                         T.C. Summary Opinion 2014-104



                         UNITED STATES TAX COURT



              MELANIE L. THOMAS-KOZAK, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 802-12S.                          Filed November 10, 2014.



      Norman D. McKellar, for petitioner.

      John R. Bampfield and William W. Kiessling, for respondent.



                              SUMMARY OPINION


      GALE, Judge: This case was heard pursuant to the provisions of section

7463 of the Internal Revenue Code in effect when the petition was filed.1



      1
        Unless otherwise indicated, all section references are to the Internal
Revenue Code of 1986, as in effect for the years in issue, and all Rule references
are to the Tax Court Rules of Practice and Procedure. All dollar amounts are
rounded to the nearest dollar.
                                        -2-

Pursuant to section 7463(b), the decision to be entered is not reviewable by any

other court, and this opinion shall not be treated as precedent for any other case.

      Respondent determined deficiencies in petitioner’s 2008 and 2009 Federal

income tax of $7,175 and $7,659, respectively, and accuracy-related penalties

under section 6662(a) of $1,435 and $1,532, respectively. After concessions,2 the

issues for decision are:

      (1) whether petitioner is entitled to a deduction for medical expenses for

2008 in an amount greater than that allowed by respondent;

      (2) whether petitioner is entitled to a charitable contribution deduction for

2009 in an amount greater than that allowed by respondent;




      2
        The notice of deficiency disallowed deductions for all but $90 (for each
year) of the $29,525 and $28,596 of expenses petitioner reported on her 2008 and
2009 Schedules A, Itemized Deductions, respectively, for “Job Expenses and
Certain Miscellaneous Deductions” (lines 21-24). These claimed amounts
included tax preparation fees of $245 and depreciation of $2,764 for 2008 and a
deduction for “other” of $4,808 for 2009. Petitioner has not addressed any of
these three items, and we accordingly deem her to have conceded them to the
extent they exceed the $90 respondent allowed for each year.
       The notice of deficiency also determined that petitioner’s filing status for
each year at issue was “married filing separately” rather than “single” as claimed
on her 2008 and 2009 returns. As petitioner has not addressed this issue, it is
likewise deemed conceded.
                                          -3-

        (3) whether petitioner is entitled to deductions for unreimbursed employee

business expenses for 2008 and 2009 in amounts greater than those allowed by

respondent;

        (4) whether petitioner is entitled to a deduction for moving expenses for

2009; and

        (5) whether petitioner is liable for accuracy-related penalties for 2008 and

2009.

                                      Background

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

facts and the accompanying exhibits are incorporated herein by this reference. At

the time the petition was filed, petitioner resided in Tennessee.

        Starting in April 2008 and continuing through the end of 2009 petitioner

worked as a mechanical engineer for SunCoke Energy, a division of Sunoco, Inc.

(Sunoco). During 2008 and 2009 petitioner maintained a residence outside

Knoxville, Tennessee. During 2008 she commuted from that residence to a

Sunoco office in Knoxville, but in 2009 her work responsibilities often required

her to travel to other jobsites, principally a jobsite in the St. Louis, Missouri, area.

        Sunoco had a written policy for reimbursing employees for their work-

related expenses for the years at issue. Sunoco’s reimbursement policy had
                                        -4-

provisions covering, among other things, business travel, membership in

professional and other organizations, clothing needed for weather or safety

conditions, and meals with persons having business relationships with the

company.

      The policy’s provisions covering lodging expenses provided that Sunoco

would not reimburse “multiple hotel expenses on the same night stay for a single

individual in more than one location”. The policy’s provisions covering expenses

relating to an employee’s profession provided that “[e]xpenses associated with

membership * * * in professional, business, civic, and trade organizations can be

reimbursed at * * * [Sunoco’s] discretion”. They also provided that “[Sunoco]

will provide reimbursement for authorized subscriptions to periodicals and

technical or scientific publications serving a business purpose, at * * * [Sunoco’s]

discretion.”

      Sunoco provided petitioner with an American Express credit card (corporate

card) to use in paying business expenses. The Sunoco reimbursement policy

required that the corporate card be used “whenever possible” for all business

expenses incurred by an employee, including meals.

      Petitioner filed timely Federal income tax returns for 2008 and 2009. On

her 2008 return she reported adjusted gross income of $106,844 and claimed
                                        -5-

deductions for medical expenses of $15,381 and unreimbursed employee business

expenses of $26,516. On her 2009 return she reported adjusted gross income of

$74,013 and claimed a deduction of $6,718 for moving expenses, a deduction of

$2,034 for charitable contributions, and a deduction for $23,788 of unreimbursed

employee business expenses. On her 2008 and 2009 tax returns she reported a

Knoxville area post office box as her address.

      Respondent subsequently mailed to petitioner a notice of deficiency with

respect to her 2008 and 2009 taxable years. The notice disallowed Schedule A

deductions that petitioner claimed for medical expenses for 2008, the charitable

contribution deduction for 2009, and miscellaneous deductions, including the

deductions for unreimbursed employee business expenses, for both years, as well

as the moving expense deduction for 2009. The notice determined that petitioner

was liable for accuracy-related penalties for both years.

      Petitioner filed a timely petition with the Court seeking redetermination of

the deficiencies.

                                     Discussion

      Generally, the Commissioner’s determinations in a notice of deficiency are

presumed correct, and the taxpayer bears the burden of proving that the

determinations are erroneous. Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111,
                                        -6-

115 (1933). Deductions are a matter of legislative grace, and the burden of

showing entitlement to a claimed deduction is on the taxpayer.3 Rule 142(a);

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

Medical Expenses

      Petitioner claimed a deduction for medical expenses of $15,381 for 2008.

Respondent allowed $11,016 of that amount in the notice of deficiency and

conceded an additional $336 at trial, leaving $4,029 in dispute. Of the disputed

amount, petitioner has addressed only a $569 expenditure for a bicycle and related

accessories. While respondent concedes that petitioner spent $569 for a bicycle

and related accessories, he contends that the expenditure does not qualify as a

medical expense.

      Petitioner testified that her physician determined that she had excessive

adrenaline in her body and recommended that she exercise to alleviate the

condition. She conceded that her physician did not recommend any particular

method of exercise but testified that the bicycle could be set up on a stand in a

hotel room and therefore provided a convenient means of exercising during her

travels.


      3
       Petitioner has not claimed or shown entitlement to any shift in the burden
of proof pursuant to sec. 7491(a).
                                        -7-

      Section 213(a) as in effect for 2008 provided a deduction for expenditures

for medical care of the taxpayer not compensated for by insurance or otherwise

that exceed 7.5% of adjusted gross income.4 “Medical care” is defined in section

213(d)(1) to include expenditures for the diagnosis, cure, mitigation, treatment, or

prevention of disease, or for the purpose of affecting any structure or function of

the body. Section 213 carves out a limited exception to the general rule in section

262 that prohibits the deduction of personal, living, or family expenses. Jacobs v.

Commissioner, 62 T.C. 813, 818 (1974). Section 1.213-1(e)(1)(ii), Income Tax

Regs., provides that medical care deductions will be confined strictly to expenses

incurred primarily for the prevention or alleviation of a physical or mental defect

or illness. These expenditures must satisfy a “but for” test: the taxpayer must

show that the expenditure was an essential element of the treatment and that it

would not have been incurred for nonmedical reasons. Jacobs v. Commissioner,

62 T.C. at 819. Inquiries of this nature are primarily factual. Id. (citing Stringham

v. Commissioner, 12 T.C. 580, 584-585 (1949), aff’d per curiam, 183 F.2d 579

(6th Cir. 1950)).




      4
       The adjusted gross income floor was raised to 10% for taxable years
beginning after December 31, 2012. See Patient Protection and Affordable Care
Act, Pub. L. No. 111-148, sec. 9013(a), 124 Stat. at 868.
                                        -8-

      Even accepting arguendo petitioner’s contention that she had an excessive

adrenaline condition, she has not shown that bicycle exercise was essential to the

treatment of that condition. Indeed, she conceded that her physician’s

recommendation was for more exercise generally rather than bicycle riding

specifically. She did not produce evidence indicating that she could not engage in

other methods of exercise. Given the inherent recreational uses of a bicycle, we

conclude that petitioner has not shown that the bicycle would not have been

purchased “but for” her medical condition. Instead, we conclude that the

expenditure was only beneficial to her health generally and therefore does not

qualify as medical care. See France v. Commissioner, 690 F.2d 68, 69 (6th Cir.

1982) (finding physician-recommended dance lessons to alleviate arthritic pains

and nervous tensions not medical care), aff’g T.C. Memo. 1980-215; Thoene v.

Commissioner, 33 T.C. 62, 65 (1959) (finding physician-recommended dance

lessons not medical care); Peacock v. Commissioner, T.C. Memo. 1978-30, 37

T.C.M. (CCH) 177, 184 (1978) (finding gym membership expense not medical

care where physician recommended exercise). We therefore conclude that

petitioner is not entitled to deduct medical expenses for 2008 in excess of those

allowed by respondent.
                                        -9-

Charitable Contributions

      Petitioner claimed a deduction for charitable contributions of $2,034 for

2009. Respondent disallowed the entire deduction in the notice of deficiency but

conceded $1,500 at trial, leaving $534 in dispute. Petitioner argues that this

amount relates to her volunteer work on a Habitat for Humanity project. She

testified that $314 pertained to vehicle expenses incurred in driving between St.

Louis and Knoxville on multiple occasions to work on the project. She calculated

her vehicle expenses using the 14-cent standard mileage rate under section 170(i).

She testified that the remaining $220 in dispute pertained to the cost of meals that

she purchased for other participants on this project.

      Section 170(a)(1) allows a deduction for charitable contributions made

during the taxable year “if verified under regulations prescribed by the Secretary.”

The contributions must be to or for the use of a qualifying organization. Sec.

170(c). Section 1.170A-1(g), Income Tax Regs., prohibits deductions for

charitable contributions of services but allows deductions for “unreimbursed

expenditures made incident to the rendition of services”. Expenditures of this

nature under $250 must be substantiated with written records that substantially

comply with the requirements of section 1.170A-13(a)(1), Income Tax Regs. See

Van Dusen v. Commissioner, 136 T.C. 515, 534-535 (2011). These documents
                                       - 10 -

must be reliable evidence of the claimed expenses, such as check copies, bank

account statements, and credit card statements. See id. at 533-535. Such

expenditures of $250 or more must also be substantiated with a contemporaneous

written statement from the donee organization containing, among other things, a

description of the services that the taxpayer provided. See id. at 536-537; sec.

1.170A-13(f)(10), Income Tax Regs.

      Petitioner offered no documentation that would satisfy the foregoing

requirements. She offered only a spreadsheet that lists the amounts of the vehicle

and meal expense deductions claimed, which she concedes she created when

preparing her return. She did not produce any receipts or other written records

that would tend to corroborate that she made the trips in her vehicle as claimed or

purchased the meals. Without additional corroboration, the noncontemporaneous

spreadsheet is not reliable evidence of her claimed expense deductions.

Additionally, she did not produce a written statement from Habitat for Humanity

regarding the services she provided to substantiate her vehicle expense, which

exceeded $250. Having failed to satisfy the substantiation requirements of section

1.170A-13, Income Tax Regs., she is not entitled to a charitable contribution
                                       - 11 -

deduction for either the vehicle expenses or the costs of meals.5 We therefore

conclude that petitioner has not shown entitlement to any charitable contribution

deduction for 2009 in excess of that allowed by respondent.

Employee Business Expenses

      Overview

      Petitioner claimed deductions for $26,516 and $23,788 of unreimbursed

employee business expenses for 2008 and 2009, respectively. As detailed in the

Forms 2106, Employee Business Expenses, attached to her returns, the expenses

reported consisted of: vehicle expenses; travel expenses while away from home

overnight; “other” employee business expenses; meals and entertainment

expenses; and, in the case of 2009 only, transportation expenses. Respondent

disallowed deductions for all of these expenses for each of the years. At trial

respondent conceded $1,200 and $1,112 of these expenses for 2008 and 2009,

respectively, leaving $25,316 and $22,676 in dispute, respectively.

      Section 162 allows a taxpayer to deduct all ordinary and necessary expenses

paid or incurred by the taxpayer in carrying on a trade or business, including

      5
        Even if petitioner had substantiated her meal purchases, they would be
more accurately characterized as nondeductible gifts to petitioner’s covolunteers
rather than meals “necessarily incurred” by petitioner while performing donated
services. See Cavalaris v. Commissioner, T.C. Memo. 1996-308, 1996 WL
380695, at *8-*9.
                                       - 12 -

expenses paid or incurred as an employee. Lucas v. Commissioner, 79 T.C. 1, 6

(1982). The taxpayer cannot deduct such expenses, however, to the extent the

taxpayer is entitled to reimbursement from the employer for an expenditure related

to the taxpayer’s status as an employee. See id. at 7; Spielbauer v. Commissioner,

T.C. Memo. 1998-80, 1998 WL 78983, at *3-*4 (stating that ordinary and

necessary educational expenses deductible to the extent they exceeded the amount

that taxpayer was entitled to be reimbursed from employer). Deductions for such

expenses belong to the employer. See Kennelly v. Commissioner, 56 T.C. 936,

943 (1971), aff’d without published opinion, 456 F.2d 1335 (2d Cir. 1972). The

taxpayer bears the burden of proving that the taxpayer was not entitled to

reimbursement from the employer for such expenses. See Fountain v.

Commissioner, 59 T.C. 696, 708 (1973). The taxpayer can prove that he was not

entitled to reimbursement by, for example, showing that he was expected to bear

these costs. See id.; Dunkelberger v. Commissioner, T.C. Memo. 1992-723, 1992

WL 379282, at *1 (finding that management team expected taxpayer to bear

expense of business lunches with vendors). Where the taxpayer’s employer has a

reimbursement policy that covers the expenses, the taxpayer must show that he

sought reimbursement from his employer for the expenses. Orvis v.

Commissioner, 788 F.2d 1406, 1408 (9th Cir. 1986), aff’g T.C. Memo. 1984-533.
                                       - 13 -

      Where a taxpayer establishes that he paid or incurred a deductible expense

but does not establish the amount of the deduction to which he may be entitled, we

may in certain circumstances estimate the amount allowable. See Cohan v.

Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930); Vanicek v. Commissioner,

85 T.C. 731, 742-743 (1985). But for expenses subject to the more stringent

substantiation requirements of section 274(d), the Cohan rule may not be used.

See Sanford v. Commissioner, 50 T.C. 823, 827 (1968), aff’d per curiam, 412 F.2d

201 (2d Cir. 1969); sec. 1.274-5T(a)(4), Temporary Income Tax Regs., 50 Fed.

Reg. 46014 (Nov. 6, 1985).

      Vehicle Expenses

            2008

      Petitioner has not addressed the $15,528 of vehicle expenses for which she

claimed a deduction for 2008. We accordingly find that she has conceded them

and sustain respondent’s disallowance thereof. See Rule 34(b)(4).

            2009

      Petitioner claimed a deduction for vehicle expenses of $7,405 for 2009, all

of which respondent disallowed.

      Petitioner testified that she incurred these expenses in connection with

round trip travel between various Sunoco jobsites and her Knoxville residence.
                                       - 14 -

She testified that Sunoco would reimburse her for these round trips only if they

occurred at times that Sunoco designated for traveling home, typically every other

weekend. According to petitioner, however, her responsibilities at these jobsites,

which involved checking on safety conditions when most workers were not on the

site, often required her to work on weekends. Consequently, some of her trips

home would occur at times other than the designated weekend times and thus were

ineligible for reimbursement, according to petitioner. She testified that the vehicle

expenses she claimed arose from such travel. As substantiation for this travel,

petitioner produced a spreadsheet that she conceded she created when preparing

her return.

      An employee may be entitled to deduct as a business expense the cost of

travel between her residence and a temporary jobsite. See sec. 162(a)(2); Mitchell

v. Commissioner, T.C. Memo. 1999-283, 1999 WL 669954, at *4-*5. However,

business use of a passenger automobile is subject to the substantiation

requirements of section 274(d) because such a vehicle is “listed property” as

defined in section 280F(d)(4)(A)(i). For such automobile expenses, a taxpayer

must substantiate, by adequate records or by sufficient evidence corroborating the

taxpayer’s own statement: (1) the amount of the expenditure; (2) the mileage for

each business use of the automobile; (3) the date of the business use; and (4) the
                                       - 15 -

business purpose of the use. See sec. 1.274-5T(b)(6), (c)(1), Temporary Income

Tax Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985).

      Petitioner has not satisfied the substantiation requirements of section

274(d). The spreadsheet and petitioner’s testimony regarding the vehicle expenses

are not sufficient to establish each element above. Petitioner did not produce any

documentary evidence that would tend to corroborate the spreadsheet entries or

offer testimony regarding what she relied upon to create the entries.

      Even aside from her failure to satisfy section 274(d), petitioner has not

corroborated her testimony that Sunoco’s reimbursement policy for trips home was

confined to weekend travel. Sunoco’s written reimbursement policy for

automobile use contained no such provision, and petitioner has not produced

correspondence with or testimony from a supervisor that would corroborate this

feature of Sunoco’s reimbursement policy. See Kessler v. Commissioner, T.C.

Memo. 1985-254, 49 T.C.M. (CCH) 1565, 1570-1571, n.9 (1985) (noting that

taxpayer called his supervisor as witness). We conclude that petitioner has failed

to show she was not entitled to reimbursement of these vehicle expenses.

      Because petitioner has not satisfied the substantiation requirements of

section 274(d) or shown that she was not entitled to reimbursement, we sustain
                                        - 16 -

respondent’s disallowance of the vehicle expense deductions she claimed for

2009.

        Travel Expenses While Away From Home Overnight

              2008

        Petitioner reported $2,140 of unreimbursed employee business expenses for

travel while away from home overnight on line 3 of her 2008 Form 2106, all of

which respondent disallowed.

        To substantiate these expenses, petitioner produced a spreadsheet that she

conceded she created when preparing her 2008 return, as well as receipts

corresponding to the spreadsheet entries.

        As indicated by the proffered receipts, approximately $1,348 of the disputed

amount is for hotel lodging in various cities. Petitioner testified that Sunoco’s

reimbursement policy provided reimbursement for only one lodging expense per

night and that she often incurred two lodging expenses for a given evening when

Sunoco required her to travel from one jobsite to another on short notice. While

Sunoco’s reimbursement policy tends to corroborate petitioner’s claim,6 we

nonetheless reject the claimed deduction for lodging expenses for 2008 because

        6
       As noted previously, the policy stated that Sunoco would not reimburse
“multiple hotel expenses on the same night stay for a single individual in more
than one location”.
                                        - 17 -

petitioner did not provide any corroborating evidence that she paid for a hotel

room in more than one location on the same evening at any time in 2008. She did

not provide, for example, receipts for hotel charges from two hotels for the same

evening or correspondence with Sunoco management regarding these expenses.

Thus, she has not provided competent evidence that any of the overnight lodging

expenses she claimed for 2008 would trigger the exclusion from reimbursement

under Sunoco’s reimbursement policy. We decline to accept petitioner’s self-

serving testimony without additional corroboration. See Tokarski v.

Commissioner, 87 T.C. 74, 77 (1986). Consequently, we conclude that petitioner

has failed to show that she was not eligible for reimbursement for these expenses.

See Lucas v. Commissioner, 79 T.C. at 7; Fountain v. Commissioner, 59 T.C. at

708.

       As indicated by the proffered receipts, an additional $773 of the disputed

amount is for round trip airfare between Knoxville and Cleveland, Ohio.

Petitioner offers no explanation as to why, if this flight was taken in connection

with her duties at Sunoco, she was not reimbursed for it, given that Sunoco’s

policy provided for such reimbursement. In the absence of further evidence, we

reject petitioner’s claim. See Lucas v. Commissioner, 79 T.C. at 7; Fountain v.

Commissioner, 59 T.C. at 708.
                                      - 18 -

      The remaining receipts consist of a $5 expense at a newsstand for

“magazines” and a $14 expense for a passport photograph. The magazines are a

nondeductible personal expense, as is the passport-related expense. See Baratelle

v. Commissioner, T.C. Memo. 2000-359, 2000 WL 1732434, at *6.7

      In sum, we conclude that petitioner has not shown entitlement to a

deduction for any of the $2,140 of expenses claimed for overnight travel for 2008.

Accordingly, we sustain respondent’s disallowance of these expenses.

            2009

      Petitioner reported $3,398 of unreimbursed employee business expenses for

travel while away from home overnight on line 3 of her 2009 Form 2106 and an

additional $584 on line 2, purportedly for local transportation.8 Respondent




      7
       But see Payne v. Commissioner, T.C. Memo. 1986-93, 51 T.C.M. (CCH)
579, 582 (1986) (concluding on the facts of that case that a passport fee is a
deductible business expense).
      8
       Although petitioner reported $584 on line 2 of the Form 2106 as expenses
for parking fees, tolls, and transportation, an examination of her supporting
receipts reveals that the expenditures were all related to travel while away from
home. This figure includes a total of $310 from hotel invoices for lodging,
parking, and Internet service that will be considered with the associated lodging
expenses.
                                          - 19 -

disallowed all of the foregoing. As substantiation, petitioner produced

spreadsheets she concedes she created when preparing her return and receipts

corresponding to the spreadsheet entries.9

      Our analysis for petitioner’s 2009 travel expense deduction claims is similar

to that for 2008. Approximately $2,895 of the receipts are for hotel lodging (and

associated expenses such as hotel parking and Internet service) in various cities.

Petitioner offered the same explanation for Sunoco’s not reimbursing her for these

lodging expenses as she offered for her 2008 lodging expenses; that is, that

Sunoco reimbursed her for only one lodging expense per night. Here again,

however, the lodging expense receipts that petitioner proffered fail to demonstrate

any instance where she incurred two lodging expenses for the same night. She did

not produce other evidence to corroborate her explanation, such as correspondence

with Sunoco management about these expenses. Consequently, we find that

petitioner has failed to show that she was not eligible for reimbursement for the

$2,895 of lodging expenses for which she claimed a deduction for 2009. See

Lucas v. Commissioner, 79 T.C. at 7; Fountain v. Commissioner, 59 T.C. at 708.

      The remaining travel expenses for which petitioner claimed a deduction

consist of $593 for a rental car used in Montreal (which petitioner contends was

      9
          The receipts total $585, a difference we treat as de minimis.
                                       - 20 -

the location of a Sunoco jobsite) and $221 for a rental car originating in Knoxville

that petitioner contends was for trip to a Sunoco facility in New Albany, Indiana.

In contrast to her testimony regarding the lodging expenses, petitioner offers no

explanation as to why Sunoco would not reimburse for rental cars used in these

circumstances. Sunoco’s written reimbursement policy provided for such

reimbursement. In the absence of additional evidence, we conclude that petitioner

has not shown that she was not entitled to reimbursement. See Lucas v.

Commissioner, 79 T.C. at 7; Fountain v. Commissioner, 59 T.C. at 708.

      With respect to the remaining $274 for which petitioner claimed a

transportation expense deduction, the substantiating receipts show expenditures

that are properly characterized as expenses for overnight travel: a $254 car rental

from March 19-20 in Wichita, Kansas; a $20 parking fee at the Knoxville airport

on March 20; and a $1 highway toll in Illinois on September 6. Given the date

overlap between the Wichita car rental and the Knoxville airport parking fee, we

infer that petitioner flew from Knoxville to Wichita on March 19 and returned

March 20. Accepting petitioner’s testimony that Wichita was one of the Sunoco

jobsites to which she was assigned, we conclude that the March travel to Wichita

was work related. Here again, however, petitioner offered no explanation for

Sunoco’s not reimbursing her for any of the foregoing expenses even though
                                        - 21 -

Sunoco’s written reimbursement policy provided for it. We therefore sustain

respondent’s disallowance of these expenses. See Lucas v. Commissioner, 79

T.C. at 7; Fountain v. Commissioner, 59 T.C. at 708.

      We accordingly sustain respondent’s disallowance of the $3,398 and $584

for which petitioner claimed deductions as overnight travel and local

transportation expenses, respectively, for 2009.

      “Other” Employee Business Expenses

             2008

      Petitioner reported $7,400 on line 4 of her 2008 Form 2106 for “other”

employee business expenses. The notice of deficiency disallowed the deduction

for the expenses in full, but respondent conceded $1,200 of the expenses at trial,

leaving $6,200 of the expenses in dispute.

      Petitioner testified that $280 of the disputed amount pertained to steel-

reinforced metatarsal boots that Sunoco required all personnel to wear on jobsites.

She produced a receipt to substantiate the purchase, but the receipt indicates that

the $280 claimed was split between a boots purchase of $142 and a coveralls

purchase of $138 (allocating the sales tax proportionally). Petitioner testified that

the steel reinforcement in the boots ran above the ankle and that the boots were

required for safety on jobsites. She testified that she requested reimbursement
                                         - 22 -

from Sunoco but was denied it because the company believed reimbursing her

would require it to reimburse all contractors at its jobsites as well. Sunoco’s

reimbursement policy, however, stated that the cost of work-related clothing

needed for “weather/safety conditions” was reimbursable.

      The cost of clothing is deductible as an employee business expense only if

the clothing is required for the taxpayer’s employment, unsuitable for general

wear, and not worn for personal use. Kinney v. Commissioner, T.C. Memo. 2008-

287, 2008 WL 5330815, at *9 (citing Hynes v. Commissioner, 74 T.C. 1266, 1290

(1980), and Yeomans v. Commissioner, 30 T.C. 757, 767 (1958)). The clothing

must be unsuitable for use outside of the taxpayer’s work environment and not

actually used outside of that environment. See Kinney v. Commissioner, 2008

WL 5330815, at *9.

      We are satisfied that petitioner has shown entitlement to deduct the cost of

the boots. We readily accept the boots’ safety purpose and their required use on

job sites as plausible. It is clear the boots are not suitable for other purposes, and

we accept petitioner’s plausible testimony that Sunoco refused reimbursement out

of concern that it not incur an obligation to purchase similar boots for others

(notwithstanding the formal terms of Sunoco’s reimbursement policy for safety-
                                        - 23 -

related clothing). We therefore conclude that petitioner has shown entitlement to a

deduction for an “other” employee business expense of $142 for the boots.

      As for the coveralls, petitioner testified that they were fire-retardant clothing

that she needed for work on jobsites. But the receipt does not indicate that the

coveralls were fire retardant. In contrast to her testimony regarding the boots,

petitioner has not shown that the coveralls were unsuitable for general wear and

not worn for personal use. See id. She also failed to address whether she was

entitled to reimbursement for the coveralls. See Lucas v. Commissioner, 79 T.C.

at 7; Fountain v. Commissioner, 59 T.C. at 708. Accordingly, petitioner has not

shown entitlement to an employee business expense deduction for the coveralls.

      Petitioner has not addressed the remaining $5,920 of “other” employee

business expenses for which she claimed a deduction for 2008. We accordingly

find that she has conceded them.

      We conclude that petitioner is not entitled to claim a deduction for “other”

employee business expenses for 2008 in excess of the amount allowed by

respondent, plus the $142 expense for boots that we have concluded petitioner is

entitled to deduct.
                                       - 24 -

             2009

      Petitioner reported $11,528 on line 4 of her 2009 Form 2106 for “other”

employee business expenses. The notice of deficiency disallowed them in full, but

respondent conceded $1,112 of them at trial, leaving $10,416 in dispute.

      Petitioner testified that $1,319 of the disputed amount pertained to

fire-retardant clothing and a special safety harness that she needed for work on

jobsites. While petitioner produced receipts for these items totaling $1,319, she

offered no testimony concerning any refusal by Sunoco to reimburse her for the

expenditures.

      The receipts in question show purchases of clothing including shoes, a

jacket, and coveralls totaling $793 but do not indicate that any of the clothing was

fire retardant. As with the coveralls expense she reported for 2008, petitioner has

not shown that this clothing was unsuitable for general wear and not worn for

personal use. See Kinney v. Commissioner, 2008 WL 5330815, at *9.

Additionally, petitioner has not addressed whether she was entitled to

reimbursement for the clothing. See Lucas v. Commissioner, 79 T.C. at 7;

Fountain v. Commissioner, 59 T.C. at 708. Accordingly, petitioner has not shown

entitlement to deduct the clothing purchases.
                                       - 25 -

      As for the safety harness, the receipts do not show such a purchase. As best

we can tell, the harness could be represented by only two receipts of purchases of

unspecified items from “W.W. Granger” totaling $525, one for $454 and one for

$71. Even if we were to accord petitioner the benefit of the doubt on her

substantiation, given the apparent safety purpose served by the harness--which

would bring it within the clear terms of Sunoco’s reimbursement policy--her

failure to explain the circumstances of Sunoco’s not reimbursing her persuades us

that she has failed to show that she did not receive reimbursement. See Lucas v.

Commissioner, 79 T.C. at 7; Fountain v. Commissioner, 59 T.C. at 708.

      Petitioner testified that $349 of the disputed “other” employee business

expenses pertained to membership fees for the American Welding Society and the

American Society of Mechanical Engineers and an American Society of

Mechanical Engineers publication. She produced receipts to substantiate these

expenditures. Petitioner testified that Sunoco did not reimburse her.

      Given that Sunoco retained discretion as to whether it would reimburse the

foregoing expenses,10 we are satisfied on this record that petitioner was not

      10
        As noted previously, Sunoco’s reimbursement policy provided that
“[e]xpenses associated with membership * * * in professional, business, civic, and
trade organizations can be reimbursed at * * * [Sunoco’s] discretion”. Sunoco’s
reimbursement policy also provided that “[Sunoco] will provide reimbursement
                                                                      (continued...)
                                        - 26 -

reimbursed, and the business purpose is apparent. We therefore conclude that

petitioner has shown entitlement to a deduction for $349 of “other” employee

business expenses beyond those respondent allowed.

      The “other” employee business expenses in dispute also include $1,763

petitioner spent for tickets to Bristol Motor Speedway.11 Petitioner testified that

she used the tickets to take her supervisor to the races for “comradery” and

conceded that she had not sought reimbursement from Sunoco. Expenditures for

sporting event tickets or drinks merely to foster camaraderie among coworkers

lack a business purpose under section 162, see Finney v. Commissioner, T.C.

Memo. 1980-23, 39 T.C.M. 938, 949-950 (1980); Brenner v. Commissioner, T.C.

Memo. 1967-239, 26 T.C.M. (CCH) 1210, 1216 (1967), unless, possibly, the

purpose is to facilitate acquaintances with new coworkers, a contention not made

here, see Moss v. Commissioner, 758 F.2d 211, 213 (7th Cir. 1985), aff’g 80 T.C.

1073 (1983). We therefore sustain respondent’s disallowance of a deduction for

this expenditure.


      10
        (...continued)
for authorized subscriptions to periodicals and technical or scientific publications
serving a business purpose, at * * * [Sunoco’s] discretion.”
      11
        Expenses of this nature are properly reported as meals and entertainment
expenses on Form 2106 line 5. Petitioner treated other Bristol Motor Speedway
ticket expenses as meals and entertainment expenses, discussed infra.
                                       - 27 -

      Also included in the disputed “other” employee business expenses is a $214

expense for a power adapter that petitioner testified she needed to power her

laptop computer12 when a power outlet was unavailable at jobsites. However, the

receipt substantiating the purchase of the power adapter is dated December 26,

2008, indicating that this expense would be deductible for 2008 if at all. See sec.

1.461-1(a), Income Tax Regs. In any event, as petitioner has not addressed

whether she was eligible for reimbursement or sought it, she has not shown

entitlement to this deduction for either year. See Fountain v. Commissioner, 59

T.C. at 708.

      Finally, although petitioner produced two receipts indicating that she made

expenditures totaling $62 for “business services” at a UPS Store and a “16GB

SDCARD”, she did not offer any testimony or other evidence to support their

business purpose. We accordingly deem them conceded.

      This leaves $6,709 of disputed “other” employee business expenses that

petitioner has not addressed. We accordingly deem them conceded.




      12
        The record is silent as to whether the laptop was petitioner’s or Sunoco’s
property.
                                       - 28 -

      We conclude that petitioner has shown entitlement to deduct an additional

$349 in “other” employee business expenses for 2009 beyond the amount allowed

by respondent.

      Meals and Entertainment Expenses

      Petitioner reported $1,448 and $873 for meals and entertainment expenses

on line 9 of her 2008 and 2009 Forms 2106, respectively, all of which respondent

disallowed.

      As substantiation, petitioner produced spreadsheets (that she created when

preparing her returns) and receipts covering $5,793 of meals and entertainment

expenses for 2008 and $3,491 for 2009. Petitioner produced 49 receipts totaling

$2,841 for meal expenses for 2008 and 59 receipts totaling $2,701 for meal

expenses for 2009. The remaining $2,951 and $790 of receipts for 2008 and 2009,

respectively, were for Bristol Motor Speedway tickets.

      Meals and entertainment expenses are subject to a 50% limitation prescribed

by section 274(n). They are also subject to the substantiation requirements of

section 274(d). See sec. 1.274-5T(b)(2) and (3), (c), Temporary Income Tax

Regs., 50 Fed. Reg. 46014-46016 (Nov. 6, 1985). A taxpayer must substantiate,

by adequate records or by sufficient evidence corroborating the taxpayer’s own

statement, several elements including the business purpose of the meal and the
                                       - 29 -

business relationship between the meal attendees and the taxpayer. As with other

employee business expenses, the taxpayer must also show that he was not entitled

to reimbursement for them. See Fountain v. Commissioner, 59 T.C. at 708.

      Sunoco’s written reimbursement policy provided with respect to business

meals that the expenses would be reimbursed if incurred in connection with

meeting persons having a business relationship with the company. The policy also

required that the corporate card be used to pay for business meals “whenever

possible”.

      Petitioner testified that the unreimbursed meal expenses for which she

claimed deductions arose from after-hours working dinners with contractors hired

by Sunoco with whom petitioner worked. According to petitioner, Sunoco

encouraged her to facilitate these after-hours meals with the contractors to

expedite project completion. Petitioner testified that she submitted reimbursement

requests to Sunoco and they were denied, which she attributed to a Sunoco policy

prohibiting reimbursement for meals provided to contractors to whom Sunoco was

paying a per diem.

      The difficulty with petitioner’s contention is that only 3 of the 49 meal

receipts for 2008 and 5 of the 59 meal receipts for 2009 conform with her “after

hours” description and the reimbursement policy requirement that they be charged
                                        - 30 -

on the corporate card (which was an American Express card); that is, only eight of

the receipts petitioner proffered to substantiate her meal expenses establish that

the charges were on an American Express card at an “after hours” time. The

remaining 46 and 54 receipts for 2008 and 2009, respectively, establish that they

were not charged on an American Express card13 or incurred “after hours”.14

      Since the eight receipts evidencing “after hours” American Express-charged

meals corroborate petitioner’s testimony, we conclude that she has satisfied the

section 274(d) substantiation requirements for these expenses. The meal expenses

on the three such receipts for 2008 total $469, and the meal expenses on the five

for 2009 total $316. We also accept petitioner’s explanation for Sunoco’s not

reimbursing her for these meals, as she could well have been unaware which

contractors were receiving per diem payments from Sunoco. We accordingly find



      13
        The bulk of these receipts demonstrates that the meals were charged on a
credit card other than American Express, while a few do not indicate whether a
credit card was used for payment. The fact that petitioner did not charge the bulk
of these meals on the corporate card as required by Sunoco’s reimbursement
policy independently supports an inference that the meals were personal.
Moreover, in 11 instances the payor on the receipt was not petitioner but “David
Kozak” (presumably her spouse at the time), further suggesting that these meals
were personal.
      14
       The bulk of the receipts establishes that the meals occurred during
business hours. In a few instances, the receipts do not establish the time of the
meal.
                                       - 31 -

that petitioner is entitled to deduct additional employee business expenses beyond

those allowed by respondent of 50% of $469 and $316 for 2008 and 2009,

respectively.

      As for the remaining meal receipts for each year, petitioner has not

produced sufficient evidence to corroborate her own statement regarding the

business purpose of these meals; that is, that they were after-hours working

dinners. Indeed, most of the receipts contradict petitioner’s testimony.

Consequently, she has not satisfied the substantiation requirements of section

274(d) for any of them.

      With regard to the Bristol Motor Speedway tickets,15 although petitioner

produced receipts documenting the purchases (of $2,951 and $790 for 2008 and

2009, respectively), she did not address them and, accordingly, she is not entitled

to deductions for any portions of them as employee business expenses.

Moving Expenses

      Petitioner claimed a moving expense deduction of $6,718 on her 2009 tax

return which was disallowed in the notice of deficiency.




      15
        Petitioner reported another purchase of such tickets, for $1,763, as an
“other” employee business expense on line 4 of her 2009 Form 2106. We
considered that claim previously.
                                        - 32 -

      To substantiate her claim, petitioner produced receipts totaling $5,01516 as

follows: (1) $2,397 for three months of lodging at an extended stay facility near

St. Louis for April, May, and July 2009;17 (2) $811 for two separate hotel stays in

St. Louis, each for a few evenings, in February 2009; (3) $257 for three months of

storage unit fees for a unit near her Knoxville residence; and (4) $1,550 for a car

rental from April 1 to April 15.

      Petitioner testified that Sunoco transferred her to a St. Louis jobsite in

January 2009 to work on a project and that St. Louis was her base of operations

for the remainder of 2009. She testified that she anticipated returning to Knoxville

once the St. Louis project was complete.

      Section 217(a) allows a taxpayer to deduct moving expenses that arise in

connection with the commencement of work by the taxpayer as an employee at a

“new principal place of work.” The taxpayer must show that his employment at

the new principal place of work was permanent or indefinite rather than

temporary. See Goldman v. Commissioner, 497 F.2d 382, 383 (6th Cir. 1974),


      16
        We treat petitioner as having conceded her moving expense deduction to
the extent it exceeded $5,015.
      17
       Petitioner reported the April, May, and July extended stay charges as
moving expenses but included some of the June, August, and September charges
from the same facility in her unreimbursed travel expenses while away from home
overnight.
                                       - 33 -

aff’g T.C. Memo. 1973-132; Schweighardt v. Commissioner, 54 T.C. 1273, 1277

(1970); Davis v. Commissioner, T.C. Memo. 1979-47, 38 T.C.M. (CCH) 189, 192

(1979).

      Under section 217(b)(1), “moving expenses” are defined as a taxpayer’s

reasonable expenses of moving his belongings from his former residence to his

new residence and of traveling (including lodging) from his former residence to

his new residence. Moving expenses do not include the cost of lodging at the new

principal place of work. See Work v. Commissioner, T.C. Memo. 2005-259, 2005

WL 2885850, at *3 (explaining that the Omnibus Budget Reconciliation Act of

1993, Pub. L. No. 103-66, sec. 13213(a)(1), 107 Stat. at 473, removed all

allowances for temporary lodging).

      The evidence in the record shows that St. Louis was not a permanent or

indefinite place of employment for petitioner. She conceded in her testimony that

she planned to return to Knoxville once the St. Louis project was finished,

indicating the temporary nature of the assignment. Moreover, petitioner reported a

Knoxville post office box as her address on her timely 2009 tax return, indicating

that she anticipated returning to Knoxville or actually had done so when she filed

her return in 2010.
                                        - 34 -

      In addition, none of the expenses petitioner substantiated qualify as moving

expenses under section 217(b). As for the lodging charges, she cannot deduct

such charges at the new location as moving expenses. See id., 2005 WL 2885850,

at *3. She failed to show that the property she stored near her Knoxville residence

was actually moved to St. Louis. See id. at *4. The fact that the car rental was for

two weeks indicates that petitioner used the rental car for purposes other than

moving her belongings between Knoxville and St. Louis.

      Because petitioner has not shown that her employment in St. Louis was

permanent or indefinite and because none of the expenses petitioner substantiated

qualify as moving expenses under section 217(b), we sustain respondent's

disallowance of petitioner’s moving expense deduction.

Accuracy-Related Penalties

      Respondent determined accuracy-related penalties under section 6662(a)

for 2008 and 2009. Respondent argues that petitioner is liable for these penalties

because of negligence and a substantial understatement of income tax. See sec.

6662(b)(1) and (2). Petitioner disputes her liability for the penalties.

      Section 6662(a) and (b)(1) and (2) imposes a penalty equal to 20% of an

underpayment of tax required to be shown on a return that is attributable to a

substantial understatement of income tax or to negligence. An “underpayment of
                                       - 35 -

tax” for this purpose is defined as the excess of the amount of income tax imposed

over the sum of the amount of tax shown as the tax by the taxpayer on his return

and any tax previously assessed (or collected without assessment), less any rebate.

Sec. 6664(a). An “understatement” is the excess of the amount of tax required to

be shown on a return over the amount of tax shown on the return less any rebate.

Sec. 6662(d)(2)(A). An understatement is substantial when it exceeds the greater

of 10% of the tax required to be shown on the return or $5,000. Sec.

6662(d)(1)(A).

      For purposes of the accuracy-related penalty, “negligence” is defined as any

failure to make a reasonable attempt to comply with the provisions of the Internal

Revenue Code, and “disregard” includes any careless, reckless, or intentional

disregard. Sec. 6662(c). Negligence includes any failure to exercise ordinary and

reasonable care in the preparation of a tax return or any failure to keep adequate

books and records or to substantiate items properly. Sec. 1.6662-3(b)(1), Income

Tax Regs.

      However, no penalty is imposed with respect to any portion of an

underpayment if the taxpayer acted with reasonable cause and in good faith with

respect to that portion. Sec. 6664(c)(1); sec. 1.6664-4(a), Income Tax Regs. The

determination of whether a taxpayer acted with reasonable cause and in good faith
                                        - 36 -

is made on a case-by-case basis, taking into account all pertinent facts and

circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs. Generally, the most

important factor is the extent of the taxpayer’s effort to assess the taxpayer’s

proper tax liability. Id. An honest misunderstanding of fact or law that is

reasonable in light of all of the facts and circumstances, including the experience,

knowledge, and education of the taxpayer may indicate reasonable cause and good

faith. Id.

      Negligence or Disregard of Rules and Regulations

             2008

      Petitioner had reasonable cause with respect to the portion of her 2008

underpayment attributable to her $569 medical expense deduction claim for the

bicycle and related accessories. Respondent conceded that petitioner purchased

them, we found her testimony regarding her physician’s recommendation credible,

and her belief that she could deduct them as a medical expense was reasonable in

the circumstances. Accordingly, petitioner is not liable for an accuracy-related

penalty on the portion of her underpayment attributable to that deduction.
                                       - 37 -

      Regarding the other deductions for expenses for which we sustained the

disallowance, petitioner did not even defend almost $28,00018 of them; that is, she

offered no argument or substantiation whatsoever. These expenses amount to

approximately 82% of the $33,800 of deductions for expenses that respondent

disallowed for 2008 in the notice of deficiency.19 Her negligence with respect to

these deductions is patent. As for the remaining $3,257, for which petitioner

offered some documentation or testimony,20 her evidence fell woefully short of

establishing entitlement to the deductions claimed, as our previous discussion

indicates. This means that petitioner could not substantiate approximately

$31,000 of the deductions she claimed for 2008 and had no support whatsoever for

approximately $28,000 of them. Given the size of these figures in relation to her

income, we conclude that petitioner failed to exercise reasonable care in preparing

her return and failed to keep adequate substantiation. Imposition of a section



      18
       This amount consists of the unaddressed tax preparation fees and
depreciation, see supra note 2, and the unaddressed medical expenses, vehicle
expenses, and “other” employee business expenses.
      19
       This amount consists of the expenses on Schedule A for which a deduction
was disallowed, see supra note 2, and the medical expenses for which a deduction
was disallowed.
      20
       This amount consists of the expenses for lodging, coveralls, airfare,
magazines, and meals and passport-related expenses.
                                        - 38 -

6662(a) penalty on the basis of negligence with respect to the 2008 underpayment

is therefore warranted.

              2009

        With respect to the 2009 deductions for which we have sustained

disallowance, we similarly conclude that petitioner was negligent in claiming

them.

        Petitioner’s claims of a moving expense deduction and a deduction for an

unreimbursed employee business expense for Bristol Motor Speedway tickets

evince a failure to exercise reasonable care in the preparation of her tax return. A

reasonable person would have ascertained that deductions for the purported

moving expenses and the Speedway tickets were well outside the bounds of

sections 217 and 162, respectively, and would not have claimed them.

        For the remaining disallowed deductions, petitioner failed to make a

reasonable attempt to comply with substantiation requirements. She offered no

substantiation or even explanation for approximately $13,000 of the expenses for

which she claimed deductions,21 or approximately 35% of the expenses for which




        21
        This amount consists of the unaddressed “other” expense, see supra note 2,
and the unaddressed moving expenses and “other” employee business expenses.
                                        - 39 -

she claimed deductions that respondent disallowed for 2009.22 For the remainder,

her substantiation was sorely lacking, as discussed previously. Given the size of

the these figures in relation to her income, we conclude that petitioner failed to

exercise reasonable care in preparing her return and failed to keep adequate

substantiation. Imposition of a section 6662(a) penalty on the basis of negligence

with respect to the 2009 underpayment is therefore warranted.

      Substantial Understatement of Income Tax

      Alternatively, to the extent that the Rule 155 computations show that the

understatement of tax for 2008 or 2009 exceeds the greater of 10% of the tax

required to be shown on the return or $5,000, see sec. 6662(d)(1)(A), petitioner is

liable for a section 6662(a) penalty for an underpayment of tax attributable to a

substantial understatement of income tax.

      To reflect the foregoing,


                                                 Decision will be entered under

                                       Rule 155.




      22
        The denominator of this percentage consists of the disallowed expenses
claimed on Schedule A, see supra note 2, and the disallowed charitable
contributions and moving expenses.
