                  T.C. Summary Opinion 2004-126



                     UNITED STATES TAX COURT



          MARK W. AND ANITA P. FRANKLIN, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7161-03S.              Filed September 9, 2004.


     Mark W. and Anita P. Franklin, pro sese.

     Margaret Rigg, 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.   The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority.   Unless otherwise indicated,

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.
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     Respondent determined a deficiency in petitioners’ Federal

income tax of $2,242, and an addition to tax of $488.25 under

section 6651(a)(1), for the taxable year 1998.

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

entitled to certain miscellaneous itemized deductions in the

amount of $14,971.38 for “job seeking expenses”; and (2) whether

petitioners are liable for an addition to tax under section

6651(a)(1) for failing to file timely their Federal income tax

return.

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

The stipulation of facts and the attached exhibits thereto are

incorporated herein by this reference.   Petitioners resided in

San Francisco, California, on the date the petition was filed in

this case.

     During 1998, Mark W. Franklin (petitioner) was employed as a

production specialist1 for United Airlines.   His employment

location was the United Airlines facility at the San Francisco

International Airport.

     Between January and the end of March 1998, Anita P. Franklin

(petitioner wife) was unemployed and had been unemployed for the

previous 4 years.   At the end of March, she began working for the

County of Alameda in Oakland, California, in an administrative



     1
      Petitioner also described his job as a “computer terminal
technician position”.
                                 - 3 -

capacity.    She remained in this position for the remainder of

1998 and was still working there at the time of trial.

     Petitioners testified that in January they decided that

petitioner would look for a new job2 with United Airlines or

another company in a different city where petitioner wife might

also find administrative work.    However, petitioners never set up

any appointments or arranged any interviews in these destination

cities.    Petitioners also were unclear about what job positions

or vocations they were seeking.

     From January 4 to 8, 1998, petitioners traveled from San

Francisco, California, to Miami, Florida, in search of employment

for both of them.    Petitioner was seeking employment with his

current employer or another airline company in Miami, while

petitioner wife conducted a “cold canvas search” with various

employers in Miami, Palm Springs, Plantation, Port Everglades,

Fort Lauderdale, Davie, Dania, Hollywood, and Hallandale,

Florida.    The total expense of this employment search was

allegedly $2,937.    Of this amount petitioners calculated $509 for

hotel expenses; $356 for meal expenses; $210 for car rental

expenses; $70 for gas expenses; $1,772 for air fare expenses; and

$20 for parking expenses.




     2
      Petitioner’s testimony is unclear as to what type of job
position he was seeking.
                               - 4 -

     The second trip occurred from January 18 to 22, 1998, when

petitioners traveled from San Francisco, California, to Los

Angeles, California, again in search of employment for both of

them.   Petitioner was seeking employment with his current

employer or another airline company in Los Angeles, while

petitioner wife conducted a “cold canvas search” with various

employers in Los Angeles, Long Beach, Santa Ana, Pasadena,

Anaheim, Riverside, Irvine, and Burbank, California.   The total

expense of this employment search was allegedly $1,592.   Of this

amount petitioners calculated $515 for hotel expenses; $287 for

meal expenses; $234 for car rental expenses; $100 for gas

expenses; $430 for air fare expenses; and $56 for parking

expenses.

     The third trip occurred from February 1 to 5, 1998, when

petitioners traveled from San Francisco, California, to

Washington, D.C., in search of employment for both of them.

Petitioner was seeking employment with his current employer or

another airline company in Washington, D.C., while petitioner

wife conducted a “cold canvas search” with various employers in

Washington, D.C.; Fairfax, Vienna, Reston, Arlington, and McLean,

Virginia; and Silver Spring, Oxon Hill, Adelphi, and Bethesda,

Maryland.   The total expense of this employment search was

allegedly $2,927.   Of this amount petitioners calculated $569 for

hotel expenses; $418 for meal expenses; $253 for car rental
                                - 5 -

expenses; $85 for gas expenses; $1,572 for air fare expenses; and

$30 for parking expenses.

     The fourth trip occurred from February 22 to 26, 1998, when

petitioners traveled from San Francisco, California, to Chicago,

Illinois, in search of employment for both of them.   Petitioner

was seeking employment with his current employer or another

airline company in Chicago, Illinois, while petitioner wife

conducted a “cold canvas search” with various employers in

Chicago, Oak Park, Oak Brook, Englewood, Norridge, and Oak Lawn,

Illinois.   The total expense of this employment search was

allegedly $2,879.   Of this amount petitioners calculated $639 for

hotel expenses; $448 for meal expenses; $336 for car rental

expenses; $120 for gas expenses; $1,298 for air fare expenses;

and $38 for parking expenses.

     Petitioners also contend that on January 2, 12-16, 23-26,

February 9-20, and March 2-13, 1998, petitioner wife conducted a

“cold canvas search” with various employers in San Francisco,

Walnut Creek, San Jose, Marin, San Rafael, Oakland, Sacramento,

Berkeley, San Mateo, Sunnyvale, Concord, and Hayward, California.

The total expense of this employment search was allegedly $738.

Of this amount, petitioners calculated $425 for gas expenses, $52

for toll expenses, $95 for parking expenses, $15 for newspaper

expenses, $30 for copying expenses, $32 for paper supplies, $64

for postage, and $25 for envelopes.
                               - 6 -

     Petitioners claimed that all receipts and documents which

substantiated the aforesaid job seeking expenses were destroyed

by water damage that occurred in their San Francisco home.

     Petitioners filed a joint Federal income tax return for the

taxable year 1998, which included a Schedule A, Itemized

Deductions.   Petitioners’ Schedule A listed miscellaneous

itemized deductions, which included “job seeking expenses” in the

amount of $14,971.38.

     Petitioners testified that they mailed their 1998 Federal

income tax return to the Internal Revenue Service (IRS) office in

Fresno, California, in October of 1999, after the expiration of

an extension date.   However, respondent contends that petitioners

mailed their return on or about April 4, 2000, and said return

was received by the IRS on April 6, 2000.

     In the notice of deficiency for the taxable year 1998,

respondent determined that petitioners:     (1) Are not entitled to

deduct the $14,971.38 claimed as “job seeking expenses”; and (2)

are liable for an addition to tax of $488.25 pursuant to section

6651(a)(1) for failure to file their 1998 tax return by the

prescribed due date.

Miscellaneous Itemized Deduction--Job Seeking Expenses

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

business expenses paid or incurred during the taxable year in

carrying on any trade or business.     To be “ordinary” the
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transaction which gives rise to the expense must be of a common

or frequent occurrence in the type of business involved.      Deputy

v. du Pont, 308 U.S. 488, 495 (1940).     To be “necessary” an

expense must be “appropriate and helpful” to the taxpayer’s

business.   Welch v. Helvering, 290 U.S. 111, 113-114 (1933).     The

performance of services as an employee constitutes a trade or

business.   See sec. 1.162-17(a), Income Tax Regs.    The employee

must show the relationship between the expenditures and the

employment.   See Evans v. Commissioner, T.C. Memo. 1974-267.

     Such deductible expenses include those incurred in searching

for new employment in the employee’s same trade or business.

Cremona v. Commissioner, 58 T.C. 219 (1972); Primuth v.

Commissioner, 54 T.C. 374 (1970).    It does not matter whether the

search is successful, or even whether the taxpayer accepts a new

position when it is obtained.   See Cremona v. Commissioner, supra

at 221-222; Kenfield v. Commissioner, 54 T.C. 1197, 1199-1200

(1970).   It does not matter that the taxpayer is temporarily

unemployed while searching, or that the taxpayer is temporarily

engaged in a different trade or business while searching for a

new position in the trade or business previously conducted by the

taxpayer.   See Primuth v. Commissioner, supra at 378; Charlton v.

Commissioner, T.C. Memo. 1988-515.      Job search expenses include

resumé preparation expenses, postage, and travel and
                                 - 8 -
transportation expenses.    See Murata v. Commissioner, T.C. Memo.

1996-321.

     If the employee is seeking a job in a new trade or business,

however, the expenses are not deductible under section 162(a).

Dean v. Commissioner, 56 T.C. 895 (1971); Frank v. Commissioner,

20 T.C. 511, 513 (1953); Hobdy v. Commissioner, T.C. Memo. 1985-

414; Evans v. Commissioner, T.C. Memo. 1981-413; see Carter v.

Commissioner, 51 T.C. 932, 934 (1969); sec. 1.212-1(f), Income

Tax Regs.   A taxpayer who has been unemployed for more than a

reasonably temporary period is not in the trade or business of

being employed, and thus the expenses of searching for a job are

not deductible.     Miller v. United States, 362 F. Supp. 1242,

1247-1248 (E.D. Tenn. 1973).

     Due to the fact that petitioner wife was unemployed during

the period of time in 1998 in which petitioners conducted their

“job search” and had been unemployed for the 4 years prior to

1998, she is considered not in the trade or business of being

employed, and thus her expenses of searching for a job in the San

Francisco area and on the four job search trips are not

deductible.   Id.

     The record is unclear as to the type of employment

petitioner was seeking in 1998.    The Court is not certain as to

whether petitioner was looking for the same position elsewhere or

another type of job.    Nevertheless, we give petitioner the
                               - 9 -
benefit of the doubt and assume that he was seeking the same job

at another location.

     Petitioners claimed a $14,971.38 deduction for traveling

expenses that they claim they incurred in seeking employment.    Of

this amount, petitioners argue that $2,937 is attributable to

their Miami, Florida, job search; $1,592 is attributable to their

Los Angeles, California, job search; $2,927 is attributable to

their Washington, D.C., job search; $2,879 is attributable to

their Chicago, Illinois, job search; and $738 is attributable to

their local job search.

     As a general rule, the determinations of the Commissioner in

a notice of deficiency are presumed correct, and the taxpayer

bears the burden of proving the Commissioner’s determinations in

the notice of deficiency to be in error.    Rule 142(a); Welch v.

Helvering, supra at 115.   Section 7491(a), which shifts the

burden of proof to the Commissioner under certain circumstances,

does not apply with respect to this factual circumstance because

petitioners neither alleged that section 7491 was applicable nor

established that they fully complied with the statutory

substantiation requirements of section 7491, as shown below.

Sec. 7491(a)(2)(A) and (B).

     Moreover, deductions are a matter of legislative grace, and

the taxpayer bears the burden of proving that he or she is

entitled to any deduction claimed.     Rule 142(a); New Colonial Ice
                                - 10 -
Co. v. Helvering, 292 U.S. 435, 440 (1934).     This includes the

burden of substantiation.    Hradesky v. Commissioner, 65 T.C. 87,

89-90 (1975), affd. per curiam 540 F.2d 821 (5th Cir. 1976).

     Section 6001 and the regulations promulgated thereunder

require taxpayers to maintain records sufficient to permit

verification of income and expenses.     As a general rule, if the

trial record provides sufficient evidence that the taxpayers have

incurred a deductible expense, but the taxpayer is unable to

adequately substantiate the precise amount of the deduction to

which he or she is otherwise entitled, the Court may estimate the

amount of the deductible expense bearing heavily against the

taxpayer whose inexactitude in substantiating the amount of the

expense is of his own making and allow the deduction to that

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

However, in order for the Court to estimate the amount of an

expense, the Court must have some basis upon which an estimate

may be made.   Vanicek v. Commissioner, 85 T.C. 731, 742-743

(1985).   Without such a basis, any allowance would amount to

unguided largesse.     Williams v. United States, 245 F.2d 559, 560-

561 (5th Cir. 1957).

     In the case of travel expenses, specifically including meals

and entertainment, as well as certain other expenses, section

274(d) overrides the so-called Cohan doctrine.     Sanford v.
                              - 11 -
Commissioner, 50 T.C. 823, 827-828 (1968), affd. per curiam 412

F.2d 201 (2d Cir. 1969).

     Nearly all of the claimed job search expenses are travel

expenses subject to the strict substantiation requirements

imposed by section 274(d).   Under section 274(d), no deduction

may be allowed for expenses incurred for travel, or certain other

expenses, on the basis of any approximation or the unsupported

testimony of the taxpayer.   Section 274(d) imposes strict

substantiation requirements to which taxpayers must strictly

adhere.   Thus, section 274(d) specifically proscribes deductions

for travel expenses in the absence of adequate records, or of

sufficient evidence corroborating the taxpayer’s own statement.

At a minimum, the taxpayer must substantiate:   (1) The amount of

such expense; (2) the time and place such expense was incurred;

and (3) the business purpose for which such expense was incurred.

     Petitioners claim that they kept adequate records and

receipts to substantiate their claimed expenses, but that such

records and receipts were allegedly destroyed by water damage.

Petitioners offered and the Court received into evidence an

expense log.   Petitioners’ expense log was based on their

recollection of the expenses and travel dates, but no receipts or

documents were used in its preparation.   The total expense

claimed in the log was $11,073.   We do not accept this log as

reliable evidence because it was prepared approximately 2 months
                                - 12 -
before trial, about 6 years after the year in issue, and it was

prepared in contemplation of litigation.      Also, petitioners’

testimony supporting such expenses is vague and unclear.        Under

the circumstances this log cannot be given any weight by this

Court.

     Furthermore, petitioners have failed to account for the

discrepancy between their total expenses in their expense log

($11,073) and their Schedule A claimed “job seeking expenses”

($14,971.38).   Although most of the expenses were charged to

personal credit cards, petitioners have not provided any

contemporaneous records or documents to show that they paid such

expenses in the amounts set forth.       For example, petitioners have

not shown that they requested copies of airfare ticket vouchers,

hotel bills, car rental agreements, or credit card statements to

substantiate their claimed deductions.      Petitioners admitted that

the amounts for “job seeking” expenses on the Schedule A are

estimates, and that they cannot provide the supporting documents

that were used to arrive at the amounts of the expenses shown

thereon.

     Petitioners have failed to satisfy the requirements of

section 274(d) with respect to any traveling expense that they

might have incurred in seeking employment.      Therefore, we

conclude that petitioners have failed to substantiate the

disallowed claimed deduction.    See sec. 6001; sec. 1.6001-1(a),
                                - 13 -
(e), Income Tax Regs.   Respondent’s disallowance of the deduction

is sustained.

Failure To File, Addition To Tax

     Respondent determined an addition to tax as a result of

petitioners’ failure to timely file their Federal income tax

return for the year in issue.    Section 6651(a)(1) provides for an

addition to tax in the event a taxpayer fails to file a timely

return (determined with regard to any extension of time for

filing).    The amount of the addition is equal to 5 percent of the

amount required to be shown as tax on the delinquent return for

each month or fraction thereof during which the return remains

delinquent, up to a maximum addition of 25 percent for returns

more than 4 months delinquent.    Sec. 6651(a)(1).

     Petitioners’ 1998 Federal income tax return was due on April

15, 1999.   See sec. 6072(a); sec. 1.6072-1(a), Income Tax Regs.

Section 6081(a) allows for a reasonable extension for the filing

of a tax return; the extension may not exceed 6 months.   See sec.

6081.   Petitioners requested an extension to August 15, 1999, to

file their 1998 return.   Petitioners obtained such extension for

filing their return.    However, petitioners testified that their

1998 return was filed in October of 1999, while respondent

contends that petitioners’ 1998 return was received by respondent

on April 6, 2000.
                               - 14 -
     Respondent has the burden of production with respect to any

penalty, addition to tax or an additional amount imposed, and

petitioners bear the burden of proving the addition to tax does

not apply.   Sec. 7491(c); Higbee v. Commissioner, 116 T.C. 438,

446-47 (2001).

     Respondent contends that petitioners mailed their return on

or about April 4, 2000, and said return was received by the IRS

on April 6, 2000.   Respondent offers as evidence to carry his

burden of production, a copy of the original 1040 form filed by

petitioners, which has stamped on its second page an IRS date

receipt stamp.   Such an IRS date stamp, which has been applied in

the ordinary course of business, has been held to be sufficient

evidence to establish receipt of a return.   See Schentur v.

United States, 4 F.3d 994 (6th Cir. 1993).

     Respondent also offers as evidence, and the Court has

received into evidence, a copy of the envelope which respondent

claims contained petitioners’ 1998 return.   Said envelope is

addressed to the IRS office in Fresno, California; it is

postmarked with the date of April 4, 2000; and it bears the

petitioners’ return address.   It is also pertinent to note that

the envelope was mailed from Oakland, California.   This Court

finds it to be more then coincidental that the envelope

containing the purported return bore the date of April 4, 2000,

and the IRS stamp date was April 6, 2000--this appears to be the
                               - 15 -
ordinary Postal Service time for delivery of mail from Oakland,

California, to Fresno, California.

     Petitioners admit they did not file their return by the

proper filing date as extended but claim they mailed their return

no later then October.    Petitioners have failed to offer any

evidence to contradict respondent’s above evidence, except

unsubstantiated trial testimony.3

     This Court finds petitioners’ testimony vague, unclear, and

unpersuasive.   We reject petitioners’ testimony that their 1998

return was filed in October of 1999 and that the copy of the

envelope offered into evidence is not the proper envelope which

contained petitioners’ 1998 return.

     Petitioners’ only dispute with the application of section

6651(a)(1) is with the date they filed their return.    Petitioners

failed to file timely their Federal income tax return for 1998.

Petitioners have not argued, and there is nothing in the record

to indicate, that such failure was due to reasonable cause and

not to willful neglect.   Respondent’s determination that

petitioners filed their return in April of 2000, and therefore



     3
      Sec. 7502 describes two examples of evidence that could
have been used by petitioners. First, if any return is required
to be filed by a certain date, and is received after that date,
the date of the U.S. postmark shall be deemed the date of
delivery. Second, if a document is sent by registered or
certified mail, such registration or certification shall be prima
facie evidence that the document was delivered on the date of the
postmark. See sec. 7502.
                             - 16 -
petitioners are liable for the addition to tax under 6651(a), is

sustained.

     Reviewed and adopted as the report of the Small Tax Case

Division.

                                        Decision will be entered

                                   for respondent.
