                  T.C. Summary Opinion 2005-105



                     UNITED STATES TAX COURT



    MICHAEL E. THIBODEAUX & STEPHANIE R. THIBODEAUX, a.k.a.
               STEPHANIE R. HEARN, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 14743-03S.            Filed July 27, 2005.



     Michael E. Thibodeaux, pro se.

     Kathleen C. Schlenzig, for respondent.


     CARLUZZO, Special Trial Judge:   This case was heard pursuant

to the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed.    Unless otherwise

indicated, subsequent section references are to the Internal

Revenue Code in effect for 1998.   Rule references are to the Tax

Court Rules of Practice and Procedure.   The decision to be
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entered is not reviewable by any other court, and this opinion

should not be cited as authority.

     Respondent determined a deficiency of $10,699 in

petitioners’ 1998 Federal income tax and a $417 section

6651(a)(1) addition to tax.    Concessions by petitioners narrow

the scope of our consideration to the following issues:    (1)

Whether petitioners are entitled to a deduction for meals and

entertainment expenses claimed on a Schedule C, Profit or Loss

From Business, included with their 1998 joint Federal income tax

return; (2) whether petitioners are entitled to a deduction for

travel expenses incurred in connection with a trip to Jamaica,

and (3) whether petitioners’ failure to file a timely 1998 return

was due to reasonable cause.

Background

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

Petitioners are husband and wife.    They were married in December

1998.    At the time the petition was filed in this case, they

resided in Chicago, Illinois.    References to petitioner are to

Michael Thibodeaux.1




     1
        Stephanie R. Thibodeaux neither appeared at trial nor
signed the stipulation of facts. The case will be dismissed as
to her for lack of prosecution. Rule 123(b). The decision
entered with respect to her will reflect the disposition of the
issues agreed to between petitioner and respondent or otherwise
here in dispute, and it will be consistent with the decision
entered with respect to petitioner.
                                - 3 -

     Throughout 1998, petitioner worked as a self-employed

consultant.   From time to time during that year he entertained

clients and prospective clients.     To that end petitioner “picked

up the tab” for various meal and entertainment expenses.

Petitioner “generally would keep just some loose papers or

notices” evidencing these expenses, and he “would send them to

[his] accountant just as records of what [he] had done.”

     According to petitioner, his records for meal and

entertainment expenses for the 1998 taxable year were lost by his

accountant.   Consequently, in 1999 petitioner prepared a “diary”

to “approximate as best [he] could” the meal and entertainment

expenses he incurred during 1998.    Various entries made in the

“diary” on numerous dates show only the name of an individual and

an amount.    The “diary” does not contain any notations describing

the business purpose of recorded expenses.

     Each petitioner initially filed a separate 1998 return.

Stephanie Thibodeaux’s return was timely; petitioner’s return,

filed February 22, 2000, was not.2      On December 19, 2001,

respondent received petitioners’ joint Form 1040X, Amended U.S.

Individual Income Tax Return, for 1998 (the joint return).      The

joint return includes a Schedule C for petitioner’s consulting


     2
       The parties stipulated that petitioner’s 1998 return was
filed Feb. 22, 2000. The notice of deficiency suggests his
return was filed Feb. 20, 2000. The difference is without
distinction and need not be reconciled.
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business, as does the separate return previously filed by

petitioner.   According to the Schedules C, the income and

deductions listed on each has been computed in accordance with

the cash receipts and disbursements method of accounting.     On

each Schedule C a deduction of $1,522 for meals and entertainment

expenses is claimed.   On the Schedule C included with

petitioner’s separate return a deduction of $4,034 for travel

expenses is claimed.   At the examination stage the parties

proceeded as though the travel expense deduction was also claimed

on the joint return, even though it was not, and we do likewise.

     The deduction for meals and entertainment expenses relates

to those items generally described above.    The deduction for

travel expenses relates to airfare, hotel, and local

transportation expenses incurred for two trips to Jamaica, one in

January and one in December.   Petitioner described the trips as

“exploratory, investigative in nature” taken “because [he] was

attempting to get into * * * a real estate investment prospect”

that “did not reach fruition.”    Petitioner now concedes that

expenses totaling $2,430 incurred in connection with the December

trip are not deductible.

     In a notice of deficiency dated June 30, 2003, respondent:

(1) Disallowed the deduction for meals and entertainment

expenses; (2) in effect, disallowed the deduction for travel

expenses for the Jamaican trips; and (3) imposed an addition to
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tax under section 6651(a)(1) for petitioners’ failure to file a

timely return.    Other adjustments made in the notice of

deficiency are not in dispute.

Discussion

     As has often been stated, deductions are a matter of

legislative grace, and the taxpayer bears the burden of proof to

establish entitlement to any claimed deduction.3   Rule 142(a);

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

Colonial Ice Co. v. Helvering, 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).

     Although without expressly making reference to it, in

support of the deductions here in dispute petitioners rely upon

section 162(a).    That section generally allows a taxpayer to

deduct ordinary and necessary expenses paid or incurred in

carrying on a trade or business.




     3
       Petitioner does not claim that the provisions of sec.
7491(a) are applicable, and we proceed as though they are not.
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     In this case, specific substantiation rules come into play

as the deductions here in dispute, although of a type generally

allowable under section 162(a), are further described in and

subject to section 274(d).    In general, that section provides

that no deduction shall be allowed for any travel expense or

entertainment expense unless the taxpayer substantiates by

adequate records the following items:    (1) The amount of such

expense; (2) the time and place of the travel or entertainment;

(3) the business purpose of the expense; and (4) the business

relationship to the taxpayer of persons entertained.    Sec.

274(d); sec. 1.274-5T(b)(2) and (3), Temporary Income Tax Regs.,

50 Fed. Reg. 46014-46015 (Nov. 6, 1985).

     Under the applicable regulations, to meet the “adequate

records” requirement of section 274(d), a taxpayer “shall

maintain an account book, diary, log, statement of expense,

trip sheets, or similar record * * * and documentary evidence

* * * which, in combination, are sufficient to establish each

element of an expenditure”.    Sec. 1.274-5T(c)(2)(i), Temporary

Income Tax Regs., 50 Fed. Reg. 46017 (Nov. 6, 1985).    The record-

keeping requirements of section 274(d) contemplate that a record

“made at or near the time of the expenditure or use, supported by

sufficient documentary evidence, has a high degree of credibility

not present with respect to a statement prepared subsequent
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thereto when generally there is a lack of accurate recall.”     Sec.

1.274-5T(c)(1), Temporary Income Tax Regs., 50 Fed. Reg. 46017

(Nov. 6, 1985).

       We turn our attention first to the deduction for meals and

entertainment.    According to petitioner, whatever receipts for

those expenses he at one time had, but turned over to his

accountant, have been lost, and nothing in the record suggests

that petitioner contacted any third parties in an attempt to

obtain duplicates of those records.     Furthermore, according to

petitioner, he at no time recorded such expenses in a

contemporaneously maintained diary.     Petitioner’s “diary”

prepared long after the events recorded in it, in and of itself,

is not sufficient to satisfy the substantiation requirements

discussed above.    See Hentges v. Commissioner, T.C. Memo. 1998-

244.

       Because petitioners have failed to satisfy the applicable

substantiation requirements with respect to expenses for meals

and entertainment, they are not entitled to a deduction for those

expenses.    Respondent’s disallowance of that deduction is

sustained.

       The dispute between the parties as to petitioners’

entitlement to a deduction for travel expenses now is limited to
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the trip to Jamaica that petitioner claims to have taken place in

January 1998.   As with the deduction for meals and expenses, this

deduction is also subject to section 274(d).   In support of the

deduction for these expenses, petitioner produced a canceled

check and a travel summary from his travel agent, Vacation

Hotline.

     We need not consider whether these records in combination

with petitioner’s explanation satisfy the special substantiation

requirements discussed above because another, more fundamental

reason exists for the disallowance of the deduction.   Although

petitioner claims that the trip occurred during 1998, we find

that the trip took place in January 1999.   We support our finding

on this point by the following:   (1) Although the check is dated

January 16, 1998, imprints on the back of the check indicate that

the check was processed by two banks on January 20, 1999, and

January 21, 1999, respectively; (2) it is not unusual for an

individual to misdate a check at the beginning of a new year, and

we find it more likely that petitioner made such a mistake rather

than the two different banks that processed the check; (3)

Vacation Hotline’s records indicate that petitioner was in

Tallahassee, Florida, rather than Jamaica, during the relevant

dates in January 1998; and (4) the number of the check suggests

that it was made at a date no earlier than December 10, 1998.
                               - 9 -

     We need not consider other reasons advanced by respondent in

support of the disallowance of the deduction for travel expenses.

Because petitioners are cash basis taxpayers, the expenses

incurred for the trip to Jamaica in January 1999, if otherwise

deductible, are not deductible in 1998.    See sec. 461(a).

Accordingly, we sustain respondent’s determination with respect

to the disallowed travel expense deduction.

     In the notice of deficiency respondent imposed an addition

to tax under section 6651(a)(1).   That section provides for an

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

have been shown on the return if the failure to file is for not

more than 1 month, with an additional 5 percent for each month in

which the failure to file continues, to a maximum of 25 percent

of the tax in the aggregate.   If an income tax return is not

filed within 60 days of the prescribed date for filing (including

extensions), the addition to tax imposed is not less than the

lesser of $100 or 100 percent of the amount required to be shown

as tax on the return.   Sec. 6651(a).   The addition to tax is

imposed on the net tax due, sec. 6651(b), and applicable unless

the taxpayer establishes that the failure to file is due to

reasonable cause and not due to willful neglect.    Sec.

6651(a)(1); United States v. Boyle, 469 U.S. 241, 245 (1985).
                               - 10 -

     Respondent bears the burden of production with respect to

the imposition of the section 6651(a)(1) addition to tax here

under consideration.    Sec. 7491(c).

     Because the amended return was filed after separate returns,

the date the amended return is deemed to have been filed is the

date that petitioner’s return was filed, that is February 22,

2000, or thereabouts, sec. 6013(b)(3)(A)(i), which date is more

than 4 months after the due date of the return.    See sec.

6072(a).

     Petitioners agree that the return was not timely.     They

argue against the imposition of the addition to tax, however,

upon several grounds.    In a Form 843, Claim for Refund and

Request for Abatement, petitioners suggest that the return was

filed late as “a result of erroneous advice from the IRS.”

Attached to that form is a two-page typed statement in which

petitioners request that the addition to tax be waived because

petitioner’s accountant had a lengthy illness and that “no one in

the [accounting firm] was familiar with [his] records”.4

     Nothing in the record identifies what, if any, “erroneous

advice” petitioners might have received from respondent, and we

give that explanation no further consideration.    Otherwise,



     4
        We note that petitioner made no mention in this letter
that the accounting firm had misplaced or lost his business
records.
                               - 11 -

petitioners claim that petitioner’s accountant is to blame for

their untimely return.

       A taxpayer has a personal and nondelegable duty to file a

timely return, and reliance on an accountant to file a return

does not provide reasonable cause for an untimely filing.    See

United States v. Boyle, supra at 249; Schirle v. Commissioner,

T.C. Memo. 1997-552.

       The evidence demonstrates that the joint return was deemed

filed more than 4 months beyond the date it was due.    Petitioners

have not established that the failure to file a timely return was

due to reasonable cause and not willful neglect.    See Higbee v.

Commissioner, 116 T.C. 438, 447 (2001).    Accordingly, we sustain

respondent’s imposition of the section 6651(a)(1) addition to

tax.

       Reviewed and adopted as the report of the Small Tax Case

Division.

                                          Decision will be entered

                                     for respondent.
