                  T.C. Summary Opinion 2010-142


                      UNITED STATES TAX COURT



              ROULETTE WILLIAM SMITH, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 6129-06S, 9684-07S.    Filed September 22, 2010.



     Roulette William Smith, pro se.

     Heather K. McCluskey and Sherri Wilder, for respondent.



     GERBER, Judge:   These consolidated cases were 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 decisions to be entered are not reviewable by any




     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years 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 deficiencies in petitioner’s Federal

income taxes of $12,948 in 2002 and $9,116 in 2003.     After

concessions, the sole issue remaining for consideration is

whether petitioner is entitled to deduct certain business

expenses.

                              Background2

         Petitioner resided in California when he filed his

petitions.     During the years in issue petitioner was employed as

a member of the faculty at Cal State University, Dominguez Hills

(CSUDH) in Carson, California, and at the Institute of

Transpersonal Psychology (ITP) in Palo Alto, California.

Petitioner also owned rental real estate in Santa Barbara,

California, and operated a business named Institute for

Postgraduate Interdisciplinary Studies (IPIS).

     On Schedules C, Profit or Loss From Business, attached to

his Forms 1040, U.S. Individual Income Tax Return, petitioner

claimed business deductions of $44,149 for 2002 and $52,589 for

2003.3    Petitioner also claimed a $35,833 loss from his rental




     2
      The stipulation of facts, the supplemental stipulation of
facts, and the attached exhibits are incorporated herein by this
reference.
     3
      All figures have been rounded to the nearest dollar.
                                 -3-

real estate on Schedule E, Supplemental Income and Loss, attached

to his 2002 income tax return.

     On February 7, 2006, respondent issued a notice of

deficiency for petitioner’s 2002 tax year disallowing

petitioner’s Schedule C deductions for lack of substantiation and

$23,889 of $35,833 petitioner claimed as a real estate loss,

determining that it was a passive activity loss.   On February 5,

2007, respondent issued a notice of deficiency for petitioner’s

2003 tax year disallowing all $52,589 of the Schedule C

deductions for lack of substantiation.

     Petitioner filed timely petitions in response to the notices

of deficiency.   On November 7, 2007, the Court granted

respondent’s oral motion to consolidate petitioner’s cases.

     Petitioner has conceded that his real estate loss was a

passive activity loss, and respondent has conceded that

petitioner is entitled to deduct $25,000 of the real estate loss

under section 469(i) because petitioner actively participated in

his rental real estate activity.

                            Discussion

     Deductions are a matter of legislative grace, and taxpayers

bear the burden of establishing entitlement to any claimed

deduction.   Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S.

79, 84 (1992).   Taxpayers must maintain records sufficient to

allow the Commissioner to determine their correct tax liability.
                                 -4-

Sec. 6001; sec. 1.6001-1(a), Income Tax Regs.      Additionally,

taxpayers bear the burden of substantiating the amount and

purpose of each item they claim as a deduction.      Hradesky v.

Commissioner, 65 T.C. 87, 89 (1975), affd. per curiam 540 F.2d

821 (5th Cir. 1976).

     For most business deductions claimed, petitioner failed to

maintain adequate or any records.      To the extent petitioner

produced substantiating records at trial, they were disorganized

and incomplete.    The Court has carefully reviewed the record and,

to the extent possible, refined petitioner’s documentation and

testimony to bring some clarity to an otherwise unfathomable sea

of murky material.    The disallowance of most of petitioner’s

claimed deductions is attributable to his failure to properly

document his expenses.

     Section 162(a) allows a taxpayer to deduct all ordinary and

necessary business expenses paid or incurred during the taxable

year.    A taxpayer’s personal or living expenses are not

deductible.    Sec. 262.

     On Schedules C of his 2002 and 2003 returns petitioner

claimed the following business expenses4 for his IPIS business

activity:



     4
      The amounts listed as petitioner’s expenses throughout this
opinion do not reflect any limitations on deductions, such as the
50-percent limitation on meals and entertainment expenses under
sec. 274(n).
                               -5-

          Expense                    2002             2003
                                1                 2
    Car and truck                $13,211.91        $11,110.80
    Insurance                           34.00            ---
    Legal and professional             656.63          2,295.00
    Office                             114.00          5,855.63
                                 3                 4
    Travel                         20,474.20         21,018.61
                                   5                 6
    Meals and entertainment          9,583.95          8,637.00
    Utilities                        3,115.07          2,750.00
    Other                            1,750.99          5,374.87
     1
      Petitioner calculated his 2002 car and truck expense by
multiplying the standard mileage rate of 36.5 cents per mile by
36,197 business miles. See Rev. Proc. 2001-54, sec. 5, 2001-2
C.B. 530, 531. However, the entries in petitioner’s log total
36,329 miles, and there is no explanation in the record for the
132-mile discrepancy.
     2
      Petitioner should have claimed a 2003 car and truck expense
of $11,111.04 using the standard mileage rate of 36 cents per
mile and the 30,864 business miles he purportedly drove. See
Rev. Proc. 2002-61, sec. 5, 2002-2 C.B. 616, 618. There is no
explanation in the record for the 24-cent discrepancy.
     3
      Petitioner claimed $14,250 in lodging expenses and
$6,224.20 in other travel expenses. Petitioner improperly
calculated his lodging expenses using a per diem rate of $150 for
95 days in Palo Alto (discussed infra). See Rev. Proc. 2001-47,
2001-2 C.B. 332; 41 C.F.R. ch. 301, app. A (2003).
     4
      Petitioner’s 2003 travel expenses consisted entirely of
lodging expenses which he improperly and incorrectly calculated
using the 2004 per diem rates (discussed infra).
     5
      Petitioner claimed $4,508 in meals expenses and $5,075.95
in entertainment expenses. Petitioner calculated his meals
expense using a per diem rate of $46 for 98 days in Palo Alto.
See Rev. Proc. 2001-47, supra; 41 C.F.R. ch. 301, app. A (2003).
     6
      Petitioner’s 2003 meals and entertainment expenses
consisted entirely of meals expenses which he calculated using
incorrect per diem rates (discussed infra).
                                -6-

     Petitioner claims he was in the business of medical

research.5   As part of that research, petitioner asserts that he

studied people who did not know they needed help and people who

mistakenly believed they needed help.    Petitioner claimed he gave

individuals gifts in order to study how they were physiologically

affected by his generosity.

     Because he defined his business activity so broadly and

considered almost any expenditure remotely connected to that

activity to be a business expense, petitioner claimed business

expense deductions for hundreds of questionable expenditures for

the years in issue.   Respondent disallowed nearly all of these

deductions in the notices of deficiency.

     Petitioner’s records provide substantiation for a limited

number of his claimed deductions.     Petitioner failed to produce a

receipt or other documentation of payment for most of his claimed

expenses, and some of the receipts he did submit show that he

spent less than the amount claimed.    In addition, his records

fail to identify the purpose of some expenses.    In other

instances the records indicate that expenditures were incurred in



     5
      It is unclear how petitioner expected to profit from this
research activity. Petitioner claimed that his research would
lead to patents that would generate income, but the record
evidences only a single patent application, for a garment bag.
Petitioner did not explain how that patent related to a business
in medical research. Respondent has, however, conceded that
petitioner operated the Institute for Postgraduate
Interdisciplinary Studies with a profit objective.
                                  -7-

connection with his teaching positions, as opposed to his

business.

      Respondent has since conceded that petitioner did

substantiate a number of his expenses and is thus entitled to

deduct them on his Schedules C.    Respondent also conceded that

petitioner is entitled to deduct on Schedule A, Itemized

Deductions, expenses that his records designated as having been

incurred in connection with his teaching jobs.     However,

respondent maintains that petitioner is not entitled to deduct

the remaining expenses for which petitioner’s records do not

substantiate payment and/or a business purpose.6

      At trial petitioner testified as to why each of the expenses

allowed as a deduction on Schedule A were in fact an IPIS expense

and as to the purpose of each of the expenses disallowed for lack

of business purpose.   We address each of these items below.

A.   Amounts Allowed on Schedules C

      Respondent conceded that petitioner has substantiated the

following amounts as business expenses:




      6
      Our review of petitioner’s records and the record as a
whole reveals that respondent’s concessions were generous.
                               -8-

         Expense                     2002           2003

  Car and truck                 $8,213.59         $2,425.68
  Insurance                          34.00             ---
  Legal and professional            378.00          2,295.00
  Office                            114.00          2,259.52
                                1                 2
  Travel                          5,044.26          1,008.70
                                3                 4
  Meals and entertainment         2,576.00          3,116.00
  Utilities                       1,645.09         1,369.52
  Other                             555.62            122.28
     1
      Because taxpayers are not allowed to use the per diem rate
to calculate their lodging expenses on Schedule C, respondent
allowed only the $1,491.97 of lodging expenses for which
petitioner actually substantiated payment. See Duncan v.
Commissioner, T.C. Memo. 2000-269.
     2
      Respondent conceded the $1,008.70 of lodging expenses for
which petitioner actually substantiated payment.
     3
      Respondent conceded that petitioner is entitled to use the
per diem rate for 56 days.
     4
      Respondent conceded that petitioner is entitled to use the
per diem rate for 53 days in Palo Alto, 8 days in Schenectady,
New York, and 4 days in San Diego, California. Petitioner
improperly used a per diem rate of $34 per day for the days in
Schenectady and the 2004 per diem rates for all of the days in
Palo Alto and San Diego. The correct rates are: (1) $51 per day
for the 26 days in Palo Alto between Oct. 1 and Dec. 31, 2003;
(2) $50 per day for the 27 days in Palo Alto between Jan. 1 and
Sept. 30, 2003; (3) $30 per day for the 8 days in Schenectady;
and (4) $50 per day for the 4 days in San Diego. See Rev. Proc.
2002-63, 2002-2 C.B. 691; Rev. Proc. 2003-80, 2003-2 C.B. 1037;
41 C.F.R. ch. 301, app. A (2004).

     On the basis of the record, we hold the following items to

be business expenses properly deductible on Schedule C.

     For 2002 petitioner claimed a $34 legal and professional

expense for a subscription to the National Geographic magazine.

He did not have a receipt for his subscription for that year, but

he was able to provide respondent with a receipt for 2003.
                                -9-

Petitioner has thus provided the Court an evidentiary basis for

allowing a deduction for the 2002 subscription, and we may do so

even though petitioner was unable to fully substantiate the

expense.   See Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d

Cir. 1930).

     Petitioner claimed a 2002 legal and professional expense of

$28.49 and a 2002 other expense of $72.81 for the purchase of

books which he discussed with business associates as part of his

IPIS research.

     Petitioner also claimed a 2003 office expense of $165 for

the purchase of video recorders “for people who were working with

* * * [him] to record events which * * * [he] would like to have

them record”.

     In addition, petitioner claimed a 2003 office expense of

$297.69 for the purchase of a travel bag and a briefcase which

were used only for IPIS business.

     After review of the evidence, we hold that petitioner is

entitled to deductions for the following expenses.7




     7
      These amounts include amounts respondent conceded or
allowed.
                                -10-

             Expense                   2002            2003

     Car and truck                $8,213.59         $2,425.68
     Insurance                        34.00             ---
     Legal and professional          440.49          2,295.00
     Office                          114.00          2,722.21
     Travel                        5,044.26          1,008.70
     Meals and entertainment       2,576.00          3,116.00
     Utilities                     1,645.09          1,369.52
     Other                           628.43            122.28

B.   Amounts Allowed on Schedules A

      1.   Charitable Contributions

      Section 170(a) generally allows a taxpayer a deduction for

any charitable contribution made during the taxable year subject

to certain limitations.    For individual taxpayers, a charitable

contribution is deducted on Schedule A as an itemized deduction.

      Petitioner claimed $100 for 2002 legal and professional

expenses and $150 for 2003 office expenses for donations to

nonprofit organizations.    Respondent allowed charitable

contribution deductions for these donations.    Petitioner has not

adequately shown that these contributions were other than

personal.    Accordingly, we hold that petitioner is entitled to

deduct $100 for 2002 and $150 for 2003 as charitable

contributions on Schedules A.

      2.   Unreimbursed Employee Expenses

      An employee may generally deduct unreimbursed employment

expenses on Schedule A subject to a floor of 2 percent of

adjusted gross income.    See secs. 62(a), 67(a).
                               -11-

     Respondent contends that a number of petitioner’s claimed

IPIS expenses were actually incurred in connection with his job

at ITP instead.   Respondent thus allowed the following expenses

as unreimbursed employee expenses.

          Expense                    2002            2003
                                1
    Car and truck                $3,631.75         $3,674.52
    Legal and professional            13.64            ---
    Office                           ---                22.34
                                 2                 3
    Travel                         3,600.00          6,962.00
                                 4                 5
    Meals and entertainment        1,748.00          3,508.00
    Other                             39.17            244.25
     1
      This figure does not include a car and truck expense of
$195.28 which respondent listed as allowed on Schedule A.
Because respondent disallowed the $885 in travel expenses and the
$138 in meals and entertainment expenses associated with the same
trip (discussed infra), it appears that respondent included this
car and truck expense by mistake and did not concede its
deductibility.
     2
      Respondent did concede that petitioner is entitled to use
the per diem rate for 24 days.
     3
      Respondent also conceded that petitioner is entitled to use
the per diem rate for 47 days in Palo Alto. The $106 rate
petitioner used applies only for the 2 days that fall during the
period Oct. 1 through Dec. 31, 2003. See Rev. Proc. 2003-80,
supra; 41 C.F.R. ch. 301, app. A (2004). The 2003 per diem rate
of $150 applies to the remaining 45 days falling between Jan. 1
and Sept. 30, 2003. See Rev. Proc. 2002-63, supra; 41 C.F.R. ch.
301, app. A (2003).
     4
      Respondent conceded that petitioner is entitled to use the
per diem rate for 38 days.
     5
      Respondent conceded that petitioner is entitled to use the
per diem rate for 70 days in Palo Alto. The $51 rate petitioner
used applies only for the 8 days that fall during the period
between Oct. 1 and Dec. 31, 2003. See Rev. Proc. 2003-80, supra;
41 C.F.R. ch. 301, app. A (2004). The 2003 per diem rate of $50
applies to the remaining 62 days falling between Jan. 1 and
Sept. 30, 2003. See Rev. Proc. 2002-63, supra; 41 C.F.R. ch.
301, app. A (2003).
                                -12-

     Petitioner argues, without providing adequate documentation,

that the expenses respondent allowed on Schedules A were IPIS

expenses that belong on Schedules C.

           a.   Car and Truck, Travel, and Meals and
                Entertainment Expenses

     During the years in issue petitioner routinely drove from

CSUDH to Palo Alto almost weekly.      Respondent contends that

petitioner drove to his job at ITP and therefore the expenses

belong on Schedules A as unreimbursed employee expenses.

Petitioner claims he always drove straight to the Stanford

University library to perform research for IPIS and therefore

claimed these amounts on Schedules C as IPIS business expenses.

     We do not find petitioner’s claim to be credible, for two

reasons.   First, petitioner’s claim is contradicted by his own

records.   In his logs petitioner labeled these trips “ITP”.      The

log entries for these trips make no mention of IPIS at all.

     Second, petitioner’s claim is not credible because

petitioner’s testimony contradicted the documentary evidence.

Petitioner claimed that on the way home from Palo Alto he

frequently stopped by his property in Santa Barbara to remove

weeds.   Petitioner claims that this work added up to at least 750

hours of work on his property in 2002 and that he therefore

satisfied section 469(c)(7)(B)(ii) (discussed infra).      Even if we

were generous in assuming that petitioner made this trip every

single week, his claim converts to spending over 14 hours
                                      -13-

removing weeds during each visit.            Since the approximately 300-

mile trip to Santa Barbara would have taken approximately 5

hours, petitioner would have arrived in Santa Barbara in the

afternoon (assuming that he left Palo Alto in the morning) and

would have been removing weeds into the middle of the night.

Considered in its entirety, petitioner’s story is thus without

substance and beyond reality.

       For these reasons we find that petitioner incurred these

expenses in connection with his job at ITP and hold that these

are itemized deductions that belong on Schedule A.

            b.   Legal and Professional, Office, and Other
                 Expenses

       Respondent allowed the following expenses on Schedules A of

petitioner’s 2002 and 2003 returns, but petitioner insists these

were IPIS business expenses.

   Expense               Amount                Reason Claimed for Expense

2002

Legal and                $13.64                FedEx service to ITP’s dean
professional                                   of students

Other                      39.17               Book purchase

2003
                          1
Office                     20.23               Printing expenses
                              2
Office                         2.11            Book purchase

Other                     244.25               Business purchases
       1
      Petitioner claimed a deduction of $70.18, but the receipt
he submitted shows a purchase of only $20.23.
                               -14-
     2
      Petitioner claimed a $480.67 deduction. Respondent allowed
$207.54 on Schedule C, allowed $2.11 on Schedule A, and
disallowed the remaining $271.02.

     Despite petitioner’s contentions to the contrary, the

receipts submitted for these expenses and the entries in

petitioner’s log are labeled “ITP”.    The record thus reveals

these expenses were incurred in his capacity as an employee of

ITP rather than in connection with IPIS.     Accordingly, we hold

these expenses to be unreimbursed employee expenses deductible on

Schedules A.

     3.   Conclusion

     We hold that petitioner is entitled to deductions for the

following expenses.8

            Expense                   2002               2003

     Car and truck                $3,631.75            $3,674.52
     Legal and professional          113.64               ---
     Office                          ---                  172.34
     Travel                        3,600.00             6,962.00
     Meals and entertainment       1,748.00             3,508.00
     Other                            39.17               244.25

C.   Amounts Disallowed

     1.   No Direct Connection With Petitioner’s Business

     Only ordinary and necessary business expenses “directly

connected with or pertaining to the taxpayer’s trade or business”

may be deducted.   Sec. 1.162-1(a), Income Tax Regs.




     8
      The amounts include those respondent conceded or allowed.
                                -15-

       Petitioner claimed a $123.74 2002 car and truck expense in

connection with a trip to his rental property.     Petitioner claims

his rental property was a business address for IPIS, but he did

not identify the business purpose of this particular trip.

       Petitioner claimed a $39.50 2002 other expense for a ticket

to a play about AIDS in Africa.     Petitioner contended that this

was a business expense because he was studying AIDS as part of

his business.

       He also claimed the following expenditures as business

expenses because they were spent on business associates.

        Expense            Amount       Reason for Claimed Expense

2002

Car and truck             $342.74       Trip to attend associate’s
                                          memorial service

Legal and                   19.55       Payment to former employees
professional

Legal and                   70.00       Gifts for associates
professional

Meals and                3,178.88       Appreciation party for
entertainment                             associates

Travel                     313.77       Trip to visit associates

Other                      272.13       Gifts for associate

2003

Office                     548.05       Gifts for associates

Office                     586.00       Payments to or on behalf of
                                          associates
                                 -16-

     Petitioner is not entitled to deduct these payments because

he has supplied, at best, a tangential connection between the

expenditures and his business.    The fact that petitioner spent

these amounts on business associates does not, by itself,

establish a direct connection with his business.    Petitioner’s

past dealings with his associates do not automatically convert

future interactions with them into business transactions.

     Furthermore, these expenses are classified as automobile,

travel, entertainment, or business gift expenses that are subject

to more rigorous substantiation under section 274(d).    To deduct

these expenses, petitioner must substantiate:     (a) The amount of

the expense, (b) the time and place the expense was incurred; the

business purpose of the expense, and (c) in the case of an

entertainment or gift expense, the business relationship to

petitioner of each expense incurred.    See id.   Each element must

be substantiated by adequate records or by sufficient evidence

corroborating petitioner’s own statement.   See id.    Although

petitioner testified as to the business purpose of these

expenses, he did not provide appropriate records or evidence to

corroborate his testimony.

     Accordingly, we hold that petitioner is not entitled to

deduct these expenses.
                                 -17-

     2.   Section 274(d)

     For 2002 petitioner deducted numerous items which constitute

automobile, travel, or entertainment expenses.

    Expense          Amount             Reason Claimed for Expense

Car and truck        $303.32       Trip to discuss repayment of a
                                    loan

Travel                300.00       Trip to discuss repayment of a
                                    loan

Car and truck            35.41     Trip to hospital for IPIS
                                    research

Car and truck         313.90       Trip to interview person with
                                    bipolar disorder

    Expense          Amount             Reason Claimed for Expense

Car and truck         100.38       Trip to interview head of
                                    charitable organization

Meals and           1,710.95       Entertaining head of charitable
entertainment                       organization

Other                    80.00     Staff luncheon for CSUDH

     Because these expenses constitute automobile, travel, and

entertainment expenses, petitioner must satisfy the more rigorous

substantiation requirements of section 274(d).      Petitioner failed

to provide evidence to corroborate his testimony as to the

business purpose of these expenses.

     Accordingly, we hold that petitioner is not entitled to

deduct these expenses.
                                 -18-

     3.   Unnecessary Expenses

     Petitioner claimed 2003 office expenses of $33.54 and $37.45

for the purchase of books.   Each of these expenses represented a

purchase of two copies of a book.       Respondent allowed deductions

of $16.77 and $18.73 for the purchase of a single copy of each

book, but petitioner could not explain why he needed the second

copies.

     Petitioner also claimed a 2003 office expense of $264.94 for

the purchase of a travel bag and a briefcase.       Petitioner claims

this luggage was different from the travel bag and briefcase he

had purchased earlier (discussed supra), but the receipt he

presented indicates otherwise.

     Petitioner did not offer a reason he needed duplicates of

these items and has therefore failed to prove the expenses were

necessary.   See sec. 1.162-1(a), Income Tax Regs.

     Petitioner also claimed utilities expenses of $629.82 in

2002 and $248.77 in 2003 for a phone line at his collaborator’s

home in Palo Alto (Palo Alto line).       Petitioner claims the line

was used only for his personal voice mail.       Even if we assume

that petitioner’s testimony is credible, the expense is redundant

and not ordinary and necessary because petitioner already

maintained a toll-free line for which he claimed--and respondent

mostly allowed--utilities expenses in 2002 and 2003.      Petitioner

testified that the toll-free line “was a business phone so that
                                 -19-

when I am traveling anywhere in the world I can pick up messages

and emergencies”.     Because petitioner already had a line where

people could leave him messages, he had no need for a Palo Alto

line.

       Accordingly, we hold that petitioner is not entitled to

deduct these expenses.

       4.   Personal Expenses

       Petitioner claimed 2003 office expenses of $67 for the cost

of repairing his wristwatch and $250 for the purchase of art for

his apartment in Long Beach.     These expenses are inherently

personal and thus nondeductible.     See sec. 262(a).

       5.   Nondeductible Charitable Contributions

       Petitioner attended a charity dinner hosted by ITP.

Petitioner claimed a 2003 office expense for a $125 donation to

ITP.    According to a letter from ITP, the fair market value of

the dinner was $125.     Petitioner also claimed a 2003 office

expense of $100 for the purchase of five books at the dinner.

Petitioner testified that the purchase “acts as a contribution

from * * * [his] business to ITP”.

       Because petitioner received goods and services in exchange

for and equal to the amount of his contributions, they cannot be

considered charitable contributions.    “The sine qua non of a

charitable contribution is a transfer of money or property
                               -20-

without adequate consideration.”   United States v. Am. Bar

Endowment, 477 U.S. 105, 118 (1986).

     Accordingly, we hold that petitioner is not entitled to

deduct these expenses.

     6.   No Business Purpose Offered

     Petitioner claimed a utilities expense of $495.13 in 2002

for a phone line at his rental property.   Petitioner claimed that

the line was used (1) for IPIS business and (2) so that anyone,

including the tenants of the rental property, could call

petitioner for any purpose.   Petitioner’s claim is not plausible

because, according to his own testimony, he spent what little

time he was at his rental property removing weeds.   Petitioner

offered no explanation as to how the phone line was used in his

business, and there is no evidence of any business use

whatsoever.   Furthermore, even if there had been some business

use of the phone line, petitioner would not be entitled to deduct

this expense because he failed to identify the amount of business

use of the line as opposed to the tenants’ personal use of the

phone line.

     Petitioner also claimed a 2003 utilities expense of $990.14

for another phone line.   Petitioner did not offer any explanation

as to how this line was used in his business.
                                 -21-

     Petitioner claimed a 2003 office expense of $50 for a

payment to an executive of CSUDH.       Petitioner did not explain

what this payment was for.

     Petitioner claimed 2003 car and truck expenses totaling

$5,010.84, 2003 travel expenses totaling $7,015, 2003 meals and

entertainment expenses totaling $510, and 2003 other expenses

totaling $1,488.57 for which he offered no business purpose.

     Accordingly, we hold that petitioner is not entitled to

deduct these expenses.

     7.    Petitioner’s Testimony Contradicted by His Own Records

     For 2002 petitioner claimed $195.28 in car and truck

expenses, $885 in travel expenses, and $138 in meals and

entertainment expenses which were purportedly incurred while

attending a Centers for Disease Control and Prevention conference

in Atlanta, Georgia.     Petitioner’s log, however, indicates he

visited friends and went to his family’s home in South Carolina

instead.

     Petitioner claimed a 2002 meals and entertainment expense of

$186.12 purportedly incurred while entertaining a business

associate.   Petitioner’s receipts show that this expense

consisted of $100 spent at a restaurant and $86.12 spent on

groceries.   Petitioner, however, testified that he neither bought

the groceries for his associate nor entertained her at his home.
                                 -22-

       Petitioner claimed a 2002 other expense of $89.71 for

purported AIDS research.     The receipt petitioner submitted for

this expense, however, shows a purchase of groceries.

       Petitioner claimed a 2002 other expense of $18.50 for

postage.     Petitioner claimed that postage was for mail sent to

his associate, Ricki Lewis.     Respondent allowed $5.20 in postage

to Schenectady, where Ricki Lewis lived.      Respondent disallowed

the remaining $13.30 because that amount constituted postage to

Atlanta, Georgia, where petitioner’s daughter resided.

       Petitioner has failed to substantiate these deductions

because his records refute his testimony regarding the business

purpose of these expenses.     Accordingly, we hold that petitioner

is not entitled to deduct these expenses.

       8.   Failure To Substantiate Payment

       Respondent disallowed the remainder of petitioner’s claimed

deductions for petitioner’s failure to substantiate payment of

the expenses claimed.

       Petitioner claimed a 2002 per diem meals expense of $46 for

a day in December for which he did not have a corresponding

travel expense.     Petitioner is not entitled to deduct this

expense because taxpayers are not entitled to claim per diem

meals expenses without traveling away from home.     See sec.

162(a)(2); Rev. Proc. 2002-63, sec. 3.01(1), 2002-2 C.B. 691,

693.
                                 -23-

     For the remainder of the expenses respondent disallowed for

lack of substantiation, petitioner claimed that he had receipts

evidencing payment but did not provide them to respondent or the

Court.

     Accordingly, we hold that petitioner is not entitled to

deduct these expenses.

     9.   Conclusion

     For these reasons, we hold that petitioner is not entitled

to deductions for the following expenses.

             Expense                     2002               2003

     Car and truck                  $1,366.57             $5,010.60
     Legal and professional            102.50                ---
     Office                            ---                 2,961.08
     Travel                         11,829.94             13,047.91
     Meals and entertainment         5,259.95              2,013.00
     Utilities                       1,469.98              1,380.48
     Other                           1,083.39              5,008.34

     To reflect the foregoing,


                                             Decisions will be entered

                                        under Rule 155.
