                  T.C. Summary Opinion 2008-101



                      UNITED STATES TAX COURT



            ALVIN FLOYD COTTRELL, SR., Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 16067-06S.                Filed August 12, 2008.



     Alvin Floyd Cottrell, Sr., pro se.

     Steven M. Friedberg, for respondent.



     GOLDBERG, Special Trial Judge:   This case was heard pursuant

to the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed.   Pursuant to section

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

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

for any other case.   Unless otherwise indicated, subsequent

section references are to the Internal Revenue Code in effect for
                              - 2 -

the years in issue, and all Rule references are to the Tax Court

Rules of Practice and Procedure.

     Respondent determined deficiencies of $1,085 and $2,728,

respectively, in petitioner’s 2003 and 2004 Federal income taxes.

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

petitioner is entitled to unreimbursed business expenses and

miscellaneous deductions for the taxable years 2003 and 2004 in

the amounts of $7,413 and $8,339, respectively, and; (2) whether

petitioner is entitled to itemized deductions for settlement

taxes, real estate taxes, and mortgage interest for the taxable

year 2004 in the amounts of $1,242, $1,608, and $6,318,

respectively.

                           Background

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

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.   At the time the petition

was filed, petitioner resided in Maryland.

     In 2003 and 2004 petitioner worked full time as an

automotive service supervisor for the State of Maryland (State)



     1
      In the notice of deficiency for 2004 respondent allowed
$8,574.64 for mortgage interest. At trial respondent conceded
that petitioner is entitled to an additional allowance of
$1,425.77 for mortgage interest paid in 2004 and that
petitioner’s total allowable mortgage interest deduction is
$10,000.41. Only the deductibility of points petitioner paid in
2004 and deducted as mortgage interest remains at issue with
respect to petitioner’s mortgage interest deduction.
                                 - 3 -

at a facility in Patapsco Valley State Park.       Petitioner also

worked part time for United Parcel Service (UPS) as an aircraft

loader at Baltimore Washington International Airport (BWI).

     Petitioner drove his personal vehicle from home to BWI when

working for UPS.   After finishing his shift with UPS, petitioner

drove straight from BWI to his job site for the State.       Between

both jobs, petitioner drove an average of 10 to 12 miles per day.

Petitioner estimated that the distance between BWI and his State

job site was 4 to 5 miles.   In 2003 and 2004 petitioner generally

worked both jobs 5 days each week.       Occasionally, petitioner

returned to his job with UPS after working with the State and

before driving home.

     Petitioner was a member of the Maryland Classified Employees

Association, Inc., a State employees union.       Petitioner was also

a member of another union in conjunction with his UPS job.

     The State required petitioner to wear a uniform and provided

two types of uniforms, both including a shirt displaying the

State emblem, and to maintain certain grooming standards.

Petitioner had his uniforms professionally laundered.       Petitioner

purchased rain gear, watertight boots, thermal underwear, and

other items to wear while loading aircraft for UPS.       This

clothing was general purpose, and petitioner could wear these

items at other places.   UPS did not reimburse petitioner for the

cost of his foul weather gear.
                                 - 4 -

     Petitioner refinanced his personal residence in 2004.     The

refinancing closed on or after November 30, 2004.     At the closing

he paid $1,068.36 in advance to his lender for 6 months of county

real property taxes, $540 in State mortgage recordation taxes,

and $6,317.59 in points.    The term of petitioner’s new loan was

360 months maturing on December 1, 2034.

     Petitioner bought tools and supplies in 2003 and 2004 to

make improvements to his home.    The items were purchased for

personal use and were not related to or required for either his

State job or his UPS job.

     Petitioner used his personal cell phone on his State job

because radio reception was not as clear as the cellular

connection.   Petitioner discussed projects and orders on his cell

phone and estimated that he used his phone for business purposes

at least 4 to 5 times a day.   His claimed deductions represent

extra charges for excess minutes used to place calls related to

his State work.   Petitioner deducted these expenses as “Supplies”

in 2003 and as “Cell Phone/Supplies” in 2004.

     Petitioner engaged a tax return preparer to prepare his

income tax returns for 2003 and 2004.     At the time of the

preparation of his returns petitioner gave his return preparer

bills and receipts to support his expenses and a mileage log for

the business use of his automobile.      The preparer told petitioner

that he could deduct the expenses for:     (1) Tools and supplies
                               - 5 -

that he used to perform his own home improvements; (2) his mobile

phone, (3) work clothes purchased for his UPS job; (4) cleaning

of his uniforms; (5) automobile mileage; and (6) refinancing his

mortgage.   Petitioner did not review his returns with the

preparer once the returns were completed.

     On Schedule A, Itemized Deductions, for the taxable year

2003 petitioner deducted job-related expenses and other

miscellaneous deductions as follows:

     Unreimbursed employee expenses:
       Vehicle expense--10,034
         miles at $.36 per mile               $3,612
       Union and professional dues               490
       Uniform and protective clothing         1,450
       Equipment                               1,215
       Supplies                                  780
         Total                                 7,547

     Tax preparation fees                        100
       Total                                   7,647

     In the notice of deficiency for 2003 respondent allowed an

itemized deduction only for $234 for dues paid to the Maryland

Classified Employees Association, Inc., and disallowed the

remainder--$7,413.

     On Schedule A for the taxable year 2004, petitioner deducted

the following:

       Taxes:
         State and local income taxes          $3,431
         Real estate taxes                      2,300
         Settlement taxes                       1,608
           Total taxes                          7,339

     Interest:
       Home mortgage interest and points       16,318
                                 - 6 -

     Job expenses and other
       miscellaneous deductions:
         Vehicle expense - 10,050
           miles at $.375 per mile             $3,769
         Union and professional dues              490
         Uniforms and protective clothing       1,560
         Equipment/tools                        1,370
         Cell phone/supplies                      800
         Grooming                                 250
           Total                                8,239

          Tax preparation fees                    100
            Total                               8,339

     In the notice of deficiency for 2004 respondent disallowed a

portion of the real estate taxes, all of the settlement taxes,

home mortgage interest and points, and all but $234 of job

expenses and other miscellaneous deductions.

                            Discussion

     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).     Deductions

are a matter of legislative grace, and the taxpayer bears the

burden of proving entitlement to any deduction claimed on a

return.   See INDOPCO, Inc. v. Commissioner, 503 U.S. 79 (1992);

Wilson v. Commissioner, T.C. Memo. 2001-139.

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

factual matters shifts to the Commissioner under certain

circumstances.   Petitioner has neither alleged that section

7491(a) applies nor established his compliance with the
                               - 7 -

requirements of section 7491(a)(2)(A) and (B) to substantiate

items, maintain records, and cooperate fully with respondent’s

reasonable requests.   Petitioner therefore bears the burden of

proof.

A.   Job Expenses and Miscellaneous Itemized Deductions

      Section 162(a) allows a deduction for all ordinary and

necessary expenses incurred during the taxable year in carrying

on a trade or business.   Generally, the performance of services

as an employee constitutes a trade or business.    Primuth v.

Commissioner, 54 T.C. 374, 377 (1970).   A taxpayer must maintain

records sufficient to substantiate the amounts of the deductions

claimed.   Sec. 1.6001-1(a), Income Tax Regs.   For such expenses

to be deductible, the taxpayer must not have the right to obtain

reimbursement from his employer.   See Orvis v. Commissioner, 788

F.2d 1406, 1408 (9th Cir. 1986), affg. T.C. Memo. 1984-533.

      Petitioner claimed deductions for employee and other

miscellaneous expenses of $7,647 and $8,339 for 2003 and 2004,

respectively.   Petitioner contends he is entitled to deductions

for the following expenses:   (1) Business use of his automobile;

(2) union dues; (3) cleaning his State uniform and purchasing

clothing to wear when working for UPS; (4) tools, equipment, and
                               - 8 -

supplies used to improve his personal residence; (5) mobile

telephone usage; (6) haircuts;2 and (7) tax return preparation.

     With the exception of allowing $234 per year for union dues

which petitioner substantiated with a letter from his State

employees union, respondent disallowed the claimed job expense

and miscellaneous deductions in full because petitioner did not

establish that the expenses were ordinary, necessary, and paid

during tax years 2003 and 2004.

     1.   Vehicle Expenses

     Petitioner claimed deductions for the business use of his

automobile.   Petitioner deducted his expenses for driving to and

between his two jobs.   Expenses relating to the use of an

automobile while commuting between the taxpayer’s residence and

the taxpayer’s place of business or employment are not deductible

because such expenses are personal and not business expenses.

Secs. 162, 262; Fausner v. Commissioner, 413 U.S. 838 (1973);

Commissioner v. Flowers, 326 U.S. 465 (1946); secs. 1.162-2(e),

1.262-1(b)(5), Income Tax Regs.    Thus, any expenses petitioner

incurred in commuting between his residence and either job are

nondeductible personal expenses.

     Transportation expenses incurred on trips between places of

business, however, may be deductible.    Steinhort v. Commissioner,


     2
      Petitioner did not claim a separate deduction for haircuts
in 2003. In 2004 petitioner claimed $250 as a deduction for
“grooming”.
                                - 9 -

335 F.2d 496, 503-504 (5th Cir. 1964), affg. and remanding T.C.

Memo. 1962-233.    Nevertheless, section 274(d) requires a taxpayer

to substantiate:   (A) The amount of the vehicle expense; (B) the

time and place of the expense; (C) the business purpose of the

expense; and (D) the business relationship of the expense to the

taxpayer.   Even though petitioner testified that he worked two

jobs 5 days each week, he did not provide any evidence to support

the expenses he incurred driving between those jobs.

     The distance between petitioner’s two job sites was 4 to 5

miles.    The product of 5 miles per day, 5 days per week, and 50

weeks per year is 1,250 miles per year.     Petitioner claimed

10,034 miles for 2003 and 10,050 miles for 2004 and asserted on

Forms 2106-EZ, Unreimbursed Employee Business Expenses, that he

had written evidence to support his mileage deductions.

Petitioner testified that he provided logs to his return

preparer, but he did not introduce any logs or other records at

trial to support these deductions.      He also did not provide any

explanation for what appear to be inflated claims of business

mileage on his 2003 and 2004 returns.     He testified that he

occasionally returned to work for UPS after his State job, but he

did not provide any details about how often this occurred.       While

we accept that petitioner drove between his two jobs, we may not

use the Cohan doctrine to estimate expenses covered by section

274(d).    See Cohan v. Commissioner, 39 F.2d 540, 544 (2d Cir.
                               - 10 -

1930); see also Sanford v. Commissioner, 50 T.C. 823, 827 (1968),

affd. per curiam 412 F.2d 201 (2d Cir. 1969); sec. 1.274-5T(a),

Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6, 1985).

Accordingly, petitioner is entitled to no deduction for the

business use of his vehicle.   Respondent’s determination is

sustained because petitioner failed to meet the strict

substantiation requirements of section 274(d).

     2.   Union Dues

     Petitioner claimed a deduction for $490 of union dues paid

to two labor unions in 2003 and 2004.    Respondent allowed $234 of

State union dues petitioner paid in each year and disallowed the

remaining $256 for lack of substantiation.    At trial petitioner

testified that he contributed approximately $37.50 per month in

union dues while employed at UPS.   We are satisfied that he paid

dues to the two unions.   However, petitioner introduced no

evidence to augment his testimony as to the amount he paid in

union dues while employed by UPS.   When a taxpayer adequately

establishes that he paid or incurred a deductible expense but

does not establish the precise amount, the Court may in some

circumstances estimate the allowable deduction.       Cohan v.

Commissioner, supra.   We are instructed to approximate a

taxpayer’s expense, bearing heavily upon “the taxpayer whose

inexactitude is of his own making.”     Id. at 544.   We allow
                                - 11 -

petitioner a deduction for UPS union dues in the amount of the

remaining $256 disallowed by respondent for 2003 and 2004.

     3.   Uniform Cleaning and UPS Clothing

     Petitioner claimed business expense deductions for the costs

of cleaning his State uniforms and purchasing clothing to keep

him warm and dry when working for UPS.    The costs to purchase and

maintain work clothing may be deductible under section 162 if the

taxpayer establishes that:    (1) The clothing is required or

essential in the taxpayer’s employment; (2) the clothing is not

suitable for general or personal wear; and (3) the clothing is

not so worn.     Yeomans v. Commissioner, 30 T.C. 757, 767-769

(1958); Kozera v. Commissioner, T.C. Memo. 1986-604.

     With respect to the uniform cleaning, respondent does not

dispute that petitioner has satisfied the legal requirements for

deductibility.    However, respondent disallowed the deductions for

lack of substantiation.    The Court accepts petitioner’s testimony

that he paid to have his State uniforms cleaned.    Therefore,

petitioner is entitled to deductions for these expenses.

Petitioner did not provide any information as to the frequency or

cost of his uniform cleaning.    Estimating his expenses, see Cohan

v. Commissioner, supra at 544, we allow $10 per week, or $500 for

uniform cleaning for 2003 and 2004.

     UPS required petitioner to wear clothing appropriate to the

weather conditions at BWI.    Petitioner purchased rain gear, long
                                 - 12 -

underwear, and watertight boots to wear when loading freight for

UPS.    Petitioner testified that the clothing and other items he

purchased were suitable for general wear.      No deduction is

allowed for personal, living, or family expenses.      Sec. 262(a).

Since general-purpose clothing is considered a personal expense,

petitioner is not entitled to any deduction for his costs to

purchase or maintain clothes worn when working for UPS.      See

Hynes v. Commissioner, 74 T.C. 1266, 1291 (1980).

       4.   Tools, Equipment, and Supplies for Home Improvement

       Petitioner claimed itemized deductions for tools and

supplies which he used for home improvements, in the amounts of

$1,215 and $1,370 for tax years 2003 and 2004, respectively.

       As mentioned above, a taxpayer may not deduct personal,

family, or living expenses.     Sec. 262(a).   Furthermore, under

section 263, no deduction is allowed for capital expenditures.

Capital expenditures include any amount paid for permanent

improvements or betterments made to increase the value of

property.     Sec. 263(a)(1).   Petitioner made improvements to his

personal residence in order to enhance his enjoyment and to

increase the value of his home.     Therefore, he is not entitled to

a deduction for home improvements for tax years 2003 and 2004.

Respondent’s determination that petitioner may not deduct his

“Equipment” and “Equipment/Tools” expenses is sustained.
                                 - 13 -

     5.   Mobile Telephone Expenses

     Petitioner used his personal mobile telephone to communicate

business matters related to his State employment.     Petitioner

deducted $780 for 2003 and $800 for 2004 for work-related mobile

phone expenses.   As stated previously, section 274(d) disallows

deductions for traveling expenses, gifts, and meals and

entertainment, as well as for listed property.     The term “listed

property” is defined in section 280F(d)(4) and includes mobile

phones.   See sec. 280F(d)(4)(v).    Petitioner did not provide any

evidence to substantiate his work-related mobile phone expenses.

Therefore, petitioner is not entitled to any deduction for the

business use of his mobile phone.     Respondent’s determination is

sustained.

     6.   Haircuts

     Petitioner claimed a deduction in 2004 for the cost of

maintaining a haircut for his State job.     Grooming remains an

inherently personal expense and is not deductible, regardless of

whether an employer requires a particularly neat appearance.

Hynes v. Commissioner, supra at 1291-1292.      Petitioner may not

deduct the cost of his haircuts.      Respondent’s determination is

sustained.

     7.   Tax Preparation Fees

     Petitioner’s 2003 and 2004 returns were professionally

prepared, and both report a $100 tax return preparation fee.
                               - 14 -

Although petitioner introduced no specific evidence proving that

he paid these fees, we find it unlikely that a paid preparer

would list as a deduction an apparently reasonable fee for tax

return preparation on a client’s tax return and not collect that

fee.    Petitioner is entitled to a $100 deduction for tax

preparation for each year at issue.

B.   Real Estate and “Settlement” Taxes

       Petitioner claimed deductions on his 2004 Schedule A for

$2,300 of real estate taxes paid and $1,608 of “Settlement

taxes”.    Respondent allowed a $1,058 deduction for real estate

taxes and disallowed all of the claimed “Settlement” taxes.

       Section 164(a) allows a deduction for certain, specified

taxes, including State and local real property taxes, which are

paid or accrued during the taxable year.    Sec. 164(a)(1).

However, petitioner failed to produce any evidence to show that

he paid real estate taxes in 2004 greater than the amount

respondent allowed.    Therefore respondent’s determination as to

the disallowed real estate taxes is sustained.

       Petitioner’s deduction of $1,608 for “Settlement taxes”

includes:    $1,068 for county property taxes paid into escrow at

closing and $540 for State recordation taxes paid in 2004.    Form

HUD-1, Settlement Statement, for the closing at his refinancing

was received into evidence.    This document shows that petitioner

paid $1,068.36, representing 6 months of county property taxes,
                               - 15 -

in advance (placed in escrow), to his lender at the closing on or

after November 30, 2004.   However, petitioner’s documentation

showing real property taxes actually paid to the county taxing

authority in 2004 reflects only the $1,058 respondent allowed.

It does not support his deduction of the $1,068, representing 6

months of real property taxes held in escrow by the lender.

     Petitioner failed to demonstrate that the claimed $1,068 was

actually paid to the county taxing authority in 2004 (as opposed

to his paying funds in advance into his lender’s property tax

escrow account for the lender to pay later to the county on

petitioner’s behalf).   Accordingly, we conclude that petitioner

may not deduct the $1,068 in 2004.

     Petitioner also claimed $540 in State recordation taxes.

That amount is also reflected on the Form HUD-1.    Section 164(a)

allows the taxpayer to deduct only certain delimited taxes, and

petitioner may deduct his recordation taxes only if section

164(a) permits.   Only two of the five categories of deductible

taxes are even potentially relevant here:    (1) State and local

real property taxes and (2) State and local personal property

taxes.   See sec. 164(a)(1) and (2).

     The recordation tax is a fee charged for the recording of

petitioner’s new mortgage.    It is not a tax on a property

interest, real or personal.    See Gibbons v. Commissioner, T.C.

Memo. 1976-125.   Thus, petitioner is not entitled to deduct the
                              - 16 -

$540 mortgage recordation tax.   Respondent’s determinations as to

real estate taxes paid into an escrow account and the mortgage

recordation fee are sustained.

C.   Home Mortgage Interest

      Petitioner claimed an itemized deduction for a home mortgage

interest expense of $16,318 for the 2004 taxable year.

Respondent allowed a deduction of $8,574.64 in the notice of

deficiency.   At trial respondent allowed an additional deduction

of $1,425.77 in home mortgage interest, leaving $6,317.59 in

dispute.   This latter amount represents petitioner’s deduction of

the mortgage points paid when he refinanced the mortgage on his

residence.

      Generally, interest paid on home indebtedness is deductible

by virtue of section 163(h)(2)(D), which provides that any

qualified residence interest does not constitute nondeductible

personal interest.   Prepaid finance charges, to the extent such

charges represent deferred interest on a loan, are generally

deductible over the life of the loan.   Sec. 461(g).   The term

“points” refers to a fee equal to a percentage of the total loan,

generally paid to the lending institution to lower the interest

rate.   Points are considered prepaid interest.   Kelly v.

Commissioner, T.C. Memo. 1991-605.

      Section 461(g) requires a cash method taxpayer to amortize

prepaid interest over the life of his loan, just as if he were on
                              - 17 -

the accrual method of accounting.   Kelly v. Commissioner, supra.

However, section 461(g) provides an exception which allows a

taxpayer to deduct his payment of certain points if they were

paid “in connection with the purchase or improvement of, and

secured by, the principal residence of the taxpayer”.    Sec.

461(g)(2).   Points paid when the taxpayer refinances a personal

residence to obtain a lower interest rate, however, are not

“incurred in connection with the purchase or improvement” of the

taxpayer’s residence; such points are not immediately deductible

and must be amortized.   Kelly v. Commissioner, supra; Fox v.

Commissioner, T.C. Memo. 1989-232, affd. without published

opinion 943 F.2d 55 (9th Cir. 1991).

     Petitioner did not introduce any evidence to demonstrate,

and the record does not indicate, that his refinancing was in

connection with his purchasing or improving his home.3   See

Huntsman v. Commissioner, 905 F.2d 1182 (8th Cir. 1990), revg. 91

T.C. 917 (1988).   Respondent is correct in determining that

petitioner may not deduct the points entirely in 2004.

     Because petitioner is a cash basis taxpayer, he may amortize

prepaid interest over the life of the loan.   See sec. 461(g).

Amortizing the $6,317.59 in points over the 30-year term of the

loan produces a $210.58 annual deduction.   Although the record


     3
      The Form HUD-1, Settlement Statement, which petitioner
introduced at trial indicates that petitioner used at least some
of the proceeds of the refinancing to pay off credit card debt.
                              - 18 -

does not clearly reflect precisely when the refinancing occurred,

it is clear that the Form HUD-1 was printed November 30, 2004,

and that the maturity date of the 30-year loan is December 1,

2034.   Therefore, we conclude that petitioner is entitled to

deduct $17.55 in 2004 for 1 month’s amortization of prepaid

interest.

     To reflect the foregoing,


                                         Decision will be entered

                                    under Rule 155.
