                          T.C. Memo. 1998-93



                        UNITED STATES TAX COURT



            ROGER L. AND GERALDINE WILLIAMS, Petitioners v.
              COMMISSIONER OF INTERNAL REVENUE, Respondent



        Docket No. 24222-96.                      Filed March 3, 1998.



        Roger L. and Geraldine Williams, pro se.

        Gregory M. Hahn, for respondent.



                MEMORANDUM FINDINGS OF FACT AND OPINION



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

the provisions of section 7443A(b)(3) and Rules 180, 181, and

182.1

        1
       Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for 1993, the taxable year in
                                                   (continued...)
                               -2-

     Respondent determined a deficiency in petitioners' Federal

income tax for the taxable year 1993 in the amount of $2,958.

     After concessions by respondent, the issues for decision,

which essentially involve substantiation, are as follows:

     (1) Whether petitioners are entitled to a deduction for

automobile expense in excess of the amount allowed by respondent;

     (2) whether petitioners are entitled to a deduction for

insurance expense in excess of the amount allowed by respondent;

     (3) whether petitioners are entitled to a deduction for

legal expense in the amount of $1,300;

     (4) whether petitioners are entitled to a deduction for the

lease of an automobile in the amount of $1,525;

     (5) whether petitioners are entitled to a deduction for rent

on business property in excess of the amount allowed by

respondent;

     (6) whether petitioners are entitled to a deduction for

repairs and maintenance in the amount of $2,338; and

     (7) whether petitioners are entitled to a deduction for

supplies in excess of the amount allowed by respondent.

     The amount of petitioners' liability for self-employment tax

and the amount of the deduction under section 164(f) to which

petitioners are entitled are mechanical matters, the resolution


     1
      (...continued)
issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
                                 -3-

of which will depend upon our disposition of the issues

enumerated above.

                           FINDINGS OF FACT

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

found.    Petitioners resided in Seattle, Washington, at the time

that their petition was filed with the Court.

     Petitioner Roger L. Williams (petitioner) began operating a

shoeshine business in 1990 at the Holiday Inn in Renton,

Washington.    Some time thereafter, but prior to the year in

issue, petitioner moved his shoeshine business to the Red Lion

Hotel (Red Lion) in SeaTac, Washington.

     The shoeshine stand at the Red Lion had two chairs and was

owned and maintained by the Red Lion.    Petitioner paid the Red

Lion $43 per week for use of the stand.       Petitioner paid the

rental in cash, and the Red Lion issued a receipt for the amount

paid.    Petitioner gave the receipts to his wife, who kept the

records of his expenses.

     On or about May 15, 1993, petitioner began operating a

second shoeshine stand at the South Satellite of the Seattle-

Tacoma International Airport (SeaTac Airport).       SeaTac Airport is

located no more than a half-mile from the Red Lion.

     Petitioner operated his shoeshine business at SeaTac Airport

pursuant to a month-to-month lease (Port lease) with the Port of

Seattle (Port).    In contrast to Red Lion, the Port did not

provide petitioner with a shoeshine stand.
                                -4-

     Petitioner's lease with the Port, which was in effect from

May 15, 1993 through the end of that year, required him to pay

rent of $300 per month.   In addition, petitioner paid a $900

security deposit to the Port upon commencement of the lease.     The

lease provided that petitioner's security deposit would be

returned to him upon termination of the lease, if all of the

terms and conditions thereof were honored.

     The Port lease required petitioner to obtain liability

insurance in the minimum amount of $1 million.   Petitioner

obtained the insurance from State Farm Fire and Casualty Co.

(State Farm).

     Petitioner determined his own work schedule.   Typically,

petitioner worked from 7 a.m. to 4 p.m. on weekdays.   In

addition, petitioner often worked a few hours on Saturdays.

Petitioner allocated his time between the Red Lion and SeaTac

Airport according to the amount of business at each location.     On

occasion, petitioner was called upon by the Red Lion to perform

shoeshine services for special guests during his leisure time.

     SeaTac is located south of petitioner's home in Seattle.     In

1993, petitioner used an automobile to commute to and from work

and to purchase supplies.   Petitioner occasionally used the

automobile for transportation between the Red Lion and SeaTac

Airport.   Generally, however, petitioner walked from one

shoeshine stand to the other.
                                -5-

     Petitioner furnished his own supplies at both the Red Lion

and SeaTac Airport.   Petitioner obtained most of his supplies

from MacPherson Leather Co. (MacPherson Leather), which was

located in Seattle.   On occasion, petitioner purchased supplies

from stores such as K-Mart and Safeway.   Petitioner did not

maintain complete records of all of the supplies that he

purchased.   Petitioner did, however, maintain some records of the

supplies that he purchased from MacPherson Leather.

     Petitioner paid business expenses both in cash and by check.

Petitioner's rent under the Port lease was paid by check "so we

have a record of what we pay to the Port."    Of the eight receipts

for supplies from MacPherson Leather that are included in the

trial record, three definitively disclose payment by check (in

the amounts of $20.90, $19.36, and $28.50).

     During 1993, an individual by the name of Willie Hughes (Mr.

Hughes) performed various services for petitioner.    These

services included accounting and tax preparation services.     Mr.

Hughes also assisted petitioner in obtaining the Port lease.

Petitioner paid Mr. Hughes for these services.

     On his Schedule C for 1993, petitioner claimed a net loss in

the amount of $5,111.   In this regard, petitioner reported gross

receipts in the amount of $11,700 and claimed expenses in the

amount of $16,811.

     In the notice of deficiency, respondent disallowed the

following expenses claimed by petitioner on his Schedule C:
                                    -6-


                           Return         Allowed   Disallowed
     Car & truck           $1,972             $98       $1,874
     Insurance                270             150          120
     Legal services         1,300              --        1,300
     Rent, vehicles         1,525              --        1,525
     Rent, business         5,036           1,330        3,706
     Repairs & maint.       2,338              --        2,338
     Supplies               2,250             219        2,031
     Taxes & licenses       1,350           1,350           --
     Other                    750             750           --
     Error on return           20              --           20
     Total                 16,811           3,897       12,914


     Prior to trial, petitioner provided documentation for some

of the disallowed deductions.    Based on such documentation,

respondent allowed additional deductions for (1) business rent in

the amount of $1,298 and (2) supplies in the amount of $9.

Accordingly, the following amounts remain in issue:

                           Return         Allowed   Disallowed
     Car & truck           $1,972             $98       $1,874
     Insurance                270             150          120
     Legal services         1,300              --        1,300
     Rent, vehicles         1,525              --        1,525
     Rent, business         5,036           2,628        2,408
     Repairs & maint.       2,338              --        2,338
     Supplies               2,250             228        2,022
     Taxes & licenses       1,350           1,350           --
     Other                    750             750           --
     Error on return           20              --           20
     Total                 16,811           5,204       11,607


                                OPINION

General Legal Principles

     We begin by noting that, as a general rule, the

Commissioner's determinations are presumed correct, and the

taxpayer bears the burden of proving that those determinations
                                 -7-

are erroneous.     Rule 142(a); INDOPCO, Inc. v. Commissioner, 503

U.S. 79, 84 (1992); Welch v. Helvering, 290 U.S. 111, 115 (1933).

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 Co. v.

Helvering, 292 U.S. 435, 440 (1934); Welch v. Helvering, supra.

This includes the burden of substantiation.    Hradesky v.

Commissioner, 65 T.C. 87, 90 (1975), affd. per curiam 540 F.2d

821 (5th Cir. 1976); see also sec. 6001 and sec. 1.6001-1(a),

(e), Income Tax Regs., (requiring taxpayers to maintain

sufficient records to permit verification of deductible

expenses).

1. Automobile-related Expenses

     Petitioners claimed deductions for "Car & Truck" in the

amount of $1,972 and for "Rent, vehicles" in the amount of

$1,525.   Respondent allowed $98 of the deduction claimed for "Car

& Truck" and disallowed the balance of that deduction.

Respondent disallowed the deduction claimed for "Rent, vehicles"

in its entirety.

     Petitioner contends that he used an automobile to commute to

and from work, to travel between the Red Lion and SeaTac Airport,

and to purchase supplies.   In this regard, petitioner contends

that the deduction claimed for "Car & Truck" represents the cost

of operating the automobile, and that the deduction claimed for

"Rent, vehicles" represents the cost of leasing the automobile.
                                -8-

     Section 162(a) authorizes deductions for ordinary and

necessary expenses paid during the taxable year in carrying on a

trade or business.   However, section 262 generally precludes

deductions for personal expenses.     Thus, expenses incurred by a

taxpayer in commuting between his or her home and place of

business are personal and nondeductible.     Commissioner v.

Flowers, 326 U.S. 465, 473-474 (1946); secs. 1.162-2(e), 1.262-

1(b)(5), Income Tax Regs.2

     Moreover, section 274(d)(4) provides that no deduction is

allowable with respect to listed property, as defined in section

280F(d)(4), unless the deduction is substantiated in accordance

with the strict substantiation requirements of section 274(d) and

the regulations promulgated thereunder.    Included in the

definition of listed property in section 280F(d)(4) is any

passenger automobile.   Sec. 280F(d)(4)(A)(i).

     In order to substantiate a deduction attributable to listed

property, a taxpayer must maintain adequate records or present

corroborative evidence to show: (A) The amount of the expense or

use, (B) the time and place of the expenditure or use of the

listed property, and (C) the business purpose for the expenditure

or use.   Sec. 1.274-5T(b)(6), Temporary Income Tax Regs., 50 Fed.

Reg. 46016 (Nov. 6, 1985).

     2
        In contrast, expenses incurred in traveling between two
places of business are deductible. Heuer v. Commissioner, 32
T.C. 947, 953 (1959), affd. per curiam 283 F.2d 865 (5th Cir.
1960).
                                 -9-

     In order to substantiate a deduction by means of adequate

records, a taxpayer must maintain a diary, a log, or a similar

record, and documentary evidence that, in combination, are

sufficient to establish each element of each expenditure or use.

Sec. 1.274-5T(c)(2)(i), Temporary Income Tax Regs., 50 Fed. Reg.

46017 (Nov. 6, 1985).    To be adequate, a record must generally be

written.    Each element of an expenditure or use that must be

substantiated should be recorded at or near the time of that

expenditure or use.    Sec. 1.274-5T(c)(2)(ii)(C)(2), Temporary

Income Tax Regs., 50 Fed. Reg. 46019 (Nov. 6, 1985).

     According to section 1.274-5T(c)(1), Temporary Income Tax

Regs., 50 Fed. Reg. 46016-46017 (Nov. 6, 1985):

     the corroborative evidence required to support a
     statement not made at or near the time of the
     expenditure or use must have a high degree of probative
     value to elevate such statement and evidence to the
     level of credibility reflected by a record made at or
     near the time of the expenditure or use supported by
     sufficient documentary evidence. * * *

     Thus, under section 274(d), no deduction may be allowed for

expenses incurred for use of a passenger automobile on the basis

of any approximation or the unsupported testimony of the

taxpayer.    E.g., Golden v. Commissioner, T.C. Memo. 1993-602.

     At trial, petitioner testified that he used an automobile

principally to commute to and from work.    However, as we have

already observed, commuting expenses are personal and

nondeductible.    Sec. 262; Commissioner v. Flowers, 326 U.S. at

473-474; secs. 1.162-2(e), 1.262-1(b)(5), Income Tax Regs.
                                -10-

     In contrast to commuting, automobile expenses incurred by

petitioner in obtaining supplies may be deductible.    However,

those expenses would not be deductible if petitioner merely

obtained supplies while commuting to work.    See Mazzotta v.

Commissioner, 57 T.C. 427 (1971), affd. per curiam 465 F.2d 1399

(2d Cir. 1972), affd. without published opinion 467 F.2d 943 (2d

Cir. 1972).    Assuming that petitioner obtained supplies

independent of his morning or afternoon commute,3 then, in order

to be entitled to any deduction, petitioner would have to meet

the strict substantiation requirements of section 274(d).

     At trial, petitioners did not introduce any records

pertaining to automobile-related expenses, much less the type of

records necessary to substantiate the claimed deductions.      See

sec. 274(d).    Rather, petitioners presented only unsupported

testimony as evidence of the claimed deductions.    Further,

petitioners did not introduce documentation demonstrating that an

automobile was leased or that payments were made on such a lease.

See Wichita Terminal Elevator Co. v. Commissioner, 6 T.C. 1158,

1165 (1946), affd. 162 F.2d 513 (10th Cir. 1947).    This

deficiency in the record, for which petitioners must accept

responsibility, precludes an allowance for any automobile-related

expense in excess of the amount allowed by respondent.


     3
       The $98 of the "Car & Truck" deduction allowed by
respondent represents 350 business miles at the standard rate of
$0.28 per mile for trips made to purchase supplies.
                               -11-

      In view of the foregoing, respondent's determinations

regarding the deductions claimed for "Car & Truck" and "Rent,

vehicles" are sustained.

2.   Insurance

     Petitioners claimed a deduction for "Insurance" in the

amount of $270.   Petitioners contend that this deduction

represents two premiums paid to State Farm for policies required

by the Port lease.   In this regard, petitioners claim that a

premium of $150 was paid for a $1 million liability policy and

another premium of $120 was paid for a $1 million bond.

Respondent allowed a deduction for the $150 premium paid for the

liability policy but disallowed the balance of the deduction for

lack of substantiation.

     In deciding whether a taxpayer has satisfied his or her

burden of substantiating a deduction, we are not required to

accept the taxpayer's self-serving, undocumented testimony.

Wood v. Commissioner, 338 F.2d 602, 605 (9th Cir. 1964), affg. 41

T.C. 593 (1964); Niedringhaus v. Commissioner, 99 T.C. 202, 219-

220 (1992); Tokarski v. Commissioner, 87 T.C. 74, 77 (1986);

Hradesky v. Commissioner, 65 T.C. at 90.

     Petitioners presented no evidence at trial that the Port

lease required a $1 million bond in addition to liability

coverage in the amount of $1 million.   The copy of the lease

introduced into evidence contains no requirement for such a bond.

Moreover, the lease recites that it is a complete contract of
                                  -12-

agreement between the parties.     Thus, if petitioner were required

to post a $1,000,000 bond by the Port lease, such a requirement

would have been included in the lease.

        In addition, petitioners claimed at trial that the $1

million bond was obtained from State Farm.     Inasmuch as

petitioners were able to produce a copy of the liability policy

obtained from State Farm, we fail to understand why petitioners

were unable to produce a copy of the alleged bond, if it existed,

from State Farm.      See Wichita Terminal Elevator Co. v.

Commissioner, supra.      Finally, petitioners failed to produce

documentary evidence of payment for the premium for the alleged

bond.

      In view of the foregoing, respondent's determination

regarding the deduction for "Insurance" is sustained.

3.   Legal Services

      Petitioners claimed a deduction for "Legal Services" in the

amount of $1,300.     Petitioners contend that this deduction

represents amounts paid in cash to Mr. Hughes for his services.

Respondent disallowed the deduction in its entirety for lack of

substantiation.

      As a general rule, in the case of expenses that are not

subject to the substantiation requirements of section 274(d), if

the record provides sufficient evidence that a taxpayer has

incurred a deductible expense, but the taxpayer is unable to

adequately substantiate the amount of the deduction to which he
                                -13-

or she is otherwise entitled, the Court may estimate the amount

of such expense and allow the deduction to that extent.     Cohan v.

Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930).     In making

such an estimate, however, the Court may bear heavily against the

taxpayer, whose inexactitude is of his or her own making.     Id.

     Petitioners claim that in 1993 Mr. Hughes provided

petitioner with a business proposal that petitioner used to

obtain the Port lease.   Petitioners also claim that Mr. Hughes

provided them with various accounting and certification services.

In return for these services, petitioners claim that they paid

Mr. Hughes $1,300 in cash.

     At trial, petitioners were unable to recall when they paid

Mr. Hughes or whether they paid him in installments.    Moreover,

petitioners introduced no copy of any invoice(s) from Mr. Hughes

for the services that he performed in 1993.   Petitioners

testified that they had "a fire in our home in the last 2 or 3

years that did a substantial amount of damage in our basement, so

some of the stuff got lost."4

     Mr. Hughes appeared at trial and corroborated petitioners'

testimony.   However, Mr. Hughes was unable to produce any records

detailing the services that he provided.   Mr. Hughes testified




     4
        Petitioners did not present any evidence, such as an
insurance claim or a fire department report, to substantiate this
allegation.
                                -14-

that although such records existed at one time, they were lost

when he moved his office.

      Based on our opportunity to observe Mr. Hughes at trial, we

are unable to accept his testimony uncritically.     Nevertheless,

and despite what appears to us to be a convenient lack of

records, we are satisfied that petitioners incurred some

deductible expense for Mr. Hughes' services in 1993.     Thus,

bearing heavily against petitioners, whose inexactitude is of

their own making, we hold that petitioners are entitled to deduct

$250 in "Legal Services" in 1993.      Cohan v. Commissioner, supra

at 543-544.   Accordingly, respondent's determination on this

issue is partially sustained.

4.   Rent

      Petitioner claimed a deduction for "Rent, business" in the

amount of $5,036.    Petitioners contend that this amount

represents the sum of (1) rent paid to SeaTac Airport under the

Port lease, and (2) amounts paid to Red Lion for the use of its

shoeshine stand.

       In the notice of deficiency, respondent allowed $1,330 of

the claimed deduction and disallowed the balance for lack of

substantiation.    However, at trial, respondent conceded that

petitioners are entitled to deduct an additional $1,298.     The sum

of these two amounts, $2,628, represents the following: (1) Rent

for 6 months in the monthly amount of $300 paid to the Port

(i.e., $1,800); (2) rent in the amount of $226 paid to the Port
                                 -15-

for the month of August 1993;5 and (3) rent for 14 weeks in the

weekly amount of $43 paid to Red Lion (i.e., $612).6

     Petitioners presented limited records to substantiate the

claimed deduction.    Nevertheless, insofar as the Port lease is

concerned, the record establishes that petitioners are entitled

to deduct rent for the 7-½ month period that the lease was in

effect during 1993; i.e., on or about May 15 through December 31,

1993.    In contrast, respondent has allowed a rent deduction for

the period June 1 through December 31, 1993.    Accordingly, we

hold that petitioners are entitled to deduct an additional $150

for the first one-half month of the lease term.

     Petitioners contend that the $900 security deposit paid to

the Port upon execution of the lease in 1993 is deductible in

that year.    We disagree.   A security deposit is not deductible,

if at all, until the year actually forfeited.    Accordingly, the

$900 security deposit is not deductible in 1993 because it was

not forfeited in that year, but remained refundable upon

termination of the lease.

     Insofar as the Red Lion is concerned, petitioners presented

only 14 weekly receipts.     However, petitioners presented at least

one receipt for each month of 1993, except November and December.

     5
       Respondent accepted petitioner's statement that the Port
rebated a portion of petitioner's rent for the month of August
1993.
     6
        Respondent allowed the latter amount based on the 14
weekly rent receipts from the Red Lion that petitioners produced.
                                  -16-

By way of explanation, petitioner testified that some of his

records were destroyed in a fire.7       Although no explanation was

given why some rent receipts escaped the alleged fire while

others did not, we ascribe some weight to petitioner's testimony

that he worked at Red Lion throughout the year.       Based on the

record as a whole, we hold that petitioners are entitled to

deduct rent paid to the Red Lion in the total amount of $1,720

(i.e., 40 weeks times $43 per week).       Cohan v. Commissioner,

supra.

5.   Repairs and Maintenance

      Petitioners claimed a deduction for "Repairs & Maintenance"

in the amount of $2,338.      In the notice of deficiency, respondent

disallowed the deduction in its entirety for lack of

substantiation.

      According to petitioners, the deduction in question

represents the cost of repairing an existing shoeshine stand and

then building a new shoeshine stand.       In this regard, petitioner

testified that repairs to his shoeshine stand were necessitated

by the Port lease; however, according to petitioner, the Port was

not satisfied with the aesthetic appearance of the stand, "So to

bring me up to standards, they got me together with an architect

to build one out of Formica and stuff, basically."




      7
          See supra note 4.
                               -17-

     At trial, petitioners introduced three checks payable to

"cash" totaling $2,285 to support the claimed deduction.8    Two

checks are dated February 1993 and one check is dated March 1993.

Petitioners contend that these checks are sufficient to

substantiate the claimed deduction.    We disagree.

     A check made payable to "cash" does not, in and of itself,

prove payment of a deductible expense.    And, other than their own

self-serving testimony, petitioners offered no evidence in

support of the claimed deduction.     See Wood v. Commissioner, 338

F.2d at 605; Niedringhaus v. Commissioner, 99 T.C. at 219-220;

Tokarski v. Commissioner, 87 T.C. at 77; Hradesky v.

Commissioner, 65 T.C. at 90.

     Thus, petitioners did not present a single invoice for

either materials or services related to the alleged repair of the

existing shoeshine stand or the construction of the new stand.

Although petitioners claim that their records were destroyed by

fire,9 petitioners failed to explain why the alleged suppliers or

service providers (such as the "architect") were unable to

testify on petitioners' behalf, or why the records of the alleged

suppliers or service providers were unavailable.




     8
        According to petitioners, the $53 difference between the
amount deducted ($2,338) and the sum of the three checks ($2,285)
represents the cost of transporting the new shoeshine stand to
SeaTac Airport.
     9
         See supra note 4.
                                -18-

     Moreover, the checks that petitioners introduced at trial

were dated in February and March, well before the Port lease was

executed.    We are not convinced that petitioners would have

incurred expenses of $2,285 before entering into the Port lease.

     In addition, the record demonstrates that petitioners wrote

checks for business expenses unrelated to the deduction for

"Repairs and Maintenance", particularly when they wanted to have

a record of what they had paid.    That being the case, petitioners

did not adequately explain why they dealt exclusively in cash

regarding the deduction in issue, especially in view of its

magnitude.

     Finally, the Port lease is silent regarding the aesthetic

"requirements" for a shoeshine stand or the Port's "right" to

impose its aesthetic sensibilities on petitioners.    In any event,

petitioners failed to call any representative of the Port to

testify regarding the need for the construction of a new

shoeshine stand or the repair of any existing stand.

     In view of the foregoing, we hold that petitioners failed to

carry their burden of proof.    While under other circumstances we

might be inclined to estimate a reasonable allowance, see Cohan

v. Commissioner, 39 F.2d 540 (2d Cir. 1930), here, however, there

is no basis upon which an estimate may be made, see Vanicek v.

Commissioner, 85 T.C. 731, 743 (1985), any allowance would amount

to unguided largess, see Williams v. United States, 245 F.2d 559,
                                  -19-

560 (5th Cir. 1957).10     Accordingly, we sustain respondent's

determination on this issue.

6.   Supplies

      Petitioners claimed a deduction for "Supplies" in the amount

of $2,250.      In the notice of deficiency, respondent allowed $219

of the claimed deduction and disallowed the balance for lack of

substantiation.     However, at trial, respondent conceded that

petitioners are entitled to deduct an additional $9.

      At trial, petitioners presented limited records related to

the claimed deduction.     Petitioners did produce several invoices

from MacPherson Leather bearing dates throughout the year, as

well as a canceled check, that together total $228, which

respondent allowed.     Petitioners allege that additional records

substantiating the claimed deduction were destroyed in a fire.11

Again, however, no explanation was provided why some of these

records escaped destruction while others did not.     Nevertheless,

we are satisfied that petitioners did in fact incur additional

expense for supplies.     Based on the record as a whole, we hold

that petitioners are entitled to deduct $250 for supplies in

addition to the amount allowed by respondent.      Cohan v.

Commissioner, supra.


      10
        In addition, any amount spent to acquire a new stand
might be a capital expenditure and for that reason not a current
expense. Secs. 263(a), 167, 168, 179(c).
      11
           See supra note 4.
                               -20-

7.   Conclusion

     To reflect our disposition of the disputed issues, as well

as respondent's concessions,



                                      Decision will be entered

                               under Rule 155.
