T.C. Memo. 2007-63



                       UNITED STATES TAX COURT



                OSCAR R. CONTRERAS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7901-05.               Filed March 19, 2007.



     Oscar R. Contreras, pro se.

     William F. Castor, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     CHIECHI, Judge:    Respondent determined a deficiency of

$11,837 in petitioner’s Federal income tax for his taxable year

2001.1



     1
      All section references are to the Internal Revenue Code in
effect for the year at issue. All Rule references are to the Tax
Court Rules of Practice and Procedure.
                                - 2 -

     The issues remaining for decision2 are:

     (1) Is petitioner entitled to deduct certain claimed amounts

as unreimbursed employee expenses?      We hold that he is not.

     (2) Is petitioner entitled to a claimed Schedule C net loss

with respect to a claimed restaurant business?      We hold that he

is not.

     (3) Is petitioner entitled to a claimed Schedule C net loss

with respect to a claimed personal digital assistant consulting

business?    We hold that he is not.

                          FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

     At the time petitioner filed the petition in this case, he

resided in Dallas, Texas.

     During 2001, FedEx Worldwide Services, one of the FedEx

companies, employed petitioner full time as a worldwide account

manager.    Pursuant to certain policies (FedEx policies),3 FedEx

Worldwide Services agreed to reimburse employees for reasonable



     2
      On brief, petitioner lists as an issue: “Allowance of
ordinary losses from the sale of vehicles used in a trade or
business or held as income producing property.” However, peti-
tioner states on brief: “With regard to the loss on the sale of
the vehicles, although petitioner believes that a minimal loss
should be allowed, he will not challenge the findings of the
respondent on that specific issue.” We conclude that petitioner
has abandoned the issue of whether he is entitled to deduct as
losses under sec. 1231(a)(2) certain claimed losses from the sale
of certain vehicles.
     3
      The FedEx policies applied to FedEx Worldwide Services and
at least one other FedEx company (viz., FedEx Express).
                                 - 3 -

expenses, as described in those policies, incurred for authorized

business activity (allowable reasonable expenses).       The allowable

reasonable expenses included:     Air transportation paid by the

employee, hotel/lodging, ground transportation, employee meals,

and business meals/entertainment.        With respect to allowable

reasonable expenses for ground transportation, the FedEx policies

used the prevailing Internal Revenue Service (IRS) mileage rate

(IRS standard mileage rate) as the basis for reimbursing employ-

ees who used their personal vehicles for authorized business

activity.4    The FedEx policies required management approval for

all reimbursements for allowable reasonable expenses.

     In order to be reimbursed under the FedEx policies, FedEx

Worldwide Services required employees, inter alia, to provide

receipts, as follows:

     Original receipts are required for all travel and
     entertainment expenses of $10 or more. An original
     receipt is documentation prepared and given by the
     service provider. Receipts must include the date and
     dollar amount of the provided service. Receipts are
     subject to the following rules:

         •   Original credit card receipts should be used to sub-
             stantiate expenses. Where credit card receipts are not
             available, a receipt prepared by the provider is suffi-
             cient if it bears the provider’s name, date, and ex-
             pense amount.

         •   Receipts must not be altered.    (Tips must be noted


     4
      Under the FedEx policies, employees did not receive reim-
bursement for gasoline expenses for personal vehicles used for
authorized business activity or for mileage, parking fees, and
tolls incurred in commuting to and from work.
                                - 4 -

            separately on the receipt.)

      •     Receipts completed by an employee will not be reim-
            bursed and are subject to investigation for possible
            falsification of Company records.

      •     Expense reports that are supported with copies of
            receipts (instead of originals) must be accompanied by
            a statement explaining why original receipts are not
            available and that the employee has not previously
            sought reimbursement for these expenses. This state-
            ment must be signed by the employee and his manager and
            attached to the expense report.

     Employees must keep copies of all receipts and documenta-
     tion.

     The FedEx policies allowed employees to request exceptions

to such policies, as follows:

     Requests for exceptions to any part of this policy must
     be submitted by the responsible officer (vice presi-
     dent/senior vice president) with his endorsement.
     Supporting documentation must describe the circum-
     stances, financial impact to the employee, any perfor-
     mance improvement actions taken, and other relevant or
     mitigating factors. Final approval is solely at the
     discretion of the vice president/controller.

     The FedEx policies authorized operating management to impose

stricter limits and guidelines than those prescribed in such

policies.

     At certain times during 2001, the year at issue, the senior

management of FedEx imposed so-called travel freezes because of

budgetary concerns, about which it informed employees through

corporate-wide e-mails.    During such travel freezes, allowable

reasonable expenses described in the FedEx policies were gener-

ally not reimbursable.    However, if a vice president approved
                              - 5 -

such expenses, they were reimbursable.

     During January 1 through May 22, 2001, pursuant to the FedEx

policies, petitioner received reimbursements from FedEx Express

for certain allowable reasonable expenses that he paid.5   During

June 21 through December 7, 2001, pursuant to the FedEx policies,

petitioner received reimbursements from FedEx Worldwide Services

for certain allowable reasonable expenses that he paid.

     During certain unidentified travel freezes in 2001, peti-

tioner paid certain unidentified expenses as a FedEx Worldwide

Services employee for which he did not submit any requests for

reimbursement and for which he made no attempt to obtain the

approval of a vice president authorizing reimbursement of such

expenses.

     In addition to working full time during the year at issue

for FedEx Worldwide Services, on April 4, 2001, petitioner sent

an e-mail addressed to Donna Dubinsky (Ms. Dubinsky), the chief

executive officer of Handspring, a manufacturer of a device known

as a personal digital assistant (Handspring’s PDA).   In that e-

mail, petitioner renewed the offer that he had made in two e-

mails addressed to Ms. Dubinsky that he had sent on November 20,


     5
      The record does not disclose why FedEx Express, rather than
petitioner’s employer FedEx Worldwide Services, reimbursed
petitioner for certain allowable reasonable expenses that he paid
during the year at issue. We presume that FedEx Worldwide
Services permitted petitioner to work on a project for FedEx
Express during that year and that FedEx Express reimbursed him
for the allowable reasonable expenses relating to that project
that he paid.
                               - 6 -

2000, to manage the development, marketing, and sale of business

applications for Handspring’s PDA.

     Petitioner timely filed Form 1040, U.S. Individual Income

Tax Return, for his taxable year 2001 (2001 return).   In Schedule

A-Itemized Deductions included as part of that return (2001

Schedule A), petitioner claimed, inter alia, $24,373 of “Job

Expenses and Most Other Miscellaneous Deductions” (job expenses)

prior to the application of the two-percent floor imposed by

section 67(a).   Those claimed job expenses consisted solely of

“Unreimbursed employee expenses”.

     Petitioner, as required, completed Form 2106, Employee

Business Expenses (2001 Form 2106), with respect to the claimed

unreimbursed employee expenses and included that form as part of

his 2001 return.   In the 2001 Form 2106, petitioner claimed the

following “Unreimbursed employee expenses”:
                              - 7 -

                        Expense       Amount
                                      1
                    Vehicle            $2,898
                    Transportation2      1,150
                    Travel3              7,875
                    Business4            9,618
                                       5
                    Meals                2,832

     1
       Petitioner calculated the $2,898 of claimed vehicle ex-
penses by using the prevailing IRS standard mileage rate for 2001
of 34.5 cents per mile and multiplying that rate by 8,400, the
number of miles that petitioner claims he drove two automobiles
(viz., a 1999 Mercedes Benz SLK 230 (Mercedes) and a 2001 Volvo
C70cv (Volvo)) for business (business miles) during that year.
     2
       In the 2001 Form 2106, the expense category “Transporta-
tion” covered “Parking fees, tolls, and transportation, including
train, bus, etc. that did not involve overnight travel or commut-
ing to and from work.” Petitioner did not specify in the 2001
Form 2106 the type(s) of transportation expenses that he was
claiming.
     3
       In the 2001 Form 2106, the expense category “Travel” cov-
ered “Travel expense while away from home overnight, including
lodging, airplane, car rental, etc.”, but not expenses for meals
or entertainment. Petitioner did not specify in the 2001 Form
2106 the type(s) of travel expenses that he was claiming.
     4
       In the 2001 Form 2106, the expense category “Business”
covered business expenses not included in the expense categories
“Vehicle”, “Transportation” and “Travel”. Petitioner did not
specify in the 2001 Form 2106 the type(s) of business expenses
that he was claiming.
     5
       In calculating the $2,832 of claimed meal expenses, peti-
tioner claimed in the 2001 Form 2106 total meal expenses of
$5,664 and reduced that total by 50 percent, as required by sec.
274(n).

     As required by section 67(a), petitioner reduced the $24,373

of job expenses claimed in the 2001 Schedule A by two percent of

his adjusted gross income (i.e., by $1,055).     In determining the

taxable income reported in petitioner’s 2001 return, petitioner

deducted the balance (i.e., $23,318), as well as the other

itemized deductions claimed in the 2001 Schedule A that were not

subject to the two-percent floor imposed by section 67(a).
                               - 8 -

     Petitioner included two Schedules C, Profit or Loss from

Business (Schedule C), as part of his 2001 return.    In one of

those schedules, petitioner showed his “Principal Business or

Profession, Including Product or Service” as “Mexican Restau-

rant”.   (We shall refer to that Schedule C as the restaurant

Schedule C.)   In the restaurant Schedule C, petitioner showed no

income and claimed total expenses and a net loss of $2,060.      The

total expenses claimed in the restaurant Schedule C consisted of

travel expenses of $1,700 and meal and entertainment expenses of

$360.

     In the second Schedule C included as part of petitioner’s

2001 return, petitioner showed his “Principal Business or Profes-

sion, Including Product or Service” as “PDA Consulting”.    (We

shall refer to that Schedule C as the PDA consulting Schedule C.)

In the PDA consulting Schedule C, petitioner showed no income and

claimed total expenses and a net loss of $15,186.    The total

expenses claimed in the PDA consulting Schedule C consisted of

car and truck expenses of $2,860, depreciation and section 179

expense deduction of $1,407, travel expenses of $1,800, meal and

entertainment expenses of $225, and other expenses of $8,894 for

“Contractor/supervisor” services.

     In determining the taxable income reported in petitioner’s

2001 return, petitioner deducted the total (i.e., $17,246) of the

respective net losses that petitioner claimed in the restaurant
                               - 9 -

Schedule C and the PDA consulting Schedule C.

     Respondent issued to petitioner a notice of deficiency

(notice) for his taxable year 2001.     In that notice, respondent

disallowed, inter alia, the $23,318 of job expenses that peti-

tioner claimed as a deduction in the 2001 Schedule A after the

reduction required by section 67(a), the $2,060 net loss that

petitioner claimed in the restaurant Schedule C, and the $15,186

net loss that petitioner claimed in the PDA consulting Schedule

C.

                              OPINION

     Petitioner bears the burden of proving that the determina-

tions in the notice are erroneous.6     Rule 142(a); Welch v.

Helvering, 

, 115 (1933).     Moreover, deductions are a

matter of legislative grace, and petitioner bears the burden of

proving entitlement to any deduction claimed.     INDOPCO, Inc. v.

Commissioner, 

, 84 (1992).     Petitioner was required to

maintain records sufficient to establish the amount of any

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

     Before turning to the issues presented, we shall summarize

certain principles applicable to those issues and evaluate

certain evidence on which petitioner relies.




     6
      Petitioner does not claim that the burden of proof shifts
to respondent under sec. 7491(a). We conclude that the burden of
proof does not shift to respondent under sec. 7491(a).
                             - 10 -

Certain Principles Applicable to the Issues Presented

     A taxpayer is entitled to deduct all the ordinary and

necessary expenses paid or incurred during the taxable year in

carrying on a trade or business.   Sec. 162(a).

     For certain kinds of expenses otherwise deductible under

section 162(a), such as business expenses while traveling away

from home, business expenses with respect to an activity that is

of a type generally considered to constitute entertainment, and

business expenses relating to “listed property”, as defined in

section 280F(d)(4),7 a taxpayer must satisfy certain substantia-

tion requirements set forth in section 274(d) before such ex-

penses will be allowed as deductions.

     In order for any of petitioner’s claimed expenses relating

to the use of his automobiles, for travel, for meals, and for

entertainment to be deductible, such expenses must satisfy the

requirements of not only section 162(a) but also section 274(d).

To the extent that petitioner carries his burden of showing that

such claimed expenses satisfy the requirements of section 162(a)

but fails to satisfy his burden of showing that such expenses

satisfy the recordkeeping requirements of section 274(d), peti-

tioner will have failed to carry his burden of establishing that

he is entitled to deduct such expenses, regardless of any equi-


     7
      As pertinent here, the term “listed property” is defined in
sec. 280F(d)(4)(A)(i) to include any passenger automobile, unless
excepted by sec. 280F(d)(5)(B).
                               - 11 -

ties involved.    See sec. 274(d); sec. 1.274-5T(a), Temporary

Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6, 1985).

       The recordkeeping requirements of section 274(d) will

preclude petitioner from deducting expenditures otherwise allow-

able under section 162(a)(2) relating to the use of his automo-

bile, for travel, for meals, and for entertainment unless he

substantiates the requisite elements of each such expenditure or

use.    See sec. 274(d); sec. 1.274-5T(b)(1), Temporary Income Tax

Regs., 50 Fed. Reg. 46014 (Nov. 6, 1985).    A taxpayer is required

to

       substantiate each element of an expenditure or use
       * * * by adequate records or by sufficient evidence
       corroborating his own statement. Section 274(d) con-
       templates that a taxpayer will maintain and produce
       such substantiation as will constitute proof of each
       expenditure or use referred to in section 274. Written
       evidence has considerably more probative value than
       oral evidence alone. In addition, the probative value
       of written evidence is greater the closer in time it
       relates to the expenditure or use. A contemporaneous
       log is not required, but a record of the elements of an
       expenditure or of a business use of listed property
       made at or near the time of the expenditure or use,
       supported by sufficient documentary evidence, has a
       high degree of credibility not present with respect to
       a statement prepared subsequent thereto when generally
       there is a lack of accurate recall. Thus, the corrobo-
       rative evidence required to support a statement not
       made at or near the time of the expenditure or use must
       have a high degree of probative value to elevate such
       statement and evidence to the level of credibility
       reflected by a record made at or near the time of the
       expenditure or use supported by sufficient documentary
       evidence. The substantiation requirements of section
       274(d) are designed to encourage taxpayers to maintain
       the records, together with documentary evidence, as
       provided in paragraph (c)(2) of this section [1.274-5T,
       Temporary Income Tax Regs.].
                               - 12 -

Sec. 1.274-5T(c)(1), Temporary Income Tax Regs., 50 Fed. Reg.

46016-46017 (Nov. 6, 1985).

     The elements that a taxpayer must prove with respect to any

listed property are:   (1)(a) The amount of each separate expendi-

ture with respect to such property and (b) the amount of each

business use based on the appropriate measure, e.g., mileage for

automobiles, of such property; (2) the time, i.e., the date of

the expenditure or use with respect to any such property; and

(3) the business purpose for an expenditure or use with respect

to such property.   Sec. 1.274-5T(b)(6), Temporary Income Tax

Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985).

     The elements that a taxpayer must prove with respect to an

expenditure for traveling away from home on business, including

expenditures relating to the use of such taxpayer’s automobile,

and for meals, are:    (1) The amount of each such expenditure for

traveling away from home, except that the daily cost of the

traveler’s own breakfast, lunch, and dinner may be aggregated;

(2) the time of each such expenditure, i.e., the dates of depar-

ture and return for each trip away from home and the number of

days away from home spent on business; (3) the place of each such

expenditure, i.e., the destination or locality of travel, de-

scribed by name of city or town or other similar designation; and

(4) the business purpose of each such expenditure, i.e., the

business reason for the travel or the nature of the business
                              - 13 -

benefit derived or expected to be derived as a result of travel.

Sec. 1.274-5T(b)(2), Temporary Income Tax Regs., 50 Fed. Reg.

46014-46015 (Nov. 6, 1985).

     The elements that a taxpayer must prove with respect to an

expenditure for entertainment are:     (1) The amount of each such

expenditure for entertainment, except that incidental items such

as taxi fares or telephone calls may be aggregated on a daily

basis; (2) the time of each such expenditure, i.e., the date of

the entertainment; (3) the place of each such expenditure, i.e.,

the name, if any, the address or location, and, if not apparent

from the designation of the place, the designation of the type of

entertainment, such as dinner or theater; (4) the business

purpose of each such expenditure, i.e., the business reason for

the entertainment or the nature of business benefit derived or

expected to be derived as a result of the entertainment and,

except in the case of business meals described in section

274(e)(1), the nature of any business discussions or activity;8


     8
      If a taxpayer claims a deduction for entertainment directly
preceding or following a substantial and bona fide business
discussion on the ground that such entertainment was associated
with the active conduct of the taxpayer’s trade or business, the
taxpayer is not required to establish the fourth element set
forth above that is otherwise required with respect to a deduc-
tion for entertainment. Instead, the taxpayer must establish the
following: (1) The date and the duration of the business discus-
sion; (2) the place of the business discussion; (3) the nature of
the business discussion and the business reason for the enter-
tainment or the nature of the business benefit derived or ex-
pected to be derived as the result of the entertainment; and
(4) the identification of the persons entertained who partici-
                                                   (continued...)
                               - 14 -

and (5) the business relationship, i.e., the occupation or other

information relating to the person or persons entertained,

including name, title, or other designation, sufficient to

establish the business relationship to the taxpayer.      See sec.

1.274-5T(b)(3), Temporary Income Tax Regs., 50 Fed. Reg. 46015

(Nov. 6, 1985).

     In lieu of substantiating the actual amount of any expendi-

ture relating to the business use of a passenger automobile, a

taxpayer may use the applicable IRS standard mileage rate.         See

sec. 1.274-5(j)(2), Income Tax Regs.; Rev. Proc. 2000-48, sec.

5.02, 2000-2 C.B. 570, 571 (applicable to Jan. 1 through Dec. 31,

2001).   The IRS standard mileage rate is to be multiplied by the

number of business miles traveled.      Rev. Proc. 2000-48, sec.

5.02, 2000-2 C.B. at 571.    The use of the IRS standard mileage

rate establishes only the amount deemed expended with respect to

the business use of a passenger automobile.      Sec. 1.274-5(j)(2),

Income Tax Regs.    The taxpayer must still establish the amount

(i.e., the business mileage), the time, and the business purpose

of each such use.

substantiating the actual amount spent for a meal

while traveling away from home on business, a taxpayer may use an

amount computed at the applicable Federal meal and incidental


     8
      (...continued)
pated in the business discussion. See sec. 1.274-5T(b)(4),
Temporary Income Tax Regs., 50 Fed. Reg. 46015-46016 (Nov. 6,
1985).
                                - 15 -

expense (M&IE) rate set forth in appendix A of 41 C.F.R. chapter

301 for the locality of travel for each calendar day that the

taxpayer is traveling away from home on business.    See sec.

1.274-5(j)(1), Income Tax Regs.; Rev. Proc. 2000-39, secs.

3.02(1)(a), 4.03, 2000-2 C.B. 340, 341-342 (applicable to, inter

alia, Jan. 1 through Sept. 30, 2001); Rev. Proc. 2001-47, secs.

3.02(1)(a), 4.03, 2001-2 C.B. 332, 333-334 (applicable to, inter

alia, Oct. 1 through Dec. 31, 2001).     The use of the M&IE estab-

lishes only the daily amount deemed spent for meals while travel-

ing away from home on business.    Sec. 1.274-5(j)(1), Income Tax

Regs.     The taxpayer must still establish the time, the place, and

the business purpose of the daily expenditures for meals.

Evidence on Which Petitioner Relies

        Petitioner relies principally on certain credit card state-

ments, two theater ticket stubs, and his testimony.    The credit

card statements on which petitioner relies consist of ten monthly

statements for a Bank of America Visa card covering December 12,

2000, through October 11, 2001, and December 12, 2001, through

January 11, 2002; six monthly statements for a Discover platinum

card covering December 18, 2000, through February 19, 2001, and

July 20 through November 26, 2001; two monthly statements for a

First USA Visa card covering the periods August 22 through

September 21, 2001, and October 23 through November 20, 2001; a

monthly statement for a First Horizon Visa card covering the
                              - 16 -

period February 5 through March 5, 2001; two monthly statements

for a First Tennessee Bank Visa card covering the period March 5

through May 7, 2001; and two monthly statements for a MBNA

America Visa card covering the periods May 8 through June 7,

2001, and November 8 through December 7, 2001.     (We shall refer

collectively to all of the above-described statements as peti-

tioner’s credit card statements.)

     Petitioner did not testify about any of petitioner’s credit

card statements.   Petitioner does not indicate on brief, and we

have no way of knowing, whether he is claiming all of the ex-

penses shown in those statements.9     There is no notation on any

of petitioner’s credit card statements indicating which, if any,

of the expenses listed in those statements petitioner is claiming

here.10

     On the instant record, we have no way of knowing (1) which,

if any, of the expenses listed in petitioner’s credit card

statements petitioner is claiming in this case or (2) the issue

presented to which any such expense pertains.     In addition,


     9
      We note that the total amount of expenses shown in peti-
tioner’s credit card statements exceeds the total amount of
expenses that petitioner claimed in petitioner’s Form 2106,
restaurant Schedule C, and PDA consulting Schedule C.
     10
      Several of petitioner’s credit card statements have a
notation adjacent to each of the expenses listed, such as a tick
mark, a check mark, or an underlining or circling of an amount.
We presume that petitioner made those notations as he was review-
ing those several statements in order to note that he had veri-
fied the accuracy of each expense listed in those statements.
                              - 17 -

petitioner’s credit card statements show only the date and the

amount of each expense listed in those statements and the name of

the company or establishment at which each such expense was

incurred.   Neither petitioner’s credit card statements nor any

other evidence in the record establishes the reason why peti-

tioner paid any of the expenses listed in those statements.    We

shall not rely on petitioner’s credit card statements to estab-

lish petitioner’s position with respect to any of the expenses

that he is claiming in this case.

     The two theater ticket stubs (petitioner’s ticket stubs) on

which petitioner relies show that the price of admission of each

ticket was $18.   Petitioner did not testify about those ticket

stubs.   Petitioner does not indicate on brief, and we have no way

of knowing, the issue presented to which they pertain.    In

addition, neither petitioner’s ticket stubs nor any other evi-

dence in the record establishes that it was petitioner who paid

for the theater tickets to which those ticket stubs relate.    Nor

do petitioner’s ticket stubs or any other evidence in the record

establish the reason why the theater tickets to which those stubs

relate were purchased.   We shall not rely on petitioner’s ticket

stubs to establish petitioner’s position with respect to any of

the expenses that he is claiming in this case.

     Petitioner’s testimony on which he relies was vague, gen-

eral, and/or conclusory in certain material respects.    We shall
                              - 18 -

not rely on petitioner’s testimony to establish his position with

respect to any of the expenses that he is claiming in this case.

Claimed Unreimbursed Employee Expenses

     A taxpayer is entitled to deduct under section 162(a)

unreimbursed employee expenses only to the extent that the

taxpayer demonstrates that such taxpayer could not have been

reimbursed for such expenses by such taxpayer’s employer.     Podems

v. Commissioner, 

, 23 (1955).11

     Petitioner contends that the unreimbursed employee expenses

at issue could not have been reimbursed because he incurred them

during travel freezes in 2001 and no company vice president

approved them.   Respondent disagrees.

     We have found that petitioner did not submit any requests

for reimbursement of employee expenses that he paid during

certain unidentified travel freezes in the year at issue and that

he made no attempt to obtain the approval of a vice president

authorizing reimbursement of any such expenses.   On the instant

record, we find that petitioner has failed to carry his burden of

showing that a company vice president would not have approved any

employee expenses which he paid during such travel freezes and

for which he did not request reimbursement.   On that record, we

further find that petitioner has failed to carry his burden of

establishing that he could not have been reimbursed by his


     11
      See also Putnam v. Commissioner, T.C. Memo. 1998-285;
Marshall v. Commissioner, T.C. Memo. 1992-65.
                              - 19 -

employer for such expenses.

     On the record before us, we find that petitioner has failed

to carry his burden of establishing that he is entitled for his

taxable year 2001 to the deduction that he claims for

unreimbursed employee expenses.12

Claimed Schedule C Restaurant Expenses

     The trade or business requirement of section 162(a) is not

met until the trade or business has begun to function as a going

concern and the activities for which it was organized are per-

formed.   Jackson v. Commissioner, 

, 514 (1986), affd.

(10th Cir. 1989).     A restaurant trade or business

does not begin until the restaurant is open to the public.13


     12
      Assuming arguendo that petitioner had established the
deductibility under sec. 162(a) of the unreimbursed employee
expenses at issue, he would still have to satisfy the require-
ments of sec. 274(d) for any such expenses that are subject to
those requirements. For example, petitioner contends that during
2001 he drove his Mercedes and Volvo, inter alia, while making
sales calls on behalf of his employer. On the instant record, we
find that petitioner’s Mercedes and Volvo, which are not subject
to the exception in sec. 280F(d)(5)(B), are listed property
within the meaning of sec. 280F(d)(4)(A)(i). We concluded above
that we shall not rely on petitioner’s credit card statements,
petitioner’s ticket stubs, or petitioner’s testimony with respect
to his claimed expenses to establish petitioner’s position
regarding such expenses, including the unreimbursed employee
expenses at issue. On the record before us, we find that peti-
tioner has failed to carry his burden of establishing all of the
elements that he must prove in order to satisfy the requirements
under sec. 274(d) for any such expenses that are subject to those
requirements. See sec. 1.274-5T(b)(2), (3), (4), (6), Temporary
Income Tax Regs., 50 Fed. Reg. 46014-46016 (Nov. 6, 1985).
     13
      See Wilson v. Commissioner, T.C. Memo. 2002-61; Walsh v.
Commissioner, T.C. Memo. 1988-242, affd. without published
                                                   (continued...)
                               - 20 -

     Petitioner contends that he first entered the restaurant

business in 2000 when he claims he worked at his uncle’s restau-

rant in Windsor, California, with the understanding that his

uncle intended to sell him his restaurant.   As a result, peti-

tioner argues, he is entitled to deduct certain amounts that he

incurred during 2001 in investigating the acquisition of a

restaurant in Dallas, Texas.   Respondent disagrees.

     The record establishes that during 2000 petitioner did not

purchase his uncle’s restaurant and that he did not operate a

restaurant at any time during that year or the following year,

which is the year at issue.

     On the record before us, we find that petitioner has failed

to carry his burden of establishing that he is entitled for his

taxable year 2001 to the net loss that he claimed in the restau-

rant Schedule C.14


     13
      (...continued)
opinion 

(6th Cir. 1989); see also Specialty Rests.
Corp. & Subs. v. Commissioner, T.C. Memo. 1992-221.
     14
      Assuming arguendo that petitioner had established the
deductibility under sec. 162(a) of the travel, meal, and enter-
tainment expenses claimed in the restaurant Schedule C, he would
still have to satisfy the requirements of sec. 274(d). We
concluded above that we shall not rely on petitioner’s credit
card statements, petitioner’s ticket stubs, or petitioner’s
testimony with respect to his claimed expenses to establish
petitioner’s position regarding such expenses, including the
travel, meal, and entertainment expenses claimed in the restau-
rant Schedule C. On the record before us, we find that peti-
tioner has failed to carry his burden of establishing all of the
elements that he must prove in order to satisfy the requirements
under sec. 274(d) for such expenses. See sec. 1.274-5T(b)(2),
                                                   (continued...)
                              - 21 -

Claimed Schedule C PDA Consulting Business Expenses

     In order for a taxpayer to be carrying on a trade or busi-

ness within the meaning of section 162(a), the taxpayer must be

involved in the activity with continuity and regularity.      Commis-

sioner v. Groetzinger, 

, 35 (1987).   A sporadic

activity will not qualify as carrying on a trade or business for

purposes of section 162(a).

taxpayer’s

primary purpose for carrying on the activity must be for income

or profit.

during the year at issue he con-

tacted or made presentations to at least four companies regarding

PDA consulting services that he hoped to sell to those companies.

As a result, petitioner argues, he was carrying on a PDA consult-

ing business during the year at issue and is entitled to deduct

certain amounts that he paid during that year in doing so.

Respondent disagrees.

     We have found that on April 4, 2001, petitioner sent an e-

mail to the chief executive officer of Handspring, a manufacturer

of PDAs, in which he renewed the offer that he had made in two e-

mails addressed to her on December 20, 2000, to develop, market,

and sell business applications of Handspring’s PDA.   On the

record before us, we find that petitioner has failed to carry his



     14
      (...continued)
(3), and (4), Temporary Income Tax Regs., 50 Fed. Reg. 46014-
46016 (Nov. 6, 1985).
                              - 22 -

burden of showing that he was involved in his claimed PDA con-

sulting business with continuity and regularity and that the

primary purpose for the activities that he undertook with respect

to that claimed business was for profit.   On that record, we find

that petitioner has failed to carry his burden of showing that

during the year at issue he was carrying on a PDA consulting

business within the meaning of section 162(a).15

     On the record before us, we find that petitioner has failed

to carry his burden of establishing that he is entitled for his

taxable year 2001 to the net loss that he claimed in the PDA

consulting Schedule C.16




     15
      Assuming arguendo that petitioner had established that
during the year at issue he was carrying on a PDA consulting
business within the meaning of sec. 162(a), on the record before
us, we find that petitioner has failed to carry his burden of
showing that he paid the expenses that he claimed in the PDA
consulting Schedule C and that such expenses are ordinary and
necessary expenses within the meaning of that section.
     16
      Assuming arguendo that petitioner had established the
deductibility under sec. 162(a) of the expenses claimed in the
PDA consulting Schedule C, he would still have to satisfy the
requirements of sec. 274(d) for any such expenses that are
subject to those requirements. We concluded above that we shall
not rely on petitioner’s credit card statements, petitioner’s
ticket stubs, or petitioner’s testimony with respect to his
claimed expenses to establish petitioner’s position regarding
such expenses, including the expenses claimed in the PDA consult-
ing Schedule C. On the record before us, we find that petitioner
has failed to carry his burden of establishing all of the ele-
ments that he must prove in order to satisfy the requirements
under sec. 274(d) for any such expenses that are subject to those
requirements. See sec. 1.274-5T(b)(2), (3), (4), (6), Temporary
Income Tax Regs., 50 Fed. Reg. 46014-46016 (Nov. 6, 1985).
                             - 23 -

     We have considered all of the parties’ contentions and

arguments that are not discussed herein, and we find them to be

without merit, irrelevant, and/or moot.

     To reflect the foregoing,


                                      Decision will be entered for

                                 respondent.