                            T.C. Memo. 1996-22



                         UNITED STATES TAX COURT



                   ABHIMANYU SWAIN, Petitioner v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 16556-94.                   Filed January 23, 1996.



      Abhimanyu Swain, pro se.

      Helen F. Rogers, for respondent.



               MEMORANDUM FINDINGS OF FACT AND OPINION



      PANUTHOS, Chief Special Trial Judge:         This case was heard

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

181, and 182.1    Respondent determined deficiencies in



     1
        Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect for the taxable years in issue. All Rule references
are to the Tax Court Rules of Practice and Procedure.
petitioner's 1989 and 1990 Federal income taxes in the amounts of

$2,092 and $2,190, respectively, and penalties pursuant to

section 6662(a) in the amounts of $399 and $438, respectively.

After concessions,2 the issues for decision are (1) Whether

petitioner is entitled to home office deductions in the amounts

claimed on his returns or in lesser amounts as determined by

respondent; (2) whether petitioner is entitled to deduct legal

fees; and (3) whether the accuracy-related penalties as

determined by respondent should be sustained.

        At the time of filing the petition herein, petitioner

resided in Damascus, Maryland.

                             FINDINGS OF FACT

        During 1989 and 1990, petitioner was a research hydraulic

engineer for the U.S. Army Corps of Engineers.           In the spring of

1989, petitioner taught a course for the U.S. Army Corps of

Engineers at Mississippi State University.          Petitioner reported

$44,368 and $42,256 as total wages on his 1989 and 1990 Federal

income tax returns, respectively.        On Schedule A of his 1989

return, petitioner claimed deductions for "Office Space" in the

amount of $5,200, and "Legal Expense" in the amount of $3,600.

On Schedule A of his 1990 return, petitioner claimed deductions




    2
        At trial, petitioner conceded the following adjustments: (1)
Petitioner failed to report $909 and $1,188 in State income tax refunds on his
1989 and 1990 returns, respectively; (2) petitioner failed to report interest
income in the amount of $43 and $101 on his 1989 and 1990 returns,
respectively; (3) petitioner is not entitled to deduct personal sales tax in
the amounts of $4,349 and $4,095 on his 1989 and 1990 returns, respectively.
                                    - 3 -

for "Office space" in the amount of $5,800 and "Legal fee" in the

amount of $4,200.3

     Petitioner asserts that a friend prepared his 1989 and 1990

returns.   The record does not indicate the name or occupation of

the preparer.    The return preparer signature line on each of the

1989 and 1990 returns is blank.        Petitioner could not explain the

basis for many of the deductions claimed on the returns.            As

previously indicated, petitioner conceded some of the claimed

deductions at trial.

     Petitioner asserts that the deductions claimed for the home

office and legal fees are correct as reflected on his 1989 and

1990 returns.    Petitioner arrived at the amounts of his home

office deductions by approximating the cost of renting comparable

office space for the year.       Respondent allowed petitioner

deductions of one-sixth of the costs associated with his home.

(Petitioner's home consists of six rooms, one of which was used

as an office.)    The room petitioner utilized as an office

measures 10 feet by 10 feet, or 100 square feet, in a home that

is approximately 1,800 square feet.         In this room petitioner

reviewed the homework of his students and prepared for class.

     Petitioner asserts that he incurred legal expenses relating

to an action brought by his former wife in 1987 to gain custody


     3
        At trial, petitioner indicated that the total amount of legal fees
claimed on his 1989 and 1990 returns was incorrect. Petitioner indicated that
he should have claimed $10,000 in legal fees on each of his 1989 and 1990
returns.
                                  - 4 -

of their child and to take possession of the house, and with

respect to a criminal action against petitioner which was

ultimately dismissed.   A letter dated July 8, 1988, reflects that

petitioner paid a total of $4,312.10 in legal fees to LaBarre &

LaBarre, a law firm, and owed an additional $2,187.90.       The

letter reflects the following services were rendered:

      SERVICES - State v. Swain (First Trial)           $2,500
                 Per Agreement
      SERVICES - State v. Swain (Second Trial)          $2,500
      SERVICES - Chancery Contempt Proceedings          $1,500
                                                        $6,500

Petitioner wrote at the bottom of this letter "Paid in 1989", and

"$7,500 to Vance in 1989".   A canceled check dated March 20,

1989, in the amount of $750 reflects that the check was in

payment of a "Chancery Contempt Case".

                                 OPINION

      At the outset, we note that respondent's determinations are

presumed correct, and petitioner bears the burden of proving that

those determinations are erroneous.        Rule 142(a); Welch v.

Helvering, 290 U.S. 111, 115 (1933).       In addition, deductions are

a matter of legislative grace, and petitioner bears the burden of

proving that he is entitled to the claimed deductions.       Rule

142(a); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440

(1934).

1.   The Home Office Deduction

      Section 280A(c) permits the deduction of expenses allocable

to a portion of the dwelling unit that is used exclusively and on
                                    - 5 -

a regular basis as "the principal place of business for any trade

or business of the taxpayer".        Sec 280A(c)(1)(A).      Additionally,

items such as interest and taxes are deductible without regard to

section 280A(a).     Sec. 280A(b).

      As indicated, petitioner claimed $5,200 and $5,800 as home

office deductions for 1989 and 1990, respectively.            Respondent

does not question petitioner's entitlement to a home office

deduction, but rather determined that the amount claimed is

excessive.    Petitioner did not allocate his expenses based upon

the number of rooms in his house or by actual floor space.

Apparently, petitioner estimated his home office deductions on

the basis of how much it would cost if he rented a room of

comparable size.     This is not a proper method to compute

deductions attributable to a home office.          The allocation method

utilized by petitioner is based upon his personal estimate of

comparable rental space.       Such a method is based purely upon

conjecture, and, in any event, is not supported by any evidence

in the record.     Accordingly, respondent's determination is

sustained.4

2.   Deductibility of Legal Fees

      The thrust of petitioner's argument is that the legal

expenses were incurred to protect his interest in his property


     4
        Based upon petitioner's testimony and estimates of the total square
footage of his home in comparison to the square footage of the home office, it
appears that respondent's allowance of one-sixth of the total square footage
was generous.
                                    - 6 -

and hence his "home office".       Petitioner argues that the amounts

paid in 1988 are deductible on his 1989 and 1990 returns because

the case continued into 1989.5       Respondent argues that the

expenses relate to a claim which is personal in nature and,

therefore, are not deductible.

     Section 212 provides, in pertinent part, that expenses for

the production of income (i.e., legal expenses) are deductible as

ordinary and necessary business expenses, if the expenses are--

     paid or incurred during the taxable year--

                (1) for the production or collection of
           income;

                (2) for the management, conservation, or
           maintenance of property held for the
           production of income; or

                (3) in connection with the
           determination, collection, or refund of any
           tax.


     Section 262(a) provides that, in general, no deduction shall

be allowed for personal, living, or family expenses.

"[A]ttorney's fees and other costs paid in connection with a

divorce, separation, or decree for support, are not deductible by

either the husband or the wife."        Sec. 1.262-1(b)(7), Income Tax

Regs.   Expenses incurred in connection with a divorce property

settlement are not deductible because such expenses are derived


     5
        We note that petitioner's proposition that expenses incurred by a cash
basis taxpayer in 1 year are deductible in the next is erroneous. Taxpayers
on a cash basis ordinarily may claim deductions only in the year such expenses
are actually paid. Sec. 1.461-1(a)(1), Income Tax Regs.
                              - 7 -

from the marital relationship rather than the spouse's activities

in holding such income-producing property.   In United States v.

Gilmore, 372 U.S. 39, 49 (1963), the Supreme Court indicated

that--

     the origin and character of the claim with respect to
     which an expense was incurred, rather than its
     potential consequences upon the fortunes of the
     taxpayer, is the controlling basic test of whether the
     expense was "business" or "personal" and hence whether
     it is deductible or not under * * * [the predecessor to
     section 212]. * * *


See also United States v. Patrick, 372 U.S. 53, 56 (1963).

     Even if the legal fees were incurred to protect the

ownership of petitioner's home, and, consequently, the home

office, petitioner has failed to show that the fees are

deductible as expenses of a profit-seeking activity.    In United

States v. Gilmore, supra at 48, the Supreme Court stated--

   If two taxpayers are each sued for an automobile accident
   while driving for pleasure, deductibility of their
   litigation costs would turn on the mere circumstance of the
   character of the assets each happened to possess, that is,
   whether the judgments against them stood to be satisfied
   out of income- or nonincome-producing property. We should
   be slow to attribute to Congress a purpose producing such
   unequal treatment among taxpayers, resting on no rational
   foundation.


Petitioner has not demonstrated that the legal expenses incurred

in the criminal action are related to his trade or business or to

any other income-producing activity conducted by him.

Commissioner v. Tellier, 383 U.S. 687, 689 (1966).     Therefore,
                                   - 8 -

the legal expenses attributable to the criminal action are not

deductible.     United States v. Gilmore, supra at 49.

      Accordingly, we hold that the payments made by petitioner

are not deductible as business or profit-seeking expenses.

3.   The Accuracy-Related Penalty

      Section 6662(a) imposes an accuracy-related penalty equal to

20 percent of the portion of the underpayment to which section

6662 applies.    Section 6662 applies to that portion of the

underpayment attributable to negligence or disregard of rules or

regulations.    Sec. 6662(b)(1).    The term "negligence" includes

any failure to make a reasonable attempt to comply with the

Internal Revenue Code, and the term "disregard" includes any

careless, reckless or intentional disregard.      Sec. 6662(c).

Negligence is defined as a lack of due care or the failure to do

what a reasonably prudent person would do under the

circumstances.     Neely v. Commissioner, 85 T.C. 934, 947 (1985).

     We find that petitioner was negligent for both years.

Petitioner conceded at trial that he was not entitled to some of

the deductions he claimed on his income tax returns.      Petitioner

argued that he supplied all of his income tax information to a

"friend" who used this information to prepare petitioner's 1989

and 1990 returns.    In addition, petitioner argued that some of

the deductions claimed were not derived from the information

provided to his friend.
                                 - 9 -

       At the time petitioner signed the returns, petitioner

should have reviewed the returns for their accuracy.      A cursory

review would have revealed that the returns contained claimed

deductions to which petitioner is not entitled.       We are satisfied

that the underpayment of tax was due to negligence.

     To reflect the foregoing,

                                         Decision will be entered

                                    for respondent.
