                   T.C. Summary Opinion 2008-45



                      UNITED STATES TAX COURT



                 DOROTHY E. WOODARD, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 13006-06S.             Filed April 29, 2008.



     Dorothy E. Woodard, pro se.

     Carrie L. Kleinjan, for respondent.



     CHABOT, Judge:   This case was heard pursuant to section

7463.1   The decision to be entered is not reviewable by any other

court, and this opinion shall not be treated as a precedent for

any other case.   Sec. 7463(b).


     1
       Unless indicated otherwise, all section references are to
sections of the Internal Revenue Code of 1986 as in effect for
the year in issue, except as to sec. 7463, which is as in effect
for proceedings commenced on the date the petition in the instant
case was filed.
                              - 2 -

     Respondent determined a deficiency in Federal individual

income tax and an accuracy-related penalty under section 66622

against petitioner for 2003 in the respective amounts of $12,470

and $2,494.

     The issues for decision are:

          (1) Whether petitioner is entitled to any

     deduction for--

                 (a) Medical and dental expenses;

                 (b) employee business expenses; and

                 (c) charitable contributions;

     and, if so, then in what amounts; and

          (2) whether petitioner is liable for an accuracy-

     related penalty and, if so, then in what amount.

                           Background

     The stipulations and the stipulated exhibits are

incorporated herein by this reference.

     When the petition in the instant case was filed, petitioner

resided in Pennsylvania.

     During 2003 petitioner worked as a registered nurse for 11

different health care providers--3 in Philadelphia, Pennsylvania,

2 in Sparks, Maryland, and 1 in each of the following




     2
       At trial respondent’s counsel clarified that the penalty
is for substantial understatement of income tax and not for
negligence or any other category to which sec. 6662 applies.
                                 - 3 -

Pennsylvania cities--Plymouth Meeting, Lafayette Hill, Wyndmoor,

Bensalem, Darby, and Chalfont.     In 2003 petitioner resided in

Lansdowne, Pennsylvania.

     Petitioner was paid (and reported) an aggregate of $79,089

as wages and salaries for her services as a registered nurse,3

from which Federal income tax of $4,393 was withheld.

     Petitioner’s 2003 adjusted gross income was $79,424,

consisting of $79,089 of wages and salary, $15 of interest, and a

$320 State and local income tax refund.

     Table 1 shows the amounts petitioner claimed on the Schedule

A, Itemized Deductions, attached to her 2003 Form 1040, U.S.

Individual Income Tax Return.

                                Table 1

         Medical and dental expenses      $26,400
           Less: 7.5-percent floor          5,957
           Deduction                                   $20,443
         State and local income taxes                    4,152
         Charitable contributions
           (cash or check)                              17,000
         Unreimbursed employee expenses   $18,500


     3
       All but $7,500 of this aggregate was reported on Forms W-
2, Wage and Tax Statement. The remaining $7,500 was reported on
a Form 1099-MISC, Miscellaneous Income, and was designated
thereon as “Nonemployee compensation”. Petitioner included this
$7,500 in the amount she reported as “Wages, salaries, tips,
etc.”. She did not report this as business income, she did not
claim “above-the-line” deductions, and she did not show a self-
employment tax liability on her tax return. Respondent neither
determined nor asserted that petitioner had a self-employment tax
liability in addition to her ch. 1 tax liability. Both sides
appear to treat this $7,500 as income from petitioner’s
registered nurse services as an employee; we do so also, without
further exploration.
                                 - 4 -

           Less: 2-percent floor             1,588
           Deduction                                       16,912
         Total itemized deductions                         58,507

     Respondent disallowed the entire $58,507 of claimed itemized

deductions, and instead allowed the $4,750 standard deduction.4

Petitioner has not kept receipts relevant to her taxes since she

started working in 1965.

     In 2003 petitioner paid medical and dental expenses.       Her

2003 medical and dental expenses that were not compensated for by

insurance or otherwise did not exceed $5,957.

     In 2003 petitioner paid expenses in connection with her

trade or business as an employee performing services as a

registered nurse.     See supra note 3.   Her 2003 employee business

expenses did not exceed $1,588.

     In 2003 petitioner made charitable contributions.       Her 2003

charitable contributions did not exceed $598.        See supra note 4.

     Petitioner’s 2003 tax return did not adequately disclose the

relevant facts affecting the tax treatment of any of the

disallowed deductions.     Petitioner did not have reasonable cause

for the positions she took on her 2003 tax return.



     4
       Because the standard deduction of $4,750 exceeds
petitioner’s claimed $4,152 deduction for State and local income
taxes, respondent disallowed all of petitioner’s itemized
deductions and allowed the standard deduction. However,
respondent does not dispute the $4,152 deduction, which would be
taken into account if we were to conclude that more than $598 of
the disputed deductions (after any appropriate “floors”) are
allowable.
                                - 5 -

                              Discussion

I.   Itemized Deductions

      A.   In General

      In general, the Commissioner’s determinations as to matters

of fact in the notice of deficiency are presumed to be correct,

and the taxpayers have the burden of proving otherwise.   See Rule

142(a);5 Welch v. Helvering, 290 U.S. 111, 115 (1933).

Petitioner has not contended that section 7491 applies so as to

shift the burden of proof; on the record in the instant case, if

such a contention had been made, then we would have concluded

that the requirements of section 7491(a)(2) have not been met,

and so the burden of proof would not have been shifted.

     We will consider first the medical expenses, then the

employee business expenses, and then the charitable

contributions.

     B.    Medical Expenses

      Petitioner is entitled to deduct her medical expenses, but

only “to the extent that such expenses exceed 7.5 percent of

[her] adjusted gross income.”    Sec. 213(a).

      On her 2003 tax return, petitioner claimed $26,400 of

medical and dental expenses, subtracted $5,957 (7.5 percent of

$79,424 adjusted gross income), and claimed the remaining $20,443



      5
       Unless indicated otherwise, all Rule references are to the
Tax Court Rules of Practice and Procedure.
                               - 6 -

as an itemized deduction.   Respondent disallowed the entire

$26,400.   Because of the 7.5-percent “floor”, petitioner is not

entitled to a deduction for her medical expenses unless (and only

to the extent that) those 2003 expenses exceed $5,957.

     Petitioner did not attempt to explain how she arrived at the

$26,400 amount she claimed on her 2003 tax return for medical and

dental expenses.   Petitioner testified that she underwent major

surgery in Philadelphia, Pennsylvania, in 2003 and that “the

hospital bill was in excess of a hundred-thousand dollars, which

the State paid.”   She also testified that after the

hospitalization she “could not go to work for six months.”

Apparently, some significant part of her medical expenses were

incurred (and paid?) during those 6 months.

     Petitioner did not present bills or receipts.     Petitioner

testified to some desultory efforts to communicate with certain

of her medical care providers, but she never followed through to

obtain a bill or receipt from any of them.    On several occasions

she stated that she probably could have gotten records from

various people but did not do so because “I could probably go to

* * * and get those, but what are we talking about, a couple of

hundred dollars”, and “I can get that, but that is not going to

bring me up to where I need to be.”
                                 - 7 -

     Petitioner testified “in 2003 and 2004, I had a lot of

medical expenses”, but she did not attempt to explain how much

related to 2003 and how much to 2004.

     As a result of the foregoing, we conclude that in 2003

petitioner paid some expenses for her medical care (within the

meaning of section 213(d)), but it is more likely than not that

the total of her payments not compensated for by insurance or

otherwise did not exceed $5,957, the 7.5-percent “floor”.    We

have so found.   As a result, she is not entitled to any 2003

medical and expense deduction.

     We hold for respondent on this issue.

     C.   Employee Business Expenses

     Petitioner is entitled to deduct her unreimbursed employee

business expenses (see supra note 3), but only to the extent they

exceed 2 percent of her adjusted gross income.    See secs. 162(a),

62(a)(1), 67.    (None of petitioner’s other claimed itemized

deductions fall within the definition of miscellaneous itemized

deductions that are subject to the 2-percent “floor”, and so the

entire 2 percent reduces petitioner’s otherwise deductible

employee business expenses.)

     On her 2003 tax return petitioner claimed $18,500 of

unreimbursed employee expenses, subtracted $1,588 (2 percent of

$79,424 adjusted gross income), and claimed the remaining $16,912

as an itemized deduction.
                               - 8 -

     Petitioner did not attempt to explain how she arrived at the

$18,500 amount she claimed on her 2003 tax return for

unreimbursed employee expenses.   On her tax return she wrote

“Nursing shoes, uniforms, small equipment to perform nursing

job”.   Petitioner did not present bills or receipts.

     Petitioner testified to having bought the following items

that she used in her work as a registered nurse:   Computer,

printer, fax, nursing shoes, uniforms, stethoscopes, and an

automated external defibrillator.

     Nothing in the record suggests that petitioner has complied

with the strict substantiation requirements of section 274 as to

the property subject to that section.   We do not have anything in

the record that would allow us to make an educated estimate as to

depreciation deductions for any of the capital assets that

petitioner referred to.   We believe that petitioner had some

nursing uniform expenses and some professional liability

insurance expenses, and that petitioner would not have been

reimbursed for those expenses if she had asked any of her 2003

employers to do so.

     As a result of the foregoing we conclude that in 2003

petitioner paid some expenses that qualify as deductible business

expenses, but it is more likely than not that the total of her

payments that would not have been reimbursed by her employers did

not exceed $1,588, the 2-percent “floor”.   Compare Lucas v.
                                 - 9 -

Commissioner, 79 T.C. 1, 6-7 (1982) (where the record showed the

taxpayer would have been reimbursed) with Jetty v. Commissioner,

T.C. Memo. 1982-378 (where the record showed the taxpayer would

not have been reimbursed).     We have so found.   As a result, she

is not entitled to any 2003 employee business expense deductions.

     We hold for respondent on this issue.

     D.     Charitable Contributions

     Petitioner is entitled to deduct her charitable

contributions.     See sec. 170(a).

     On her 2003 tax return petitioner claimed $17,000 of

charitable contributions, all shown on Schedule A line 15, “Gifts

by cash or check.”     Next to the $17,000 amount on her Schedule A,

petitioner wrote “Church tithes different Churches--Cash each

Sunday”.     Respondent disallowed the entire $17,000.   As a result

of our determinations that petitioner is not entitled to deduct

her medical expenses and her employee business expenses,

petitioner’s itemized deductions will exceed the standard

deduction that respondent allowed only if we hold that

petitioner’s deductible charitable contribution deductions exceed

$598.     See supra note 4.

     Petitioner did not attempt to explain how she arrived at the

$17,000 amount she claimed for charitable contributions on her

2003 tax return.
                              - 10 -

     Petitioner initially testified that she attended “any kind

of [her denomination’s] churches that I could find * * * [and

contributed] 10 percent of what I earned that week.”

     Petitioner then testified that she gave “a thousand dollars

up here under the table because of a drug and alcohol place that

was opening up on 17th and Montgomery in Philadelphia.”   The

asserted donee organization (“Nextus”) did not give to petitioner

a written acknowledgment of the asserted $1,000 contribution.

See sec. 170(f)(8) (requiring in general that no charitable

contribution deduction is allowable “for any contribution of $250

or more unless the taxpayer substantiates the contribution by a

contemporaneous written acknowledgment of the contribution by the

donee organization”).   It does not appear from the record herein

that any exception to this general rule applies in the instant

case.   Accordingly, even if we were persuaded that petitioner did

make the $1,000 contribution to Nextus in 2003 and all the other

requirements for a deduction had been met, the statute would

prohibit allowance of a deduction for this asserted $1,000

contribution.

     When the Court noted that petitioner had testified to

amounts aggregating far short of the $17,000 she claimed,

petitioner testified:   “Maybe I gave more than the 10 percent to

the churches during 2003.   I am saying maybe.   I am not going to

say, yes, I did.”
                               - 11 -

     When respondent pressed petitioner on the amount of her

weekly contributions, noting that petitioner’s claimed $17,000 in

contributions would require her to have contributed more than

$300 a week in cash on hand, petitioner testified that her “home

church is * * * in * * * South Carolina, which I send $500 a year

to religiously.”   Petitioner then testified:

          I go to various churches, and when I go home to
     visit, that is my home church. And I don’t walk around
     with $300 in my pocket, but I know when I am leaving
     work on Saturday night from 11:00 to 7:00, I will stop
     at whatever church before I go home to sleep, and if it
     is $110, yes, I will take that along with me.

The following colloquy then took place:

          Q [Ms. Kleinjan] So when you prepared your return
     would you agree that was more of a guess or an
     estimate?

          A [Petitioner] No, it wasn’t a guess or an
     estimate. If I go back home and think about things, or
     whatever, I will probably be able to come up with why
     it is $17,000.

     We came away from the foregoing with the impression that

petitioner’s testimony was focused on plausibility and not

reality.   We conclude that it is more likely than not that

petitioner’s deductible charitable contributions did not exceed

$598.   We have so found.   As a result, her total itemized

deductions did not exceed the standard deduction that respondent

allowed in the notice of deficiency.
                                - 12 -

      We hold for respondent on this issue.

II.   Penalty

      Respondent determined that the entire deficiency is a

substantial understatement of income tax, resulting in a 20-

percent penalty--$2,494.    See subsecs. (b)(2) and (d) of sec.

6662.     The penalty is imposed if the “understatement” (which in

this case is the same as the deficiency) is more than the greater

of (1) $5,000 or (2) 10 percent of the amount required to be

shown on the tax return.

      As a result of our holdings as to the disputed itemized

deductions, petitioner’s understatement is more than $5,000, and

so the penalty applies unless some reduction or exception

applies.6

      The substantial understatement penalty is to be reduced by

that portion of the understatement which is attributable to an

item if (1) there was substantial authority for the taxpayer’s

position, (2) there was adequate disclosure on or attached to the




      6
       As we noted supra, petitioner has not invoked sec. 7491.
We have considered sec. 7491(c), which imposes on the
Commissioner the burden of production with respect to penalties.
Our holdings as to the disputed itemized deductions satisfy the
burden of production requirements, because they show that
petitioner has an understatement of income tax of more than the
greater of (1) $5,000 or (2) 10 percent of the amount petitioner
was required to show on her tax return. Petitioner has the
burden of proving that some reduction or exception applies. See
Montgomery v. Commissioner, 127 T.C. 43, 66-67 (2006); Higbee v.
Commissioner, 116 T.C. 438, 446-447 (2001).
                               - 13 -

tax return and there was a reasonable basis for the taxpayer’s

position, or (3) there was reasonable cause and the taxpayer

acted in good faith.   Secs. 6662(d)(2)(B), 6664(c).

     Petitioner did not attempt to explain how she arrived at the

deduction amounts she claimed on her tax return; she did not keep

receipts or, apparently, any records; and she did not present any

evidence about consulting with an appropriate tax adviser as to

how she should proceed.7   It does not appear that any matter

involved in the instant case was an issue of first impression

when petitioner filed her tax return, or involved application of

complex laws to the facts of her tax return.

     We conclude that no reduction or exemption applies in the

instant case and so petitioner is liable for the full

understatement penalty.    Cf. Montgomery v. Commissioner, 127 T.C.

43, 66-67 (2006).




     7
       Petitioner testified that “I never kept receipts, because
I was always taught by my dad, who is dead now, that the burden
of proof is on the IRS.” We may admire petitioner’s steadfast
filial devotion, but this advice was generally incorrect when
petitioner received it (Welch v. Helvering, 290 U.S. 111, 115
(1933), is older than petitioner) and was generally incorrect in
2003, the only year before the Court, and was generally incorrect
as applied to the instant case. As we held in a similar context
(negligence penalty under sec. 6662), a taxpayer “cannot rely on
the advice of his father to avoid the negligence penalty, because
* * * [the taxpayer] failed to show that his father had any
expertise in tax matters.” Maguire v. Commissioner, T.C. Memo.
1996-145. On the record in the instant case, petitioner’s
father’s advice is not reasonable cause within the meaning of
sec. 6664(d).
                        - 14 -

We hold for respondent on this issue.


                              Decision will be entered

                         for respondent.
