# UNITED STATES TAX COURT > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/agency%3Atax-court%3A15cff87c258f890e ## Record - **Collection:** Agency decision - **Document type:** Agency decision ## Text T.C. Memo. 2011-164 UNITED STATES TAX COURT ] GLENN PATRICK BOGUE, Petitioner v. COMMISE IONER OF INTERNAL REVENUE, Respondent Docket No. 12291-09. • Filed July 11, 2011. Glenn Patrici Bogue, pro se. Carrie L. Kleinian, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION WELLS, Judge Respondent determined income tax deficiencies of $5, 900 . 85 and $6, 738 . 11, and accuracy-related penalties pursuant to section 6662(a)1 of $1,180.17 and $1,347.62 for IUnless otherwise indicated, section references are to the Internal Revenue Code of 1986, as amended, and Rules references are to the Tax Court Rules of Practice and Procedure . ( SERVED JUL 1 1 2011 - 2 petitioner's 2005 and 2006 tax years (the years in issue), respectively. After concessions, the issues we must decide are: (1) Whether petitioner is entitled to deduct certain transportation expenses for travel between his residence and worksites during the years in issue; (2) whether petitioner is entitled to certain depreciation deductions; (3) whether petitioner is entitled to certain deductions on his Schedule C; and (4) whether petitioner is liable for the accuracy-related penalties for the years in issue. FINDINGS OF FACT Some of the facts and certain exhibits have been stipulated. The parties' stipulations of fact are incorporated in this opinion by reference and are found accordingly. At the time he filed his petition, petitioner was a resident of New Jersey. Petitioner is an independent contractor based in Cherry Hill, New Jersey. During the years in issue, petitioner lived in a house owned by his fiance, Janis Pannepacker (Ms. Pannepacker) (we sometimes also refer to Ms . Pannepacker' s house as petitioner's residence). o During the years in issue, petitioner was building an addition to Ms . Pannepacker' s house in his spare time. During the years in issue, petitioner worked with Raymond J. Mancino (Mr. Mancino) to renovate residential properties. his 2005 tax year, petitioner worked on properties at gthe During 3 - following locations: East Upsal Street, Philadelphia, * Pennsylvania; Wissahickon Avenue, Philadelphia, Pennsylvania; and Seminole Avenue, Melrose Par , Pennsyivania. During his 2006 tax year, petitioner worked on properties at the following locations: Seminole-Avenue, Melrose Park, Pennsylvaniä; Albright3 Aven'ue, Elkins Parks, Peansylvania; and Coles Mills Road, Haddonfield, New Jersey. Those five work locations (hereinafter sometimes referred to as wbrksites) were 20.1; 15.7, 15.0; 14.7, and 4.0 miles, respectively, from petitioner's residence. He worked at each of the work ites for a n mber of months and then, when the project at that worksite. orksite was afinished, he moved to another Petit oner also reeeïved~ some income from his work as a track team coach: Petitioner declared bankiruptcy during 1999, following a divorce it. During 2003, the bank "foreclosed'on his house and sold The individual who purchased it razed the h'ouse before petitioner had removed all of his possessions, includiñg some of his important records. Among the records he lost were the purchase records for his 1991 Ford Explorer and for his tools. Pètitioner's credit was affected by his bankruptcy, and consequently, he was unable.to get a'credit card'or open a bank accounty To provide a bank aâcount for petitioner's'use, Ms. Pannepacker opened an account in her name5that was used only for - 4 pe t itioner ' s expenses . Although Ms . Pannepacker wrote checks from the account at the direction. of petitioner, both- she and petitioner treated all of the funds in the account as petitioner's. On his returns for the years in issue, petitioner claimed deductions for a variety of expenses related to his. transportation between his residence and the worksites. He claimed deductions for car and truck expenses of $9, 232 and$9,657.50 on Schedules C, Profit or Loss from Business, .attached to his tax returns for 2005 and 2006, respectively. In addition to car and truck expenses, petitioner deducted as part of -his "Other Expenses" on his Schedules C amounts for tolls that he paid on the way to worksites. He claimed deductions of $660 and $400 for those tolls during 2005 and 2006, a respectively. - As part of the insurance expenses he reported on his Schedules C, petitioner deducted auto insurance expenses of $2; 028 and $1, 866 for . 2005 and 2006, respectively. Petitioner also deducted $650 in car rental expenses for the period- during 2005 when.he was renting a car after the 1991 Ford Explorer became inoperable. Additionally, petitioner claimed a deduction of $4; 600 for the depreciation of his 1991 Ford Explorer, which became inoperable during 2005. The $4, 600 he claimed as a depreciation deduction reflects petitioner' s estimate of its "Kelley, Blue Book" value when it became inoperable . - 5 - On his 2006 tax return, petitioner claimed depreciation of $400 for tools he purchased in a prior year. His tool purchase records were los: when his house was destroyed during 2003, and he subsequently estimated the values of those tools for the purpose of depreciating them. aa During the years in issue, petitioner had a storage shed at Ms. Pannepacker's house-where he kept all of his tools when he was not using them. However, he did not deduct, any expense for depreciation of the storage s ed on his tax return for either year. During 2005 petitioner had a dispute withrone of his clients over the payment of a bill and was arrested in Pennsylvania when the client~ reported to the police: that petitioner had stolen a deposit. In connection with that dispute, Ms. Pan epacker paid $398 to, the clerk of court. TOn his Schedule C for 2005, petitioner claïmed a deduction for legal expenses of $1,250. That amount'also included $800 petitioner had paid a lawyer to represent him during 2003 but never claimed as a deduction. He therefore deducted both of those expenses on his 2005 return.2 On the-Schedule C attached to his 2006 return, petitioner claimed a deduction for $1,970 in legal expenses related to a 2The sum of >etitioner's legal expenses from 2003 and 2005 is $1,198. It ir not clear f om the record how he arrived at a deductible expence of $1,250. - 6 a lawsuit stemming from a contract dispute. To ,substantiate those expenses, he of fered canceled checks totaling $1, 423 from Ms . Pannepacker to the law firm he retained to represent him. He also provided part of the complaint filed in that lawsuit and the retainer agreement he signed with the law f irm that represented him. I Petitioner- was unable to find any other records to substantiate the full amount of his - claimed legal expenses for 2006. Petitioner used one of the rooms in Ms . Pannepacker' s house as his office (office) during the years in issue, but he did not claim a deduction-for the business use of his office. Petitioner used the computer in the office to research parts for building houses and to keep track of his billing. He also used the landline telephone in the office to contact building asupply stores. Petitioner claimed $1,200 for office expenses on his tax returns for .both of the years in -issue, but respondent allowed only $600 for each year. Petitioner now contends -that he should be entitled to deduct office expenses of $2,184 for each of the, years in issue. To substantiate his claimed expenses, petitioner submitted a receipt from Ms. Pannepacker stating that petitioner pays her the following amounts each month: $50 for Internet service; $30 for a landline telephone; $20 for computer and printer use; and $82 for petitioner's share of a joint cellular - 7 - phone plan. Petitioner submitted several invoices in Ms. Pannepacker' s name, including an invoice for Internet and cable television that shows that Ms. Pannepacker paid only $33 -per month for Internet service. iMs. Pannepacker also accesses the Internet through her laptop at. her home. On. the Schedule C' attached to his 2005 tax return, petitioner claimed "Other EXÓenses" of $1", 000 for the settlement of a purchase 'ciispute with Builder' s Prime Window. On his 2006 tax return, petitioner claimed Schedule C "Other Expenses" of $2,200; for books that he purchased during the-preceding 5 years. He eventually used those books as part of his research for a book series that he recently published through a self-publishing house". - Petition3redid not ddduct those expenses as he paid them; instead, he dedu ted all of them on his 2006 tax return because it was not until 2006 that he "firmly decided that he would write the books . 3 Petitioner imely filed his Federal income tax returns for the years in iss e. On April 23, 2009, respondent issued and mailed to petitioner a notice of deficiency. Petitioner timely filed his petition with this Court. 3Petitioner stated with regard to his work on the books that during 2006, "I know I'm going forward." - 8 OPINION I. Whether the Burden of Proof Has Shifted Under Sectïon 7491 We consider tas a preliminary matter petitioner' s contention that the burden of proof has shifted to respondent pursùànt to section 7491(a) . Generally, the Commissioner's determination of a deficiency is presumed correct," ands the taxpayer has the burden of proving it incorrect. U.S.* 111, 115 (1933),. Rule 142(a); Welch v. Helvering, 290 Section 7491(a) (1) provides an exception that shifts the burden of proof td the Commissioner as to sany factual issue :relevant to a taxpayer's liability, for tax if: (i) The taxpayer introduces credible evidence with respect to that issue; and (2), the .taxpayer satisfiesa certain other conditions éincluding substantiation of any item and cooperation with the Government's requests for witnesses, documents, other information, and meetings. 142 (a) (2) . Sec . 7491(a) (2) ;. see also |Rule The taxpayer bears the burden of proving that, the taxpayer has met the requirements of section 7491(a) . Commissioner, 135 T.C. 471, 483 a Rolfs v. (2010) . » As we explain below, petitioner has failed to present credible evidence sufficient to substantiate most-items. 4 On those issues, the burden of proof remains with petitioner. With respect to a few factual issues, petitioner presented credible evidence sufficient to substantiate his expenses. However, because we decide those issues in petitioner's favor on the preponderance of the evidence, the allocation of the burden of proof is immateri.al. 189 (2008) . See Knudsen. v. Conimissioner, 131 T.C.. 185, We :herefore need not decide whether petitioner has also mets the conditions of section 7491(a) (2)i required to shift the burden of proof to respondent with respect- to those issues. II. Whether Petitioner Is Entitled to the Claimed Deductions Deductions are a matter of legislative grace, and taxpayers generally bear the burden of proving their entitlement to the deductions claimed. 503 U.S. 79, 84 Sec. 6001;a INDOPCO, Inc. v. Commissi'oner, '1992) . Section 162 (a) permits "as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business" . To be deductible, ordinary and nece sary expenses must be' "directly connected with or pertaining to the taxpayer' s trade or business". Sec. 1.162-1(a), Income Tax Regs section 212 generally allows . Additionally, he -deduction of ordinary and necessary expens s paid or inburred during the tax year for the production or collection of income. Regs . Sec. 1.212-1(d); Income Tax Such expenses must be reasonable in amount and bear' a reasonable and p oximate relationship to the production or collection of taxable incotne . 1 deduct personal expenses . Id. However, a taxpayer may not Sec . 262 (a) . -^10 - Generally, "a taxpayer must keep records sufficient to establish the amounts of the items reported on his federal income tax return. Sec..6001; sec. 1.6001-1(a), (e), Income Tax Regs. In the event that a taxpayer establishes that a deductible expense has been paid but is unable to substantiate the sprecisè amount, we generally may estimate the amount of the deductible expense, bearing heavily against the taxpayer whose inexactitude in substantiating the amount of the expense is of his own making. Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930).- We - generally will not estimate a deductible expense, however, únless ther taxpayer-presents sufficient evidence to provide some basis uponawhich an-estimate may be-made. T.C. 731, 743 (1985). Vanicek v. Commissioner,- 85 - Section ,274(d) supersedes the Cohan doctrine for certain categories of expenses. 827-828 Sanford v. Commissioner, 50 T.C. 823,s. (1968), affd. per curiam 412 F.2d 201 (2d Cir. -1969). - Generally, a deduction is disallowed for an expense for travel, meals and entertainment, or listed property unless the taxpayer properly substantiates: -(1) The amount of such expense; '(2) the time and place of the expense; -(3) the business purpose; and (4) in the case of meals and entertainment, the business relationship between the taxpayer and the persons being entertained., Sec. 274(d). Listed property includes passenger automobiles, any type of property generally used for entertainment or recreation, any - 11 - computer or peripheral equipdent, and any cellular:phone or other similar telecommanications equipment.4 Sec. 280F-(d) (4). Generally, deductions for expenses subject to the strict substantiation requirements df.section 274(d) mustube disallowed in full unless tae taxpayer satisfies every element of those requirements. Sanford -v. Commissioner, "supra at 827-828; Larson v. Commissioner, T.C. Memo. 2008-187; sec. 1.274-5T(a), Temporary Income Tax Regs., 50 Fed. Red. 46014 (Nov. 6, 1985). Deductions . for listed property 'that is used both personally and in the taxpayer's business are disallowed unless a taxpayer establishes ther amount of business use of the property. Kinney v. Commissioner, T.C. Memo. 20084287; Olsen v. Commissioner, T.C. Memo. 2002-42, a fd. 54 Fed. Appx. 479'(9th Cir. 2003); sec. 1.274-5T(b) (6) (i -(B),. Temporary Income Tax Regs., 50 Fed. Reg. I 46016 (Nov. 6, 1985). Taxpayersamay substantiate their deductions by either adequate-records or sufficient evidence that corroborates the taxpayer's owns statement. Seg. 274(d). To'satisfy- the adequate records requirement~, a taxpayer must maintain records and documentary evidence that in combination are sufficient- to *Sec. 280F(d) (4) has sinée been amended by the Creating Small Business Jobs Act of 2010, Pub. L. 111-240, sec. 2043(a), 124 Stat. 2560, Ehich removed cellular phones and other similar telecommunicatio1s equipment from "listed property." However, that amendment is effective only for tax years beginning after Dec. 31, 2009. I: -. 12. - establish each element of an expenditure or use . Larson y Commissioner, supra; sec. 1.274--5T(c) (2) (i), Temporary Income Tax Regs.-, 50 Fed. Reg. 46017 (Nov. 6, 1985) .s As we haŸe stated,t á contemporaneous log is not required, but corroborative evidence used».to support a taxpayer' s reconstruction of the expenditure "'must have a high degree. of probative value to elevate such.. statement'" to the level of credibility of a contemporaneous record. Larson v. Commissioner, supra (quoting section i.274- 5T (c ) (1) , Temporary Income Tax Regs . , 50 Fed . - Reg . 46016 (Nov . 6, .1985) ) . In the absence of adequate grecords,- a .taxpayer alternatively may establish an element of an expenditure by "his own statement, whether written or oral,s containing specific information .in detail as to such element"o and by "other corroborative evidences sufficient to establish such element." Larson v. Commissioner,- suora; sec. 1.274-5T(c) (3), Temporary Income Tax Regs,, 50:Fed. Reg. 46020 (Nov. 6, 1985) . Even if an expense woulds otherwise be deductible, . the deduction may still be denied if there is insuf f ic ient substantiation to support mit . See se c . 1 . 274 5T (a) , Temporary Income Tax Regs; , 50 Fed. Reg. 46014 (Nov. 6, 1985) . We do not estimate under the Cohan doctrine expenses that are subject to the requirements of section 274 (d) . Sanford v. Commissioner, supra at 827; Larson v. Commi~ssioner, suprat - 13 - A.- Commuting Expenses Respondent contends that many of petitioner's expenses, including the amounts petitioner claimed for car and truck expen'ses, -tolls, sauto insura ce, and car rental expenses deductible because they are commuting expenses. are not As a general -rule, expenses for traveling between one's home and one's place of business or enployment constitute commuting expenses and, consequently, are nondeductible personal expenses. 262 (a) ; »Fausner . Commissioner, 413 U. S. 838 See sec. (1973) ; Commissioner v. Flowers, 326 U.S. 465 (1946); Feistman v. Commissioner, 63 T.C. 129, 134 (1974) . As the Supreme Court explained in Commissioner v. Flowers, såpra at 473, Éh core reason commuting expenses are not - deductible is that the taxpayer makes a personal choice about where to live. In Flowers, the taxpayer was a longtime resident of Jackson, Mississippi, who accepted a job that required him to spend most of his time in Mobile, Alabama. For personal reasons, the taxpayer decided to contihue to maintain a home in Jackson and made repeated trips between Jackson and Mobile. The Supreme Court held that the taxpayer was not entitled to deduct the costs of traveling from Jackson to obile, despite the substantial distance, because those costs were incurred for personal reasons and not in the pursuit of the business of his employer. Supreme Court explained: The - 14 - The facts demonstrate clearly that the expenses were not incurred in the pursuit of the business of the taxpayer' s employer, the railroad. Jackson was his regular home. Had his post of duty been in that city the cost of maintaining his home there and of commuting or driving to work concededly would be non-deductible living and personal expenses lacking ;the necessary direct relation to the prosecution of the business . The character of such expenses is unaltered by the circumstance that the taxpayer' s post of" , duty was in Mobile, thereby increasing the costs of transportation, food and lodging. Whether he maintained öne abode or two, whether he traveled three blocks or three hundred miles to work, the nature of these expenditures remained the same . The added costs in issue, moreover, were as unnecessary and inappropriate to the-development of the railroad's business as were his personal and living costs in Jackson. They were incurred solely as the result of the taxpayer' s desire to maintain a home in Jackson while working in Mobile, a factor irrelevant to the maintehance and prosecution of the railroad's legal business. * * * The fact that he traveled frequently between the two citiek and incurred extra living expenses in Mobile, while doing much of his work in Jackson, was occasioned solely by his personal propensities. * * * Id. at 473-474. By holding that commuting expenses are ,personal, the Supreme Court placed those expenses in the category of nondeductible expenses now governed by section 262 (a) . Such personal "expenses contrast with trade or business expenses, which are deductible provided they satisfy the requirements of section 162. Section 162 (a) provides that a deduction is allowed for * "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business". Three exceptions to the general rule that commuting expenses are nondeductible have evolved since the Supreme Court decided Flowers. The first exception is that expenses incurred traveling I - 15. between a.taxpayer's residence and a place of business are deductible if the residence is the taxpayer's principal place of business -(home office exceptÎon). The second exception is that trave,l expenses between a taxpayer's residence and temporary work locations outsid of the metropolitan area where the taxpayer lives and normal y works are deductible (temporary distant worksite exception). The third exception is that travel expenses betwÊen a taxpayer's residence and temporary work locations, regardless of th distance, re deductible if the taxpayer also has one or more regular work locationssaway from the taxpayer's residence- (regular work location exception). Petitioner contends that his transportation expenses driving between his residence and worksites qualify under all three exceptions; we will consider each exception in turn. 1. The Home Office Exception The first exception, that expenses incurred traveling between a taxpayer's residencò and a place of business are deductible if the residence is the taxpayer's principal place of business because a home office is located at the residence, is a judicially created exception.i 113 T.C. 106, 113-114 See Strohmaier v.. Commissioner, (1999);,Wis. Psychiatric Servs. v. sThe first exception is Olso recognized under Rev. Rul. 997, 1999-1 C.B. 361, 362, which states: "If a taxpayer's residence is the takpayer's piincipal place of business * * *, the taxpayer may deduct daily transportation expenses incurred in going between the residence and another work location". - 16 Commissioner, 76 T.C. 839, 849 (1981) ; Curphey v. Commissioner, 73 T.C. 766, 777-778 (1980) . In the-seminal case on the home office exception, Curphev :v. Commissioner, supra, the taxpayer maintained a home office in his residence that qualified as his "principal place of business" under section 280A(c) (1) (A) . We stated Petitioner made his trips from his home office (which" we have held to be the principal place of business with respect to his rental activities) to his rentalsproperties for a business purpose, i.e., to carry out management duties at , those properties . We see no reason why the rule that local transportation expenses incurred in travel between one business location and another are deductible should not be equally applicable where the taxpayer' s principal place of business with respect to the ,activities involved is his residence. * * * Id. at 777-778 (citations omitted) . According to the terms of this judicially created home office exception, the taxpayer's residence must qualify as the taxpayer's "principal place of business", and we have consistently equated the "principal place of blisiness" requirement for the home office exception with the "principal place of business" requirement under section 280A. See Walker v. Commissioner, 101 T.C. 537, 546 (1993); Curphey v. Commissioner, supra at 777. Consequently, although petitioner did not claim a deduction for the business use of his residence pursuant to section 280A(c) (1), we nonetheless must consider whether petitioner's office in his residence qualifies as his prïncipal place of business under that statute. - 17 Section3280A(a) provides that, as a general rule, no deduction is allowed with respect to the taxpayer's residence. Section 280A (c) (1) provides several exceptions to that general rule: Subsection (a) shall not apély to any' item to the extent such item is allocable to a portion of the dwelling unit which is ex lusively used on a regularabasis-trade ( ) as the principal place of business for any r business of the taxpayer, ( ) as a place of business which is used by patients, clients, or customers in· meeting -or dealing with the taxpayer in the normal course of his trade or businebs, or ( ) in the case of a separate structure which is not attached to the dwelling unit, in connection with the taxpayer' s trade or business . * * * For purposes of subparagraph (A) , the term "principal place of business" includes a place of business which is used by the taxpayer for the administrative or management activities of any trade or business of the taxpayer if there s no other fixed location of such trade or business where the taxpayer conducts substantial administrative or management activities of such trade or business. Where a taxpayer s. business is conducted in part at the taxpayer' s residence and in part at another location, the Supreme Court has held that there are two primary considerations in deciding whether the home office qualifies as the taxpayer's principal place of business: (1) The relative importance of the functions or act:.vities perfo -med at each location; and (2) the time spent at each location. Commissioner v. Soliman, 506 U.S. - 18 - 168, 175-177 (1993) ; Strohmaier v. Commissioner supra at 111-112 . Since the Supreme Court's decision in Soliman, Congress has added the flush language following section 280A(c) (1) (C) to expand the scope of the home office deduction. That flush÷ language was intended to permit taxpayers who manage business activities from their homes to claim a home office deduction even if they would not qualify under the Soliman standard.' However, The House report accompanying the amendment explained its purpose as follows: The Committee believes that the Supreme Court's decision in Soliman unfairly denies a home office deduction to a growing number of taxpayers who manage their business activities from their homes Thus, the statutory modifiàation adopted by the Committee will reduce the present-law bias in favor'of taxpayers who manage their a business activities from outside their home, thereby enabling more taxpayers to work efficiently at.home, save commuting time and expenses, and spend additional time with their families. Moreover, the statutory modification is an appropriate response to the computer and information revolution, which has made it more practical, for t'axpayers to manage trade or business activities from a home office. * * * * * * * Section 280A is amended to specifically piovide that a home office qualifies as the "principal place of business" if (1) the office is used by the taxpayer to conduct. administrative or management activities of a trade or business and (2) there is no other fixed location of the trade or business where the taxpayer conducts substantial administrative or management actinities of the trade or business. As under present law, deductions will be allowed for a home office meeting the above two-part test only if* the office is exclusively used on a regular basis as a place of business by the taxpayer * * * (continued. . . ) - 19 - Congress did not change the requirement that, in order to qualify as the principa3 place of business, the home office must be regularly and exclusively used for business purposes. The exclusive-use requirement in section 280A(c) (1) is an'"all-ornothing" standard. Hamacher v. Commissioner, 94 T.C. 348; 357 (1990). Our first consideration is whether petitioner's residence is his principal place of business, a-prerequisite for qualification under the home office exception. Petitioner stored tools in a shed at his residence, used the telephone in his office in¡his , residence to contact;building -supply, stores, and used his desktop computer in his office to research parts for building houses and to keep track of his billing. Petitioner, however, offered no testimony or other evidence 'that he used the office in his residence exclus vely for his business.. Although Ms.- Pannepacker testified that she did not.use the office at all during regular business hours, she did not include in her testimony anything regarding her us of it during evenings or weekends. Petitioner did testify that he -used a se arate storage 'shed exclusively for his business, and Ms. Pannepacker confirmed petitioner's testimony on tha point. It is clear from petitioner's arguments '(...continued) H. Rept. 105-148 see also H. Conf 2) 1457, 1934. at 407 (1997.), 1997-4 C.B. (Vol. 1) 319, 729; Rept. 105-2 0, at 464 (£997), 1997-4 C.B. (Vol. - 20 - about the storage shed, and his direct examination of Ms. - Pannepacker on that subject, that he understood the importance;of exclusive use. Nonetheless, he failed to offer any testimony or other evidence that he used his home office exclusively- for his business. Petitioner also argues that his use of the storage shed exclusively for business entitles him to deduct his commuting expenses. Although deductions are allowed for separate structures used in connection with the taxpayer's business, pursuant tx> section 280A(c) (1) (C), the use of such separate structures for business does not qual-ify the taxpayer's -residence as his principal place of business. The term "princiyal place of business" is set forth in section 280A(c) (1) (A) and the flushe language following section 280A(c) (1).(C) that, by its terms, clarifies; only section 280(c) (1) (A). Accordingly, petitioner's exclusive use of his storage shed does not make his.residence his principal place of business. Petitioner has the burden of proof on the home office exception, yet he has failed to produce testimony or documentary evidence that he used his home office exclusively forebusiness purposes. Accordingly, we conclude that petitioner has not shown that his residence was his principal place of business. Consequently, we hold that petitioner is not entitled to deduct his commuting expenses under the first exception. See Strohmaier - 21 v. Commissioner, 113 T.C. at 114,("Since ipetitioner!'s residence, was not his 'principal place of business', it follows that the expenses relating to the disallowed mileage for each year constitutes commhting expenses that are not' deductible."); see also Romer v. Commissioner, T.C. Memo. 2001-168 (holding that because the taxpayer's residence did not qualify as his principal place of business under section 280A(c) (1) (A), he was not entitled to deduct- travel expenses to and from his home); Beale v. Commissioner, T.C. Memo. 2000-158 (same). Petitioner ::elies on Walker v. Commissioner,- 101 T.C. 537 (1993), to argue that his travel expenses between his home- and his wòrksites ará deductible gnder the home office exception even if his home does not qualify as his -"principal place of business." The Walker was Rev. evenue ruling in effect at the time we decided ul. 90-23, 1990-1 C.B. 28, which allowed a taxpayer to dedu t expenses t aveling between a "regular place of business" and a 'temporary work location." In Walker, we interpreted "regular place of business" undér Rev. Rul. 90-23, supra, to include a taxpayer's residence even though his residence did no qualify as under.section 2.80A(c) (1). is "principal place of business" We held that the "regular place of business" standard employed by the Commissioner in Rev. Rul. 902 23, supra, was a less exacting standard than the "principal place of business" - star dard adopted in our priors cases . Id . at- 548 . - 22 - We, treated the Commissioner's,use -of "the "regular place of business" standard as a concession that effectively expanded the scope of the home office "exception. Id. at 550. The IRS neven acquiesced to our interpretation of "regular place of business," and both Rev. Rul. 94-47, 1994-2 C.B. 18, and Rev. Rul. 99-7, 1999-1 C.B. 361, explicitly exclude a itaxpayer's residence from what is considered a "regular work location." In Strohmaier v. Commissioner, supra at 114, we made it clear that our holding in Walker was limited to the "regular place of business" standard under Revt. Rul. 90-23, supra. In Strohmaier, we held that after Rev. Rul. 90-23, supra, was superseded by- Rev. Rul. 94-47, supra, the home office exception remained limited to instances inewhïch the taxpayer's residence qualifies under section 280A(c) (1) as the- taxpayer's "principal place of business." Id. Accordingly, we decline to accept petitioner's argument that our holding in Walker permits him to deduct transportation expenses between his residence and his worksites. 2. The Temporary Distant Worksite Exception The temporary distant worksite exceptione is also rooted in caselaw. In Schurer v. Commissioner, 3 T.C. 544 (1944), we held that the taxpayers was entitled to deduct travel and-lodging expenses stemming from a series of temporary worksites at which the taxpayer worked during the year, all of which were distant from the taxpayer's residence: Our decision in that case was - 23 - based, in part, on the fact that- the taxpayer had no principal place of business during the tax year. Commissioner, 12 T.C. 20 (1949). See also Leach v. The IRS acquiesced to our decision in Schurer and laten issued Rev. Rula 190, 1953-2 C.B. 303, which state that when an employee "is employed for a strictly temporary (as distinguished from an indefinite) period on a construction project situated at a distance from the metropolitan area in which he is regularly employed, he may deduct * * * his actual expenses incurred for daily transportation between his principal or regular place of employment and such job" . Originally, when courts decided whether transportation expenses were nondeductible commuting expenses, they focused only on the nature of the job: indefinite duration. whether it was of temporary or In Peurifoy v. Commissioner, 358 U.S. 59, 60 (1958), the Supreme Court summarized the law as follows: Generally, a taxpayer is entitled to deduct unreimbursed travel expedses under this subsection only -when they are required by "the exigencies of business." * * * To this rule, however, the Tax Court has engrafted an exception which allows a deduction for expenditures of the type made il this case when the taxpayer's employment is "temporary" as contrasted with "indefinite" or "indeterminate." * * * However, over the ears, a number of courts added an additional requirement that the temporary worksite had to be distant from the area where the taxpayer lives and normally works. See Dahood - 24 v. United States, United States, 747 F.2d 46; 48 671 F.2d 1059, 1061 Commissioner, T.C. Memo. 1985-382. (1st Cir. 1984) ; Kasun v. (7th 'Cir. 1982) ; Epýerson . The Court of Appeals for othe First Circuit explained the reasoningiunderlying the temporary distant worksite exception. as follows: A judicial- exception'has been carved out of this general rule [that commuting expenses are nondeductible] to cover instances when people commute -long distances to their workplaces for business, rather than personal, re'asons. This exception permits taxpayers to deduct commuting expenses to a job that is temporary, as opposed to indefinite, in duration. The exception has been deemed necessary because "it is not reasonable to expect þeople to move to a distant location when a ,job is foreseeablyt of limited duration." Implicit in this exception is the requirement that the taxpayer commute to a worksite distant from his or her residence. Without such a requirement, the absurd result would obtain of permitting a taxpayer who e commuted to a succession of temporary jobs, to deduct commuting expenses, no matter how close these jobs were to. his residence. Dahood v. United States, supra at 48 (citations omitted) . Consistent with the holdings of similar cases, the IRS has memorialized the temporary distant worksite exception in Rev. Rul. 99-7, 1999-19 C.B. at 361, which states: "A taxpayer e* * * may deduct daily transportation expenses incurred in going between the taxpayer' s residence and a temporary work location outside the metropolitan area where, the taxpayer lives and normally works." The revenue ruling defines a temporary work location as one that "is realistically expected to last (and does in fact last) for 1 year or less" . Id. Neither Rev. Rul. 99-7, - 25 - supra, nor any cf its predecessors? defines the term "metropolitan area". The revenue:ruling does not explain the rationale for the temporary distant worksite exception. However, as we read the revenue ruling, on.the basis of the caselaw cited above, the revenue ruling redognizes that taxpayers whose work consists of many temporary worksites might not always,have a choice about the location of those worksites. Although the taxpayer's.choices about whe e to live and where to "normally work" are person 1 and it is assumed the taxpayer will live near the place of employment, it is unreasonable to expect' that a taxpayer will mo e to a distant location for a temporary job. See Kasun v. Uniaed States, supra at 1061. I The taxpayer's choice to take a temporary job at a remote location is therefore dictated-by business needs more thans ersonal preference. Petitioner contends that because he lived in Cherry Hill, New Jersey, and nost of his worksites were across the State line in Pennsylvania, those worksites were temporary work locations not within his "netropolitan.area". Because "metropolitan area" is not defined in any revenue ruling, petitioner argues that we should refer to the Office of Management and Budget (OMB) for a definition of "metropolitan", which petitioner contends is an urban area with more than 50,000 people. However, petitioner is 7Rev. Rul. 91-47, 1994-2 C.B. 18; Rev. Rul. C.B. 28; Rev. Ru]. 190, 1953-2 C.B. 303. I 90-23, 1990-1 - 26 mistaken about how the OMB defines "metropolitan area." The OMB defines a "metropolitan statistical area" or a "microÿolitan statistical area" as "an area contäining a recognized population nucleus and adjacent communities that have a high degree of integration with that nucleus." Standards for Defining Metropolitan and Micropolitan Statistical Areas, 65 Fed.- Reg. 82,228 a(Dec. 27, 2000). A metropolitan statistical area is distinguished from a micropolitan statistical area by having a population core of at least :50,000. However, petitioner's reference to the definitions used by the OMB does -not support his contention because, as defined by the OMB, petitioner's residence in therry.Hill,;New Jersey, and all of his temporary worksites are part of the Philadelphia-Camden-Wilmington Metropolitan , Statistical Area. See Office of Mgmt.' & Budget, Exec * Office df therPresident, OMB Bull. No. 06-01, Update of Statistical*Area Definitions and Guidance on Their Uses (2005). Nonetheless,.we decline to adopt any such rigid "definition for deciding when«a taxpayer's temporary worksites take him "outside the metropolitan area where the taxpayer lives and normally works." Adopting such a rigid definition would inevitably lead to some absurd results. In some situations, à rigid definition would disallow the deduction of travel expenses that should be permitted. The metropolitan statistical areas (MSAs) defined by the OMB are often quite large, such as. the 27 - Philadelphia-Camden-Wilmington MSA. - A taxpayer who lives and normally works near the outskirts of one- MSA may normally drive only 5 miles to and from worksites. * However, if that taxpayer accepts work at a temporary- worksite on the opposite end of the MSA, but still within the MSA, the- taxpayer could end up driving as much as 100 mLles each way yet not be able to deduct such transportation e:cation and the situation where the taxpayer has one or more regular work locations,and travels between the taxpayer's residence and a nearby temporary work location. The exception would be logical if it were limited to distant temporary work locations. Ho ever, as it stands, the regular work location exception reaches a result similar to what the Court of Appeals for the First Circuit labeled "absurd" when it held that there was an implic t requirement that, in order for trave], expenses between a taxpayer's residence and a temporary work location to be deductible, the temporary work location must be distant from tie taxpayer's residence." See Dahood.v. United States, supra at 48. Nonetheless, we will treat the regular work location exception as a conceþsion by the Commissioner.' 9Similarly, in Walker v. Commissioner, 101 T.C. 53T, 550 (continued...) - 32 - rIn the instant case, petitioner' s only work locatioris during the years in issues were worksites where he performed renovations. All of those worksites were temporary as defined in Rev. Rul. 99-7, supra, and petitioner has not shown that he had other,' regular work locations.1° Accordingly, petitioner has not established facts that would qualify him for respondent's concession. Consequently, we conclude that petitioner is not entitled to deduct his commuting expenses under the regular work location exception. Because petitioner has failed to qualify under any of the - three exceptions, we hold that his expenses in traveling between his worksites and his residence were nondeductible commutinc) expenses . 4. Other Travel Expense Deductions Petitioner contends that his travel between his residence and his worksites should not be considered commuting because he was carrying his tools in his pickup truck. However, the Supreme Court rejected a similar argument made by the taxpayer in Fausner * (. . . continued) (1993) , we treated as a concession another portion of Rev. RuL. 90-23, 1990-1 C.B. 28, that was inconsistent with our prècedent but that was a concession in favor of the taxpayer. 1°We reject petitioner's, contention that his storage shed, his car, the bank, and various building supply stores should be considered regular work locations. Petitioner has not established that he " [worked] or [performed] services on a regu]:ar basis", at any of those locations. See Rev. Rul. 90-23, 1990.-1 C.B. 28. - 33 - v. Commissioner, 413 U.S. at 839. In that case, the taxpayer was an airline pilot who argued that his commuting expenses were deductible because he used h s automobile to transport the bags he needed for his job. Id. at 838. The Supreme Court rejected the taxpayer's argument but left open the possibility that a taxpayer could allocate expenses between the necessary costs for commuting,and.ad itional costs that might be incurred to transport job-related tools and materials. . Id. at 839. After Fausner, the IRS published Rev. Rul. 75-380, 1975-2 C.B..59, stating that a taxpayer was entitled to deduct the cost of "transporting the work implements by the mode of - transportation used in excess of the cost of commuting by the same mode of- transportation without the twork implements." However, petitioner- did not p ovide any evidence that would allow us to decide what excess commuting expenses, if any, might be attributable to transporting his tools to and from his worksites. Because "any tra eling expense" under section 162 is subject to the strict substantiation requirements of section 274(d), the Cohan doctrine does not apply, and we therefore will not estimate the amount of a y additional feductible commuting expenses petitioner may have incurred by transporting his tools." We reject petitioner's argument that the strict · substantiation rcquirements of sec. 274(d) do not apply-because petitioner's care were trucks, not passenger automobiles, and therefore were not listed property under sec. 280F(d) (4): Sec. (continued...) - 34 Accordingly, we will not allow petitioner any deduction.for the transportation of his tools to his worksites. Petitioner contends that, even if he is not entitled to deduct his commuting expenses, he should still be entitled to deduct his expenses for short errands to pick up materials at building supply stores. Respondent acknowledges that -such travel expenses would be deductible but contends that -petitioner failed to supply evidence documenting his alleged trips. In his brief, petitioner contends that we may ascertain how many trips he made to building supply stores by examining his debit cakd 'purchases and calculating the distances.from his worksites to those building supply stores. However, petitioner did not provide- sufficient evidence for us to link those trips to particular worksi:tes. Because expenses for listed property and 4"any "(...continued) 280F(d) (5) defines a "passenger automobile" as "any 4-wheeled vehicle * * * manufactured primarily for use on public streets * roads and highways, and * * * rated at 6,000 pounds unloaded gross vehicle weight or less." In the case of a truck or van, the vehicle will be considered a passenger automobile if the gross vehicle weight is 6,000 pounds or less. The record does not contain any evidence regarding the gross vehicle weight of his Ford Explorer and Toyota Tundra, but we note that such vehicles,are commonly used passenger automobiles. Moreover, the regulations specifically state that the substantiation requirements of sec. 274(d) "apply generally to any pickup truck or van, unless the truck or van has been specially modified with the result that it is not likely to be used more than a de minimis amount for personal purposes." Sec. 1.274-5T(k) (7), Temporary Income Tax Regs., 50 Fed. Reg. 46035 (Nov. 6, 1985). Petitioner has not contended, and the record does not support a finding, that his pickup truck was so modified. - 35 - traveling expense" under section 162 are subject to the'strict substantiation requirements of section 274(d), the Cohan doctrine does not apply, and we therefore cannot estimate the amounts of such expenses. Moreover, petitioner was also performing renovation and constructing an addition on his own residence during the years in issue, and it is impossible for us to determine from his debit card transactions whether purchases at building supply stores were for his own residence o for his business.- Accordingly,9 we conclude that petitioner'has failed to prove that he is entitled to deduct expenses related to trips from his work'sites, to building supply stores. inally, respondent also acknowledges:that petitioner would be entitled to deduct travel xpenses between different temporary worksites, but petitioner testified that he typically worked at one worksite for several months at a time before'moving on to another worksite Accordingl , petitioner has failed to show that he made any such trips. In sum, we hold that petitioner is n'ot entitled to deduct any transportation expenses during the years-in -issue. B. Deprec:.ation Experises In order to be entitled to a deduction for depreciation with respect to an automobile, a taxpayer must establish.that the automobilé~was used at least artiall deduction will to the extent of business use. e allowed on1 for business,, Ánd the - 36 Sec. 167(a); Henry Schwartz Corp. v. Commissioner, 60 T.C.s 728, 744 (1973) . An automobile is listed property under section 280F (d) (4) and is therefore subject to the strict substantiatión requirements of section-274(d) and the regulations thereunder. Those, regulations also require strict substantiation with respect to depreciation expenses on listed property; Temporary, Income Tax Regs., 50 Fed. Reg. 46014 Sec. 1.274x5T(a), (Nov. 6, 1985) In order ,to deduct depreciation on listed property, the taxpayer must strictly substantiate the percentage of business use, and we will not estimate the appropriate allocation using the; Cohan rule. See Sowards v. Commissioner, T.C. Memo. 2003-180; Vaksman v. Commissioner, T.C. Memo. .2001-165, affd. 254 Fed.. Appx. 592 (5th Cir. 2002); Bishop v. Commissioner, T.C. Memo.,2001-82; Yecheskel v. Commissioner, T.C. Memo." 1997-89, affd. without published opinion 173 F.3d 427 (4th Cir. 1999) ; Whalley v. r Commissioner, T.C. Memo. 1996-533. As we concluded above, most of petitioner' s claimed business use -of his automobile was actually for commuting, ,a nondeductible "Sec. 1.274-5T(a), Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6, 1985), provides: For* taxable years beginning on or after January 1, 1986, no deduction or credit shall be allowed with respect to * * * listed property * * * unless the taxpayer substantiates each element of the expenditure * * *. This limitation supersedes the doctrine found in Cohan v.' Commissioner * * *. For purposes of this section * * * the term "expenditure" means expenses and items (including items* such as loss and depreciation) . l - 37 personal expense. Petitioner provided no evidence ,regarding any other use of hid vehicle that would satisfy the substantiation requirements of section 274(d). Accordingly, we hold that he is not entitled to deduct any depreciation on his automobile." On his 2006 tax return, petitioner claimed a $400 deduction for d'epreciation of his toolá. However, her did not explain how he determined that he was entitled to such a-deduction. On brief, he contends that $3,200 is a reasonable value for his tools and that h should be ntitled to deduct them using straight-line depreciation over 4 years. Petitioner contends that we should employ the Cohan rule- and estimate the amount of depreciation to which he is entitled. The cost of tools with useful lives greater than a year is recoverable by depreciation. Secs. 167(a), 168(b); Seawright v. 9At trial, petitioner á tempted to introduce an incomplete, unsigned portion.of his 2004 tax return for the purpose of showing 'that he put his Ford Explorer into service duking 2003. We suátained res ondent's objection to that exhibit and did not admit it into evidence. Petitioner argues, in a separate motion, that we erred in refusing to admit that exhibit. Even if that exhibit were admitted, petitioner would not be allowed to depreciate his F rd Explorer. Accordingly, we will deem petitioner's motion moot. Similarly, we will deem moot 3 petitioner's motion to admit a portion of his 2007 tax return', which:he contends should be admitted to show that the IRS did not object to deductions he claimed for commuting expenses during 2007. Whether the IRS examined petitioner's return for his 2007 tax year is irrelevant to our decision in the instant case. Respondent is not estopped from asserting a different position in the years in issue even if he accepted petitioner's treatment of certain items du(ing other ye rs. See Rose v. Commissioner, 55 T.C.. 28, 32 (1970). - 38 Commissioner, 117 T.C. 294, 305 (2001) . Petitioner offered no testimony gor other evidence regarding the date on, which he purchased the tools. Since he testified that the records e a regarding their purchase were destroyed in 2003, we irifer that they were purchased some time before then. Petitioner failed to offer any evidence that the cost of, his tools were not already fully depreciat-ed by 2005 and 2006. Without more evidence, we are unable to estimate the amount of depreciation -to which petitioner is entitled." See Vanicek v. Commissioner, 85 T.C. at 743. Although he did not claim it on his return, petitioner contends that he should also be allowed to depreciate the cost of the toolshed that he used exclusively to store his toolst for work. However, petitioner produced no evidence to substantiate the amount he spent on the toolshed, nor did he indicate when he purchased it. He merely guessed what it was worth. Accordingly, we conclude that petitioner has failed to produce "At trial, in order to provide- a basis for estimating the value of his tools, petitioner attempted to introduce a price squote on similar tools. He obtained the price quote from Home Depot during April 2008. We sustained respondent's objection and did not admit the price quote into evidence. Petitioner now moves that we reconsider that ru-ling. However, even if we- were to adniit petitioner's price quote, we would still disallow petitioner's claim for depreciation of his tools because he introduced no evidence regarding when he purchased thóse tools. Accordingly, we will deem petitioner's motion moot. 4 - "39 evidence that would allow him to claim depreciation on the toolshed. See id_ d. Legal Expenses A taxpayer is entitled to deduct expenses for legal fees - pursuant to section 162(a) in a suit that "arises in connection with" the taxpay r's business. U.S. 39, 48 153 United States v. Gilmore, 372 (196 ); Kornhauser v. United States, 276 U.S. 145, (1928); O'Malley v. Commissioner, (1988). A taxpayer is even from a criminal 91 T.C. 352, 361-362 ermitted to deduct legal expenses atter, as long as the criminal matter is sufficiently connected to thel taxpayer's business. Commissioner v. Tellier, '383'U.S. 687 (1966). of le#al expense See - The deductibility is determine'd by looking at" the "origin and character of the claim with respect to-which an expense was incurred". United Stätes v. Gilmore, supra at 49. Petitioner' testimony established that his legal expenses were incurred during several þontract disputes, including one that led to his arrest. Those disputes arose in connection with his business as an.independent building contractor. We are satisfied by petitioner's and Ms. Pannepacker's testimony regarding the origin and charäcter.of those expenses. We are also. satisfied that, although the canceled checks provided by petitione to substanŠiute the majority of those expenses were written by Ms. Pannepacker, t ey were written on a bank account - 40 - containing petitioner's funds.- However, petitioner's claimed deduction of $800 in legal fees paid during 2003 cannot be deducted on his 2005 return. 775, 782 (1959) See Burke v. Commissioner, 32 T.C. (a cash basis taxpayer's legal'fees could be deducted only in the years during which they weresactually paid, not in subsequent years), affd. 283 F.2d 487 (9th Cir. 1960); see also Dehoney v. Commissioner, T.C. Memo. 2006-108. Accordingly, we conålude that petitioner is entitled to deduct only the legal fees he has substantiated, i.e., $398 for 2005 and $1,:423 for 2006. D. Office Expenses Section 262(a) generally disallows deductions for,personal expenses,, and section 262(b)a provides that the "first tel'ephone line of a taxpayer's residence will bes treated as a personal expense. Accordingly, we conclude that petitioner is not entitled to deduct the cost of his landline telephone. Cellular phones" and computers are listed items under section 280F(d) (4) and are therefore subject to the heighténed substantiation requirements of section 274(d)." Petitioner dida "As noted above, for tax years beginning after Dec.-31, 2009, cellular phones are no longer "listed property" under sec. 280F(d) (4). "Because we have found that no portion of petitiôner's residence qualified as his principal place' of business~under sec. 280A(c) (1), we reject petitioner's argument that his computer qualifies for the exception under 280F(d) (4) (B), which providès (continued...) , 41 - not provide- any testimony or ¡other evidence regarding the extent of his business use of his cellular phone or computer. Accordingly, he has not satisfied the strict-substantiatión requirements und r section 274(d), and respondent's disallowance of those expense will be sustained. The Court h s characterized Internet service provider expenses as util ty expenses. 2001-132. Verma v. Commissioner, TsC. Memo. (Strict substantiation therefore does not apply, and the Court may estimate a taxpayer's deductible expenses, provided that the Court has a reasonable basis for making an estimate. Vanicek v. Commissioner, supra at 743. Petitioner provided documentation th t Ms. Pannepacker spends $33 per month on Internet service, and he testified that he uses the Internet to resea ch parts and tools. . Ho ever, Ms. Pannepacker'also áses the Internet at home presumably for recreation. Ýhe record before us would establish petitioner's office expende deduction of, at most, $16.50 per month. "However, respondent conceded to petitioner in the notice of defioiency a deduction of $$0 per month for office expenses. 'Accordingly, we sustain respondent's determination that petitioner is entitled to "(...contin ed) that computers uded at a regular,business establishment are not iisted property. Sec. 280F(d) (4) (B) providès that any portion of a dwelling unit will qualify as a "regular business establishment" odly if that portion of the dwelling satisfies the requi ements of sec. 280A(c)(1). - 42 - deduct only $600 per year for office expenses, not the $1,4200 per year he claimed on his returns . E. Other Expenses As part of petitioner's claimed "Other Expenses" on his 2005 Schedule C, he included a $1,000 expense related to assettlement with Builder's Prime Window (Builder's Prime). At some point, Builder's-Prime billed Ms. Pannepacker approximately $2,~500 for windows that petitioner and Ms. Pannepacker'testified she never purchased. Petitioner testified that the bill was related to some work he was doing as general contractor-, but that the accounting department at Builder's Prime had made an error andbilled him for windows he did not order.. Because petitioner used a bank account in Ms. Pannepacker's name to conduct his business, the bi'll from Builder's Prime was actually addressed to Ms. Pannepacker, who has never bought anything from ·Builder's