                   T.C. Summary Opinion 2006-6



                     UNITED STATES TAX COURT



             CONRAD FITZGERALD LEWIS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 2430-04S.               Filed January 24, 2006.


     Conrad Fitzgerald Lewis, pro se.

     Steven M. Webster, for respondent.



     GOLDBERG, Special Trial Judge:     This case was heard pursuant

to the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed.    The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority.   Unless otherwise indicated,

subsequent section references are to the Internal Revenue Code in

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

Tax Court Rules of Practice and Procedure.
                              - 2 -

     Respondent determined deficiencies in petitioner’s Federal

income taxes of $5,926.00, $7,816.65, and $5,336.00 for the

taxable years 2000, 2001, and 2002, respectively.

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

Whether petitioner is entitled to claim the dependency exemption

deduction for DD for tax years 2000, 2001, and 2002; (2) whether

petitioner is entitled to a child tax credit with DD as the

qualifying child for tax years 2000, 2001, and 2002; (3) whether

petitioner is entitled to claim Schedule C expenses for the 2000,

2001, and 2002 tax years; (4) whether petitioner is entitled to

miscellaneous itemized deductions for the 2000 tax year;2 and (5)

whether petitioner failed to report interest income for tax years

2000 and 2001.

                           Background

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

The stipulation of facts and the attached exhibits are


     1
      Petitioner listed KM, BW, and DD (the Court uses only the
minor child’s initials) as dependents on his tax returns for the
taxable years 2000, 2001, and 2002. In the notice of deficiency,
respondent disallowed petitioner’s claimed dependency exemption
deductions and related child tax credits for KM, BW, and DD.
However, at trial, respondent conceded that petitioner was
entitled to the dependency exemption deductions and related child
tax credits for KM and BW for the taxable years 2000, 2001, and
2002.
     2
      Respondent also adjusted petitioner’s miscellaneous
itemized deductions for 2002. The amount of deductions, with
respect to taxable year 2002, to which petitioner is entitled is
a computational matter, which will be decided based on the
Court’s resolution of the issues in this case.
                               - 3 -

incorporated herein by this reference.    Petitioner resided in

Hopkins, South Carolina, on the date the petition was filed in

this case.

     In March of 1995, petitioner and Paula B. Lewis (Ms. Lewis)

were married.   Ms. Lewis had a child, KM, from a previous

relationship.   Petitioner and Ms. Lewis had two children during

their marriage, BL and JL.   Petitioner and Ms. Lewis also had two

foster children, BW and DD, in their custody during the taxable

years in issue.   DD is the only child at issue in the present

case.   On June 3, 1999, the South Carolina Department of Social

Services issued to petitioner and Ms. Lewis a license to conduct

a foster family boarding home under the provisions of Act Number

334, Section 3, enacted March 10, 1986.    DD was placed with

petitioner and Ms. Lewis by Growing Home, a branch of South

Carolina Social Services, from April 9, 2000, through October 1,

2001.

     Petitioner and Ms. Lewis separated in taxable year 2000.     At

that time, petitioner moved out of their house.    At the time of

trial, petitioner and Ms. Lewis were still trying to reconcile,

but were not formally divorced.

     Petitioner and Ms. Lewis purchased their house in 1999 using

their combined funds.   The house was titled solely in Ms. Lewis’s

name.   Ms. Lewis claimed a deduction for the home mortgage
                                - 4 -

interest paid on her and petitioner’s house for taxable year 2002

of $6,458.

     During the years in issue, Ms. Lewis was a self-employed

cosmetologist.    Also, during the years in issue, petitioner was

employed as a truck driver by Wilson Trucking Corporation.

Petitioner received wage income from Wilson Trucking Corporation

for taxable years 2000, 2001, and 2002, of $40,816, $34,904, and

$41,035, respectively.    Further, during the years in issue,

petitioner operated a hair cutting and beauty salon business

known as “Your Future Style”.

     Sometime in 1997, Ms. Lewis started a business known as

“Kiddy Cuts and Styles”.    During 1998, Ms. Lewis ceased business

operations of “Kiddy Cuts and Styles”.    Shortly after Ms. Lewis

discontinued her existing business, in May 1998, petitioner

started his business named “Your Future Style” (the business).

Petitioner leased a commercial unit in Leesburg Plaza (commercial

space), which was located in Columbia, South Carolina.

Petitioner and Ms. Lewis’s names were both on the commercial

lease contract and the phone bills for the business.    The utility

bills relating to the business were in the name of and addressed

to “Paula B. Adams[3] Doing Business As Kiddy Cuts & Style”.




     3
        The Court assumes that Paula B. Adams is Ms. Lewis’s maiden
name.
                                 - 5 -

     Petitioner renovated the commercial space before opening his

salon.   Petitioner’s commercial space consisted of three barber

chairs and six salon stations.    Petitioner leased out the barber

chairs and salon stations to licensed barbers and cosmetologists.

The average lease rentals for the barber chairs and salon

stations were $60 and $100 per week, respectively.   One of the

cosmetologists to whom petitioner leased a salon station was Ms.

Lewis.

     Ms. Lewis filed Federal income tax returns for the taxable

years 2000, 2001, and 2002.   Ms. Lewis attached a Schedule C,

Profit or Loss From Business, to each of her Forms 1040, U.S.

Individual Income Tax Return, for the taxable years 2000, 2001,

and 2002.   On her Schedules C for these years Ms. Lewis reported:

(1) Her principal profession as a cosmetologist, (2) her business

name as “Your Future Style”, and (3) the commercial space as the

address of “Your Future Style”.

     Petitioner received interest income during taxable years

2000 and 2001 from Wachovia Bank of $20 and $12, respectively.

Petitioner also received interest income during taxable years

2000 and 2001 from Fort Jackson Federal Credit Union of $93 and

$29, respectively.   Petitioner did not report any of this

interest income on his 2000 and 2001 Federal income tax returns.

     On his 2000 Federal income tax return, petitioner claimed

dependency exemption deductions for KM, BW, and DD and child tax
                                     - 6 -

credits for KM, BW, and DD, as the qualifying children.              Also,

petitioner attached to his 2000 Federal income tax return a

Schedule C.       On his Schedule C, for taxable year 2000, petitioner

reported $9,250 of business income from the business.              Petitioner

deducted $20,387 in business expenses, which resulted in a

reported business loss of $11,137.           Petitioner’s Schedule C

business expenses were as follows:

     Line   15    Insurance (other than health)                       $600
     Line   20a   Rent or lease (Vehicles, machinery and equipment) $8,340
     Line   21    Repairs and maintenance                           $1,850
     Line   22    Supplies                                            $990
     Line   23    Taxes and licenses                                  $415
     Line   25    Utilities                                         $4,200
     Line   27    Other expenses                                    $3,992
                                                            Total  $20,387

     Furthermore, petitioner attached a Schedule A, Itemized

Deductions, to his 2000 Federal income tax return.             On his 2000

Schedule A, petitioner claimed as follows, in pertinent part:

            Itemized Deductions                                    Amount

            Line 5      State and local income taxes               $2,553
            Line 6      Real estate taxes                             901
            Line 7      Personal property taxes                       792
            Line 9      Total taxes                                 4,246
            Line 10     Home mortgage interest and points           7,134
            Line 15     Gifts to charity by cash                    3,300
                              or check (Church)
            Line 16     Other than by cash or check                   250
            Line 18     Total contributions to charity              3,550
            Line 20     Unreimbursed employee expenses              2,750
                          Uniforms and cleaning $2,500
                          Shoes                      250
            Line   21   Tax preparation fees                          125
            Line   23   Total limited misc. expenses                2,875
            Line   26   Net limited misc. deduction                 2,237
            Line   28   Total itemized deductions                  17,167
                                - 7 -

As previously stated, petitioner did not report any interest

income on his 2000 Federal income tax return.

     On his 2001 Federal income tax return petitioner claimed

dependency exemption deductions for KM, BW, and DD and child tax

credits for KM, BW, and DD, as the qualifying children.    Also,

petitioner attached to his 2001 Federal income tax return a

Schedule C.   On his Schedule C, for taxable year 2001, petitioner

reported $5,000 of business income from the business and deducted

$25,440 in business expenses, which resulted in a reported

business loss of $20,440.4    As previously stated, petitioner did

not report any interest income on his 2001 Federal income tax

return.

     On his 2002 Federal income tax return petitioner claimed

dependency exemption deductions for KM, BW, and DD and child tax

credits for KM, BW, and DD, as the qualifying children.    Also,

petitioner attached to his 2002 Federal income tax return a

Schedule C.   On his Schedule C, for taxable year 2002, petitioner

reported $1,352 of business income from the business and deducted

$8,631 in business expenses, which resulted in a reported

business loss of $7,279.5    Furthermore, petitioner attached a



     4
      The record in this case did not contain an itemized list of
petitioner’s Schedule C business expenses for taxable years 2001
and 2002.
     5
      See supra note 4.
                                - 8 -

Schedule A to his 2002 Federal income tax return.    On his 2002

Schedule A, petitioner claimed as follows, in pertinent part:

          Itemized Deductions                             Amount

          Line 1    Medical and dental expenses           $6,419
          Line 4    Net medical deduction                  3,887
          Line 5    State and local income taxes           2,578
          Line 9    Total taxes                            2,578
          Line 28   Total itemized deductions              6,465

     In the notice of deficiency, with respect to taxable year

2000, respondent denied petitioner:     (1) The claimed dependency

exemption deductions; (2) the claimed child tax credits; (3)

$6,904 of his claimed $20,387 business expense deductions; and

(4) $8,961 of his claimed $17,167 Schedule A itemized deductions.

Additionally, respondent determined that petitioner had

unreported interest income of $113 for taxable year 2000.

     With respect to taxable year 2001, respondent denied

petitioner:   (1) The claimed dependency exemption deductions; (2)

the claimed child tax credits; and (3) the entire amount of his

claimed $25,440 Schedule C business expense deductions.

Additionally, respondent determined that petitioner had

unreported interest income of $41 for taxable year 2001.

     With respect to taxable year 2002, respondent denied

petitioner:   (1) The claimed dependency exemption deductions; (2)

the claimed child tax credits; (3) the entire amount of

petitioner’s claimed $8,631 Schedule C business expense
                                - 9 -

deductions; and (4) $640 of petitioner’s claimed $6,465 Schedule

A itemized deductions.6

                              Discussion

     In general, the Commissioner’s determination set forth in a

notice of deficiency is presumed correct.       Welch v. Helvering,

290 U.S. 111, 115 (1933).    In pertinent part, Rule 142(a)(1)

provides the general rule that “The burden of proof shall be upon

the petitioner”.    In certain circumstances, however, if the

taxpayer introduces credible evidence with respect to any factual

issue relevant to ascertaining the proper tax liability, section

7491 places the burden of proof on the Commissioner.       Sec.

7491(a)(1); Rule 142(a)(2).    Credible evidence is “‘the quality

of evidence which, after critical analysis, * * * [a] court would

find sufficient * * * to base a decision on the issue if no

contrary evidence were submitted’”.7       Baker v. Commissioner, 122

T.C. 143, 168 (2004) (quoting Higbee v. Commissioner, 116 T.C.

438, 442 (2001)).    Section 7491(a)(1) applies only if the

taxpayer complies with substantiation requirements, maintains all

required records, and cooperates with the Commissioner for

witnesses, information, documents, meetings, and interviews.

     6
      See footnote 2.
     7
      We interpret the quoted language as requiring the
taxpayer’s evidence pertaining to any factual issue to be
evidence the Court would find sufficient upon which to base a
decision on the issue in favor of the taxpayer. See Bernardo v.
Commissioner, T.C. Memo. 2004-199.
                              - 10 -

Sec. 7491(a)(2).   Although neither party alleges the

applicability of section 7491(a), we conclude that the burden of

proof has not shifted to respondent with respect to any of the

issues in the present case.

     Moreover, deductions are a matter of legislative grace and

are allowed only as specifically provided by statute.     INDOPCO,

Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice

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

1.   Deduction for Dependency Exemption

      At issue are the dependency exemption deductions claimed by

petitioner for DD.

      Section 151 allows deductions for exemptions for dependents

of the taxpayer.   See sec. 151(c).    Section 152(a) defines the

term “dependent” to mean a child of the taxpayer over half of

whose support for the year was received from the taxpayer.

Section 152(b)(2) provides that a foster child shall be treated

as a child of the taxpayer, if such child satisfies the

requirements of section 152(a)(9).     That section requires that

the child be:

           (9) An individual (other than an individual who at any
      time during the taxable year was the spouse, determined
      without regard to section 7703, of the taxpayer) who, for
      the taxable year of the taxpayer, has as his principal place
      of abode the home of the taxpayer and is a member of the
      taxpayer’s household.

      “[S]upport” includes “food, shelter, clothing, medical and

dental care, education, and the like.”     Sec. 1.152-1(a)(2)(i),
                               - 11 -

Income Tax Regs.   In determining whether an individual received

more than one-half of his or her support from the taxpayer, there

shall be taken into account the amount of support received from

the taxpayer as compared to the entire amount of support which

the individual received from all sources.    Id.   In other words,

the support test requires the taxpayer to establish the total

support costs for the claimed individual and that the taxpayer

provided at least half of that amount.    A taxpayer who cannot

establish the total amount of support costs for the claimed

individual generally may not claim that individual as a

dependent.    Blanco v. Commissioner, 56 T.C. 512, 514-515 (1971);

Cotton v. Commissioner, T.C. Memo. 2000-333.

     DD was placed in petitioner and Ms. Lewis’s home as a foster

child by the Department of Social Services of South Carolina on

April 9, 2000, and DD stayed in their home until October 1, 2001.

Petitioner and Ms. Lewis received approximately $900 per month

from Social Services toward the support of DD.     Petitioner and

Ms. Lewis separated in 2000, and thereafter petitioner moved out

of the house.

     Petitioner admitted that after he moved out of the house

still occupied by Ms. Lewis, his new residence did not constitute

the principal place of abode for DD for taxable years 2000, 2001,

and 2002.    Additionally, petitioner did not testify that he

provided over half of DD’s support for the taxable years 2000,
                              - 12 -

2001, and 2002.   In fact, petitioner testified that the

Department of Social Services provided funding that completely

paid for all of DD’s support for the taxable years at issue in

the present case.

      Upon the basis of the record before us, we find that

petitioner has not established that his home during taxable year

2000, 2001, and 2002 was the principal place of abode of DD.

Further, we find that petitioner has failed to establish the

total support costs for the claimed individual, DD, and that he

provided at least half of that amount.    Respondent’s

determination on this issue is sustained.

2.   Child Tax Credit

      As previously stated, petitioner claimed a child tax credit

for taxable years 2000, 2001, and 2002 with DD as the qualifying

child.   In the notice of deficiency, respondent disallowed the

child tax credit.

      Section 24(a) authorizes a child tax credit with respect to

each “qualifying child” of the taxpayer.    The term “qualifying

child” is defined in section 24(c).    As relevant here, a

“qualifying child” means an individual with respect to whom the

taxpayer is allowed a deduction under section 151.    Sec.

24(c)(1)(A).

      We have already held that petitioner is not entitled to a

dependency exemption deduction under section 151 for DD.
                                - 13 -

Accordingly, DD is not considered a “qualifying child” within the

meaning of section 24(c).    It follows, therefore, that petitioner

is not entitled to a child tax credit under section 24(a) with

respect to DD.

3.   Schedule C Expenses

      A taxpayer generally may not deduct personal, living, and

family expenses.    Sec. 262(a).   However, section 162(a) allows a

taxpayer to deduct all ordinary and necessary business expenses

paid or incurred during the taxable year in carrying on any trade

or business.     To be “necessary” an expense must be “appropriate

and helpful” to the taxpayer’s business.     Welch v. Helvering, 290

U.S. at 113-114.    To be “ordinary” the transaction which gives

rise to the expense must be of a common or frequent occurrence in

the type of business involved.     Deputy v. Du Pont, 308 U.S. 488,

495 (1940).

      Section 6001 and the regulations promulgated thereunder

require taxpayers to maintain records sufficient to permit

verification of income and expenses.     As a general rule, if the

trial record provides sufficient evidence that the taxpayer has

incurred a deductible expense, but the taxpayer is unable to

adequately substantiate the precise amount of the deduction to

which he or she is otherwise entitled, the Court may estimate the

amount of the deductible expense, bearing heavily against the

taxpayer whose inexactitude in substantiating the amount of the
                                - 14 -

expense is of his own making, and allow the deduction to that

extent.   Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930).

However, in order for the Court to estimate the amount of an

expense, the Court must have some basis upon which an estimate

may be made.    Vanicek v. Commissioner, 85 T.C. 731, 742-743

(1985).   Without such basis, any allowance would amount to

unguided largesse.     Williams v. United States, 245 F.2d 559, 560-

561 (5th Cir. 1957).    With these well-established propositions in

mind, we must determine whether petitioner has satisfied his

burden of proving that he is entitled to the claimed Schedule C

expenses.

     At trial, petitioner testified that most of his records

substantiating his claimed Schedule C business expenses were

destroyed due to a fire in his house.    However, petitioner

offered into evidence documents which were not destroyed by the

alleged fire.   These documents consisted of:   (1) BellSouth phone

bills which were in the name of and addressed to “Paula & Conrad

Lewis Doing Business As Kiddy Cut & Style”, (2) utility bills

from SCE&G in the name of and addressed to “Paula B. Adams[8]

Doing Business As Kiddy Cuts & Style”, and (3) a letter from R.E.

Hendrix - Apartment Rentals, stating:    “This is to confirm the

fact that Paula & Conrad Lewis rented from us unit N at Leesburg



     8
      See footnote 3.
                              - 15 -

Plaza satisfactorily from May 1998 to July 2002.   The rent was

$695.00 per month.”

     The expenses evidenced by the above-mentioned phone bills

and utility bills appear, from the text of the bills, to be

incurred not for the business, “Your Future Style”, but for

“Kiddy Cuts and Styles”.   The record is not entirely clear as to

the transition of business operations from “Kiddy Cuts and

Styles” to “Your Future Style”.   However, we surmise the

following facts.   It appears that out of convenience and for “bad

credit” reasons, petitioner transferred the utility and phone

accounts from “Kiddy Cuts and Styles” to his business.    In doing

so, he did not change the name of the business on the utility and

phone account official records.   Petitioner’s testimony and Ms.

Lewis’s Forms 1040 establish that “Kiddy Cuts and Styles” ceased

business operations in 1998 and that the charges shown on the

above-mentioned phone bills and utility bills were, in fact,

incurred in the operation of the business, “Your Future Style”.

     At first glance, the business relationship between Ms. Lewis

and petitioner outwardly resembles a joint venture or a

partnership.   Whether a valid partnership exists for Federal

income tax purposes is governed by Federal law.    See Commissioner

v. Culbertson, 337 U.S. 733 (1949).

     As pertinent here, a partnership for Federal income tax

purposes is defined in section 761(a) as “a * * * joint venture
                              - 16 -

or other unincorporated organization through or by means of which

any business, * * * or venture is carried on, and which is not,

within the meaning of this * * * [subtitle], a corporation or a

trust or estate.”   See also sec. 7701(a)(2).

     A partnership is created “when persons join together their

money, goods, labor, or skill for the purpose of carrying on a

trade, profession, or business and when there is community of

interest in the profits and losses.”   Commissioner v. Tower, 327

U.S. 280, 286 (1946).

     Whether parties have formed a partnership is a question of

fact, and while all circumstances are to be considered, the

essential question is whether the parties intended to, and did in

fact, join together for the present conduct of an undertaking or

enterprise.   Luna v. Commissioner, 42 T.C. 1067, 1077 (1964).

     Petitioner stated that Ms. Lewis’s name was on the

commercial lease contract, the phone bills, and the utility bills

because he had “bad credit” and needed her creditworthiness to

enter into the lease and obtain phone and utility services.

Petitioner further testified that profits and expenses stemming

from the business were not split between himself and Ms. Lewis.

Ms. Lewis’s Federal income tax returns for taxable years 2000,

2001, and 2002, confirm that she did not report any of the income

generated by the business.   Her Federal income tax returns for

the taxable years 2000, 2001, and 2002, report that her income
                                - 17 -

was derived from her occupation as a cosmetologist/independent

contractor.    We therefore conclude that petitioner was the sole

proprietor of the business, “Your Future Style”.    Thus, he is

entitled to deduct all substantiated Schedule C expenses that

were incurred in the operation of the business.

     A.   Taxable Year 2000

     As previously stated, on his Schedule C for taxable year

2000 petitioner reported $9,250 of business income from the

business.     Additionally, petitioner deducted $20,387 in business

expenses, which resulted in a reported business loss of $11,137.

     Respondent, in the notice of deficiency, disallowed $6,904

of petitioner’s claimed $20,387 business expense deductions for

taxable year 2000.

     On the basis of the record in this case, for the taxable

year 2000 petitioner has substantiated, through the phone bills,

the utility bills, and his landlord’s letter, business expenses

in the following amounts:

     1.     Rent                           $8,340.00
     2.     BellSouth phone expenses       $1,129.70
     3.     SCE&G utility expenses         $1,728.21
                                 Total     $11,197.91

Petitioner has substantiated Schedule C business expenses for

taxable year 2000 of $11,198.    As previously stated, respondent,

in the notice of deficiency, allowed petitioner $13,483 in

Schedule C business expenses.    Thus, respondent has allowed a

larger amount than petitioner was able to substantiate at trial.
                                - 18 -

Therefore, we sustain respondent’s determination as to the

taxable year 2000.

     B.   Taxable Year 2001

     As previously stated, on his Schedule C for taxable year

2001 petitioner reported $5,000 of business income from the

business.    Additionally, petitioner deducted $25,440 in business

expenses, which resulted in a reported business loss of $20,440.

Respondent, in the notice of deficiency, disallowed the entire

amount of petitioner’s claimed $25,440 Schedule C business

expense deductions for taxable year 2001.

     On the basis of the record in this case, for the taxable

year 2001 petitioner has substantiated through the aforementioned

documents business expenses in the following amounts:

     1.     Rent                            $8,340.00
     2.     BellSouth phone expenses        $1,483.96
     3.     SSE&G utility expenses          $1,044.81
                                   Total   $10,868.77

Petitioner has substantiated Schedule C business expenses for

taxable year 2001 of $10,869.    We conclude that petitioner is

entitled to deduct Schedule C business expenses for taxable year

2001 of $10,869.

     C.   Taxable Year 2002

     As previously stated, on his Schedule C for taxable year

2002 petitioner reported $1,352 of business income from the

business.    Additionally, petitioner deducted $8,631 in business

expenses, which resulted in a reported business loss of $7,279.
                               - 19 -

     Respondent, in the notice of deficiency, disallowed the

entire amount of petitioner’s claimed $8,631 Schedule C business

expense deductions for taxable year 2002.

     On the basis of the record in this case, for the taxable

year 2002 petitioner substantiated through the aforementioned

documents the following amounts of business expenses:

     1.   Rent                           $4,865.00
     2.   BellSouth phone expenses         $649.86
     3.   SCE&G utility expenses           $502.82
                                 Total   $6,017.68

Petitioner has substantiated Schedule C business expenses for

taxable year 2002 of $6,018.   We conclude that petitioner is

entitled to deduct Schedule C business expenses for taxable year

2002 of $6,018.

4.   Miscellaneous Itemized Deductions

     Petitioner attached a Schedule A to his 2000 Federal income

tax return.

     In the notice of deficiency, respondent disallowed $8,961 of

petitioner’s claimed $17,167 Schedule A itemized deductions for

taxable year 2000.   The amount of $8,961 disallowed by respondent

consists of:   (1) Disallowed home mortgage interest expense of

$7,134; (2) disallowed “total contributions to charity” of $250;

and (3) disallowed “net limited miscellaneous itemized

deductions” of $1,577.
                              - 20 -

     A.   Home Mortgage Interest

     As stated above, respondent disallowed petitioner’s claimed

deduction of $7,134 for home mortgage interest paid during

taxable year 2000.   Respondent contends that petitioner is not

entitled to any of the claimed deduction because the house was

purchased and encumbered by a mortgage in Ms. Lewis’s name and

titled in Ms. Lewis’s name.   Petitioner testified that the house

was in Ms. Lewis’s name because of his bad credit history.

     As pertinent here, section 163(a) and (h)(1) allows an

individual a deduction for all interest paid within the taxable

year on indebtedness, except for personal interest.   Qualified

residence interest is excluded from the definition of personal

interest and thus is deductible under section 163(a).   See sec.

163(h)(2)(D).   Qualified residence interest is any interest which

is paid or accrued during the taxable year on acquisition

indebtedness or home equity indebtedness.   See sec. 163(h)(3)(A).

Acquisition indebtedness is any indebtedness secured by the

qualified residence of the taxpayer or incurred in acquiring,

constructing, or substantially improving the qualified residence.

See sec. 163(h)(3)(B).   The indebtedness generally must be an

obligation of the taxpayer and not an obligation of another.     See

Golder v. Commissioner, 604 F.2d 34, 35 (9th Cir. 1979), affg.

T.C. Memo. 1976-150.
                                - 21 -

     As previously stated, at trial, petitioner testified that

the qualified residence was in Ms. Lewis’s name because of his

bad credit history.    Petitioner presented no documentary evidence

such as the mortgage itself or canceled checks to prove that the

mortgage was his obligation or that he paid the mortgage interest

during taxable year 2000.     Further, Ms. Lewis claimed a deduction

for the home mortgage interest paid on the subject property for

taxable year 2002 in the amount of $6,548.    Since petitioner has

failed to provide any proof that the mortgage was his obligation

or that he made mortgage interest payments, we sustain

respondent’s disallowance of petitioner’s claimed deduction of

home mortgage interest.

     B.    Gifts to Charity

     On petitioner’s Schedule A filed with his Federal income tax

return for taxable year 2000, he reported the following gifts to

charity:

     Itemized Deductions                             Amount

     Gifts by cash or check                          $3,300
     Gifts other than by cash or check                  250
          Total gifts                                $3,550

     Respondent determined that petitioner did not adequately

substantiate that “gifts other than by cash or check” were made.

Respondent further determined that, if such gifts were made,

petitioner did not adequately substantiate the fair market value

of the gifts.    Accordingly, respondent allowed a deduction for
                               - 22 -

charitable contributions for taxable year 2000 in the amount of

$3,300.

     Deductions for charitable contributions are allowable only

if verified under regulations prescribed by the Secretary.    Sec.

170(a).   Section 1.170A-13, Income Tax Regs., in turn, sets forth

the types of substantiation necessary to support deductions for

charitable contributions.

     For charitable contributions of property other than money,

taxpayers generally must maintain for each contribution a receipt

from the donee showing the following information:   (1) The name

of the donee; (2) the date and location of the contribution; and

(3) a description of the property in detail reasonably sufficient

under the circumstances.    Sec. 1.170A-13(b)(1), Income Tax Regs.

The amount of the contribution is the fair market value of the

property at the time of the contribution.   Sec. 1.170A-1(c)(1),

Income Tax Regs.

     Petitioner provided no documentation that would substantiate

that his claimed “gifts other than by cash or check” were made or

the fair market value of such alleged gifts.   Furthermore,

petitioner did not give any testimony as to any specific

charitable gifts.   On the basis of the record in this case, we

conclude that petitioner has not substantiated any charitable

gifts for taxable year 2000 other then those already allowed by
                                - 23 -

respondent.   Accordingly, respondent’s determination on this

issue is sustained.

     C.   Unreimbursed Employee Expenses

     On petitioner’s Schedule A filed with his Federal income tax

return for taxable year 2000, petitioner deducted unreimbursed

employee expenses of $2,750 and tax preparation fees of $125.

Respondent determined that petitioner did not adequately

substantiate unreimbursed employee expenses above the amount of

$1,313.   Accordingly, respondent allowed a deduction for “job

expenses and most other miscellaneous deductions” for taxable

year 2000 of $1,438.9

     As previously stated, section 162(a) allows a deduction for

ordinary and necessary business expenses paid or incurred during

the taxable year in carrying on any trade or business.       For an

expense to be “ordinary” the transaction that gives rise to the

expense must be of a common or frequent occurrence in the type of

business involved.     Deputy v. du Pont, 308 U.S. at 495.    To be

“necessary” an expense must be “appropriate and helpful” to the

taxpayer’s business.     Welch v. Helvering, 290 U.S. at 113-114.

     The performance of services as an employee constitutes a

trade or business.    See sec. 1.162-17(a), Income Tax Regs.     The

employee must show the relationship between the expenditures and


     9
      Respondent calculated this amount by adding the
substantiated claimed unreimbursed employee expenses of $1,313 to
the tax preparation fees allowed of $125.
                               - 24 -

the employment.   See Evans v. Commissioner, T.C. Memo. 1974-267,

affd. 557 F.2d 1095 (5th Cir. 1977).      The taxpayer bears the

burden of substantiation.    Hradesky v. Commissioner, 65 T.C. 87,

90 (1975), affd. per curiam 540 F.2d 821 (5th Cir. 1976).

     Petitioner testified that the unreimbursed employee expenses

were paid in furtherance of his occupation as a truck driver.

Once again, petitioner provided no documentation that would

substantiate that he paid the claimed expenses or that the

alleged expenses were related to his employment as a truck

driver.

     On the basis of the record in this case, we conclude that

petitioner has not substantiated any unreimbursed employee

expenses for taxable year 2000 in excess of the amount allowed by

respondent.   Accordingly, respondent’s determination on this

issue is sustained.

5.   Interest Income

     Petitioner timely filed his Federal income tax returns for

taxable years 2000 and 2001 without reporting any interest

income.   Respondent, in the notice of deficiency, determined that

petitioner received interest income of $113 and $41 for taxable

years 2000 and 2001, respectively.

     The law is clear.   Gross income includes all income from

whatever source derived.    Sec. 61(a).    Section 61(a)(4)

specifically includes income derived from interest.
                               - 25 -

     Respondent has established that petitioner received interest

income from:    (1) Wachovia Bank of $20 and $12 for taxable years

2000 and 2001, respectively; and (2) Fort Jackson Federal Credit

Union of $93 and $29 for taxable years 2000 and 2001,

respectively.

     Petitioner has failed to provide any documentation that

would contradict respondent’s determination.      Furthermore,

petitioner has not specifically testified to not receiving the

above-mentioned interest income.

     On the basis of the record in this case, we conclude that

petitioner has received interest income of $113 and $41 for

taxable years 2000 and 2001, respectively.   Accordingly,

respondent’s determination on this issue is sustained.

     Reviewed and adopted as the report of the Small Tax Case

Division.

                                     Decision will be entered

                                under Rule 155.
