                        T.C. Memo. 2008-280



                      UNITED STATES TAX COURT



        MOSHE SHAFRIR AND LILIA VALITOVA, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8482-07.              Filed December 15, 2008.



     Moshe Shafrir, pro se.

     Catherine G. Chang, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION

     SWIFT, Judge:   Respondent determined a deficiency of $8,270

in petitioners’ Federal income taxes for 2004, a $1,675 addition

to tax under section 6651(a)(1), and a $1,654 accuracy-related

penalty under section 6662(a).
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     Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for 2004, and all Rule

references are to the Tax Court Rules of Practice and Procedure.

     At issue is petitioner Moshe Shafrir’s entitlement to

deductions for business expenses, dependency exemptions, and Hope

Scholarship credits beyond those allowed by respondent.

Petitioner Lilia Valitova is a petitioner only because she filed

a 2004 joint Federal income tax return with her husband.

References to petitioner are to Moshe Shafrir.


                           FINDINGS OF FACT

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

     At the time the petition was filed petitioner resided in

California.

     In 1980 petitioner graduated from the Technion-Israel

Institute of Technology in Israel with a bachelor’s degree in

architecture and town planning.    Thereafter, petitioner married,

moved to the United States, and eventually became licensed as an

architect in California.

     In 2004 petitioner was employed as an architect in San Jose,

California, and in San Francisco, California.    Petitioner also

worked as an independent architect.

     At his home petitioner maintained a cellular telephone line

and three telephone land lines.    All of the telephone lines were
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used by petitioner and his family in their personal affairs and

also by petitioner in his work as an independent architect.

     In 2004 petitioner took 29 automobile trips totaling 7,320

miles to various cities in California, and petitioner kept a

mileage log relating thereto.   The trips were described in

petitioner’s mileage log as being taken for the purpose of either

“meeting with potential clients” (837 miles) or “marketing,

urban, and architectural study” (6,483 miles).     With respect to

trips described as made for the purpose of meeting with potential

clients, petitioner also noted in his log the client’s name, the

location and subject of the meeting, and the architectural work

involved.

     With respect to trips described as made for the purpose of

marketing, urban, and architectural study, petitioner made no

further notes in his log, but petitioner explained at trial that

these trips were not made in connection with a particular client

or a particular architectural work assignment but were made to

generally inform petitioner as to the current urban planning and

architecture of the cities visited.     On these trips petitioner

generally stayed overnight with friends or at campsites in

National parks, and petitioner occasionally brought his family

along with him.
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     In 2004 petitioner’s son and daughter attended college as

full-time students, and petitioner’s son also worked as a full-

time chef at a restaurant.

     On his 2002 and 2003 Federal income tax returns, petitioner

claimed Hope Scholarship credits for education expenses he

incurred in 2002 and 2003 on behalf of his son and daughter.

     In 2005 petitioner’s son timely filed his own 2004

individual Federal income tax return on which he claimed himself

as a dependent and on which he reported $27,309 in income

relating to his employment as a chef.

     On January 18, 2006, petitioner late filed his 2004 return

to which petitioner attached a Schedule C, Profit or Loss From a

Business (Sole Proprietorship), relating to his work as an

independent architect, petitioner reported business expenses of

$11,478.   Petitioner also claimed $6,200 in dependency exemptions

and $3,000 in Hope Scholarship credits with respect to his son

and daughter.

     On audit respondent determined that petitioner had not

substantiated and therefore was not entitled to the claimed

$11,478 Schedule C expenses, the $6,200 dependency exemptions,

and the $3,000 Hope Scholarship credits.   Respondent also

determined that petitioner was liable for the addition to tax

under section 6651(a)(1) and the accuracy-related penalty under

section 6662(a).
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     On April 16, 2007, petitioner filed with this Court his

petition relating to respondent’s statutory notice of deficiency.

     On April 26, 2008, petitioner’s son filed with respondent a

Form 1040X, Amended U.S. Individual Income Tax Return, for 2004

on which he disclaimed himself as a dependent and with which he

included a $493 payment for the additional taxes owed in

connection with his disclaimer of his dependency exemption.

     Before trial the parties entered into various settlement

concessions with respect to the disallowed Schedule C expenses

relating to petitioner’s work in 2004 as an independent

architect.   The schedule below reflects the expenses claimed by

petitioner on the Schedule C attached to his 2004 return, the

amounts conceded by either petitioner or respondent, and the

amounts still in dispute:
                                  - 6 -
                        Claimed        Conceded     Conceded    Still
 Claimed Schedule          by             by           by         in
    C Expenses         Petitioner     Petitioner   Respondent Dispute

Advertising                $495               $0        $0       $495
Computer depreciation       328              328         0          0
Software depreciation       976                0         0        976
Heater depreciation           5                0         0          5
Legal/prof. services        416                0       300        116
Office supplies             358                0         0        358
Repairs/maintenance         385                0         0        385
Prof. literature            756                0         0        756
Mailing/shipping            321                0         0        321
Printing/copying            401                0         0        401
Prof. training            1,305                0         0      1,305
Architect’s license         200                0       200          0
Telephone                 1,973                0         0      1,973
Trips                     2,711                0       314      2,397
                      *
    Total amount        $10,630             $328      $814     $9,488
     *
       It is unclear from the record the reason for the
discrepancy between the $11,478 claimed expenses on the
Schedule C attached to petitioner’s 2004 tax return and the
$10,630 total expenses listed in the above schedule.


     The parties also agreed that the claimed dependency

exemption for petitioner’s daughter was allowable.


                                  OPINION

     Generally, as to claimed deductions a taxpayer bears the

burden of proof, and respondent’s determinations are entitled to

a presumption of correctness.1      Rule 142(a); Welch v. Helvering,

290 U.S. 111, 115 (1933); Durando v. United States, 70 F.3d 548,

550 (9th Cir. 1995).   A taxpayer is required to maintain and to

submit to respondent upon request documentation sufficient to

     1
        Petitioner makes no argument that he qualifies under sec.
7491(a) for a shift in the burden of proof.
                               - 7 -
establish the amount and purpose of deductions claimed.       Sec.

6001; sec. 1.6001-1(a), Income Tax Regs.

     Where appropriate, the Court may estimate the amount of the

expenses and allow deductions therefor.     Cohan v. Commissioner,

39 F.2d 540, 543-544 (2d Cir. 1930); Vanicek v. Commissioner, 85

T.C. 731, 742-743 (1985).

     Under section 162 a taxpayer is allowed to deduct all

ordinary and necessary business expenses paid or incurred during

the year.   However, deductions for personal, living, or family

expenses are not allowed unless expressly provided under the

Code.   Sec. 262(a).

     At trial petitioner submitted documentation relating only to

the telephone and travel expenses.     No documentation was

submitted with regard to the other claimed Schedule C expenses

still in dispute.

     With regard to the telephone expenses of $1,973, the

documentation petitioner submitted does not provide sufficient

information to distinguish which expenses were incurred in

petitioner’s work as an architect and which expenses were

incurred in petitioner’s personal and family affairs.     Petitioner

has not properly substantiated the claimed telephone expenses and

has not submitted sufficient evidence for us to make an estimate

of deductible telephone expenses.    See Vanicek v. Commissioner,
                               - 8 -
supra at 742-743.   The $1,973 in disputed telephone expenses are

not allowed as ordinary and necessary business expenses.

     Regarding the $2,397 travel expenses still in dispute

(relating just to the trips described as made for the purpose of

marketing, urban, and architectural study), expenses incurred by

a taxpayer to further his general education are generally treated

as nondeductible personal expenses unless they qualify as

business expenses under section 162.   Sec. 274(m)(2); Boser v.

Commissioner, 77 T.C. 1124, 1133-1134 (1981), affd. without

published opinion (9th Cir., Dec. 22, 1983); sec. 1.262-1(b)(9),

Income Tax Regs.

     In Postman v. Commissioner, T.C. Memo. 1974-145, we held

that an architect’s expenses incurred while traveling with his

family in Europe for the purpose of acquiring increased

understanding of various architectural styles did not qualify as

deductible ordinary and necessary business expenses.   See also

Cole v. Commissioner, T.C. Memo. 1983-88 (expenses incurred on

businessman’s travel to different cities to educate himself

generally on store management and good business practices did not

qualify as deductible ordinary and necessary expenses).

     The business purpose of the $2,397 travel expenses still in

dispute has not been adequately substantiated and the $2,397 are

not allowed as ordinary and necessary business expenses.
                                 - 9 -
     Regarding petitioner’s claimed dependency exemption for his

son, generally a taxpayer is allowed an exemption for a dependent

if, among other things, the taxpayer has provided over one-half

of the dependent’s support and the dependent has not claimed

himself as a dependent for the same year.   Secs. 151(a), (c),

152(a).

     In determining whether a taxpayer provided over one-half of

the support for a claimed dependent, the amount of support

provided by the taxpayer is compared to the total amount of

support which the claimed dependent received from all sources.

Sec. 1.152-1(a)(2)(i), Income Tax Regs.   “[S]upport” is defined

as, among other things, food, shelter, clothing, education, and

medical and dental care.   Id.

     Where a claimed dependent has income in the year in which he

is claimed as a dependent, only that portion of the claimed

dependent’s income which is actually spent on the claimed

dependent’s support is considered in determining total “support”

under section 152.   See Carter v. Commissioner, 55 T.C. 109, 112

(1970).

     Petitioner claims that in 2004 his son did not spend any of

the $27,309 earned as a chef for his own support, that petitioner

provided over one-half of his son’s support, and that because of

his son’s disclaimer on his son’s amended 2004 tax return,

petitioner should be allowed the exemption for his son.
                               - 10 -
     Petitioner has submitted no credible evidence to corroborate

that he provided over one-half of his son’s support for 2004 and

that his son did not provide over one-half of his own support.

Petitioner’s son does not qualify under section 152(a), and

petitioner may not treat his son under section 151(a) and (c) as

a dependent for 2004.

     Under section 25A(b)(2), Hope Scholarship credits may be

claimed for the first 2 years of a student’s postsecondary

education.    Because petitioner claimed Hope Scholarship credits

for 2002 and 2003 with respect to his son and daughter, the Hope

Scholarship credits petitioner claims for 2004 are disallowed.

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

taxpayer’s failure to timely file a tax return unless the

taxpayer proves that such failure is due to reasonable cause and

not willful neglect.    See United States v. Boyle, 469 U.S. 241,

245 (1985).    By virtue of the adjustments that we sustain herein,

respondent has carried his burden of production under section

7491(c) as to the addition to tax and the penalty.

     Petitioner provided no explanation and submitted no evidence

to suggest that his failure to timely file his 2004 return was

due to reasonable cause.    We sustain respondent’s imposition of

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

     Section 6662(a) and (b)(1) imposes an accuracy-related

penalty equal to 20 percent of the underpayment of the taxes
                              - 11 -
required to be shown on a return where the underpayment, or a

portion thereof, is due to negligence or disregard of rules or

regulations.

     For purposes of section 6662(b)(1), the term “negligence”

includes “any failure by the taxpayer to keep adequate books and

records or to substantiate items properly.”   Sec. 1.6662-3(b)(1),

Income Tax Regs.

     Where a taxpayer can demonstrate reasonable cause for the

underpayment, an exception to the section 6662(a) penalty may be

granted.   Sec. 6664(c)(1).

     Petitioner has not explained his failure to keep and

maintain proper documentation to substantiate the Schedule C

expenses that we disallow and his expenses relating to the

dependency exemption for his son that we disallow.   The claimed

Hope Scholarship credits for his son and daughter were clearly

not allowable.

     We sustain respondent’s imposition of the accuracy-related

penalty under section 6662(a).

     To reflect the foregoing,


                                       Decision will be entered

                                 under Rule 155.
