# T .C . Summary Opinion 2008-14 3

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- **Document type:** Agency decision

## Text

T .C . Summary Opinion 2008-14 3

UNITED STATES TAX COUR T

SHERMAN L . AND DAISY SPIVEY, Petitioners v .
COMMISSIONER OF INTERNAL REVENUE, Responden t

Docket No . 12198-06S .

Filed

November

13,

2008 .

Sherman L . and Daisy Spivey, pro sese .
Bradley Plovan , for respondent .

GOLDBERG,

Special Trial Judge : This case was heard pursuant

to the provisions of section 7463 of the Internal Revenue Code
(Code) in effect at the time 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 . Unless otherwise indicated ,

SERVED NOV 13 2008

i

- 2 subsequent section references are to the Internal Revenue Code in
effect for the years in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure .
On March 24, 2006, respondent mailed petitioners a notice of
deficiency with respect to their taxable years 2002, 2003, and
2004 . In that notice, respondent determined the following
deficiencies, additions to tax for late filing, and accuracyrelated penalties :

Addition to Tax

Penalty

Year

Deficiency

Sec . 6651(a)(1)

Sec . 6662(a )

2002

$11,470

$2,460 .00

$2,294 .0 0

2003

10,142

2,248 .25

2,028 .4 0

2004

7,627

289 .90

1,525 .4 0

These deficiencies resulted from respondent's disallowance
of the following expenses :

Disallowed Expense
Schedule E--Supplementa l
Income and Loss--Renta l
Real Estate
Schedule C--Profit or Los s
From Business
Schedule A--Itemize d
Deductions--Job Expense s
and Other Miscellaneou s
Deductions

2002

Taxable Year s
2003
200 4

$19,641

$21,894

$24,01 3

18,074

17,075

10,27 6

1,856

1,096

0,77 5

The Schedule A job expenses and other miscellaneous
deductions shown above comprised two categories of expenses, as
follows :

Taxable Year s
Expense Category
Unreimbursed employe e
business expenses
Tax preparation fees
Total before 2-percen t
reduction '

2002

2003

200 4

$ 11,856
35

$10,996
100

$ 10,74 5
30

11,891

11,096

10,77 5

'Sec . 67 ( a) reduces miscellaneous itemized expenses by
2 percent of adjusted gross income .
Petitioners attached Forms 2106-EZ, Unreimbursed Employee
Business Expenses , to their income tax returns for the years in
issue . The Forms 2106- EZ summarized the unreimbursed employee
business expenses that petitioners deducted on their Schedules A ,

Itemized Deductions ,

as shown below :
Taxable Year s

Business Expenses

2002

2003

200 4

Parking fees
Other business expenses
Meals and entertainmen t
expenses '

$480
4,663

$480
4,102

$48 0
4,03 6

10,328

9,868
x 65 6
6,414
10,996

.8,89 8

Multiplied by deduction rate2
Deduction for meals
Total expenses

x 65 6
6,713
11,856

x 70 0
6,22 9
10,74 5

'Petitioners included cellular phone expenses in the
meals and entertainment category .
2Sec . 274 ( n) allows a deduction for meal and
entertainment expenses at a 50 - percent rate . However, sec .
274(n)( 3) increases that rate gradually to 80 percent during
1998 to 2008 for employees who are subject to Department of
Transportation (DOT) limitations on hours of service .
Petitioners claimed the higher DOT rate .
At trial, the Court received into evidence petitioners'
exhibit entitled " Miscellaneous Statements "

that purportedly

detailed their unreimbursed employee business expenses for each

- 4 year . Petitioners offered no other documentation or records to
substantiate the amounts on the miscellaneous statements . As the
figures below show, petitioners '

calculations for meals and

cellular phone expenses in 2003 and 2004, and their calculation
of other expenses in 2003, do not agree with the amounts that
petitioners claimed on the Forms 2106-EZ attached to their tax
returns . Petitioners did not explain the differences .

Expenses per
Statements "

"Miscellaneous

Parking Fee s
($40 x 12 months )

Taxable Years
2002 2003 2004

$ 480

$480

$48 0

Meals . and Cellular Phone
Expense s
Meals
(2002 : $35 x 268 trips)
2003 : $25 x 268 trip s
2004 : $ 25 x 268 trips )
$ 9,380 $6,700 $6,700
Cellular Phon e
948 948 948
($79 x 12 months )
Total meals and cellula r
phone expenses 10,328 7 , 648 7,64 8
Other Expense s
Union dues
New uniforms

$ 1,004 $1,004 $1,014
( jackets ,

shirts, pants ,

ties, hats ,

and
sweaters)
525
527
530
Uniform maintenanc e
912 912 912
($24 x 38 weeks )
Safety shoe s
327 327 330
($109 x 3 pairs )
Safety glasse s
325 325 327
(2 pairs per year )
Groomin g
(2002 : $15 x 37 weeks)
(2003 : $20 x 37 weeks )
(2004 : $25 x 37 weeks) 555 740 925

- 5 -

Supplies (briefcase ,
security locks, laptop ,
calculators , pens )
Total other expenses

1,000
4,663

-03,835

-0 4,03 6

Petitioners brought to trial receipts and records that
supported some of the disallowed deductions . Respondent stated
that if given time to review the records and discuss the
adjustments with petitioners, the parties might reach a
settlement on many of the items . The Court agreed, the parties
met, and afterwards, the parties filed a supplemental
stipulation .
According to the supplemental stipulation, the parties
resolved all issues related to the Schedule E rental property .
They also resolved all issues regarding the Schedule C business
expenses except one : whether petitioners are entitled to deduct
depreciation on two computers they had purchased in prior years .
Petitioners had not claimed a deduction in the years at issue ;
however, at trial they asserted they were entitled to
depreciation .
Related to Schedule A job expenses, respondent allowed union
dues of $992 .92, $1,019 .19, and $1,399 .00 for 2002, 2003, and
2004, respectively, but continues to disallow deductions for the
remainder of petitioners' unreimbursed employee business expenses
for the 3 years in issue, and tax return preparation fees for
2003 and 2004 .

6 Thus, in summary, after concessions, the issues for decision
are whether petitioners are : (1) Entitled to deduct depreciation
expenses for 2002, 2003, and 2004 for two computers they
purchased in prior years for use in their Schedule C business ;
(2) entitled to deduct unreimbursed employee business expenses
for the years in issue in addition to union dues that respondent
has already conceded ; and (3) entitled to deduct tax return
preparation fees for 2003 and 2004 .
Background
Some of the facts have been stipulated and are so found .
The stipulations of facts and the attached exhibits are
incorporated herein by this reference . At the time they filed
their petition, petitioners resided in Maryland .
In 1988 petitioner wife (Ms . Spivey) started a computer
education and training business called Small Bytes . She operated
Small Bytes out of their home and provided computer instruction
to children enrolled at daycare centers and afterschool programs
near petitioners' home .
In 1999 Ms . Spivey bought a laptop computer for $1,500 from
CompUSA, Inc ., for use in her business . Ms . Spivey promptly
began using the computer for Small Bytes and continued to use the
laptop for Small Bytes during the taxable years in issue . In
2000 Ms . Spivey purchased another laptop computer for use in her
business . This one was from Best Buy, where she paid

- 7 approximately $1,900 . Again she promptly began using the
computer and continued to use it during the years in issue . Ms .
Spivey did not claim a depreciation expense on Schedule C with
respect to her business for 2002, 2003 ,

or 2004 .

During the years at issue petitioner husband

( Mr . Spivey)

served as a railroad passenger conductor' for Amtrak and Maryland
Area Regional Commuter service

( MARC )

on the Penn line .2

At the

time of the trial he had worked as a conductor for 35 years . He
started with Penn Central in 1972, and later that year, whe n

Amtrak took over Penn Central's passenger service, Mr .

Spivey

became an Amtrak employee .
In 2002 Mr .
D .C .--New York ,

Spivey worked mainly on Amtrak's Washington,
New York route .

He also worked on the entire

length of the MARC Penn line route that runs ,

with intermediate

stops, from Washington Union Station to Baltimore Penn Station
and on to Perryville Station

(Maryland ) .

During 2003 and 200 4

' The primary responsibility of a railroad conductor is to
make sure passengers have paid for their travel . A conductor may
sell, punch, or collect tickets . The number of conductors on
Amtrak and MARC trains varies depending on the number of cars
that make up the train . A supervising or senior conductor may
also be on board .
2 Under an operating agreement between MARC and Amtrak,
Amtrak provides engineers, conductors, and repair and maintenance
personnel to MARC for the Penn Line commuter trains between
Perryville, Baltimore Penn Station, Union Station, and
intermediate stations . When working on Amtrak trains personnel
wear Amtrak insignia on their uniforms, and while on MARC trains
they wear MARC insignia .

- 8 -

Mr . Spivey increased the number of his work trips on the MARC
line while decreasing his trips on Amtrak .
When Mr . Spivey was working his Amtrak schedule, his workday
would last 8 to 12 hours .3 He would begin the day by driving his
car from his residence in Maryland and parking at the Baltimore
Washington International Airport (BWI) Station . He paid $40 per
month for a parking pass . He would then take a train from the
BWI Station to Union Station in Washington, D .C ., which was his
duty station and where his workday would begin . He worked a
daily (not overnight) round trip route between Union Station and
New York Penn Station . For example, he might depart on an 8 a .m .
train from Union Station and arrive into Penn Station in New York
at approximately 11 :30 a .m . After turning in the money and
tickets he had collected to the Amtrak Penn Station office, Mr .
Spivey was released from his work duties . Since he usually
arrived near lunchtime, Mr . Spivey would often join other
conductors for lunch in one of the nearby restaurants . He did
not bring meals from home . Mr . Spivey would also spend a good
part of his time in the Amtrak employee lounge . Employees called
the lounge the "Quiet Room", though it did not have a suitable
place where employees could sleep . Mr . Spivey typically did not
engage in substantial sleep or rest during his layover in Ne w

3 To determine the total hours of "work" per day, we
excluded the number of hours for Mr . Spivey's personal commuting
time between his residence and his duty station .

- 9 York . After the layover, which lasted for sometimes 1 but
usually around 3 to 4 hours, Mr . Spivey would work on a return
train from New York to Union Station . He would then return home
by reversing his morning commute ; i .e ., he would take a train
from Union Station to BWI Station and then drive his car to
Catonsville .
When Mr . Spivey was working his MARC schedule, his workday
might last from 11 to 13 hours . He would drive from his home in
Catonsville to Baltimore Penn Station, which was his dut y
station . Parking for MARC employees was free at Baltimore Penn
Station . Mr . Spivey would typically work two round trip routes
each day (no overnight trips) . He began with a round tri p
between Baltimore Penn Station and Union Station in Washington,
D .C . After a short layover in Washington Union Station, he would
return to Baltimore, where he could have around a 2-hour layover .
At the conclusion of each leg of the trip, Mr . Spivey would turn
in the money and tickets he had collected to the local Amtrak
office, which under an agreement served as an agent for MARC .
Both Baltimore's Penn Station and Washington's Union Station had
quiet rooms for employees . Mr . Spivey did not normally sleep
during his layovers in Baltimore or Washington . In the .
afternoons Mr . Spivey would work the round trip route from
Baltimore Penn Station to Washington Union Station . On occasion
he might work on a train that was going from Union Station to the

- 10 Perryville Station, which was approximately 40 miles northeast of
Baltimore . He would then return to Baltimore Penn Station on a
MARC train . Once back in Baltimore Penn Station, he would end
his workday and commute by car to his residence in Catonsville .
To compute his meals deduction for the years at issue, Mr .
Spivey used a per diem rate of $35 for meals when working on the
Amtrak trains and a per diem of $25 when working on MARC trains .
The $35 figure represented Mr . Spivey's understanding of th e
Federal per diem allowance for meals for transportation workers .
The $25 was apparently Mr . Spivey's attempt to reduce the per
diem for the shorter time of his MARC layovers . Neither Amtrak
nor MARC reimbursed Mr . Spivey for his meals .
Amtrak and MARC each required Mr . Spivey to wear their
uniform, insignia, and emblems when working on their trains . To
accomplish this, Mr . Spivey would merely remove his Amtrak
insignia and emblems and replace them with MARC insignia and
emblems . Amtrak's uniform requirement, which also applied to
MARC employees, included a provision that employees maintain
their uniforms through professional laundering and pressing .
While Amtrak provided an allowance for uniforms, Amtrak deducted
from Mr . Spivey's pay an amount for uniform items that Mr . Spivey
decided to purchase in excess of the allowance, or any items that
he had to purchase because of loss or excessive wear .

- 11 In addition to his uniform, Amtrak required Mr . Spivey to
wear safety glasses . Amtrak contracted with a specialty vendor
who sold the glasses to rail workers at Union Station . The
glasses had safety lenses with protective shields which, when
worn, protected the entire upper half of the wearer's face . Mr .
Spivey paid $325 per year to purchase two pairs of glasses during
each year at issue .
Although neither Amtrak nor MARC required Mr . Spivey to
purchase any other supplies for his work, and they did not
require him to carry a cellular phone for business, on occasion
Mr . Spivey would purchased various items such as pens and
calculators to use in his job as a conductor . Additionally, Mr .
Spivey belonged to a union, and Amtrak deducted union dues from
his paycheck .

In the taxable years at issue, petitioners completed most of
the work involved in filling out their tax returns, however, they
hired a tax preparer to complete the returns . They paid $35 ,
$100, and $30 in tax preparation fees for 2002, 2003, and 2004,
respectively .
Discussion
In general, the Commissioner's determination set forth in a
notice of deficiency is presumed correct, and the taxpayer bears
the burden of showing that the determination is in error . Rule
142(a) ;

Welch v . Helvering , 290 U .S . 111, 115 (1933) . Deductions

- 12 are a matter of legislative grace, and the taxpayer bears the
burden of proving entitlement to any deduction claimed on a
return . See INDOPCO, Inc . v . Commissioner , 503 U .S . 79 (1992) ;
Wilson v . Commissioner , T .C . Memo . 2001-139 .
Pursuant to section 7491(a), the burden of proof as to
factual matters shifts to the Commissioner under certain
circumstances . Petitioners have neither alleged that section
7491(a) applies nor established their compliance with the
requirements of section 7491(a)(2)(A) and (B) to substantiate
items, maintain records, and cooperate fully with respondent's
reasonable requests . Petitioners therefore bear the burden of
proof . With respect to penalties and additions to tax, section
7491(c) places the burden of production on the Commissioner .
Section 162(a) allows a deduction for all ordinary and
necessary expenses incurred during the taxable year in carrying
on a trade or business . Generally, the performance of services
as an employee constitutes a trade or business .

Primuth v .

Commissioner , 54 T .C . 374, 377 (1970) . A taxpayer must maintain
records sufficient to substantiate the amounts of the deductions
claimed . Sec . 1 .6001-1(a), Income Tax Regs . For such expenses
to be deductible, the taxpayer must not have the right to obtain
reimbursement from his employer . See Orvis v . Commissioner , 788
F .2d 1406, 1408 (9th Cir . 1986), affg . T .C . Memo . 1984-533 .

- 13 If a taxpayer establishes that an expense is deductible but
is unable to substantiate the precise amount, we may estimate the
amount, bearing heavily against the taxpayer whose inexactitude
is of his own making .
544 (2d Cir .

1930 ) .

Cohan v . Commissioner ,

39 F .2d 540, 543-

The taxpayer must present sufficient

evidence for the Court to form an estimate because without such a
basis, any allowance would amount to unguided largesse .

Williams

v . United States , 245 F .2d 559 ,

Vanicek

v . Commissioner ,

560-561

( 5th Cir . 1957) ;

85 T .C . 731, 742 - 743 (1985) .

Section 274 overrides the Cohan rule with regard to certain
expenses .

Sec . 1 .274-5T ( a), Temporary Income Tax Regs ., 50 Fed .

Reg . 46014

( Nov . 6, 1985 ) .

substantiation for travel ,

Section 274 requires stricter
meals, and listed property such as

computers . Section 274 ( d) requires taxpayers to provide adequate
records or sufficient other evidence establishing the amount,
time, place ,

and business purpose of the expense to corroborate

the taxpayer ' s statements .
otherwise be deductible ,

Even if such an expense would

section 274 may still prohibit a

deduction if the taxpayer does not have sufficient
substantiation .
su ra .

Sec . 1 .274-5T ( a), Temporary Income Tax Regs . ,

- 14 For employees in the transportation industry,4 the Internal
Revenue Service (Service) publishes an annual revenue procedure
that offers a per diem exception to the above substantiation
rules for meals and incidental expenses (M&IE) . See Rev . Proc .
2002-63, sec . 4 .04, 2002-2 C .B . 691, 694 . Under the exception,
transportation industry employees may deduct their meals using
the published M&IE rate, in lieu of claiming actual expenses and
maintaining records .

Id .

For context, the rate for meal and

incidental expenses was $40 per day for the first part of 2003 .
Id .

sec .. 4 .04 (2) .

Keeping in mind these well-established principles, we now
turn to decide whether the Spiveys may deduct the disputed
business expenses .
I.

Schedule C Depreciation Expense for Computers
Following concessions reflected in the supplemental

stipulation of facts, Ms . Spivey maintains that she is entitled
to a depreciation deduction for two laptop computers she
purchased for use in her business, Small Bytes . Ms . Spivey's
laptop computers are an ordinary and necessary expense under
section 162 for her computer training business that entails
visiting clients at offsite locations .

4 The definition of transportation industries employees
relevant here includes workers who (a) directly move people by
train, and (b) who regularly travel away from home . Rev . Proc .
2002-63, sec . 4 .04(4), 2002-2 C .B . 691, 694 .

- 15 -

Section 167(a) allows as a depreciation deduction a
reasonable allowance for the exhaustion, wear, and tear of
property used in a trade or business . The purpose of the
deduction for depreciation is to allow the taxpayer to recove r
over the useful life of the property its cost or other basis .
Unites States v . Ludev , 274 U .S . 295, 300-301 (1927) .
Pursuant to section 168(a), taxpayers determine th e
depreciation deduction by using the applicable depreciation
method, applicable convention, and the applicable recovery"
period . The period for depreciation of an asset begins when the
taxpayer first places the asset into service . Sec . 1 .167(a)10(b), Income Tax Regs . Deductions for depreciation must be
taken in the year in which depreciation occurs and cannot be
recouped in subsequent years by reason of a taxpayer's failure to
deduct the depreciation allowance in prior years . Sec . 1 .167(a)10(a), Income Tax Regs . Generally, depreciation is computed-by
using the cost of the property as its basis . Secs . 167(c), 1011,
1012 ; sec . 1 .167(g)-1, Income Tax Regs .
Computers used exclusively in a trade or business are
depreciable using the Modified Accelerated Cost Recovery System
(MACRS) over a 5-year life . For such 5-year property, MACRS uses
an accelerated depreciation schedule for the first 3 years,
converting to straight-line for the last 3 years . MACRS also

- 16 -

uses a half - year convention, computing depreciation for a half
year in year 1 and a half year in year 6 .
Section 280F

( d)(4)(A) subjects computers to special

substantiation requirements of section 274 as "listed property" .
However, section 280F ( d) .(4)(B) provides an exception ,

subject to

certain requirements, for computers that taxpayers us e
exclusively in their business .

Whalley v . Commissioner , T .C .

Memo . 1996 - 533 . On the basis of Ms . Spivey ' s uncontroverted
testimony ,
service ,

and the nature of her business, a computer training

we believe that Ms . Spivey used the computers

exclusively in her business . Further, Ms . Spivey presented
credible evidence through the receipts from CompUSA ,
Best Buy to adequately substantiate her bases .

Inc ., and

See sec . 6001 .

Thus, to the extent section 168 allows depreciation expense
deductions for the laptop computers in the years at issue, we
hold that petitioners are entitled to deduct the allowable
depreciation expenses for 2002, 2003, and 2004 .

II .

Schedule A--Unreimbursed Employee Business Expense s
For unreimbursed employee business expenses ,

the initial bar

is whether the taxpayer received reimbursement or had the right
to receive reimbursement from his employer .
Commissioner ,

788 F .2d at 1408 .

Orvis v .

In other words ,

a taxpayer may

not deduct unreimbursed expenses if the employer maintains a
reimbursement plan and the employee fails to seek reimbursement

- 17 for work-related expenses .
810 (1985 ) .

Leamy v . Commissioner , 85 T .C . 798,

Mr . Spivey did not receive reimbursement and was not

eligible to receive reimbursement . We now discuss the specific
categories of Mr . Spivey ' s unreimbursed expenses .
A.

Parking Fee s

Mr . Spivey deducted $ 480 per year during 2002 - 04 to park in
a garage at the BWI Station on the days he worked for Amtrak . He
would drive from his residence ,
his commute to Washington ,

park at BWI ,

and then continue

D .C . Union Station where he reported

to work . He would reverse the commute on his way home . Mr .
Spivey claimed that he paid the parking fees by check but did not
produce any receipts or canceled checks . Thus ,

Mr . Spivey did

not satisfy the substantiation requirements of section 274 .
Moreover ,

parking fees ,

from work ,

are personal expenses and therefore are not

deductible .
473-474
B .

similar to the cost of driving to and

Sec . 262 (a) ;

( 1946 ) ;

Commissioner v . Flowers ,

326 U .S . 465,

sec . 1 .162-2 ( e), Income Tax Regs .

Meals Purchased While Away From Home

As noted above ,

Mr . Spivey was correct in that the Service

permits employees in the transportation industries to use a per
diem rate .

See Rev . Proc .

we discuss the amount ,

2002-63, sec . 4 .04 . However ,

before

we must first decide the threshold issue

of whether Mr . Spivey ' s meals qualify for a deduction .

- 18 Section 162(a)(2) allows taxpayers to deduct traveling
expenses, including meals, if the taxpayer is "away from home"
while traveling for a trade or business . The reason for Mr .
Spivey's travel was his job, which required him to work on
railroad passenger cars traveling between cities . As a result,
the sole issue is whether Mr . Spivey was "away from home" when he
purchased his meals . Overnight nonlocal business travel normally
fits easily into the definition of "away from home" . See
Williams v . Patterson , 286 F .2d 333, 335 (5th Cir . 1961) .
However., Mr . Spivey's travel was not overnight . He worked long
days compounded by a long commute, but he completed his trips
within 1 day . Section 262 prohibits deductions for personal
expenses, which include meals workers buy during a workday . Sec .
262(a) ; . Commissioner v . Flowers ,

supra at 473-474 ; sec . 1 .162-

2(e), Income Tax Regs . Therefore, the key is determining under
what circumstances taxpayers who travel away from home on
business for shorter than overnight may nonetheless deduct their
meals .
On this point, the Commissioner's position is found in Rev .
Rul . 75-170, 1975-1 C .B . 60 .5 The Service allows railroa d

5 Rev . Rul . 75-170, 1975-1 C .B . 60, updates and restates
Rev . Rul . 61-221, 1961-2 C .B . 34, which the Commissioner based on
the division in Williams v . Patterson , 286 F .2d 333, 340 (5th
Cir . 1961), where the Court of Appeals for the Fifth Circuit
concluded that the sleep or rest rule was the "correct rule" .
See Williams also for excellent histories of the development of
(continued . . .)

- 19 employees to deduct the cost of their meals when a layover
requires substantial sleep or rest because although the absence
is less than 24 hours, the employees have in effect met the "away
from home" requirement for deducting traveling expenses under
section 162(a)(2) . Rev . Rul . 75-170,

supra . Conversely, the

Service will disallow a deduction when a layover is of sufficient
time to eat but too brief to require substantial sleep or rest
because such intervals are not the equivalent of traveling away
from home .

Id .

These principles are known as the "sleep or rest

rule" .
In United States v . Correll , 389 U .S . 299, 302-303 (1967),
the Supreme Court determined that the Commissioner's sleep or
rest rule detailed in Rev . Rul . 61-221, 1961-2 C .B . 34, provided
substantial fairness and objectivity and avoided wasteful
litigation, in part by placing 1-day travelers on a footing
similar to that of intracity travelers and commuters who do not
have the advantage of a business expense deduction to help pay
for their meals . The Court noted that when Treasury regulations
and interpretations continue substantially unchanged for a long
time, such as this one, the rules take on the imprimatur of
congressional approval and therefore have the effect of law .

Id .

at 305-306 . The Court concluded that while one could imagin e

5( . . .continued)
the statutory "away from home" requirement and the Commissioner's
"sleep or rest rule" .

- 20 improvements to the rule, the courts are not responsible for
perfecting tax administration .

Id .

at 306-307 . Rather, Congress

delegated that authority to the Commissioner .

Id .

at 307 . The

proper role of the judiciary is to determine whether a regulation
falls within the congressional mandate, which the Court found
this rule did .

Id .

In the 40 years since that opinion, the judiciary has not
changed its approval of the Commissioner's rule, Congress has not
amended the statute, and the Commissioner has not altered his
stance . Accordingly, we find that the Commissioner's "sleep or,
rest rule" is a legitimate promulgation that governs Mr . Spivey's
situation .
This Court has held that a railroad employee who claimed
meal deductions on facts similar to Mr . Spivey's circumstances
was not entitled to the deductions .

Stevens v . Commissioner ,

T .C . Memo . 1985-16 . In Stevens , the taxpayer worked as a
railroad engineer on two separate round trip schedules . On the
first schedule ; Mr . Stevens worked one round trip that required a
13 .5-hour workday including an 8-hour layover . His second
schedule necessitated two round trips between the same two cities
as his one round trip . The two round trips aggregated to an
11 .3-hour workday, which included various layovers, the longest
being 2 .3 hours . Regarding the first schedule, we found that the
8-hour layover was due to the combination of the railroad's

- 21 business schedule and Federal regulations and not due to any need
for substantial sleep or rest . Regarding the more arduous two-aday round trips, we likewise found that the schedule did not
require substantial sleep or rest and that in actuality Mr .
Stevens did not engage in substantial sleep or rest . We
concluded that both of Mr . Stevens's work schedules were in
effect no different than those of many other workers whose jobs
require long hours but whose meals remain personal expenses .
Addressing Mr . Spivey's facts, we find that Mr . Spivey also
worked two separate schedules : One with Amtrak that required one
round trip for the day and the other with MARC that usually
required two round trips . The Amtrak route encompassed a 3-1/2to 4-hour run from Washington, D .C ., to New York Penn Station, a
sometimes 1-hour but more typically a 3- to 4-hour layover,
followed by a 3-1/2- to 4-hour return run to Washington, D .C .
Mr . Spivey did not claim that he rested, and we find that his
workday did not require substantial sleep or rest .
Even though Mr . Stevens worked a longer day than Mr . Spivey,
and as a railroad engineer Mr . Stevens had greater public safety
responsibilities, we still found that Mr . Stevens's long day was
a result of the railroad company's scheduling convenience and not
of Mr . Stevens's need for substantial sleep or rest . Likewise,
or even more so, we find that Mr . Spivey's workday was not so
long or arduous and did not involve public safety to an extent

22 that required substantial sleep or rest . Additionally, the fact
that Mr . Spivey did not engage in substantial sleep or rest is
significant, as is the fact that on some days, he was able to
complete the return trip with only a 1-hour layover in New York .
Thus, we find Mr . Spivey's layover was for his employer's
scheduling convenience and not for Mr . Spivey's needs . His meals
are clearly personal expenses and not deductible meals purchased
when traveling away from home on business . Further, Mr . Spivey's
facts closely match the hypothetical in United States v . Correll ,
supra at 304-305, where the Court noted the "obvious" inequity of
permitting a taxpayer to deduct the cost of his lunch simply by
making a quick trip from New York to Washington and returning in
time for dinner . In summary, regarding Mr . Spivey's employment
with Amtrak, we find that he did not satisfy the sleep or rest
rule, and therefore, we hold that he is not entitled to deduct
his meal expenses when he traveled for Amtrak because he does not
satisfy the away from home requirement of section 162(a)(2) .
Regarding Mr . Spivey's meal expenses during his two-a-day
round trips for MARC, we also find that he did not satisfy the
sleep or rest rule . For MARC, Mr . Spivey's main layover was at
Baltimore Penn Station and the layover lasted for at most 2-1/2
hours . In Stevens v . Commissioner ,

supra , Mr . Stevens, similar

to Mr . Spivey, also had a separate two-a-day round trip schedule .
Even though we found that the two-a-day schedule was more arduous

- 23 than a one - a-day schedule ,
layovers ,

we still found that Mr . Stevens'

the longest being 2 .3 hours, were too brief to allow

substantial sleep or rest .

Ultimately, we concluded that the

breaks were not more than a "mere pause "
work routine .

Likewise for Mr . Spivey ;

in the engineer ' s daily
his MARC trip layovers

were too brief and did not require substantial sleep or rest and
he did not engage in substantial sleep or rest .
conclude for MARC, similar to Amtrak ,

Thus, we

that Mr . Spivey ' s travel

did not satisfy the sleep or rest rule .

Consequently, he was not

away from home for purposes of section 162(a )( 2) and therefore
may not deduct his meal expenses .
C.

Cellular Phone Expense s

In certain circumstances, the taxpayer must meet specific
substantiation requirements in addition to section 162 . See sec .
274 . Section 274(d )

applies to the use of

" listed property" as

defined in section 280F ( d), which includes cellular phones . To
deduct these types of expenses ,

the taxpayer must provide

evidence that, through adequate records, corroborates the
taxpayer ' s testimony as to :
use ; and

( 1) The amount of the expenditure or

( 2) the business relationship of the taxpayer to each

expenditure or use . Sec .

274(d) .

To satisfy the adequate records requirement of section 274,
a ,taxpayer must maintain records and documentary evidence that in
combination are sufficient to establish each element of an

- 24 expenditure or use . Sec . 1 .274-5T(c)(2), Temporary Income Tax
Regs ., 50 Fed . Reg . 46017 (Nov . 6, 1985) . Although a
contemporaneous log is not required, corroborative evidence to
support a taxpayer's reconstruction "of the elements * * * of the
expenditure or use must have a high degree of probative value to
elevate such statement" to the level of credibility of a
contemporaneous record . Sec . 1 .274-5T(c)(1), Temporary Income
Tax Regs ., 50 Fed . Reg . 46016 (Nov . 6, 1985) .

Mr . Spivey testified that he deducted his entire cell phone
bill, $79 per month, as a business expense .' He provided no
records or receipts showing actual expenses to support these
cellular phone expenses . Since Mr . Spivey failed to meet the
strict substantiation requirements of section 274(d) with respec t
to his cellular phone, we sustain respondent's disallowance in
full regarding the cellular phone expenses for the years in
issue .
D.

Other Business Expense s

With respect to the remaining unreimbursed employee business
expenses at issue, we discuss their deductibility below .
(1) New Uniforms - Taxpayers may deduct expenses for
articles of clothing under section 162(a) only if the clothing is
required in the taxpayer's employment, is not suitable fo r

6 Petitioners included Mr . Spivey's cellular phone expenses
for all years as "other unreimbursed employee business expenses" .

- 25 general or personal wear, and is not worn for general or personal
purposes .

Yeomans v . Commissioner , 30 T .C . 757, 767-768 (1958) .

On his tax returns, Mr . Spivey claimed deductions of $525, $527,
and $530 for new uniforms that he purchased in 2002, 2003, and
2004, respectively . However, Mr . Spivey did not provide support
for those amounts, and at trial he testified that he actually
spent $93, $139, and $369 .99 on purchasing new uniforms in 2002,
2003, and 2004, respectively . We find that the-uniforms (Amtrak
shirts, jackets, and pants) were not suitable for general wear,
and were "directly connected with or pertaining to the taxpayer's
trade or business" . Sec . 1 .162-1(a), Income Tax Regs .
Accordingly, we hold that petitioners are entitled to business
expense deductions for Mr . Spivey's new uniforms of $93, $139,
and $369 .99 for 2002, 2003, and 2004, respectively .
(2) Uniform Maintenance - Petitioners multiplied $24
per week times 38 weeks to arrive at a deduction of $912 for
uniform maintenance for each year at issue . However, petitioners
did not testify or provide receipts to substantiate the cost or
frequency of professional cleaning . We find that Amtrak required
such maintenance, but the unsubstantiated amounts that
petitioners claimed seem overstated . Since the record is silent
regarding the amounts of these expenses, we allow petitioners,
under Cohan v . Commissioner , 39 F .2d at 543-544, a deduction of
$10 per week multiplied by 38 weeks per year to arrive at a

- 26 deduction for uniform maintenance of $380 for each year, 2002,
2003, and 2004 .
(3) Safety Shoes - The record is devoid of evidence
that Mr . Spivey's employment required safety shoes, that the
shoes were not suitable for general or personal wear, and that he
did not wear the shoes for general or personal purposes .
Although Mr . Spivey testified that his shoes permitted him to
"feel the ballast (the stones on train tracks between the ties]"
during a stop, Mr . Spivey provided no evidence that he was, in
fact, required to wear a specific type of shoe in his work .
Under cross-examination, Mr . Spivey stated that the shoes were
not steel toe and were not resistant to chemicals . We conclude
that petitioners are not entitled to a deduction for Mr . Spivey's
safety shoes for 2002, 2003, or 2004 .
(4) Safety Glasses - On the basis of Mr . Spivey's
thorough description of the uniqueness of the glasses and the
fact that Amtrak-MARC required him to use them, we conclude that
these expenses were necessary, appropriate, and helpful to his
business .

Welch v . Helvering , 290 U .S . at 113 . Mr . Spivey's

testimony as to the cost and quantity of glasses he purchased was
also credible . Thus, under Cohan , we permit petitioners to
deduct the expense of purchasing two pairs per year, for a total
annual cost of $325 for years 2002, 2003, and 2004 .

- 27 (5) Grooming - The Court has long held that grooming
expenses are inherently personal and are nondeductible .

Drake v .

Commissioner , 52 T .C . 842, 844 (1969) . We are unconvinced that
Mr . Spivey's particular grooming regime was "directly connected
with or pertaining to the taxpayer's trade or business" . Sec .
1 .162-1(a), Income Tax Regs . We acknowledge that his employment
required him to maintain a general level of proper grooming ;
however, we do not find any element of this requirement to be so
extraordinary as to permit Mr . Spivey to deduct grooming as an
ordinary or necessary trade or business expense . Accordingly, we
sustain respondent's disallowance in full regarding Mr . Spivey's
claimed grooming expenses .
(6) Supplies - Petitioners claimed a $1,000 deduction
for supplies Mr . Spivey purchased in 2002 . Petitioners'
supporting schedule noted that Mr . Spivey's 2002 supplies
purportedly included expenses for a laptop computer, which ;
during testimony, Mr . Spivey acknowledged was a mistake .
Removing the computer, and relying on Cohan , we find $100 is a
reasonable estimate of the other supplies Mr . Spivey purchased
during 2002 .
III .

Tax Return Preparation Fee s
Section 212(3) permits a deduction for expenses paid "in

connection with the determination, collection, or refund of any
tax ." Thus, payments by taxpayers for preparation of their

- 28 returns are deductible . Sec . 1 .212-1(1), Income Tax Regs .
Petitioners claimed on their returns and testified
uncontrovertedly that they paid a preparer $35, $100, and $30 to
assist with their returns for 2002, 2003, and 2004 . A preparer's
name was printed on the returns for those years, and we find it
unlikely that a preparer would list a deduction for tax
preparation fees that petitioners did not pay . Moreover,
respondent allowed the deduction for 2002 and appears to have
disallowed it for 2003 and 2004 only by mistake . We therefore
hold that petitioners may deduct the disputed tax return
preparation fees for 2003 and 2004 .
IV .

Accuracy-Related Penalty and Addition to Tax for Late Filing
As a final comment we note that respondent determined that

for each year at issue, 2002, 2003, and 2004, petitioners are
liable for an accuracy-related penalty under section 6662(a) and
an addition to tax under section 6651(a)(1) for late filing .
Although the Commissioner bears the burden of production with
respect to a penalty or an addition to tax, in this case
petitioners failed to raise the penalties or the additions as
issues in their petition, or at trial . See sec . 7491(c) ;
v . Commissioner , 116 T .C . 438, 446-447 (2001) .
thereby deemed conceded . See Rule 34(b)(4) ;
Commissioner , 118 T .C . 358 (2002) .

Higbee

These issues are

Swain v .

- 29 -

To reflect our disposition of the issues ,

Decision will be entered
under Rule 155 .

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Atax-court%3Ac92237a7f579bec3. Public record. Not legal advice.