                    T.C. Summary Opinion 2007-143



                        UNITED STATES TAX COURT



                 SHARON T. MYRICK, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8611-06S.               Filed August 15, 2007.



     Sharon T. Myrick, pro se.

     Ronald S. Collins, Jr., for respondent.



     RUWE, Judge:     This case was heard pursuant to the provisions

of section 74631 of the Internal Revenue Code in effect when the

petition was filed.    Pursuant to section 7463(b), the decision to

be entered is not reviewable by any other court, and this opinion

shall not be treated as precedent for any other case.


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

       Respondent determined deficiencies in petitioner’s Federal

income tax of $4,246 and $135 and accuracy-related penalties

under section 6662(a) of $849.20 and $27 for 2002 and 2004,

respectively.       Respondent concedes both the deficiency and the

section 6662 accuracy-related penalty for 2004.

       After concessions by petitioner,2 the issues for decision

are:       (1) Whether petitioner is entitled to deduct $15,686 for

business expenses claimed on her Schedule C, Profit or Loss From

Business, for 2002; and (2) whether petitioner is liable for an

accuracy-related penalty pursuant to section 6662 for 2002.3

                                Background

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

The stipulation of facts and the attached exhibits are

incorporated by this reference.       When the petition was filed,

petitioner resided in Philadelphia, Pennsylvania.

       Petitioner was an IRS employee in 2002 and had received

training in tax law in the early 1990s.       Petitioner claims that

she also operated an event-planning business in 2002.       Petitioner

reported $400 of gross receipts attributable to the alleged


       2
       Petitioner concedes she is not entitled to deduct $4,746
for medical expenses before the 7.5-percent adjusted gross income
limitation or $2,216 for charitable contributions claimed on her
Schedule A, Itemized Deductions, for 2002.
       3
       Respondent adjusted petitioner’s retirement savings
credit, education credit, and earned income credit in 2002 as a
result of the change in petitioner’s adjusted gross income.
                                   - 3 -

event-planning business on her 2002 Schedule C.      Respondent

disallowed the deductions that petitioner claimed on her 2002

Schedule C, as follows:

                Expense                         Amount

     Utilities                                  $1,242
     Supplies                                    1,321
     Repairs and maintenance                     1,838
     Rent or lease of                              847
       vehicles, machinery, or
       equipment
     Office expenses                               130
     Legal and professional                      1,250
       services
     Depreciation and sec. 179                   2,950
       expense
     Car and truck expenses                      5,679
     Advertising                                   429
       Total                                    15,686

                                Discussion

A.   Schedule C Business Expenses

     Deductions are a matter of legislative grace, and taxpayers

bear the burden of proving that they are entitled to any

deductions 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).      Taxpayers are required to maintain

sufficient records to enable the Commissioner to determine their

correct tax liability.      Sec. 6001.
                                - 4 -

     Section 162 generally allows a deduction for all ordinary

and necessary expenses paid or incurred during the taxable year

in carrying on a trade or business.     Such expenses must be

directly connected with or pertain to the taxpayer’s trade or

business.   Sec. 1.162-1(a), Income Tax Regs.    Whether a

taxpayer’s activities constitute the carrying on of a trade or

business is a question of fact requiring an examination of the

particular facts and circumstances of each case.     Commissioner v.

Groetzinger, 480 U.S. 23, 36 (1987).     We decide whether

petitioner has established that she engaged in a trade or

business in 2002 on a preponderance of the evidence.

     In order to establish that he or she was engaged in a trade

or business, the taxpayer must be continuously and regularly

involved in the activity for the primary purpose of making a

profit.   Id. at 35.   “While the focus of the test for whether a

taxpayer engaged in an activity with the intention of making a

profit is on the subjective intention of the taxpayer, greater

weight is given to the objective facts than is given to the

taxpayer’s mere statement of his intent.”     Wesley v.

Commissioner, T.C. Memo. 2007-78; see also sec. 1.183-2(a),

Income Tax Regs.

     Petitioner claims that she was engaged in an event-planning

business in 2002.   Petitioner provided some documents in an

attempt to demonstrate that she operated a business and to
                                 - 5 -

substantiate some of the expenses claimed on her 2002 Schedule C.

These documents included an alleged customer list, a receipt for

a purchased laptop computer, a canceled check for prepaid legal

services, receipts for supplies totaling $21.38, a canceled check

for postage, invoices for the alleged rental of a postage

machine, and phone bills.4

     Altogether, petitioner’s documentation fell woefully short

of demonstrating that she was involved in a trade or business and

represented only a fraction of the expenses petitioner attempted

to deduct on her return.     Petitioner testified that she had more

records when she prepared her 2002 return than the records she

provided to respondent or the Court, but that they had been lost

or removed from her computer files.      Petitioner also stated that

the only business she did in 2002 relating to event planning was

a Crab Feast Safety Tour, for which she provided documentation

indicating that the tour had been canceled, and that she could

not get any more bookings that year.

     Evidence of one canceled event, along with a sampling of

receipts, canceled checks, and invoices, is insufficient to show

that petitioner was continuously and regularly involved in the

trade or business of event planning for the primary purpose of


     4
       Petitioner testified that she kept receipts, but that her
son had thrown away many of her receipts by mistake when she
replaced some flooring in her house where the records were kept.
Petitioner also testified that she kept a notebook in which she
recorded expenses, but that she had thrown it away by mistake.
                                 - 6 -

making a profit.    Considering the foregoing, we find that

petitioner was not involved in an event-planning trade or

business in 2002.    Petitioner’s evidence also failed to show that

any of her expenditures were related to income-producing

activity.    Accordingly, respondent’s disallowance of petitioner’s

2002 Schedule C deductions is sustained.

B.   Section 6662 Accuracy-Related Penalty

     With respect to the accuracy-related penalty under section

6662(a), the Commissioner has the burden of production.      Sec.

7491(c).    To prevail, the Commissioner must produce sufficient

evidence that it is appropriate to apply the penalty to the

taxpayer.    Higbee v. Commissioner, 116 T.C. 438, 446 (2001).

Once the Commissioner meets his burden of production, the

taxpayer bears the burden of supplying sufficient evidence to

persuade the Court that the Commissioner’s determination is

incorrect.    Id. at 447.

     Section 6662(a) provides an accuracy-related penalty equal

to 20 percent of the underpayment required to be shown on a

return due to negligence or disregard of rules or regulations.

Sec. 6662(b)(1).    For purposes of section 6662, the term

“negligence” includes “any failure to make a reasonable attempt

to comply with the provisions of * * * [the Code], and the term

‘disregard’ includes any careless, reckless, or intentional

disregard.”    Sec. 6662(c).   “Negligence” also includes any
                                - 7 -

failure by a taxpayer to keep adequate books and records or to

substantiate items properly.   Sec. 1.6662-3(b), Income Tax Regs.

     An accuracy-related penalty is not imposed with respect to

any portion of the underpayment as to which the taxpayer acted

with reasonable cause and in good faith.    Sec. 6664(c)(1); see

Higbee v. Commissioner, supra at 448.    This determination is

based on all the relevant facts and circumstances.    Higbee v.

Commissioner, supra at 448; sec. 1.6664-4(b)(1), Income Tax Regs.

“Relevant factors include the taxpayer’s efforts to assess his

proper tax liability, including the taxpayer’s reasonable and

good faith reliance on the advice of a professional such as an

accountant.”    Higbee v. Commissioner, supra at 448-449.

     Petitioner has failed to keep or produce adequate records.

Respondent has provided sufficient evidence to meet his burden of

production.    Although petitioner had a background in tax law, she

failed to show that she kept proper records to establish her

entitlement to her claimed deductions.   Petitioner has failed to

show she acted with reasonable care or in good faith and has not

produced reliable evidence to prove that respondent’s

determination of negligence is incorrect.    We hold that
                                 - 8 -

petitioner is liable for the accuracy-related penalty under

section 6662 for 2002.

     To reflect the foregoing,


                                              Decision will be entered

                                         under Rule 155.
