Lucien Joseph Larvadain, Petitioner

T .C . Summary Opinion 2007-

UNITED STATES TAX COUR T

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S .T . JUDGE CoUV ► LL%0N I FILES LUCIEN JOSEPH LARVADAIN, Petitic ner v .

COMMISSIONER OF INTERNAL REVENUE, Desponden t Docket No . 6295-05S .

Filed November 21, 2007 .

Keith S . Blair , for petitioner .

C . Teddy Li , for respondent .

COUVILLION, Special Trial Judge :' This ase was heard pursuant to the provisions of section 7463 of the Internal Revenue Code in effect when the petition was iled . Pursuant t o section 7463(b), the decision to be entered i not reviewable by

Chief Judg e ial Trial Judge Irvin Couvillio n

SERVED NOV 21 2007

any other court, and this opinion shall not be treated as precedent for any other case . 2 Respondent determined a deficiency of $7,106 in petitioner's 2001 Federal income tax . The sole issue for decision is whether petitioner is entitled to deductions for certain expenses claimed on Schedule C, Profit or Loss From Business, for the year a t issue in excess of amounts allowed by respondent . That issue is premised on whether petitioner conducted a trade or business activity principally in his home .

Some of the facts were stipulated . Those facts, with the annexed exhibits, are so found and are made part hereof .

Petitioner's legal residence at the time the petition was filed was Glen Burnie, Maryland .

Background From 1974 to 1991, petitioner was an employee of th e National Oceanic & Atmospheric Administration (NOAA), a Federal agency . Petitioner's background is in naval navigation . He left his employment with NOAA in 1991 and commenced a self-employment activity which dealt essentially in the sale of charts, maps , nautical supplies, and navigational services to boat and yacht owners . Petitioner discontinued that activity around 1996 and reestablished a relationship with NOAA as an independen t

contractor providing navigational services and in particular, training NOAA employees at the U .S . Coast Guar branch facility at Silver Spring, Maryland . Petitioner was no engaged with NOAA as an employee . His relationship was based on a contract for training new employees, preparation of manuals desk reference guides, and other navigational matters used by such employees .

Petitioner was not required to be at NOAA offi es on a daily basis and was allowed to prepare his manuals, uides, and other contract requirements at home . The time petitioner spent at NOAA facilities was to train employees . However, N AA made available to petitioner at all times office space and eq ipment necessary for him to perform his services under the contract . Petitioner estimated that during the year at issue, he was at NOAA facilities between 35 to 40 percent of the tim for the trainin g of NOAA employees . The remainder of his time 'Was spent at home where he performed his other obligations under the contract (preparing training manuals, etc .) . None of t e training activities took place at his home .

Petitioner's contract with NOAA was obtained by bid . He was paid by the hour . For the year at issue, petitioner contracted to perform 976 hours of work which translated to 122 work days .

The compensation for that amount of time was $30,256 .

. .)

f On his 2001 Federal income tax return petitioner reported his income and expenses from the NOAA contract on Schedule C in amounts as follows :

Income Gross income $35,222 Cost of goods sold 1,650 Gross Profit 33,57 2 Expense s Advertising $400 Car & truck 10,389 Insurance 1,572 Mortgage interest 8,520 Legal/professional 360 Repairs/maintenance 2,299 Taxes/licenses 2,730 Utilities 3,690 Other expenses :

Postal & shipping 420 Business calls & faxes 1,195 Computer & softwar e services 425 2,040 Total expenses 32,000 Net profit $1,57 2 In the notice of deficiency respondent disallowed the claimed deductions for advertising expenses, car and truck expenses, legal/professional expenses, and other expenses which consisted of postal and shipping, business calls and faxes, and computer and software services on petitioner's Schedule C fo r 3( .

. .continued) dispute as to the amount of petitioner's income and, the Court surmises that petitioner was paid for additional services he performed .

lack of substantiation . Although petitioner substantiated $1,514 for insurance, $3,027 for repairs and maintenance expenses, and $898 for utilities, respondent disallowed those expenses a s personal in nature .

In the notice of deficiency respondent determined that petitioner is entitled to deduct $2,010 as real . estate taxes, $12,740 as mortgage interest, and $400 as a charitable contribution deduction on Schedule A, Itemized Deductions .

Discussio n Section 162(a) allows a taxpayer to deduct all ordinary and necessary expenses paid or incurred in carryin on a trade or business . Under section 280A, however, deductions associated with a home office are generally disallowed unless the home office is used exclusively and regularly as th principal place of business of the taxpayer . ' Petitioner presented no evidence to substantiate deductions claimed for advertising expenses, car and truck expenses, legal/professional expenses, and other expense which consisted of postal and shipping, business calls and fax~s, and computer and software services claimed on Schedule C . ecs . 162, 274(d), 280F(d)(4) . Respondent's determination as to these adjustments is sustained .

I In addition, section 280A(a) provides as a general rule that "no deduction * * * shall be allowed with respect to the use of a dwelling unit which is used by the taxpayer during the taxable year as a residence ." However, section 280A(c)(1) sets forth the following exceptions to the general rule :

SEC . 280A(c) . Exceptions for Certain Business or Rental Use ; Limitation on Deductions for Such Use .

(1) Certain business use .--Subsection (a) shall not apply to any item to the extent such item is allocable to a portion of the dwelling unit which is exclusively used on a regular basis-- (A) the principal place of business for any trade or business of the taxpayer , (B) as a place of business which is used by patients, clients, or customers in meeting or dealing with the taxpayer in the normal course of his trade or business, o r (C) in the case of a separate structure which is not attached to the dwelling unit, in connection with the taxpayer's trade or business .

In determining whether petitioner's home was used exclusively and regularly as his principal place of business, there are several factors that militate against petitioner in this case . First, petitioner was not required under his contract with NOAA to perform his contract obligations at home . Second, petitioner admitted at trial that he performed services under the contract at NOAA's offices from 35 to 40 percent of the time and the remainder of his contract obligations were performed at home .

Third, employees of NOAA that petitioner trained were not required to report to petitioner's home for their training and there is no evidence that petitioner ever trained NOAA employees at his home .

As to the disallowed claimed deductions for insurance, repairs and maintenance expenses, and utilities, those expenses related to petitioner's use of his home in connection with his NOAA contract .

Generally, in determining whether a home constitutes the taxpayer's principal place of business, the Court examines the various locations in which the activity is con ucted, th e relative importance of the activities performe at each business location, and the time spent at each place . T~ be sure, althoug h petitioner's home was helpful and used in conn ction with his NOAA contract, the evidence in this case fails to persuade the Court that petitioner's home was the principal place of his business activity nor was his home exclusively used for such activity . Rather, the Court finds that the tr ining of the NOAA employees was of primary importance and that t e NOAA facilit y was petitioner's principal place of business . The Court, therefore, concludes that the facts of this case do not establish petitioner's entitlement to deductions for home office expenses under section 280A(c)(1) . The Court sustains respondent's determinations .

Decisidn will be entered for respondent .

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1. With the consent of the parties, the reassigned this case, after the death of Spe Carleton D . Powell, to Special Trial Judge D for disposition on the existing record .
2. Unless otherwise indicated, subsequent section references are to the Internal Revenue Code in effect for the year at issue .
3. On his income tax return for the year at issue, petitioner reported $35,222 income from NOAA . There is n o (continued .
4. Petitioner does not argue, nor does th record establish, that petitioner satisfied the requirements of sec . 7491(a) .