                       T.C. Memo. 2001-83



                     UNITED STATES TAX COURT



            HAROUT AND MANIK GAPIKIA, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 1882-00.                   Filed April 5, 2001.


     Harout and Manik Gapikia, pro sese.

     Patricia H. Delzotti, for respondent.



                       MEMORANDUM OPINION

     DEAN, Special Trial Judge:   Respondent determined a

deficiency of $3,611 in petitioners’ 1996 Federal income tax.

The issues for decision are:   (1) Whether petitioners are

entitled to deductions for job expenses claimed on Schedule A,

Itemized Deductions, beyond those allowed by respondent; and (2)

whether petitioners are entitled to deductions for business
                                 - 2 -

expenses claimed on Schedule C, Profit or Loss From Business,

beyond those allowed by respondent.

                              Background

     The stipulation of facts and the accompanying exhibits are

incorporated herein by reference.    Petitioners resided in

Clifton, New Jersey, at the time the petition in this case was

filed.

     In 1996 petitioner Harout Gapikia (petitioner) was employed

as a car salesman by Bob Ciasulli Auto Mall, Inc. and Hudson

Toyota Inc.   His combined wage income from these two employers

was $62,4151 in 1996.    Petitioner also received $1,150 from

Toyota Motor Sales USA, Inc. in 1996 for selling extra items,

such as undercoating and alarm systems, to car buyers.

     In addition, petitioner offered sales training programs to

car dealerships and attempted to arrange for the export of cars

to other countries.     Petitioner, however, did not have any gross

receipts from these activities.

     Petitioners filed a joint 1040, U.S. Individual Income Tax

Return, for their 1996 taxable year.       Petitioners claimed the

following job expenses on their Schedule A:




     1
         All numbers have been rounded to the nearest dollar.
                               - 3 -


     Uniforms and cleaning                              $1,212
     Form 2106, employee business expenses
          Vehicle expense                      $4,151
          Parking, tolls, and transportation      246
          Other business expenses               1,592
          Meals and entertainment (50%)         2,142    8,131

     Supplies                                            1,478
     Fees                                                  390
     Legal and investment expenses                       1,500
     Job search                                          2,070
     B/C                                                   270
     Familiarization expenses                            2,276

         Total                                          17,327

     Petitioners filed a Schedule C for petitioner’s “auto sales”

business reporting $1,150 of gross receipts or sales and a net

loss of $7,237.   The Schedule C lists the following expenses:

     Advertising and promotion                           $600
     Car expenses                                       3,107
     Legal and professional expenses                      100
     Office expenses                                      850
     Supplies                                             480
     Travel                                               268
     Entertainment                                      3,218
     Utilities                                          1,373

         Total                                          9,996

The $1,150 reported as gross receipts or sales was the amount

petitioner received as sales incentives from Toyota Motor Sales

USA, Inc. for selling extra items to car buyers.

     Respondent allowed petitioners’ deductions for the following

Schedule A job expenses:
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     Business mileage                                    $1,158
     Cellular pager                                         514
     Telephone                                              113
     Printer and adding machine                             139
     Miscellaneous supplies                                  86
     Meals and entertainment                                246
     Fees                                                   390
     Tolls                                                  246

         Total                                            2,892

     Respondent allowed petitioners’ deductions for the following

Schedule C expenses:

     Business mileage                                        $24
     Legal and professional expenses                         100
     Office expenses                                           5
     Supplies                                                189
     Utilities                                                13

         Total                                               331

     Respondent maintains that petitioners have failed to

establish that the expenses claimed on their 1996 return for

which deductions have been disallowed are ordinary and necessary

within the meaning of section 162(a) and have failed to

substantiate the expenses.2

                              Discussion

     Generally, a taxpayer may deduct all ordinary and necessary

expenses paid or incurred during the taxable year in carrying on

a trade or business.   See sec. 162(a).    No deduction is allowed

for personal, living, or family expenses.    See sec. 262.   Thus,



     2
        Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the year in issue.
                                - 5 -

if an expenditure is motivated primarily by personal

considerations, no deduction generally will be allowed.       See

Henry v. Commissioner, 36 T.C. 879, 884 (1961).

       An individual may engage in the trade or business of

rendering services as an employee.      See O’Malley v. Commissioner,

91 T.C. 352, 363-364 (1988), affd. 972 F.2d 150 (7th Cir. 1992);

Primuth v. Commissioner, 54 T.C. 374, 377 (1970).     Consequently,

an employee’s business expenses may be deductible under section

162.    See Johnson v. Commissioner, 115 T.C. 210, 217 (2000);

O’Malley v. Commissioner, supra; Primuth v. Commissioner, supra

at 377-378.

       Deductions are strictly a matter of legislative grace, and a

taxpayer must meet the specific statutory requirements for any

deduction claimed.    See INDOPCO, Inc. v. Commissioner, 503 U.S.

79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435,

440 (1934).    Taxpayers are required to maintain records

sufficient to substantiate their claimed deductions.     See sec.

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

circumstances, if claimed deductions are not adequately

substantiated, we may estimate them, provided we are convinced

that the taxpayer has incurred such expenses and we have a basis

upon which to make an estimate.    See Cohan v. Commissioner, 39

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

T.C. 731, 743 (1985).
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     Certain business deductions described in section 274,

however, are subject to strict substantiation.     No deduction is

allowed with respect to:   (1) Any traveling expense (including

meals and lodging while away from home); (2) any item with

respect to an activity which is of a type generally considered to

constitute entertainment, amusement, or recreation; (3) any

expense for gifts; or (4) the use of any “listed property”, as

defined in section 280F(d)(4), unless certain elements are

substantiated.   See sec. 274(d).   Passenger automobiles are

listed property under section 280F(d)(4)(A)(i).

     Petitioners presented no records at trial to substantiate

any of the expenses at issue.   Furthermore, they provided little

testimony from which we could determine their entitlement to

deductions for the expenses.

     Petitioner testified that he took three sales-training

courses in 1996 at his own expense; however, he did not provide

any information as to the amount of his expense.    With regard to

the expenses petitioner claimed for uniforms and cleaning,

petitioner testified that the expenses were for business suits he

was required to wear to his job.    The expense of uniforms is

deductible under section 162(a) only if:    (1) The uniforms are of

a type specifically required as a condition of employment; (2)

the uniforms are not adaptable to general usage as ordinary

clothing; and (3) the uniforms are not so worn.    See Yeomans v.
                               - 7 -

Commissioner, 30 T.C. 757, 767-769 (1958); Udoh v. Commissioner,

T.C. Memo. 1999-174; Beckey v. Commissioner, T.C. Memo. 1994-514.

Petitioner’s testimony indicates that the articles of clothing

claimed as expenses were adaptable to general use.     Therefore,

petitioner’s clothing expenses are personal expenses and are not

deductible.

     Petitioner testified that he was entitled to larger

deductions for vehicle expenses related to business mileage than

allowed by respondent.   Petitioners, however, presented no

evidence other than a summary of the expenses claimed on their

Schedules A and C.   Under section 274(d), the elements that must

be substantiated to deduct business use of an automobile are:

(1) The amount of the expenditure; (2) the mileage for each

business use of the automobile and the total mileage for all use

of the automobile during the taxable period; (3) the date of the

business use; and (4) the business purpose of the use of the

automobile.   See sec. 1.274-5T(b)(6), Temporary Income Tax Regs.,

50 Fed. Reg. 46014 (Nov. 6, 1985).     Petitioners failed to

substantiate any of these elements at trial.

     Although petitioners did not claim deductions for child care

on their 1996 return or assert their entitlement to such

deductions in their petition, petitioner raised this issue at

trial.   Generally, we do not consider issues raised for the first

time at trial.   See Vetco Inc. v. Commissioner, 95 T.C. 579, 589
                               - 8 -

(1990).   Even if petitioners had properly raised this issue,

petitioner’s testimony was unclear, and no documentary evidence

was presented.   Thus, petitioners have not substantiated any

expense they may have incurred for child care.

     Petitioner also presented argument at trial that expenses

related to his employment as a car salesman should be Schedule C

expenses rather than Schedule A expenses.    He argues that these

expenses should be deducted from his gross income in order to

arrive at his adjusted gross income.    We disagree.

     Section 62, which defines adjusted gross income, lists the

deductions from gross income which are allowed for the purpose of

computing adjusted gross income.   Section 62(a)(1) states the

general rule that trade or business deductions are allowed for

the purpose of computing adjusted gross income “if such trade or

business does not consist of the performance of services by the

taxpayer as an employee”.   Expenses of employment, if incurred by

performing artists or State or local government officials, or

under a reimbursement arrangement with the employer, are

deductible in computing the employee’s adjusted gross income.

See sec. 62(a)(2).   Otherwise, employed individuals with

unreimbursed trade or business expenses of their employment must

itemize deductions for such expenses.    See secs. 161 and 162.

Under section 67 these itemized deductions are subject to a 2-

percent floor.
                                 - 9 -

     Petitioner acknowledges that his employers did not reimburse

him for any expense he incurred related to his employment.      Thus,

his employment-related expenses must be reported on Schedule A.

     In their petition, petitioners alleged that respondent bears

the burden of discrediting their claimed deductions.    Section

7491, effective for court proceedings arising in connection with

examinations commencing after July 22, 1998, shifts the burden of

proof to the Commissioner, under certain circumstances, where a

taxpayer introduces credible evidence with respect to factual

issues relevant to ascertaining the taxpayer's liability for tax.

See Internal Revenue Service Restructuring & Reform Act of 1998,

Pub. L. 105-206, sec. 3001, 112 Stat. 685, 724.    Respondent

argues that the examination of petitioner’s 1996 income tax

liability began on June 22, 1998.    Petitioners did not address

this issue at trial.   Furthermore, petitioners have failed to

present credible evidence with respect to the deductions at issue.

     Accordingly, we uphold respondent’s determinations.

     To reflect the foregoing,

                                           Decision will be entered

                                      for respondent.
