                    T.C. Summary Opinion 2011-70



                       UNITED STATES TAX COURT



         WILLIAM M. AND KAREN M. LOEWENHAGEN, Petitioners v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 4357-10S.                 Filed June 15, 2011.



     William M. and Karen M. Loewenhagen, pro sese.

     Christina L. Cook, for respondent.



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

the provisions of section 7463 of the Internal Revenue Code in

effect when the petition was filed.1   Pursuant to section

7463(b), the decision to be entered is not reviewable by any



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

other court, and this opinion shall not be treated as precedent

for any other case.

     Respondent determined a deficiency in petitioners’ 2006

Federal income tax of $7,656.

     After concessions by petitioners,2 the issue for decision is

whether petitioners are entitled to Schedule C, Profit or Loss

From Business, deductions for various expenses related to their

campground business activities.

                            Background

     Some of the facts have been stipulated, and they are so

found.   We incorporate by reference the parties’ stipulation of

facts and accompanying exhibits.   All references to petitioner in

the singular are to William M. Loewenhagen.

     Petitioners resided in the State of Wisconsin when the

petition was filed.

     In 2001 petitioner entered into a contract with the County

of La Crosse, Wisconsin, to manage Goose Island Park (the

campground).   Petitioner’s duties as campground manager commenced

January 1, 2002, and terminated on December 31, 2006.   As the

campground manager petitioner was an independent contractor and

not an employee of the County of La Crosse.



     2
        Petitioners concede that they are not entitled to: (1) A
loss on the sale of business property of $42,610 for the sale of
a campground building; and (2) depreciation of $1,257 for that
same building.
                               - 3 -

     The campground has a store from which the campground manager

is permitted to sell food and refreshments as well as bait and

fishing supplies.   The campground manager is required to pay to

the county “a $600 rental fee [per year] for the * * * store

including electricity” and to furnish all of the materials and

supplies necessary to operate the store.

     The campground manager’s duties include, inter alia, renting

boats and other recreational equipment, operating a holding tank

pumpout service (“honey wagon”) for campers for fee, taking

reservations and collecting fees from campers, and providing 24-

hour security services.   The campground manager is permitted to

move a mobile home onto the campground and there reside.   The

campground manager is required to pay to the county $1 rent per

year for the site on which the mobile home is located and $44 per

month “for electricity provided to his mobile home.”   Upon

approval the campground manager is permitted to erect structures

at his own expense as necessary to the operation of the

campground.   The campground manager is also required to maintain

worker’s compensation and general liability insurance, with the

County of La Crosse to be named as an additional insured on the

policy.

     Because the campground manager is required to provide 24-

hour security services, petitioner exercised his right to move a

mobile home onto the campground.   There was no storage space on
                              - 4 -

the campground for the food and tackle sold in the campground

store, so petitioner erected a room on the side of the mobile

home to house goods to be sold in the store.   Petitioner also

maintained a home office so that when he was not in the

campground store and during the off-season, he would be able to

take reservations and assist campers as necessary.

     In respect of his duties as campground manager, petitioner

operated various fuel-consuming vehicles, including the honey

wagon, a 1944 tractor for pulling the honey wagon, a Ford service

van (“a 21,000 pound retired ambulance”), and a Dodge diesel

truck that was used only for the month of January.

     Petitioners timely filed a 2006 Federal income tax return.

On a Schedule C petitioners claimed the following expenses:

          Depreciation and sec. 179 expenses         $8,864
          Insurance (other than health)               3,647
          Interest--mortgage                          5,631
          Utilities                                   3,226

Petitioners also claimed a deduction for an “auto expense” under

“Other expenses” of $2,798.

     In a notice of deficiency, respondent determined, inter

alia, that petitioners were not entitled to:   (1) Depreciation

and section 179 expenses of $2,034 related to the campground

vehicles and the mobile home; (2) insurance other than health of

$380 related to the campground vehicles and mobile home; (3)

mortgage interest of $2,816 related to the mobile home; (4)
                                - 5 -

utilities of $2,258 for the mobile home; and (5) vehicle expenses

of $2,098 for fuel for the various campground vehicles.

                            Discussion

I.   Burden of Proof

      In general, the Commissioner’s determination set forth in a

notice of deficiency is presumed correct, and the taxpayer bears

the burden of showing that the determination is in error.       Rule

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

to section 7491(a), the burden of proof as to factual matters

shifts to the Commissioner under certain circumstances.

Petitioners have neither alleged that section 7491(a) applies nor

established their compliance with its requirements.     Accordingly,

petitioners bear the burden of proof.     See Rule 142(a).

      Deductions are a matter of legislative grace, and the

taxpayer bears the burden of proof to establish entitlement to

any claimed deduction.   Rule 142(a); INDOPCO, Inc. v.

Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v.

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

taxpayer to substantiate claimed deductions by keeping and

producing adequate records that enable the Commissioner to

determine the taxpayer’s correct tax liability.     Sec. 6001;

Hradesky v. Commissioner, 65 T.C. 87, 90 (1975), affd. per curiam

540 F.2d 821 (5th Cir. 1976).   A taxpayer claiming a deduction on

a Federal income tax return must demonstrate that the deduction
                               - 6 -

is allowable pursuant to some statutory provision and must

further substantiate that the expense to which the deduction

relates has been paid or incurred.     See sec. 6001; Hradesky v.

Commissioner, supra at 90; sec. 1.6001-1(a), Income Tax Regs.

     If the taxpayer establishes that he has incurred a

deductible expense yet is unable to substantiate the exact

amount, the Court may estimate a deductible amount, but may bear

heavily against the taxpayer whose inexactitude is of his own

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

The taxpayer must present sufficient evidence for the Court to

form an estimate because without such a basis, any allowance

would amount to unguided largesse.     Williams v. United States,

245 F.2d 559, 560-561 (5th Cir. 1957); Vanicek v. Commissioner,

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

     Section 274(d) generally imposes stringent substantiation

requirements in the case of expenses relating to the use of

listed property, specifically including any passenger automobile

or other property used as a means of transportation.    Sec.

280F(d)(4)(A)(i) and (ii), (5); Larson v. Commissioner, T.C.

Memo. 2008-187; sec. 1.274-5T(a), Temporary Income Tax Regs., 50

Fed. Reg. 46014 (Nov. 6, 1985) (expressly superseding the so-

called Cohan rule and making it inapplicable).    The flush

language of section 274(d), however, specifically excludes from

the strict substantiation requirements any “qualified nonpersonal
                                - 7 -

use vehicle”.    A “qualified nonpersonal use vehicle” is “any

vehicle which, by reason of its nature, is not likely to be used

more than a de minimis amount for personal purposes.”      Sec.

274(i).

II.   Expenses Related to the Mobile Home

      Respondent determined3 that petitioners are not entitled to

Schedule C deductions related to the mobile home as follows:

            Depreciation and sec. 179 expenses        $1,277
            Insurance (other than health)                302
            Interest--mortgage                         2,816
            Utilities                                  2,258

      Petitioners contend that they are entitled to the Schedule C

deductions related to the mobile home because petitioner was

required to live on the campground.      Petitioners rely upon

Lindeman v. Commissioner, 60 T.C. 609 (1973), in support of their

position.

      Petitioners’ reliance upon Lindeman is misplaced.     In

Lindeman the taxpayer was the general manager of a hotel and

lived in housing furnished by his employer.       Id. at 611.    The

Court held that the taxpayer in Lindeman was entitled to exclude

from gross income the value of the lodging furnished by his

employer pursuant to section 119.       Id. at 617.



      3
        Respondent’s determination allowed a portion of the
deductions claimed for the mobile home on the ground that
petitioners used part of the mobile home as an office to
facilitate the campground manager duties and as a storage area
for the campground store. See sec. 280A.
                               - 8 -

     Section 119 excludes from an employee’s gross income the

value of lodging furnished to him by his employer if three

conditions are met:   (1) The lodging is furnished for the

convenience of the employer; (2) the employee is required to

accept the lodging as a condition of his employment; and (3) the

lodging is on the business premises of the employer.    Lindeman v.

Commissioner, supra at 613; sec. 1.119-1(b), Income Tax Regs.

“The threshold requirement for section 119 is that the employer

furnish the employee with housing in kind, the value of which is

properly includable in income.”   Fuhrmann v. Commissioner, T.C.

Memo. 1977-416; sec. 1.119-1(c)(2), Income Tax Regs.

     Section 119 does not apply in the instant case.   First,

section 119 is an income exclusion provision that petitioners

rely upon to deduct expenses on a Schedule C.   Petitioners,

however, did not receive income from the County of La Crosse in

the form of lodging furnished in kind, nor did they include the

value of lodging in income.   Respondent is also not charging

petitioners with income from the fair rental value of the land on

which the mobile home was located.

     Second, even if petitioners had income from the County of La

Crosse in the form of lodging furnished in kind, they do not

satisfy the threshold requirements for section 119.    See Fuhrmann

v. Commissioner, supra.   Petitioner was not an employee but

rather an independent contractor, and the mobile home was not
                                   - 9 -

furnished to petitioner but rather petitioner moved the mobile

home onto the campground.

       Therefore, petitioners are not entitled to an exclusion

under section 119 for the mobile home.

       Furthermore, under section 262 personal, living, or family

expenses are not deductible.       “Everyone must have food and

shelter.       They are personal things essential to all of us alike

regardless of occupation.       They do not lose their personal

characteristics because they may contribute indirectly to a

taxpayer’s business activities.”          Commissioner v. Moran, 236 F.2d

595, 597 (8th Cir. 1956), revg. on another matter T.C. Memo.

1955-202.       Petitioners’ expenses related to the mobile home are

personal expenses.       See sec. 262.4

       Accordingly, we hold that petitioners are not entitled to

deduct the expenses related to the mobile home in any amounts

greater than those previously allowed by respondent.

III.       Expenses Related to the Campground Vehicles

       Respondent determined that petitioners are not entitled to

Schedule C deductions related to the campground vehicles as

follows:




       4
        Mortgage interest is deductible on Schedule A, Itemized
Deductions. Petitioners, however, claimed the standard deduction
and have not presented any evidence that their itemized
deductions would be greater than the standard deduction.
                              - 10 -

          Other expenses--auto expense             $2,098
          Insurance (other than health)                78
          Depreciation and sec. 179 expenses          757

     Respondent argues that petitioners are not entitled to such

deductions because the amounts have not been substantiated and

petitioners did not provide a mileage log for the auto expense.

     Petitioner explained at trial that the $2,098 of “other

expenses” for auto expenses claimed on the Schedule C was for

gasoline for the campground vehicles.   Those vehicles include the

honey wagon, the 1944 tractor, and the Ford service van.5   These

vehicles are “qualified nonpersonal use vehicles” within the

meaning of section 274(i) and therefore are not subject to the

strict substantiation requirements of section 274(d) and no

mileage log is necessary.   The record demonstrates that

petitioners are entitled to the deduction of $2,098 for “other

expenses” for gasoline for the campground vehicles.   See Williams

v. Commissioner, 245 F.2d at 560-561; Cohan v. Commissioner, 39

F.2d at 544; Vanicek v. Commissioner, 85 T.C. at 742-743.

     Petitioners have not established that they are entitled to

deductions for insurance of $78 or depreciation of $757.

     Thus, we hold that petitioners are entitled to a deduction

of $2,098 for gasoline for the campground vehicles but are not

otherwise entitled to deductions for the campground vehicles in


     5
        The Dodge truck, used only for the month of January, was
a diesel, and petitioner explained that the $2,098 reflects only
the amount paid for gasoline and not diesel fuel.
                             - 11 -

excess of the amounts previously allowed or conceded by

respondent.

                           Conclusion

     We have considered all of the arguments made by the parties,

and, to the extent that we have not specifically addressed them,

we conclude that they do not support a result contrary to that

reached herein.

     To reflect the foregoing,


                                        Decision will be entered

                                   under Rule 155.
