T.C. Summary Opinion 2007-102



                     UNITED STATES TAX COURT



        JAMES L. AND PATRICIA R. WILLIAMS, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8323-06S.             Filed June 20, 2007.


     James L. and Patricia R. Williams, pro sese.

     Lynn M. Curry, for respondent.



     PANUTHOS, Chief Special Trial Judge:   This case was heard

pursuant to the provisions of section 7463 of the Internal

Revenue Code in effect when the petition was filed.   Pursuant to

section 7463(b), the decision to be entered is not reviewable by

any other court, and this opinion shall not be treated as

precedent for any other case.   Unless otherwise indicated,

subsequent section references are to the Internal Revenue Code in
                                - 2 -

effect for the years in issue, and all Rule references are to the

Tax Court Rules of Practice and Procedure.

     Respondent determined deficiencies of $4,964, $5,482, and

$6,077 in petitioners’ 2002, 2003, and 2004 Federal income taxes

respectively.1    The issues for decision are whether petitioners

are entitled to (1) itemized deductions in amounts greater than

the standard deductions allowed by respondent for the years in

issue and (2) a credit for education expenses in 2003 and 2004.

                             Background

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

The stipulation of facts and the attached exhibits, as well as

additional exhibits introduced at trial, are incorporated herein

by this reference.    Petitioners resided in Orlando, Florida, when

the petition was filed.

     During the years at issue, Patricia R. Williams was an

engineer with the Florida Department of Environmental Protection

and James L. Williams was a salesman.     For approximately the

first 9 months of 2002, Mr. Williams worked for U.S. Foods

selling food products in central Florida.     Mr. Williams spent the

majority of his time at work visiting customers and soliciting

business.    U.S. Foods did not provide an automobile for Mr.

Williams to use, nor did it reimburse him for gasoline or other

expenses.


     1
         All dollar amounts are rounded to the nearest dollar.
                                - 3 -

     In or about October 2002, Mr. Williams left U.S. Foods and

began working for Gold Medal.    Gold Medal provided a vehicle and

paid for gasoline, although Mr. Williams occasionally used his

own car for business purposes without reimbursement.

     In August 2004, Hurricane Charley struck the east coast of

Florida.   Shortly after that, Mr. Williams lost his job with Gold

Medal and remained unemployed for the remainder of 2004.

Hurricane Charley also damaged petitioners’ home and destroyed

many of their records.

     Petitioners timely filed joint Federal income tax returns

for the years in issue.    On Schedule A, Itemized Deductions,

petitioners claimed deductions totaling $34,616, $30,872, and

$23,172 for 2002, 2003, and 2004, respectively.    The claimed

deductions consist of medical and dental expenses, taxes,

contributions, tax preparation fees, and unreimbursed employee

business expenses.   Respondent disallowed the claimed itemized

deductions in full and instead allowed petitioners the standard

deduction for each year.    Petitioners also claimed education

credits of $2,272 and $3,000 in 2003 and 2004, respectively,

which respondent disallowed in full.

                             Discussion

I.   In General

     The Commissioner’s determinations set forth in a notice of

deficiency generally are presumed correct, and the taxpayer bears
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the burden of showing that the determinations are in error.    Rule

142(a); Welch v. Helvering, 

, 115 (1933).    Deductions

and credits are a matter of legislative grace, and the taxpayer

bears the burden of proving entitlement to any deduction or

credit claimed on a return.    See INDOPCO, Inc. v. Commissioner,

(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.

     Where a taxpayer establishes that he has incurred deductible

expenses but is unable to substantiate the exact amounts, the

Court can estimate the deductible amount if the taxpayer presents

sufficient evidence to establish a rational basis for making the

estimate.    See Cohan v. Commissioner, 

, 543-544 (2d

Cir. 1930); Vanicek v. Commissioner, 

, 742-743

(1985).2    In addition, we may permit a taxpayer to substantiate

     2
        Sec. 274(d) imposes additional substantiation
requirements for certain types of expenses. See sec.
1.274-5T(a), Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov.
6, 1985). The Cohan rule does not apply to expenses governed by
sec. 274(d). Sanford v. Commissioner, 

, 827-828
                                                   (continued...)
                                 - 5 -

deductions through secondary evidence where the underlying

documents have been unintentionally lost or destroyed.     See Boyd

v. Commissioner, 

, 320-321 (2004).

II.   Itemized Deductions

      As stated above, petitioners claimed itemized deductions on

their 2002, 2003, and 2004 tax returns totaling $34,616, $30,872,

and $23,172, respectively.    In reconstructing their records for

trial, however, petitioners appear to concede all but $11,920,

$10,060, and $9,715 of these amounts.     We limit our discussion to

these amounts.

      A.    Medical and Dental Expenses

      Under section 213(a), medical and dental expenses paid and

not compensated for by insurance or otherwise are deductible to

the extent they exceed 7.5 percent of adjusted gross income

(AGI).

      Petitioners reported AGI of $68,488, $72,364, and $84,501 in

2002, 2003, and 2004, respectively.      Multiplying these amounts by

7.5 percent yields $5,137, $5,427, and $6,338 for the years in

issue.     Petitioners contend that they incurred medical and dental

expenses totaling $2,100 in 2002, $4,210 in 2003, and $5,315 in



      2
      (...continued)
(1968), affd. per curiam 

(2d Cir. 1969). Although
some of petitioners’ claimed   itemized deductions are subject to
sec. 274(d), for the reasons   discussed below we need not decide
whether petitioners meet the   heightened substantiation
requirements.
                                      - 6 -

2004.3      Because the claimed medical and dental expenses are less

than 7.5 percent of petitioners’ reported AGI for each of the

years in issue, petitioners are not entitled to a deduction for

medical and dental expenses.       See sec. 213(a).

       B.      Unreimbursed Employee Business Expenses

       In general, a taxpayer may deduct ordinary and necessary

expenses paid or incurred in connection with the operation of a

trade or business.       Sec. 162(a); Boyd v. 

at

313.       A trade or business includes the trade or business of being

an employee.       O’Malley v. Commissioner, 

, 363-364

(1988).       For such expenses to be deductible, the taxpayer must

not have the right to obtain reimbursement from his employer.

See Orvis v. Commissioner, 

, 1408 (9th Cir. 1986),

affg. T.C. Memo. 1984-533.

       A taxpayer generally cannot deduct personal, living, or

family expenses.       Sec. 262(a).    Articles of clothing, including

shoes or boots, are deductible only if the clothing is required

in the taxpayer’s employment, is not suitable for general or

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

Yeomans v. Commissioner, 

, 767-768 (1958); Nicely v.

Commissioner, T.C. Memo. 2006-172.

       Petitioners contend they spent a total of $1,400 in each of

       3
       Petitioners did not claim a deduction for medical and
dental expenses on their 2002 return. However, the $11,920 of
reconstructed expenses for 2002 includes $2,100 of medical and
dental expenses.
                                - 7 -

the years in issue for items such as clothing and shoes that were

required for employment.    Petitioners’ testimony on this issue

was vague, however, and petitioners gave no indication that the

clothing or shoes were unsuitable for general or personal wear.

Accordingly, such expenses are not deductible.    See Yeomans v.

.

       Petitioners assert they spent $600 on haircuts in each of

the years at issue.    We have repeatedly held that such costs are

nondeductible personal expenses.    See Hynes v. Commissioner, 

, 1291-1292 (1980); Drake v. Commissioner, 

,

844 (1969); Fryer v. Commissioner, T.C. Memo. 1974-26.

Petitioners therefore are not entitled to deduct the costs of

clothing, shoes, and haircuts as business expenses.

       Petitioners contend they paid or incurred numerous other

business-related expenses for items such as gasoline, a computer,

and a facsimile machine.    We need not consider these remaining

items.    The standard deduction for 2002, 2003, and 2004 was

$7,850, $9,500, and $9,700, respectively.    See sec. 63(c)(2),

(4).    After the claimed deductions for medical and dental

expenses, clothing and shoes, and haircuts are disallowed,

petitioners’ remaining deductions for each year do not exceed

these amounts.    Petitioners therefore are entitled only to the

standard deduction for each year.    Sec. 63(b) and (c); Shepherd

v. Commissioner, T.C. Memo. 1999-19.    Respondent’s determination

on this issue is sustained.
                                   - 8 -

III.    Education Credits

       A taxpayer who incurs tuition and related expenses may be

eligible for a credit under section 25A.         See sec. 25A(b)(1),

(c)(1).    Petitioners contend that Mrs. Williams qualifies for an

education credit under section 25A for 2003 and 2004.

Petitioners introduced no evidence concerning where Mrs. Williams

attended school or the amount, if any, of her tuition and related

expenses.    Accordingly, respondent’s determination is sustained.

       To reflect the foregoing,


                                           Decision will be entered

                                   for respondent.