                       T.C. Memo. 1997-488



                     UNITED STATES TAX COURT



          OCTAVIO AND FELICITAS OLVERA, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 23237-96.                   Filed October 29, 1997.



     Octavio Olvera, pro se.

     Joseph T. Ferrick, for respondent.


                       MEMORANDUM OPINION

     GOLDBERG, Special Trial Judge:   This case was heard pursuant

to section 7443A(b)(3) and Rules 180, 181, and 182.1   Respondent

determined deficiencies in petitioners' Federal income taxes for

1993 and 1994 in the respective amounts of $498 and $1,261.

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

     Petitioners concede that they failed to report $47 of

taxable interest income received in 1993.    Respondent concedes

that petitioners are entitled to two dependency exemption

deductions for their daughters for the years in issue.    As a

result of respondent's concession, there is no deficiency in

income tax for 1993.   Therefore, we need not decide whether

petitioners are entitled to additional dependency exemption

deductions for 1993, as the issue is moot.    However, a deficiency

in self-employment tax remains at issue for 1993.    See sec.

1402(a)(7).

     After concessions, the issues for decision are whether

petitioners are entitled to two additional dependency exemption

deductions under section 151 with respect to the mother and

sister of Octavio Olvera (petitioner) for 1994, and whether

petitioners are entitled to deductions for automobile and

telephone expenses in excess of amounts allowed by respondent for

either of the years in issue.2

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

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.   Petitioners resided in

Chicago, Illinois, at the time their petition was filed.

     Petitioners are from Mexico and have two daughters, Janet

and Illiana.   Petitioners moved to the United States to seek

2
     The computation of self-employment tax will be resolved by
this issue.
                                  3

medical treatment for Janet, and they lived in Chicago, Illinois,

for approximately 11 years prior to trial.       Sometime during 1993,

or prior thereto, petitioners determined that medical treatment

was too costly in the United States, and Janet returned to Mexico

for treatment.   Janet lived with petitioner's mother, Altagracia

Figueroa, and father, Jacinto Olvera Camacho.       Petitioner's

parents live in a rented two-bedroom home in the city of

Cuernavaca, in Morelos, Mexico.       In addition to Janet,

petitioner's sister, Zulma Olvera, resided in the home.

Petitioner's father worked periodically, doing electrical or

plumbing work, but he did not work on a regular basis.        By

petitioner's estimates, his parents' annual expenditures for

rent, utilities, and food averaged approximately $6,390 during

the years in issue.

     In June 1993 Felicitas Olvera (Mrs. Olvera) and Illiana

returned to Mexico to care for Janet because petitioner's mother

became ill.   Mrs. Olvera and Illiana stayed with Mrs. Olvera's

parents.   Janet remained with petitioner's parents.

     During the years in issue, petitioner wired money to various

relatives in Mexico to help support his parents and his sister

Zulma Olvera, to pay for Janet's care, and to support Mrs.

Olvera, Janet, and Illiana.   Petitioner wired funds at least 12

times in 1993 and at least 6 times in 1994, transferring amounts

totaling $3,510 and $2,400 in 1993 and 1994, respectively.         Of
                                 4

these amounts, $1,800 and $1,770 in 1993 and 1994 were payable to

Mrs. Olvera.    Petitioner wired an additional $550 to Mrs. Olvera,

but it is not clear when this transfer was made.   Petitioner

traveled to Mexico twice in 1993 and once in 1994.   On these

trips he carried cash, which he gave to his relatives.

     During the years in issue, in addition to other employment,

petitioner delivered pizzas on a part-time basis for Father & Son

Pizza.   Petitioner was required to provide his own car for use in

delivering pizzas.   Father & Son Pizza recommended that drivers

carry cellular phones because the safety of the neighborhoods on

the delivery routes was uncertain.    In 1993 petitioner borrowed a

cellular phone for this use.   In 1994 petitioner purchased a

cellular phone.   Petitioner did not maintain any records with

respect to his automobile or cellular phone usage or expense.

     On their joint Federal income tax returns filed for 1993 and

1994, petitioners claimed dependency exemption deductions with

respect to their two daughters and with respect to petitioner's

mother and his sister Zulma Olvera.   On Schedule C of their 1993

return, petitioners reported gross receipts of $3,808 from

petitioner's pizza deliveries and claimed deductions for car

expense and utilities expense in the amounts of $2,484 and $474,

respectively.   On Schedule C of their 1994 return, petitioners

reported gross receipts of $3,091 from petitioner's pizza
                                 5

deliveries and claimed deductions for car expense of $1,728 and

for utilities expense of $372.

     In the notice of deficiency, respondent disallowed

petitioners' claimed dependency exemption deductions in 1993 and

1994 with respect to petitioner's mother and sister.    With

respect to the tax year 1993, respondent also disallowed a

portion of petitioners' deductions for car expense in the amount

of $994 and for phone expense in the amount of $293.    Respondent

disallowed a portion of petitioners' claimed Schedule C

deductions in the amount of $576 for 1994.   From the record, it

appears that this entire disallowance was attributable to the

claimed car expense.   Respondent determined self-employment tax

in each of the years as a computational result of the adjustments

to petitioners' Schedule C deductions.   Respondent allowed

petitioners a deduction with respect to this tax for each of the

years in issue.

     Respondent's determinations are presumed correct, and

petitioners have the burden of proving them erroneous.     Rule

142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).      Deductions

are a matter of legislative grace, and petitioners must prove

entitlement to any deductions claimed.   New Colonial Ice Co. v.

Helvering, 292 U.S. 435, 440 (1934).   Taxpayers must maintain

adequate records to establish the amount of any deductions

claimed.   Sec. 6001; sec. 1.6001-1(a), Income Tax Regs.
                                  6

Dependency Exemption Deductions

     As relevant here, section 151 allows a taxpayer to deduct an

exemption amount for each dependent, as defined in section 152,

whose gross income for the calendar year is less than the

exemption amount.   The term "dependent" is defined to include a

sister or mother of the taxpayer, over half of whose support for

the calendar year is received from the taxpayer.

     Respondent contends that petitioners have not established

that they provided over one-half of the support for either

petitioner's mother or his sister in 1994.   Thus, respondent

argues these individuals were not petitioners' dependents under

section 152 in 1994.

     Although we sympathize with petitioners and acknowledge that

they clearly provided some support for petitioner's mother and

sister, we cannot find on the basis of the record that they

provided over half of the support for either.    We found

petitioner to be a credible witness.   Petitioner testified that,

in addition to $2,400 wired to various relatives in Mexico in

1994, he took somewhere between $2,000 and $2,500 in cash with

him on his trip to Mexico, and that he gave cash to cousins to

take to Mexico as well.   However, some of this money must have

been used to support Mrs. Olvera and petitioners' daughters, as

they had no other identified means of support.    Petitioner

testified that Mrs. Olvera's parents were unwilling to help
                                  7

support them.    Thus, we cannot infer from the evidence how much

of the funds actually was used to support petitioner's mother and

sister as opposed to Mrs. Olvera and petitioners' daughters.

     Furthermore, petitioner testified that his sister, who may

have worked, received money from another source.    He also

acknowledged that his nine siblings helped provide support at

times, although he stated that his parents did not receive any

governmental support or insurance.    Thus, petitioners have failed

to establish the total amount of support provided for

petitioner's mother and sister from all sources, a prerequisite

to finding that petitioners provided one-half of either

individual's support.    See Blanco v. Commissioner, 56 T.C. 512,

514 (1971).     Respondent is sustained on this issue.

Schedule C Deductions

     Petitioners contend that they are entitled to Schedule C

deductions in the amounts disallowed by respondent.      Section 162

allows a deduction for all ordinary and necessary expenses paid

or incurred in carrying on a trade or business.    Generally, when

evidence shows that the taxpayers paid a deductible expense but

the exact amount cannot be determined, the Court may approximate

the amount.     Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930).

An exception to the Cohan rule is section 274(d), which requires

strict substantiation of certain expenses, including those paid

or incurred with respect to certain listed property.     Sec.
                                  8

274(d).   Listed property includes automobiles and cellular

telephones.    Sec. 280F(d)(4).   Section 274(d) requires

substantiation of these expenses either "by adequate records or

by sufficient evidence corroborating the taxpayer's own

statement".

     Petitioner testified that his business mileage was based on

an estimate.    He also testified that his 1993 telephone expense

represented amounts paid to a friend from whom he borrowed a

cellular phone.    Petitioners presented no records or

corroborating evidence with respect to these expenses, and they

have failed to substantiate any amount in excess of that allowed

by respondent.    Respondent is sustained on this issue.

     To reflect the foregoing,


                                           Decision will be entered

                                      under Rule 155.
