                  T.C. Summary Opinion 2009-110



                     UNITED STATES TAX COURT



         JOHNNY D. AND CANDY L. FORIEST, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 13485-06S.               Filed July 14, 2009.



     Johnny D. Foriest and Candy L. Foriest, 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 treated as precedent

for any other case.

     In a notice of deficiency dated April 12, 2006, respondent

determined deficiencies in petitioners’ income taxes and

penalties as follows:

                                             Penalty
           Year       Deficiency           Sec. 6662(a)

           2003         $11,821              $2,364.20
           2004          12,889               2,577.80

     The issues for decision are:      (1) Whether petitioners are

entitled to deductions for unreimbursed employee business

expenses for 2003 and 2004; (2) whether petitioners properly

reported deductions related to a lawn care business for 2003 and

2004; (3) whether petitioners are entitled to a loss from a

farming activity for 2004; (4) whether petitioners are entitled

to deductions for charitable contributions for 2003 and 2004; (5)

whether petitioners understated income earned in the lawn care

business for 2003; and (6) whether petitioners are liable for

section 6662(a) accuracy-related penalties for 2003 and 2004.

                             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.
                                 - 3 -

     Petitioners are members of the Slayden Baptist Church.

Contributions they made to that church during each year in issue

were routinely made by check.

Petitioners’ Employment and Farming Activity

     At all times relevant, Johnny D. Foriest (petitioner) was

employed as a firefighter by the City of Dickson, Tennessee.

During each year in issue he contributed to a common meal fund

for meals consumed at the firehouse.       He also incurred expenses

for maintaining and cleaning his firefighter uniforms.

     Petitioner was also the sole proprietor of a lawn care

business that he operated during 2003 (as well as for years

before 2003) under the name Spoon’s Lawn Care (Spoon’s).

Petitioner maintained a business checking account for Spoon’s

(the business account).   During 2003 deposits totaling $14,589

were made to the business account.       Income and expenses

attributable to Spoon’s are shown on a Schedule C, Profit or Loss

From Business, included with petitioners’ Federal income tax

return for each year in issue.    Petitioner sold Spoon’s at the

end of 2003.

     At all times relevant, petitioners lived on what petitioner

describes as a “family farm”.    The property is owned by Candy L.

Foriest’s parents, who apparently conducted some farming activity

on the property during years preceding the years in issue.      In
                               - 4 -

November 2004 petitioner purchased two heifers for a total cost

of $1,580.

     It cannot be determined whether, or if so how, Candy Foriest

was employed during the years in issue.    The wage income

($260,145) reported on petitioners’ 2004 Federal income tax

return strongly suggests that she was employed during that year,

but the record is completely silent on the point.

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, a Form 2106, Employee Business

Expenses, relating to petitioner’s employment as a firefighter,

and a Schedule C on which income and expenses attributable to

Spoon’s are reported.

     Among other things, on the Schedule A petitioners claimed a

$4,024 deduction for unreimbursed employee business expenses.2

Of this amount, $2,040 is identified as meals expenses (after the

application of section 274(n)), $260 is identified merely as

“business expenses”, $210 is identified as union dues, and $1,514

is identified as “uniforms for work”.


     2
      This is the amount before the application of sec. 67(a).
                              - 5 -

     On the Schedule C petitioners claimed a $2,760 deduction for

vehicle expenses, a $30,366 deduction for depreciation and

section 179 expense, a $250 deduction for legal and professional

services, a $501 deduction for supplies, and a $990 deduction for

other expenses.3

     2. 2004

     As relevant here, petitioners’ 2004 return includes a

Schedule A, a Form 2106 relating to petitioner’s employment as a

firefighter, a Schedule C on which expenses attributable to

petitioner’s lawn care business are reported, and a Schedule F,

Profit or Loss From Farming, on which the income and expenditures

attributable to petitioner’s 2004 farming activity are reported.

     Among other things, on the Schedule A petitioners claimed a

$4,390 deduction for unreimbursed employee business expenses.4

Of this amount, $2,040 is identified as meals expenses (after the

application of section 274(n)), $260 is identified merely as

“business expenses”, $510 is identified as union dues, and $1,580

is identified as “uniforms for work”.

     On the 2004 Schedule C petitioners claimed a $7,686

deduction for depreciation and section 179 expense as well as a

$245 deduction for repairs and maintenance.   Petitioners,


     3
      Petitioners now concede that the depreciation and sec. 179
expense deduction reported on the 2003 Schedule C is overstated.
     4
      This amount is before the application of sec. 67(a).
                                 - 6 -

however, did not report any income from gross receipts or sales

on their Schedule C.   The $7,931 net loss shown on the Schedule C

is taken into account in the computation of the adjusted gross

income reported on petitioners’ 2004 return.

     On the Schedule F petitioners claimed a net loss of $24,116,

of which $19,785 is attributable to a depreciation and section

179 expense deduction, $492 is attributable to a deduction for

repairs and maintenance, and $1,131 is attributable to a

deduction for other expenses.    Although there is no income

reported on the Schedule F, $2,708 is shown as cost of goods

sold.

The Notice of Deficiency

     Some of the adjustments made in the notice of deficiency

have been agreed to between the parties or conceded, and other

adjustments are computational.    Those adjustments will not be

discussed.

     For 2003 respondent disallowed:     (1) All unreimbursed

employee expenses, with the exception of union dues, claimed on

the Schedule A; (2) the entire charitable contribution deduction;

and (3) all of the Schedule C deductions listed above.

     For 2004 respondent disallowed:     (1) All unreimbursed

employee expenses, with the exception of $210 for union dues;

(2) the entire charitable contribution deduction; (3) all of the
                              - 7 -

Schedule C deductions listed above; and (4) all of the Schedule F

deductions listed above.

     For each year respondent also imposed a section 6662(a)

accuracy-related penalty on several grounds, including

“negligence or disregard of rules or regulations” and

“substantial understatement of income tax”.

                           Discussion

     As we have observed in countless opinions, deductions are a

matter of legislative grace, and the taxpayer bears the burden of

proof to establish entitlement to any claimed deduction.5    Rule

142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992);

New Colonial Ice Co. v. Commissioner, 292 U.S. 435, 440 (1934).

This burden requires the taxpayer to substantiate deductions

claimed by keeping and producing adequate records that enable the

Commissioner to determine the taxpayer’s correct tax liability.

Sec. 6001; Hradesky v. Commissioner, 65 T.C. 87, 90 (1975), affd.

per curiam 540 F.2d 821 (5th Cir. 1976); Meneguzzo v.

Commissioner, 43 T.C. 824, 831-832 (1965).     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;


     5
      Petitioners do not claim that the provisions of sec.
7491(a) are applicable, and we proceed as though they are not.
                                - 8 -

Hradesky v. Commissioner, supra; sec. 1.6001-1(a), Income Tax

Regs.

     Except for the deductions for charitable contributions, the

types of deductions here in dispute are allowable, if at all,

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 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.
                                 - 9 -

     Set against these fundamental principles, we turn our

attention first to the deductions here in dispute.

A. Disputed Deductions

     1. Unreimbursed Employee Business Expense Deduction

     The unreimbursed employee business expense deduction

petitioners claimed for each year in issue relates to

petitioner’s employment as a firefighter and consists of four

components:    (1) Unreimbursed incidental expenditures of $260 for

2003 and $260 for 2004; (2) union dues of $210 for 2003 and $510

for 2004; (3) expenses for meals petitioner consumed at the

firehouse; and (4) expenses for uniform maintenance.    We consider

each in the order just listed.

          a.    Unreimbursed Incidental Expenditures

     The unreimbursed business expense deduction claimed for each

year includes amounts attributable to incidental expenditures

such as batteries for flashlights and other work supplies.    For

each year, the deduction was disallowed for lack of

substantiation, and at trial petitioners failed to present any

documentary evidence to substantiate the $260 deduction claimed

for both 2003 and 2004.   We accept petitioner’s testimony that

some amounts were expended for certain items; but in the absence

of any documents supporting the amounts so expended, we find

that petitioners are allowed a $50 deduction for incidental
                                - 10 -

expenditures for each year.     See Cohan v. Commissioner, 39 F.2d

540 (2d Cir. 1930).

            b. Union Dues

     Petitioners claim unreimbursed employee business expense

deductions for union dues of $210 and $510 in 2003 and 2004,

respectively.    Respondent concedes that petitioners are

entitled to a $210 deduction for union dues for each year in

issue.   That leaves $300 in dispute for 2004.

     Petitioners have failed to present any evidence that they

actually paid more than $260 for union dues in 2004.     It would

seem that written substantiation for such an expense is readily

available.    In the absence of written substantiation, petitioners

are not entitled to a deduction for union dues for 2004 in excess

of the amount respondent conceded.

            c. 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 cost of a taxpayer’s meals are nondeductible

personal expenses, unless the expense of the 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
                               - 11 -

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, and the expenses cannot be deducted on that ground.

Furthermore, nothing in the record would support a finding that

the contributions petitioner made to the common meal fund were

made other than voluntarily.   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.6

          d. Expenses for Uniform Maintenance

     The unreimbursed employee business expense deduction claimed

on petitioners’ returns includes $1,514 and $1,580 for 2003 and

2004, respectively, for uniform maintenance.     Uniform maintenance

includes the cost of dry cleaning, polish for petitioner’s shoes

     6
      Even if otherwise allowable, we note that the amount
deducted for meals expenses each year greatly exceeded the amount
actually expended.
                                - 12 -

and brass/silver, and the occasional item that is not covered by

the yearly uniform allowance.

     Expenses for uniforms are deductible if the uniforms are of

a type specifically required as a condition of employment, the

uniforms are not adaptable to general use as ordinary clothing,

and the uniforms are not worn as ordinary clothing.    Yeomans v.

Commissioner, 30 T.C. 757, 767-769 (1958); Wasik v. Commissioner,

T.C. Memo. 2007-148; Beckey v. Commissioner, T.C. Memo. 1994-514.

Petitioner was required to wear a uniform provided by the City of

Dickson as a condition of his employment as a firefighter.

     Petitioners did not offer any evidence to substantiate the

deductions claimed for uniform maintenance.   In the absence of

any substantiating evidence, we find that petitioners are

entitled to a deduction of $500 for each year in issue.   See

Cohan v. Commissioner, supra.

     2. Lawn Care Schedule C Deductions

     For 2003 the Schedule C expense deductions in dispute are:

(1) $2,760 for car and truck expenses, (2) $250 for legal

expenses, (3) $501 for supplies expenses, (4) $990 for other

expenses; and (5) some portion of the $30,366 depreciation and

section 179 expense deduction.    As noted, petitioners now concede

that the depreciation and section 179 expense deduction was

overstated by $11,694 (an amount attributable to a Dodge truck).
                              - 13 -

     Petitioners submitted bank records, credit card company

records, receipts, and other written documents to substantiate

their deductions.   The organization of the documents as relating

to the deductions in dispute leaves much to be desired.

Nevertheless, after a careful review of the documents we find

that petitioners are entitled to the 2003 Schedule C deductions

as claimed, with the exception of the portion of the depreciation

and section 179 expense deduction attributable to the Dodge

truck.

     Petitioner testified that Spoon’s was sold sometime near the

end of 2003.7   The sale of the business in 2003 perhaps explains

why the 2004 Schedule C shows no income.   What remains

unexplained is why deductions attributed to that business are

claimed for 2004.   Petitioners’ failure to justify or otherwise

explain business expense deductions claimed for 2004, the year

following the year that the business apparently was sold,

requires that respondent’s disallowance of those deductions be

sustained.

     3. Farming Activity Schedule F Deductions

     According to petitioners, the expense deductions claimed and

resultant loss shown on the 2004 Schedule F are allowable because

the expenses were paid or incurred in connection with a “trade or

     7
      He was less than certain on the point, but petitioners
provided nothing else to otherwise establish the date the
business was sold.
                              - 14 -

business”.   According to respondent, petitioners’ farming

activity did not qualify as a trade or business during 2004 and

expenditures incurred in connection with that activity are

deductible only as provided by section 183.

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

section 162(a) and section 165(c)(1), 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.

      Petitioners’ evidence on the point consists of the

following:   (1) They lived on property, owned by the parents of

one of them, which was at one time used as an operating farm; (2)

two heifers were purchased and apparently kept on the property

during 2004; and (3) petitioner observed that nobody “farms as a

hobby”.   To the extent that petitioner’s observation suggests

that farming is an arduous activity, we agree.   Keeping

petitioner’s observation in mind, as we view the matter, living

on a family farm and the purchase of two cows, without more, does

not a farmer make.   Petitioners have failed to demonstrate that

the farming activity was conducted with “continuity and

regularity” and “for the purpose of making a livelihood” as

necessary to be considered a trade or business within the meaning
                                   - 15 -

of section 162.       Id. at 28, 35.   Respondent’s disallowances of

deductions claimed in connection with that activity are

sustained.       Petitioners are not entitled to a deduction for

expenses or the loss shown on the 2004 Schedule F.

       4. Charitable Contribution Deductions

       According to petitioners, the charitable contribution

deductions of $1,200 and $6,896 claimed on their 2003 and 2004

returns, respectively, consist of contributions by check to

Slayden Baptist Church.

       In general, a taxpayer is allowed to deduct any

contributions or gifts made to qualifying organizations for their

use.       See sec. 170(a).   Section 1.170A-13(a)(1), Income Tax

Regs., requires that a charitable contribution deduction, whether

made by cash or otherwise, be substantiated by at least one of

the following:       (1) A canceled check; (2) a receipt from the

donee charitable organization showing the name of the donee, the

date of the contribution, and the amount of the contribution;8 or

(3) in the absence of a canceled check or receipt from the donee

charitable organization, other reliable written records showing

the name of the donee, the date of contribution, and the

amount of the contribution.        The reliability of the records is




       8
      A letter or other communication from the donee charitable
organization acknowledging receipt of a contribution and showing
the date and amount of the contribution constitutes a receipt.
                              - 16 -

determined on the basis of all the relevant facts and

circumstances.   See sec. 1.170A-13(a)(2), Income Tax Regs.

     Although petitioners claim to have made the contributions by

check, they presented no canceled checks or other acceptable

substantiating documents showing any contributions.   That being

so, they are not entitled to the charitable contribution

deductions claimed on their 2003 and 2004 returns, and

respondent’s disallowance of those deductions is sustained.

B. Omitted Income

     The 2003 deficiency results in part from the disallowed

deductions discussed above.   It also results in part from

respondent’s adjustment increasing the income reported on Spoon’s

Schedule C, and we turn our attention to that adjustment.

     During 2003, deposits totaling $14,589 were made to the

business account, but the Schedule C shows income of only $6,014.

Respondent increased petitioners’ income by the difference; that

is, $8,575.

     Taxpayers must keep adequate books and records from which

their correct tax liability can be determined.   Sec. 6001.

Petitioners’ business records, which consist in part of the

monthly statements for the business account, show deposits in

excess of the amount reported as income.   According to

petitioner, the business account was used exclusively for

business purposes and the income generated by the business was
                               - 17 -

deposited into that account.   Petitioners’ business records

support respondent’s adjustment, and petitioners have failed to

explain the difference between the income established by the

business records and the income reported on the Schedule C.

Respondent’s adjustment, therefore, is sustained.

C. The Accuracy-Related Penalties

     Lastly, we consider whether petitioners are liable for

section 6662(a) accuracy-related penalties.     For each year in

issue, respondent has determined that they are.

     Various grounds for the imposition of that penalty are set

forth in the notice of deficiency.      Nevertheless, if it is shown

that petitioners acted in good faith and there is reasonable

cause for the deficiency for each year, then the section 6662(a)

accuracy-related penalty is not applicable to either.     See sec.

6664(c); Higbee v. Commissioner, 116 T.C. 438, 446-447 (2001).

     For each year in issue, petitioners relied upon a paid

income tax return preparer to prepare their Federal income tax

return and to compute the tax liability shown on the return.       We

are satisfied that petitioners had reasonable cause and acted in

good faith with respect to the underpayment of tax that will

remain for each year.   See sec. 6664(c).    They are not liable for

the section 6662(a) accuracy-related penalty for either year in

issue.
                        - 18 -

To reflect the foregoing,


                                 Decision will be entered

                            under Rule 155.
