                       T.C. Memo. 2000-269



                     UNITED STATES TAX COURT



               PAUL HARRISON DUNCAN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent


     Docket No. 19650-97.                    Filed August 24, 2000.


     Paul Harrison Duncan, pro se.

     Andrew M. Papadakis, for respondent.



                       MEMORANDUM OPINION


     COUVILLION, Special Trial Judge: Respondent determined a

deficiency of $3,023 in petitioner’s 1994 Federal income tax and

an addition to tax under section 6651(a)(1) of $150.1




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


     After a concession by respondent,2 the issues remaining for

decision are: (1) Whether petitioner is entitled to Schedule C,

Profit or Loss From Business, deductions for travel expenses

related to his trucking activity in excess of amounts allowed by

respondent; (2) whether petitioner is entitled to a home office

expense deduction under section 280A in connection with his

trucking activity; and (3) whether petitioner is liable for an

addition to tax under section 6651(a)(1) for failure to file his

income tax return timely.

     Some of the facts were stipulated, and those facts, with the

annexed exhibits, are so found and are incorporated herein by

reference.   Petitioner's legal residence at the time the petition

was filed was Tazewell, Tennessee.

     During 1994, petitioner was an independent, over-the-road

truck driver.   Petitioner operated a 1984 Volvo tractor-truck

that he purchased for $10,000 in January 1994.    Petitioner

contracted all of his cargo hauling assignments during 1994

through Knox Cartage in Knoxville, Tennessee.    Typically,



     2
          At trial, respondent conceded that petitioner is
entitled to a Schedule C, Profit or Loss From Business, deduction
of $10,000 under sec. 179 for the cost of a Volvo tractor-truck
petitioner purchased during 1994 for use in his truck driving
activity. Other adjustments in the notice of deficiency are
computational and will be resolved by the Court’s holdings on the
contested issues. These adjustments include increases in
petitioner’s self-employment taxes, the deduction for one-half of
self-employment taxes, and petitioner’s earned income credit.
                                - 3 -


petitioner picked up a cargo trailer from Knox Cartage and

delivered the cargo to an appointed destination somewhere in the

continental United States.    Knox Cartage then dispatched

petitioner to pick up new cargo to be transported back to

Knoxville.    Petitioner traveled approximately 130,000 miles

hauling cargo during 1994.

     Petitioner’s 1994 Federal income tax return was due to be

filed on April 15, 1995.    However, petitioner filed an Internal

Revenue Service (IRS) Form 4868, Application for Automatic

Extension of Time to File, for his 1994 return timely, extending

the filing date to August 15, 1995.     Petitioner did not file for

or receive any additional extension of time for his 1994 return.

He filed his 1994 return on August 24, 1995.

     Petitioner’s 1994 return included a Schedule C, on which

petitioner reported income and expenses from his trucking

activity.    He reported $62,474 in gross income for 1994, total

expenses of $62,113, and a net profit of $361.    The following

table shows the expenses petitioner claimed on Schedule C and the

adjustments by respondent in the notice of deficiency with

respect to each item:
                               - 4 -


                                         Allowed by   Disallowed by
                           Per Return    Respondent   Respondent
Car and truck expenses        $17,877       $20,431        $(2,554)
Sec. 179 expense               10,000           -0-         10,000
Insurance                       1,385         1,385            -0-
Interest                           14            14            -0-
Office expense                    230           230            -0-
Repairs & maint.               20,255        20,255            -0-
Taxes & licenses                  275           275            -0-
Lodging                         5,730           154          5,576
Meals (50%)*                    2,255         1,984            271
Other expenses                  3,749         3,749            -0-
Business use of home              343           -0-            343
  Total expenses              $62,113       $48,477        $13,636

     *The meal amounts reflect the application of the 50%
     limitation under sec. 274(n).


Respondent also determined petitioner was liable for the addition

to tax under section 6651(a)(1) for failure to file his return

timely.

     Section 162(a) allows a deduction for the ordinary and

necessary expenses paid or incurred during the taxable year in

carrying on a trade or business.   Section 162(a)(2) expressly

permits the deduction of traveling expenses, including meals and

lodging, while away from home in the pursuit of a trade or

business.   Expenses that do not meet these criteria are

considered personal expenses and are not deductible.   See sec.

262(a).

     A taxpayer is required to maintain records sufficient to

establish the amount of his or her income and deductions.    See

sec. 6001; sec. 1.6001-1(a), Income Tax Regs.   Under certain
                               - 5 -


circumstances, where a taxpayer establishes entitlement to a

deduction but does not establish the amount of the deduction, the

Court is allowed to estimate the amount allowable.   See Cohan v.

Commissioner, 39 F.2d 540 (2d Cir. 1930).   However, section

274(d) overrules the so-called Cohan doctrine and provides that

no deduction is allowable under section 162 for any traveling

expenses, including meals and lodging while away from home,

unless the taxpayer complies with strict substantiation rules.

See sec. 274(d)(1), (4).   Particularly, the taxpayer must

substantiate the amount, time, place, and business purpose of the

enumerated types of expenses by adequate records or by sufficient

evidence corroborating his own statement.   See sec. 274(d); sec.

1.274-5T(b)(2), (6), (c), Temporary Income Tax Regs., 50 Fed.

Reg. 46016 (Nov. 6, 1985).

     Section 274(d) and the regulations thereunder vest the

Secretary with the authority to promulgate regulations that

prescribe alternative methods for substantiating expenses covered

by section 274.   See sec. 1.274-5T(j), Temporary Income Tax

Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985).   Pursuant to this

authority, the Secretary issued Rev. Proc. 93-50, 1993-2 C.B.

586, providing rules under which the amount of ordinary and

necessary business expenses of an employee for lodging, meals,

and/or incidental expenses incurred while traveling away from

home will be deemed substantiated for purposes of section 274(d).
                               - 6 -


This revenue procedure also provides an optional method for

employees and self-employed individuals to substantiate the

amount of business meal and incidental expenses incurred while

traveling away from home.

     The amounts petitioner claimed for lodging and meals

represent expenses incurred while hauling cargo throughout the

United States.   Instead of claiming the actual lodging and meal

expenses incurred, petitioner claimed expenses for lodging and

meals based on the Federal per-diem rates for lodging and meals

provided in Rev. Proc. 93-50, 1993-2 C.B. 586.   Petitioner

calculated the number of days during 1994 that he traveled while

hauling cargo and then multiplied the days traveled by the per-

diem amounts allowed for lodging expenses and meal and incidental

expenses, respectively.

     Respondent disallowed $5,576 of the lodging expenses claimed

for lack of substantiation.   Respondent contends that petitioner

had not provided documentation to substantiate that he actually

incurred lodging expenses on his cargo hauling trips or the

amount of the expenses he incurred as required by section 274 for

the reason that petitioner slept in the cab of his tractor-truck

when traveling and therefore did not actually incur lodging

expenses.   Respondent otherwise agrees that petitioner properly

substantiated the time, place, and business purpose of the trips

for which the lodging expenses were claimed.
                               - 7 -


     It is uncontested that petitioner maintained a log in which

he recorded his hauling trips, including time, place, and

business purpose.   However, petitioner did not keep records of

the amounts of lodging expenses he incurred but instead relied on

the per-diem rates to compute the amount of his lodging expenses.

While section 4.01 of Rev. Proc. 93-50 authorizes the use of the

per-diem method to substantiate the amount of lodging, meal, and

incidental costs, this method of reporting is available only

where employers pay a per-diem allowance in lieu of reimbursing

the actual expenses an employee incurs while traveling away from

home.   Therefore, petitioner’s expenses for lodging are not

included within this provision because he was self-employed.

Although petitioner, as a self-employed individual, is entitled

to use the per-diem method allowed under section 4.03 of Rev.

Proc. 93-50, that provision is limited only to meals and

incidental expenses.   Accordingly, petitioner’s lodging expenses

are not deductible because such expenses have otherwise not been

substantiated pursuant to section 274(d).   The Court finds it

unnecessary to address respondent’s contention that petitioner

did not in fact incur any lodging expense because petitioner

slept in the sleeper cab of his truck.   Respondent, therefore, is

sustained on this issue.

     Respondent agrees that petitioner was entitled to use and

properly applied the optional per-diem method of substantiating
                                 - 8 -


his meal and incidental expenses provided for in section 4.03 of

Rev. Proc. 93-50.   However, respondent disallowed $271 in meal

expenses relating to 17 days during 1994 in which petitioner

stayed overnight in Knoxville.    Respondent contends that

petitioner’s home in Tazewell was in close proximity to

Knoxville, and, therefore, petitioner was not “away from home”

within the meaning of section 162 when he stayed overnight in

Knoxville.

     Petitioner argues that the meal expenses he incurred in

Knoxville were incurred “away from home” within the meaning of

section 162.    Petitioner’s position is that, on several occasions

during 1994, Knox Cartage scheduled petitioner to haul new cargo

out of Knoxville immediately upon his return from other hauling

trips.   However, on those occasions, petitioner was required by

Federal regulations to get 8 hours sleep before he could haul

another load.   Rather than returning to his home in Tazewell and

losing 2 or more hours of sleep time making the round-trip

commute, petitioner slept for 8 hours in Knoxville, which

satisfied his rest requirements, and then took the new cargo.     If

petitioner had not been able to begin hauling the new cargo as

quickly as he did, the cargo would have been contracted to

another driver, which would have been the result had he driven

back to his home in Tazewell.
                                 - 9 -


     A "home" for purposes of section 162(a)(2) means the

vicinity of the taxpayer's principal place of business rather

than the personal residence of the taxpayer, when the personal

residence is not in the same vicinity as the place of employment.

Mitchell v. Commissioner, 74 T.C. 578, 581 (1980); Daly v.

Commissioner, 72 T.C. 190, 195 (1979), affd. en banc 662 F.2d 253

(4th Cir. 1981).    Knoxville was clearly petitioner's principal

place of business during 1994.    Petitioner contracted all of his

hauling assignments through Knox Cartage, a Knoxville-based

company, and all of his hauling assignments originated and

terminated in Knoxville.    Thus, any expenses petitioner incurred

in the Knoxville area were not away from home within the meaning

of section 162.    Respondent is sustained on this issue.

     The next issue is whether petitioner is entitled to a home

office deduction under section 280A.     The $343 petitioner claimed

for home office expenses was based on 9 percent of the floor

space of petitioner’s Tazewell, Tennessee, home where petitioner

performed the administrative duties associated with his trucking

activity.   The amount claimed represented 9 percent of

petitioner’s mortgage interest, real estate taxes, and utilities

for 1994.   Respondent determined that petitioner was not entitled

to a home office deduction because petitioner’s home office was

not used exclusively and regularly as his principal place of

business.
                              - 10 -


     As previously noted, section 162 allows taxpayers a

deduction for all ordinary and necessary expenses paid or

incurred in carrying on a trade or business.    Under section 280A,

however, deductions associated with a home office are generally

disallowed unless the home office was used exclusively and

regularly as the principal place of business of the taxpayer.

     Where a taxpayer’s business is conducted in part in the

taxpayer’s residence and in part at another location, the

following two primary factors are considered in determining

whether the home office qualifies under section 280A(c)(1)(A) as

the taxpayer’s principal place of business:    (1) The relative

importance of the functions or activities performed at each

business location, and (2) the amount of time spent at each

location.   See Commissioner v. Soliman, 506 U.S. 168, 175-177

(1993).

     Whether the functions or activities performed at the home

office are necessary to the business is relevant but not

controlling, and the location at which goods and services are

delivered to customers generally is regarded as the principal

place of a taxpayer’s business.   See id. at 176.   The relative

importance of business activities engaged in at the home office

may be substantially outweighed by business activities engaged in

at another location.   The Supreme Court has explained as follows:
                             - 11 -


     If the nature of the business requires that its
     services are rendered or its goods are delivered at a
     facility with unique or special characteristics, this
     is a further and weighty consideration in finding that
     it is the delivery point or facility, not the
     taxpayer’s residence, where the most important
     functions of the business are undertaken.

Id. at 176.

     The principal activities relating to petitioner’s truck

driving activity consisted of the delivery of cargo to various

destinations throughout the United States.   Moreover, petitioner

was paid solely for his time on the road.    Although the Court is

satisfied that petitioner utilized his home office space for the

administrative duties related to his trucking activity, it is

evident that the most important aspects, as well as a substantial

majority, of petitioner’s activities in connection with his

trucking activity were performed outside of his home office.

Therefore, the Court sustains respondent on this issue.

     The final issue is whether petitioner is liable for the

addition to tax under section 6651(a)(1) for his failure to file

timely his 1994 Federal income tax return.   Section 6651(a)(1)

imposes an addition to tax for a taxpayer's failure to file

timely returns, unless the taxpayer can establish that such

failure "is due to reasonable cause and not due to willful

neglect."

     Reasonable cause exists where the taxpayer exercises

ordinary business care and prudence that still renders one unable
                                - 12 -


to file a timely return.   See Crocker v. Commissioner, 92 T.C.

899, 913 (1989);   Estate of Vriniotis v. Commissioner, 79 T.C.

298, 310 (1982); sec. 301.6651-1(c)(1), Proced. & Admin. Regs.

Willful neglect is viewed as a conscious, intentional failure or

reckless indifference to the obligation to file.   See United

States v. Boyle, 469 U.S. 241, 245-246 (1985); Estate of Newton

v. Commissioner, T.C. Memo. 1990-208.    Whether the taxpayer has

sufficiently shown reasonable cause and no willful neglect is a

question of fact to be decided on the entire record.   See Estate

of Duttenhofer v. Commissioner, 49 T.C. 200, 204 (1967), affd.

410 F.2d 302 (6th Cir. 1969).

     A taxpayer may establish reasonable cause for failing to

file a timely return by proving that he reasonably relied on the

advice of an accountant or attorney and later found that such

advice was erroneous or mistaken.    See United States v. Boyle,

supra at 250; Estate of Paxton v. Commissioner, 86 T.C. 785, 820

(1986); CTUW Georgia Ketteman Hollingsworth Trust v.

Commissioner, 86 T.C. 91, 108-109 (1986).   In United States v.

Boyle, supra at 251, the Supreme Court explained that a

taxpayer’s reliance on the advice of an attorney concerning a

matter of law, such as whether a return must be filed,

constitutes reasonable cause because “Most taxpayers are not

competent to discern error in the substantive advice of an

accountant or attorney.”   However, the Supreme Court noted that
                              - 13 -


“It requires no special training or effort to ascertain a

deadline and make sure that it is met” and held that, while it is

reasonable for taxpayers to rely on substantive advice given by

an accountant or attorney, “failure to make a timely filing of a

tax return is not excused by the taxpayer’s reliance on an agent,

and such reliance is not ‘reasonable cause’ for late filing under

section 6651(a)(1).”   Id. at 252.

     Petitioner’s 1994 Federal income tax return was due, after

extension, on August 15, 1995.   Petitioner’s 1994 return was

filed on August 23, 1995.   Petitioner asserts that he relied upon

his accountant to file timely petitioner’s 1994 return.

Petitioner’s reliance on his accountant does not constitute

reasonable cause for late filing under section 6651(a)(1).    See

United States v. Boyle, supra.   Accordingly, the Court sustains

respondent’s application of the addition to tax under section

6651(a)(1).



                                          Decision will be entered

                                     under Rule 155.
