                          T.C. Memo. 1999-63



                        UNITED STATES TAX COURT



                    JOHN PAUL MASSA, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



        Docket No. 12472-97.                      Filed March 4, 1999.



        John Paul Massa, pro se.

        James R. Robb, for respondent.



                          MEMORANDUM OPINION


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

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

182.1


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

     Respondent determined a deficiency in petitioner's Federal

income tax for 1992 in the amount of $5,115 and an addition to

tax pursuant to section 6651(a)(1) in the amount of $1,279.

     The issues for decision are:   (1) Whether petitioner is

entitled to Schedule C trade or business expense deductions; (2)

whether petitioner is entitled to a medical expense deduction for

amounts claimed for his special diet; and (3) whether petitioner

is liable for the section 6651(a)(1) addition to tax.2

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

The stipulations of fact and attached exhibits are incorporated

herein by this reference.   Petitioner resided in Colorado

Springs, Colorado, on the date the petition was filed in this

case.

     Petitioner is a certified public accountant.   He worked as

the chief financial officer of Gates Land Company (GLC) until he

retired in 1989.   At that time, GLC was downsizing its workforce

and petitioner was suffering from complications related to

Crohn's disease.   Crohn's disease is characterized by

inflammation of the lower digestive tract.   Petitioner has

endured numerous surgeries and periods of hospitalization for his

Crohn's disease.   In order to meet his minimum nutritional

requirements, petitioner has followed a special diet and has

     2
          Respondent's adjustments to petitioner's taxable Social
Security benefits, medical expense deduction (other than to the
amounts claimed for his special diet), and miscellaneous itemized
deductions are computational and will be resolved by the Court's
holding on the issues in this case.
                                - 3 -

taken dietary supplements recommended by his physician and a

certified nutritionist.

     Petitioner conducted a bookkeeping activity during 1990 and

1991.   On a Schedule C attached to his 1990 return, he reported

gross income in the amount of $225 and claimed total expenses in

the amount of $10,782.    On a Schedule C attached to his 1991

return, he reported no gross income and claimed total expenses in

the amount of $10,963.    In 1991, he ended his bookkeeping

activity and referred his clients to another certified public

accountant.

     Petitioner purchased personal care products sold by

Melaleuca, Inc. during 1991 and 1992.    According to his bank

statements, the total amounts of his purchases in 1991 and 1992

were $344.32 and $325.28, respectively.

     Petitioner traveled to Russia for 2 weeks in May 1992 to

investigate certain business ventures.    In preparation for these

business ventures, petitioner had retained an office service and

warehouse space in Colorado Springs, Colorado.

     The first issue for decision is whether petitioner is

entitled to Schedule C trade or business expense deductions for

1992.   On a Schedule C attached to his 1992 return, petitioner

reported no gross income and claimed expenses in the total amount

of $20,745 with respect to a "trade" activity.    In the statutory

notice of deficiency, respondent disallowed any deduction for the

claimed expenses.
                               - 4 -

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

necessary expenses paid or incurred during the taxable year in

carrying on a trade or business.    The record contains evidence of

communications which petitioner had in 1991 and 1992 concerning

potential trade with individuals in the former Soviet Republics,

including Russia.   However, there is no evidence that any

completed business transactions resulted from his communications

and travel to Russia.   Petitioner testified that the lack of a

reliable infrastructure and instability in the Russian currency

convinced him that business ventures in Russia were too risky.

     Based on the record, we find that petitioner was not

"carrying on a trade or business" during 1992.   Rather, we find

that he was investigating potential trade opportunities.     We

further find that the amounts paid by him during 1992 in

connection with his trade activity constitute "start-up

expenditures" which are only deductible over the 60-month period

beginning in the month in which an active trade or business

begins.   Sec. 195(b)(1) and (c).   We hold that petitioner is not

entitled to any deductions for his Schedule C trade or business

expenses for 1992 because his alleged business activity did not

rise to the level of an active trade or business during 1992.

Sec. 195.

     The second issue for decision is whether petitioner is

entitled to a medical expense deduction for amounts claimed for

his special diet.
                               - 5 -

      On a Schedule A attached to his 1992 return, petitioner

claimed medical expenses in the total amount of $7,960.     In the

statutory notice of deficiency, respondent disallowed any

deduction for $2,696 of the claimed expenses on the ground that

petitioner did not establish that the disallowed amount meets the

requirements of section 213.   This disallowed amount represents

the costs which petitioner claimed for his special diet.

      Section 213(a) allows as a deduction the expenses paid

during the taxable year, not compensated by insurance or

otherwise, for the medical care of the taxpayer, to the extent

that such expenses exceed 7.5 percent of adjusted gross income.

The term "medical care" includes the diagnosis, cure, mitigation,

treatment, or prevention of disease.   Sec. 1.213-1(e)(1)(i),

Income Tax Regs.   Deductions for expenditures for medical care

allowable under section 213 are confined strictly to expenses

paid primarily for the prevention or alleviation of a physical or

mental defect or illness.   Sec. 1.213-1(e)(1)(ii), Income Tax

Regs.   An expenditure which is merely beneficial to the general

health of an individual is not an expenditure for medical care.

Id.

      We have held that the additional costs of obtaining

medically required foods are deductible as expenditures for

medical care.   Randolph v. Commissioner, 67 T.C. 481 (1976); Cohn

v. Commissioner, 38 T.C. 387 (1962); Von Kalb v. Commissioner,

T.C. Memo. 1978-366.   On the other hand, we have rejected

taxpayers' claims for deductions for special foods which were
                                 - 6 -

found to be merely substitutes for foods normally consumed by an

individual.     Harris v. Commissioner, 46 T.C. 672 (1966); Estate

of Webb v. Commissioner, 30 T.C. 1202, 1213-1214 (1958); Collins

v. Commissioner, T.C. Memo. 1965-233.     The costs of a special

diet are deductible only to the extent the taxpayer establishes

that such costs exceed the costs of a normal diet.     Nehus v.

Commissioner, T.C. Memo. 1994-631, affd. without published

opinion 108 F.3d 338 (9th Cir. 1997); Crawford v. Commissioner,

T.C. Memo. 1993-192.

     Based on the record, we find that petitioner has failed to

establish that his special diet was other than a substitute for a

normal diet.    We are not convinced that his special diet,

although followed for medical reasons, differed from the diet of

an ordinarily health-conscious individual.    Sec. 1.213-

1(e)(1)(ii), Income Tax Regs.    Moreover, petitioner has failed to

establish the amount by which his actual food expenditures

exceeded the costs of a normal diet.     Petitioner testified that

he deducted 66 percent of his total food expenditures for 1992 as

medical expenses, but submitted little evidence of the cost,

quantity, or type of foods and supplements which he purchased

during 1992.    We are therefore unable to make an estimate of his

excess costs.    Cf. Cohan v. Commissioner, 39 F.2d 540 (2d. Cir.

1930); Von Kalb v. Commissioner, supra.

     We hold that petitioner is not entitled to a medical expense

deduction for the amounts claimed for his special diet.
                                - 7 -

     The third issue for decision is whether petitioner is liable

for the section 6651(a)(1) addition to tax.

     Section 6651(a)(1) imposes an addition to tax for failure to

timely file a return, unless the taxpayer establishes that such

failure is due to reasonable cause and not due to willful

neglect.   "Reasonable cause" requires the taxpayer to demonstrate

that it exercised ordinary business care and prudence and was

nonetheless unable to file a return within the prescribed time.

United States v. Boyle, 469 U.S. 241, 245-246 (1985).     "Willful

neglect" means a conscious, intentional failure or reckless

indifference.   Id.   The addition to tax equals 5 percent of the

tax required to be shown on the return if the failure to file is

for not more than 1 month, with an additional 5 percent for each

additional month or fraction of a month during which the failure

to file continues, not to exceed a maximum of 25 percent.     Sec.

6651(a)(1).

     Petitioner testified that he thought that he was not

required to file a return for 1992 because he believed that his

gross income for 1992 was less than $5,900.    Section 6012

provides that an individual with a filing status of single must

file an income tax return for any taxable year in which his

"gross income" exceeds the sum of the section 151(d)(1) exemption

amount and the section 63(c)(2) basic standard deduction for such

individual.   Sec. 6012(a)(1)(A)(i).    The sum of these amounts for

petitioner's 1992 taxable year was $5,900.    However, petitioner's

reported gross income for 1992 was $31,452, consisting of
                                   - 8 -

interest ($794), dividends ($723), and taxable individual

retirement account distributions ($29,935).      Petitioner

erroneously believed that his claimed Schedule C business expense

deductions and his alleged net operating carryover losses from

1990 and 1991 reduced his reported gross income for 1992 below

$5,900.    These amounts reduce "taxable income" under section

63(a), but do not reduce "gross income" under section 61(a).

See, e.g., sec. 61(a)(2); sec. 1.61-3(a), Income Tax Regs. (gross

income derived from business determined "without subtraction of

selling expenses, losses or other items not ordinarily used in

computing costs of goods sold").      Thus, petitioner's reported

gross income for 1992 exceeded the section 6012(a)(1)(A)(i)

threshold for filing a return.3

     Petitioner's return for his 1992 taxable year was due on

April 15, 1993.    Sec. 6072(a).    Respondent received petitioner's

1992 return at his Ogden, Utah, service center on August 10,

1994.    In light of the fact that he is a certified public

accountant, we find that petitioner's failure to understand the

basic term "gross income" does not constitute reasonable cause

for not timely filing his return.      Accordingly, we hold that

petitioner is liable for the section 6651(a)(1) addition to tax.




     3
          We note that petitioner's actual gross income for 1992
is greater than his reported gross income as a result of the
computational adjustment to the taxable amount of his Social
Security benefits under sec. 86.
                            - 9 -

To reflect the foregoing,



                                         Decision will be entered

                                    for respondent.
