Vaksman v. CIR ( 2002 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________________________
No. 02-60062
(Summary Calendar)
_______________________________
FABIAN VAKSMAN,
Petitioner-Appellant,
versus
COMMISSIONER OF INTERNAL REVENUE,
Respondent-Appellee.
_________________________________________________
Appeal from the United States Tax Court
(4741-00)
_________________________________________________
November 21, 2002
Before DAVIS, WIENER and EMILIO M. GARZA, Circuit Judges.
WIENER, Circuit Judge*:
Petitioner-Appellant Fabian Vaksman appeals the decision of
the United States Tax Court determining a deficiency in his federal
income tax for 1997 in the amount of $2,108. For essentially the
same reasons as are set forth in the Tax Court’s ruling, we
affirm.1
*
Pursuant to 5th Cir. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5th Cir. R. 47.5.4.
1
We review the Tax Court’s factual findings for clear error
and examine conclusions of law de novo. Dunn v. Comm’r of Internal
Revenue, 301 F.3d 339, 348 (5th Cir. 2002).
Vaksman appeals the Tax Court’s determinations regarding the
deductions he claimed for (1) depreciation of his automobile; (2)
cellular telephone expenses; (3) educational expenses; and (4)
business use of his home. He also challenges specified IRS policies
and procedures and alleges several constitutional violations. We
briefly address each of Vaksman’s claims.
1. Automobile Depreciation
Vaksman asserts that he drove his automobile 15,000 miles in
1997, of which 79.10 percent, or 11,865 miles were for business. On
this basis, he computed a $1,325 depreciation deduction. He did
not, however, submit any records to substantiate the business use
of his vehicle, or to distinguish business use from personal use.
Passenger automobiles are “listed property” subject to the
strict substantiation requirements of § 274(d) of the Internal
Revenue Code (“I.R.C.”). Under I.R.C. § 274(d), “[n]o deduction or
credit shall be allowed . . . with respect to any listed property
. . . unless the taxpayer substantiates by adequate records or
sufficient evidence corroborating the taxpayer’s own statement” (1)
the amount of the expense; (2) the time and place of the use of the
property; and (3) the “business purpose of the expense.”2 As
Vaksman has provided none of the required documentation, but relies
solely on his own uncorroborated estimate, the Tax Court properly
disallowed the deduction.
2
26 U.S.C. § 274(d)(4).
2
2. Cellular Telephone Expenses
Vaksman claimed a deduction of $715 for cellular telephone
expenses. Cellular telephones are also “listed property” subject to
the substantiation requirements of I.R.C. § 274. As with his
automobile, Vaksman failed to submit any documentation to establish
the business use of his cellular telephone, the amount he paid for
the service, or even the identity of the telephone company. The Tax
Court properly disallowed the deduction.
3. Educational Expenses
Vaksman claimed a deduction of $1,550 for “continuing
education.” On appeal, he argues that his tuition payments to the
University of Houston for “dissertation hours” in the history
department were “used as a business expense” and were necessary to
generate business as a Russian translator.
As a threshold matter, we again note that Vaksman has failed
to submit documentation in support of the claimed deduction. Even
if the deduction were adequately documented, however, Vaksman’s
tuition payments to the university would not be deductible as
business expenses under these circumstances. The I.R.C. authorizes
deductions for business expenses that are “ordinary and
necessary.”3 An expense is “ordinary and necessary” if it is
“appropriate, helpful, and of a common or frequent occurrence in
3
26 U.S.C. § 162(a).
3
the type of business carried on by the taxpayer.”4 The expense
“must be directly related to the taxpayer’s business.”5
Vaksman has failed to establish that his pursuit of a doctoral
degree in history “relates to” his translating business. Although
Vaksman contends that a university affiliation was necessary to
generate translation business, he produced no evidence; and the
record on appeal reflects no evidence to support this contention.
Neither we, the Tax Court, nor the Commissioner has questioned the
fact that Vaksman is engaged in the business of Russian
translating; nevertheless, he has failed to prove a “nexus” between
this business and the study of United States history. Although
association with a local university, and access to computers and
other university resources, may marginally benefit any businessman,
we agree with the Tax Court’s conclusion that “[t]he ‘ordinary and
necessary’ requirement . . . is not so elastic a concept as to
countenance a marginal relationship between an expense and a
taxpayer’s trade or business.”6
4. Business Use of Home
Vaksman claimed a home office deduction of $5,280 based on his
4
Tulia Feedlot, Inc. v. United States, 513 F.2d 800, 804 (5th
Cir. 1975).
5
Hymel v. Comm’r of Internal Revenue, 794 F.2d 939, 940 (5th
Cir. 1986).
6
82 T.C.M. (CCH) 19, R. 17, at 11.
4
estimate that, in 1997, he used 80 percent of the 900 available
square feet in his apartment (720 square feet) for his translating
business. The Commissioner reduced the deduction to $1,588,
allocating 25 percent of Vaksman’s $6,350 rent to business use.
As a general rule, “the use of a dwelling unit which is used
by the taxpayer during the taxable year as a residence” is not
deductible.7 This rule does not apply, however, to the portion of
a residence “which is exclusively used on a regular basis . . . as
the principal place of business for any trade or business of the
taxpayer.”8
Vaksman failed to demonstrate that he used 80 percent of his
residence exclusively and on a regular basis for his translating
business. As the Tax Court explained, Vaksman’s claim in this
regard is belied by his own admission that he worked only seven
days in 1997. Moreover, Vaksman’s inclusion of his bathroom and
bedroom in his estimate of “business use” is misplaced; although he
may have used these areas on occasion for a business purpose, any
business use of these areas was not exclusive. We conclude that the
Tax Court properly disallowed the $5,280 deduction in favor of a
more reasonable——and, we might add, generous——$1,588 home office
deduction.
7
26 U.S.C. § 280A(a).
8
Id. § 280A(c)(A).
5
5. Remaining Claims
Vaksman’s remaining arguments are entirely without merit. He
dedicates the bulk of his argument on appeal to perceived
unfairness in the Internal Revenue Service (“IRS”) procedures
leading to his notice of deficiency. In particular, Vaksman objects
to the ability of an IRS supervisor to “overrule” or modify the
conclusions of an auditor and repeatedly alleges “bad faith” on the
part of the IRS for failing to comply with his discovery requests.
Vaksman also asserts sweeping First Amendment and constitutional
issues and seeks an award of costs and attorney fees.
Courts do not “look behind the notice of deficiency to
determine or examine the evidence used, or the propriety of the
Commissioner’s motives in making the deficiency determinations.”9
The law is well-settled that the government’s determination of
deficiency is presumed to be correct; this “presumption of
correctness generally prohibits a court from looking behind the
Commissioner’s determination even though it may be based on hearsay
or other evidence inadmissible at trial.”10 For this reason, we,
like the Tax Court, will not revisit or second-guess the methods of
the IRS.
9
Pasternak v. Comm’r of Internal Revenue, 990 F.2d 893, 898
(6th Cir. 1993).
10
Portillo v. Comm’r of Internal Revenue, 932 F.2d 1128, 1133
(5th Cir. 1991).
6
Vaksman’s First Amendment claim is grounded in his complaint
that the IRS sent an agent to his home to investigate his
transmission of a poem to an IRS Group Manager. Assuming, without
concluding, that the Tax Court had jurisdiction to consider this
claim and that we have appellate jurisdiction to review it, we hold
that Vaksman’s First Amendment claim is wholly without merit and
not worthy of further discussion.
Finally, Vaksman’s claim for costs and attorney fees is
equally without merit and borders on frivolousness. As a pro se
litigant, he is not entitled to attorney fees because, quite
simply, he did not actually “pay” or “incur” attorney fees.11 In
addition, Vaksman was not the “prevailing party” as defined in
I.R.C. § 7430(c)(4). Vaksman neither “substantially prevailed with
respect to the amount in controversy”12——the deficiency was reduced
only from $2,217 in the original notice, to $2,108 in the Tax
Court’s decision——nor “substantially prevailed with respect to the
most significant issues.”13
We recognize that Vaksman has serious misgivings about the
manner in which federal income taxes are collected in the United
11
Corrigan v. United States, 27 F.3d 436, 438 (9th Cir. 1994)
(“A pro se litigant does not pay or incur attorney fees. Thus,
attorney fees are not available to pro se litigants under I.R.C. §
7430).
12
26 U.S.C. § 7430(c)(4)(i)(I).
13
Id. § 7430(c)(4)(i)(II).
7
States. It is obvious, and unfortunate, that he feels that he has
been unfairly and illegally “targeted” by the IRS. Nevertheless,
our careful review of the record, the parties’ briefs, and the
applicable law convinces us that, as a matter of law, all Vaksman’s
claims in the Tax Court, and his contentions on appeal, are
baseless. Finally, we caution Vaksman against further prosecution
of these claims, lest he incur sanctions for protracting litigation
that is legally frivolous.
Conclusion
For essentially the same reasons set forth by the Tax Court,
its disposition of this action is, in all respects,
AFFIRMED.
8