Sharon A. Struble ( 2022 )

T.C. Summary Opinion 2022-1UNITED STATES TAX COURT
SHARON A. STRUBLE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 329-19S. Filed January 6, 2022.
Joel Cruz-Esparza, for petitioner.
Michael T. Garrett and Matthew A. Houtsma, for respondent.
SUMMARY OPINION
NEGA, Judge: This case was heard pursuant to the provisions of section
7463 in effect when the petition was filed. 1 Pursuant to section 7463(b), the
1
Unless otherwise indicated, all section references are to the Internal
Revenue Code (Code) in effect at all relevant times, and all Rule references are to
the Tax Court Rules of Practice and Procedure. All monetary amounts are rounded
to the nearest dollar.
Served 01/06/22
-2-
decision to be entered is not reviewable by any other court, and this opinion shall
not be treated as precedent for any other case.
By notice of deficiency dated October 15, 2018, respondent determined a
deficiency of $3,998 in petitioner’s Federal income tax for tax year 2015 (year at
issue).
After concessions,2 the issues remaining for decision are whether petitioner
is entitled to deductions for unreimbursed employee expenses and for tax
preparation fees claimed for the year at issue.
Background
I. Petitioner’s Military Background
Some of the facts are stipulated and are so found. The stipulation of facts
and the attached exhibits are incorporated herein by this reference. Petitioner
resided in New Mexico when she timely filed her petition. During the year at issue
petitioner was employed by the United States Air Force and held the rank of senior
2
In her posttrial brief petitioner conceded that she is not entitled to deduct
meals and entertainment expenses, which she had reported on her Form 2106,
Employee Business Expenses, submitted with her Schedule A, Itemized
Deductions, for the year at issue. Petitioner also has conceded, as further discussed
below, that she is not entitled to deduct the full amount of the mileage expenses,
travel expenses, and “other” business expenses as reported on her Form 2106 for
the year at issue.
-3-
master sergeant. Her primary duty was to act as a medical facilitator, coordinating
across the Department of Defense among the Air Force, Army, and Navy to ensure
each branch was in compliance with applicable standards and regulations for
medical training. Petitioner was a trained medic and was assigned medical
facilitator duties as a result of this training.
During the year at issue petitioner was stationed at Fort Sam Houston in San
Antonio, Texas, but she normally performed her duties as a medical facilitator at
both Lackland Air Force Base (Lackland) in San Antonio, Texas, and Fort Sam
Houston. Petitioner’s duties as a medical facilitator required her to drive back and
forth regularly between Fort Sam Houston, Lackland, and her home off base in San
Antonio. Lackland was approximately 15 miles from her home, and Fort Sam
Houston was approximately 30 miles from her home. Petitioner was reimbursed
for all expenses incurred in connection with her duties as a medical facilitator, and
none of the expenses at issue involves expenses incurred as a medical facilitator.
In addition to her primary job duties as a medical facilitator, petitioner
performed duties as an additional duty first sergeant (ADFS) from January 1
through July 31, 2015. As an ADFS petitioner assisted active first sergeants in the
performance of their duties and occasionally performed the duties of an active first
duty sergeant if he or she was otherwise unavailable. Petitioner’s tasks as an
-4-
ADFS involved a variety of personnel issues in the medical operations squadron,
such as taking care of individuals with health problems, guiding individuals
through financial issues incident to their health problems, and making death
notifications. As a general matter, her ADFS assignments ranged from days to
months. Petitioner’s ADFS duties usually involved travel between various military
bases in San Antonio, including Lackland, Fort Sam Houston, and occasionally
Randolph Air Force Base in Randolph, Texas. All expenses incurred in connection
with her ADFS duties were not reimbursable, and only her ADFS-related expenses
are at issue herein.
II. Petitioner’s Return and Unreimbursed Business Expenses
Petitioner timely filed Form 1040, U.S. Individual Income Tax Return, for
the year at issue, to which she attached Schedule A and Form 2106, which reported
her unreimbursed employee business expenses for the year at issue. In relevant
part petitioner deducted the following unreimbursed business expenses for the year
at issue: (1) $9,387 for mileage; (2) $1,249 for travel, and (3) $15,098 for “other”.
Petitioner now claims that her deductions for those respective expenses are $2,882,
$2,317, and $7,156. Petitioner also claimed a $304 deduction for tax preparation
fees on her Schedule A.
-5-
A. Business Mileage Expenses
Petitioner reported the business mileage expenses on her Form 2106 on the
basis of business miles driven rather than actual vehicle expenses, such as vehicle
maintenance (in other words, at the standard mileage rate).
To substantiate her business miles driven, petitioner kept a self-prepared
ledger documenting business miles driven each month of the year at issue. The
ledger shows that petitioner traveled 5,012 miles for business purposes, and she
computed her reported $2,882 in business miles expenses by multiplying 5,012 by
a standard mileage rate of 57.5 cents per mile.
Petitioner’s ledger was not a contemporaneous record, and she usually
updated it quarterly using a calendar that purportedly recorded contemporaneously
all of her business mileage. Petitioner did not produce the calendar into evidence.
Petitioner’s ledger entries do not clearly state a business purpose for the reported
mileage, and the entries do not clearly indicate that her business mileage expenses
were nonreimbursable costs incurred in connection with her ADFS duties. For
example, each business mile entry includes the following generic description:
“Home to * * * [Fort Sam Houston] to Lackland to Back Home,” without
specifying whether the cost was incurred for nonreimbursable purposes.
-6-
B. Travel Expenses
Petitioner incurred her now-reported travel expenses while traveling to a
friend’s funeral in Louisiana and to attend a training session in Houston. Specific
expenses arising from these trips include, but are not limited to, $591 in airfare to
and from Louisiana and $363 in car rental in connection with her Houston trip.
To substantiate these travel expenses, petitioner relied on her ledger and a
number of receipts produced into evidence at trial. Petitioner’s ledger and receipts
did not establish a business purpose behind her purported travel expenses.
Petitioner was not required or designated by the Air Force to travel to her friend’s
funeral, and the Air Force specifically designated another individual to attend the
funeral in an official capacity. Additionally, petitioner had a personal friendship
with the decedent, and that personal connection was the primary reason for
petitioner’s attendance at the funeral. She also was not required to attend the
training in Houston and did not provide a business purpose for expenses in
connection with her attendance.
C. Other Business Expenses
Petitioner’s now-reported other business expenses consist of cell phone bills
of $1,407; miscellaneous office expenses including an iPad, HDMI cables,
speakers, software, and postage of $4,196; uniform maintenance expenses of
-7-
$1,495; and parking expenses of $58. To substantiate her expenses, petitioner
relied on her ledger and receipts produced as evidence. Petitioner’s records in
connection with her miscellaneous office expenses, which include but are not
limited to the cost of a “refurbished iPod or iPad” of $722 and postage expenses of
$34, do not state any business purpose. Petitioner’s ledger does not describe the
purpose behind her miscellaneous office expenses with any specificity.
III. Notice of Deficiency and Petition
After examination, respondent issued a notice of deficiency dated October
15, 2018, determining a deficiency of $3,998 in petitioner’s Federal income tax for
the year at issue. Attached to the notice of deficiency was Form 886-A,
Explanation of Items, which explained why respondent disallowed petitioner’s
unreimbursed business expense deduction. The form explained that, on the basis
of documentation submitted, petitioner attempted to deduct mileage and actual
vehicle expenses, which is not allowable. Further, the form stated that petitioner’s
mileage expenses reflected the cost of commuting between her residence and
places of employment, which is not an allowable deduction. Respondent
disallowed the nonmileage expense deduction because petitioner failed to
adequately substantiate her reported expenses.
-8-
Discussion
I. Burden of Proof
The Commissioner’s determinations in a notice of deficiency are generally
presumed correct, and the taxpayer generally bears the burden of proving those
determinations erroneous. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115
(1933). Deductions are a matter of legislative grace; taxpayers must demonstrate
their entitlement to deductions allowed by the Code and substantiate amounts
claimed as deductions. See INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84
(1992); sec. 1.6001-1(a), Income Tax Regs. This includes the burden of
substantiation. Hradesky v. Commissioner, 65 T.C. 87, 89-90 (1975), aff’d per
curiam, 540 F.2d 821 (5th Cir. 1976). In certain circumstances the burden of proof
on factual issues may shift to the Commissioner. See sec. 7491(a). Petitioner does
not contend that she has satisfied the requirements of section 7491 for shifting the
burden of proof. See Rule 142(a). Accordingly, the burden of proof remains on
her on all factual issues.
II. Petitioner’s Unreimbursed Business Expense Deductions
A taxpayer may deduct unreimbursed employee expenses as ordinary and
necessary business expenses under section 162. Lucas v. Commissioner, 79
T.C. 1, 6 (1982). An employee cannot deduct such expenses to the extent that the
-9-
employee is entitled to reimbursement for them. Id. at 7. An employee of the Air
Force may incur unreimbursed employee business expenses. See Marshall v.
Commissioner, T.C. Memo. 1992-65. A taxpayer may not deduct personal, living,
or family expenses. Sec. 262.
When a taxpayer, such as petitioner, establishes that she paid a deductible
expense but fails to establish the amount of the deduction, the Court normally may
estimate the amount allowable as a deduction. Cohan v. Commissioner, 39 F.2d
540, 543-544 (2d Cir. 1930). However, the expenses at issue are specified in
section 274 and are subject to strict substantiation rules thereunder that supersede
the Cohan rule. See Boyd v. Commissioner, 122 T.C. 305, 320 (2004);
sec. 1.274-5T(a), Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6,
1985). Section 274(d) provides that certain expenses, such as vehicle mileage and
travel expenses, are not deductible unless the taxpayer substantiates them with
adequate records or sufficient evidence corroborating his or her own statement that
establish: (1) the amount of the expense, (2) the time and place of the travel or use
of the property, and (3) the business purpose of the expenditure. Balyan v.
Commissioner, T.C. Memo. 2017-140, at *7; sec. 1.274- 5T(b)(6), Temporary
Income Tax Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985).
- 10 -
The strict substantiation rules require the taxpayer to maintain records or
other documentary evidence adequate to establish the business purpose and other
elements of the reported expenditures. See sec. 1.274-5(c)(2)(iii), Income Tax
Regs. To meet the adequate records requirements, a taxpayer must maintain an
account book, a log, or other documentary evidence which, in combination, is
sufficient to establish each element of an expenditure. Sec. 1.274-5T(c)(2),
Temporary Income Tax Regs., 50 Fed. Reg. 46017 (Nov. 6, 1985). If a taxpayer
does not satisfy the adequate records requirements with respect to one or more
elements, he or she may substantiate those elements with his or her own detailed
statement and with other corroborative evidence. Sec. 1.274-5T(c)(3)(i),
Temporary Income Tax Regs., 50 Fed. Reg. 46020 (Nov. 6, 1985). To substantiate
by sufficient evidence corroborating the taxpayer’s own statement, the taxpayer
must establish each element by his or her own statement and by other corroborative
evidence sufficient to establish such element. Id. While a contemporaneous log is
not required, a taxpayer’s subsequent reconstruction of his or her expenses does
require corroborative evidence with a high degree of probative value to support
such a reconstruction, in order to elevate that reconstruction to the same level of
credibility as a contemporaneous record. Sec. 1.274-5T(c)(1), Temporary Income
Tax Regs., 50 Fed. Reg. 46017 (Nov. 6, 1985).
- 11 -
A. Business Mileage Expenses
A taxpayer may deduct vehicle mileage expenses that are substantiated by
adequate records or sufficient evidence. Secs. 274(d)(4), 280F(d)(4)(A)(i) and (ii).
However, commuting expenses are generally nondeductible personal expenses,
regardless of the distances involved. See Fausner v. Commissioner, 413 U.S. 838,
839 (1973); Commissioner v. Flowers, 326 U.S. 465, 473-474 (1946); sec. 1.162-
2(e), Income Tax Regs. There are two exceptions to this general rule where, as
petitioner argues, the commuting involves a temporary work location. See Bogue
v. Commissioner, T.C. Memo. 2011-164, aff’d, 522 F. App’x 169 (3d Cir. 2013).
The first exception permits a taxpayer to deduct transportation expenses incurred in
going between the taxpayer’s residence and a temporary work location outside the
metropolitan area where the taxpayer normally lives and works. See Gorokhovsky
v. Commissioner, T.C. Memo. 2013-65; Bogue v. Commissioner, T.C. Memo.
2011-164; Rev. Rul. 99-7, 1999-1 C.B. 361. The second exception permits a
taxpayer to deduct commuting expenses between the taxpayer’s residence and a
temporary work location, regardless of distance, if the taxpayer also has one or
more regular work locations away from the taxpayer’s residence. See Bogue v.
Commissioner, T.C. Memo. 2011-164.
- 12 -
A work location is temporary if it is realistically expected to last (and does
in fact last) for one year or less. Id.; Rev. Rul. 99-7, 1999-1 C.B. 361. Work is
temporary only if it can be expected to end within a short time. Norwood v.
Commissioner, 66 T.C. 467, 469 (1976). In contrast a work location is not
temporary if it is a location at which the taxpayer works or performs services
regularly. Bogue v. Commissioner, T.C. Memo. 2011-164. A work location is
either a regular work location or a temporary work location--it cannot be both at
the same time. Id.Petitioner contends that her claimed deductible mileage expense deductions
were incurred driving between Fort Sam Houston, Lackland, and her home in
connection with her ADFS duties. She contends the evidence establishes that her
regular work location was Fort Sam Houston and that she performed a variety of
ADFS related tasks on a temporary basis elsewhere. Specifically, she contends
that the entries on her ledger demonstrate that she is entitled to deduct $2,882 in
mileage expenses.
Petitioner’s claim for a mileage expense deduction is not supported by
evidence meeting the strict substantiation requirements of section 274(d). Her
ledger does not establish a business purpose for any of her trips to and from her
home and the various military bases where she allegedly performed her ADFS
- 13 -
duties. See sec. 1.274-5T(c)(2), Temporary Income Tax Regs., supra. Her ledger
does not describe in detail sufficient under the circumstances the times, dates, and
purposes of her reported mileage expenses. See id. Petitioner testified that she
regularly performed her medical facilitator’s duties at Lackland and Fort Sam
Houston. The record does not credibly establish that her costs to travel by car to
those bases were exclusively for temporary ADFS duties rather than reimbursable
medical facilitator duties. See Bogue v. Commissioner, T.C. Memo. 2011-164.
Thus, petitioner has failed to demonstrate that her mileage expenses were in
connection with unreimbursable ADFS duties rather than her daily commute.
Accordingly, petitioner is not entitled to deduct any of her reported mileage
expenses.
B. Travel Expenses
Petitioner testified that she was not required or designated by the Air Force
to travel to her friend’s funeral or to attend the training session in Houston. With
respect to the funeral in Louisiana, the Air Force specifically designated another
individual to attend the funeral in an official capacity. Additionally, petitioner had
a personal friendship with the decedent, and that personal connection was the
primary reason for her attendance at the funeral. Further, petitioner’s ledger
documenting her alleged expenses does not establish a clear business purpose for
- 14 -
her travel. See sec. 1.274-5T(c)(2), Temporary Income Tax Regs., supra. With
respect to the training in Houston, petitioner was not ordered to attend the training,
and the ledger does not establish a clear business purpose for the training. See id.
Petitioner has not properly substantiated her travel expenses. Accordingly, she is
not entitled to a deduction for any such expenses.
C. Other Business Expenses and Tax Preparer Costs
Petitioner’s other business expenses consist of her cell phone bill, the cost of
an iPad, postage costs, other miscellaneous expenses, parking expenses, and
uniform-related expenses. With respect to her cell phone bills, petitioner testified
that her cell phone bill covered personal use as well as business purposes.
Petitioner’s ledger does not list any cell phone bills, but she submitted a number of
AT&T bill stubs to substantiate her expenses. However, petitioner did not provide
credible evidence of a business purpose for her cell phone bills. Although cell
phone bills were not subject to the strict substantiation requirements under section
274 during the year at issue, petitioner was nonetheless required to provide
evidence establishing how much of the bill was for personal as opposed to business
use. See Windham v. Commissioner, T.C. Memo. 2017-68, at *23-*24. Petitioner
did not do this, and we think it more likely that the use was primarily personal
- 15 -
rather than for business. With respect to the cost of the refurbished iPad, petitioner
testified she did not need it whatsoever to perform her work duties.
As to the postage costs, miscellaneous expenses, parking expenses, and
uniform-related expenses, petitioner provided no documentary evidence to
substantiate that such expenses were unreimbursed employee expenses. Her ledger
and receipts do not provide sufficient evidence as to the business purpose behind
any of these expenses. She has not properly substantiated her other business
expense deductions. Accordingly, she is not entitled to a deduction for these
expenses.
Petitioner also claimed a deduction of $304 for tax preparation fees on her
Schedule A. She provided no documentary evidence at trial to corroborate her
claim concerning the deduction of such fees. Petitioner on brief neglected to
mention this deduction. Accordingly, petitioner is not entitled to deduct that
expense.
The Court has considered all the other arguments of the parties and, to the
extent not discussed above, finds those arguments to be irrelevant, moot, or
without merit.
- 16 -
To reflect the foregoing,
Decision will be entered for
respondent.