                         T.C. Memo. 1996-232



                       UNITED STATES TAX COURT



         JOON H. CHONG AND YOUNGCHA KIM CHONG, Petitioners v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 6642-94.                         Filed May 22, 1996.



     Joon H. Chong and Youngcha Kim Chong, pro sese.

     Terri L. Parrot, for respondent.



               MEMORANDUM FINDINGS OF FACT AND OPINION


     CARLUZZO, Special Trial Judge:     This case was heard pursuant

to section 7443A(b)(3) and Rules 180, 181, and 182.1     Respondent



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

determined a deficiency in petitioners' 1992 Federal income tax

in the amount of $2,860.

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

entitled to a deduction for a home office used by Joon H. Chong

in connection with his practice of medicine as a self-employed

anesthesiologist; and (2) whether petitioners are entitled to a

deduction in an amount greater than that already allowed by

respondent for automobile expenses related to Joon H. Chong's

practice of medicine.   Issues resulting from other adjustments

made in the notice of deficiency to petitioners' itemized and

personal exemption deductions will automatically be resolved in

accordance with the resolution of the two issues referred to

above.

                           FINDINGS OF FACT

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

The stipulation of facts and the exhibits attached thereto are

incorporated herein by this reference.      At the time that the

petition was filed in this case, petitioners resided in St.

Joseph, Michigan.   References to petitioner are to Joon H. Chong.

     Petitioner began practicing medicine in 1975.      During the

year in issue petitioner was a self-employed anesthesiologist,

licensed to practice in Michigan.    He held privileges to provide

services as an anesthesiologist at Mercy Memorial Hospital (the

hospital) in St. Joseph, Michigan.      Petitioner was neither an

employee of, nor compensated by, the hospital.      The hospital did
                               - 3 -

not provide a private office for petitioner's use, but he did

have access to a telephone, and could make and receive telephone

calls on a limited basis at the hospital.   He also had access to

an area where he could do some paperwork.   He was entitled to use

the physicians' lounge at the hospital, but due to the activity

normally going on in the lounge, he could not do any paperwork

there.

     On occasion petitioner would be contacted directly by a

patient in need of his services; however, the majority of

petitioner's patients were referred to him by surgeons or by the

hospital.   He was compensated by his patients on a fee for

service basis.   Fee, billing, and payment arrangements were made

directly between petitioner and his patients.   For the year 1992,

petitioner reported the income earned and expenses incurred in

connection with his medical practice on a Schedule C.

     Petitioner administered anesthesia to patients scheduled to

undergo various surgical procedures at the hospital.    In addition

to the services petitioner provided to patients at the hospital

during surgery, he would spend time with patients before and

after surgery in order to assess, and presumably reduce, the risk

of postoperative complications.   During 1992, petitioner

administered anesthesia to patients at the hospital on 626

occasions, which required his presence there for approximately

1,000 hours.
                               - 4 -

     Petitioner lived in a house located approximately 15-20

miles from the hospital.   Petitioner conducted his billing

activities in an office located in the basement of his house.

There was no sign outside petitioners' house indicating that

petitioner maintained his medical office there.    Routinely,

petitioner would travel between his house and the hospital two or

three times per day, at least 3 days a week.    He employed an

office manager who spent 20 hours per week at his home office.

Petitioner's office manager was responsible for maintaining and

updating patient billing records, assisting patients with

insurance and medicare form preparation, and responding to

questions regarding a patient's bill.   Youngcha Kim Chong, a

registered nurse, also was involved in the billing process and

performed the same services as petitioner's office manager.

The billing services that petitioner conducted at his home office

related exclusively to his patients.    Petitioner did not provide

billing services for any other physicians.

     Petitioner had no other office from which he could conduct

his billing and recordkeeping activities.    His patients were

provided with his office telephone number, which was also

petitioners' personal home telephone number.    Petitioner's

patients routinely contacted petitioner, or his office manager,

by telephone at his home office for assistance or questions

relating to billing matters.   Petitioner rarely treated or
                                - 5 -

consulted with patients for medical treatment purposes at his

home office.

     Petitioners estimated that petitioner's home office

constituted approximately 27 percent of the total area of their

house.   On the Schedule C related to petitioner's medical

practice, petitioners deducted $10,343.12 as expenses for the

business use of their house.    Included in this total are amounts

attributable to depreciation, mortgage interest, property taxes,

utilities, insurance, and repairs and maintenance.    Car expenses,

including depreciation, in the total amount of $4,615 were also

deducted on the Schedule C.    Petitioners estimated that the

automobile to which the expenses related, a 1989 Mazda, was

driven 7,000 miles in 1992.    Of the total miles driven,

petitioners' return reflects that 6,300 miles were business

related and 700 miles related to personal, noncommuting purposes.

     In the notice of deficiency upon which this case is based,

respondent disallowed petitioners' home office deduction upon the

ground that the home office was not the principal place of

petitioner's medical practice.2   Having determined that

petitioner's house was not his principal place of business,

respondent decreased petitioners' car expenses by $4,108 upon the



     2
      In the notice of deficiency respondent increased
petitioners' itemized deductions by the amounts of the real
estate taxes and mortgage interest disallowed as part of the home
office deduction. Sec. 280A(b).
                                 - 6 -

ground that petitioners failed to establish that such expenses

constitute ordinary and necessary business expenses.

                                OPINION

       Respondent's determinations, having been made in a notice of

deficiency, are presumptively correct, and petitioners bear the

burden of proving that such determinations are erroneous.       Rule

142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).     Deductions

are matters of legislative grace.     A taxpayer who claims a

deduction must identify the specific statute which allows for the

type of deduction being claimed, and the taxpayer must

demonstrate that he or she satisfies all of the requirements or

conditions set forth in the statute.      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); Welch v. Helvering, supra.

Home Office Deduction

       In general, section 162 allows deductions for ordinary and

necessary expenses incurred by a taxpayer in carrying on a trade

or business.    Sec. 162(a).   Petitioner's medical practice

constitutes a trade or business within the meaning of section

162.    See Commissioner v. Groetzinger, 480 U.S. 23 (1987).     The

general rule provided by section 162(a) is qualified by various

limitations, including one that prohibits otherwise allowable

deductions "with respect to the use of a dwelling unit which is

used by the taxpayer during the taxable year as a residence."

Sec. 280A(a).    The dwelling unit involved in this case, namely
                               - 7 -

petitioners' house, was used as their residence during 1992.      The

provisions of section 280A(a) do not apply to expenses

attributable to any portion of the dwelling unit used exclusively

on a regular basis as the principal place of the taxpayer's trade

or business.   Sec. 280A(c)(1)(A).   Respondent agrees that the

exclusive use requirement set forth in section 280A has been

satisfied.   However, based upon the Supreme Court's holding in

Commissioner v. Soliman, 506 U.S. 168 (1993), respondent takes

the position that petitioner's home office does not constitute

his principal place of business within the meaning of section

280A(c)(1)(A).   Therefore, according to respondent, section

280A(a) precludes petitioners from deducting the expenses

incurred in connection with petitioner's home office.3

     In Soliman, the taxpayer, also an anesthesiologist,

administered anesthesia and treated patients at several

hospitals.   Much like petitioner, Dr. Soliman used his home

office for billing, recordkeeping, and other purposes related to

his medical practice.   Dr. Soliman did not treat any patients at


     3
      Petitioners do argue for the application of sec.
280A(c)(1)(B), which allows expenses attributable to any portion
of a dwelling unit exclusively used on a regular basis by
patients, clients, or customers in meeting or dealing with the
taxpayer in the normal course of the taxpayer's trade or
business. We are satisfied that sec. 280A(c)(1)(B) has no
application in this case. Contacts by telephone between
petitioner and his patients do not satisfy the provisions of that
section, see Frankel v. Commissioner, 82 T.C. 318 (1984), and the
rare visits by petitioner's patients do not constitute usage of
the home office for such purposes on a regular basis.
                                - 8 -

his home office.    The Supreme Court held that Dr. Soliman was not

entitled to a deduction for home office expenses because his home

office was not his "principal place of business".    After

discussing various tests for determining a taxpayer's principal

place of business, the Supreme Court concluded that when a

taxpayer carries on business activities at more than one

location, the principal place of such business is the location

where the most important or significant events take place.      In

Dr. Soliman's case, the most important or significant event in

the anesthesiologist's practice was the treatment of patients,

which took place at the hospitals, not at Dr. Soliman's home

office.    The Supreme Court, recognizing that "in integrated

transactions, all steps are essential", nevertheless concluded

that the activities that Dr. Soliman performed at home were less

important to his medical practice than the treatments he provided

at the medical facilities.    Commissioner v. Soliman, supra at

176.

       Although petitioners agree that Soliman applies to their

situation, they argue that its application would result in the

allowance of the home office deduction here in dispute.

Petitioners take the position that petitioner's medical practice

should be considered as two equally important but separate

activities, one consisting of treating patients, and the other

consisting of billing and collecting from such patients.

Petitioners assert that the "principal place of business"
                               - 9 -

determination should be made on an activity-by-activity basis,

rather than on the basis of an integrated business.   Petitioners

contend that petitioner's home office was the only place where he

conducted his billing activities.   According to petitioners, the

most significant or important events in the billing process took

place at petitioner's home office; therefore under Soliman, and

pursuant to section 280A(c)(1)(A), they are entitled to treat the

home office as the principal place of petitioner's billing

"business" and are entitled to the deduction in dispute.

     We disagree with petitioners' contention as to how Soliman

applies to their case.   We also reject their suggestion that

section 280A(c)(1)(A), and the test established by the Supreme

Court in Soliman, should be applied on a bifurcated basis.

Petitioner's medical practice constituted a single trade or

business, albeit composed of various activities contributing to

the income earned from that trade or business.   Because

petitioner's medical practice constituted a single trade or

business, it can have no more than one principal place of

business.

     After taking into account petitioner's opinion with respect

to the relative importance of the various aspects of his medical

practice, and applying the "significant activity" test

established in Soliman to that practice, we find that the most

important or significant activity took place at the hospital
                               - 10 -

where petitioner administered anesthesia to his patients, not at

his home office where he conducted billing and other activities.

     The facts in this case are remarkably similar to the facts

in Soliman.    Consequently, it is difficult to seriously entertain

petitioners' argument that the application of Soliman in their

case should lead to a different result.   Accordingly, for the

reasons discussed in Soliman we find that the principal place of

petitioner's medical practice in 1992 was the hospital, not his

home office.    Consequently, we hold that petitioners are not

entitled to a home office deduction for the year 1992.

Automobile Expenses

     Along with other items not in dispute and the home office

deduction discussed above, on the Schedule C related to his

medical practice, petitioner claimed a $1,327.50 depreciation

expense deduction, and deducted other car expenses in the amount

of $3,287.85.   The deductions apparently relate to a 1989 Mazda

automobile placed in service in April of 1989.    According to

petitioners' return, 90 percent of the usage of the Mazda was

related to petitioner's medical practice.   Petitioner did not

explain, and it is not otherwise evident from the record, how he

computed the $3,287.85 car expense deduction.4   In the notice of


     4
      In their petition, petitioners stated that "actual auto
expenses rather than standard mileage should be allowed." There
is no evidence in the record, however, regarding any actual car
expenses incurred by petitioner in connection with his medical
practice.
                               - 11 -

deficiency, respondent aggregated these two deductions, and

reduced the total ($4,615) by $4,108 because petitioners did not

establish "that any amount more than $507 was for ordinary and

necessary business expense".   Respondent did not explain in any

detail what portion of what deduction was being disallowed.

Although the record is less than clear on the point, respondent

claims, and petitioners do not appear to dispute, that the

disallowed portions of the deductions are attributable to

expenses incurred for travel between petitioner's house and the

hospital.

     According to respondent, the disallowed portions of the

deductions constitute, or are attributable to, nondeductible

commuting expenses.   Commuting expenses, which are transportation

expenses incurred between an individual's residence and regular

place of employment, are considered personal expenses, the

deduction of which is prohibited by section 262.5   Commissioner

v. Flowers, 326 U.S. 465, 470-474 (1946).   Respondent's position

on this point obviously results in part from her determination

that petitioner's house was not his principal place of business.

     We have held on numerous occasions that transportation

expenses incurred between an individual's residence and local job

sites may be deductible if his residence serves as his "principal

place of business" and the travel is in the nature of normal and

     5
      Sec. 262 provides in relevant part, "no deduction shall be
allowed for personal, living, or family expenses."
                               - 12 -

deductible business travel.    Wisconsin Psychiatric Servs., Ltd.

v. Commissioner, 76 T.C. 839, 849 (1981); Curphey v.

Commissioner, 73 T.C. 766, 777-778 (1980); Mazzotta v.

Commissioner, 57 T.C. 427, 429 (1971), affd. per curiam 467 F.2d

943 (2d. Cir. 1972); Green v. Commissioner, T.C. Memo. 1989-599;

Kisicki v. Commissioner, T.C. Memo. 1987-245, affd. per curiam

without published opinion 871 F.2d 1088 (6th Cir. 1989); Adams v.

Commissioner, T.C. Memo. 1982-223, affd. without published

opinion 732 F.2d 159 (7th Cir. 1984).     We have also allowed

deductions for expenses incurred for transportation between an

individual's residence, which constituted a "regular place of

business", and the individual's "temporary places of business".

See Walker v. Commissioner, 101 T.C. 537 (1993) (applying Rev.

Rul. 90-23, 1990-1 C.B. 28).   However, because petitioner's house

was not his principal place of business, and because there is

nothing in the record that leads us to conclude that the hospital

was merely petitioner's temporary place of business, the above

cases provide no authority for allowing the car expense and

depreciation deductions in dispute.     Accordingly, we sustain

respondent's determination with respect to the disallowed

portions of petitioners' claimed car expense and depreciation

deductions.

     To reflect the foregoing,

                                      Decision will be entered

                                 for respondent.
