T.C. Summary Opinion 2009-23



                        UNITED STATES TAX COURT



                     ANDREA FARINA, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



        Docket No. 13411-07S.            Filed February 18, 2009.


        Andrea Farina, pro se.

        Steven D. Tillem, for respondent.



     DEAN, 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 as amended, and all Rule

references are to the Tax Court Rules of Practice and Procedure.
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     Respondent determined a deficiency of $4,800 in petitioner’s

Federal income tax for 2003.

     Petitioner concedes that respondent’s disallowance of

$20,419 of miscellaneous deductions on Schedule A, Itemized

Deductions, is correct to the extent of $17,033.    Respondent

concedes that petitioner is entitled to deduct tax preparation

fees of $225 on Schedule A.    The issues remaining for decision

are whether:   (1) Petitioner is entitled to deduct unreimbursed

travel and meal expenses as miscellaneous expenses; (2)

petitioner is allowed the standard deduction on Form 1040NR, U.S.

Nonresident Alien Income Tax Return; (3) respondent is estopped

to assert the deficiency due to oral representations by his

agent; and (4) petitioner is entitled to an abatement of interest

on the deficiency.

                              Background

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

The stipulation of facts and exhibits received in evidence are

incorporated herein by reference.    At the time the petition was

filed, petitioner was living in New York.
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     Petitioner is an Italian national working in the United

States for the National Institutes of Health (NIH)1 as a medical

researcher under a “J-1 Visa”.2

     Petitioner filed a 2003 Form 1040NR, U.S. Nonresident Alien

Income Tax Return, claiming $23,568 of itemized deductions

including State income taxes of $4,148, U.S. charitable

contributions of $190, and job and miscellaneous expenses of

$19,230.   Petitioner also claimed a tax refund of $4,553 that

respondent sent to petitioner on July 2, 2004.

     Respondent subsequently requested additional information

from petitioner with respect to several items on the return,

including his status as an alien.   Petitioner replied to the

request for information, but respondent issued the statutory

notice of deficiency that is the subject of this case.    After the

issuance of the notice of deficiency, petitioner wrote a letter

to respondent expressing his disagreement with the notice of

deficiency.   Respondent sent to petitioner in reply Letter 555

(DO), Reconsideration After Statutory Notice, stating that there

was no justification for any change in the proposed adjustments


     1
      NIH is an agency of the Federal Government within the
Public Health Service, which is a unit of the U.S. Department of
Health and Human Services. See 42 U.S.C. secs. 201-203 (2006).
     2
      A J-1 visa allows certain foreign nationals a temporary
presence in the United States to conduct certain activities,
among them studying, teaching, or assisting with research. See 8
U.S.C. secs. 1101(a)(15)(J), 1182(j) (2006); Korvah v. Brown, 

, 810 (6th Cir. 1995).
                                - 4 -

in the notice of deficiency.    Petitioner, after receiving the

Letter 555 (DO), remitted to respondent $4,250 by a personal

check bearing the notation “Form 1040NR 2003 Final Settlement Tax

Liability”.

                             Discussion

     Generally, the Commissioner’s determinations in a notice of

deficiency are presumed correct, and the taxpayer has the burden

of proving that those determinations are erroneous.    See Rule

142(a); Welch v. Helvering, 

, 115 (1933).    In some

cases the burden of proof with respect to relevant factual issues

may shift to the Commissioner under section 7491(a).    Petitioner

did not present evidence or argument that he satisfied the

requirements of section 7491(a).    Therefore, the burden of proof

does not shift to respondent.

     Petitioner contends that he is entitled to deductions of

$2,886 for unreimbursed business travel expenses and $275 for

unreimbursed meal expenses, or, in the alternative, the standard

deduction.    Petitioner argues that he is not liable for a

deficiency because he relied on the erroneous oral advice of an

agent of respondent.    Petitioner also seeks a waiver of all

interest on the proposed deficiency.
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Expenses for Meals and Travel

     Business or Personal Expenses

     Section 162 generally allows a deduction for ordinary and

necessary expenses paid or incurred during the taxable year in

carrying on a trade or business.    Generally, no deduction is

allowed for personal, living, or family expenses.      See sec. 262.

An employee’s trade or business is earning his compensation, and

generally only the expenses that are related to the continuation

of his employment are deductible.       Noland v. Commissioner, 

, 111 (4th Cir. 1959), affg. T.C. Memo. 1958-60.      The

taxpayer must show that any claimed business expenses were

incurred primarily for business rather than social reasons.      See

Rule 142(a); Walliser v. Commissioner, 

, 437 (1979).

To show that the expense was not personal, the taxpayer must

demonstrate that the expense was incurred primarily to benefit

his business on the continuation of his employment and there must

have been a proximate relationship between the claimed expense

and his business.   See Walliser v. Commissioner, supra at 437.

     Section 274 Expenses

     Certain business deductions described in section 274 are

subject to strict rules of substantiation that supersede the

doctrine in Cohan v. Commissioner, 

(2d Cir. 1930).

See sec. 1.274-5T(a) through (c), Temporary Income Tax Regs., 50

Fed. Reg. 46014 (Nov. 6, 1985).     Section 274(d) provides that no
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deduction shall be allowed with respect to:   (a) Any traveling

expense, including meals and lodging away from home; (b) any item

related to an activity of a type considered to be entertainment,

amusement, or recreation; or (c) the use of any “listed

property”, as defined in section 280F(d)(4), unless the taxpayer

substantiates certain elements.

     To meet the requirements of section 274(d), the taxpayer

must present adequate records, or sufficient evidence to

corroborate the taxpayer’s own testimony, to establish:    (1) The

amount of the expenditure or use based on the appropriate measure

(mileage may be used in the case of automobiles), (2) the time

and place of the expenditure or use, (3) the business purpose of

the expenditure or use, and (4) the business relationship to the

taxpayer of each expenditure or use in the case of an

entertainment expense.

     In general, “adequate records” means an account book, diary,

log, or similar record and documentary evidence which in

combination are sufficient to establish each element of an

expenditure.   Sec. 1.274-5T(c)(2), Temporary Income Tax Regs., 50

Fed. Reg. 46017 (Nov. 6, 1985).   Corroborative evidence required

to support records not made at or near the time of the

expenditure must have a high degree of probative value.    Sec.

1.274-5T(c)(1), Temporary Income Tax Regs., 50 Fed. Reg. 46016

(Nov. 6, 1985).
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     Reimbursement by Employer

     In addition to the above requirements, business expenses of

the employer cannot be converted into the employee’s business

expenses by the mere failure of an employee to seek

reimbursement.   Kennelly v. Commissioner, 

, 943

(1971), affd. without published opinion 

(2d Cir.

1972); Stolk v. Commissioner, 

, 356 (1963), affd. per

curiam 

(2d Cir. 1964).      The employee has the burden

of establishing that the employer would not reimburse the expense

had the employee requested reimbursement.      Podems v.

Commissioner, 

, 22-23 (1955).

     Petitioner’s Evidence

     Petitioner offered as evidence of his meals and travel

expenses:   (a) An Air France receipt and boarding pass for a

$2,063 round trip flight between Washington, D.C., and Rome,

Italy, in April 2003; (b) an Air France receipt for an $823.40

round trip flight between Washington, D.C., and Rome, Italy, in

December 2003; and (c) a handwritten letter dated August 8, 2007,

purporting to be from a Dr. Giulia Piaggio (Dr. Piaggio), staff

scientist, experimental oncology department, “Molecular

Oncofluesis Laboratory”, in Rome, Italy.     According to the letter

from Dr. Piaggio, petitioner “visited my laboratory for work

related issues” on dates at or near the time of the flights for

which petitioner produced his receipts.
                               - 8 -

     Petitioner testified that he had no documentation from NIH

to show that either of his trips to Rome was taken as part of his

employment.   Petitioner admitted that “we were able to get plane

tickets [from NIH] when going to meetings.”   When he was asked by

the Court why he did not get his tickets from NIH, he replied:

“I don’t know.”

     The Court finds that petitioner has not shown that his meal

and travel expenses were business and not personal expenses, that

he has substantiated the expenses as required by section 274, or

that his employer would not have reimbursed him for the expenses

had he properly requested reimbursement.

The Standard Deduction

     Petitioner argues alternatively that should he not be

entitled to his claimed itemized deductions, he is entitled to

the standard deduction allowed by section 63(b).   Respondent

counters by pointing out that section 63(c)(6)(B) provides that

the standard deduction, in the case of nonresident individuals,

is zero.   To avoid the consequences of section 63(c)(6)(B),

petitioner argues that its application to him would violate

article 24 of the United States-Italy Income and Capital Tax

Convention, April 17, 1984, T.I.A.S. 11064 (treaty).

     The language on which he relies states that nationals of a

contracting State shall not be subjected in the other State to

more burdensome taxation and related requirements than those to
                                - 9 -

which nationals of the other State, under the same circumstances,

are or may be subject.   Petitioner’s argument assumes that he is

in the same circumstance as a U.S. citizen or resident, persons

who are generally allowed the standard deduction.

     Respondent, however, points out the disparate circumstances

of taxation between nonresident aliens on the one hand and U.S.

citizens and residents on the other.    In general, U.S. citizens

and residents are taxable on their income from both within and

without the United States.    Sec. 1; sec. 1.1-1(b), Income Tax

Regs.   Nonresident aliens, however, are generally taxable only on

their U.S. source income, sec. 872(a), at either a flat rate of

30 percent or at graduated rates, depending on the type of

income, see secs. 871(a) though (c), 1441(b).

     Respondent also points out that the Committee on Foreign

Relations report on the treaty states with regard to article 24

that “for the purposes of U.S. tax, a U.S. citizen who is not a

resident of the United States and an Italian national who is not

a resident of the United States are not in the same

circumstances, because the U.S. citizen is subject to U.S. tax on

his worldwide income.”   S.   Exec. Rept. 99-6 (1985), 1992-1 C.B.

452, 469.

     The Court agrees with respondent.    The prohibition against

the allowance of the standard deduction to nonresident aliens is

not in violation of article 24 of the treaty.
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     The parties have stipulated that during the year 2003

petitioner was a “nonresident alien”.   The stipulation is a legal

conclusion rather than a fact.   While the parties are free to

stipulate the facts of their case, they may not stipulate the

legal conclusions to be reached from those facts by the Court.

Saviano v. Commissioner, 

, 645 (7th Cir. 1985), affg.

(1983); Barnette v. Commissioner, T.C. Memo. 1992-

595, affd. without published opinion sub nom. Commissioner v.

Allied Mgmt. Corp., 

(11th Cir. 1994).

     Article 4 of the treaty defines “resident” of a State, in

the case of a person, as one who is liable to tax under the laws

of that State because of his domicile or residence rather than

the source of his income.   Section 7701(b)(1)(B) provides that a

nonresident alien is a person who is not a citizen or resident of

the United States within the meaning of section 7701(b)(1)(A).

Under section 7701(b)(1)(A)(ii), a person who meets the

“substantial presence test” is a resident of the United States.

     Petitioner states on his tax return for 2003 that he was

present in the United States for 329 days in 2003, 341 days in

2002, and 348 days in 2001.    Petitioner’s presence as described

in his tax return meets the definition of substantial presence,

which would in turn cause him to be a resident alien for 2003.

Sec. 7701(b)(1)(A)(ii), (3).   But an individual is not treated as
                                - 11 -

being present in the United States on any day on which he is an

“exempt individual”.    Sec. 7701(b)(3)(D).

     Section 7701(b)(5) describes exempt individuals to include

teachers, trainees, or students.    Petitioner, however, cannot be

an exempt “teacher or trainee” for 2003 if he was an exempt

teacher, trainee, or student for 2 of the 6 previous calendar

years.   See sec. 7701(b)(5)(E)(i).      But petitioner had not

reached the limitation on “students” in 2003.       See sec.

7701(b)(5)(E) (ii).    The term “student” includes any person

temporarily present in the United States under a J-1 visa.        Sec.

7701(b)(5)(D).

     The Court concludes that petitioner was a nonresident alien

not entitled to the standard deduction for 2003.

Erroneous Advice of Respondent’s Agent

     Petitioner alleges that his return preparer was misled by

respondent’s agent into thinking that the deductions on his 2003

Form 1040NR were proper.    Petitioner’s argument that he was

misled by respondent’s representative into taking improper

deductions is essentially one of estoppel.       Equitable estoppel is

a judicial doctrine that “‘precludes a party from denying his own

acts or representations which induced another to act to his

detriment.’”     Hofstetter v. Commissioner, 

, 700 (1992)

(quoting Graff v. Commissioner, 

, 761 (1980), affd.

(5th Cir. 1982)).    This Court has held that it will
                              - 12 -

apply the doctrine of equitable estoppel against the Government

with the utmost caution and restraint.   Kronish v. Commissioner,

, 695 (1988) (citing Boulez v. Commissioner, 

, 214-215 (1981), affd. 

(D.C. Cir. 1987)); see

Cavanaugh v. Commissioner, T.C. Memo. 1991-407, affd. without

published opinion 

(10th Cir. 1993).

     “[T]hose who deal with the government are charged with

knowledge of applicable statutes and regulations.”   Boulez v.

n.68; see also FCIC v. Merrill, 

, 384 (1947).   The doctrine of estoppel applies to

statements of fact, not statements of law or opinion.   See

McCorkle v. Commissioner, 

, 68 (2005); Miller v.

Commissioner, T.C. Memo. 2001-55.

     Petitioner testified that the agent told his return preparer

by telephone “What she should include on the 1040NR.”   The

deductibility of the items at issue requires legal

determinations.   Even if an agent of respondent (petitioner

presented no evidence on the issue other than his own vague

testimony) made statements as to what to include on the Form

1040NR,3 respondent is not bound by them.   “The government could



     3
      Petitioner submitted an affidavit from his return preparer
stating that an Internal Revenue Service “officer” gave her
“specific instructions to file Form 1040NR.” [Emphasis added.]
In the affidavit the return preparer also states that “Form
1040NR does not allow the Standard Deduction. A non-resident
taxpayer can only claim Itemized Deductions.”
                               - 13 -

scarcely function if it were bound by its employees’ unauthorized

representations.”    Goldberg v. Weinberger, 

, 480-481

(2d Cir. 1976); see also FCIC v. Merrill, supra at 384.

     Respondent is not estopped to assert a deficiency against

petitioner.

Abatement of Interest on the Deficiency

     Petitioner contests in the petition “the high rate of

interest” and states in his pretrial memorandum that an

unjustified and unreasonably long examination process has

contributed to the “escalation of the exhorbitant [sic] compound

interest.”    The Court interprets petitioner’s statements as a

request for an abatement of interest.

     Section 6404(e) authorizes the Commissioner to abate an

assessment of interest that is computed on the basis of any

deficiency or payment of tax that is attributable in whole or in

part to any unreasonable error or delay by an officer or employee

of the Internal Revenue Service in performing a ministerial or

managerial act.

     Section 6404(h) provides in pertinent part that the Tax

Court shall have jurisdiction over any action brought by a

taxpayer to determine whether the Secretary’s failure to abate

interest under this section was an abuse of discretion.    The

Court may order an abatement if an action is brought within 180
                              - 14 -

days after the date of the mailing of the Secretary’s final

determination not to abate such interest.

     Petitioner has not filed a formal request for abatement of

interest with respondent.   See Rev. Proc. 87-42, sec. 4.01, 1987-

, 589 (requests for abatement of assessment of interest

should be made on Form 843, Claim for Refund and Request for

Abatement). Absent a notice of final determination not to abate

interest on the deficiency or payment from respondent, petitioner

may not invoke the Court’s jurisdiction under section 6404(h).

See Bourekis v. Commissioner, 

(1998).

     To reflect the foregoing,


                                         Decision will be entered

                                    under Rule 155.