                          T.C. Memo. 1998-109



                        UNITED STATES TAX COURT



       HERBERT J. MEEKS AND PAULA J. MEEKS, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 11972-96, 26425-96.     Filed March 17, 1998.



     Edward T. Perry, for petitioners.

     Christian A. Speck and Bryan E. Sladek, for respondent.



                MEMORANDUM FINDINGS OF FACT AND OPINION

     VASQUEZ, Judge:     In these consolidated cases, respondent

determined deficiencies in petitioners' Federal income tax in the

amounts of $8,038, $6,426, and $1,988 for 1992, 1993, and 1994,

respectively.
                              - 2 -


     All section references are to the Internal Revenue Code in

effect for the years in issue, and all Rules references are to

the Tax Court Rules of Practice and Procedure.

     After concessions,1 the issues for decision are:    (1)

Whether education expenses that Herbert J. Meeks (Herbert)

incurred are deductible as trade or business expenses; (2)

whether certain job-seeking and tax return preparation expenses

are deductible; (3) whether expenditures that Paula J. Meeks

(Paula) incurred are deductible as trade or business expenses;

(4) whether petitioners' boat chartering activity was an activity

engaged in for profit; and (5) whether petitioners substantiated

charitable contributions in amounts greater than respondent

concedes.

                        FINDINGS OF FACT

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

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.   Petitioners, husband and

wife, resided in Sacramento, California, at the time they filed

the petitions in this case.

Educational Expenses

     From March 1986 until sometime in 1995, Herbert was a

correctional officer with the State of California, Department of

     1
        Respondent concedes that petitioners may deduct $1,200 of
expenses from their boat chartering activity in 1992 pursuant to
sec. 183(b)(2).
                                - 3 -


Corrections.    He was originally assigned as an inmate supervisor

and, later, to a transportation team where his responsibilities

included supervising and observing inmate behavior, evaluating

inmate conduct, and writing activity reports.

     In 1992, Herbert entered the organizational behavior program

(the program) at the University of San Francisco in Sacramento,

California.    The goal of the program was to train a student to be

"an effective human resource specialist in the workplace."

Herbert did not complete the program to obtain a degree.2    In

1992 and 1993, petitioners deducted educational expenses of

$6,379 and $1,551 for Herbert's tuition and books purchased for

the courses at the University of San Francisco.

     After completing the courses, Herbert received a temporary

assignment at the Richard A. McGee Correctional Training Facility

for the State of California (the academy).    After this

assignment, the academy interviewed Herbert for a position as an

instructor.    The position of instructor required 2 years of

college education.    In June of 1995, Herbert was promoted to

sergeant instructor at the academy.

Job-Seeking and Tax Return Preparation Expenses

     In 1992, petitioners took a deduction of $60 for tax

preparation expenses.    In 1993, petitioners also claimed

     2
        While enrolled in the program, Herbert completed the
following courses: Introduction to Organizational Behavior,
Research in Organizations, Organizational Communication, Small
Group Leadership, Social Ethics, Interdisciplinary Writing, and
Critical Thinking (the courses).
                                 - 4 -


deductions for miscellaneous expenses incurred in job seeking and

for tax return preparation in the amounts of $887 and $65,

respectively.

                  Trade or Business Expenses

     During the years in issue, Paula was employed full time as a

dance and physical education teacher at Florin High School in

Sacramento, California.    She taught beginning jazz classes and

gave instruction on technique and execution for the drill team.

Additionally, she developed "Masterpiece Dance Theater", a

touring company with dance performances by students.    Petitioners

deducted tickets to dance concerts, clothing, shoes, and other

miscellaneous items related to Paula's employment at the school

as miscellaneous itemized deductions on their 1992, 1993, and

1994 Federal income tax returns.

Chartering Activity

     In 1992, 1993, and 1994, petitioners owned two boats:    A 30-

foot wooden Chris Craft river cruiser and a 24-foot cuddy cabin

(the boats).    Petitioners have owned other boats for recreation

in the past.    Petitioners publicized that the boats were

available for 12-hour chartered boating and fishing trips on the

Sacramento River and Lake Comanche, California.    Petitioners

called their charter business "It Takes 2" and charged $240 to

charter a boat.    Petitioners provided fishing gear, bait, and

safety vests for their customers.
                                - 5 -


     Before engaging in the chartering activity, petitioners did

not set up a business plan.    Additionally, petitioners did not

analyze the possibility of making a profit.    Petitioners tried,

but were unable, to obtain insurance which covered commercial use

of the boats.   Petitioners did not keep books and records of

their chartering business.

     Petitioners would go out on the boats about once a week,

generally on weekends.   Occasionally, petitioners would use the

boats for recreational purposes.    Petitioners had four to six

paying customers in 1992 and had none in 1993 and 1994.

     Petitioners primarily promoted their chartering services

primarily through announcements made at the church they attended

and flyers posted at other churches, barber shops, and bait

shops.   In addition, petitioners distributed business cards and

attached them to the flyers.

     For 1992, 1993, and 1994, petitioners deducted $14,646,

$12,100, and $6,948, respectively, for expenses related to their

chartering activity.   In 1992, petitioners reported $1,200 in

income from the activity.    Petitioners reported no income from

the chartering activity in 1993 or 1994.

Charitable Contributions

     Petitioners regularly attended several churches in the bay

area of California, including the New Hope Baptist Church in

Oakland, California.   During the years in issue, petitioners made

financial contributions to these churches and to other charitable
                                - 6 -


organizations.   The New Hope Baptist Church did not keep records

of contributions before 1994, nor did the other churches maintain

any tracking systems of contributions during the years at issue.

Petitioners did not maintain records of all their contributions.

     Petitioners deducted charitable contributions of $7,953 and

$7,640 in 1992 and 1993, respectively.   Respondent allowed $1,075

and $3,725 in 1992 and 1993, respectively, after petitioners

substantiated those amounts.

                               OPINION

     All disputed items on petitioners' income tax returns are

deductions they claimed.   Deductions are strictly a matter of

legislative grace, and petitioners bear the burden of proving

entitlement to any deduction claimed.    Rule 142(a); INDOPCO, Inc.

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

Education Expenses

     Section 162(a) allows a deduction for all ordinary and

necessary expenses incurred in carrying on a trade or business.

Education expenses are considered ordinary and necessary business

expenses if the education maintains or improves skills required

by the taxpayer in his employment or meets the express

requirements of an employer imposed as a condition for the

taxpayer's continued employment, status, or rate of compensation.

Sec. 1.162-5(a), Income Tax Regs.   Education expenses, however,

are not deductible if they are "made by an individual for

education which is part of a program of study being pursued by
                                - 7 -


him which will lead to qualifying him in a new trade or

business."   Sec. 1.162-5(b)(3)(i), Income Tax Regs.   This is so

even if the courses meet the express requirements of the

employer.    See Jungreis v. Commissioner, 55 T.C. 581, 591 (1970).

It is immaterial whether the individual undertaking the education

does in fact become employed in a new trade or business.     Bodley

v. Commissioner, 56 T.C. 1357, 1360 (1971).    Petitioners have the

burden of proving that the education does not qualify Herbert for

a new trade or business.   Rule 142(a).

     Petitioners contend that the courses Herbert took maintained

and improved his skills as a correctional officer.     Petitioners

also argue that Herbert had no intention of developing another

career, nor did he seek to obtain a degree in organizational

behavior.

     Whether the education qualifies a taxpayer for a new trade

or business depends upon the tasks and activities which he was

qualified to perform before the education and those which he is

qualified to perform afterwards.    Weiszmann v. Commissioner, 52

T.C. 1106, 1110 (1969), affd. per curiam 443 F.2d 29 (9th Cir.

1971).   We have repeatedly disallowed education expenses where

the education qualifies the taxpayer to perform significantly

different tasks and activities.    Browne v. Commissioner, 73 T.C.

723, 726 (1980); Glenn v. Commissioner, 62 T.C. 270, 275 (1974).

     As a correctional officer, Herbert supervised inmates and

handled other custodial duties.    The record is not clear what
                               - 8 -


duties and activities were required of Herbert as a sergeant

instructor, but the title of the position itself suggests that

the primary duty would be instructing students at the academy.

Thus, we find that the duties and activities of a correctional

officer and a sergeant instructor are significantly different.

     Upon completing the courses, Herbert met the 2-year college

education requirement of the instructor position.    We find that

these courses qualified Herbert for the duties and activities of

a sergeant instructor.   Accordingly, we conclude that the

education qualified Herbert for a new trade or business and

sustain respondent's disallowance of the education expenses under

section 162.

Job-Seeking and Tax Return Preparation Expenses

     Petitioners also claimed deductions for miscellaneous

expenses incurred in job seeking and for tax return preparation.

Petitioners have presented no evidence to support the claimed

job-seeking expenses or the tax preparation fee.    We cannot be

sure that petitioners intended to abandon these issues, but in

any case we sustain respondent's disallowance of these deductions

as petitioners have not met their burden of proof on these

matters.

Trade or Business Expenses

     As we stated earlier, section 162(a) allows a deduction for

all ordinary and necessary expenses incurred during the taxable

year in carrying on a trade or business.   An employee's trade or
                                - 9 -


business is earning his compensation, and generally only those

expenses that are related to the continuation of his employment

are deductible.   Noland v. Commissioner, 269 F.2d 108, 111 (4th

Cir. 1959), affg. T.C. Memo. 1958-60.    Pursuant to section

162(a), if expenditures qualify as "ordinary and necessary", an

employee may deduct unreimbursed employee expenses.    An employee

may not deduct such expenses, however, if the expenses are not

substantiated or if the employee has a right to, but fails to

seek, reimbursement from the employer.    Kennelly v. Commissioner,

56 T.C. 936, 943 (1971), affd. without published opinion 456 F.2d

1335 (2d Cir. 1972). Paula testified that her employer would have

reimbursed her for the garment shields for school costumes had

she sought a reimbursement.    We, therefore, sustain respondent's

determination with respect to this deduction.

     Petitioners claimed deductions for concert tickets which

Paula attended with her husband or students.    For expenses to be

deductible under section 162, petitioners must show that the

purpose of the expenditure was primarily business rather than

personal and that Paula's business benefited, or was intended to

benefit, by the expenditure.    Hynes v. Commissioner, 74 T.C.

1266, 1289 (1980); Schulz v. Commissioner, 16 T.C. 401, 405

(1951).   Paula claims that she attended concerts to learn about

the changes in jazz dance for her business as a dance instructor.

We conclude that petitioners have failed to demonstrate that the

purpose of the concerts was primarily business rather than
                                  - 10 -


personal.       Therefore, we sustain respondent's determination with

respect to this deduction.

        Petitioners claimed deductions for items such as musical

records, magazine subscriptions, and office supplies.       The

musical records enabled Paula to conduct dance instruction in her

business.       We find the expenses for jazz dance records to be

ordinary and necessary to Paula's business as a dance instructor.

Although petitioners claim a business purpose for the magazine

subscriptions, the types of magazines are so inherently personal

that we conclude they are not business expenses under section

162.3       Paula testified that the office supplies were necessary

for school.       Petitioners, however, did not introduce evidence

that showed that the expenses relating to the office supplies

would not be reimbursed by Paula's employer.       Therefore, we hold

that petitioners are entitled to deduct the cost of the musical

records and sustain respondent's disallowance of expenses

relating to the magazine subscriptions and office supplies.

        Petitioners also claimed deductions for clothing expenses.

For the cost of clothing and maintaining such clothing to be

deductible as an ordinary and necessary business expense, it must

(1) be required or essential in the taxpayer's employment, (2)

not be suitable for general or personal wear, and (3) not be so

worn.       Yeomans v. Commissioner, 30 T.C. 757, 767 (1958).

        3
        Petitioners claimed deductions for magazine subscriptions
to Highlights, a children's magazine; and Essence and Ebony,
magazines of style and entertainment.
                              - 11 -


     The clothing items petitioners claimed as business expenses

include hosiery, exercise wear, warmup suits, denim clothing,

athletic shoes, and jazz shoes.   At trial, Paula testified that

these items were necessary to teach aerobics and jazz dance.     She

also testified that she does not wear the clothing "around the

house."   The fact that Paula chose not to wear the clothing when

she was away from the school does not establish that such

clothing is not suitable for her private and personal wear.    See

Hynes v. Commissioner, supra at 1291.   It is relatively common

for people to wear warmup clothes, exercise wear, and athletic

shoes of the type purchased by petitioners while engaged in a

wide variety of casual or athletic activities.   We, however, find

that the jazz shoes are not suitable for general or personal wear

and hold that petitioners may deduct the cost of this item as a

business expense.   Petitioners presented no evidence that the

other clothing purchased for Paula's business was not adaptable

for wear outside the workplace.   Therefore, we conclude that all

items of clothing at issue, except the jazz shoes, are suitable

for general or personal wear and hold that petitioners are not

entitled to deduct the costs of those items.

Chartering Activity

     Section 183(a) provides generally that, if an activity is

not engaged in for profit, no deduction attributable to the
                              - 12 -


activity shall be allowed except as provided in section 183(b).4

Section 183(c) defines an "activity not engaged in for profit" as

"any activity other than one with respect to which deductions are

allowable for the taxable year under section 162 or under

paragraph (1) or (2) of section 212."

     For a deduction to be allowed under section 162 or 212(1) or

(2), the taxpayers must establish that they engaged in the

activity with an actual and honest objective of making an

economic profit independent of tax savings.     Antonides v.

Commissioner, 91 T.C. 686, 693-694 (1988), affd. 893 F.2d 656

(4th Cir. 1990); Dreicer v. Commissioner, 78 T.C. 642, 644-645

(1982), affd. without opinion 702 F.2d 1205 (D.C. Cir. 1983).

Their expectation of profit need not have been reasonable;

however, they must have entered into the activity, or continued

with it, with the objective of making a profit.     Hulter v.

Commissioner, 91 T.C. 371, 393 (1988); sec. 1.183-2(a), Income

Tax Regs.

     Whether the requisite profit objective exists is determined

by looking at all the surrounding facts and circumstances.

Keanini v. Commissioner, 94 T.C. 41, 46 (1990); sec. 1.183-2(b),

Income Tax Regs.   Greater weight is given to objective facts than

to a taxpayer's mere statement of intent.     Thomas v.

Commissioner, 84 T.C. 1244, 1269 (1985), affd. 792 F.2d 1256 (4th



     4
        Sec. 183(b) allows deductions in situations not
applicable to the instant cases.
                               - 13 -


Cir. 1986); sec. 1.183-2(a), Income Tax Regs.     Petitioners have

the burden of proving that they engaged in the chartering

activity with the intent to make a profit.     Rule 142(a).

     Section 1.183-2(b), Income Tax Regs., provides a list of

factors to be considered in the evaluation of a taxpayer's profit

objective:    (1) The manner in which the taxpayer carries on the

activity; (2) the expertise of the taxpayer or his advisors; (3)

the time and effort expended by the taxpayer in carrying on the

activity; (4) the expectation that assets used in activity may

appreciate in value; (5) the success of the taxpayer in carrying

on other similar or dissimilar activities; (6) the taxpayer's

history of income or losses with respect to the activity; (7) the

amount of occasional profits, if any, from the activity; (8) the

financial status of the taxpayer; and (9) elements of personal

pleasure or recreation.    The number of factors for or against the

taxpayer is not necessarily determinative, but rather all facts

and circumstances must be taken into account, and more weight may

be given to some factors than to others.     Cf. Dunn v.

Commissioner, 70 T.C. 715, 720 (1978), affd. 615 F.2d 578 (2d

Cir. 1980).

     During the years at issue, petitioners did not conduct the

chartering activity in a businesslike manner.     Petitioners failed

to maintain any books and records.      Herbert testified that they

did not retain receipts from customers.     Petitioners also

indicated that they had no business plan for the activity.
                              - 14 -


Although they attempted to obtain insurance for commercial use of

their boat, they never did.   Herbert did not check with local

authorities regarding the requirements for operating a passenger-

carrying vessel on a public river.     In addition, he did not

investigate whether a business license was required for the

chartering activity. We are not convinced that petitioners

operated their chartering service in a businesslike manner.

     Careful investigation of a potential business to ensure the

chance for profitability strongly indicates an objective to

engage in the activity for profit.     Sec. 1.183-2(b)(2), Income

Tax Regs.   While a formal market study is not required, a basic

investigation of the factors that would affect profit generally

is necessary.   Harrison v. Commissioner, T.C. Memo. 1996-509.

Herbert testified that he did not consult with any professionals

about the profitability of the chartering activity.     Before

entering into the activity, he did not analyze operating costs to

determine whether the chartering business would be profitable.

This indicates that the chartering service was not engaged in for

profit.

     A record of substantial losses over several years may be

indicative of the absence of a profit motive.     Golanty v.

Commissioner, 72 T.C. 411, 426 (1979), affd. without published

opinion 647 F.2d 170 (9th Cir. 1981).     Petitioners never

generated a profit for the chartering activity during the years
                                - 15 -


at issue.   Additionally, 1992 was the only year in which

petitioners received any revenue from the chartering activity.

     Furthermore, there are elements of personal pleasure present

in petitioners' chartering activity.     Petitioners testified that

they would occasionally use the boats for recreational purposes.

Petitioners had also been involved in recreational boating prior

to claiming the activity was a business.    This indicates a lack

of profit objective.    Sec. 1.183-2(b)(9), Income Tax Regs.

      We are not persuaded that the remote and speculative

possibility of profit was petitioners' objective for commencing

their chartering activity.    After reviewing all the facts and

circumstances, we conclude that petitioners did not engage in the

chartering activity for profit within the meaning of section 183.

We, therefore, sustain respondent's determination on this issue.

Charitable Contributions

     Under section 170(c), contributions of money to or for the

use of a religious organization are generally deductible.        Henson

v. Commissioner, T.C. Memo. 1979-110.     A taxpayer, however, must

substantiate his contributions.     Id.; sec. 1.170A-13(a)(1),

Income Tax Regs.    If the record provides sufficient evidence that

petitioners made charitable contributions, but they are unable to

prove the exact amount, we can estimate the amount of the

contributions.     Cohan v. Commissioner, 39 F.2d 540, 544 (2d Cir.

1930).   In order for the Court to make an estimate, we must have

some basis in fact upon which an estimate can be made.      Vanicek
                              - 16 -


v. Commissioner, 85 T.C. 731, 743 (1985).   Without such a basis,

any allowance would amount to unguided largesse.    Williams v.

United States, 245 F.2d 559, 560 (5th Cir. 1957).   The burden is

on petitioners to prove their entitlement to the claimed

deductions.   Rule 142(a).

     In this case, petitioners credibly testified and we find

that they did make cash contributions to the churches they

attended.   However, we are cautioned to bear heavily against

taxpayers whose inexactitude is of their own making.      Cohan v.

Commissioner, supra at 544.   Accordingly, we hold that

petitioners are entitled to deduct $3,375 and $725 of their

claimed charitable contributions for 1992 and 1993, respectively,

in excess of the amounts allowed by respondent.

     To reflect the foregoing and concessions of the parties,

                                              Decisions will be

                                         entered under Rule 155.
