                  T.C. Summary Opinion 2006-167



                      UNITED STATES TAX COURT



                  DANIEL M. GRAY, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 23314-04S.             Filed October 18, 2006.



     Daniel M. Gray, pro se.

     Michael E. Melone, for respondent.



     DEAN, Special Trial Judge:    This case was heard pursuant to

the provisions of section 7463.    Unless otherwise indicated, all

section references are to the Internal Revenue Code in effect for

the year in issue, and all Rule references are to the Tax Court

Rules of Practice and Procedure.   The decision to be entered is

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

cited as authority.
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     Respondent determined a deficiency of $3,178 in petitioner’s

Federal income tax for 2000.    The issues for decision are whether

petitioner is entitled to:   (1) A home mortgage interest

deduction, and (2) employee business expense deductions in excess

of those allowed by respondent.

                             Background

     The stipulation of facts and the exhibits received into

evidence are incorporated herein by reference.      At the time the

petition in this case was filed, petitioner resided in

Sacramento, California.

     During 2000, petitioner was employed as a phone line

installer by several companies.   Petitioner traveled nationwide

for his jobs and was employed at the following locations in 2000.

     Employer        Location           Dates in 2000   Total Days

     ADEX            Denver, CO           1/1-1/8              8
     Tesinc          Los Gatos, CA        1/17-5/20          125
     Butler          Saratoga, CA         5/27-6/8            13
     TEKSYSTEMS      Sacramento, CA       7/1-7/10             8
     US Utilities    Washington, DC       8/8-8/30            23
     RJE Telecom     Denver, CO           9/5-9/28            19
     ADEX            Seattle, WA          10/21-12/31         72

     Total days worked 268
     Total days not worked 97

     Petitioner filed for 2000 a Form 1040, U.S. Individual

Income Tax Return.   On Schedule A, Itemized Deductions,

petitioner deducted a home mortgage interest expense of $6,600

for a condominium located at 5912 #2 Walerga, Sacramento,
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California (condo), which was disallowed by respondent in the

statutory notice of deficiency.

      Petitioner also reported, on Schedule A, employee business

expenses and other miscellaneous itemized deductions of $33,881.

Petitioner claims that he is entitled to deduct $32,938 of that

amount, after taking into account the 2-percent floor of section

67.   In the statutory notice of deficiency, respondent allowed

$12,014.43 of the reported deductions.   Respondent determined

that the balance of $21,866.57 represented travel, meals, and

lodging that petitioner incurred while away from home.

Respondent disallowed this amount on the grounds that petitioner

did not have a tax home in 2000.

                            Discussion

      The Commissioner’s determinations are presumed correct, and

generally taxpayers bear the burden of proving otherwise.1   Rule

142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 (1933).

      Tax deductions are a matter of legislative grace with the

taxpayer bearing the burden of proving entitlement to the

deductions claimed.   Rule 142(a)(1); INDOPCO, Inc. v.

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




      1
      Petitioner has not raised the issue of sec. 7491(a), which
shifts the burden of proof to the Commissioner in certain
situations. This Court concludes that sec. 7491 does not apply
because petitioner has not produced any evidence that establishes
the preconditions for its application.
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Mortgage Interest Deduction

      Section 163 allows a deduction for interest paid or accrued

on certain indebtedness, including acquisition indebtedness on a

qualified residence.   See sec. 163(h)(2)(D), (3)(A).   The

acquisition indebtedness generally must be an obligation of the

taxpayer and not an obligation of another.   See Golder v.

Commissioner, 604 F.2d 34, 36 (9th Cir. 1979), affg. T.C. Memo.

1976-150; Smith v. Commissioner, 84 T.C. 889, 897 (1985), affd.

without published opinion 805 F.2d 1073 (D.C. Cir. 1986).

      The applicable regulation, however, in pertinent part

provides:

           Interest paid by the taxpayer on a mortgage upon
      real estate of which he is the legal or equitable
      owner, even though the taxpayer is not directly liable
      upon the bond or note secured by such mortgage, may be
      deducted as interest on his indebtedness. * * *

Sec. 1.163-1(b), Income Tax Regs.

      Our Memorandum Opinion in Golder, as affirmed by the Court

of Appeals for the Ninth Circuit, construed section 1.163-1(b),

Income Tax Regs., to permit interest deductions in situations

where the taxpayer is not personally liable on a mortgage of the

property which is used as security for a loan made to the

taxpayer.   Although the taxpayer is not personally liable on the

debt, the taxpayer must pay the mortgage to avoid foreclosure.

Id.   According to Golder, section 1.163-1(b), Income Tax Regs.,

recognizes the economic substance of nonrecourse borrowing and
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allows an interest deduction to a taxpayer, who, in the

situations contemplated in the regulations, is not directly

liable on the mortgage indebtedness.     Id.

     This Court, relying on the same rationale underlying the

interpretation in Golder of section 1.163-1(b), Income Tax Regs.,

has held that taxpayers who do not hold legal title to property,

but who establish that they are equitable owners of the property,

are entitled to deduct mortgage interest paid by them with

respect to the property.     Daya v. Commissioner, T.C. Memo. 2000-

360; Trans v. Commissioner, T.C. Memo. 1999-233; Usla v.

Commissioner, T.C. Memo. 1997-551.

     Petitioner contends that he is entitled to deduct home

mortgage interest because:    (1) He was the owner of the condo in

2000, and (2) he paid the interest during that year.    Respondent

disagrees, contending that petitioner has not established that:

(a) He had any legal or equitable interest in the condo during

2000, (b) he was legally liable for the indebtedness on the

condo, and (c) the claimed deduction of $6,600 (i) was an

interest expense and (ii) was paid.

     Petitioner testified that, around November or December of

1999, he purchased the condo from his mother, Elsie Gray Tiernan

(Mrs. Tiernan), for $30,000.    Petitioner claims that the

acquisition of the condo was financed entirely by Mrs. Tiernan.

In support, petitioner provided a copy of a one-page typewritten
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document entitled “Promissory Note” dated “December 1999” (note)

purporting to be between petitioner and Mrs. Tiernan, which, in

its entirety, provides:

     $30,000.00 face value, payable at $2,000.00 per month,
     secured by the Condo at 5912 #2 Walerga, Sacramento,
     California. This agreement for the purchase of
     mentioned Condo is between Elsie Gray Tiernan (Seller)
     and Daniel M. Gray (Buyer) as his sole and separate
     property.

     Despite the “sale”, petitioner testified that he did not

hold legal title to the condo in 2000, claiming that the title

was not conveyed and filed under his name until 2001.   The

“note”, however, was not signed by Mrs. Tiernan, suggesting that

petitioner and Mrs. Tiernan never reached an agreement on the

sale.   It is not disputed that legal title remained under Mrs.

Tiernan’s name during 2000.   Petitioner must therefore show that

he had an equitable interest in the condo to prevail.

     In addition to the “note”, petitioner presented and the

Court admitted the following documents as evidence:   (1) Bank

statements dated 2000 and 2001 from a joint checking account that

petitioner maintained in Nevada with his stepfather, William

Tiernan (Mr. Tiernan); (2) a check register for 2000 with entries

that corresponded to the check numbers on some of the bank

statements; (3) letters dated as in 2002 between petitioner and

the Tiernans relating to petitioner’s rental and eviction from

the condo; (4) a signed purchase agreement dated December 14,
                               - 7 -

2000, for the sale of the condo by Mrs. Tiernan to a third party;

(5) a Tenant Reimbursement Request for Alterations to Rental Unit

dated March 24, 2003, from petitioner to the Tiernans; (6)

utility bills dated 2000 for the condo; and (7) other

miscellaneous documents.

     The Court has reviewed the evidence presented by petitioner

and has found little support for petitioner’s contention that he

was the owner of the condo, legal or equitable, during 2000.   The

purchase agreement dated December 14, 2000, indicates that Mrs.

Tiernan had discussions with a third party regarding the sale of

the condo.   This, together with Mrs. Tiernan’s failure to sign

the “note”, tends to suggest that Mrs. Tiernan did not convey any

type of interest in the condo to petitioner in 1999.

     Petitioner asserts that the bank statements, together with

the check register, show the actual amount that he paid to Mrs.

Tiernan in connection with the condo in 2000.   Petitioner and Mr.

Tiernan maintained a joint checking account in Nevada where the

source of the funds in the account was deposits from petitioner’s

payroll.   Petitioner testified that he gave Mr. Tiernan access to

the account because he needed someone to pay his bills, including

payments on the condo, whenever he was out of town on a job.
                               - 8 -

     The check register shows only one entry that relates

directly to a payment on the condo.    The entry reads: “Dep. to

7942 acct 5/27/00 4,000.00 from Dan Gray, Less $2,000.00 for

Condo, approx Bal. 3591.00.”   A comparison of the check register

to the bank statement shows that Mrs. Tiernan was the payee of

check No. 2057, dated May 30, 2000, for $2,000 (check No. 2057).

Petitioner urges the Court to infer from the entry that

petitioner has been making payments on the principal and the

interest under the “note”.

     It is unclear which portion of check No. 2057, if any, would

constitute interest because interest was unstated under the

“note”.   At trial, petitioner failed to explain how he had

determined the interest component for each payment, or how he had

calculated that he paid a home mortgage interest expense of

$6,600 for 2000.   Petitioner relies solely on his uncorroborated

testimony that the interest due and paid under the “note” for

2000 was $6,600.

     Even if petitioner had paid any interest under the “note”,

it is not deductible because the Court is not persuaded that

petitioner was the equitable owner of the condo in 2000.    Other

than check No. 2057, the check register shows no other payments

to Mrs. Tiernan or payments related to the condo.    Petitioner did
                               - 9 -

not offer any other evidence to show that he made payments on the

mortgage for the condo.

     Petitioner’s evidence, as a whole, indicates that he was

more like a lessee than an equitable owner of the condo during

2000.   Petitioner has not shown that he assumed the benefits and

burdens of ownership.   See Baird v. Commissioner, 68 T.C. 115,

124 (1977) (a taxpayer becomes the equitable owner of property

when he assumes the benefits and burdens of ownership).

     The bank statements show that petitioner made numerous

purchases from Home Depot and Homebase to improve the condo.

After the improvements were completed, petitioner submitted a

Tenant Reimbursement Request for Alterations to Rental Unit to

the Tiernans to seek reimbursement for the materials and labor

spent on the project.

     Furthermore, the letters dated 2002, between petitioner and

Mr. Tiernan, show that petitioner was facing eviction from the

condo because he was behind on his “monthly payments”.    In one of

the letters, petitioner characterized a payment that he was

making to the Tiernans as “Lease/Rental of 5912 Walerga St. #2”.

     Based on the foregoing, the Court finds that petitioner has

not treated the condo as if he were the owner and has not

established equitable ownership of the condo during 2000.

Respondent’s determination disallowing petitioner’s home mortgage

interest deduction is therefore sustained.
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Employee Business Expense Deductions

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

necessary expenses paid or incurred in carrying on a trade or

business.   Section 162(a)(2) allows a taxpayer to deduct

traveling expenses, including amounts expended for meals and

lodging, if such expenses are:   (1) Ordinary and necessary, (2)

incurred while away from home, and (3) incurred in the pursuit of

a trade or business.   Commissioner v. Flowers, 326 U.S. 465, 470

(1946).   Services performed by an employee constitute a trade or

business for this purpose.    O’Malley v. Commissioner, 91 T.C.

352, 363-364 (1988).

     For purposes of section 162, generally “home” (or tax home)

means the vicinity of the taxpayer’s principal place of business

or employment.   Mitchell v. Commissioner, 74 T.C. 578, 581

(1980); Daly v. Commissioner, 72 T.C. 190, 195 (1979), affd. 662

F.2d 253 (4th Cir. 1981).    A taxpayer’s residence, when different

from the vicinity of his principal place of employment, may be

treated as his tax home if the taxpayer’s employment is

“temporary” rather than “indefinite”.    Peurifoy v. Commissioner,

358 U.S. 59, 60 (1958).

     A taxpayer must have a tax home from which to be away from

to be entitled to a deduction under section 162(a)(2).      Henderson

v. Commissioner, T.C. Memo. 1995-559, affd. 143 F.3d 497 (9th

Cir. 1998).   A taxpayer without a tax home is deemed to have
                              - 11 -

“carried his home on his back”, to have been an itinerant, and is

not entitled to the deduction because he was not “away from

home”.   Wirth v. Commissioner, 61 T.C. 855, 859 (1974); Hicks v.

Commissioner, 47 T.C. 71, 74 (1966).   The purpose of the “away

from home” provision is to mitigate the burden of the taxpayer

who, because of exigencies of his trade or business, must

maintain two places of abode and thereby incur additional and

duplicate living expenses.   Kroll v. Commissioner, 49 T.C. 557,

561-562 (1968); Hicks v. Commissioner, supra.   A taxpayer has a

“home” when he has incurred substantial continuing living

expenses at a permanent place of residence.   James v. United

States, 308 F.2d 204, 208 (9th Cir. 1962); Wirth v. Commissioner,

supra.

     Respondent argues that petitioner may not deduct the cost of

travel, meals, and lodging that petitioner paid during 2000,

because petitioner had no tax home.

     Petitioner argues that in 2000, his tax home was in

Sacramento, California.   Petitioner asserts that he owns the

condo, paid the utilities, returned to the condo between jobs,

and used the condo’s address to report his Federal taxes.   In

support, petitioner presented utility bills and bank statements.

Petitioner contends that the bank statements show that he was in

Sacramento during his periods of unemployment in 2000, since the
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statements post the locations where he withdrew money or

purchased items.

     On the basis of the record, the Court finds that petitioner

did not have a tax home in 2000.    Petitioner traveled nationwide

and had no principal place of employment.    While petitioner may

have believed that Sacramento was his home and made an effort to

return whenever possible, that belief is not sufficient to

establish Sacramento as his tax home.

     Petitioner did not have a legal or equitable interest in the

condo.   The letters dated 2002 show that petitioner was obligated

to pay rent to the Tiernans.   But, it is unclear what

petitioner’s monthly rent was in 2000 or how much rent was

actually paid during that year.    The check register shows that

petitioner paid to Mrs. Tiernan $2,000 by check No. 2057 dated

May 30, 2000, “for Condo”.   There are no other entries in the

check register that relate directly to a payment on the condo.

The record shows that petitioner traveled 268 days out of the

year or 73.42 percent.   Petitioner’s financial contribution of

$2,000 for the condo is minimal when compared to the $21,866.57

of living expenses that he incurred while traveling.     See

Henderson v. Commissioner, supra.

     Petitioner asserts that he returned to his condo after each

job because that was his “base” and that he, for the most part,

spent time in Sacramento between jobs.    The bank statements,
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petitioner’s sole evidence that he returned to the condo, are

either irrelevant or of little probative value.   Some of the bank

statements were dated 2001 or had dates that were illegible.     To

the extent that the statements were dated 2000, they fail to

cover the periods for which petitioner was unemployed during that

year.

     Petitioner did not present a complete set of utility bills

for 2000.   The utility bills that were presented were in either

Mr. or Mrs. Tiernan’s name.   Nevertheless, the utility bills,

together with the check register, show that petitioner paid for

the gas, electric, and water for the condo in 2000.

     Even if petitioner made a $2,000 financial contribution and

paid the utilities for the condo in 2000, the Court finds that

petitioner did not have such substantial continuing and

duplicative living expenses in Sacramento to justify the

allowance of a deduction for travel, meals, and lodging expenses

incurred while traveling.   Respondent’s determination with

respect to petitioner’s employee expense deduction is sustained.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect the foregoing,



                                         Decision will be entered

                                    for respondent.
