Patricia S. Chappell

United States Tax Court

T.C. Summary Opinion 2024-2

PATRICIA S. CHAPPELL,

Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

—————

Docket No. 25309-18S. Filed March 11, 2024.

—————

Patricia S. Chappell, pro se.

Evan K. Like and Louis H. Hill, for respondent.

SUMMARY OPINION

COPELAND, Judge: This case was heard pursuant to the

provisions of section 7463 1 of the Internal Revenue Code in effect when

the Petition was filed. Pursuant to section 7463(b), the decision to be

entered is not reviewable by any other court, and this Opinion shall not

be treated as precedent for any other case.

Petitioner, Patricia Chappell, has worked as a tax return

preparer since 1996. During tax year 2015 she operated a sole

proprietorship called Quik Tax. She had a home office in Maineville,

Ohio, and a business office in Mason, Ohio, about a 15-minute drive

away. The Internal Revenue Service (IRS) audited Ms. Chappell’s 2015

federal income tax return and determined various adjustments to the

1 Unless otherwise indicated, statutory references are to the Internal Revenue

Code, Title 26 U.S.C. (I.R.C. or Code), in effect at all relevant times, regulation

references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all

relevant times, and Rule references are to the Tax Court Rules of Practice and

Procedure. Some dollar amounts are rounded.

Served 03/11/24

2

expenses she reported on her Schedule C, Profit or Loss From Business.

Specifically, the IRS disallowed $2,310 of expenses that Ms. Chappell

reported for the business use of her home, $1,299 of contract labor

expenses, $2,352 of phone expenses, and $15,385 of transportation

expenses. The Commissioner of Internal Revenue (Commissioner) has

since conceded all of the previously disallowed expenses for business use

of the home and contract labor. We are therefore left with

Ms. Chappell’s request for us to redetermine her phone and

transportation expenses and to review the Commissioner’s

determination of a negligence penalty under section 6662(a) and (b)(1).

Background

Some of the facts have been stipulated by the parties and are so

found. Ms. Chappell was a resident of Ohio when she timely filed her

Petition.

I. Quik Tax

Ms. Chappell began working in tax preparation when she was

hired in 1996 by her brother, Lonnie Bennett, who lived and worked in

Belpre, Ohio, about a three-hour drive from Ms. Chappell’s home in

Maineville. Ms. Chappell worked for Bennett Tax Service for two years

before opening Quik Tax in 1998. However, Ms. Chappell and

Mr. Bennett continued associating professionally and, during 2015, met

and corresponded periodically to collaborate on advertising, prepare

newsletters, attend educational seminars, and discuss tax questions.

Ms. Chappell’s son, Chadrick Travis, worked for Quik Tax as an

independent contractor during 2015. Ms. Chappell and Mr. Travis

signed an “Independent Contractors [sic] Agreement” on January 2,

2015, specifying (among other things) that Mr. Travis agreed to “pay all

expenses incurred by [him] . . . in procuring and furnishing of the above

referenced [tax preparation] services to customers.” Ms. Chappell

compensated Mr. Travis in part by allowing him to pay certain of his

personal expenses with her credit and debit cards. Some other relatives

of Ms. Chappell also worked for Quik Tax in 2015, at least some of whom

Ms. Chappell compensated in part by allowing them use of her credit

cards for personal expenses.

II. Business Phones

Ms. Chappell paid a total of $3,418 to AT&T in 2015 for phone

“service charges” and “wireless equipment.” The AT&T monthly billing

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statements for these expenses listed the respective charges for each

device, but all devices were part of a single wireless phone plan with a

single monthly payment (i.e., Ms. Chappell received only one invoice

each month).

A. Service Charges

The phone “service charges” related to AT&T’s billing covering

five different devices at various times during the year: (1) an Apple cell

phone for Ms. Chappell, (2) a Samsung cell phone for Mr. Travis, (3) an

iPad, (4) a tablet, and (5) a cell phone used for scheduling client

appointments. The service charges for Ms. Chappell’s Apple cell phone

were particularly high in the February–March billing cycle, when she

incurred $266 of roaming fees during a cruise in Florida with

Mr. Bennett. Other than those roaming fees, each of the five devices

had a set monthly fee that did not vary with the amount of use.

B. Wireless Equipment Charges

The AT&T billing statements also included installment charges

for “wireless equipment” purchases. AT&T billed Ms. Chappell $31.25

monthly beginning in March for the purchase of a $750 Apple cell phone,

a device she used during 2015. AT&T likewise charged Ms. Chappell

$22.84 monthly beginning in June for a $685 Samsung cell phone

purchased for Mr. Travis.

III. Business Transportation

Beginning on March 23, 2015, Ms. Chappell used a cell phone

application called MileIQ to record most or all of her car trips during the

year. 2 She took most of these trips in her Toyota Prius. MileIQ used

GPS technology on Ms. Chappell’s phone to track starting points,

stopping points, and transit mileage. At the end of each trip,

Ms. Chappell would identify the trip as business or personal. MileIQ

then compiled this information into a spreadsheet (MileIQ log) listing

the following information for each recorded trip: date and starting time,

category (business or personal), starting and ending locations, distance

2 Ms. Chappell did not use MileIQ or any other contemporaneous

recordkeeping for her trips between January 1 and March 22, 2015, nor did she offer

any alternative substantiation for those trips.

4

(in miles), and vehicle. 3 The MileIQ log shows a total of 15,204.8 miles

driven between March 23 and December 31, 2015, of which 13,585.8

were labeled “business” and 1,619.0 “personal.”

At some point before trial, Ms. Chappell prepared an edited

version of the MileIQ log (modified mileage log). The total number of

business miles listed in the modified mileage log is less than the

comparable figure in the MileIQ log: 11,598.2 versus 13,585.8. 4 Despite

the reduction in overall miles, 63 of the trips marked “personal” on the

MileIQ log were changed to “business” on the modified mileage log,

collectively accounting for 1,190.4 miles. The modified mileage log

includes a short “purpose” description for each trip (e.g., “Between

Offices,” “Supplies,” “Staff Recruiting,” “[Office] Location Prospecting”);

those descriptions were not recorded on the original MileIQ log.

Ms. Chappell’s driver’s license was suspended for about six

months in the middle of 2015. For at least some of that time,

Ms. Chappell employed a driver named Melissa Wright, who drove

Ms. Chappell as a passenger in one or more vehicles and also drove those

vehicle(s) by herself at times, for instance to purchase gas.

IV. Tax Return and Examination

Ms. Chappell filed a Schedule C with her 2015 tax return. She

reported gross receipts for Quik Tax of $152,521 and expenses totaling

$140,768, which included (among other things) vehicle expenses of

$15,385 and utilities expenses of $20,519 (including phone expenses of

$3,360).

After the IRS examined Ms. Chappell’s 2015 return, the

Commissioner issued a notice of deficiency dated September 28, 2018,

in which he disallowed deductions for all of her reported vehicle

expenses and $2,352 of her reported utilities expenses. 5 The

3 The Vehicle field of the MileIQ report lists “Missing Vehicle” from March 23

through June 2 and lists “Prius” thereafter. Most of the trips tagged with “Missing

Vehicle” were taken in the Prius, but Ms. Chappell did not see the appropriate field to

enter the vehicle information into MileIQ until June 3.

4 Ms. Chappell’s tally of business miles, listed at the top of the modified mileage

log, is 11,591.5. The Court arrived at 11,598.2 miles through its own review of the

modified mileage log.

5 In the notice of deficiency the Commissioner also disallowed deductions for

$1,299 of her reported contract labor expenses and all expenses for business use of her

5

Commissioner also determined an accuracy-related penalty under

section 6662(a) and (b)(1). The immediate supervisor of the IRS revenue

agent who made the initial determination to impose this penalty

approved that determination before its first communication to

Ms. Chappell. After concessions by the Commissioner, Ms. Chappell

requests that we increase her reported phone expenses from $3,360 to

$3,418, and she requests that $10,615 of vehicle expenses be allowed

(although she concedes that her vehicle expenses should be decreased

from $15,385).

Discussion

I. Burden of Proof

Generally, the Commissioner’s determinations in a notice of

deficiency are presumed correct, and the taxpayer bears the burden of

proving that those determinations are erroneous. See Rule 142(a);

Welch v. Helvering, 290 U.S. 111, 115 (1933). Further, a taxpayer is

required to maintain sufficient permanent records to substantiate all

components of reported net income, including deductible business

expenses. See I.R.C. § 6001; Treas. Reg. § 1.6001-1(a). The burden of

showing entitlement to a claimed deduction is on the taxpayer. See Rule

142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). 6

If a taxpayer clearly shows that she incurred a deductible expense

but is unable to substantiate the exact amount, the “Cohan rule” permits

the Court to estimate the amount of the expense, provided there is a

reasonable basis for doing so. See Cohan v. Commissioner, 39 F.2d 540,

543–44 (2d Cir. 1930); Vanicek v. Commissioner, 85 T.C. 731, 742–43

(1985); Goldsmith v. Commissioner, 31 T.C. 56, 62 (1958). In making an

estimate under the Cohan rule, the Court “bear[s] heavily if it chooses

upon the taxpayer whose inexactitude is of his own making.” Cohan v.

home; however, before trial he conceded those two adjustments. All of the remaining

disallowed utility expenses in the notice of deficiency relate to phone expenses;

however, the Commissioner allowed 80% of the aggregate of (1) the $70 monthly

“Mobile Share Value 6GB with Rollover Data” fee for Ms. Chappell’s multiline cell

phone plan, (2) the $25 monthly “Mobile Share Value iPhone on 4G LTE w/VVM” fee

for Ms. Chappell’s Apple cell phone, and (3) the $10 monthly “Mobile Share Value for

Tablet 4G LTE” fee for the iPad and tablet. That is, the Commissioner allowed 80% of

$105 per month, or $1,008 of phone expenses. Because Ms. Chappell claimed $3,360

in total for phone expenses, the Commissioner disallowed the remaining $2,352.

6 Ms. Chappell does not contend, and the record does not establish, that the

burden of proof should shift to the Commissioner as to any factual issue under section

7491(a).

6

Commissioner, 39 F.2d at 544. The Court may not use the Cohan rule

to estimate expenses covered by the strict substantiation requirements

of section 274(d), which apply to most transportation expenses. Sanford

v. Commissioner, 50 T.C. 823, 827–28 (1968), aff’d, 412 F.2d 201 (2d Cir.

1969).

II. Phone Expenses

Section 162(a) generally allows a deduction for the ordinary and

necessary expenses of carrying on a business while section 262 prohibits

a deduction for personal expenses.

Ms. Chappell produced AT&T statements showing monthly

billing charges for phone and other wireless service during 2015. The

statements provide a breakdown of charges by device for each of

Ms. Chappell’s five devices, as well as monthly installment billing for

the Apple and Samsung cell phones used in the business in 2015, listed

on the statements as “wireless equipment” charges. Likewise, the

statements reflect the additional roaming fees incurred by Ms. Chappell

during her cruise in February.

From the AT&T statements, Ms. Chappell created a phone

expense spreadsheet listing each of her five devices as headings across

the top and the monthly charges by device in the rows below the

heading. She then totaled these monthly amounts for the year. The

spreadsheet includes separate columns for monthly payments made and

payment dates. The spreadsheet lists $3,166 as the total billed for all

five devices in 2015 and $3,418 as the total paid. Of the $3,166 billed,

$97 (approximately two-thirds) of the 12/12/14 to 1/11/15 billing related

to the 2014 tax year and $78 (approximately one-third) of the 12/12/15

to 1/11/16 billing related to the 2016 tax year.

A. Ms. Chappell’s Cell Phone

Ms. Chappell offered evidence that she used her cell phone

extensively for business purposes during tax season, including while on

the cruise. In addition, while the volume of tax work slowed during

other times of the year, it seems appropriate that she would have needed

to keep her and Mr. Travis’s cell phones, the iPad, the tablet, and the

company cell phone active all year. While her phone expense

spreadsheet did not account for personal use, pursuant to the Cohan

rule this Court can estimate the amount of deductible expenses. We

accept Ms. Chappell’s position that her cell phone use was substantial

during tax season and allow 80% of the charges for her Apple cell phone

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during tax season, which lasted roughly from January through May

2015. For the remainder of the year we will allow 50% as business

related. Accordingly, on the basis of the AT&T billing statements we

hold that the total business-related cell phone charges for her personal

phone were $1,296. This amount includes $313 of installment payments

on the phone purchase.

B. Mr. Travis’s Cell Phone

Ms. Chappell provided a cell phone to Mr. Travis for Quik Tax

business use. She testified that in addition to the cell phone she paid

for on his behalf, Mr. Travis also had a personal cell phone and two work

phones during 2015. Ms. Chappell indicated that she paid for the

additional phone so that Mr. Travis could perform client tax work on her

behalf and so that she could “bypass everybody else” and always reach

Mr. Travis. We found this testimony credible. Because Ms. Chappell

provided the phone to her independent contractor for tax preparation

work, we will allow Samsung cell phone expenses of $555 incurred in

2015. 7 This amount includes $160 of installment payments made

toward the phone purchase.

C. Other Devices

Ms. Chappell also provided sufficient records for us to calculate

the sum of the remaining phone expenses, relating to service for the

iPad, tablet, and appointment-scheduling phone, and certain service

charges. We therefore will allow these expenses to the extent they relate

to the 2015 tax year. Specifically, we will allow $15 for the iPad, $167

for the tablet, $161 for the appointment-scheduling phone and $55 of

service charges, a total of $398.

7 The Commissioner would have us rule that Ms. Chappell cannot deduct the

cost of Mr. Travis’s cell phone service simply on the grounds that the Independent

Contractors Agreement specifies that Mr. Travis will “pay all expenses incurred by

[him] . . . in procuring and furnishing of the above referenced [tax preparation] services

to customers.” However, the record clearly shows that Ms. Chappell, not Mr. Travis,

made all payments on the Samsung cell phone and it is not unusual to provide cell

phones to independent contractors in order for them to speak to the business’ owner

and its clients. Accordingly, in redetermining Ms. Chappell’s income tax we look to

the charges she actually incurred and paid for, regardless of the strict terms of the

Independent Contractors Agreement.

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D. Wireless Equipment

The Commissioner takes issue with the monthly AT&T billing

statement charges related to the installment purchase of the Apple and

Samsung cell phones costing $750 and $685, respectively. Again, these

costs were referred to by the parties and in billing statements as

“wireless equipment.” While such amounts might have been capitalized

under section 263(a) and Treasury Regulation § 1.263(a)-2(d), 8 they

could also have been immediately deducted under section 179. Because

Ms. Chappell is a cash basis taxpayer, we allow the monthly

installments on the Apple and Samsung cell phones (as included in the

monthly phone charges detailed above) to be deducted under section

179.

E. Summary of Phone and Wireless Expenses Allowed

In sum, we will allow phone and wireless equipment expenses of

$2,249 ($1,296 + $555 + $398), rather than the $3,360 Ms. Chappell

included as a utilities expense on her return, making the downward

adjustment $1,111 rather than the $2,352 determined in the notice of

deficiency.

III. Vehicle Expenses

Under section 274(d), taxpayers must meet strict substantiation

requirements to deduct certain expenses under section 162, including

expenses for the use of “listed property” as defined in section 280F(d)(4),

such as passenger automobiles. To meet these strict requirements with

respect to listed property, taxpayers must substantiate by adequate

records, or by sufficient evidence corroborating their own statements,

(1) the amount of the expense, (2) the amount of total use and of business

use of the listed property during the relevant tax year, (3) the date of

each expense or use of the listed property, and (4) the business purpose

of the expense or use. See I.R.C. § 274(d); Temp. Treas. Reg. § 1.274-

5T(b)(6). 9

8 We note that the exception under Treasury Regulation § 1.162-3 that allows

a business deduction for “materials and supplies” does not apply here, since (among

other reasons) both pieces of wireless equipment cost more than $200. See Treas. Reg.

§ 1.162-3(c)(1)(iv).

9 Section 7805(e)(2) provides that temporary regulations expire within three

years after the date of issuance. However, that rule applies only to regulations issued

9

To substantiate vehicle expenses by way of adequate records,

taxpayers must maintain a contemporaneous log, trip sheet, or similar

record, as well as corroborating documentary evidence, to establish each

of the four required elements listed above. See Temp. Treas. Reg.

§ 1.274-5T(c)(2)(i) and (ii). In the absence of adequate records, taxpayers

may establish each required element by providing both “[their] own

statement, whether written or oral, containing specific information in

detail as to such element” and “other corroborative evidence sufficient

to establish such element.” Id. subpara. (3)(i).

Treasury Regulation § 1.274-5(j)(2) authorizes the Commissioner

to provide an alternative, simplified method for calculating vehicle

expenses that requires neither adequate records of actual costs nor

sufficient corroborating evidence of actual costs:

The Commissioner may establish a method under which a

taxpayer may use mileage rates to determine the amount

of the ordinary and necessary expenses of using a vehicle

for local transportation and transportation to, from, and at

the destination while traveling away from home in lieu of

substantiating the actual costs. . . . The taxpayer will not

be relieved of the requirement to substantiate the amount

of each business use (i.e., the business mileage), or the time

and business purpose of each use.

Revenue Procedure 2010-51, § 4.01, 2010-51 I.R.B. 883, 884, clarifies

that

[a] taxpayer may use the business standard mileage rate

(published in an annual notice) to substantiate the amount

of a deduction for an automobile that a taxpayer either

owns or leases. A taxpayer generally may deduct an

amount equal to either the business standard mileage rate

times the number of business miles traveled or the actual

after November 20, 1988. See Technical and Miscellaneous Revenue Act of 1988, Pub.

L. No. 100-647, § 6232(b), 102 Stat. 3342, 3735. Temporary Treasury Regulation

§ 1.274-5T was first issued in 1985, see T.D. 8061, 1985-2 C.B. 93, 100–09, and none of

the provisions of that regulation relied upon here has since been amended.

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costs (both fixed and variable) the taxpayer pays or incurs

that are allocable to traveling those business miles . . . .[10]

I.R.S. Notice 2014-79, § 3, 2014-53 I.R.B. 1001, 1001, set out a business

standard mileage rate for 2015 of 57.5 cents. Ms. Chappell asks the

Court to allow her actual vehicle expenses as business deductions or, in

the alternative, to allow a standard mileage rate deduction.

A. Actual Vehicle Expenses

Ms. Chappell did not keep any records of her vehicles’ business

use percentages between January 1 and March 22, 2015, so we cannot

allow any of her reported vehicle expenses for that period in any event.

See I.R.C. § 274(d); Temp. Treas. Reg. § 1.274-5T(b)(6).

As for the period of March 23 to December 31, Ms. Chappell

provided bank records and some receipts for her vehicle expenses and

relied on the MileIQ log and/or the modified mileage log for her business

use percentage. However, much of her offered substantiation is not

sufficiently reliable.

Ms. Chappell’s receipts for fuel, insurance, interest on a car loan,

repairs, licensing fees, and depreciation are flawed in that several other

people had use of her debit and credit cards during 2015 and may have

made personal use of those cards. For example, Ms. Chappell’s remarks

at trial suggest that Ms. Wright may have used the cards for filling up

her personal vehicle rather than a car used for Ms. Chappell’s business

needs. If that is so, calculating the business use percentage from either

of the mileage logs, see Temp. Treas. Reg. § 1.274-5T(b)(6)(i)(B), would

not be reliable. (This business percentage is needed for prorating the

total actual vehicle costs to determine the deductible portion.)

Moreover, the likelihood that some indeterminate portion of

Ms. Chappell’s reported vehicles costs was actually incurred for

nonbusiness uses is exacerbated by the fact that her receipts show two

or three same-day gas purchases on at least ten different days—days on

which neither of the mileage logs shows an excessive number of miles

driven. At trial, the Commissioner’s counsel confronted Ms. Chappell

with ten instances where, in the receipts she submitted to the Court, she

identified two separate purchases on the same day as having been made

10 Revenue Procedure 2010-51 has been superseded by Revenue Procedure

2019-46, 2019-49 I.R.B. 1301. However, Revenue Procedure 2010-51 was in effect

during Ms. Chappell’s 2015 tax year.

11

for fuel. (In one case the number of purported same-day fuel purchases

was three.) 11 Ms. Chappell’s records also identify a purchase for gas in

Kings Mill, Ohio, on July 9, 2015, a date when both the MileIQ log and

the modified mileage log indicate that she was in the Washington, D.C.,

area for a conference hosted by the IRS. In response to these various

incongruities, Ms. Chappell speculated that Ms. Wright may have

sometimes purchased gas using one of Ms. Chappell’s debit or credit

cards for a car owned by Ms. Wright or a third party, without

Ms. Chappell’s knowledge or permission. For these reasons we decline

Ms. Chappell’s invitation to rely on actual expenses and turn to the

standard mileage rate to determine whether vehicle expenses can be

allowed.

B. Standard Mileage Rate

We hold that Ms. Chappell qualifies for a deduction using the

business standard mileage rate pursuant to Revenue Procedure 2010-

51, in lieu of actual expenses, for the period of March 23 to December

31, 2015. Such a deduction required Ms. Chappell to substantiate the

number, time, and purpose of her business miles under either the

“adequate records” standard or the “sufficient evidence” standard of

section 274(d) and Temporary Treasury Regulation § 1.274-5T(c)(2)

and (3). See Treas. Reg. § 1.274-5(j)(2). The MileIQ log was compiled

contemporaneously during the period of March 23 to December 31;

although it did not specify the exact business purpose of any of the trips

listed (the trips are identified simply as “business” or “personal”), she

produced a modified mileage log specifying a particular business

purpose for each of the business-related trips (e.g., “Supplies,” “Staff

Recruiting,” etc.). She corroborated that evidence with credible

testimony at trial.

In addition, we can allow Ms. Chappell a standard-mileage-rate

deduction for those trips whose business purpose is self-evident from

their starting and ending points. Temporary Treasury Regulation

§ 1.274-5T(c)(2)(ii)(B) provides as follows:

In order to constitute an adequate record of business

purpose within the meaning of section 274(d) and this

11 On none of these ten days does either the MileIQ log or the modified mileage

log show an unduly large number of miles. The maximum daily mileage recorded

among the ten days was 227.5. (This amount was recorded on March 29, 2015, and

was an outlier by far.) Ms. Chappell testified that her Prius had a ten-gallon fuel tank

and a fuel economy of around 40 miles per gallon.

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paragraph (c)(2), a written statement of business purpose

generally is required. However, the degree of

substantiation necessary to establish business purpose will

vary depending upon the facts and circumstances of each

case. Where the business purpose is evident from the

surrounding facts and circumstances, a written

explanation of such business purpose will not be required.

This exception applies to those trips that Ms. Chappell took between her

Maineville home and her Mason office, in light of the Commissioner’s

concession that the Maineville home office qualified as Ms. Chappell’s

principal place of business under section 280A(c)(1)(A). See Curphey v.

Commissioner, 73 T.C. 766, 777–78 (1980) (holding that commuting

expenses between a taxpayer’s home office and a business location may

be deductible if the home office is the taxpayer’s principal place of

business); Rev. Rul. 99-7, 1999-1 C.B. 361 (same). As a result, the

modified mileage log meets the “sufficient evidence” standard, even if it

did not strictly meet the contemporaneous “adequate records” standard.

We thus allow a vehicle expense deduction based on 11,598 business

miles at 57.5 cents per mile, or $6,669 (versus the $15,385 that

Ms. Chappell claimed on her 2015 return and the $10,615 that she

requested in her briefings).

IV. Accuracy-Related Penalty

Section 6662 imposes a 20% accuracy-related penalty on an

underpayment of tax attributable to (among other things) negligence or

disregard of rules or regulations. I.R.C. § 6662(a) and (b)(1). Negligence

includes any failure to make a reasonable attempt to comply with the

provisions of the Code, including any failure to maintain adequate books

and records or to substantiate items properly. I.R.C. § 6662(c).

Disregard includes “any careless, reckless, or intentional disregard.” Id.

Under section 7491(c), the Commissioner bears the burden of

production regarding penalties and must come forward with sufficient

evidence indicating that it is appropriate to impose a penalty in the

absence of available defenses. Higbee v. Commissioner, 116 T.C. 438,

446–47 (2001). As we noted in Graev v. Commissioner, 149 T.C. 485,

493 (2017), supplementing and overruling in part 147 T.C. 460 (2016),

one part of this burden is to show compliance with section 6751(b)(1),

which provides that “[n]o penalty . . . shall be assessed unless the initial

determination of such assessment is personally approved (in writing) by

the immediate supervisor of the individual making such determination.”

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Here, the parties have stipulated facts and documents substantiating

that the Commissioner met the supervisory approval requirement with

respect to his determination of the penalty under section 6662(a) and

(b)(1).

We next note that Ms. Chappell was at least careless in claiming

deductions, without adequate substantiation or records, for the full cost

of her cell phone service and for her actual vehicle costs. See I.R.C.

§ 6001 (providing that taxpayers “shall keep such records . . . as the

Secretary may from time to time prescribe”); Treas. Reg. § 1.6001-1(a)

(providing that taxpayers “shall keep such permanent books of account

or records . . . as are sufficient to establish the amount of gross income,

deductions, credits, or other matters required to be shown by such

person in any return of such tax or information”).

Section 6664(c)(1) grants an exception to a penalty under section

6662 “if it is shown that there was a reasonable cause for such portion

[of an underpayment of tax] and that the taxpayer acted in good faith

with respect to such portion.” The determination as to whether a

taxpayer acted with reasonable cause and in good faith is made on a

case-by-case basis, considering all pertinent facts and circumstances.

Treas. Reg. § 1.6664-4(b)(1). Generally, the most important factor in

determining the existence of reasonable cause is the taxpayer’s effort to

ascertain her correct tax liability. Id. Circumstances that may signal

reasonable cause and good faith include an honest misunderstanding of

fact or law that is reasonable in light of all the facts and circumstances,

including the experience, knowledge, and education of the taxpayer. Id.

Ms. Chappell contends that she qualifies for a reasonable cause

exception because in 2015 she was caring for her elderly disabled mother

and was herself suffering from a painful tumor. Additionally, her

daughter passed away in November 2015 after a period of injury and

infection beginning in 2014, leaving Ms. Chappell to care for her four

grandchildren while grieving for her daughter.

We sympathize with Ms. Chappell’s personal difficulties in 2015.

However, she testified that during that year she continued to run a

vibrant tax preparation business, make multiple business trips almost

every day, and work up to 12 hours a day. This Court has consistently

held that taxpayers dealing with personal or family illness, incapacity,

or death do not qualify for a reasonable cause exception if they were able

to continue their business affairs during the relevant period. See, e.g.,

Judge v. Commissioner, 88 T.C. 1175, 1189–91 (1987); Hardin v.

14

Commissioner, T.C. Memo. 2012-162, 103 T.C.M. (CCH) 1861, 1862;

Ruggeri v. Commissioner, T.C. Memo. 2008-300, 96 T.C.M. (CCH) 511,

513 (collecting cases). Moreover, Ms. Chappell was almost surely

familiar with the substantiation requirements for business deductions,

given her professional experience as a tax preparer. Therefore, we hold

Ms. Chappell liable for an accuracy-related penalty under section

6662(a) and (b)(1).

We have considered all of the arguments made by the parties and,

to the extent they are not addressed herein, we find them to be moot,

irrelevant, or without merit.

To reflect the foregoing,

Decision will be entered under Rule 155.