                  T.C. Summary Opinion 2008-41



                     UNITED STATES TAX COURT



         ERIC D. WALKER AND LYNN WALKER, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7566-06S.          Filed April 22, 2008.



     Eric D. Walker, pro se.

     Brian A. Pfeifer, 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.
                               - 2 -

other court, and this opinion shall not be cited as precedent for

any other case.

     In a notice of deficiency issued to petitioners on January

19, 2006, respondent determined a $5,975 deficiency in and a

$1,195 section 6662(a) accuracy-related penalty with respect to

petitioners’ 2002 Federal income tax.

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

entitled to certain trade or business expense deductions, some

claimed on a Schedule A, Itemized Deductions, and some claimed on

a Schedule C, Profit or Loss From Business; and (2) whether

petitioners are liable for the accuracy-related penalty.

                            Background

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

Petitioners married on March 31, 2002.   They filed a timely joint

Federal income tax return for that year.    At the time the

petition was filed, they resided in Florida.

     Eric D. Walker (petitioner) is an electrician who at all

times relevant was a member of Local 613 of the International

Brotherhood of Electrical Workers (IBEW).    Local 613 is located

in Atlanta, Georgia, but petitioner did not work within the

jurisdiction of Local 613, or anywhere within the State of

Georgia, during 2002.   Instead, he traveled repeatedly up and

down the east coast from Massachusetts to Florida in search of or

in connection with available union-based employment
                               - 3 -

opportunities.   IBEW procedures required that he announce his

availability for employment in any given location by visiting the

local chapter of the IBEW and signing whatever paperwork was

required.   This procedure had to be repeated periodically as long

as petitioner was unemployed, which he was during part of 2002,

and continued to look for jobs.

     Although he actively sought employment using the process

described above throughout 2002, petitioner was employed only

from time to time from May 1 through November 1, 2002, and only

for various employers in New Jersey.   While working in New Jersey

petitioner stayed in a YMCA or in a rented house.   Petitioner

spent 216 days in New Jersey during 2002, including those days

when he was present there either working or looking for work.

     Following his marriage in March, petitioner spent only 3

days in Georgia.   Lynn Walker lived with her mother in Florida

during 2002, both before and after petitioners were married.

Petitioner spent a fair amount of time in Florida during that

year.2   As of the end of November 2002, petitioner considered

that his residence was in Florida.




     2
        Petitioner was in Florida 25 days during January; 7 days
during February; 12 days during March; 9 days during April; 3
days during June; 6 days during September; 8 days during
November; and all of December.
                               - 4 -

     Petitioners’ 2002 self-prepared, joint Federal income tax

return was timely filed.   That return includes a Schedule C and a

Schedule A.   The Schedule C identifies the business as “Spinal

Connection Rehab and Wellness” and shows the proprietor as Lynn

Walker.   There is no income reported on the Schedule C, and

various deductions totaling $9,087 result in a net loss in that

amount which is claimed as a deduction on petitioners’ 2002

return.   As relevant here, on the Schedule A, petitioners claimed

a $32,525 unreimbursed employee business expense deduction, most

of which is attributable to meals and lodging expenses.

     Petitioners also claimed a $15,218 loss from an S

corporation on their 2002 return.   That loss is identified as a

“nonpassive loss from [a] Schedule K-1” issued to petitioners by

Spinal Connection Rehab and Wellness.

     In the above-referenced notice of deficiency, respondent:

(1) Disallowed the deduction for the net loss reported on the

Schedule C; (2) disallowed a portion of the unreimbursed employee

business expense deduction claimed on the Schedule A; (3) allowed

the standard deduction applicable to petitioners’ filing status

as the remaining itemized deductions respondent allowed totaled

less than the standard deduction;3 and (4) imposed an accuracy-



     3
        The itemized deductions otherwise allowed are:
(1) Taxes--$972; (2) Gifts to Charity--$745; and (3)
Miscellaneous deductions, including unreimbursed employee
business expenses--$5,498, before the application of sec. 67(a).
                               - 5 -

related penalty under section 6662(a) upon the ground that, among

other reasons, the underpayment of tax required to be shown on

petitioners’ 2002 return is a substantial understatement of

income tax.   Other adjustments made in the notice of deficiency

are computational or have been agreed upon by the parties.

                             Discussion

1. Deduction for Net Loss Claimed on the Schedule C

     Petitioners now agree that they are not entitled to a

deduction for the net loss shown on the Schedule C.    Although

less than certain, it appears that the expenses that generated

the loss might have been duplicated in the loss claimed from

the above-referenced S corporation.    That loss has not been

disallowed.

2. Disallowed Portion of the Employee Business Expense Deduction

     According to the notice of deficiency, the portion of the

employee business expenses deduction attributable to “travel,

meals and lodging” was disallowed because respondent determined

that those expenses, if paid or incurred, were not paid or

incurred while petitioner was traveling away from home in

pursuit of his employment.   According to respondent, petitioner

maintained “no fixed place of abode or business locality,”

consequently, “each place where * * * [petitioner worked became

his] principal place of business and * * * tax home.”    According

to petitioner, his residence and tax home, at least until the end
                                - 6 -

of November 2002, was in Stockbridge, Georgia, where he lived

with his brother in his brother’s house.   Petitioner now

acknowledges that amounts claimed on his 2002 return for lodging

were overstated, but claims entitlement to:   (1) A portion of the

claimed deduction for lodging; and (2) the entire claimed

deduction for meals.

     Expenses incurred by an individual for meals and lodging are

normally considered nondeductible personal or living expenses.

Sec. 262(a).   On the other hand, expenses paid or incurred for

meals and lodging, if properly substantiated, are deductible if

paid or incurred by an individual while traveling away from home

in pursuit of the individual’s trade or business.   Secs.

162(a)(2), 274(d).   In this regard, the reference to the

individual’s trade or business includes the trade or business of

being an employee, O’Malley v. Commissioner, 91 T.C. 352, 363-364

(1988), and the reference to the individual’s home means the

individual’s tax home, Henderson v. Commissioner, T.C. Memo.

1995-559, affd. 143 F.3d 497 (9th Cir. 1998).

     In general, the location of an individual’s tax home is the

location of his or her principal place of employment.     Daly v.

Commissioner, 72 T.C. 190, 195 (1979), affd. 662 F.2d 253 (4th

Cir. 1981).    If, during the taxable year, the individual has no

principal place of employment, this Court considers the

individual’s permanent place of residence to be his or her tax
                                - 7 -

home.    Rambo v. Commissioner, 69 T.C. 920, 923-925 (1978).     If an

individual has no principal place of employment or permanent

residence during the taxable year, then this Court considers that

individual to have no tax home from which the individual can be

away from for purposes of deducting meals and lodging expenses

otherwise deductible under section 162(a)(2).    Wirth v.

Commissioner, 61 T.C. 855, 859 (1974).

     Petitioner’s profession and status as an IBEW member

required that he seek and/or accept employment on a temporary

basis in various locations during 2002.    He had no principal

place of business during that year.4    Whether petitioner had a

permanent place of residence during 2002 is questionable.      If he

did, then it was at his brother’s house only up until the date of

his wedding on March 31, and it was in Florida at some point

starting in November.   The meals and lodging expense deductions

here in dispute relate to the period between those dates, and the

record does not support a finding that he paid or incurred any

living expense in connection with his brother’s house or any

other “permanent place of residence” while at the same time he

was present and working in New Jersey or elsewhere.    See Kroll v.



     4
        We disagree with the suggestion made in the notice of
deficiency that New Jersey was petitioner’s tax home during 2002.
His employment there was clearly temporary. This distinction,
however, makes no difference to whether petitioner is entitled to
deduct expenses for meals and lodging while working in New
Jersey.
                                - 8 -

Commissioner, 49 T.C. 557, 562 (1968) (noting that the purpose of

section 162(a)(2) is to “mitigate the burden of the taxpayer who,

because of the exigencies of his trade or business, must maintain

two places of abode and thereby incur additional and duplicate

living expenses”).

       Because petitioner had neither a principal permanent place

of residence nor a principal place of employment during the

period to which the deductions for meals and lodging expenses

relate, he is not considered to have a tax home for that period.

Because the deductions for meals and lodging expenses relate to a

period for which petitioner had no tax home, he is not entitled

to those deductions.    Respondent’s disallowance of the portion of

the employee business expense deduction attributable to amounts

for meals and lodging is sustained.

       Respondent acknowledges that petitioner is entitled to tolls

and vehicle expenses incurred in connection with his search for

employment during 2002.    The amounts already allowed for such

expenses exceed the amounts petitioners substantiated and, when

taken into account with other itemized deductions allowed or not

challenged, do not exceed the $7,850 standard deduction

applicable to petitioners’ filing status.    See sec. 63(b) and

(c).    It is unnecessary, therefore, to consider petitioners’

entitlement to such deductions any further, and respondent’s

allowance of the standard deduction in lieu of the itemized
                                - 9 -

deductions otherwise claimed and not disallowed is sustained.

3. The Section 6662(a) Accuracy-Related Penalty

     Section 6662(a) imposes an accuracy-related penalty of 20

percent of any portion of an underpayment of tax, if among other

reasons, the underpayment is attributable to a substantial

understatement of income tax.   Sec. 6662(b)(2), (d).    An

understatement of income tax is a substantial understatement of

income tax if it exceeds the greater of $5,000 or 10 percent of

the tax required to be shown on the taxpayer’s return.5       Sec.

6662(d)(1).   Ignoring conditions not relevant here, for purposes

of section 6662 an understatement is defined as the excess of the

amount of the tax required to be shown on the taxpayer’s return

over the amount of the tax which is shown on the return.       Sec.

6662(d)(2)(A).   In this case the understatement of income tax is

computed in the same manner as and is equal to the deficiency in

dispute; that is, $5,975.   See secs. 6211, 6662(d)(2).

     Under section 7491(c) respondent has the burden of

production with respect to the accuracy-related penalty under

section 6662(a).   To meet that burden, respondent must come

forward with sufficient evidence to show that imposition of the

penalty is appropriate.   See Higbee v. Commissioner, 116 T.C.

438, 446 (2001).   We have sustained, or petitioners have



     5
        Ten percent of the tax required to be shown on
petitioners’ 2002 return is $892.50.
                                - 10 -

conceded, the adjustments in the notice of deficiency that give

rise to the deficiency.    Respondent has satisfied his burden of

production under sec. 7491(c) with respect to the accuracy-

related penalty under section 6662(a) determined in the notice of

deficiency because the underpayment of tax exceeds $5,000.

     The accuracy-related penalty does not apply to any part of

an underpayment of tax if it is shown the taxpayer acted with

reasonable cause and in good faith.      Sec. 6664(c)(1).   The

determination of whether a taxpayer acted in good faith is made

on a case-by-case basis, taking into account all the pertinent

facts and circumstances.    Sec. 1.6664-4(b)(1), Income Tax Regs.

Petitioners bear the burden of proving that they had reasonable

cause and acted in good faith with respect to the underpayment.

See Higbee v. Commissioner, supra at 449.      This they have failed

to do.   Respondent’s imposition of the section 6662(a) accuracy-

related penalty is sustained.

     To reflect the foregoing,


                                      Decision will be entered

                                 for respondent.
