                         T.C. Memo. 1999-111



                       UNITED STATES TAX COURT



                   ROBERT J. GEARY, Petitioner v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



       Docket No. 7380-97.                       Filed April 2, 1999.



       Stephen M. Moskowitz and Robert L. Goldstein, for

petitioner.

       Margaret S. Rigg, for respondent.


               MEMORANDUM FINDINGS OF FACT AND OPINION

       GOLDBERG, Special Trial Judge:   This case was heard pursuant

to the provisions of section 7443A(b)(3) and Rules 180, 181, and

182.    Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the year in issue, and
                              - 2 -

all Rule references are to the Tax Court Rules of Practice and

Procedure.

     Respondent determined a deficiency in petitioner's 1993

Federal income tax in the amount of $3,499 and an accuracy-

related penalty in the amount of $700 pursuant to section

6662(a).

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

petitioner is entitled to claim a Schedule C advertising expense

deduction for the 1993 tax year; and (2) whether petitioner is

liable for an accuracy-related penalty pursuant to section

6662(a) in the amount of $700 for the 1993 tax year.

     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.   At the time the petition

was filed, petitioner resided in San Francisco, California.

                        FINDINGS OF FACT

     During the year in issue, petitioner was a full-time police

officer for the City and County of San Francisco.   Petitioner was

a 24-year police veteran who had been decorated four times for

valor.

     In 1991, the San Francisco Police Department started a

Community Police on Patrol Program (Patrol Program) which was

designed to encourage patrol officers "to be a highly visible

1
     Petitioner conceded respondent's adjustments of claimed 1993
Schedule C deductions for supplies and legal expenses.
                               - 3 -

presence in the city's neighborhoods" and "encouraged [police

officers] to engage in responsible, creative ways to make the

community safer and more attractive."

     After attending a course on the Patrol Program at the police

academy, petitioner purchased a ventriloquist dummy/puppet.

Petitioner named the puppet Officer Brendan O'Smarty

(Officer O'Smarty) and outfitted him in a San Francisco

Police Department uniform complete with badge2 and water pistol.

Petitioner began to patrol his beat with Officer O'Smarty in

1991.

     Petitioner patrolled the North Beach District of San

Francisco, an area with a multicultural mix of people speaking

several different languages.   Petitioner felt that a

ventriloquist puppet such as Officer O'Smarty helped petitioner

improve his working relationship with residents of North Beach by

making petitioner more approachable and less forbidding.

     Though petitioner's supervisors at the police department

initially permitted petitioner and Officer O'Smarty to patrol

together "for a year or so", they later ordered petitioner to

stop taking Officer O'Smarty on patrol.   Petitioner met with

police officials in an attempt to get the order rescinded but was

only partially successful.   The Chief of Police of the San

Francisco Police Department modified the order, but petitioner


2
     Petitioner issued Officer O'Smarty badge No. ½.
                                 - 4 -

was still prohibited from taking Officer O'Smarty on patrol

without advance written permission.

     In response to the restrictions on petitioner's use of the

puppet, the San Francisco Board of Supervisors (Board) passed a

resolution "[urging] the Mayor to urge the Police Commissioner to

allow [petitioner] police officer Bob Geary to use his

professional judgement in using non-traditional 'tools' to gain

the trust of the public."   The Mayor refused to act on the

Board's resolution, and petitioner, after exhausting his

administrative remedies, decided to take the Officer O'Smarty

puppet issue to local voters.

     In the latter part of 1992, or early in January 1993,

petitioner formed the Committee to Save Puppet Officer Brendan

O'Smarty (Committee).   Through the Committee, petitioner paid

$9,711.49 to professional "signature gatherers" to circulate

petitions and gather signatures from local voters in order to

place the issue on the November 1993 ballot.    Once the signatures

were gathered, petitioner contributed $1,200 to local political

organizations which recommended passage of "Proposition BB", the

Officer O'Smarty proposition.3    In addition, petitioner paid $621




3
     Petitioner contributed $600 to the Richmond District
Democratic Club, $400 to the District Eight Democratic Club, and
$200 to the Affordable Housing Alliance Political Action
Committee, all of which endorsed Proposition BB on their
respective slates.
                                 - 5 -

to the Registrar of Voters in order to include a lengthy pro-

Officer O'Smarty statement in voting materials.

     Proposition BB asked voters to decide whether it should "be

the policy of the people of San Francisco to allow Police Officer

Bob Geary to decide when he may use his puppet Brendan O'Smarty

while on duty."     Voters ultimately approved Proposition BB and

petitioner was once again allowed to patrol the streets of San

Francisco with Officer O'Smarty.

     On or about November 13, 1992, petitioner signed an option

agreement with Golden Door Productions (Golden Door), a movie

studio, whereby Golden Door would use its best efforts to exploit

the concept of using petitioner and Officer O’Smarty in various

law enforcement scenarios suitable for motion pictures,

television, etc.4    This option agreement was subsequently amended

by agreement prepared on September 3, 1993.     In 1993 Golden Door

assisted petitioner to enter into a contract with Interscope

Communications (Interscope).

     Petitioner attracted significant media attention as a result

of his high-profile ballot campaign.5    Petitioner was able to


4
     The precise terms of this contract are unclear as the
contract does not appear in the record.
5
     See Jane Gross, Dummy is on Ballot (He isn't Seeking
Office), "New York Times", Oct. 30, 1993, at A-1. Petitioner
also spoke to local community groups and schools and even
attracted international attention. Foreign media interest was
generated in Turkey, Portugal, Australia, Britain, Canada, and
Sarajevo.
                               - 6 -

capitalize on the resultant publicity to develop commercial

interest in his unique patrol ideas.

     Interscope paid petitioner $10,000 under the contract for

consulting services in connection with the development of a

screenplay, which income petitioner reported as wage income on

his 1993 Federal income tax return.6   Petitioner also received

$4,500 from Golden Door Productions, the movie studio which

helped petitioner sell his idea to Interscope, and $2,216 from

miscellaneous sources for various appearances as a "hand model"

and as an "entertainer".   Petitioner reported these

amounts, a total of $6,716, on Schedule C attached to

his 1993 Federal income tax return.    Petitioner claimed an

$11,465 advertising expense deduction on Schedule C representing

petitioner's total ballot expenditures for Proposition BB.7




6
     Petitioner is still under contract with Interscope. If
Interscope exercises the option and a movie is ever made,
petitioner will earn $25,000 as a consultant, plus 15 percent of
the fee which would be paid to the producers of the film, and 33
percent of the profits to be paid to the producers from any
assignment of the story.
7
     This amount includes $9,711.49 for signature gatherers,
$1,200 in contributions to local political organizations that
endorsed Proposition BB on their local slates, and other
miscellaneous expenses. Though petitioner only claimed as
advertising expenses the amount of $11,465 on Schedule C of his
1993 Federal income tax return, the parties stipulated that
petitioner incurred total ballot expenses in the amount of
$11,645. The difference between these two numbers seems to be a
transpositional error.
                               - 7 -

     In a notice of deficiency dated January 16, 1997, respondent

disallowed petitioner's total claimed Schedule C advertising

expense deduction for the 1993 tax year.   Respondent contends

that petitioner's claimed advertising expenses were actually

lobbying and political expenditures which are disallowed by

section 162(e).

                              OPINION

     Deductions are a matter of legislative grace.   See New

Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).      A

taxpayer bears the burden of proving that he is entitled to

claimed deductions.   See Welch v. Helvering, 290 U.S. 111, 115

(1933).

     Petitioner has advanced two alternative arguments in support

of his claim that the expenses incurred should be allowable as an

ordinary and necessary business deduction:   (1) Petitioner

contends that the claimed deduction represents Schedule C

business expenses incurred by petitioner in his business as an

entertainer; or, alternatively, (2) petitioner contends that the

expenditures represent unreimbursed employee business expenses

which are deductible on Schedule A.

1.   Section 162(e)(2)(B) Exclusion

     Relying on Section 162(e), respondent contends that

petitioner would not be entitled to deduct his claimed expenses

even if they otherwise had been allowable deductions under

section 162(a).
                                - 8 -

     Section 162(e)(2)(B) prohibits a deduction for any amount

paid or incurred "in connection with any attempt to influence the

general public, or segments, thereof, with respect to legislative

matters, elections, or referendums."

     Petitioner contends that section 162(e)(2)(B) is

inapplicable in this case, but concedes that if this Court finds

section 162(e)(2)(B) applicable, then expenses incurred by

petitioner in obtaining voting slate approval for Proposition BB

from various political groups totaling $1,200 would be

nondeductible.   Petitioner contends, however, that expenses

incurred by petitioner for the use of signature gatherers would

not be prohibited since petitioner's use of signature gatherers

was not an "attempt to influence the general public".    We

disagree.

     Petitioner contends that his sole purpose in getting the

Officer O'Smarty issue on the ballot was to let the voters decide

the issue.   Petitioner thereby claims a disinterest in the

outcome of the vote though his actions at the time indicate

otherwise.

     Petitioner organized his Committee with the express purpose

of "saving" Officer O'Smarty.   Indeed the very name of the

Committee, the Committee to Save Puppet Officer Brendan O'Smarty,

is a good indication of its purpose.    Petitioner funded the

ballot proposition entirely through the Committee and paid the

signature gatherers with Committee funds.
                               - 9 -

     Petitioner's signature gatherers were employed to gather

signatures with the express purpose of putting the puppet issue

on the November 1993 ballot.   These signature gatherers were paid

by petitioner's Committee and certainly made statements

supporting the inclusion of the issue on the November 1993 ballot

while gathering signatures from the public in San Francisco.

     This Court has consistently held that expenses incurred to

influence the public with respect to legislative matters,

decisions, or referendums are nondeductible.    See Cloud v.

Commissioner, 97 T.C. 613 (1991); Southern Pac. Transp. Co. v.

Commissioner, 90 T.C. 771, 780-782 (1988).     Taken as a whole,

petitioner's actions show a clear intent to influence the general

public.   Petitioner formed his Committee, funded it with his own

money, sent out signature gatherers to qualify the issue for the

November 1993 ballot, and then secured voting slate approval of

Proposition BB from local political organizations.    Petitioner is

now attempting to break out certain expenses and narrowly isolate

those expenses so they do not fall under the section 162(e)(2)(B)

exclusion.   We are not persuaded by his argument in that respect.

Petitioner's claimed expenses are disallowed by section

162(e)(2)(B).

     We therefore hold that petitioner is not entitled to claim

expenses incurred in putting the Officer O'Smarty issue on the

November 1993 ballot as section 162 deductions on his 1993

Federal income tax return.
                                - 10 -

     Inasmuch as we hold that section 162(e) is dispositive of

the issue, we need not address petitioner's contentions that the

claimed expenses represent either Schedule C business expenses or

Schedule A unreimbursed employee business expenses.   Respondent

is sustained on this issue.

2.   Accuracy-Related Penalty

     Section 6662(a) imposes an accuracy-related penalty equal to

20 percent of the portion of any underpayment of tax that is due

to negligence or disregard of rules or regulations.   Under

section 6662(c), negligence is any failure to make a reasonable

attempt to comply with the provisions of the Code, and the term

"disregard" includes any careless, reckless, or intentional

disregard.   Negligence includes the failure to exercise the due

care of a reasonable and ordinarily prudent person under the

circumstances.   See Allen v. Commissioner, 925 F.2d 348, 353 (9th

Cir. 1991), affg. 92 T.C. 1 (1989); Neely v. Commissioner, 85

T.C. 934, 947 (1985).

     Petitioner contends that he is not liable for the section

6662(a) accuracy-related penalty because he relied on erroneous

expert advice given by his tax preparer.   When an expert provides

erroneous advice on a matter of tax law, such as whether a tax

liability exists, it may be reasonable for a taxpayer to rely on

that advice.   See United States v. Boyle, 469 U.S. 241, 250-251

(1985).
                              - 11 -

     Though petitioner contends that he received erroneous tax

advice from his tax preparer, petitioner did not testify to such

advice or call his tax preparer as a witness at trial.   This

Court can infer that testimony which was not produced at trial

would not have been favorable to a taxpayer.   See Wichita

Terminal Elevator Co. v. Commissioner, 6 T.C. 1158, 1165 (1946),

affd. 162 F.2d 513 (10th Cir. 1947).   Additionally, there is no

evidence in the record supporting petitioner's contention

regarding erroneous expert advice.

     On the basis of the record, we hold that petitioner did not

comply with the requirements of section 162, and failed to

exercise the due care of a reasonable and ordinarily prudent

person.   We therefore hold that petitioner is liable for an

accuracy-related penalty for the 1993 tax year.

     To reflect the foregoing,

                                          Decision will be entered

                                     for respondent.
