                  T.C. Summary Opinion 2003-18



                     UNITED STATES TAX COURT



            JOE D. AND MAURA F. WHITE, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent


     Docket No. 11161-01S.                 Filed March 12, 2003.


     Joe D. White, pro se.

     Gerald L. Brantley, for respondent.



     COUVILLION, Special Trial Judge:    This case was heard

pursuant to section 7463 of the Internal Revenue Code in effect

at the time the petition was filed.1    The decision to be entered

is not reviewable by any other court, and this opinion should not

be cited as authority.



     1
          Unless otherwise indicated, subsequent section
references are to the Internal Revenue Code in effect for the
year at issue. All Rule references are to the Tax Court Rules of
Practice and Procedure.
                               - 2 -


     Respondent determined a deficiency of $654 in petitioners'

Federal income tax for 1999.

     Following concessions by the parties noted hereafter, the

issue remaining for decision is whether petitioners are entitled

to deductions for a trade or business expense activity under

section 162(a) in excess of amounts conceded by respondent.    More

specifically, the issue is whether petitioners are entitled to

deductions for car and truck expenses and home office expenses.

     Some of the facts were stipulated.   Those facts, with the

annexed exhibits, are so found and are incorporated herein by

reference.   At the time the petition was filed, petitioners were

legal residents of Del Rio, Texas.

     Petitioners filed a Federal income tax return for 1999 on a

Form 1040A, U.S. Individual Income Tax Return.   On line 7 of the

return, for wages, salaries, tips, etc., petitioners reported

$25,746.66, which included wage and salary income reflected on

five Forms W-2, Wage and Tax Statement, totaling $14,944.63 and

other income from other sources totaling $10,802.03.   These other

sources were $5,807 in unemployment compensation benefits

reflected on Form 1099-G, Certain Government Payments, and

$4,995.03 in self-employment income paid to Joe D. White

(petitioner) reflected on three Forms 1099-MISC, Miscellaneous

Income.   In addition, on line 8a of the return, petitioners

reported taxable interest income of $12.31.
                              - 3 -


     Petitioners did not include with their return a Schedule C,

Profit or Loss From Business, with respect to the $4,995.03 in

self-employment income, nor did they claim deductions for

expenses in connection with the activity or compute self-

employment taxes on the income.   The three sources of this income

reflected on the Forms 1099-MISC earned by petitioner were from

the following sources:


     Xprezzo Caffe Club, 11c                 $1,328.03
     Villa Del Rio                            1,662.00
     Rio Grande Property Management           2,005.00
       Total                                 $4,995.03


     In the notice of deficiency, respondent determined a

deficiency of $654 in taxes, representing self-employment taxes

due under section 1401(a) and allowing petitioners a deduction

for one-half of the taxes under section 164(f).    Respondent's

determination, however, was based only on two of the Forms 1099-

MISC identified above, $1,662 from Villa Del Rio, and $2,005 from

Rio Grande Property Management, totaling $3,667.    Respondent's

determination failed to include the $1,328.03 shown above in the

deficiency determination.

     In preparation for trial, petitioners prepared and submitted

to respondent an income tax return, Form 1040, for 1999, on which

they correctly reported their income from the various sources
                                - 4 -


recited above.   The return included a Schedule C, on which

petitioners reported the following income and expenses:


     Gross income                               $4,995.03
     Expenses:
       Car & truck           $938.43
       Depreciation           253.43
       Other expenses         351.77
       Home office            941.43
         Total expenses                          2,485.06
     Net profit                                 $2,509.97


The return also included the schedule for self-employment taxes,

which amounted to $354.46.   Elsewhere on their return,

petitioners claimed a deduction for one-half of the self-

employment taxes allowable under section 164(f).     This tax return

was admitted into evidence at trial.     Even though the deficiency

determined in the notice of deficiency was based only on two of

the Forms 1099-MISC, totaling $3,667, petitioners conceded at

trial that their self-employment income totaled $4,995.03, based

on the three Forms 1099-MISC described earlier.

     At trial, respondent conceded petitioners' entitlement to a

deduction for the following expenses shown on petitioners'

corrected 1999 income tax return:      (1) $100 of the $938.43 in car

and truck expenses; (2) $253.43 in depreciation; and (3) $351.77

in other expenses, leaving at issue $838.43 in car and truck

expenses and $941.43 claimed as expenses for the business use of

petitioners' home.
                                - 5 -


     For the first part of 1999, petitioner was unemployed and

received the reported $5,807 in unemployment compensation

benefits.   In June 1999, petitioner began working for an

individual who owned three businesses (which businesses issued

the Forms 1099-MISC identified above).    One of the entities was a

restaurant, one was a bed and breakfast activity, and one was a

real estate management activity involving rental apartments and

houses.   Petitioner performed a variety of services for these

entities, such as landscaping, cutting grass, gardening,

carpentry, repairs, and generally "fixing things".    Petitioner

described himself as a handyman.   He was considered self-

employed, a status that respondent has not challenged.

     Respondent challenges petitioners' entitlement to two

expenses claimed by petitioners with respect to the self-

employment activity:   the home office expenses of $941.43 and

$838.43 of the $938.43 in car and truck expenses.

     With respect to the home office expenses, petitioner used

one room of his home, a mobile home, in connection with his

activity.   In this room, he had a computer, telephone, filing

cabinet, desk, chairs, etc.   He received no clients or customers

at his home, nor did he solicit business from others, except for

the three entities described above.     Outside his home, petitioner

had a shed where he stored the equipment used in his activity.

Petitioner did not advertise.   For all intents and purposes,
                                - 6 -


petitioner worked for the three enterprises previously discussed.

Between assignments, he was reached at home to attend to one or

more of the projects that required his services; however, he also

received assignments while he was at a work site.

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

necessary expenses paid or incurred in carrying on a trade or

business.    Under section 280A, however, deductions associated

with a home office are generally disallowed unless the home

office is used exclusively and regularly as the principal place

of business of the taxpayer.    Petitioner contends his home was

his principal place of business because he was required to

perform his services at three different locations.    He alleges

that, because he received his orders and directions for his

services at his home, his home was, therefore, the focal point of

his activity.    In addition, petitioner stored equipment used in

his activity at his home.2

     Section 280A(a) provides that no deduction otherwise

allowable shall be allowed with respect to the use of a dwelling

unit which is used by the taxpayer during the taxable year as a

residence.    Section 280A(c), however, provides an exception if a

portion of the residence is exclusively used on a regular basis:


     2
          Sec. 7491, in certain instances, places the burden of
proof upon the Commissioner. The parties have not alleged that
sec. 7491 would be applicable in this case. The Court,
nonetheless, decides this case without regard to the burden of
proof.
                               - 7 -


     (1) as the principal place of business for any trade or

business of the taxpayer (sec. 280A(c)(1)(A));

     (2) as a place of business used by patients, clients, or

customers in meeting or dealing with the taxpayer in the normal

course of his trade or business (sec. 280A(c)(1)(B)); or

     (3) in the case of a separate structure which is not

attached to the dwelling unit, in connection with the taxpayer's

trade or business (sec. 280A(c)(1)(C)).

     Where a taxpayer's business is conducted in part in the

taxpayer's residence and in part at another location, the

following two primary factors are considered in determining

whether the home office qualifies under section 280A(c)(1)(A) as

the taxpayer's "principal" place of business:    (1) The relative

importance of the functions or activities performed at each

business location, and (2) the amount of time spent at each

location.   Commissioner v. Soliman, 506 U.S. 168, 175-177 (1993).

     Whether the functions or activities performed at the home

office are necessary to the business is relevant but not

controlling, and the location at which goods and services are

delivered to customers generally will be regarded as the

principal place of a taxpayer's business.   Id. at 176.    The

relative importance of business activities engaged in at the home

office may be substantially outweighed by business activities
                               - 8 -


engaged in at another location.   The Supreme Court has explained

as follows:


     If the nature of the business requires that its services are
     rendered or its goods are delivered at a facility with
     unique or special characteristics, this is a further and
     weighty consideration in finding that it is the delivery
     point or facility, not the taxpayer's residence, where the
     most important functions of the business are undertaken.


Id. at 176.

     In petitioner's situation, none of his services were

performed at home.   His services were all performed at the three

business locations of his principal.   He received orders at those

locations to perform services at one or two of the other

businesses of his principal.   To be sure, petitioner occasionally

received orders at home.   On this record, it is evident that the

most important parts of petitioner's activities were performed

away from his home at the business locations of his client.

Section 280A(c)(1), with respect to tax years beginning after

December 31, 1998, provides, in pertinent part:


     For purposes of subparagraph (A), the term "principal place
     of business" includes a place of business which is used by
     the taxpayer for the administrative or management activities
     of any trade or business of the taxpayer if there is no
     other fixed location of such trade or business where the
     taxpayer conducts substantial administrative or management
     activities of such trade or business.
                                - 9 -


Petitioner did not establish that he conducted substantial

administrative or management activities of his trade or business

at his home.    Except for occasional telephone calls he received

at home with respect to some of his work assignments, there was

no other evidence presented that would satisfy the Court that

petitioner's home was the situs of management or administrative

activity related to his activity.

     Petitioner also contended that, because he stored equipment

used in his business activity in a shed on his home premises,

such fact entitles petitioners to a home office deduction.

Section 280A(c)(1) provides, in pertinent part:


          (1) Certain business use.–-Subsection (a) shall not
     apply to any item to the extent such item is allocable to a
     portion of the dwelling unit which is exclusively used on a
     regular basis--

            *      *       *        *      *        *        *

            (C) in the case of a separate structure which is not
     attached to the dwelling unit, in connection with the
     taxpayer's trade or business.


However, none of the expenses petitioners claimed with respect to

their home office related to the shed.   All of the claimed

expenses related to the room in petitioners' home.      Petitioners,

therefore, are not entitled to a deduction for home office

expenses.
                              - 10 -


     The remaining expenses relate to petitioner's car and truck

expenses.   As noted earlier, petitioners claimed $938.43.    At

trial, respondent conceded petitioners' entitlement to a

deduction of $100 for such expenses, leaving at issue $838.43.

     The expenses claimed relate to petitioner's use of his

vehicle in going to and from his home to each of the places where

he performed his services, including the use of his vehicle in

going from one business place to another business place.     The

$100 respondent conceded as a car expense represents the amount

respondent determined was incurred by petitioner in going from

one location of his business to other locations.     The remainder

represents petitioner's transportation expenses to and from his

home to each business location where he performed his self-

employment activity.

     The Court finds it unnecessary to decide whether petitioner

substantiated the amount at issue.     Petitioner contends that,

because his home was his principal place of business, he is

entitled to a deduction for car and truck expenses incurred from

his home to each place of business and his return home.

Petitioners' home, however, was not his principal place of

business; therefore, section 262 governs in this situation.     As a

general rule, section 262 disallows expenses for personal,

living, or family expenses.   Transportation expenses ordinarily

incurred between one's residence and one's principal place of
                              - 11 -


business, typically referred to as commuting expenses, are

nondeductible personal expenses under section 262.   Fausner v.

Commissioner, 413 U.S. 838 (1973); Commissioner v. Flowers, 326

U.S. 465 (1946).   The expenses at issue were incurred by

petitioner as commuting expenses and, therefore, are not

deductible.

     Reviewed and adopted as the report of the Small Tax Case

Division.



                                    Decision will be entered

                               under Rule 155.
