74 T.C. 1266 (1980)
JOHN B. HYNES, JR., and MARIE T. HYNES, PETITIONERS
COMMISSIONER of INTERNAL REVENUE, RESPONDENT
JOHN B. HYNES, JR., INDIVIDUALLY and AS TRUSTEE, WOOD SONG VILLAGE TRUST, and MARIE T. HYNES, INDIVIDUALLY, PETITIONERS
COMMISSIONER of INTERNAL REVENUE, RESPONDENT
Nos. 6852-76, 13886-78.
United States Tax Court
September 15, 1980
1. P created T, a trust, for the purpose of developing and selling certain real estate for profit. P was one of three trustees, but he held all the shares of beneficial ownership of T. Under the terms of the trust indenture, T was to continue until 20 years after the death of the original trustees unless terminated sooner by a majority vote of them. The trustees had broad powers to conduct the affairs of T, each having the individual authority to bind T in all matters relating to the trust property. The trust indenture also provided that the liability of the trustees and the beneficiary was limited to the property of T. Before any shares of T could be transferred, the beneficiary had to obtain the unanimous consent of all the trustees. On the Federal income tax returns filed by P and his wife for 1973, 1974, and 1975, they deducted the losses of T. Held: T is an association taxable as a corporation since T had associates, an objective to carry on a business for joint profit, continuity of life, centralization of management, and limited liability for its members. Sec. 301.7701-2, Proced. & Admin. Regs. Accordingly, P and his wife may not deduct the losses of T on their returns.
2. To finance the purchase of the trust property, T took out a mortgage with B. As a condition of granting the mortgage to T, B required P to personally guarantee the note. T defaulted on the mortgage, and B foreclosed on the property and sold it at public auction. The proceeds from such auction were insufficient to satisfy the amount due under the note, and B then sued P for the balance. P and his wife deducted such balance on their income tax return for 1976 as a business loss. Held, P and his wife are not entitled to a deduction for a business loss under sec. 165(c)(1), I.R.C. 1954, since any such loss would be a bad debt subject to sec. 166, I.R.C. 1954. Held, further, P and his wife are not entitled to a bad debt deduction in 1976, since he admitted that he paid nothing to B in such year.
3. At the time B foreclosed on the mortgage, T owed interest and real estate taxes on such mortgage. B included such amounts as part of the total due from P under his personal guarantee of the mortgage. P and his wife deducted such amounts for interest and real estate taxes on their Federal income tax return for 1976. Held, P and his wife are not entitled to deduct interest due on the mortgage of T since such amount is not interest on P's own indebtedness. Held, further, P and his wife are not entitled to deduct real estate taxes of T since such taxes were not imposed on them. Sec. 1.164-1(a), Income Tax Regs.
4. P was also employed as a newsman for a television station during the years in issue. He deducted as business expenses amounts for his wardrobe, laundry and dry cleaning, haircuts and makeup, hotels and meals, and automobile use and depreciation. Held, P has failed to prove that he is entitled to any deductions for such expenses in excess of the amounts allowed by the Commissioner.
5. P and his wife deducted in 1976 expenses for the use of a room in their residence as a home office. Held, under sec. 280A(a), I.R.C. 1954, they are not entitled to deduct such expenses since the home office was not the principal place of business of either of them, and it was not maintained for the convenience of their employers.
6. The Commissioner determined that T failed to report the sale of property in 1975 on its income tax return for such year. Held, determination of the Commissioner is sustained, since T failed to introduce any evidence on this issue.
C. Frederick Bent III and Philip Raoul Tetu, for the petitioners.
Barry J. Laterman, for the respondent.
The Commissioner determined the following deficiencies in the petitioners' Federal income taxes:
| John B. Hynes, Jr., and Marie T. Hynes
| Wood Song Village Trust
After concessions by the parties, the issues for decision are: (1) Whether the trust created by the petitioner for the purpose of developing and selling real estate for profit is an association taxable as a corporation; (2) whether the petitioner is entitled to a deduction for a business loss resulting from the foreclosure of a mortgage executed by the trust and guaranteed by him; (3) whether the petitioner may deduct in 1976 the interest and real estate taxes owed by the trust when the bank foreclosed on its mortgage; (4) whether the petitioner is entitled to deduct as business expenses under sections 162 and 274(d) of the Internal Revenue Code of 1954
certain expenditures for his wardrobe, laundry and dry cleaning, haircuts and makeup, hotels and meals, and automobile use and depreciation; (5) whether the petitioners may deduct under section 280A expenses claimed to have been incurred for the use of a room in their residence as a home office; and (6) whether the Wood Song trust failed to report income in 1975 from the sale of certain property. Page 1269
FINDINGS OF FACT Some of the facts have been stipulated, and those facts are so found. The petitioners, John B. Hynes, Jr., and Marie T. Hynes, husband and wife, resided in Chatham, Mass., at the time they filed their petitions in this case. They filed their joint Federal income tax returns for 1973, 1974, 1975, and 1976 with the Internal Revenue Service Center, Andover, Mass. The petitioner, Wood Song Village Trust (Wood Song or the trust), was organized under the laws of Massachusetts and had its principal office in Boston, Mass., at the time it filed a petition in this case. The trust filed Federal income tax returns (Forms 1041) for 1973, 1974, and 1975 with the Internal Revenue Service Center, Andover, Mass. Mr. Hynes will sometimes be referred to as the petitioner. During the years in issue, the petitioner was employed as a staff announcer and television newswriter by Boston Broadcasters, Inc., WCVB-TV (the station), in Needham Mass. His contract with the station required him to appear 5 days a week, 48 weeks during the year, on the 6 p.m. and 11 p.m. newscasts. During such years, such contract also required that he maintain " a physical appearance suitable for services as a television announcer." The petitioner wore regular business clothing on his television appearances, but his selection of such attire was limited to colors and patterns which would televise well. He often changed his shirt between the 6 p.m. and 11 p.m. broadcasts, and he had his hair cut once every 4 weeks to maintain a neat appearance. The petitioner was not reimbursed by the station for the costs of his wardrobe, dry cleaning and laundry, or haircut and makeup during the years in issue. The petitioner's employment contract with the station for 1978 does provide him with a clothing allowance. It was approximately 90 miles between the petitioner's home and the station, and therefore, during the years in issue, he lived in hotels near the station during the work week. He drove to his home in Chatham on weekends and often once during the workweek. The rooms in which he stayed were ordinary hotel rooms and did not have kitchen or office facilities. The station provided a large workroom with desks and typewriters for the use of all newsroom employees, and the petitioner worked wherever there was an empty desk. However, since the petitioner Page 1270
did not have his own office or telephone at the station, he sometimes had business meetings with various people at his hotels. He made telephone calls from the hotel rooms, and he kept a small filing box and his briefcase with personal papers in such rooms. The petitioner also used a room at his home in Chatham as his office and library. The room had a desk, filing cabinet, typewriter, and a telephone. He kept his personal papers in the room as well as his trade journals and some of the materials that he used as sources for his stories. Mrs. Hynes was a licensed real estate broker and had an office in Chatham, but she also used the room in the residence to deal with clients on the telephone and kept some of her records there. The station provided transportation when the petitioner left from the station with a news crew to cover a story. However, on some occasions, he used his personal automobile in the course of his employment with the station. At times, he drove his car to the scene of a news story to meet a film crew, or he used his car to meet with some of his news sources. He was not reimbursed by the station for such travel. The petitioner also used his car to drive to work each day and to drive to Chatham during the week and on weekends. The petitioner is also a licensed real estate broker. On August 11, 1973, he entered into an agreement with the trustees of the Nauset Realty Trust (Nauset Trust) under which he agreed to purchase from the trust 67 lots of real estate located in Brewster, Mass. (Brewster property). The purchase and sale agreement was subsequently modified on September 7, 1973, and the purchase price for the land was set at $335,000 plus various amounts which were to be paid to Frank Ireland of Orleans, Mass., who was designated as the broker for the land. On August 14, 1973, the petitioner applied to the Bass River Savings Band (Bass River Bank) for a mortgage...