                               T.C. Memo. 2013-240



                         UNITED STATES TAX COURT



             WILLIAM L. COR AND JANA K. COR, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 10202-12.                        Filed October 22, 2013.



      William L. Cor and Jana K. Cor, pro sese.

      Steven I. Josephy, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


      COHEN, Judge: Respondent determined a $13,282 deficiency in

petitioners’ Federal income tax for 2010 and a $2,656.40 section 6662(a) penalty.

After concessions, the issues for decision are whether petitioners are entitled to

itemized deductions beyond those respondent conceded and whether they are
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[*2] liable for the accuracy-related penalty. Unless otherwise indicated, 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.

                               FINDINGS OF FACT

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

incorporated in our findings by this reference. Petitioners resided in Nevada when

they filed their petition.

       William Cor (petitioner) is a mechanical engineer and was employed by

National Security Tech, LLC (National Security) during the years 2008 through

2010. National Security hired petitioner to work at a remote test site called

JASPER (JASPER site), in the Nevada desert. Direct public transportation to the

JASPER site was unavailable, and petitioner commuted by car. Petitioner

calculated that his commute from petitioners’ residence in North Las Vegas to

work and back was approximately 160 miles a day, four days a week. Petitioner

kept no log or records of the expenses of his commute.

       On their 2010 joint Federal income tax return, petitioners reported adjusted

gross income of $120,502, itemized deductions of $51,053, and total tax of

$3,223. On their Schedule A, Itemized Deductions, petitioners reported gifts to

charity of $14,657 and unreimbursed employee expenses of $29,457. The
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[*3] reported employee expenses consisted primarily of commuting costs.

Petitioners included, as an expense, $150 per commute day for the three hours that

petitioner spent commuting.

      Petitioners also attached to their return two Schedules C, Profit or Loss

From Business: one for “Mechanical Oasis”, an activity that reported no income

but claimed expense deductions of $16,250; and the other for “Jana’s Home

School”, an activity that provided the home-schooling of petitioners’ four children

and that also reported no income but claimed expense deductions of $2,655.

      In the statutory notice, the Internal Revenue Service disallowed the entire

amount of itemized deductions and, as a result, used a standard deduction of

$11,400 to calculate petitioners’ tax liability. During trial preparation, petitioners

provided written acknowledgments of charitable contributions totaling $2,937,

which respondent allowed along with paid home mortgage interest and real estate

taxes deductions of $7,694 and $1,655, respectively--for a total allowed itemized

deductions of $12,286. Petitioners produced an unsigned document to establish an

alleged contribution of $6,830, but this document does not have petitioners’ names

on it, does not bear any address or employer identification number of a qualified

donee, and does not state whether the donee provided any consideration in return

for the donation, as required by section 170 and its related regulations.
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[*4] Respondent was unable to verify this incomplete document because

petitioners refused to provide contact information for the donee. Petitioners

conceded that they were not entitled to any Schedule C deductions for either

Mechanical Oasis or Jana’s Home School.

                                    OPINION

      Petitioners bear the burden of proving that respondent’s determinations are

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

(1992); Rockwell v. Commissioner, 512 F.2d 882, 886 (9th Cir. 1975), aff’g T.C.

Memo. 1972-133. This burden includes substantiating the amounts of deductions

claimed. Hradesky v. Commissioner, 65 T.C. 87, 90 (1975), aff’d per curiam, 540

F.2d 821 (5th Cir. 1976). Generally, a taxpayer must keep records sufficient to

establish the amounts of the items reported on his or her Federal income tax

return. Sec. 6001; sec. 1.6001-1(a), (e), Income Tax Regs.

Unreimbursed Employee Business Expenses Deduction

      A taxpayer who is an employee may deduct unreimbursed employee

expenses as an ordinary and necessary business expense under section 162. Sec.

162(a)(2); Lucas v. Commissioner, 79 T.C. 1, 6 (1982). However, personal

expenses are not deductible. Sec. 262. In general, the cost of daily commuting to

and from work is a personal expense and therefore not deductible. See
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[*5] Commissioner v. Flowers, 326 U.S. 465, 473-474 (1946); sec. 1.162-2(e),

Income Tax Regs.; see also secs. 1.212-1(f), 1.262-1(b)(5), Income Tax Regs.

Petitioners argue that petitioner’s commute is atypical in regard to the remoteness

of the JASPER site and because no public transportation was available. As a

result, petitioner endured a more costly and much longer than average commute in

both mileage and time. Relying on these grounds, petitioners reason that they

should be allowed to adjust their taxable income to recoup petitioner’s commuting

costs. Petitioners’ arguments are contrary to established law and are not

persuasive.

      Coombs v. Commissioner, 67 T.C. 426 (1976), aff’d in part, rev’d in part on

other grounds, 608 F.2d 1269 (9th Cir. 1979), involved several taxpayers with

circumstances very similar to petitioners’, i.e., they were employed at test sites in

the same remote area of Nevada, and they commuted to work from their residences

in and around Las Vegas--some taxpayers driving as much as 200 miles daily.

The taxpayers in Coombs argued that their greater commutes were exceptional

compared to “ordinary commuting” and, accordingly, that they should not be held

to the general rule that expenses of commuting are personal and nondeductible.

Id. at 473. The Court held then--as we do here--that “[t]ravel expenses which arise

from going to and from work on a daily basis are not ordinary business expenses
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[*6] deductible under section 162(a)(2) regardless of the distance traveled or the

availability of housing at or near the work site.” Id. at 477.

      While there are possible exceptions to the general rule, such as commuting

to a distant worksite for a temporary assignment, petitioners do not argue, and the

record does not reflect, any recognized exception under these facts. See generally

Rev. Rul. 190, 1953-2 C.B. 303 (explaining the temporary distant worksite

exception).

      Additionally, petitioners claim that the Government benefited from

petitioner’s unpaid time of the long commute, thus justifying their need to charge

$50 an hour for travel time as an expense. Petitioners, however, did not pay or

incur any out-of-pocket cost for this time. If petitioner were compensated for this

time, he would have to report the same amount as income, which he did not.

Moreover, because commuting is inherently personal and because personal

expenses are not deductible, then logically, expenses derived from the time, as

well as the travel, of a commute are not deductible. See, e.g., Nat’l Treasury

Employees Union (NTEU) v. Fed. Labor Relations Auth., 418 F.3d 1068, 1072 n.8

(9th Cir. 2005) (“[N]ormal home to work travel is considered personal time and

* * * is not tax deductible.”). Petitioners are not entitled to their claimed

unreimbursed employee business expenses deduction.
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[*7] Charitable Contribution Deduction

      Section 170(a)(1) allows a deduction for contributions to charitable

organizations defined in section 170(c). Section 170(f)(8) provides substantiation

requirements for certain charitable contributions. Specifically, section

170(f)(8)(A) provides: “No deduction shall be allowed * * * for any contribution

of $250 or more unless the taxpayer substantiates the contribution by a

contemporaneous written acknowledgment of the contribution by the donee

organization that meets the requirements of subparagraph (B).” For donations of

money, the donee’s written acknowledgment must state the amount contributed,

indicate whether the donee organization provided any goods or services in

consideration for the contribution, and provide a description and good faith

estimate of the value of any goods or services provided by the donee organization.

See sec. 170(f)(8)(B); sec. 1.170A-13(f)(2), Income Tax Regs.

      Respondent conceded that petitioners are entitled to a charitable

contribution deduction of $2,937 but disallowed the remainder. Petitioners did not

substantiate any other deductible amounts. Petitioners have not satisfied the

requirements of section 170 and are not entitled to a charitable contribution

deduction beyond what respondent conceded.
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[*8] Accuracy-Related Penalty

      Section 6662(a) and (b)(1) and (2) imposes a 20% accuracy-related penalty

on any underpayment of Federal income tax attributable to a taxpayer’s negligence

or disregard of rules or regulations or substantial understatement of income tax.

Respondent has the burden of production with respect to the accuracy-related

penalty on the ground of negligence or, alternatively, substantial understatement

of income tax. See sec. 7491(c); Higbee v. Commissioner, 116 T.C. 438, 446-447

(2001). Section 6662(c) defines negligence as including any failure to make a

reasonable attempt to comply with the provisions of the Code and defines

disregard as any careless, reckless, or intentional disregard. Disregard of rules or

regulations is careless if the taxpayer does not exercise reasonable diligence to

determine the correctness of a return position that is contrary to the rule or

regulation. Sec. 1.6662-3(b)(2), Income Tax Regs.

      Petitioners deducted personal expenses as employee business expenses and

failed to maintain records to substantiate all of their reported charitable

contributions for 2010. Petitioners have conceded erroneous deductions claimed

on Schedules C that appear to be personal. Claiming personal expenses as

business expense deductions and failing to maintain records substantiating any

potentially valid deductions constitute negligence for purposes of section 6662(a)
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[*9] and (b)(1). See Higbee v. Commissioner, 116 T.C. at 449; sec.

1.6662-3(b)(1), Income Tax Regs. Respondent has satisfied the burden of

production.

      Once the Commissioner has met the burden of production, the taxpayers

must come forward with persuasive evidence that the penalty is inappropriate

because they acted with reasonable cause and in good faith. Sec. 6664(c)(1);

Higbee v. Commissioner, 116 T.C. at 448-449. The decision as to whether

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

basis, taking into account all of the pertinent facts and circumstances. See sec.

1.6664-4(b)(1), Income Tax Regs. The most important factor is the extent of the

taxpayers’ effort to assess their proper tax liability. Id.

      Petitioners do not address the reasonable cause and good faith defense to the

section 6662(a) penalty. Petitioners simply assert that they are entitled to their

claimed deductions and that they have done their best to pay their taxes throughout

their careers. We conclude that petitioners have failed to satisfy their burden of

proving that they are not liable for the section 6662(a) penalty. Because the

penalty is sustained on the ground of negligence, we need not consider whether

respondent has proven that there is a substantial understatement of income tax on

the 2010 tax return.
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[*10] In reaching our decision, we have considered all arguments made, and, to

the extent not mentioned, we conclude that they are moot, irrelevant, or without

merit.

         To reflect the foregoing,


                                                    Decision will be entered

                                               under Rule 155.
