                       T.C. Memo. 2000-199



                     UNITED STATES TAX COURT



                 KEVIN E. O’BRIEN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent


     Docket No. 8646-98.                       Filed June 29, 2000.


     Kevin E. O’Brien, pro se.

     Deborah S. Dipiero, for respondent.


                       MEMORANDUM OPINION


     NAMEROFF, Special Trial Judge:   Respondent determined a

deficiency in petitioner’s 1993 Federal income tax of $6,933

and an addition to tax pursuant to section 6651(a)(1)1 of $1,690.

     The issues for decision are:   (1) Whether petitioner is

entitled to the deductions claimed for employee business expenses


     1
        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.
                                 - 2 -

and miscellaneous expenses on Schedule A, Itemized Deductions;

and (2) whether petitioner is liable for the addition to tax

pursuant to section 6651(a)(1) for failure to timely file his

return.

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

The stipulation of facts, the supplemental stipulation of facts,

and the attached exhibits are incorporated herein by this

reference.   At the time his petition was filed, petitioner

resided in Honolulu, Hawaii.

     During 1993, petitioner was employed as a car salesman with

South Seas Jeep Eagle (the dealership) in Hawaii.    He reported

$65,267 as compensation from the dealership for 1993.    In order

to secure customers and make a sale, petitioner would purchase

beverages, food, gifts, and gasoline for them.    Petitioner’s

employer did not reimburse him for any expenses incurred.

Petitioner maintained a calendar in which he recorded the amounts

he spent on customers.   In the calendar, which is rather

unorganized and confusing, petitioner listed the name of the

customer and the vehicle sold.    Petitioner recorded whether he

purchased a snack or meal for the customer and the amounts spent.

Petitioner also recorded when he gave demo rides.    Some days have

numbers listed instead of customer names, while other days show

that petitioner had a customer and numerous expenditures were

made.
                                 - 3 -

     On Schedule A filed with his 1993 Federal income tax return,

petitioner claimed the following as unreimbursed employee

business expenses:

          Expense                               Amount
          Vehicle                               $6,351
          Parking                                  780
          Travel                                 5,892
          Business                               6,986
          Meals and entertainment1               5,594
            Total                               25,603
          1
              After the 20 percent reduction.   See sec. 274(n).

     Respondent disallowed the claimed expenses for failure to

substantiate.     Petitioner alleges that his records were destroyed

in November 1996 due to a rainstorm which flooded his apartment.

Petitioner recently found copies of the calendar in storage.

     Deductions are a matter of legislative grace.       See INDOPCO,

Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice

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

substantiate any deductions claimed and bear the burden of

substantiation.    See Hradesky v. Commissioner, 65 T.C. 87, 89-90

(1975), affd. per curiam 540 F.2d 821 (5th Cir. 1976).      Taxpayers

are required to maintain adequate records sufficient to establish

the amounts of the deductions.    See sec. 6001; Meneguzzo v.

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

     Section 162(a) allows a taxpayer to deduct all ordinary and

necessary business expenses paid or incurred during the taxable
                               - 4 -

year in carrying on any trade or business.   No deduction is

allowed for personal, living, or family expenses.   See sec. 262.

     In some circumstances, if a taxpayer is unable to

substantiate a claimed business expense, the Court is permitted

to make as close an approximation as it can.   See Cohan v.

Commissioner, 39 F.2d 540 (2d Cir. 1930).    The estimate, however,

must have a reasonable evidentiary basis.    See Vanicek v.

Commissioner, 85 T.C. 731, 743 (1985).   Section 274(d) requires

strict substantiation of certain expenses including those

incurred with respect to vehicle, travel, meals, gifts, and

entertainment.

     Under section 274(d), a taxpayer must maintain adequate

records or provide sufficient evidence corroborating his own

statement to support a deduction.   See Lukes v. Commissioner,

T.C. Memo. 1988-116.   The regulations require substantiation by

documents showing the amount paid, the time and place of the

vehicle use, travel, meals, or entertainment, and the business

purpose of the expense.   See sec. 1.274-5T(a)(1), (b)(2),

Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6, 1985).

     In order to substantiate a deduction by means of adequate

records, a taxpayer must maintain a diary, a log, or a similar

record, and documentary evidence which, in combination, are

sufficient to establish each element of each expenditure or use.
                                - 5 -

See sec. 1.274-5T(c)(2)(i), Temporary Income Tax Regs., 50 Fed.

Reg. 46017 (Nov. 6, 1985).

     If an expense comes within the requirements of section

274(d), this Court cannot rely on Cohan v. Commissioner, supra,

to estimate the taxpayer’s expenses with respect to that item.

See Sanford v. Commissioner, 50 T.C. 823, 827 (1968), affd. per

curiam 412 F.2d 201 (2d Cir. 1969).

     When a taxpayer’s records are lost or destroyed through

circumstances beyond his control, he is entitled to substantiate

deductions by reconstructing his expenditures through other

credible evidence.   See Malinowski v. Commissioner, 71 T.C. 1120,

1125 (1979); sec. 1.274-5A(c)(5), Income Tax Regs.

     We address each expense with additional facts separately.

     1. Vehicle

     Petitioner claimed a deduction of $6,351 for vehicle

expenses on his 1993 return based on 22,683 alleged business

miles.   Petitioner testified that he often had to drive customers

to other related dealerships on the island to look at cars or to

their credit unions or banks.   Petitioner admitted that he often

took a car from the lot to use instead of driving his own.

Petitioner also claimed that he incurred mileage driving

customers home when they did not have a vehicle.   It is not clear

how often petitioner drove the customers to the various places.
                              - 6 -

     Petitioner does not have a mileage log or any other

documentation to substantiate his claim.   Petitioner contends

that he kept a cash account book on his person at all times in

which he recorded “everything”.   This account book was destroyed

by the flooding in the apartment.   No miles or trips were

recorded on the calendar submitted at trial.

     Passenger automobiles are listed property under section

280F(d)(4)(A)(i), and they are subject to the strict

substantiation requirements of section 274(d).   Petitioner did

not reconstruct any records with regard to the mileage he

incurred.

     On the basis of this record, we are precluded from allowing

a deduction for any vehicle expenses.   We sustain respondent with

respect to this item.

     2. Parking

     Petitioner claimed a deduction of $780 for parking expenses.

The dealership does not provide parking for the employees.

Therefore, petitioner parked at a nearby parking lot for which he

paid parking fees of $780 for the year.    It is well settled that

parking fees a taxpayer incurs as a part of his or her daily

commute are nondeductible personal expenses.   See sec. 262; see

also Commissioner v. Flowers, 326 U.S. 465, 470 (1946).

Accordingly, respondent is sustained on this item.
                                 - 7 -

     3. Travel

     Petitioner claimed a deduction of $5,892 for travel

expenses.   Petitioner testified that when he would drive a

customer home late at night, he would occasionally stay in a

hotel instead of driving back.    Petitioner also stated that there

were conferences he attended on the island and seminars in

Arizona.    Petitioner could not recall whether any of these events

occurred in 1993.   Petitioner did not provide any records or

reconstructed records, nor were there any notations in his

calendar, about any of these events.     On the basis of this

record, petitioner has not met the strict substantiation

requirements of section 274(d), and he is not entitled to a

deduction for travel expenses.

     4. Business

     Petitioner claimed a deduction of $6,986 for business

expenses.   According to petitioner’s testimony, these expenses

were for items purchased, such as gifts and gasoline, to secure

sales.   In petitioner’s calendar, he recorded the items he

purchased for customers, such as hats, t-shirts, and bikini tops

(a vinyl covering for certain vehicles).     When a customer’s

vehicle was not ready on the day of purchase, petitioner would

give the customer a loaner car and would fill up the tank with

gasoline.   For some months, petitioner listed at the bottom of

the calendar page the amount he incurred with respect to gifts
                               - 8 -

without identifying the customer.   Therefore, in the instances

where it is somewhat clear which customer received the gift,

petitioner is entitled to a deduction.    Overall, we conclude that

petitioner is entitled to a deduction of $1,035 for business

gifts.2

     5. Meals and entertainment

     Petitioner claimed a deduction of $5,594 for meals and

entertainment.   Petitioner contended that he often purchased

snacks, lunches, and dinners for customers to attract sales.      The

receipts for these items were allegedly destroyed in the flooding

from the rainstorm.   In the calendar, petitioner occasionally

listed an amount next to a customer’s name on a specific date

along with “SNK” for snack or “lunch” or “dinner”.    The majority

of the entries are just amounts next to “lunch” or “dinner” with

no indication that a customer was involved.    From the best we

could discern from this rather unorganized and cryptic document,

petitioner incurred $926 in deductible meals expenses, which

amount is subject to the limitation provided by section 274(n).

     We gave petitioner credit only where it was clear that a

specific purchase was for a customer.    There were too many

repeated entries that said $22 for lunch and $30 for dinner.



     2
        Even if we allowed all gifts noted on the calendar, it is
still nearly $5,000 short of the amount claimed on petitioner’s
return. Petitioner did not offer any explanation as to what
other expenses this amount is attributable.
                                - 9 -

These amounts rarely changed and very few indicated a customer

was involved.   There are a lot of numbers next to the entries for

demo rides, but there is no indication as to what these numbers

mean.    We also note that there were numerous entries for “BRK 15"

which petitioner stated meant that he was dealing with

individuals from the military barracks on the island.      We find it

incredible that nearly every time petitioner dealt with a person

from the barracks, it cost him $15.     Therefore, petitioner is

limited to a deduction for the meals expenses identified above.3

     Petitioner also claimed a deduction for tax preparation of

$200 as a miscellaneous deduction on Schedule A.     Petitioner

admitted that he did not incur a $200 expense for tax preparation

in 1993, since he had his 1992, 1993, 1994, and 1995 returns

prepared in 1996.    Accordingly, since there was no tax

preparation expense incurred in 1993, petitioner is not entitled

to claim such a deduction.

Section 6651(a)(1)

     Petitioner did not file his 1991 return because he did not

receive a Form W-2 from his employer.     Petitioner did not file

any subsequent returns because a coworker allegedly told him he

could not file any returns until the 1991 return was filed.




     3
        We also note that all expenses allowed are subject to the
2 percent of AGI limitation pursuant to sec. 67(a).
                               - 10 -

Petitioner did not consult with an accountant or attorney about

this matter.   Petitioner’s 1993 return was filed on July 3, 1996.

     In the case of failure to file an income tax return on the

date prescribed for filing, section 6651(a)(1) imposes an

addition to tax equal to 5 percent of the amount required to be

shown on the return, with an additional 5 percent to be added for

each month during which such failure continues, not to exceed 25

percent in the aggregate.   The addition to tax for failure to

file a timely return is imposed unless the taxpayer shows that

the delay was due to reasonable cause and not willful neglect.

See sec. 6651(a)(1); United States v. Boyle, 469 U.S. 241, 245

(1985).   A failure to file is due to “reasonable cause” if the

taxpayer exercised ordinary business care and prudence and was,

nevertheless, unable to file the return within the time

prescribed by law.    United States v. Boyle, supra at 246.   While

reliance on advice as to whether a return must be filed may

constitute reasonable cause, the person giving advice must be

competent to render that advice and the reliance on that advice

must be reasonable.   See id. at 250.

     Petitioner has not demonstrated that the coworker giving the

advice was competent to give such advice.   Such erroneous advice

does not constitute reasonable cause for petitioner’s failure to

comply with the statutory requirements.   Lastly, petitioner did

not seek professional advice about filing requirements.
                               - 11 -

Therefore, petitioner is liable for the addition to tax pursuant

to section 6651(a)(1) for delinquency.

     Based on the foregoing,

                                         Decision will be entered

                                    under Rule 155.
