                         T.C. Memo. 2007-300



                       UNITED STATES TAX COURT



         BENJAMIN O. & LINDA L. AGBANIYAKA, Petitioners v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8340-06.             Filed October 2, 2007.



     Benjamin O. Agbaniyaka and Linda L. Agbaniyaka, pro sese.

     Theresa G. McQueeney, for respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION


     CHIECHI, Judge:    Respondent determined the following defi-

ciencies in, and accuracy-related penalties under section

6662(a)1 on, petitioners’ Federal income tax (tax):



     1
      All section references are to the Internal Revenue Code
(Code) in effect for the years at issue. All Rule references are
to the Tax Court Rules of Practice and Procedure.
                                  - 2 -

                                          Accuracy-Related Penalty
    Year             Deficiency              Under Sec. 6662(a)
    2001               $3,301                     $660.20
    2002               $3,727                     $745.40
    2003               $2,137                     $427.40
    2004               $1,600                     $320.00

     The issues remaining for decision are:

     (1) Are petitioners entitled to deduct for each of their

taxable years 2002 through 2004 certain claimed unreimbursed

employee expenses?    We hold that they are not.

     (2) Are petitioners entitled for each of their taxable years

2001 through 2004 to a net loss shown in Schedule C, Profit or

Loss From Business, with respect to a claimed arts and crafts

business?    We hold that they are not.

     (3) Are petitioners entitled to deduct for their taxable

year 2003 certain claimed student loan interest?       We hold that

they are not.

     (4) Are petitioners liable for each of their taxable years

2001 through 2004 for the accuracy-related penalty under section

6662(a)?    We hold that they are.

                          FINDINGS OF FACT

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

     At the time petitioners filed the petition in this case,

they resided in Valley Stream, New York.

     During the years at issue, petitioner Benjamin O. Agbaniyaka

(Mr. Agbaniyaka), who holds a master’s degree in accounting with
                                - 3 -

a concentration in taxation from Long Island University, was

employed full time by the Internal Revenue Service as a revenue

agent.   At all relevant times, Mr. Agbaniyaka was familiar with

the requirements of section 6001.

     During the years 2001 through 2003, the State of New York

correctional system employed petitioner Linda L. Agbaniyaka (Ms.

Agbaniyaka).   In 2003, Ms. Agbaniyaka was diagnosed with a tumor

behind her right eye.   During that year, Ms. Agbaniyaka stopped

working for the State of New York correctional system.

     Petitioners began to report in Schedule C, Profit or Loss

From Business (Schedule C), for their taxable year 1988 income

and/or expenses with respect to certain activities relating to

African arts and crafts (claimed arts and crafts business).    As

part of those activities, Mr. Agbaniyaka traveled to various

trade shows across the United States.   In 1996, after Mr.

Agbaniyaka suffered a heart attack, his doctor advised him to

limit his traveling.    Mr. Agbaniyaka followed his doctor’s advice

and ceased traveling long distances, including traveling to

various trade shows across the United States.   In 2002, Mr.

Agbaniyaka was diagnosed with sleep apnea, which made it danger-

ous for him to drive.   At all relevant times, Mr. Agbaniyaka also

limited his traveling in order to care for petitioners’ autistic

daughter.

     During each of the years 2001 through 2004, Mr. Agbaniyaka
                               - 4 -

maintained a checking account for his claimed arts and crafts

business (claimed business checking account), even though that

account had a zero balance.   At least during each of the years

2001, 2002, and 2003, Mr. Agbaniyaka paid certain bank service

charges to maintain the claimed business checking account.

     Petitioners timely filed Form 1040, U.S. Individual Income

Tax Return (return), for each of their taxable years 2001 (2001

return), 2002 (2002 return), 2003 (2003 return), and 2004 (2004

return).   Petitioners included Schedule A-Itemized Deductions

(Schedule A) as part of the 2001 return (2001 Schedule A), the

2002 return (2002 Schedule A), the 2003 return (2003 Schedule A),

and the 2004 return (2004 Schedule A).     Petitioners also included

Schedule C as part of the 2001 return (2001 Schedule C), the 2002

return (2002 Schedule C), the 2003 return (2003 Schedule C), and

the 2004 return (2004 Schedule C).     In each such Schedule C,

petitioners showed the “Principal business or profession, includ-

ing product or service” as “AFRICAN ARTS & CRAFT”2 and the “Busi-

ness name” as “WAND AFRICA CONTEMPORARY IMPORTS”.

     In the 2001 Schedule A, petitioners claimed under the

heading “Job Expenses and Most Other Miscellaneous Deductions”

$4,792 of “Unreimbursed employee expenses” (unreimbursed employee

expenses), which they identified in that schedule as “UNION DUES


     2
      In the 2002 Schedule C, petitioners showed the “Principal
business or profession, including product or service” as “AFRICAN
ARTS, CRAFTS”.
                               - 5 -

JOURNALS DUES”.   As required by section 67(a), petitioners

reduced those expenses by two percent of their adjusted gross

income (i.e., by $1,631).   In determining the taxable income

reported in their 2001 return, petitioners deducted the balance

(i.e., $3,161), as well as the other itemized deductions claimed

in the 2001 Schedule A that were not subject to the two-percent

floor imposed by section 67(a).

     In the 2002 Schedule A, petitioners claimed $2,300 of

unreimbursed employee expenses, which they identified in that

schedule as “EXPENSES”.   As required by section 67(a), petition-

ers reduced those expenses by two percent of their adjusted gross

income (i.e., by $1,488).   In determining the taxable income

reported in their 2002 return, petitioners deducted the balance

(i.e., $812), as well as the other itemized deductions claimed in

the 2002 Schedule A that were not subject to the two-percent

floor imposed by section 67(a).

     In the 2003 Schedule A, petitioners claimed $2,300 of

unreimbursed employee expenses, which they identified in that

schedule as “UNION DUES ACCOUNTING JOU”.   As required by section

67(a), petitioners reduced those expenses by two percent of their

adjusted gross income (i.e., by $1,716).   In determining the

taxable income reported in their 2002 return, petitioners de-

ducted the balance (i.e., $584), as well as the other itemized

deductions claimed in the 2003 Schedule A that were not subject
                                - 6 -

to the two-percent floor imposed by section 67(a).

     In the 2004 Schedule A, petitioners claimed $2,300 of

unreimbursed employee expenses, which they identified in that

schedule as “UNION DUES, ACCOUNTING JOU”.    As required by section

67(a), petitioners reduced those expenses by two percent of their

adjusted gross income (i.e., by $1,751).    In determining the

taxable income reported in their 2002 return, petitioners de-

ducted the balance (i.e., $549), as well as the other itemized

deductions claimed in the 2004 Schedule A that were not subject

to the two-percent floor imposed by section 67(a).

     In the 2001 Schedule C, petitioners made no entries in the

section entitled “Income”.   In that schedule, petitioners claimed

total expenses of $5,661 consisting of $2,496 for “Depreciation

and section 179 expense deduction” with respect to a “RAM VAN”

(Dodge van), $1,125 for “Insurance”, and $2,040 for “Other

expenses”.   Under “Other Expenses”, petitioners claimed $240 for

“BANK CHARGES”, $200 for “GASOLINE EXPENSES”, and $1,600 for

“REPAIR OIL TIRES REGIST”.   In the 2001 Schedule C, petitioners

claimed a net loss of $5,661.   In determining the taxable income

reported in their 2001 return, petitioners deducted that net

loss.

     In the 2002 Schedule C, petitioners claimed gross receipts

or sales of $3,216, cost of goods sold of $15,500, and a negative

gross income of $12,284.   In that schedule, petitioners also
                               - 7 -

claimed total expenses of $2,948 consisting of $1,498 for “Depre-

ciation and section 179 expense deduction” with respect to the

Dodge van, $1,110 for “Insurance”, and $340 for “Other expenses”.

Under “Other Expenses”, petitioners claimed $240 for “BANK

CHARGES”, $50 for “GASOLINE”, and $50 for “INSPECTION & TUNE UP”.

In the 2002 Schedule C, petitioners claimed a net loss of

$15,232.   In determining the taxable income reported in their

2002 return, petitioners deducted that net loss.

     In the 2003 Schedule C, petitioners claimed gross receipts

or sales of $1,372, cost of goods sold of $6,686, and a negative

gross income of $5,314.   In that schedule, petitioners also

claimed total expenses of $2,310 consisting of $898 for “Depreci-

ation and section 179 expense deduction” with respect to the

Dodge van, $980 for “Insurance”, and $432 for “Other expenses”.

Under “Other Expenses”, petitioners claimed $262 for “BANK

CHARGES”, $50 for “GASOLINE”, $50 for “INSPECTION & TUNE UP”, and

$70 for “REGISTRATION 140 TWO YRS”.    In the 2003 Schedule C,

petitioners claimed a net loss of $7,624.    In determining the

taxable income reported in their 2003 return, petitioners de-

ducted that net loss.

     In the 2004 Schedule C, petitioners claimed gross receipts

or sales of $200, cost of goods sold of $3,570, and a negative

gross income of $3,370.   In that schedule, petitioners also

claimed total expenses of $3,013 consisting of $898 for “Depreci-
                                 - 8 -

ation and section 179 expense deduction” with respect to the

Dodge van, $860 for “Insurance”, $1,100 for “Taxes and licenses”,

and $155 for “Other expenses”.    Under “Other Expenses”, petition-

ers claimed $50 for “GASOLINE”, $35 for “INSPECTION”, and $70 for

“REGISTRATION”.   In the 2004 Schedule C, petitioners claimed a

net loss of $6,383.   In determining the taxable income reported

in their 2004 return, petitioners deducted that net loss.

     In determining adjusted gross income for their taxable year

2003, petitioners claimed on page 1, line 26, of the 2003 return

a “Tuition and fees deduction” (tuition and fees deduction) of

$633.

     On April 14, 2006, respondent issued to petitioners a notice

of deficiency (notice) with respect to their taxable years 2001

through 2004.   In that notice, respondent, inter alia, disal-

lowed:   (1) Petitioners’ respective unreimbursed employee ex-

penses of $4,792, $2,300, $2,300, and $2,300 claimed in the 2001

Schedule A, the 2002 Schedule A, the 2003 Schedule A, and the

2004 Schedule A; (2) $12,284 of the cost of goods sold claimed in

the 2002 Schedule C, $5,314 of the cost of goods sold claimed in

the 2003 Schedule C, and $3,370 of the cost of goods sold claimed

in the 2004 Schedule C;3 (3) petitioners’ respective Schedule C



     3
      Respondent allowed the cost of goods sold claimed in each
of the 2002 Schedule C, the 2003 Schedule C, and the 2004 Sched-
ule C to the extent that the claimed cost of goods sold equaled
the gross receipts or sales reported in each such Schedule C.
                                 - 9 -

expenses of $5,661, $2,938, $2,310, and $3,013 claimed in the

2001 Schedule C, the 2002 Schedule C,4 the 2003 Schedule C, and

the 2004 Schedule C; and (4) the tuition and fees deduction of

$633 claimed in the 2003 return.    In the notice, respondent also

determined that petitioners are liable for each of their taxable

years 2001 through 2004 for the accuracy-related penalty under

section 6662(a).

                                OPINION

     Petitioners bear the burden of proving error in the determi-

nations for each of their taxable years 2001 through 2004 that

remain at issue.5   See Rule 142(a); Welch v. Helvering, 290 U.S.

111, 115 (1933).

     Before turning to the issues presented, we shall summarize

certain principles applicable to certain of those issues and

evaluate the evidence on which petitioners rely.

Certain Applicable Principles

     Deductions are strictly a matter of legislative grace, and

petitioners bear the burden of proving entitlement to any deduc-



     4
      In disallowing petitioners’ expenses claimed in the 2002
Schedule C, respondent disallowed all of the expenses claimed in
that schedule except for $10 of petitioners’ claimed “Insurance”
expenses.
     5
      Petitioners do not claim that the burden of proof shifts to
respondent under sec. 7491(a). In any event, petitioners have
failed to establish that they satisfy the requirements of sec.
7491(a)(1) and (2). On the record before us, we find that the
burden of proof does not shift to respondent under sec. 7491(a).
                                - 10 -

tion claimed.   INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84

(1992).   A taxpayer is required to maintain records sufficient to

establish the amount of any deduction claimed.      Sec. 6001; sec.

1.6001-1(a), Income Tax Regs.

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

necessary expenses paid or incurred during the taxable year in

carrying on any trade or business.6      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, 689 (1966); Carbine v. Commissioner, 83

T.C. 356, 363 (1984), affd. 777 F.2d 662 (11th Cir. 1985).

     For certain kinds of expenses otherwise deductible under

section 162(a), such as business expenses relating to “listed


     6
      If it is established that a taxpayer paid or incurred
ordinary and necessary expenses in carrying on a trade or busi-
ness and if sec. 274 does not apply to such expenses, we are
generally permitted to estimate the amount of deductible expenses
if we are convinced from the record that such expenses were paid
or incurred by the taxpayer and that we have a basis upon which
to make such an estimate. Cohan v. Commissioner, 39 F.2d 540,
544 (2d Cir. 1930).
                               - 11 -

property”, as defined in section 280F(d)(4), a taxpayer must

satisfy substantiation requirements set forth in section 274(d)

before such expenses will be allowed as deductions.     See sec.

1.274-5T(b)(6), Temporary Income Tax Regs., 50 Fed. Reg. 46016

(Nov. 6, 1985).   “Listed property” is defined in section

280F(d)(4) to include passenger automobiles and other property

used as a means of transportation, unless excepted by section

280F(d)(4)(C) or (5)(B).   See sec. 280F(d)(4)(A)(i) and (ii).

Evaluation of Evidence on Which Petitioners Rely

     Petitioners rely on their own testimony in order to satisfy

their burden of proof in this case.     We found Mr. Agbaniyaka’s

testimony to be general, vague, conclusory, uncorroborated, self-

serving, and/or questionable in certain material respects.       We

found Ms. Agbaniyaka’s testimony to be general, conclusory, and

self-serving in all material respects.7    Under these circum-

stances, we are not required to, and we shall not, rely on Mr.

Agbaniyaka’s testimony and Ms. Agbaniyaka’s testimony to estab-

lish petitioners’ position with respect to any of the issues

presented in this case.    See Lerch v. Commissioner, 877 F.2d 624,

631-632 (7th Cir. 1989), affg. T.C. Memo. 1987-295; Geiger v.

Commissioner, 440 F.2d 688, 689-690 (9th Cir. 1971), affg. per

curiam T.C. Memo. 1969-159; Shea v. Commissioner, 112 T.C. 183,


     7
      The only testimony that Ms. Agbaniyaka gave in support of
petitioners’ position on the issues presented was that her
husband’s testimony is correct.
                              - 12 -

189 (1999).

Claimed Unreimbursed Employee Expenses

     It is petitioners’ position that, prior to the application

of the two-percent floor imposed by section 67(a), they are

entitled for each of their taxable years 2002 through 2004 to

deduct the $2,300 of unreimbursed employee expenses that they

claimed in each of the 2002 Schedule A, the 2003 Schedule A, and

the 2004 Schedule A.8   According to petitioners, they paid that

amount during each of those years for certain unidentified

educational expenses of Mr. Agbaniyaka (claimed educational

expenses)9 and for certain unidentified union dues of Mr.

Agbaniyaka and Ms. Agbaniyaka.

     We turn first to petitioners’ claimed educational expenses.

Petitioners contend that during each of the years 2002 through

2004 Mr. Agbaniyaka attended a course on trusts and estates and

certain other unidentified courses and that he paid certain

unidentified expenses relating to those courses.   According to


     8
      Respondent does not dispute Schedule A unreimbursed em-
ployee expenses that petitioners are claiming for their taxable
year 2001.
     9
      Although petitioners contend that the claimed educational
expenses are for professional books, accounting journals, and
transportation to and from certain schools, on the record before
us, we find that petitioners have failed to carry their burden of
establishing the names of those claimed professional books and
accounting journals, the mode of transportation that petitioners
contend Mr. Agbaniyaka used to travel to and from certain
schools, and the respective amounts of those unidentified ex-
penses.
                              - 13 -

petitioners, they are entitled for each of their taxable years

2002 through 2004 to a deduction under section 162(a) for those

claimed expenses as unreimbursed employee expenses.

     Expenses that a taxpayer incurs “in obtaining an education

or in furthering his education are not deductible unless they

qualify under section 162 and § 1.162-5.”   Sec. 1.262-1(b)(9),

Income Tax Regs.   Section 1.162-5(a), Income Tax Regs., provides

that expenses relating to education are deductible as ordinary

and necessary business expenses if that education

          (1) Maintains or improves skills required by the
     individual in his employment or other trade or busi-
     ness, or

          (2) Meets the express requirements of the individ-
     ual’s employer * * * imposed as a condition to the
     retention by the individual of an established employ-
     ment relationship, status, or rate of compensation.

     The question whether education maintains or improves skills

required by the individual in his employment is one of fact.

Boser v. Commissioner, 77 T.C. 1124, 1131 (1981).     The taxpayer

must show that there was a direct and proximate relationship

between the education and the skills required in the taxpayer’s

employment.   Kornhauser v. United States, 276 U.S. 145, 153

(1928); Schwartz v. Commissioner, 69 T.C. 877, 889 (1978).

     On the record before us, we find that petitioners have

failed to carry their burden of establishing for each of their

taxable years 2002 through 2004 (1) the nature of each of the

claimed educational expenses, (2) the amount of each of those
                              - 14 -

expenses, (3) that Mr. Agbaniyaka paid or incurred each of the

claimed educational expenses, and (4) that the courses that

petitioners contend Mr. Agbaniyaka took maintained or improved

the skills required in his employment as a revenue agent or that

the Internal Revenue Service expressly required Mr. Agbaniyaka to

attend any such courses.

     On the record before us, we find that petitioners have

failed to carry their burden of establishing that they are

entitled for each of their taxable years 2002 through 2004 to the

deduction under section 162(a) that they claim for Mr.

Agbaniyaka’s educational expenses.10

     We next consider petitioners’ claimed union dues.   On the

record before us, we find that petitioners have failed to carry

their burden of establishing for each of their taxable years 2002

through 2004 (1) that they were members of a union, (2) that they

paid the claimed union dues, and (3) the amounts of any such

dues.


     10
       The record does not establish the mode of transportation
that Mr. Agbaniyaka contends he used to travel to and from
certain schools. Assuming arguendo that petitioners had estab-
lished for each of their taxable years 2002 through 2004 the
deductibility under sec. 162(a) of the claimed educational
expenses and that the mode of transportation that Mr. Agbaniyaka
used to attend certain courses was listed property within the
meaning of sec. 280F(d)(4), petitioners would still have to
satisfy the requirements of sec. 274(d) with respect to any
claimed transportation expenses. On the record before us, we
find that they have not done so. See sec. 274(d)(4); sec. 1.274-
5T(b)(6), Temporary Income Tax Regs., 50 Fed. Reg. 46016 (Nov. 6,
1985).
                              - 15 -

     On the record before us, we find that petitioners have

failed to carry their burden of establishing that they are

entitled for each of their taxable years 2002 through 2004 to the

deduction under section 162(a) that they claim for union dues.

     Based upon our examination of the entire record before us,

we find that petitioners have failed to carry their burden of

establishing that they are entitled for each of their taxable

years 2002 through 2004 to the deduction under section 162(a)

that they claim for unreimbursed employee expenses.

Claimed Schedule C Net Loss

     It is petitioners’ position that they are entitled for each

of their taxable years 2001 through 2004 to the Schedule C net

loss that they claimed for each such year.   In support of that

position, petitioners argue that they are entitled to (1) cost of

goods sold of $12,284, $5,314, and $3,370 in excess of the

amounts of cost of goods sold allowed by respondent for petition-

ers’ respective taxable years 2002 through 2004;11 (2) deprecia-

tion of $2,496, $1,498, $898, and $898 claimed for the Dodge van

for petitioners’ respective taxable years 2001 through 2004;

(3) auto insurance premiums of $942, $942,12 $917, and $860

claimed for petitioners’ respective taxable years 2001 through



     11
          See supra note 3.
     12
      In the 2002 Schedule C, petitioners claimed insurance
expenses totaling $1,110. See supra note 4.
                               - 16 -

2004; (4) other expenses relating to the Dodge van of $1,800,

$100, $170, and $155 claimed for petitioners’ respective taxable

years 2001 through 2004; (5) bank service charges of $240, $240,

and $262 for petitioners’ respective taxable years 2001 through

2003 and an unidentified amount of bank service charges for their

taxable year 2004; (6) $183, $158,13 and $63 of the total premi-

ums for their homeowner’s insurance policy for petitioners’

respective taxable years 2001 through 2003; and (7) delinquent

New York state sales tax of $1,100 claimed for petitioners’

taxable year 2004.

     In order for a taxpayer to be carrying on a trade or busi-

ness within the meaning of section 162(a), the taxpayer must be

involved in the activity with continuity and regularity.       Commis-

sioner v. Groetzinger, 480 U.S. 23, 35 (1987).    A sporadic

activity will not qualify as carrying on a trade or business for

purposes of section 162(a).    Id.   In addition, the taxpayer’s

primary purpose for carrying on the activity must be for income

or profit.     Id.

     On the record before us, we find that petitioners have

failed to carry their burden of establishing that during each of

the years at issue Mr. Agbaniyaka was involved in his claimed

arts and crafts business with continuity and regularity and that

the primary purpose for the activities that he undertook with


     13
          See supra note 12.
                              - 17 -

respect to that claimed business was for profit.   On that record,

we find that petitioners have failed to carry their burden of

establishing that during each of the years at issue Mr.

Agbaniyaka was carrying on an arts and crafts business within the

meaning of section 162(a).

      Based upon our examination of the entire record before us,

we find that petitioners have failed to carry their burden of

establishing that they are entitled for each of their taxable

years 2001 through 2004 to the Schedule C net loss that they

claim for each such year.14


     14
      Assuming arguendo that petitioners had carried their
burden of establishing that during each of the years at issue Mr.
Agbaniyaka was carrying on an arts and crafts business, they
would still have to satisfy other applicable requirements in
order to carry their burden of establishing their entitlement to
the Schedule C net loss claimed for each such year. With respect
to the cost of goods sold that petitioners claim for each of
their taxable years 2002 through 2004, on the record before us,
we find that petitioners have failed to carry their burden of
establishing the manner by which they derived the cost of goods
sold claimed, the propriety of that manner, and the propriety of
the amount that they claim. With respect to the depreciation
deduction that petitioners claim for the Dodge van for each of
their taxable years 2001 through 2004, on the record before us,
we find that petitioners have failed to carry their burden of
establishing the propriety of the depreciation deduction claimed
for each such year. See, e.g., sec. 167(c) (Basis for Deprecia-
tion). With respect to the expenses that petitioners claim for
each of their taxable years 2001 through 2004 relating to the
Dodge van (e.g., gasoline, repair, oil), which is listed property
within the meaning of sec. 280F(d)(4)(A)(i), on the record before
us, we find that petitioners have failed to carry their burden,
inter alia, of establishing all of the elements that they must
prove in order to satisfy the requirements under sec. 274(d).
See sec. 274(d)(4); sec. 1.274-5T(b)(6), Temporary Income Tax
Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985). With respect to the
                                                   (continued...)
                                - 18 -

Claimed Student Loan Interest

     It is petitioners’ position that they are entitled to deduct

student loan interest of $633 in determining adjusted gross

income for their taxable year 2003.      On brief, petitioners argue:

         Taxpayers contend that the $633.00 deduction which
    they claimed [as a tuition and fees deduction15] in
    2003 on line 26 of their 1040 income tax return is in
    fact interest paid on student loans. The deduction was
    inadvertently entered on the wrong line and should have
    been deducted on line 25 of the tax. As interest paid
    on student loans, the item is an allowable deduction
    and should not be disallowed.


     14
      (...continued)
portion of the premium for their homeowner’s insurance policy
that they claim as a deduction for each of their taxable years
2001 through 2003, on the record before us, we find that peti-
tioners have failed to carry their burden of establishing that
they paid or incurred such premium, the manner by which they
determined the claimed deductible portion of such premium, and
the propriety of claiming a portion of such premium under sec.
162. With respect to the delinquent New York state sales tax
that petitioners claim as a deduction for their taxable year
2004, on the record before us, we find that petitioners have
failed to carry their burden of establishing the amount of such
tax, that Mr. Agbaniyaka paid such tax, and the propriety of
claiming such tax under sec. 162.
     15
      Mr. Agbaniyaka incorrectly testified that “he did not take
a tuition deduction” in petitioners’ 2003 return. Petitioners
claimed a tuition and fees deduction in the 2003 return and did
not claim a student loan interest deduction in that return. With
respect to the tuition and fees deduction that petitioners
claimed in the 2003 return, respondent states on brief: “Peti-
tioners paid the tuition and fee deduction amount of $633 for tax
year 2003. Based on the Court’s determination, a recomputation
of the tuition and fees deduction for tax year 2003 will be
required.” It appears that the “Tuition and Fees Deduction
Worksheet” for petitioners’ taxable year 2003 that is included in
the notice contains an error in that it does not list any “quali-
fied tuition and fees * * * paid in 2003.” The Court expects
respondent to correct any such error in the computation under
Rule 155.
                              - 19 -

     Based upon our examination of the entire record before us,

we find that petitioners have failed to carry their burden of

establishing that they are entitled to deduct student loan

interest of $633 in determining adjusted gross income for their

taxable year 2003.

Accuracy-Related Penalty

     It is respondent’s position that petitioners are liable for

each of their taxable years 2001 through 2004 for an accuracy-

related penalty under section 6662(a) because of negligence or

disregard of rules or regulations under section 6662(b)(1).

     The term “negligence” in section 6662(b)(1) includes any

failure to make a reasonable attempt to comply with the Code.

Sec. 6662(c).   Negligence has also been defined as a failure to

do what a reasonable person would do under the circumstances.

See Leuhsler v. Commissioner, 963 F.2d 907, 910 (6th Cir. 1992),

affg. T.C. Memo. 1991-179; Antonides v. Commissioner, 91 T.C.

686, 699 (1988), affd. 893 F.2d 656 (4th Cir. 1990).   The term

“disregard” includes any careless, reckless, or intentional

disregard.   Sec. 6662(c).

     Failure to keep adequate records is evidence not only of

negligence, but also of intentional disregard of regulations.

See sec. 1.6662-3(b)(1) and (2), Income Tax Regs.; see also

Magnon v. Commissioner, 73 T.C. 980, 1008 (1980).

     The accuracy-related penalty under section 6662(a) does not
                              - 20 -

apply to any portion of an underpayment if it is shown that there

was reasonable cause for, and that the taxpayer acted in good

faith with respect to, such portion.   Sec. 6664(c)(1).   The

determination of whether the taxpayer acted with reasonable cause

and in good faith depends on the pertinent facts and circum-

stances, including the taxpayer’s efforts to assess such tax-

payer’s proper tax liability, the knowledge and experience of the

taxpayer, and the reliance on the advice of a professional, such

as an accountant.   Sec. 1.6664-4(b)(1), Income Tax Regs.

     Respondent has the burden of production under section

7491(c) with respect to the accuracy-related penalty under

section 6662.   To meet that burden, respondent must come forward

with sufficient evidence indicating that it is appropriate to

impose that penalty.   Higbee v. Commissioner, 116 T.C. 438, 446

(2001).   Although respondent bears the burden of production with

respect to the accuracy-related penalty that respondent deter-

mined for each of petitioners’ taxable years 2001 through 2004,

respondent “need not introduce evidence regarding reasonable

cause * * * or similar provisions. * * * the taxpayer bears the

burden of proof with regard to those issues.”   Id.

     With respect to the accuracy-related penalty under section

6662(a) that respondent determined for each of petitioners’

taxable years 2001 through 2004, Mr. Agbaniyaka testified that

petitioners maintained documents to support the amounts at issue.
                                - 21 -

The record in this case does not contain any of the records that

Mr. Agbaniyaka testified he maintained.16    On the instant record,

we find that petitioners did not maintain the records required by

section 6001 and section 1.6001-1(a), Income Tax Regs.     On that

record, we further find that the burden of production that

respondent has under section 7491(c) is satisfied.     See sec.

1.6662-3(b)(1) and (2), Income Tax Regs.

     In support of their position that they are not liable for

each of the years at issue for the accuracy-related penalty,

petitioners make the following argument on brief:

          Taxpayers relied upon the knowledge gained by
     Benjamin as an IRS Revenue Agent. Respondent charac-
     terizes him as an expert when arguing that he acted
     negligently in failing to follow the tax code and
     regulations. Similarly, he should be accorded the
     benefit of this expertise in claiming deductions which
     are proper and allowable under the Internal Revenue
     Code and based on the IRS policy and procedures and
     that Benjamin is familiar with.

     On the record before us, we reject petitioners’ argument.

During the years at issue, Mr. Agbaniyaka was a trained revenue

agent and was fully aware of the requirements imposed by section

6001.     Nonetheless, petitioners failed to maintain sufficient

records for each of their taxable years 2001 through 2004 to



     16
      The only documentation that petitioners introduced into
the record are copies of two American Express Business Gold Card
bills that showed a purchase on June 8, 2002, from “IMPORTS OF
AFRICA” of $1,200 and a purchase on June 25, 2002, from “IMPORTS
OF AFRICA” of $750. Respondent concedes that Mr. Agbaniyaka made
those purchases in 2002.
                             - 22 -

establish their position with respect to any of the issues

presented.

     On the record before us, we find that petitioners have

failed to carry their burden of showing that they were not

negligent and did not disregard rules or regulations, or other-

wise did what a reasonable person would do, with respect to the

underpayment for each of the years at issue.

     On that record, we further find that petitioners have

failed to carry their burden of showing that there was reasonable

cause for, and that they acted in good faith with respect to, the

underpayment for each of the years at issue.

     Based upon our examination of the entire record before us,

we find that petitioners have failed to carry their burden of

establishing that they are not liable for each of the tax years

at issue for the accuracy-related penalty under section 6662(a).

     We have considered all of petitioners’ contentions and

arguments that are not discussed herein, and we find them to be

without merit, irrelevant, and/or moot.

     To reflect the foregoing and the concessions of respondent,


                                   Decision will be entered under

                              Rule 155.
