                    T.C. Summary Opinion 2011-29



                        UNITED STATES TAX COURT



               CHERYL LYNN DE WERFF, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 16355-08S.               Filed March 14, 2011.



     Cheryl Lynn de Werff, pro se.

     Matthew D. Carlson, for respondent.



     RUWE, Judge:     This case was heard pursuant to the provisions

of section 74631 of the Internal Revenue Code in effect when the

petition was filed.    Pursuant to section 7463(b), the decision to




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

be entered is not reviewable by any other court, and this opinion

shall not be treated as precedent for any other case.

     Respondent determined a $8,418 deficiency in petitioner’s

2004 Federal income tax and a $1,683.60 accuracy-related penalty

pursuant to section 6662.   After concessions by respondent, the

issues for decision are:    (1) Whether petitioner is entitled to a

medical expense deduction in excess of that allowed by

respondent; (2) whether petitioner is entitled to certain

charitable contribution deductions; (3) whether petitioner is

entitled to certain miscellaneous itemized deductions reported on

Schedule A, Itemized Deductions; and (4) whether petitioner is

liable for an accuracy-related penalty pursuant to section 6662.

                             Background

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

The stipulation of facts and the attached exhibits are

incorporated herein by reference.   At the time the petition was

filed, petitioner resided in California.

     Petitioner timely filed a 2004 Form 1040, U.S. Individual

Income Tax Return.   On the return petitioner reported adjusted

gross income of $71,806 and claimed itemized deductions of

$84,514.   On Schedule A petitioner claimed certain itemized

deductions as follows:
                                - 3 -

              Expense                         Amount
                                              1
     Medical and dental                         $2,802
     Cash gifts to charity                       4,581
     Noncash gifts to charity                    8,500
                                              2
     Miscellaneous                              46,651
          1
           Petitioner claimed $8,187 of medical expenses.
     After application of the 7.5-percent floor, see sec.
     213(a), petitioner’s claimed medical expenses deduction
     was $2,802.
          2
           Petitioner’s claimed miscellaneous deductions
     included $44,598 for unreimbursed employee expenses,
     $808 for tax preparation fees, and $2,681 for “asset
     preservation”. After application of the 2-percent
     floor, see sec. 67(a), petitioner’s claimed
     miscellaneous itemized deduction was $46,651.

     During 2004 petitioner paid $3,235.37 in copayments for

prescription drugs, $173.80 for alternative healing prescribed by

a physician, $424 for copayments for doctor’s visits, and $298.34

for travel expenses associated with doctor’s visits.

     During 2004 petitioner paid $1,328.89 in cash charitable

contributions.   Attached to her 2004 return was a Form 8283,

Noncash Charitable Contributions, in which petitioner described

property that she allegedly donated as “various household items

and clothing”.   Petitioner produced self-prepared lists of

hundreds of items allegedly donated to charity.   The lists

contain the alleged cost of each property when new and a self-

estimated value at the time of donation.

     During 2004 petitioner was employed as director of

professional development by the Solano County Office of Education

(SCOE) in Fairfield, California.   Attached to her 2004 return was
                                 - 4 -

a Form 2106, Employee Business Expenses.    On the Form 2106

petitioner claimed the following business expenses:

              Expense                                      Amount

  Vehicle expense                                          $8,969
  Parking fees, tolls, and                                    433
    transportation
  Travel expense while away                                 5,883
    from home overnight
  Other business expenses                                  26,763
    Subtotal                                               42,048
  Meals and entertainment                       8,232
    Less: Employer reimbursements              (3,132)
      Subtotal                                  5,100
    Less: 50 percent of meals and                           2,550
      entertainment
    Total employee business expenses                       44,598

     SCOE had an employee reimbursement policy.    SCOE reimbursed

petitioner $3,132 for food, travel, and meeting supplies.

Petitioner did not request reimbursement for any other expenses

she incurred above the $3,132 that SCOE reimbursed.      The portion

of SCOE’s reimbursement policy petitioner provided specifically

covers travel and conferences.    According to the reimbursement

policy, employees who are required to use their cars for travel

approved by their supervisors “shall be reimbursed”.      With

respect to attendance at meetings, conferences, and conventions,

these expenses require prior authorization by the County

Superintendent of Schools and may be reimbursed.    The

reimbursement policy sets forth requirements for obtaining

approval of travel and for claim reimbursement.    Petitioner has
                               - 5 -

not shown that SCOE would not have reimbursed her if she had

requested reimbursement for her expenses.

      Although respondent does not agree that the following

amounts deducted as employee business expenses were ordinary or

necessary to petitioner’s trade or business, the parties agree

that petitioner paid the following amounts during 2004:     (1)

$6,899.09 for car payments and $2,125.35 for car insurance; (2)

$286.14 for parking fees and transportation; (3) $3,557.11 for

what petitioner claimed as traveling expenses; (4) miscellaneous

expenses:   $2,854 claimed for “continuing education”, $377.35

claimed as telephone expenses, $719.86 claimed for postage,

$3,285.69 claimed for professional books and magazines, $156.57

for a claimed “program for teachers” expense, $4,975.20 for

office supplies, $1,253.79 for what was claimed as “other

business related expenses”, $24 to the “DMV”, $764 claimed for

professional dues, and $8,600 for gifts; and (5) $2,800.54 for

what petitioner claimed were meals and entertainment expenses and

$5,787.85 for food for SCOE events.

                            Discussion

A.   Burden of Proof

      A taxpayer generally bears the burden of proving error in

the Commissioner’s determinations.     Rule 142(a); Welch v.

Helvering, 290 U.S. 111, 115 (1933).     The burden of proof may

shift to the Commissioner in certain circumstances if the
                                  - 6 -

taxpayer introduces credible evidence, maintained required

records, and fully cooperated with the Commissioner’s reasonable

requests.    Sec. 7491(a)(1) and (2)(A) and (B).    Petitioner has

neither asserted nor met the requirements for shifting the burden

of proof to respondent.

B.   Itemized Deductions

      Deductions are a matter of legislative grace, and the

taxpayer bears the burden of proving she is entitled to the

deductions claimed.    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).      A taxpayer must substantiate amounts

claimed as deductions by producing evidence and records necessary

to establish that she is entitled to the deductions.      Sec. 6001;

sec. 1.6001-1(a), Income Tax Regs.

      1.   Medical Expense Deduction

      Section 213(a) allows a deduction for expenses paid during

the taxable year, not compensated for by insurance or otherwise,

for medical care of the taxpayer, a spouse, or a dependent to the

extent that such expenses exceed 7.5 percent of the taxpayer’s

adjusted gross income.      The term “medical care” includes amounts

paid for “the diagnosis, cure, mitigation, treatment, or

prevention of disease, or for the purpose of affecting any

structure or function of the body, * * * for transportation

primarily for and essential to medical care”, or for insurance.
                                - 7 -

Sec. 213(d)(1)(A), (B), (D).    However, amounts paid during the

taxable year for medicine or a drug are taken into account only

if the medicine or drug is a prescribed drug or insulin.    Sec.

213(b).   The term “prescribed drug” means a drug or biological

which requires a physician’s prescription for its use by an

individual.   Sec. 213(d)(3).

     Petitioner alleges that a portion of her medical expense

deduction is related to “alternative healing and medications”.

The only documentary evidence petitioner provided is a doctor’s

“note” dated June 10, 2008, 4 years after the year at issue,

recommending that petitioner take vitamins, minerals, and herbs

to supplement her regular diet, and a computer printout of her

alleged medical expenditures.    Petitioner has not provided

receipts, copies of canceled checks, or bank statements to

substantiate her alleged medical expenses.    Moreover, petitioner

has not established what the so-called alternative healing and

medication is.   Other than her self-serving and unverified

testimony, which we are not required to and do not accept, see

Tokarski v. Commissioner, 87 T.C. 74, 77 (1986), petitioner has

failed to establish that she paid for medical care or that her

dietary supplements require a physician’s prescription.    See sec.

213(a), (b), (d).   Accordingly, we hold that petitioner is

entitled to a medical expense deduction only for the $3,235.37

she paid for prescription drugs, $424 paid for doctor’s visits,
                                 - 8 -

and $298.34 paid for travel to doctors that the parties

stipulated.     The total of these amounts is subject to the 7.5-

percent adjusted gross income threshold.

     2.   Charitable Contributions Deduction

     In general, section 170(a) allows as a deduction any

charitable contribution the payment of which is made within the

taxable year.    Deductions for charitable contributions are

allowable only if verified under regulations prescribed by the

Secretary.    Sec. 170(a)(1); Hewitt v. Commissioner, 109 T.C. 258,

261 (1997), affd. without published opinion 166 F.3d 332 (4th

Cir. 1998).

           a.    Cash Charitable Contributions

     A cash contribution to charity made on or before August 17,

2006, in an amount less than $250 may be substantiated with a

canceled check, a receipt, or other reliable evidence showing the

name of the donee, the date of the contribution, and the amount

of the contribution.2    Alami El Moujahid v. Commissioner, T.C.

Memo. 2009-42; sec. 1.170A-13(a)(1), Income Tax Regs.

     The parties agree that petitioner paid $1,328.89 in

charitable cash contributions during 2004.       Petitioner has failed

to establish that she made any other cash contributions to




     2
      There are now stricter requirements for cash contributions
to charity. Sec. 170(f)(17).
                                 - 9 -

charity during 2004.   Accordingly, we hold that petitioner may

deduct only $1,328.89 as a cash charitable contribution.

          b.   Noncash Charitable Contributions

     For charitable contributions made in property other than

cash, the value of the contribution is the fair market value at

the time of contribution.    Hewitt v. Commissioner, supra at 261;

sec. 1.170A-1(c)(1), Income Tax Regs.    The fair market value of

contributed property is the price at which the property would

change hands between a willing buyer and a willing seller,

neither being under any compulsion to buy or sell and both having

reasonable knowledge of relevant facts.   Sec. 1.170A-1(c)(2),

Income Tax Regs.

     Generally, for noncash charitable contributions of property,

a taxpayer must maintain for each contribution a receipt from the

donee showing the name of the donee, the date and location of the

contribution, and a description of the property in detail

reasonably sufficient under the circumstances.    Sec. 1.170A-

13(b)(1), Income Tax Regs.

     Petitioner claimed noncash charitable contributions of

$8,500 and on her return described the items as “various

household items and clothing”.

     Petitioner produced lists of noncash contributions that

contain hundreds of items, such as more than a dozen necklaces

and bracelets, 22 bras and other intimate apparel and
                              - 10 -

undergarments, decorative soaps and candles (including “1 great

smelling rose candle”), several porcelain dolls, dozens of pairs

of shoes, pins, earrings, watches, hair clips, wallpaper, etc.

However, the alleged records petitioner provided to substantiate

her charitable contributions are inconsistent and unreliable.

Petitioner’s records indicate that she made contributions to

three charitable organizations during 2004:     United Cerebral

Palsy, Community Projects, Inc., and Goodwill.     The receipts

petitioner provided show different dates:     March 4, 2004, to

United Cerebral Palsy; October 14, 2004, to Community Projects,

Inc.; and “July 2004” to Goodwill.     However, on the Form 8283

petitioner claimed that she contributed “various household items

and clothing” to Goodwill with an alleged fair market value of

$8,500 on October 31, 2004.   Furthermore, petitioner’s self-

prepared tax summary report indicates that on December 31, 2004,

“1 trailer full of goods” was donated to Goodwill.     Although

petitioner provided two statements from Terry Lee Green of Rent-

A-Husband, one dated February 2004 and the other October 2004,

stating that he took several large bags of clothing and household

goods to Goodwill, the only receipt from Goodwill is dated July

2004.

     We find petitioner’s lists and receipts to be inconsistent

and unreliable.   Accordingly, we sustain respondent’s
                               - 11 -

determination denying petitioner a deduction for noncash

charitable contributions.

     3.   Miscellaneous Itemized Deductions

           a. Unreimbursed Employee Expenses

     On Schedule A attached to her 2004 return, petitioner

claimed $44,598 for unreimbursed employee expenses.    Respondent

agrees that petitioner made certain expenditures but argues that

she has failed to establish that they were ordinary and necessary

employee business expenses.

     Section 162(a) generally allows as a deduction all the

ordinary and necessary expenses paid or incurred during the

taxable year in carrying on any trade or business.    A taxpayer

may be in the trade or business of being an employee and, as

such, may deduct business expenses.     O’Malley v. Commissioner, 91

T.C. 352, 363-364 (1988); Lucas v. Commissioner, 79 T.C. 1, 6

(1982).   The taxpayer bears the burden of proving that claimed

expenses were ordinary and necessary as required by section 162.

To be “ordinary” the transaction which gives rise to the expense

must be of a common or frequent occurrence in the type of

business involved.   Deputy v. du Pont, 308 U.S. 488, 495 (1940).

To be “necessary” an expense must be “appropriate and helpful” to

the taxpayer’s business.    Welch v. Helvering, 290 U.S. at 113.

Additionally, the expenditure must be “directly connected with or

pertaining to the taxpayer’s trade or business”.    Sec. 1.162-
                                - 12 -

1(a), Income Tax Regs.     Section 262(a) prohibits deductions for

personal, living, or family expenses.

     A trade or business expense deduction is not allowable to an

employee to the extent that the employee is entitled to

reimbursement from her employer for an expenditure related to her

status as an employee.     Orvis v. Commissioner, 788 F.2d 1406,

1408 (9th Cir. 1986), affg. T.C. Memo. 1984-533; Lucas v.

Commissioner, supra at 7.     This rule forecloses an avenue for tax

manipulation by preventing the taxpayer from converting a

business expense of her company into one of her own by simply

failing to seek reimbursement.     Orvis v. Commissioner, supra at

1408.     Petitioner bears the burden of establishing that SCOE

would not have reimbursed her for such expenses.     See Podems v.

Commissioner, 24 T.C. 21, 23 (1955); Benson v. Commissioner, T.C.

Memo. 2007-113; Putnam v. Commissioner, T.C. Memo. 1998-285.

        Of the $84,514 of itemized deductions petitioner claimed on

her 2004 Federal tax return, $44,598 was claimed for unreimbursed

employee expenses.     During 2004 petitioner received $72,510 in

wages from SCOE and SCOE reimbursed petitioner $3,132 for food,

travel, and meeting supplies.

        Section 274(d) provides heightened substantiation

requirements for, inter alia, vehicle, transportation, travel,

meals, lodging, gifts, and cellular telephone expenses.     Section

274(d) requires the taxpayer to establish by adequate records or
                                - 13 -

by sufficient evidence corroborating the taxpayer’s own

statement:   (A) The amount of such expense or other item; (B) the

time and place of the travel, entertainment, amusement,

recreation, or use of the facility or property, or the date and

description of the gift; (C) the business purpose of the expense

or other item; and (D) the business relationship to the taxpayer

of persons entertained, using the facility or property, or

receiving the gift.

                i.    Vehicle

     Petitioner claimed vehicle expenses of $8,969.    SCOE’s

reimbursement policy provides, in pertinent part, that “An

employee required to use his/her own car for travel approved by

his/her supervisor shall be reimbursed for mileage at the rate

currently in force on a monthly basis.”    The reimbursement policy

also states that “Employees are reimbursed for actual mileage

driven beyond their travel to and from the work site.”    Although

petitioner did not testify whether she sought approval from her

supervisor for the vehicle expenses claimed, she did testify that

she did not seek reimbursement.    Petitioner has failed to show

that she would not have been reimbursed for the claimed vehicle

expenses had she sought reimbursement from SCOE.    Furthermore,

most of the entries on her 2004 travel log are insufficient to

establish the “place of the travel” or the “business purpose” of

the expenses.   See sec. 274(d).   Consequently, petitioner has
                                   - 14 -

failed to carry her burden of proof, and we therefore sustain

respondent’s determination disallowing any deduction for vehicle

expenses.

                  ii.    Parking and Transportation

     Petitioner claimed that she paid $433 for parking fees and

transportation during 2004.        The parties agree that petitioner

paid $286.14 for parking fees and transportation during 2004.

SCOE’s reimbursement policy expressly provides for the

reimbursement of parking fees, taxi fares, and tolls without

receipts.     However, petitioner did not seek reimbursement.

Furthermore, petitioner has not offered any credible documentary

or testimonial evidence establishing that the parking fees and

transportation costs claimed on her 2004 Federal tax return were

ordinary and necessary to her business as an employee of SCOE,

nor has she established any related business purpose.

Accordingly, petitioner is not entitled to deduct any amount for

parking fees, tolls, and transportation costs.

                  iii.    Travel

     Petitioner claimed that she paid $5,883 for travel during

2004.   Travel expenses are also covered by SCOE’s reimbursement

policy.     Petitioner’s tax summary report for 2004 appears to

indicate that many of the travel expenses relate to various

conferences she attended.      Again, SCOE’s reimbursement policy

expressly covers attendance at conferences, and petitioner did
                                  - 15 -

not seek reimbursement from SCOE for these expenses.       Petitioner

has failed to establish that she would not have been reimbursed

for her travel expenses and also has failed to establish any

ordinary and necessary business purpose for the expenses claimed.

Accordingly, petitioner is not entitled to deduct any amount for

travel expense.

                  iv.   Meals

     Petitioner claimed an $8,232 deduction for meals.       Meals are

also covered by SCOE’s reimbursement policy.       The reimbursement

policy provides that petitioner could have either accepted a

standard reimbursement rate for meals without having to provide

receipts, or provided receipts and received reimbursement for the

actual and necessary costs of meals.       Petitioner has failed to

establish both that she paid the amount claimed as a meals

expense and that there was a related business purpose.

Accordingly, petitioner is not entitled to a deduction for meal

expenses.

                  v.    Continuing Education

     Petitioner claimed a $3,920 deduction for “continuing

education” expenses.      Petitioner testified that she was required

to complete 150 hours of professional development to retain a

teaching credential and an administrative service credential.

Petitioner has not established that a teaching credential or an

administrative service credential was necessary to maintain her
                                   - 16 -

position as director of professional development for SCOE.

Petitioner has also failed to establish that she paid the amount

claimed and that the expense was ordinary and necessary.

Accordingly, petitioner is not entitled to a deduction for

“continuing education” expenses.

                vi.    Telephone

     Petitioner claimed a $381 deduction for telephone expenses.

This expense allegedly relates to petitioner’s Pacific Bell

telephone bills and a few cellular phone and hotel phone calls.

Petitioner has established neither a business purpose nor that

she actually paid these expenditures.       Personal telephone bills

are typically not deductible as they are a personal expense.       See

sec. 262.   Accordingly, petitioner is not entitled to a deduction

for telephone expenses.

                vii.    Postage

     Petitioner claimed a $1,761 deduction for postage expenses.

Petitioner’s tax summary report appears to indicate that her

postage expenses were personal.       For example, petitioner claimed

postage expenses for Victoria’s Secret, Coldwater Creek, Horchow,

and Frederick’s mail order.       Petitioner has not established by

either documentary or testimonial evidence how these expenses

relate to her trade or business as an employee of SCOE.

Accordingly, petitioner is not entitled to deduct postage

expenses.
                                 - 17 -

                viii.     Books and Magazines

     Petitioner claimed a $3,680 deduction for expenses for

professional books and magazines.     The parties have agreed that

petitioner paid $3,285.69 for these expenses.     Petitioner failed

to establish by documentary or testimonial evidence either what

books or magazines were purchased or how they related to her

business as an employee of SCOE.     Accordingly, petitioner is not

entitled to deduct any amount for book and magazine expenses.

                ix.     Teaching and Office Supplies

     Petitioner claimed a $7,583 deduction for teaching and

office supplies.   The parties have agreed that petitioner paid

$156.57 for a “program for teachers” and $4,975.20 for the

alleged office supplies.     The purported supplies expenses

included, among other things, items such as stationery, cards for

employees, a phone battery, CDs, fancy paper, a videotape from

Gentle Yoga, lamps, a daily planner, and over $1,900 in “loose

receipts”.   Petitioner has not established any business purpose

for these expenses, nor whether SCOE required her to attend a

“program for teachers”, whether SCOE provided office supplies, or

whether SCOE would reimburse her for the “program for teachers”

or for the purchase of office supplies.     Accordingly, petitioner

is not entitled to a deduction for teaching and office supply

expenses.
                                  - 18 -

                 x.    Professional Dues

     Petitioner claimed an $814 deduction for professional dues.

The parties have agreed that petitioner paid $764 for the alleged

expense.   Petitioner’s tax summary report indicates that this

expense relates to alleged payments to the University of La Verne

and to “ACSA”.   Petitioner has not established how these expenses

relate to her business as an employee of SCOE or why she might be

required to pay them.     Accordingly, petitioner is not entitled to

a deduction for professional dues expenses.

                 xi.    Gifts

     “The cost of gifts may be an ordinary and necessary business

expense if the gifts are connected with the taxpayer’s

opportunity to generate business income.”         Bruns v. Commissioner,

T.C. Memo. 2009-168 (citing Brown v. Commissioner, T.C. Memo.

1984-120).   Where a business purpose is established for the gift,

pursuant to section 162 the business gift deduction is restricted

to $25 per donee per taxable year.         Sec. 274(b)(1).

     Petitioner claimed an $8,600 deduction for “staff

appreciation”; i.e., gifts to employees of SCOE.         Petitioner

testified that she gives a Christmas gift to everyone that works

in her building and that she takes a deduction for it.

Petitioner also testified that she claimed a deduction for a

wedding gift certificate.       Other so-called staff appreciation

gifts included purchases from, among others, Victoria’s Secret,
                               - 19 -

Frederick’s mail order, Bath & Body Works, Sally Beauty,

Nordstrom Direct, and Talbots.

     Petitioner has not satisfied the heightened substantiation

requirements of section 274(d).    Petitioner’s tax summary report

lists numerous items as employee gifts but does not establish the

business purpose of the gifts.    Many of the purported gifts

appear to total more than $25, and it is unclear to whom each

gift was given and whether there was a business purpose for it.

In fact, the gifts appear to be personal.    Furthermore,

petitioner has not established how or to what extent the gift

items contributed to her income.    See Bruns v. Commissioner,

supra.   Accordingly, petitioner is not entitled to a deduction

for business gifts.

           b.   Tax Preparation Fees

     Section 212(3) provides that there shall be allowed as a

deduction all the ordinary and necessary expenses paid or

incurred during the taxable year in connection with the

determination, collection, or refund of any tax.

     On Schedule A attached to her 2004 return, petitioner

claimed $808 for tax preparation fees.    However, petitioner

neither testified nor offered any documentary evidence to

establish that she paid this, or any other, amount in connection

with the determination, collection, or refund of any tax.
                               - 20 -

Accordingly, we sustain respondent’s determination disallowing a

deduction for tax preparation fees.

          c.    Asset Preservation Expenses

     Section 212(2) allows as a deduction all the ordinary and

necessary expenses paid or incurred during the taxable year for

the management, conservation, or maintenance of property held for

the production of income.   Whether legal fees are deductible

under section 212 or nondeductible under section 262(a) depends

upon the origin of the claim with respect to which the fees were

incurred and not upon its potential effects on the fortunes of

the taxpayer.    See United States v. Gilmore, 372 U.S. 39, 49

(1963); Hill v. Commissioner, T.C. Memo. 2010-268.

     On Schedule A attached to her 2004 return, petitioner

claimed that she paid $2,681 for legal expenses for “asset

preservation”.    The claimed deduction is an aggregate of prepaid

legal expenses of $312 and the cost of a lawsuit filed against a

moving company for damage to a rental property and to some

personal property.

     The record is unclear as to what the term “rental property”

means or whether it was income-producing property that petitioner

owned or property she rented as her personal residence.

Nevertheless, petitioner has failed to established that any

portion of the legal expenses paid or incurred in 2004 was

ordinary or necessary for the management, conservation, or
                               - 21 -

maintenance of property held for the production of income.

Accordingly, we sustain respondent’s determination disallowing

petitioner any deduction for legal fees for “asset preservation”.

C.   Accuracy-Related Penalty Under Section 6662

      Section 6662(a) and (b)(1) and (2) provides that a taxpayer

is liable for a 20-percent accuracy-related penalty on any

portion of an underpayment of tax required to be shown on a

return attributable to, inter alia, (1) negligence or disregard

of rules or regulations or (2) any substantial understatement of

income tax.   The Commissioner generally bears the burden of

production for any penalty, but the taxpayer bears the ultimate

burden of proof.   Sec. 7491(c); Higbee v. Commissioner, 116 T.C.

438, 446 (2001).

      Negligence is defined as “any failure to make a reasonable

attempt to comply with the provisions of this title,” and

disregard includes “any careless, reckless, or intentional

disregard.”   Sec. 6662(c).   The regulations promulgated under

section 6662 provide that negligence “includes any failure by the

taxpayer to keep adequate books and records or to substantiate

items properly.”   Sec. 1.6662-3(b)(1), Income Tax Regs.

      An understatement of income tax is defined as the excess of

the amount of the tax required to be shown on the return for the

taxable year over the amount of the tax shown on the return.      See

sec. 6662(d)(2)(A).   For purposes of section 6662, there is a
                              - 22 -

substantial understatement of income tax for any taxable year if

the amount of the understatement for the taxable year exceeds the

greater of 10 percent of the tax required to be shown on the

return for the taxable year or $5,000.   See sec. 6662(d)(1)(A).

     On her 2004 return petitioner reported total tax of $58.

Respondent has shown that the amount of the understatement

exceeds 10 percent of the tax required to be shown on the return

or $5,000.   With respect to negligence petitioner did not

maintain required records or substantiate deductions as required

by the Code.   Accordingly, absent an exception, such as that

found in section 6664, petitioner would be liable for an

accuracy-related penalty.

     Section 6664 provides that the accuracy-related penalty is

not imposed with respect to any portion of an underpayment as to

which the taxpayer acted with reasonable cause and in good faith.

The determination of whether a taxpayer acted with reasonable

cause and in good faith depends on the pertinent facts and

circumstances and includes 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.    For a

taxpayer to rely reasonably upon the advice of a tax adviser, the

taxpayer must, at a minimum, prove by a preponderance of the

evidence that:   (1) The adviser was a competent professional with

sufficient expertise to justify reliance, (2) the taxpayer
                               - 23 -

provided necessary and accurate information to the adviser, and

(3) the taxpayer actually relied in good faith on the adviser’s

judgment.   Neonatology Associates, P.A. v. Commissioner, 115 T.C.

43, 99 (2000), affd. 299 F.3d 221 (3d Cir. 2002).

     Petitioner asserts that she relied on the advice of an

accountant in determining to deduct the items and amounts

reported on her 2004 return.   Petitioner, however, has failed to

establish that her adviser was a competent professional, that she

provided necessary and accurate information to her adviser, or

that she actually relied in good faith on the adviser’s judgment.

Accordingly, we sustain respondent’s determination to impose an

accuracy-related penalty under section 6662.

     To reflect the foregoing,


                                         Decision will be entered

                                    under Rule 155.
