Because there are substantial business and personal motives for the expenses related to petitioner's residence, we must determine what portion of the residence was used regularly and exclusively for her businesses. See Int'l Trading Co. v. Commissioner, 275 F.2d 578">275 F.2d 578, 275 F.2d 578">584-587, 1960-2 C.B. 435 (7th Cir. 1960), aff'gT.C. Memo. 1958-104; Deihl v. Commissioner, T.C. Memo 2005-287. Combined personal and business use of a section of the residence precludes deductibility. See generally Sam Goldberger, Inc. v. Commissioner, 88 T.C. 1532">88 T.C. 1532, 88 T.C. 1532">1557 (1987).

The Gardiner house was petitioner's residence during the years at issue. As a result, expenses with respect to the Gardiner house are not deductible unless an exception pursuant to section 280A(c) applies. Petitioner used the Gardiner house for business purposes in connection with Betty Ong Real Estate, BAO Home Care, and US Pacific during the years at issue. Petitioner argues that the Gardiner house was used to meet with clients and perform administrative work for Betty Ong Real 2012 Tax Ct. Memo LEXIS 112">*126 Estate. However, petitioner has not established the existence of an office or other similar part of the Gardiner house that was exclusively used for this purpose. For BAO Home Care and US Pacific, petitioner has failed to present any evidence of how and to what extent she used the Gardiner house. Thus, we have no reasonable basis upon which we may apply the39 F.2d 540">Cohan rule to estimate the deductible portions of petitioner's expenses in connection with the Gardiner house. We therefore sustain respondent's determination with respect to all expenses in connection with the Gardiner house.

If a member of the taxpayer's family uses the dwelling unit as a principal residence, a personal purpose is attributed to the taxpayer. Secs. 280A(d)(2)(A), 267(c)(4). Beginning in 2008 petitioner began using the Lassik house for Betty Ong Real Estate. The Lassik house was Filemon's principal residence and, therefore, section 280A(d)(2)(A) attributes a personal purpose to petitioner's use of the Lassik house. Petitioner has not established that any part of the Lassik house was used exclusively for any of her businesses. Accordingly, because petitioner used the Lassik house for "personal purposes" 2012 Tax Ct. Memo LEXIS 112">*127 pursuant to section 280A(d)(2)(A) and because petitioner failed to establish that any part of the Lassik house was used exclusively for business, we sustain respondent's determination with respect to all expenses in connection with the Lassik house.

A taxpayer is not entitled to a deduction for premiums paid on any life insurance policy if the taxpayer directly or indirectly is a beneficiary under the policy. Seesec. 264(a)(1). Petitioner made payments to Reassure America Life Insurance Co. on behalf of BAO Home Care of $1,610 in 2008 and 2009. Petitioner failed to provide a copy of the insurance policy related to these payments or any other information listing the beneficiaries of the policy. She has therefore failed to meet her burden of proof. Accordingly, we sustain respondent's determinations with respect to petitioner's deductions for nonhealth insurance of $1,610 for 2008 and 2009. ⁷

Petitioner relies on numerous checks in the record to various individuals to substantiate expense deductions for contract labor, commissions and fees, and returns and allowances. Further, petitioner has provided Forms 1099-MISC issued to Garcia and Asis for 2006 from Betty Ong Real Estate and to Ceron and Marasigan for 2006 from BAO Home Care.

With respect to Garcia, in addition to the Form 1099-MISC for 2006, the broker-agent agreement indicates that as of March 29, 2005, Garcia provided brokerage services on behalf of petitioner. The broker-agent agreement required Garcia to maintain a real estate license in California, work exclusively for petitioner, and entitled her to 70% of broker's fees for her participation in a listing. Petitioner's books and records include a copy of Garcia's driver's license, Social Security card, and birth certificate. Petitioner has established the existence of a working relationship between herself and Garcia. Additionally, petitioner has presented two checks made payable to Garcia in 2006 as proof of payment, one for $4,960 and the other for $18,930. Therefore, petitioner is entitled to 2012 Tax Ct. Memo LEXIS 112">*129 a deduction of $23,890 for contract labor paid to Garcia in 2006.

Petitioner testified that Asis was one of her employees, and respondent conceded that petitioner is entitled to a deduction for $900 paid to Asis on behalf of BAO Home Care in 2009. However, the Form 1099-MISC issued to Asis in 2006 was from Betty Ong Real Estate. Asis did not testify at trial, and petitioner has not provided any information to describe the type of work Asis performed on behalf of her businesses. Therefore, although respondent has conceded that a working relationship existed between petitioner and Asis with respect to BAO Home Care in 2009, we have no reliable proof of such a relationship in 2006 with respect to Betty Ong Real Estate.

Similarly, petitioner has not provided any additional evidence that Ceron and Marasigan performed work for her during the years at issue or had any connection with her businesses. The memo lines in the checks payable to Ceron and Marasigan make vague references to dates and addresses, but absent any corroborative evidence do little to prove a working relationship. Neither Ceron nor Marasigan testified at trial, and petitioner did not provide a description of their work performed 2012 Tax Ct. Memo LEXIS 112">*130 or proof that they included the amounts received from her in their income. This lack of evidence is equally applicable to each of the other payees listed in petitioner's checks where she has not presented a Form 1099-MISC. Therefore, petitioner has failed to establish a business purpose for these expenses, and we sustain respondent's determinations with respect to all contract labor expenses, commissions and fees, and returns and allowances outside of the $23,890 paid to Garcia in 2006.

Respondent has conceded deductions for taxes and licenses of $165 for 2007 and licenses of $737 for 2008 in connection with Betty Ong Real Estate. Without any further explanation, petitioner relies on checks to the department of motor vehicles, Fire Insurance Exchange, and American General Finance to substantiate her additional deductions for taxes and licenses. Petitioner has failed to explain the purpose of these expenses. Further, petitioner has failed to provide proof of a tax due or license acquired. We therefore sustain respondent's determinations with respect to taxes and licenses.

Petitioner claimed legal and professional fee deductions for amounts 2012 Tax Ct. Memo LEXIS 112">*131 paid to her gardener, her cleaning lady, and repair workers on the Lassik house. As discussed above, petitioner has failed to satisfy the requirements of section 280A with respect to all expenses in connection with the Lassik house. Petitioner has also presented several checks for what she claims to be legal work but has not presented any evidence of the type of legal or professional work conducted. We therefore sustain respondent's determinations with respect to legal and professional fees.

Respondent allowed many of petitioner's claimed deductions for business phone expenses, Web site expenses, education expenses, and dues and membership fees. Petitioner has not presented any evidence outside of checks and her own self-serving testimony to establish a business purpose for her disallowed deductions. See Tokarski v. Commissioner, 87 T.C. 74">87 T.C. 77. We therefore sustain respondent's determination with respect to business phone expenses, Web site expenses, education expenses, and dues and membership fees.

Petitioner relies 2012 Tax Ct. Memo LEXIS 112">*132 on a voluminous collection of books and records to substantiate many additional disallowed expense deductions. These books and records establish the authenticity of most of petitioner's expenses. However, they do little to connect petitioner's expenses with a business purpose. As a result, the Court has little evidence upon which to distinguish between petitioner's legitimate and illegitimate deductions.

Further, petitioner's books and records list many expenses that are clearly personal. For instance, among other personal expenses too numerous to list, petitioner claimed the following expense deductions with respect to Betty Ong Real Estate and BAO Home Care: (1) $20 for a "6 week make over"; (2) $54 and $148 for fashion jewelry; (3) $55 and $99 for health club memberships; (4) $200 to her son supported by a check with the note "happy birthday"; and (5) $200 to the "Martinez Family" as an offer of condolences. Petitioner's attempt to deduct these clearly personal expenses makes it difficult for the Court to give credibility to any deduction where she has not established a clear business purpose.

Nonetheless, respondent does not dispute that Betty Ong Real Estate and BAO Home Care were 2012 Tax Ct. Memo LEXIS 112">*133 legitimate businesses during the years at issue. Consequently, we have no doubt that some of petitioner's remaining disallowed deductions are legitimate. Petitioner's credit card bills include notations next to each item identifying expenses such as "supplies" or "business promotions". Petitioner is likely to have incurred these types of expenses for her businesses during the years at issue and testified that these notations indicate legitimate business expenses. Accordingly, given petitioner's burden, the lack of evidence in the record to support the business purpose of her remaining claimed deductions, and her lack of credibility, we believe we are being generous in allowing 10% of her remaining disallowed deductions under the Cohan rule. Any inexactitude in the estimate by the Court is of petitioner's own making and due to her failure to maintain proper business records. See Cohan v. Commissioner, 39 F.2d 540">39 F.2d at 543-544.

Section 213(a) carves out an exception to section 262, allowing for a deduction for personal medical care expenses to the extent that such expenses exceed 7.5% of the taxpayer's adjusted gross income. "Medical care" includes premiums 2012 Tax Ct. Memo LEXIS 112">*134 paid for any qualified long-term care insurance contract as defined in section 7702B(b). Sec. 213(d)(1)(D). Section 7702B(b)(1) provides that a "qualified long-term care insurance contract" means any insurance contract if:

(A) the only insurance protection provided under such contract is coverage of qualified long-term care services,

(B) such contract does not pay or reimburse expenses incurred for services or items to the extent that such expenses are reimbursable under title XVIII of the Social Security Act or would be so reimbursable but for the application of a deductible or coinsurance amount,

(C) such contract is guaranteed renewable,

(D) such contract does not provide for a cash surrender value or other money that can be—

(E) all refunds of premiums, and all policyholder dividends or similar amounts, under such contract are to be applied as a reduction in future premiums or to increase future benefits, and

(F) such contract meets the requirements of subsection (g).

Petitioner paid $3,660 to Genworth Financial for long-term care insurance in 2009. Petitioner 2012 Tax Ct. Memo LEXIS 112">*135 has not provided a copy of any related insurance policy or any other information regarding the coverage provided or terms of the agreement. Without such information, we have no way to determine whether petitioner's long-term care insurance satisfies the requirements of section 7702B(b). Accordingly, petitioner has not met her burden, and we sustain respondent's determinations with respect to petitioner's long-term health care insurance.

Respondent bears the burden of production with respect to the accuracy-related penalty and must therefore produce sufficient evidence that it is appropriate to impose that penalty. Seesec. 7491(c); see also Higbee v. Commissioner, 116 T.C. 438">116 T.C. 438, 116 T.C. 438">446 (2001). Section 6662(a) and (b)(2) imposes an accuracy-related penalty upon any underpayment of tax resulting from a substantial understatement of income tax. The penalty is equal to 20% of the portion of any underpayment attributable to a substantial understatement of income tax. Id. The term "substantial understatement" is defined as an understatement exceeding the greater of: (1) 10% of the tax required to be shown on the return for the taxable year or (2) $5,000. Sec. 6662(d)(1)(A). Section 6662(a)2012 Tax Ct. Memo LEXIS 112">*136 and (b)(1) also imposes a penalty equal to 20% of the amount of an underpayment attributable to negligence or disregard of rules or regulations. Negligence includes any failure to make a reasonable attempt to comply with the provisions of the Internal Revenue Code, including any failure to maintain adequate books and records or to substantiate items properly. Sec. 6662(c); sec. 1.6662-3(b)(1), Income Tax Regs.

Petitioner's failure to produce records substantiating her Schedule C expenses and her long-term health care costs supports the imposition of the accuracy-related penalty for negligence for the years at issue. The applicability of section 6662(b)(2) will depend on the magnitude of the understatement of income tax as calculated under Rule 155. If petitioner's understatement of income tax for each year at issue, as calculated under Rule 155, exceeds the greater of $5,000 or 10% of the tax required to be shown on her return, respondent will have met his burden of production under section 7491(c). If not, respondent will have failed to meet his burden of production under section 7491(c) with respect to the section 6662 penalty for a substantial understatement.

The accuracy-related 2012 Tax Ct. Memo LEXIS 112">*137 penalty is not imposed with respect to any portion of the underpayment of tax if the taxpayer can establish that he acted with reasonable cause and in good faith. Sec. 6664(c)(1). The decision as to whether the taxpayer acted with reasonable cause and in good faith depends upon all the pertinent facts and circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs. Circumstances indicating that a taxpayer acted with reasonable cause and in good faith include "an honest misunderstanding of fact or law that is reasonable in light of all of the facts and circumstances, including the experience, knowledge, and education of the taxpayer." Id. Reliance on the advice of a tax professional may establish reasonable cause and good faith. See United States v. Boyle, 469 U.S. 241">469 U.S. 241, 469 U.S. 241">250, 105 S. Ct. 687">105 S. Ct. 687, 83 L. Ed. 2d 622">83 L. Ed. 2d 622 (1985). A taxpayer claiming reliance on professional advice must show that: (1) the adviser was a competent professional who had sufficient expertise to justify reliance, (2) the taxpayer provided necessary and accurate information to the adviser, and (3) the taxpayer actually relied in good faith on the adviser's judgment. Neonatology Assocs. P.A. v. Commissioner, 115 T.C. 43">115 T.C. 43, 115 T.C. 43">99 (2000), aff'd, 299 F.3d 221">299 F.3d 221 (3d Cir. 2002).

Petitioner 2012 Tax Ct. Memo LEXIS 112">*138 was a knowledgeable taxpayer. She was a member of CTEC throughout the years at issue, and worked for H&R Block as a tax return preparer sometime between 2003 and 2005. Petitioner filed her own Federal tax returns for 2006-08. Despite her knowledge and training, petitioner claimed deductions for many clearly personal expenses. This conduct shows a lack of reasonable cause and good faith. For 2009 HRB prepared petitioner's Federal tax return. Petitioner argues that she provided HRB with all the necessary information to prepare her 2009 Federal tax return and relied on HRB to prepare an accurate return. Petitioner has failed to establish the accuracy of the information she provided to HRB and, therefore, has failed to establish reasonable cause and good faith for 2009.

Accordingly, pending a final calculation of petitioner's understatement of income tax under Rule 155, we find her liable for the section 6662 penalty for the years at issue as commensurate with respondent's concessions and our holdings.

The Court, in reaching its holdings, has considered all arguments made, and, to the extent not mentioned, concludes that they are moot, irrelevant, or without merit.

To reflect the foregoing,

Decisions 2012 Tax Ct. Memo LEXIS 112">*139 will be entered under Rule 155.