                     T.C. Summary Opinion 2009-8



                       UNITED STATES TAX COURT



         MIKE CULBERSON AND FELICIA C. CULBERSON, Petitioners
            v. COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 12544-06S.                Filed January 8, 2009.



     Mike Culberson and Felicia C. Culberson, pro sese.

     Beth A. Nunnink, for respondent.



     CARLUZZO, Special Trial Judge:     This case was heard

pursuant to the provisions of section 7463.1     Pursuant to section

7463(b), the decision to be entered is not reviewable by any



     1
      Unless otherwise indicated, section references are to the
Internal Revenue Code of 1986, as amended, in effect for the
relevant period. Rule references are to the Tax Court Rules of
Practice and Procedure.
                                  - 2 -

other court, and this opinion shall not be cited as precedent for

any other case.

     In a notice of deficiency dated April 5, 2006, respondent

determined the following deficiencies in and penalties with

respect to petitioners’ Federal income taxes:

                                            Penalty
           Year      Deficiency           Sec. 6662(a)

           2003        $18,593              $3,718.60
           2004         12,459               2,491.80

     The issues for decision for each year are:          (1) Whether

petitioners are entitled to a trade or business expense deduction

for utilities; (2) whether petitioners are entitled to an

itemized deduction for amounts identified as unreimbursed

employee business expenses; and (3) whether petitioners are

entitled to trade or business expense deductions for expenses

attributable to a tournament fishing activity.

                            Background

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

Petitioners are, and were at all times relevant, married to each

other.   At the time the petition was filed, they resided in

Tennessee.

Petitioners’ Employment and Tournament Fishing Activity

     Mike Culberson (petitioner) was employed as a firefighter by

the City of Franklin, Tennessee.     During each year in issue he

paid union dues, he contributed towards the cost of
                               - 3 -

cable/satellite television service at the firehouse, he

contributed towards a common meal fund for meals consumed at the

firehouse, and he incurred expenses for maintaining and cleaning

his firefighter uniforms.

     Petitioner was also the sole proprietor of a lawn care

business that he operated during each year in issue.   The income

and expenses attributable to that business are shown on a

Schedule C, Profit or Loss From Business, included with

petitioners’ return for each year in issue.

     During each year in issue petitioner entered or participated

in various fishing tournaments, a practice that he started in

1988.   Typically, entrants to these fishing tournaments paid a

fee and were eligible to win various prizes or prize money.   From

1988 through the years in issue petitioner’s expenditures

incurred in connection with the fishing tournaments always

exceeded any winnings or income he received from the activity.

From 1988 through 2002 petitioner apparently did not treat his

tournament fishing activity as a trade or business for Federal

income tax purposes.   Things changed in 2003.   Starting in that

year, having heard that other firefighters were claiming

deductions for similar expenditures, and upon the advice of his

income tax return preparer, petitioner considered his tournament

fishing activity a trade or business.
                               - 4 -

     Felicia C. Culberson was employed as a vehicle repair

supervisor by Enterprise Rent-A-Car (Enterprise) until November

2003.   As an employee of Enterprise, she was provided the use of

a company-owned car.   The value of the use of the company-owned

car was somehow calculated and included in the wage income

reported on the 2003 Form W-2, Wage and Tax Statement, issued to

her by Enterprise.

     From December 2003 through May 2004 she worked on a part-

time or temporary basis for various employers.

     In June 2004 she began working full time for an employer she

identified only as “Dell”.   She described her job with Dell as

“sales rep for the business sales floor”.

Petitioners’ Federal Income Tax Returns

     Petitioners filed a timely joint Federal income tax return

for each year in issue.   Both returns were prepared by a

professional income tax return preparer.

     1. 2003

     As relevant here, petitioners’ 2003 return includes a

Schedule A, Itemized Deductions, two Forms 2106, Employee

Business Expenses (one relating to petitioner’s employment as a

firefighter and the other relating to Felicia C. Culberson’s

employment with Enterprise), a Schedule C on which the income and

expenses of petitioner’s lawn care business are reported (the

2003 lawn care Schedule C), and a Schedule C on which the income
                                - 5 -

and expenditures attributable to petitioner’s tournament fishing

activity are reported (the 2003 tournament fishing activity

Schedule C).

     Among other things, on the Schedule A petitioners claimed a

$7,448 deduction for unreimbursed employee business expenses.2

Of this amount, $2,624 relates to petitioner and $3,960 relates

to Felicia C. Culberson.3    The amount relating to petitioner

($2,624) is attributable to claimed expenses for vehicle expenses

($324), meals consumed at the firehouse ($2,040, after the

application of section 274(n)), and other “business expenses”

($260, presumably including union dues, haircuts, uniform

maintenance, and contributions towards cable/satellite television

service at the firehouse).    The amount relating to Felicia C.

Culberson ($3,960) is attributable entirely to vehicle expenses.

This amount was computed by applying the applicable “standard

mileage rate” (then 36 cents per mile) to 11,000 of the 14,000

miles that a vehicle not identified on the return is claimed to

have been driven by her for business purposes.




     2
      This amount is before the application of sec. 67(a).
     3
      The difference between $6,584 (the sum of $2,624 and $3,960
as shown on the Forms 2106) and $7,448, the amount deducted on
the Schedule A, has not been explained. The difference might be
explained on a statement referenced on the Schedule A but not
included with the copy of the return placed into evidence.
                               - 6 -

     On the 2003 lawn care Schedule C, among other items no

longer in dispute, petitioners claimed a $240 deduction for

“utilities” expenses.   The exact nature of the underlying

expenditure is not known.

     The 2003 tournament fishing activity Schedule C shows gross

receipts and gross income in the same amount; that is, $415.   The

following deductions are claimed on that Schedule C:

               Deduction                      Amount

          Depreciation/sec. 179              $18,749
          Legal and professional services        750
          Supplies                               620
          Taxes and licenses                     238
          Fuel for boat                          404
          Entry fees                           1,110
          Oil for boat                           110

The $21,566 net loss shown on that Schedule C is taken into

account in the computation of the adjusted gross income reported

on petitioners’ 2003 return.

     2. 2004

     As relevant here, petitioners’ 2004 return includes a

Schedule A, two Forms 2106 (one relating to petitioner’s

employment as a firefighter, and the other relating to Felicia C.

Culberson’s employment, presumably with Dell), a Schedule C on

which the income and expenses of petitioner’s lawn care business

are reported (the 2004 lawn care Schedule C), and a Schedule C on

which the income and expenditures attributable to petitioner’s
                               - 7 -

2004 tournament fishing activity are reported (the 2004

tournament fishing activity Schedule C).

     Among other things, on the Schedule A petitioners claimed a

$5,857 deduction for unreimbursed employee business expenses.4

Of this amount, $2,446 relates to petitioner and $1,425 relates

to Felicia Culbertson.5   The amount relating to petitioner

($2,446) is attributable to claimed expenses for vehicle expenses

($41), meals consumed at the firehouse ($2,040, after the

application of section 274(n)), and other “business expenses”

($365, presumably including union dues, haircuts, uniform

maintenance, and contributions towards cable/satellite television

service at the firehouse).   The amount relating to Felicia C.

Culberson ($1,425) is attributable entirely to vehicle expenses.

This amount was computed by applying the applicable “standard

mileage rate” (then 37.5 cents per mile) to 3,800 of the 13,000

miles that a vehicle not identified on the return is claimed to

have been driven by her for business purposes.

     On the 2004 lawn care Schedule C, among other items no

longer in dispute, petitioners claimed a $255 deduction for




     4
      This is the amount before the application of sec. 67(a).
     5
      The difference between $3,871 (the sum of $2,446 and $1,425
as shown on the Forms 2106) and $5,857, the amount deducted on
the Schedule A, has not been explained. The difference might be
explained on a statement referenced on the Schedule A but not
included with the copy of the return placed into evidence.
                                - 8 -

“utilities” expenses.   The exact nature of the underlying

expenditure is not known.

     The 2004 tournament fishing activity Schedule C shows gross

receipts and gross income in the same amount; that is, $380.    The

following deductions are claimed on that Schedule C:

               Deduction                      Amount

          Car and truck expenses              $3,338
          Depreciation/sec. 179                7,080
          Repairs and maintenance                 75
          Supplies                               540
          Meals (after sec. 274(n))              255
          Fuel for boat                          516
          Entry fees                           2,390
          Oil for boat                           239
          Cellphone                              588

The $14,641 net loss shown on that Schedule C is taken into

account in the computation of the adjusted gross income reported

on petitioners’ 2004 return.

The Notice of Deficiency

     Some of the adjustments made in that notice have been agreed

to between the parties or conceded by one or the other of them,

and others are computational.   Those adjustments will not be

noted.

     The adjustments that remain in dispute for each year in

issue are as follows:   (1) The disallowance of the utilities

expense deduction claimed on the lawn care Schedule C; (2) the
                               - 9 -

disallowance of the unreimbursed employee business expense

deduction claimed on the Schedule A; and (3) the disallowance

of the net loss claimed on the tournament fishing activity

Schedule C.

                            Discussion

     The issues that remain in dispute all involve disallowed

deductions.   As we have observed in countless opinions,

deductions are a matter of legislative grace.     New Colonial Ice

Co. v. Commissioner, 292 U.S. 435, 440 (1934).    A taxpayer

claiming a deduction on a Federal income tax return must

demonstrate that the deduction is allowable pursuant to some

statutory provision and must further substantiate that the

expense to which the deduction relates has been paid or incurred.

See sec. 6001; Hradesky v. Commissioner, 65 T.C. 87 (1975), affd.

per curiam 540 F.2d 821 (5th Cir. 1976); sec. 1.6001-1(a), Income

Tax Regs.

     According to petitioners, the deductions here in dispute are

allowable under section 162(a).   That section generally allows a

deduction for ordinary and necessary expenses paid or incurred

during the taxable year in carrying on any trade or business.

The term “trade or business” as used in section 162(a) includes

the trade or business of being an employee.     Primuth v.

Commissioner, 54 T.C. 374, 377-378 (1970); Christensen v.

Commissioner, 17 T.C. 1456 (1952).     The determination of whether
                              - 10 -

an expenditure satisfies the requirements for deductibility under

section 162 is a question of fact.     See Commissioner v.

Heininger, 320 U.S. 467, 475 (1943).    In general, an expense is

ordinary if it is considered normal, usual, or customary in the

context of the particular business out of which it arose.     See

Deputy v. du Pont, 308 U.S. 488, 495 (1940).     Ordinarily, an

expense is necessary if it is appropriate and helpful to the

operation of the taxpayer’s trade or business.    See Commissioner

v. Tellier, 383 U.S. 687 (1966); Carbine v. Commissioner, 83 T.C.

356, 363 (1984), affd. 777 F.2d 662 (11th Cir. 1985).    On the

other hand, section 262(a) generally disallows a deduction for

personal, living, or family expenses.

     Against these general principles of Federal income taxation,

we consider petitioners’ entitlement to the deductions respondent

disallowed.

Utilities Expense Deduction

     Petitioners claimed a deduction for utilities expenses on

the lawn care Schedule C for each year in issue.    Neither

petitioners nor their income tax return preparer could explain

the nature of the underlying expenditure with the degree of

specificity necessary to allow the claimed deduction.    Without

knowing the nature of the expense we cannot determine whether it

was “ordinary and necessary” for petitioner to have incurred that

expense in connection with his lawn care business.
                                - 11 -

Respondent’s disallowance of the utilities expense deduction for

each year in issue is sustained.

Unreimbursed Employee Business Expense Deduction

     The unreimbursed employee business expense deduction

petitioners claimed for each year in issue consists of four

components:   (1) An amount for which no explanation has been

provided ($864 for 2003 and $1,986 for 2004); (2) vehicle

expenses for both petitioners; (3) meals petitioner consumed at

the firehouse; and (4) various expenses, including union dues,

haircuts, uniform maintenance, etc., relating to petitioner’s

employment as a firefighter.    We consider each in the order just

listed.

     1. Unexplained Amounts

     Expenditures not explained hardly qualify for deduction.

Petitioners are not entitled to a deduction for the unexplained

amounts included in the unreimbursed employee business expense

deduction claimed for each year.

     2. Vehicle Expenses

     The unreimbursed employee business expense deduction claimed

for each year includes amounts attributable to vehicle expenses

relating to both petitioners.    The record contains insufficient

evidence to support a finding that either petitioner was

required, as a condition of employment, to incur any expenses

for the use of any vehicle.    Petitioners are not entitled to a
                                - 12 -

deduction for amounts attributable to vehicle expenses included

in the unreimbursed employee business expense deduction claimed

for each year.

     3. Meals Expenses

     Petitioner contributed to a fund that was used to purchase

food for meals that he consumed while on duty at the firehouse.

Generally, the costs of a taxpayer’s meals are nondeductible

personal expenses, unless the expense of a meal is incurred while

the taxpayer is traveling away from home for business purposes.

See secs. 162(a)(2), 262(a).    If, however, a fire department

requires its firefighter-employees as a condition of employment

to make contributions into a common meal fund, then those

contributions qualify as deductible, ordinary and necessary

business expenses.    See, e.g., Sibla v. Commissioner, 68 T.C.

422, 432 (1977), affd. 611 F.2d 1260 (9th Cir. 1980); Belt v.

Commissioner, T.C. Memo. 1984-167.       On the other hand, if a

firefighter’s contributions into a common meal fund are not

required as a condition of employment but are made voluntarily,

then such contributions are considered a personal expense that is

not deductible.    See, e.g., Duggan v. Commissioner, 77 T.C. 911,

914-915 (1981).

     It is obvious that the meal expenses petitioners deducted

were not incurred while petitioner was traveling away from home

on business.     Furthermore, nothing in the record would support a
                              - 13 -

finding that the contributions petitioner made to the common meal

fund were made on other than a voluntary basis.   Petitioners are

not entitled to a deduction for amounts attributable to meal

expenses included in the unreimbursed employee business expense

deduction claimed for each year.

     4. Other Expenses

     The unreimbursed employee business expense deduction claimed

for each year includes amounts attributable to various

expenditures for union dues, haircuts, uniform maintenance, etc.,

relating to petitioner’s employment as a firefighter.    We need

not consider petitioners’ entitlement to include those amounts in

an unreimbursed employee business expense deduction because even

if the total amount claimed for each year were allowed, it would

not exceed 2 percent of their adjusted gross income.    See sec.

67(a).

     Respondent’s disallowance of the miscellaneous itemized

deduction for unreimbursed employee business expenses for each

year in issue is sustained.

Tournament Fishing Activity Schedule C Losses

     According to petitioners, the expense deductions claimed and

the resultant loss shown on the 2003 tournament fishing activity

Schedule C and the 2004 tournament fishing activity Schedule C

are allowable because the activity constitutes a trade or

business within the meaning of section 162(a) and section
                               - 14 -

165(c)(1).   According to respondent, petitioner’s tournament

fishing activity did not qualify as a trade or business during

either year in issue and expenditures incurred in connection with

that activity are deductible only as allowed by section 183.

      To be engaged in a trade or business within the meaning of

section 162(a) and section 165(a)(2), a taxpayer must conduct the

activity with continuity, regularity, and for the primary purpose

of deriving a profit.   Commissioner v. Groetzinger, 480 U.S. 23,

35 (1987).   Whether a taxpayer is carrying on a trade or business

requires an examination of all of the facts in each case.     Id. at

36.

      Although a reasonable expectation of profit is not required,

the taxpayer’s profit objective must be actual and honest.

Dreicer v. Commissioner, 78 T.C. 642, 644-645 (1982), affd.

without published opinion 702 F.2d 1205 (D.C. Cir. 1983); sec.

1.183-2(a), Income Tax Regs.   Whether a taxpayer has an actual

and honest profit objective is a question of fact to be answered

from all of the relevant facts and circumstances.    Hastings v.

Commissioner, T.C. Memo. 2002-310; sec. 1.183-2(a), Income Tax

Regs.

      The pertinent regulations set forth a nonexhaustive list of

factors that may be considered in deciding whether a profit

objective exists.   These factors include:   (1) The manner in

which the taxpayer carries on the activity, (2) the expertise of
                               - 15 -

the taxpayer or his advisers, (3) the time and effort expended by

the taxpayer in carrying on the activity, (4) the expectation

that assets used in the activity may appreciate in value, (5) the

success of the taxpayer in carrying on other similar or

dissimilar activities, (6) the taxpayer’s history of income or

losses with respect to the activity, (7) the amount of occasional

profits, if any, which are earned, (8) the financial status of

the taxpayer, and (9) the elements of personal pleasure or

recreation.   Golanty v. Commissioner, 72 T.C. 411, 426 (1979),

affd. without published opinion 647 F.2d 170 (9th Cir. 1981);

sec. 1.183-2(b), Income Tax Regs.   No single factor or group of

factors is determinative.   Golanty v. Commissioner, supra at 426.

A final determination is made only after a consideration of all

of the relevant facts and circumstances.

     It is not necessary to discuss each of the factors

enumerated in section 1.183-2(b), Income Tax Regs., as it is

clear that no factor supports a determination in petitioners’

favor.   The record contains insufficient evidence to support a

finding that petitioner conducted his tournament fishing activity

with the primary objective of making a profit for either year in

issue.   It follows that the activity does not constitute a trade

or business for either year.   It further follows that petitioners

are entitled to deductions relating to that activity only as

allowable under section 183, and they are not entitled to a
                             - 16 -

deduction for the loss shown on either the 2003 or the 2004

tournament fishing activity Schedule C.

     To reflect the foregoing,


                                      Decision will be entered

                                 under Rule 155.
