                        T.C. Memo. 1999-207



                      UNITED STATES TAX COURT



              ROY J. AND HELEN COLE, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 5394-98.              Filed June 22, 1999.



     Roy J. Cole, pro se.

     Anne S. Daugharty, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     PARR, Judge:   Respondent determined a $31,714 deficiency in

petitioners' 1995 Federal income tax, an addition to tax under
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section 6654(a)1 in the amount of $1,719.60, and an accuracy-

related penalty under section 6662(a) in the amount of $6,342.80.

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

for 1995 petitioners are entitled to certain deductions related

to petitioner's home office.     We hold they are not.   (2) Whether

for 1995 petitioners are liable for the accuracy-related penalty

pursuant to section 6662(a).     We hold they are.

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

The stipulated facts and the accompanying exhibits are

incorporated herein by this reference.     At the time the petition

in this case was filed, petitioners resided in Edmonds,

Washington.

                            FINDINGS OF FACT

       Petitioner has been in the floor covering business since

1962.      Each morning petitioner spends approximately 1 hour in his

home office contacting customers, builders, and suppliers.     When

petitioner returns home at night, he spends a few more hours in

his home office preparing various paperwork and returning calls

to people who left messages on his answering machine during the

day.



       1
      All section references are to the Internal Revenue Code in
effect for the taxable year in issue, and all Rule references are
to the Tax Court Rules of Practice and Procedure, unless
otherwise indicated. References to petitioner are to Roy J.
Cole.
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     Petitioners' home is approximately 1,300 square feet, and

petitioner's home office is approximately 110 square feet.    When

petitioners' children grew up and moved out, petitioner converted

one of the bedrooms in the house for use as a home office.

     Petitioner does not have an office located anywhere else and

does not use this room in the house for any purpose other than a

home office.   No person other than petitioner uses the room.

There is no bed or dresser located in the room, and petitioner

does not use the room for any type of storage.

     Petitioner has one phone line for the household that doubles

as a business line.   Petitioner keeps business-related materials

in the room, such as a computer, books pertaining to his trade,

and business records.

     Respondent did not raise an issue regarding substantiation.

                              OPINION

     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.

     Section 280A, in general, disallows deductions with respect

to the use of a dwelling unit that is used by the taxpayer during

the taxable year as a residence.   However, section 280A(c)(1)(A)

permits the deduction of expenses allocable to a portion of the

dwelling unit which is exclusively used on a regular basis as

"the principal place of business for any trade or business of the
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taxpayer".   Thus, to qualify under section 280A(c) for a home

office deduction, petitioner must establish that a portion of his

dwelling is (1) exclusively used, (2) on a regular basis, and (3)

as the principal place of business for his trade or business.

See Hamacher v. Commissioner, 94 T.C. 348, 353 (1990).

     We are satisfied that petitioner's home office was used

exclusively and regularly in petitioner's business.   We now

consider whether petitioner's home office was his principal place

of business.

     In Commissioner v. Soliman, 506 U.S. 168 (1993), the Supreme

Court identified two primary factors to be considered in deciding

whether a home office is the taxpayer's principal place of

business: (1) The relative importance of the activities performed

at each business location, and (2) the time spent at each place.

See id. at 175.   The relative importance of the activities

performed at each business location is to be determined by the

basic characteristics of the taxpayer's particular business.     The

point where goods and services are delivered must be given great

weight in determining the place where the most important

functions are performed.   See id.

     In Commissioner v. Soliman, supra, the taxpayer was an

anesthesiologist who divided the practice of his profession among

three hospitals in Maryland and Virginia.   The taxpayer

administered the anesthesia, cared for patients after surgery,
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and treated patients for pain at the hospitals.     See id. at 170.

None of the three hospitals provided the taxpayer with an office.

See id.

      The taxpayer had a spare bedroom in his residence which he

used exclusively as an office.     See id.   The taxpayer did not

meet with patients at his home office, but he did spend 2 to 3

hours per day there performing various administrative tasks, such

as:   (1) Contacting patients, surgeons, and hospitals by

telephone, (2) maintaining billing records and patient logs, (3)

preparing for treatments and presentations, (4) satisfying

continuing medical education requirements, and (5) reading

medical journals and books.   See id.     On the basis of these

circumstances, the Supreme Court held that the home office was

not the taxpayer's principal place of business, and therefore the

taxpayer was not entitled to a deduction for home office

expenses.   See id. at 178-179.

      In the instant case, petitioner's services are not performed

at the home office.   Instead, his floor covering services are

performed at the job sites.   Therefore, while the home office was

an important place for petitioner's business, we cannot say that

it was his principal place of business.      Accordingly, petitioner
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has not satisfied the requirements of section 280A and is not

entitled to a deduction for the use of a home office.2

     In addition, respondent determined an accuracy-related

penalty pursuant to section 6662(a).   Section 6662 provides for

an accuracy-related penalty equal to 20 percent of the portion of

the underpayment due to negligence or disregard of rules or

regulations.   For purposes of section 6662, negligence "includes

any failure to make a reasonable attempt to comply with the * * *

[income tax laws]" and disregard "includes any careless,

reckless, or intentional disregard."   See sec. 6662(c).

     The Commissioner's determinations are presumptively correct,

and the taxpayer bears the burden of proving otherwise.     See Rule

142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).      Petitioner

testified that he did not think he was negligent.   Petitioner has

failed to carry his burden.   Accordingly, respondent is sustained

on this issue.




     2
      For tax years beginning after Dec. 31, 1998, sec.
280A(c)(1) has been amended to read: "the term 'principal place
of business' includes a place of business which is used by the
taxpayer for the administrative or management activities of any
trade or business of the taxpayer if there is no other fixed
location of such trade or business where the taxpayer conducts
substantial administrative or management activities of such trade
or business." Our holding regarding petitioner's home office for
his 1995 taxable year does not imply that petitioner may not be
eligible for a home office deduction in the future.
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For the foregoing reasons,

                                      Decision will be entered

                                 under Rule 155.
