C for the years 1990

and 1991.   Respondent disallowed the deductions upon the ground

that petitioners failed to establish that the payments were

ordinary and necessary business expenses.

     Respondent's determinations are presumed correct, and

petitioners bear the burden of proving that such determinations

are erroneous.   Rule 142(a); Welch v. Helvering, 290 U.S. 111,

115 (1933).   Furthermore, deductions are a matter of legislative

grace, and the taxpayer bears the burden of proving that he or

she is entitled to any deduction claimed.   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); Welch v. Helvering,

supra.

     In general, section 162(a) provides a deduction for all

ordinary and necessary expenses paid or incurred by a taxpayer

during the taxable year in carrying on a trade or business.    As

used in section 162(a), "ordinary" has been defined as that which

is "normal, usual, or customary" in the taxpayer's trade or

business.   Deputy v. DuPont, 308 U.S. 488, 495 (1940).

"Necessary" has been construed to mean "appropriate" or "helpful"
                               - 5 -

in the development of the taxpayer's business.     Welch v.

Helvering, supra.

     Petitioner did not adequately explain why the payments were

appropriate or helpful to his business, or how he expected them

to produce commensurate benefits for his business, and we fail to

see how such payments could be considered normal, usual, or

customary in the operation of a piano service and sales business.

Because petitioners have failed to establish that the payments

were ordinary and necessary business expenses within the meaning

of section 162(a), respondent's adjustment disallowing the

business deduction for each year is sustained.2

2. Self-Employment Tax

     In addition to other taxes, section 1401 imposes a tax on

the self-employment income of an individual.    With the exception

of circumstances not present here, section 1402(b) defines self-

employment income as net earnings from self-employment derived by

an individual.   Sec. 1402(b)(2).   The term "net earnings from


     2
      In the computation of the deficiencies, respondent allowed
the payments in dispute as charitable contribution deductions
pursuant to sec. 170. The provisions of sec. 162(b) and sec.
1.162-15(a), Income Tax Regs. (which deny deductions under sec.
162(a) for contributions deductible under sec. 170), however,
were not relied upon by respondent in her notice of deficiency or
in her brief. Consequently, we did not directly consider the
applicability of those sections. Other than respondent's
recharacterization, the record is insufficient to allow for an
independent determination of whether the payments in dispute
constituted charitable contributions within the meaning of secs.
162(b) and 170. For a discussion on this point, see Marquis v.
Commissioner, 49 T.C. 695 (1968).
                              - 6 -

self-employment" means gross income derived by an individual from

any trade or business carried on by such individual, less allowed

deductions attributable to such trade or business.     Sec. 1402(a).

Petitioner agrees that but for his religious convictions, the

income earned in connection with his piano service and sales

business would be subject to self-employment tax.     Petitioner

argues, however, that he is exempt from self-employment tax based

upon his religious beliefs.

     Section 1402(g) provides an exemption from payment of the

self-employment tax to taxpayers conscientiously opposed to

accepting the benefits of any private or public insurance on

religious grounds if certain requirements are met.3    Among these

     3
      Sec. 1402(g) provides:
     (1) Exemption.--Any individual may file an application
     * * * for an exemption from the tax imposed by this
     chapter if he is a member of a recognized religious
     sect or division thereof and is an adherent of
     established tenets or teachings of such sect or
     division by reason of which he is conscientiously
     opposed to acceptance of the benefits of any private or
     public insurance which makes payments in the event of
     death, disability, old-age, or retirement or makes
     payments toward the cost of, or provides services for,
     medical care (including the benefits of any insurance
     system established by the Social Security Act). Such
     exemption may be granted only if the application
     contains or is accompanied by--

          (A) such evidence of such individual's
          membership in, and adherence to the tenets or
          teachings of, the sect or division thereof as
          the Secretary may require for purposes of
          determining such individual's compliance with
          the preceding sentence, and

                                                      (continued...)
                              - 7 -

requirements, the taxpayer seeking an exemption must be a member

of a recognized religious sect or division thereof and must

adhere to the sect's or division's established tenets or

teachings that promote opposition to acceptance of the benefits

of private or public insurance.    Taxpayers seeking the exemption

must file a Form 4029 with the Internal Revenue Service.     Sec.

1.1402(h)-1(b), Income Tax Regs.   Petitioners bear the burden of

proving their entitlement to the exemption.   Rule 142(a).




     3
      (...continued)
          (B) his waiver of all benefits and other
          payments under titles II and XVIII of the
          Social Security Act on the basis of his wages
          and self-employment income as well as all
          such benefits and other payments to him on
          the basis of the wages and self-employment
          income of any other person,

     and only if the Secretary of Health and Human Services
     finds that--

          (C) such sect or division thereof has the
          established tenets or teachings referred to
          in the preceding sentence,

          (D) it is the practice, and has been for a
          period of time which he deems to be
          substantial, for members of such sect or
          division thereof to make provision for their
          dependent members which in his judgment is
          reasonable in view of their general level of
          living, and

          (E) such sect or division thereof has been in
          existence at all times since December 31,
          1950.
                               - 8 -

     The Form 4029 prepared by petitioner and filed with the

Internal Revenue Service represented that petitioner had

continuously been a member of the Church of Jesus Christ since

1977, and that as a follower of the established teachings of that

organization, he conscientiously opposed being covered under

private or public insurance programs.   At trial, however,

petitioner admitted that the Church of Jesus Christ did not exist

and that the reference to the organization related to a

theoretical collection of churches that adhere to basic tenets of

the Christian faith.   Petitioner argues that he should be exempt

from self-employment tax based on his belief that "the philosophy

of the social security system is diametrically opposed to the

faith that [he] participate[s] in" whether or not he belongs to a

recognized religious sect described in section 1402(g).

     The exemption provided by section 1402(g) is narrowly drawn,

however, and applies only to individuals who are members of a

"recognized religious sect or division thereof" and who are

"[adherents] of established tenets or teachings of such sect or

division by reason of which [they are] conscientiously opposed to

acceptance of the benefits of any private or public insurance" as

outlined in the statute.   Petitioner has presented no evidence

that he is a member of a recognized religious sect, the tenets or

teachings of which are opposed to private or public insurance

programs.   Petitioner's personal religious beliefs, as sincere as

they might be, are not a substitute for the requirements of the
                               - 9 -

statute.   Hughes v. Commissioner, 81 T.C. 683 (1983); Palmer v.

Commissioner, 52 T.C. 310 (1969); Stradley v. Commissioner, T.C.

Memo. 1986-424.   It is clear the petitioner does not come within

the provisions of section 1402(g).

     Petitioner next argues that the denial of the exemption from

self-employment tax represents an attempt to regulate his

religious beliefs in violation of the First Amendment.

Specifically, petitioner argues the following:

     Other religious groups have been granted exemption. To
     deny me that same exemption would effectively establish
     a class of religious people that enjoy privileges of
     the federal government unattainable by others. That is
     the establishment of one religion more favored than
     others. The First Amendment of the Constitution
     forbids the government from this kind of practice.

On several occasions this Court and other Courts have considered

similar arguments and found them to be without merit.    Droz v.

Commissioner, 48 F.3d 1120 (9th Cir. 1995), affg. an Oral Opinion

of this Court; Randolph v. Commissioner, 74 T.C. 284 (1980);

Henson v. Commissioner, 66 T.C. 835 (1976); Palmer v.

Commissioner, 52 T.C. 310 (1969); Grieve v. Commissioner, T.C.

Memo. 1986-453.   We can find nothing in the instant case to

distinguish it from the above cases.   Accordingly, we find the

reasoning of those opinions to be dispositive of this argument.

The denial of exemption from self-employment tax is not in

violation of petitioner's First Amendment rights.   Thus, we

sustain respondent's determination that petitioners are liable

for self-employment tax for the years in issue.
                        - 10 -

To reflect the foregoing,

                                 Decision will be entered

                            for respondent.
