                        T.C. Memo. 1995-457


                      UNITED STATES TAX COURT



     LEROY WALKER, JR. AND CAROLYN L. WALKER, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent


Docket No. 5764-94.                      Filed September 26, 1995.


Leroy Walker, Jr. and Carolyn L. Walker, pro sese.

Aretha Jones, for respondent.


                        MEMORANDUM OPINION



     JACOBS, Judge: Respondent determined deficiencies in

petitioners' 1990 and 1991 Federal income taxes in the amounts of

$10,781 and $7,232, respectively.

     After concessions by the parties, the issues remaining for

decision, all of which involve petitioners'* entitlement to

deductions, dependency exemptions, and child care credits as

claimed on their tax returns for 1990 and 1991, are:
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     (1) Whether petitioners are entitled to itemized deductions

as claimed on Schedules A in excess of the amounts allowed by

respondent.   We hold that they are not.

     (2) Whether petitioners are entitled to deductions for

business expenses as claimed on Schedules C. We hold that they

are not.

     (3) Whether petitioners are entitled to six dependency

exemptions as claimed for 1990 and five dependency exemptions as

claimed for 1991. We hold that they are entitled to two of the

six exemptions claimed for 1990 and two of the five exemptions

claimed for 1991.

     (4) Whether petitioners are entitled to child care credits

as claimed. We hold that they are not.

     For simplicity, we shall first set forth the relevant

background facts and general legal principles; we will then

combine our findings of fact and opinion with respect to each

issue.

Background Facts

     Some of the facts have been stipulated and are found

accordingly. The stipulation of facts and the attached exhibits

are incorporated herein by this reference. Petitioners, husband

and wife, filed joint tax returns for both years in issue. The

returns were prepared by a paid tax preparer. Petitioners resided

in Fort Washington, Maryland, at the time they filed their

petition.
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     Leroy Walker, Jr. is a high school graduate. During the

years under consideration, he was a salesman for an automobile

dealership.   He also ran an automobile detailing business, and,

in 1991, he was a franchisee of a U-Haul rental business. Carolyn

L. Walker is a college graduate with a degree in business. For

the past 18 years, she has worked as a driver’s license      examiner

for the Commonwealth of Virginia.      Mr. and Mrs. Walker were

married in 1983. It was Mr. Walker's first marriage and Mrs.

Walker's second marriage. Mr. Walker has a daughter, Kimberly

Shavon Walker (Kimberly), who was born in 1978; Kimberly's mother

is Mabel Savoy (Ms. Savoy). During the years under consideration,

Kimberly lived in petitioners' household. Although Ms. Savoy

would occasionally buy gifts for Kimberly, and Kimberly would

occasionally stay with Ms. Savoy, petitioners provided the

majority of Kimberly's support.

     Mrs. Walker has two daughters born of her prior marriage:

Monica Covington (Monica), born in 1970, and Erica Covington

(Erica), born in 1974. During 1990, Monica was a full-time

college student. In addition to attending college, Monica worked

as a secretary, earning approximately $8,000 in 1990.

     During the years under consideration, Erica lived with

petitioners and attended high school. She worked part time,

earning approximately $2,000 during both 1990 and 1991. Both Monica

and Erica claimed personal exemptions for themselves on their 1990 and

1991 Federal income tax returns.
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     Mrs. Walker has a stepdaughter, Avis Bivens Faskey (Mrs.

Faskey), from her prior marriage. Both Mrs. Faskey and her

husband were incarcerated during 1990 and 1991. As a result, Mrs.

Walker's stepdaughter's three children lived with petitioners in

1990. The children, Tremayne Bivens Faskey (Tremayne), Trovor

Faskey (Trovor), and Jessie Covington (Jessie), all were under 10

years of age as of 1991. Petitioners cared for Tremayne and

Trovor during 1990 and 1991, and for Jessie for part of 1990.

     General Legal Principles

     As a general rule, the Commissioner's determinations are

presumed correct; the taxpayer bears the burden of proving that

those determinations are erroneous. Rule 142(a);1   Welch v.

Helvering, 290 U.S. 111, 115 (1933).

     Deductions are strictly a matter of legislative grace; the

taxpayer bears the burden of proving that he or she is entitled

to the deductions claimed. Rule 142 (a); New Colonial Ice Co. v.

Helvering, 292 U.S. 435, 440 (1934).    This includes the burden of

substantiation. Hradesky v. Commissioner, 65 T.C. 87, 90 (1975),

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

     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



     1
      All Rule references are to the Tax Court Rules of Practice
and Procedure. All section references are to the Internal Revenue
Code in effect for the years under consideration.
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trial record provides sufficient evidence' that the taxpayer has

incurred a deductible expense, but the taxpayer is unable to

adequately substantiate the exact amount of the deduction to

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

amount of such expense and allow the deduction to that extent.

Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930).

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

expense, we must have some basis upon which an estimate may be

made. Vanicek 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).

     We now address each category of disallowed items

independently.

     1.   Schedule A Deductions

     On Schedule A of their 1990 Federal income tax return,

petitioners claimed, and respondent subsequently allowed, the

following deductions:

Item                          Claimed       Allowed
Real estate taxes             $ 2,238       $ 2,238
Personal interest (10 percent) 4,443             46
Charitable contributions        7,383         1,200
Payment worker's comp. fund    10,207            -0
Mortgage interest              12,793        12,375

     On Schedule A of their 1991 Federal income tax return,

petitioners claimed, and respondent subsequently allowed, the

following deductions:

     Item                         Claimed   Allowed
     Real estate taxes            $ 3,221   $ 2,463
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     Charitable contributions   5,550     1,200
     Mortgage interest        14,148     12,205

     Petitioners failed to produce any convincing evidence to

substantiate the itemized deductions claimed on Schedules A of

their 1990 and 1991 returns in excess of the amounts allowed by

respondent. Accordingly, based on the record before us, we

sustain respondent's disallowance of Schedule A deductions except

as conceded.

     2.   Schedule C Deductions

     On Schedule C of their 1990 Federal income tax return,

petitioners claimed deductions of $10,987. They claimed Schedule

C deductions for 1991 totaling $10,257. Respondent disallowed all

of these deductions on the basis of petitioners' failure to

substantiate.

     At trial, petitioners failed to produce any convincing

evidence to substantiate the deductions claimed on Schedules C of

their 1990 and 1991 returns. Further, there is nothing in the

record before us that would provide us with a basis upon which an

estimate could be made. Accordingly, based on petitioners'

failure to satisfy their burden of proving respondent erred in

disallowing the claimed Schedule C deductions, we sustain

respondent's determination in this regard.

     3. Dependency Exemptions

     Petitioners have convinced us that they are entitled to

dependency exemptions for Kimberly (Mr. Walker's daughter) and
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Erica (Mrs. Walker's daughter) for both 1990 and 1991. During

these years, they both were under the age of 19, and petitioners

provided over one-half of the support for each of them. Sec.

152(a). However, we are not convinced that petitioners are

entitled to dependency exemptions for Monica or any of the

children of Mrs. Walker's stepdaughter. With respect to Monica,

the record reveals that she earned $8,000 in 1990, the only year

before us in which petitioners claimed a dependency exemption for

her. We are not satisfied that petitioners provided over one-half

of her support for 1990. Sec. 152(a). With respect to Tremayne,

Trovor, and Jessie, the children of Mrs. Walker's stepdaughter,

we are not convinced that these children were members of

petitioners' household during 1990 and 1991. The record was held

open in order to permit petitioners an opportunity to provide the

Court with copies of Tremayne's and Trovor's school records, as

petitioners indicated they would, but petitioners failed to

provide such documentation. Accordingly, based on the record

before us, we hold that petitioners are entitled to only two of

the claimed dependency exemptions for both 1990 and 1991.

     4.Child Care Credits

     Section 21 (a) allows a credit for a "percentage of the

employment-related expenses * * * paid by * * * [an] individual

during the taxable year" if the individual maintains a household

that includes "one or more qualifying individuals". A qualifying

individual includes a dependent of the taxpayer who is under the age
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of 13 and for whom the taxpayer may claim an exemption under section

151 (c) , or a dependent or spouse of the taxpayer who is mentally

or physically incapable of caring for himself or herself. Sec. 21

(b) (1) (A) and (B). Section 21 (e) (9) provides that a child care

credit is not allowed for an amount paid to any person unless the

name, address, and taxpayer identification number of such person is

included on the return claiming the credit or the taxpayer has

exercised due diligence in attempting to provide the information.

    On both their 1990 and 1991 tax returns, petitioners claimed

(for each year) a child care credit of $960 .   The returns indicate

that for 1990 the care provider was "Day Care Center" and for 1991

"Full Gospel Church".

    Mrs. Walker testified that while she was at work: (1)

Petitioners paid Myrtle Brill, a neighbor of her stepdaughter,

approximately $50 every 2 weeks to watch the children; (2) the

method of payment to the neighbor was cash; and (3) Myrtle Brill

died prior to the date of, trial. Petitioners did not present

receipts for the cash payments. Petitioners failed to substantiate

the alleged child care payments. They offered no explanation of the

discrepancy between the identity of the care provider as reported on

the tax returns and that to which Mrs. Walker testified. Petitioners

would not be entitled to the claimed child care credits in any event

because the children to whom the care was allegedly provided were

not dependents of petitioners. Accordingly, respondent's

determination with respect to this issue is sustained.
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To reflect the foregoing and concessions by the parties,

                Decision will be entered under Rule 155.
