White v. Comm'r ( 2007 )

T.C. Summary Opinion 2007-199
UNITED STATES TAX COURT
ROBERT A. WHITE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 8881-06S. Filed November 26, 2007.
Robert A. White, pro se.
Michael A. Raiken and Scott Hovey, for respondent.
PANUTHOS, Chief Special Trial Judge: This case was heard
pursuant to the provisions of section 7463 of the Internal
Revenue Code in effect at the time 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
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Revenue Code in effect for the year in issue, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
Respondent determined a deficiency of $6,175 in petitioner’s
2003 Federal income tax. After a concession,1 the issue for
decision is whether petitioner is entitled to certain deductions
claimed on Schedule A, Itemized Deductions.
Background
Some of the facts have been stipulated and are so found. We
incorporate the stipulation of facts and attached exhibits herein
by this reference. At the time the petition was filed,
petitioner resided in Fort Washington, Maryland.
Petitioner was a staff sergeant in the National Guard and
also worked as a customs and immigration inspector for the U.S.
Immigration and Naturalization Service (INS). After a
reorganization, petitioner was employed by the Department of
Homeland Security (DHS) during tax year 2003.2 DHS stationed
petitioner at points of entry to inspect persons entering the
country. Petitioner’s regular duty location was the Baltimore
1
Respondent conceded that petitioner is not liable for
$1,178 identified in the notice of deficiency as “uncollected
FICA tax”. Respondent has failed to provide an explanation as to
this adjustment.
2
The Court notes that on Mar. 1, 2003, the Department of
Homeland Security absorbed the U.S. Immigration and
Naturalization Service (INS). Thereafter, a new organization
called U.S. Customs and Border Protection combined INS
inspectors, Border Patrol, and Customs inspectors. See 6 U.S.C.
251 (Supp. II, 2002).
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Washington International Airport (BWI), where he worked a
regular, set schedule of about 40 hours per week. He also worked
some overtime assignments, often at BWI and sometimes at other
locations, such as seaports in and around Baltimore, Maryland.
These overtime assignments sometimes began and ended hours before
or after his regular shifts.
JD Tax and Accounting Services prepared petitioner’s 2003
Federal income tax return, which was timely filed.
Petitioner reported the following items on Schedule A:
Taxes paid
State and local income tax $4,191
Charitable contributions
Cash contributions 755
Noncash contributions 4,960
Total charitable contributions 5,715
Job expenses and other miscellaneous deductions:
Unreimbursed employee expenses
Vehicle expenses 7,196
Parking fees and tolls 1,285
Business expenses 5,190
Job search 325
Resume 155
Business cards 105
Briefcase 210
Cellular telephone 875
Uniform and cleaning 1,965
Shoes 225
Haircuts 215
Supplies 525
Accounting fees 360
Computer 2,285
Total unreimbursed employee expenses 20,916
2% of adjusted gross income (1,364)
Total miscellaneous after 2% floor 19,552
Total itemized deductions 29,458
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Respondent allowed the deduction for State and local taxes
and disallowed all other claimed deductions. In the notice of
deficiency, respondent allowed petitioner the standard deduction
for 2003 of $4,750 because it was greater than the total itemized
deductions allowed.
Petitioner filed a timely petition to this Court, asserting
that he is entitled to the itemized deductions claimed on the
return.
Discussion
In general, the Commissioner’s determinations set forth in a
notice of deficiency are presumed correct, and the taxpayer bears
the burden of proving that these determinations are in error.
Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).
Pursuant to section 7491(a), the burden of proof as to factual
matters shifts to the Commissioner under certain circumstances.
Petitioner has neither alleged that section 7491(a) applies nor
established his compliance with the requirements of section
7491(a)(2)(A) and (B) to substantiate items, maintain records,
and cooperate fully with respondent’s reasonable requests.
Petitioner therefore bears the burden of proof.
The issue in this case is whether petitioner is entitled to
the itemized deductions claimed for 2003, and, if so, in what
amounts. Deductions are a matter of legislative grace, and the
taxpayer bears the burden of proving that he is entitled to any
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deduction claimed. INDOPCO, Inc. v. Commissioner, 503 U.S. 79,
84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440
(1934). Taxpayers are required to maintain records sufficient to
enable the Commissioner to determine their correct tax liability.
Such records must substantiate both the amount and purpose of the
claimed deductions. Sec. 6001; Higbee v. Commissioner, 116 T.C.
438 (2001); sec. 1.6001-1(a), Income Tax Regs.
When a taxpayer establishes that he has incurred a
deductible expense but is unable to substantiate the exact
amount, we are generally permitted to estimate the deductible
amount. Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir.
1930). To apply the Cohan rule, however, the Court must have a
reasonable basis upon which to make an estimate. Vanicek v.
Commissioner, 85 T.C. 731, 742-743 (1985).
I. Charitable Contributions
Section 170(a) allows as a deduction any charitable
contribution made within the taxable year. Deductions for
charitable contributions are allowable only if verified under the
regulations prescribed by the Secretary. Sec. 170(a)(1).
Petitioner claimed a deduction for $755 of cash
contributions during 2003. He did not provide any canceled
checks, receipts, or other reliable written records to verify the
claimed contributions. He did not provide any contemporaneous,
written acknowledgments.
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Petitioner testified that in an average year he contributed
approximately $100 to the Combined Federal Campaign (CFC) and
that it was possible that he did so in 2003. His practice was to
write a check to CFC, and the reason for his uncertainty about
2003 was his lack of a canceled check. He further stated that he
normally contributes $20 each time he goes to church and that he
probably attended church “maybe three times in 2003.”
Petitioner’s testimony was vague and uncertain.
In general, the regulations require the taxpayer to maintain
one of the following for each contribution of money: (1) A
canceled check; (2) a receipt from the donee; or (3) in the
absence of a check or receipt, other reliable written records.3
Sec. 1.170A-13(a)(1), Income Tax Regs. The taxpayer must
establish the reliability of the written records. Sec. 1.170A-
13(a)(2)(i), Income Tax Regs. Any contribution of $250 or more
shall not be allowed unless the taxpayer substantiates the
contribution by a contemporaneous written acknowledgment of the
contribution by the donee organization.4 Sec. 170(f)(8).
3
Both receipts and reliable written records should include
the name of the donee, the date of the contribution, and the
amount of the contribution. Sec. 1.170A-13(a)(1)(ii) and (iii),
Income Tax Regs.
4
The written acknowledgment must state the amount of cash
and a description (but not necessarily the value) of any property
other than cash the taxpayer donated and also whether the donee
provided any consideration to the taxpayer. Sec. 1.170A-
13(f)(2), Income Tax Regs.
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We do not accept petitioner’s testimony as a reasonable
basis to estimate his cash charitable contributions.
Respondent’s determination as to the claimed cash charitable
contributions is sustained.
Petitioner claimed a deduction of $4,950 for noncash
charitable contributions. To substantiate his noncash charitable
contributions, petitioner provided copies of two receipts from
the Salvation Army and two self-prepared logs. One of the
receipts does not state the date on which the property was
contributed. The other receipt indicates that the contribution
was made on May 4, 2006. Neither receipt contains the value of
the items contributed.
To verify a charitable contribution for property other than
money, the regulations require the taxpayer to maintain a receipt
from the donee for each contribution showing the following: (1)
The name of the donee; (2) the date and location of the
contribution; and (3) a description of the property in detail
reasonably sufficient under the circumstances. Sec. 1.170A-
13(b)(1), Income Tax Regs. Where it is “impractical” to obtain a
receipt, the taxpayer must maintain “reliable written records” of
the noncash contributions.5 See id. However, deductions for
5
A reliable written record for purposes of substantiating a
noncash contribution shall contain the name and address of the
donee, the date and location of the contribution, a description
of the property, and the fair market value of the property at the
(continued...)
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contributions of $250 or more under section 170(a), whether cash
or property, must be substantiated by a contemporaneous written
acknowledgment of the contribution by the donee organization.
Sec. 170(f)(8).
The contribution logs are neither receipts nor
acknowledgments prepared by the donee organization. The receipts
and contribution logs do not meet the substantiation requirements
of section 1.170A-13(b)(1), Income Tax Regs., nor do they meet
the heightened substantiation requirements of section 170(f)(8).6
Respondent’s determination as to the claimed noncash charitable
contributions is sustained.
II. Miscellaneous Itemized Deductions
On his 2003 Schedule A, petitioner reported unreimbursed
employee expenses totaling $20,916. After accounting for the
2-percent floor of section 67(a), petitioner claimed a
miscellaneous itemized deduction of $19,552.
Respondent disallowed all of the miscellaneous itemized
deductions because petitioner did not prove to respondent that he
paid or incurred the expenses in 2003 or that the expenses were
5
(...continued)
time of the donation. Sec. 1.170A-13(b)(2)(ii), Income Tax Regs.
6
Petitioner told his return preparer that he donated used
clothes and furniture in 2003. However, he had no idea how his
return preparer arrived at the deduction claimed in the amount of
$4,950; “when I saw the 4,000 I couldn’t phantom [sic] donating
4,000 worth of clothes.”
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ordinary and necessary for petitioner’s business. Respondent
asserts that petitioner was eligible for reimbursement from DHS
for expenses incurred performing his duties.
Section 162 allows deductions for all ordinary and necessary
business expenses paid or incurred during the taxable year in
carrying on a trade or business. Performing services as an
employee constitutes a trade or business. Primuth v.
Commissioner, 54 T.C. 374, 377-378 (1970). Those expenses that
are (1) ordinary and necessary to the taxpayer’s business and (2)
paid or incurred in a given year are deductible that year. Sec.
162(a); see sec. 1.162-17(a), Income Tax Regs. However,
personal, living, or family expenses are not deductible. See
secs. 162(a), 262(a); sec. 1.162-17(a), Income Tax Regs.
Certain categories of expenses must also satisfy the strict
substantiation requirements of section 274(d) before those
expenses will be allowed as deductions. Expenses subject to
section 274(d) include travel and meal expenses, as well as
expenses for listed property, such as passenger automobiles,
computers, and cellular telephones. Secs. 274(d), 280F(d)(4).
The taxpayer must substantiate the amount, time, place, and
business purpose of the expenditures and must provide adequate
records or sufficient evidence to corroborate his own statement.
See sec. 274(d); sec. 1.274-5T(c)(1), Temporary Income Tax Regs.,
50 Fed. Reg. 46016 (Nov. 6, 1985). In order to meet the
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“adequate records” requirement, a taxpayer is to maintain an
account book, diary, statement of expenses, or similar record and
documentary evidence (such as receipts, paid bills, or similar
evidence) which, when combined, establish each element of the
expense that section 274(d) requires substantiated. Sec.
1.274-5T(c)(2)(i), Temporary Income Tax Regs., 50 Fed. Reg. 46017
(Nov. 6, 1985). Section 274(d) supersedes the general rule of
Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930), and prohibits
the Court from estimating the taxpayer’s expenses with respect to
expenses subject to the strict substantiation requirement.
Sanford v. Commissioner, 50 T.C. 823, 827 (1968), affd. per
curiam 412 F.2d 201 (2d Cir. 1969).
We now consider whether petitioner is entitled to some or
all of the claimed miscellaneous itemized deductions.
Vehicle Expenses
Using the standard mileage rate, petitioner claimed a
deduction in the amount of $7,196 for vehicle expenses. At
trial, petitioner testified that because his tax preparer told
him that trips to work outside his normal commute were
deductible, he has been claiming deductions for driving to
overtime shifts since he started working for the Government in
1997. For 2003, he provided his return preparer with the total
number of miles he drove and an estimate of how many miles were
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for overtime work. The preparer calculated the total expense
deduction.
Petitioner introduced 69 Inspection Overtime Forms and 12
monthly printouts of a computer calendar for 2003. The Court
finds that petitioner worked the overtime shifts reflected on the
Inspection Overtime Forms. The monthly computer calendar
printouts purport to substantiate the dates, overtime hours,
locations, and miles driven for petitioner’s overtime shifts.
Petitioner drove to various locations for overtime work,
including BWI, his usual place of business. He typically
returned home before and after performing overtime inspections at
other locations. He rarely drove directly from BWI to a second
work location.
Petitioner did not identify the overtime shifts for which he
drove directly from one work location to a second work location.
Instead, he contends that all transportation for overtime is
deductible if outside his usual commute. Transportation expenses
for trips between two places of business are deductible, but
transportation to and from work, whether for a regular shift or
for an overtime shift, is a nondeductible personal commuting
expense. See Curphey v. Commissioner, 73 T.C. 766, 777 (1980).
Furthermore, petitioner admitted that DHS reimbursed him for
transportation expenses and that DHS provided a Government car
for trips between BWI and the seaport for ship inspection
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assignments during his normal shifts. Petitioner claimed that
DHS told inspectors that they were not authorized for vehicle
expenses reimbursement for overtime shifts because DHS was paying
them overtime. Petitioner has not introduced any evidence to
support his assertion that reimbursement was denied for any of
his transportation in a personal automobile between duty posts
(i.e., noncommuting transportation between business locations).
Where an employee incurs expenses for which he is entitled
to, but does not, seek reimbursement, he is not allowed to deduct
those expenses. Walliser v. Commissioner, 72 T.C. 433, 437 n.4
(1979); Wollesen v. Commissioner, T.C. Memo. 1987-611, affd.
without published opinion 875 F.2d 317 (4th Cir. 1989).
Finally, even if petitioner claimed and DHS denied
reimbursement for the noncommuting expenses, petitioner did not
furnish any evidence to show how many of the miles driven were
between places of business. The Court concludes that the
evidence petitioner presented is insufficient to satisfy the
strict substantiation requirements of section 274(d).
Respondent’s determination as to the claimed vehicle expense
deduction is sustained.
Parking Fees and Tolls
Petitioner claimed a deduction of $1,285 for unreimbursed
parking fees and tolls. Petitioner did not provide any evidence
to support these expenses, to demonstrate that they were for
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business transportation rather than for personal commuting
expenses, or to show that he was not eligible for reimbursement
from DHS. Furthermore, petitioner testified that he did not know
how his return preparer came up with the figure for this
deduction. Respondent’s determination as to the claimed parking
fees and tolls deduction is sustained.
Business Expenses
Petitioner claimed a $5,190 deduction for other employee
business expenses.7 As with the claimed deduction for parking
fees and tolls, petitioner did not provide any evidence to
support this deduction, and he testified that he did not know how
his return preparer came up with the figure for this deduction.
Respondent’s determination as to the claimed business expense
deduction is sustained.
Job Search and Resume
Petitioner claimed deductions of $325 for job search
expenses and $155 for resume expenses. He testified that the
expenses were for computer ink and ribbons consumed to print job
announcements and his resume and for having his resume
professionally prepared.
7
On line 4 of Form 2106, Employee Business Expenses,
petitioner reported expenses other than vehicle expenses; parking
fees, tolls, and transportation; travel expenses while away from
home overnight; and meals and entertainment.
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To the extent that an employee incurs expenses searching for
new employment in the employee’s same trade or business, the job
search expenses are deductible under section 162(a). See Primuth
v. Commissioner, 54 T.C. 377-378. However, if the employee is
seeking a job in a new trade or business, the expenses are not
deductible under section 162(a). See Frank v. Commissioner, 20
T.C. 511, 513-514 (1953). Job search expenses include resume
preparation expenses, postage, and travel and transportation
expenses. See Murata v. Commissioner, T.C. Memo. 1996-321.
Petitioner did not provide any documentary evidence that he
actually incurred any job search or resume expenses in 2003. We
do not accept petitioner’s testimony as a reasonable basis to
estimate any job search or resume expenses. Respondent’s
determination as to the claimed job search and resume expense
deductions is sustained.
Business Cards and Briefcase
Petitioner claimed deductions of $105 for business cards and
$210 for a briefcase. Petitioner did not provide any receipts to
document that he purchased these items in 2003.
Petitioner introduced a business card that identifies him as
an immigration inspector for the INS within the Department of
Justice.8 Petitioner testified that “We weren’t allowed business
8
Petitioner began working for the INS in 1997 and did not
specify when he purchased these business cards. These cards were
(continued...)
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cards at that time, so I had to go out and purchase business
cards on my own.”
Petitioner also testified that he may have attended two
training sessions in 2003 and that he purchased a briefcase to
carry materials back from a training session in Georgia. He did
not specify when he bought the briefcase.
We are not convinced that petitioner purchased these items
in 2003, particularly given the short shelf life of any INS
business cards printed in 2003, see supra note 8. We do not
accept petitioner’s testimony as a reasonable basis to estimate a
2003 deduction for these expenses, in the absence of documentary
proof that petitioner actually purchased the business cards and
briefcase in 2003. Respondent’s determination as to the claimed
business card and briefcase expense deductions is sustained.
Cellular Telephone
Petitioner claimed a deduction of $875 for cellular
telephone expenses in 2003. Petitioner asserted that he incurred
these charges making work-related calls when on overtime
assignments. Petitioner did not offer any receipts, bills, or
other documentary support for these expenses.
Petitioner has failed to meet the strict substantiation
requirements required by sections 274(d) and 280F(d)(4)(A)(v) for
8
(...continued)
obsolete by March of 2003, since petitioner worked for a
different organization at that point. See supra note 2.
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cellular telephone expenses, and he has failed to demonstrate
that he was not eligible for reimbursement for any such work-
related expenses. Respondent’s determination as to the claimed
cellular telephone expense deduction is sustained.
Uniform and Cleaning
Petitioner claimed a deduction of $1,965 for the cost of
cleaning his military and DHS uniforms in 2003.
As an immigration inspector, petitioner wore a white shirt
with insignia on the sleeves, blue slacks, and, depending on the
season, a uniform jacket with an insignia on the chest. Normal
washing was at times insufficient to clean the DHS uniform. For
example, if petitioner rubbed against a greasy cable when
inspecting a ship, ordinary laundering would not remove the
stain. Professional cleaning was at times necessary.
Two days each month and 2 weeks each year, petitioner
attended National Guard drills. Petitioner estimated that he
paid $12 each time he had his military uniform cleaned.
Petitioner did not offer any estimate of the cost to clean his
DHS uniform or indicate how often his uniforms required
professional cleaning.
Petitioner described only cleaning expenses. He did not
testify that he spent more to purchase uniforms than any uniform
allowance provided by DHS or the National Guard. Petitioner
admitted that he did not know how his return preparer arrived at
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the $1,965 deduction for cleaning expenses and did not offer any
receipts to substantiate any cleaning expenses.
Where business clothes are suitable for general wear, their
cost is generally not deductible. However, where custom and
usage forbid wearing a uniform when off duty, deduction is
allowed. The cost of maintaining clothes for work is deductible
when the purchase price was deductible. Hynes v. Commissioner,
74 T.C. 1266, 1290 (1980).
We accept petitioner’s testimony that professional cleaning
was at times necessary for his uniforms, and we find that it
would have been improper for petitioner to wear either his DHS
uniform or his military uniform when off duty. We conclude that
petitioner is entitled to a deduction for uniform cleaning in the
amount of $480 for 2003.9
Shoes
Petitioner claimed a $225 deduction for expenses relating to
work shoes. Petitioner testified that he had an allowance for
shoes but would occasionally have his shoes repaired and that he
spent $225 in 2003 on shoe repair. Petitioner estimated that
each heel repair cost $25 to $40 but did not offer any receipts
or any details of how often such repairs were necessary.
9
When estimating the taxpayer’s expenses, the Court’s
findings bear heavily against the taxpayer whose inexactitude is
of his own making. Cohan v. Commissioner, 39 F.2d 540, 544 (2d
Cir. 1930). We allow 15 cleanings of his military uniform at $12
each and 50 cleanings of his DHS uniform at $6 each.
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Absent some documentary evidence that petitioner actually
repaired any shoes in 2003 notwithstanding his shoe allowance, we
do not accept petitioner’s testimony as a reasonable basis to
estimate his shoe repair expenses. Respondent’s determination as
to the claimed shoe expense deduction is sustained.
Haircuts
Petitioner claimed a deduction of $215 for haircuts in 2003.
Petitioner testified that he paid $60 per month for haircuts and
that his return preparer advised him that, since DHS and the
military require petitioner to be well groomed, his weekly
haircuts were deductible.
Grooming remains an inherently personal expense and is not
deductible, regardless of whether an employer requires a
particularly neat appearance. Hynes v. Commissioner, supra at
1291-1292. Respondent’s determination as to the claimed haircut
expense deduction is sustained.
Supplies
Petitioner claimed a deduction of $525 for supplies but at
trial testified that the only supply expenses he incurred in 2003
were those related to his job search (discussed above). He was
unable to explain how his return preparer came up with the $525
supplies expense figure. Respondent’s determination as to the
claimed supplies expense deduction is sustained.
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Accounting Fees
Petitioner claimed a deduction in 2003 of $360 for
accounting fees as an unreimbursed employee business expense.10
Petitioner testified that he paid his return preparer in cash.
He did not produce any receipts.
It is apparent from the evidence that petitioner paid to
have his 2003 Federal income tax return prepared.11 We conclude
that petitioner is entitled to a deduction for tax preparation
expenses paid in 2003 in the amount claimed, $360.
Computer
Petitioner claimed a deduction of $2,285 for a computer but
did not produce any receipts or other records to support the
deduction. Computers are listed property, subject to the strict
substantiation requirements of section 274(d). Secs. 274(d),
280F(d)(4)(A)(iv). Accordingly, we may not estimate an allowable
deduction for petitioner’s claimed computer expense.
10
Petitioner testified that he paid this amount to his
return preparer for 2003. The record does not indicate why
petitioner included the accounting fees expense with his
unreimbursed employee business expenses on line 20 of Schedule A,
Itemized Deductions, rather than on line 21, which is labeled Tax
Preparation Fees.
11
Petitioner’s 2003 return includes the name of
petitioner’s return preparer, as well as the preparer’s Social
Security number or paid preparer tax identification number, the
name and address of the firm petitioner used, JD Tax Accounting
Services, and the phone number and employer identification number
of that firm.
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Furthermore, petitioner testified that he bought a computer
but that he was uncertain whether he purchased it in 2003.
Respondent’s determination as to the claimed deduction for
computer expenses is sustained.
To reflect the foregoing,
Decision will be entered
under Rule 155.12
12
The deductions allowed herein do not appear to exceed the
2-percent floor imposed by sec. 67(a) on the miscellaneous
itemized deductions of individuals. Accordingly, the standard
deduction may well exceed petitioner’s allowed itemized
deductions. We leave the calculations to the parties.