Robert A. Oliveri v. Commissioner

T.C. Memo. 2019-57UNITED STATES TAX COURT
ROBERT A. OLIVERI, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 6792-15. Filed May 28, 2019.
Nancy Ortmeyer Kuhn, for petitioner.
Jeffrey E. Gold and Scott A. Hovey, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
COLVIN, Judge: Respondent determined that petitioner has a deficiency of
$16,548 in his 2012 Federal income tax and is liable for an addition to tax of
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[*2] $2,010 under section 6651(a)(1)1 for failure to timely file a return and an
accuracy-related penalty of $5,011 under section 6662(a). After concessions,2 the
issues for decision are:
1. Whether petitioner may deduct as charitable contributions for 2012
$39,979 that remains in dispute after respondent’s concessions. We hold that he
may to the extent stated below.
2. Whether, for taxable year 2012, petitioner is liable for an addition to tax
under section 6651(a)(1) for failure to timely file an income tax return. We hold
that he is.
3. Whether, for taxable year 2012, petitioner is liable for a penalty under
section 6662(a). We hold that he is not.3
1
Unless otherwise indicated, section references are to the Internal Revenue
Code in effect at all relevant times. Rule references are to the Tax Court Rules of
Practice and Procedure. We round some monetary amounts to the nearest dollar.
Petitioner resided in Maryland when the petition was filed.
2
Respondent determined that petitioner overstated his itemized deductions
for 2012 by $62,407. After respondent’s concessions, $39,979 remains in dispute.
3
This case was tried before another Judge who is no longer serving with this
Court. The parties consented to having the case decided by Judge John O. Colvin
on the basis of the record of trial.
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[*3] FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
A. Petitioner and His Evangelism Activities
Petitioner graduated from the U.S. Naval Academy in 1959 and served in
the U.S. Air Force for more than 26 years. From 1959 to 1980 he logged more
than 3,000 flight hours. He became very active in the Catholic Church after he
retired from the U.S. Air Force in 1986. He frequently attended church-related
meetings, participated in community-outreach efforts, and assisted various church
officials. In 1987 petitioner was certified as a teacher and trainer for the Catholic
Church following his completion of a 16-week Catholic evangelization trainer’s
program offered by Franciscan University of Steubenville, a Catholic university in
Steubenville, Ohio.
Since 1987 petitioner has dedicated his life to being an evangelist.
Petitioner seeks to spread the teachings of the Catholic Church through random
interactions with members of the general public. He considers all of his contact
with members of the public to be opportunities for evangelism. He wears a large
and visible crucifix at all times which identifies his religious affiliation and
commitment to evangelism. Petitioner evangelizes people he happens to see when
he engages in otherwise personal activities, such as when he eats in restaurants,
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[*4] travels, and pilots private planes. He usually does not know in advance
whom he will evangelize. Petitioner evangelizes and discusses his faith with
friends, members of his extended family, and members of the religious
organization that he founded, see infra, and the Catholic Church.
Petitioner visited some persons in hospitals and nursing homes and one
prisoner during 2012 to offer spiritual and financial support. He did not keep a
record of the visits. He did not deduct any expenses relating to his visits to
hospitals or nursing homes during 2012, except for mileage.
B. The Brothers and Sisters of the Divine Mercy
In 1987 petitioner cofounded the Brothers and Sisters of the Divine Mercy
(BSDM). BSDM was incorporated in Maryland in 2003.
BSDM’s corporate charter states in part as follows: “The Corporation will
provide religious and spiritual counseling to people of need, including prison
inmates and hospital patients, and provide guidance to people counseled after
release from prison or from the hospital.” According to its mission statement,
BSDM is responsible to the Pontifical Council of the Laity, a dicastery of the
Catholic Church. Nothing in the record shows that the Catholic Church
recognized or had any formal relationship to BSDM.
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[*5] During 2012 petitioner was president and brother superior of BSDM and
was one of its three directors. BSDM also had an acting vice president and an
acting treasurer. BSDM had 13 members in addition to petitioner during 2012:
11 in the United States and 2 in Paraguay. BSDM had no office outside
petitioner’s home.
C. Connection of the Catholic Church and BSDM to Petitioner’s Evangelism
Activities
Petitioner did not seek or obtain approval in advance from the Catholic
Church regarding any aspect of his evangelism activities, and he was not required
to report afterwards to the Catholic Church about those activities.
Petitioner met with other members of BSDM a number of times not
specified in the record during 2012. At those meetings they discussed each other’s
evangelization activities. BSDM did not select or approve the methods petitioner
used to evangelize, who he evangelized, or the expenses he incurred while
evangelizing. Neither the Catholic Church nor BSDM provided petitioner with
contemporaneous written acknowledgments for any of his expenses for 2012.
D. Petitioner’s Charitable Contribution Deductions
Petitioner deducted as charitable contributions the unreimbursed expenses
which he contends he incurred in connection with evangelism. Petitioner divided
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[*6] these expenses into 13 categories and gave each category a caption (e.g., the
caption for the category comprising most of his airplane rental and training
expenses is “Evangelization: Christian Outreach”). Respondent does not agree
that petitioner’s captions for the 13 categories correctly characterize the expenses.
We have added a caption for each category based on the goods or services
petitioner purchased (e.g., what petitioner characterized as “Evangelization--
Christian Outreach” we call “Airplane Rental and Training”). For the convenience
of the parties, we also have retained petitioner’s 13 captions in parentheses, but
our retention of petitioner’s captions does not bear on whether the expenses within
each category are deductible. We also changed the order of the 13 groups to better
fit into three broader categories (transportation, airplane, and meals expenses;
payments to or for individuals; and communications and administrative expenses).
Petitioner’s expenses are as follows.
1. Transportation, Airplane, and Meals Expenses
a. Airplane Rental and Training (“Evangelization: Christian
Outreach”--Petitioner’s Group No. 6)
Petitioner deducted $15,082 for expenses that he characterized as
“Evangelization: Christian Outreach”. These expenses were incurred in
connection with petitioner’s rental of private airplanes both for travel purposes
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[*7] and for pilot training undertaken by petitioner to meet licensing and safety
requirements.
Petitioner enjoys flying. He kept a flight log for 2012 showing the
departure and arrival airports for each of his flights, the number of times he landed
his plane during each rental period, and the purpose of each rental.
Number of
Date Purpose Amount paid landings
1/7 Training $401 2
1/19 Training 200 2
1/31 Training 512 2
2/2 Training 267 2
2/3 Purchase 25 n/a
2/7 Training 374 2
2/13 Purchase 6 n/a
2/14 Training 174 5
2/20 Training 731 3
2/22 Training 145 3
3/1 Training 343 3
3/1 Purchase 58 n/a
3/8 Course purchase 370 n/a
3/22 Training 147 5
3/27 Training 668 2
4/5 Training 210 1
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[*8] 4/16 Purchase 17 n/a
4/19 Training 200 7
4/30 Training 86 3
5/31 Training 228 2
5/3 Training 129 2
5/10 Training 172 2
5/11 Training 172 2
5/12 Training 227 2
5/17 Training 621 2
5/17 Purchase 162 n/a
5/21 Purchase 58 n/a
5/25 Training 227 5
5/27 Training 113 3
5/28 Training 227 4
6/8 Training 272 4
6/14 Training 373 5
6/17 Training 678 2
6/21 Training 385 5
6/27 Training (2 ) 4
6/28 Training (2 ) 2
7/16 Training 329 5
7/30 Training --- 1
7/30 Purchase 41 n/a
8/9 Training 350 5
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[*9] 8/14 Training 461 6
9/20 Training 274 1
9/26 Training 465 5
10/10 Training --- 5
10/11 Training 358 10
11/14 Training 243 3
12/3 Training 260 12
12/3 Purchase 33 n/a
12/18 Training 346 1
1
On May 3, 2012, petitioner flew twice, from two different airports, for
training purposes.
2
Petitioner deducted the cost of this rental as a temporary assignment. See
infra p. 13.
Petitioner randomly evangelized people with whom he came into contact
when he was engaged in training flights, such as airport staff and his pilot training
instructors.
Petitioner rented planes three times in 2012 for nontraining purposes. On
July 23, 2012, petitioner rented a plane to provide an “area tour for Amelia.”
Amelia is not identified in the record. Petitioner deducted $126 for this trip. On
July 28, 2012, petitioner rented a plane and flew Monsignor Rossi, Rector at the
Basilica of the National Shrine of the Immaculate Conception (Basilica) in
Washington, D.C., to New Jersey to officiate at the funeral of the Monsignor’s
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[*10] cousin. Petitioner deducted $1,432 for this trip, but he did not provide a
contemporaneous written acknowledgment of this contribution from the Catholic
Church or BSDM. On August 20, 2012, petitioner flew Victor Polizzi, a member
of his Biblical theology class, to Ocean City for lunch. Petitioner deducted $605
for this trip.
b. Other Flying-Related Expenses (“Evangelization: Christian
Outreach Support”--Petitioner’s Group No. 9)
Petitioner deducted $3,299 for expenses he characterized as
“Evangelization: Christian Outreach Support”, which comprises the expenses of
his private airplane rentals that were not included above, airplane equipment costs,
and expenses incurred for meals, lodging, train tickets, clothes, and parking.
Petitioner purchased a jacket for the son of a BSDM member and paid to rent a
plane to fly his car mechanic, Wayne Lopez, to Ocean City, Maryland.
c. Automobile Expenses (“Pastoral Ministry: Transportation”--
Petitioner’s Group No. 1)
Petitioner deducted $1,292 for expenses that he characterized as “Pastoral
Ministry: Transportation”. Petitioner owned two vehicles in 2012: a 1992
Toyota Camry and a 2009 Toyota Venza.
These expenses comprise automobile traveling expenses of $983.36 for
automobile mileage to and from airports, and $309 for highway tolls, parking
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[*11] expense at Baltimore-Washington International Airport, and a car wash.
The $309 amount includes all of the highway tolls, parking, and car washing
expenses petitioner paid during 2012. During 2012 petitioner drove the Camry
4,175 miles and the Venza 18,811 miles. In computing the amount of his
deduction petitioner computed the deduction for mileage using a rate of 14 cents
per mile.4
Petitioner did not maintain a contemporaneous mileage log showing the
purpose of any of his automobile travel. However, he maintained records showing
that during 2012 he made 38 round trips of 33 miles one way from his home to the
Basilica. On each of these trips he read at Catholic masses or was a Eucharistic
minister.5 Petitioner also drove Monsignor Rossi 236 miles round trip from
Annapolis, Maryland, to Ocean City, Maryland, to view a property that had been
donated to the Basilica.6
4
The standard mileage rate is 14 cents for purposes of computing the sec.
170(a) deduction for mileage in connection with a charitable contribution. See
sec. 170(i); Rev. Proc. 2010-51, sec. 5.01, 2010-51 I.R.B. 883, 885; Notice 2012-
1, sec. 2, 2012-2 I.R.B. 260, 260.
5
We take judicial notice that the distance from petitioner’s home in
Maryland to the Basilica is 33 miles (one way). See Fed. R. Evid. 201(b).
6
At trial before another Judge, the Court reserved ruling on the admission of
Exhibit 25-P, which consists of a series of email messages petitioner sent in 2012.
(continued...)
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[*12] d. Meals, Coffee, and Snacks (“Evangelization: Counseling”--
Petitioner’s Group No. 10)
Petitioner deducted $5,228 for expenses that he characterized as
“Evangelization: Counseling”. These expenses comprise petitioner’s payments
for every restaurant meal he ate in 2012, including meals he ate with members of
his extended family, and also the costs of snacks and coffee when he met with
several individuals, including BSDM members. Petitioner provided meals and
coffee for others while he was providing spiritual counseling and discussing his
faith and evangelism.
On some, but not all, of his restaurant and coffee receipts petitioner wrote
the name or names of the person or persons with whom he had the meal or coffee.
Petitioner testified that he tried to “talk [to them] and find out what’s going on” in
their lives. Petitioner testified that he paid for snacks when meeting with BSDM
members to discuss what they were doing in their ministry. Petitioner often left
large tips because he wanted servers to “think * * * that God cares for them and
they’re very special.” The record contains five receipts on which petitioner wrote
6
(...continued)
Those messages include communications with Monsignor Rossi regarding the
drive to Ocean City. There being no remaining objection, we now admit Exhibit
25-P into evidence. We also take judicial notice that the distance from Annapolis,
Maryland, to Ocean City, Maryland is 118 miles. See Fed. R. Evid. 201(b).
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[*13] the name of the server as the only person with whom petitioner had contact
at a meal.
e. Travel Expenses (“Evangelization: Temporary Assignments”--
Petitioner’s Group No. 13)
Petitioner deducted $7,151 for expenses of six trips that he characterized as
“Evangelization: Temporary Assignments”. These trips were to Colorado;
Florida; Aberdeen, Maryland; New York; Texas; and North Carolina. His
expenses include the costs of commercial airline tickets, private airplane rentals,
car rentals, lodging, and meals.
Petitioner went to Colorado to learn to fly in a mountainous area. He went
to Texas to attend his daughter-in-law’s family reunion and to New York to visit
his sister-in-law. During his New York trip he paid for and deducted as a
charitable contribution a birthday lunch for his sister-in-law. Petitioner went to
Florida to visit and counsel Marla Benkovich. The record includes no specific
information about the purposes of his trips to Aberdeen, Maryland, or North
Carolina except for his general statement that everything he did related to
evangelization. Neither the Catholic Church nor BSDM instructed petitioner to
take any of these trips.
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[*14] 2. Payments to or for Individuals
a. Gifts and Payments to Others (“Evangelization: Charitable
Grants”--Petitioner’s Group No. 11)
Petitioner deducted $7,910 for expenses that he characterized as
“Evangelization: Charitable Grants”, which comprise his payments for clothes,
groceries, lodging, traveling, and other miscellaneous gifts for other people.
Petitioner paid $1,000 to Marla Benkovich for the cost of her lodging and
telephone service during her stay in Maryland. He also paid for her meals and
groceries during that trip, gave her a money order for $30, paid $114.75 to Sam’s
Club and $169 for contact lenses for her, and paid for a gift for her daughter
Marta. Petitioner paid travel expenses for and gave $1,485 in cash to Sister Lila
Nunez, a BSDM member from Paraguay, for a trip to Washington, D.C., to attend
the celebration of BSDM’s 25th anniversary.
Petitioner gave a $500 gift card from Bass Pro Shops to Tom Eveler, a
retired police officer. He paid $700 for sailing school fees for Anne-Marie Kasuda
and paid $24 for movie tickets.
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[*15] b. Maintenance Expenses for St. Mary’s Church and the Home of
a BSDM Member (“Evangelization: Mission Support”--
Petitioner’s Group No. 12)
Petitioner spent $1,335 for items which he characterized as “Evangelization:
Mission Support”. This category includes petitioner’s purchases of home
maintenance items for Sister Kathleen Sheldon, a BSDM member. Petitioner did
not get a contemporaneous written acknowledgment of these expenses from the
Catholic Church or BSDM.
This category also includes $224 for maintenance at St. Mary’s Catholic
Church in Annapolis, Maryland, which respondent concedes petitioner may
deduct.
c. Printed Material and Gifts (“Pastoral Ministry: Audio Visual
Media”--Petitioner’s Group No. 4)
Petitioner deducted $2,587 for the cost of printed material and gifts for
persons he evangelized. He characterized these expenses as “Pastoral Ministry:
Audio Visual Media”. This included the costs of Christmas ornaments and
religious books and videos which he gave to people he evangelized. He did not
have the approval of BSDM or the Catholic Church before making these gifts.
Petitioner paid $1,056 for 1,000 copies of a Spanish language religious
pamphlet which he gave to Sister Lila Nunez to distribute in Paraguay. He paid
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[*16] $112 for a subscription to a local newspaper, $25 to RBC Ministries,7 and $6
to a jewelry store to repair his crucifix.
3. Communications and Administrative Expenses
a. Insurance and Legal Expenses (“Pastoral Ministry:
Professional Expenses”--Petitioner’s Group No. 2)
Petitioner deducted an amount for expenses that he characterized as
“Pastoral Ministry: Professional Expenses”, which comprise: $297 for an
umbrella insurance policy covering petitioner and his then wife from personal
liabilities, $1,615 for legal fees incurred in connection with an audit of his
personal income tax return, and $284 paid to CT Corp. for serving as BSDM’s
registered agent for receipt of legal documents in Maryland.
b. Office Supplies and Refreshments (“Pastoral Ministry: Office
Expenses”--Petitioner’s Group No. 3)
Petitioner deducted $1,378 for expenses that he characterized as “Pastoral
Ministry: Office Expenses”. These expenses include the costs of office supplies
such as paper, books, pens, and computer equipment, which were almost all used
in petitioner’s home. Petitioner did not report or account for his office expenses to
either the Catholic Church or BSDM. This category also includes food items,
7
The receipt from RBC Ministries states that this payment was a donation.
Petitioner provided no evidence regarding the purpose of this payment.
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[*17] such as cookies and pies, that petitioner served at Biblical theology classes
held in the home of a member of BSDM.
c. Shipping (“Pastoral Ministry: Shipping”--Petitioner’s Group
No. 5)
Petitioner deducted $200 for payments to Fed Ex and UPS that he
characterized as “Pastoral Ministry: Shipping”. Some of the expenses were paid
to ship items to his sister-in-law, his doctor, and a person assisting with the
administration of the estate of Cathy Milligan, a deceased sister of BSDM.
d. Communications (“Evangelization: Communications”--
Petitioner’s Group No. 7)
Petitioner deducted $3,567 for expenses that he characterized as
“Evangelization: Communications”. This amount comprises the costs of
petitioner’s home telephone, a separate line for a fax machine, and a cell phone.
Petitioner had no other telephones or telecommunication devices for his personal
use during 2012. Petitioner used the three lines for some personal calls and faxes,
such as to speak with his doctor, family members, and friends, and to his lawyers
regarding the audit of his personal income tax return. Petitioner did not keep a
record of his personal use of the telephone lines.
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[*18] e. Internet and Cable Service in Petitioner’s Home
(“Evangelization: Evangelization Support”--Petitioner’s Group
No. 8)
Petitioner deducted $730 for internet and cable television service in his
home, which he characterized as “Evangelization: Evangelization Support”.
Petitioner used the internet to send emails to those to whom he ministered, send
weekly emails containing religious thoughts and news to BSDM’s mailing list,
check the weather, shop online, and watch religious videos. Petitioner used the
cable televison service to obtain weather information for flying and to view
religious programs. Petitioner had no separate internet or cable service for his
personal use during the year at issue.
E. Petitioner’s 2012 Federal Income Tax Return
Petitioner’s 2012 Form 1040, U.S. Individual Income Tax Return, was
originally due on April 15, 2013. Petitioner timely filed a Form 4868, Application
for Automatic Extension of Time to File U.S. Individual Income Tax Return,
which extended the due date for filing his 2012 return to October 15, 2013.
Petitioner filed his Form 1040 for 2012 on August 16, 2014, which was 10 months
after the extended due date. On that return he reported tax liability of $7,074.
On Schedule A, Itemized Deductions, attached to that return, he deducted
charitable contributions as follows: $3,240 in cash contributions, $90 in
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[*19] contributions other than cash, and $62,407 on line 18, the line for
carryforward contributions from 2011. The parties agree that petitioner did not
have a carryover contribution from 2011 and that the amount he reported on
Schedule A, line 18, represents the unreimbursed expenses that are at issue here.
Petitioner reduced the $62,407 to $44,189 because of the limits on the deduction
of charitable contributions under section 170(f).8
OPINION
Petitioner contends that he is entitled to deduct $39,979 in charitable
contributions under section 170 in excess of the amount respondent allowed.
Petitioner also contends that he is not liable for the addition to tax for failure to
timely file his 2012 tax return under section 6651(a)(1) or the accuracy-related
penalty under section 6662(a). We will first decide whether or to what extent his
unreimbursed expenses for evangelization are deductible as charitable
contributions.
8
Respondent’s previous audits of petitioner’s tax returns for 2008 and 2010
resulted in this Court’s entering stipulated decisions reflecting deficiencies. See
Oliveri v. Commissioner, T.C. Dkt. No. 14773-08S (Apr. 27, 2009); Oliveri v.
Commissioner, T.C. Dkt. No. 3494-11S (Oct. 13, 2011).
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[*20] A. Charitable Contribution Deductions
Section 170(a) permits the deduction of “any charitable contribution” made
by a taxpayer for contributions or gifts “to or for the use of” a charitable
organization. Sec. 170(c). Amounts paid to a charity for the benefit of a specified
individual are generally not deductible as charitable contributions, regardless of
the circumstances of the recipient or the intent of the donor. Tripp v.
Commissioner, 337 F.2d 432 (7th Cir. 1964), aff’g T.C. Memo. 1963-244;
Thomason v. Commissioner, 2 T.C 441, 443-444 (1943). In contrast, an
unreimbursed expenditure incident to the rendition of services to a qualified
charitable organization may be deductible under section 170. Sec. 1.170A-1(g),
Income Tax Regs. Such expenditures include, for example, “transportation
expenses necessarily incurred in performing donated services”. Id. In order to be
deductible an unreimbursed expense must be directly connected with and solely
attributable to a service provided to an organization to which contributions are
deductible. See sec. 1.170A-1(g), Income Tax Regs.; see also Van Dusen v.
Commissioner, 136 T.C. 515, 525 (2011); Saltzman v. Commissioner, 54 T.C.
722, 724 (1970).
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[*21] B. Whether or to What Extent Petitioner May Deduct Expenses He
Incurred in 2012 Which He Contends Were Related to Evangelization
Petitioner contends that he may deduct all of the disputed amount of his
expenses, which he claims were incurred in connection with his evangelism.
Specifically, he contends that: (1) his expenses were in no part personal, (2) his
expenses were incident to his rendition of services to BSDM or the Catholic
Church, (3) the contemporaneous written acknowledgment requirement, section
170(f)(8) and section 1.170A-13, Income Tax Regs., does not apply to
unreimbursed expenses, and (4) respondent’s disallowance of his charitable
contribution deductions violates the First Amendment to the Constitution.
Respondent concedes that BSDM is tax exempt under section 501(c)(3) and that
petitioner provided receipts or other records which adequately substantiate the
amounts of his reported expenses. Respondent contends that (1) most of
petitioner’s expenses were at least in part personal; (2) petitioner’s unreimbursed
expenses were not contributions “to or for the use of” either BSDM or the Catholic
Church because of the absence of coordination or supervision as described in Van
Dusen v. Commissioner, 136 T.C. at 523, 525, and Smith v. Commissioner, 60
T.C. 988 (1973); (3) petitioner’s expenses of $250 or above are not deductible
because petitioner did not receive a contemporaneous written acknowledgment
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[*22] from the Catholic Church or BSDM for the expense; and (4) respondent’s
conduct of this case has not violated petitioner’s constitutional rights.
1. Personal Expenses
A contribution is not deductible if the primary purpose is to obtain a
personal benefit for the taxpayer. Babilonia v. Commissioner, 681 F.2d 678, 679
(9th Cir. 1982), aff’g T.C. Memo. 1980-207; Allen v. United States, 541 F.2d 786,
788 (9th Cir. 1976); Tate v. Commissioner, 59 T.C. 543, 550 (1973); Seed v.
Commissioner, 57 T.C. 265, 275-276 (1971). Expenses which are incurred
incident to rendering services to a charitable organization are considered to have a
dual character if they benefit both the charity and the taxpayer. See, e.g.,
Churukian v. Commissioner, T.C. Memo. 1980-205. For the expense to be
deductible, the charity, rather than the taxpayer, must receive the primary benefit
of the expenditure. Babilonia v. Commissioner, 681 F.2d at 679. When a claimed
charitable contribution deduction arises from an expense that is in part personal
and in part charitable, the burden of proof is on the taxpayer to show that the
expense is attributable to the charitable use. Orr v. United States, 343 F.2d 553,
557-558 (5th Cir. 1965). Failure to prove that an expense would not have been
incurred absent the charitable use bars a taxpayer’s claim for a charitable
contribution deduction. Id. at 558.
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[*23] Costs of traveling away from home (including transportation, meals, and
lodging) are not deductible unless they qualify as expenses deductible, as relevant
here, under section 170 and regulations thereunder. Sec. 1.262-1(b)(5), Income
Tax Regs. A charitable deduction for unreimbursed travel expenses is denied
where the taxpayer derives substantive personal pleasure while on trips. Saltzman
v. Commissioner, 54 T.C. at 725. For purposes of rendering donated services,
“while away from home” has the same meaning as in section 162(a)(2). Sec.
1.170A-1(g), Income Tax Regs. If the purpose of a trip is primarily personal, the
travel expenses are not deductible even though the taxpayer performs charitable
services while at the destination. See sec. 1.162-2(b), Income Tax Regs. Meals
and other travel expenses are not deductible where there is a substantial direct
personal benefit to the taxpayer. See Seed v. Commissioner, 57 T.C. at 275-276;
Sheffels v. United States, 264 F. Supp. 85 (E.D. Wash. 1967), aff’d, 405 F.2d 924(9th Cir. 1969); see also sec. 1.170A-1(g), Income Tax Regs.
Petitioner treated the expenses of a wide range of things he did, such as his
flying lessons, all of his restaurant meals in 2012, travel to visit his family
members, and home internet and telephone service, as expenses of evangelism.
Most of petitioner’s expenses were incurred in whole or in part for personal
purposes and therefore do not qualify for deduction under section 170.
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[*24] 2. Whether Expenses Were Incurred in Coordination With or Supervised
by a Charitable Organization
To be deductible under section 170, a contribution must be “to or for the use
of” a charitable organization. In order to meet this requirement, the expense must
be subject to coordination, supervision, or oversight by the organization. Van
Dusen v. Commissioner, 136 T.C. at 523-524.
Courts have applied several factors in deciding whether a taxpayer provided
services “to or for the use of” an organization, including: (1) “the strength of the
taxpayer’s affiliation with the organization”, (2) “the organization’s ability to
initiate or request services from the taxpayer”, (3) “the organization’s supervision
over the taxpayer’s work”, and (4) “the taxpayer’s accountability to the
organization”. Id. at 523; see Smith v. Commissioner, 60 T.C. 988. The charity
must direct or encourage the taxpayer to perform the charitable services. Saltzman
v. Commissioner, 54 T.C. at 723-724. We consider these factors and any other
relevant circumstances in deciding whether to view the taxpayer’s unreimbursed
expenses as sufficiently coordinated by, or the taxpayer is sufficiently accountable
to, the charitable organization for the contribution to be considered to be “to or for
the use of” the organization. Van Dusen v. Commissioner, 136 T.C. at 523-524.
We refer to this as the “coordination” factor.
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[*25] Petitioner contends that because the taxpayers’ unreimbursed expenses for
evangelical activities were deductible in Smith v. Commissioner, 60 T.C. 988, and
Orr v. United States, 343 F.2d 553, his unreimbursed expenses also are deductible.
We disagree. The facts in those cases contrast sharply with the facts here. In
Smith v. Commissioner, 60 T.C. at 989, Mr. Smith was a member of a local church
organization (an “assembly”) which had well-established procedures for
coordinating the evangelical activities of certain of its members. Mr. Smith took
trips to Newfoundland, Canada, with his wife and children and several young men
who joined them in Newfoundland. Id. at 991. Mr. Smith selected that
geographic area because he believed that the large number of low-income people
living there would respond to his preaching. Id. at 990. His wife assisted with
cooking and other arrangements for the group.
According to its usual practice, Mr. Smith’s assembly provided him with
letters of introduction (“commendation”) directed to religious groups along his
route in Maine, Vermont, and Nova Scotia, Canada, written by one member of his
assembly and countersigned by another member. Because no assembly existed in
the area Mr. Smith’s group would be visiting, according to its usual practice his
assembly addressed the letter of commendation to “those gathered to the name of
the Lord Jesus Christ”. Id.- 26 -
[*26] In Newfoundland Mr. Smith and his volunteers often held three meetings
per day, each attended by 10 to 150 people. After he returned home Mr. Smith
reported back to his assembly, which publicized his efforts and accomplishments
to other assemblies affiliated with his assembly. Id. at 991.
We held that the travel expenses Mr. Smith incurred on these trips were
deductible. Id. at 992-995. Mr. Smith’s evangelistic activities were sufficiently
coordinated with his assembly, and his evangelism was “not merely * * * [his]
‘own personal religious enterprise’ but was an undertaking which was approved,
encouraged, and aided by his local church.” Id. at 994. We held that Mr. Smith’s
trips were taken on behalf of his assembly and that, for purposes of section 170, he
rendered services “to or for the use of ” his assembly. See id. at 993.
In contrast to Mr. Smith’s evangelism activities, petitioner’s were mostly
random and uncoordinated by either the Catholic Church or BSDM. Mr. Smith
incurred expenses in order to evangelize; in contrast, petitioner evangelized during
the course of his usual personal activities. Petitioner did not sufficiently
coordinate his expenses with either BSDM or the Catholic Church for expenses to
be considered to be “to or for the use of” either of those organizations.
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[*27] 3. Substantiation
A taxpayer must substantiate the amounts of unreimbursed expenses
incurred while rendering services to a charity in order for the expenses to be
deductible. Charitable contribution deductions are subject to the recordkeeping
requirements of section 1.170A-13(a), Income Tax Regs., for contributions of
money or section 1.170A-13(b), Income Tax Regs., for contributions of nonmoney
property. Charitable contributions of unreimbursed out-of-pocket expenses of less
than $250 are governed by section 1.170A-13(a), Income Tax Regs. Van Dusen v.
Commissioner, 136 T.C. at 531. No deduction is allowed under section 170(a) for
a contribution of $250 or more unless the taxpayer substantiates the contribution
with a contemporaneous written acknowledgment from the donee organization.9
Sec. 170(f)(8)(A); Van Dusen v. Commissioner, 136 T.C. at 536. A taxpayer who
incurs unreimbursed expenditures incident to the rendition of services is treated as
9
This requirement does not apply “if the donee organization files a return,
on such form and in accordance with such regulations as the Secretary may
prescribe, which includes the information” required to be included in a
contemporaneous written acknowledgment. Sec. 170(f)(8)(D). Sec. 170(f)(8)(D)
was repealed effective for contributions made in tax years beginning after
December 31, 2016. See Tax Cuts and Jobs Act of 2017, Pub. L. No. 115-97, sec.
13705(a), 131 Stat. at 2169. Petitioner has not argued, and the record contains no
evidence, that BSDM or the Catholic Church filed a return that included the
information required by sec. 170(f)(8)(B) such that this substantiation requirement
would not apply.
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[*28] having obtained a contemporaneous written acknowledgment of those
expenditures if the taxpayer (1) has adequate records to substantiate the amounts
of the expenditures; and (2) obtains (a) a statement prepared by the donee
organization containing a description of the services provided by the taxpayer,
(b) a statement of whether the donee organization provides any goods or services
in consideration, in whole or in part, for the unreimbursed expenditures, and (c) a
description and good faith estimate of the value of those goods or services, and if
the donee organization provides any intangible religious benefits, a statement to
that effect. Sec. 1.170A-13(f)(10), Income Tax Regs. Because petitioner did not
obtain any contemporaneous written acknowledgments, his expenses of $250 or
more are not deductible.
Petitioner points out that the contemporaneous written acknowledgment
requirement of section 170(f)(8) applies to “contributions” and contends that it
does not apply to unreimbursed expenses because the statute provides that
acknowledgments are required for “contributions” over $250, not for “‘out-of-
pocket’ expenditures.” We disagree with that contention because an
unreimbursed, “out-of-pocket” expense made incident to the rendition of services
to an organization is deductible only if it is a “contribution”, and the deductibility
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[*29] of charitable contributions is subject to the substantiation requirements of
section 170(f)(8). Sec. 1.170A-1(g), Income Tax Regs.
Petitioner contends that the reporting provisions of section 1.170A-13,
Income Tax Regs., require only substantial compliance. The substantial
compliance doctrine applies to unreimbursed volunteer expenses of less than $250,
Van Dusen v. Commissioner, 136 T.C. at 534-535, but in Averyt v. Commissioner,
T.C. Memo. 2012-198, 2012 WL 2891077, at *4, we said that it does not apply to
contributions of $250 or more.
Petitioner contends that a contemporaneous written acknowledgment from
BSDM would be superfluous because he was cofounder and president of BSDM.
Therefore, according to petitioner, “he should not be penalized for not having a
letter from himself, to himself, to document the expenditures on behalf of * * *
BSDM”. If this statement is taken to its extreme, petitioner could be understood to
contend that, since he founded and led an organization exempt from taxation under
section 501(c)(3), that all of his personal expenses for travel, flying lessons,
restaurant meals, and expenditures for gifts to numerous people, including many
of his organization’s volunteers and members of their families, are “to or for the
use of” a charitable organization for purposes of section 170. Petitioner cites no
authority for this sweeping proposition. At a minimum, we can easily conclude
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[*30] that there is no exception to section 170(f)(8)(A) for self-created
organizations.10
We next apply these standards to several of the expenses described above.
C. Transportation, Airplane, and Meals
1. Private Aircraft Rental and Flying Lessons (“Evangelization:
Christian Outreach”--Petitioner’s Group No. 6); Other Flying-Related
Expenses (“Evangelization: Christian Outreach Support”--
Petitioner’s Group No. 9)
Petitioner incurred expenses of $15,082 for aircraft rental (which he
characterized as “Evangelization: Christian Outreach”) and $3,299 for flight-
related expenses (which he characterized as “Evangelization: Christian Outreach
Support”).
Petitioner testified that he “like[s] flying”, but emphasizes that his rental of
small aircraft was not “for [his] personal use at all * * * it’s all for my work for
God.” According to petitioner, his flying enabled him to visit small airports and
distant places to evangelize people who otherwise had no access to his preaching.
10
Petitioner testified that he accounted only to God for his evangelistic work
and that “getting approval from * * * [BSDM] would be getting approval from
himself”. Since BSDM provided no contemporaneous written acknowledgments
to petitioner, we need not consider what significance we would attribute to a
statement from an organization controlled by the taxpayer.
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[*31] Most of petitioner’s expenses in this category involve training flights. The
expenses associated with these flights are primarily personal and do not constitute
gifts “to or for the use of” a charity. See Orr, 343 F.2d at 557.
Petitioner testified that when he flew with Wayne Lopez (his mechanic),
Victor Polizzi (a member of petitioner’s Biblical studies class), and the
Monsignor, he had wonderful conversations about their faith. But these flight
expenses are not made “to or for the use of” a charitable organization merely
because petitioner discusses religion while conducting the activity. The charitable
contribution deduction is disallowed where, as here, there is a substantial personal
benefit to the taxpayer. See Saltzman v. Commissioner, 54 T.C. at 725; Seed v.
Commissioner, 54 T.C. at 276. In addition the charitable contribution deduction
does not apply to the expenses of flying Mr. Lopez and Mr. Polizzi or buying a
jacket for the son of a BSDM member because those individuals were apparently
selected by petitioner because of his personal relationships with him. Thomason
v. Commissioner, 2 T.C. at 443-445; see also Seed v. Commissioner, 57 T.C. at
275-276; Sheffels, 264 F. Supp. at 88-89. As to the jacket for the son of a BSDM
member, petitioner cited no authority that persons who are active in BSDM or
members of their family are suitable objects of charity. Finally, the expenses were
not “to or for the use of” the Catholic Church or BSDM because neither
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[*32] organization provided meaningful coordination or supervision of those
activities. See Van Dusen v. Commissioner, 136 T.C. at 523-524.
Flying Monsignor Rossi to New Jersey to officiate at a funeral was a service
to the Catholic Church, but the expenses of that trip (as well as the trips with Mr.
Polizzi and Mr. Lopez) are not deductible because the cost of each trip exceeded
$250 and petitioner did not obtain a contemporaneous written acknowledgment of
the services from the Catholic Church or BSDM as required by section 1.170A-
13(f)(10), Income Tax Regs. See Van Dusen v. Commissioner, 136 T.C. at 536-
537.
2. Automobile Expenses (“Pastoral Ministry: Transportation”--
Petitioner’s Group No. 1)
Petitioner deducted automobile expenses totaling $1,378. Petitioner
testified and contends that 100% of his vehicle use related to his evangelization
activities and that every time one of his cars passed through a toll booth the trip
was for the purpose of evangelization.
Petitioner made 38 round trips of 68 miles each (totaling 2,584 miles) to the
Basilica to read at masses and act as a Eucharistic minister, for which he claimed a
deduction for mileage of $362 (2,584 miles at 14 cents per mile). Expenses of
commuting to church to participate in a choir at Sunday services are a form of
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[*33] religious worship and are not deductible as charitable contributions.
Churukian v. Commissioner, T.C. Memo. 1980-205. Petitioner has provided no
argument or authority that we should distinguish his activities from those in
Churukian.
Petitioner drove numerous times from his home to and parked at various
airports. Because, as discussed above, the expenses of most of petitioner’s flights
were personal and nondeductible, these expenses also are not deductible. See Orr,
343 F.2d at 558; Cavalaris v. Commissioner, T.C. Memo. 1996-308, slip op. at 18.
3. Meals, Snacks, Coffee (“Evangelization: Counseling”--Petitioner’s
Group No. 10)
Petitioner spent $5,228 for the items in this category which he characterized
as “Evangelization--Counseling”. This category includes the cost of every meal
he ate in a restaurant in 2012. Petitioner incurred some of these expenses while he
initiated conversations in which he endeavored to provide counseling with persons
he had not previously met, including on several instances the wait staff serving
him during the meal.
The cost of eating in a restaurant is a personal expense and is not made
deductible by evangelizing persons randomly encountered while eating. A
taxpayer may deduct reasonable expenses for meals and lodging while performing
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[*34] donated services, provided that the taxpayer satisfies the “away from home”
test under section 162 and the regulations thereunder. Sec. 1.170A-1(g), Income
Tax Regs. However, petitioner has not shown which of his meals in 2012 he
consumed while he was away from home as defined in section 162. See sec.
1.170-2(a)(2), Income Tax Regs. Finally, these expenses were not “to or for the
use of” a charitable organization because the activity lacked sufficient
coordination with the Catholic Church or BSDM. Therefore petitioner has not
shown that he may deduct any of the expenses in this category.
4. Travel Expenses (“Evangelization: Temporary Assignments”--
Petitioner’s Group No. 13)
Petitioner incurred $7,151 in expenses for five trips that he characterized as
“temporary assignments”. This includes travel expenses (including hotels, airfare,
rental car, aircraft rental, and expenses for restaurants and groceries) for trips to
Colorado (to practice flying in the mountains), New York and Texas (to visit
family members), Florida (to counsel a BSDM member), and Maryland and North
Carolina (for purposes not described in the record). We hold that these travel
expenses were primarily personal and are not deductible as charitable
contributions. See Seed v. Commissioner, 57 T.C. at 277-278; Sheffels, 264 F.
Supp. at 88-89. Petitioner’s expenses relating to a BSDM member are not
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[*35] deductible because expenses of providing services for individuals selected
for personal reasons by the taxpayer are not deductible, and petitioner has
provided no authority showing that members of BSDM qualify as recipients of
charity. See Thomason v. Commissioner, 2 T.C. at 443-444. These expenses also
are not deductible because the activity was not sufficiently coordinated with the
Catholic Church or BSDM to be considered to or for the use of either of those
organizations.
D. Payments to or for Individuals
1. Gifts and Payments to Others (“Evangelization: Charitable Grants”--
Petitioner’s Group No. 11); Maintenance Expenses at the Home of a
BSDM Member and at St. Mary’s Church (“Evangelization: Mission
Support”--Petitioner’s Group No. 12)
Petitioner incurred expenses of $7,910 which he characterized as charitable
grants and $1,335 which he characterized as mission support. These amounts
were paid to provide a $500 gift card for Tom Eveler, $700 for sailing school fees
for Ann-Marie Kasuda, a $1,485 wire transfer to Sister Lila Nunez, $1,066 to pay
Marla Bankovich’s hotel expenses, the cost of a ticket to a movie which petitioner
attended with Sister Kathleen Sheldon, and $1,110.65 for maintenance at the home
of BSDM member Sister Kathleen Sheldon. These expenses are not deductible
because they were for individuals selected by petitioner for whom no substantial
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[*36] charitable need was established, see Thomason v. Commissioner, 2 T.C. at
443-445; Cavalaris v. Commissioner, slip op. at 20, and, generally speaking,
persons carrying on the work of a charitable organization are not proper objects of
charitable activity of that organization. These expenses also are nondeductible
because there was not sufficient coordination of the activity by the Catholic
Church or BSDM to treat these expenses “to or for the use of” either of these
organizations.
Petitioner spent $224.35 on repairs at St. Mary’s Catholic Church in
Annapolis. Respondent concedes that petitioner may deduct this expense.
2. Gifts and Printed Material (“Pastoral Ministry: Audio Visual
Media”--Petitioner’s Group No. 4)
Petitioner incurred expenses for books and videos, Christmas ornaments
which he donated to others, and religious pamphlets which he gave to another
BSDM member. These expenses are not deductible because petitioner’s activities
were not sufficiently coordinated with the Catholic Church or BSDM to treat the
expenses as “to or for the use of” either of those organizations.
Petitioner subscribed to a local newspaper. This expense was incurred
primarily for personal reasons and is therefore nondeductible. Petitioner made a
gift to RBC Ministries (not identified in the record) but did not establish a
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[*37] charitable purpose for the gift. Finally, petitioner has provided no authority
for his claim that he may deduct as a charitable contribution the cost of repairing
his crucifix.
E. Communications and Administrative Expenses
Petitioner deducted most of the expenses in these categories on the grounds
that the expenses of the activities discussed above (such as flying, traveling, eating
in restaurants, and gifts) were deductible as charitable contributions, and thus,
petitioner argues, his communications and administrative expenses incurred to
conduct those activities also are deductible. As discussed above, the costs of most
of these activities are not deductible. Thus, the administrative expenses of
carrying on the activities also are not deductible. Petitioner did not use his
telephone, internet service, and office supplies exclusively for charitable purposes,
and he would have paid these expenses whether or not he engaged in evangelism.
Thus, those expenses would not be deductible even if petitioner’s expenses of
flying, traveling, and eating meals were deductible. See Orr, 343 F.2d at 557.
1. Insurance and Legal Expenses (“Pastoral Ministry: Professional
Expenses”--Petitioner’s Group No. 2)
Petitioner paid $4,196 in expenses for legal advice relating to an IRS audit
of a prior year’s return and an umbrella liability policy covering petitioner and his
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[*38] former wife. Petitioner testified that the legal fees were paid for the purpose
of evangelization because “everything * * * [is] tied to evangelization.” We
disagree; these expenses are nondeductible personal expenses. The expenses of
maintaining a corporate registered agent for BSDM in Maryland are deductible.
2. Office Supplies and Refreshments (“Pastoral Ministry: Office
Expenses”--Petitioner’s Group No. 3)
Petitioner deducted $1,329 for expenses which he characterized as “Pastoral
Ministry: Office Expenses”. Petitioner did not maintain a separate office for
BSDM. All of the items purchased in this category were kept in his home and
petitioner admitted to some personal use of those items. Petitioner has not
established that substantial amounts of the expenses of his evangelical activities
were deductible as charitable expenses. Thus, we have no basis on which to
allocate between the personal and charitable use of these items. These expenses
also are not deductible because neither the Catholic Church nor BSDM had
sufficient connection with or oversight of these expenses.
3. Shipping Costs (“Pastoral Ministry: Shipping”--Petitioner’s Group
No. 5)
Petitioner paid for the rental of a post office box. Petitioner shipped
documents to his doctor, someone handling the estate for a deceased member of
BSDM, Donna Oliveri, Marta Gwynn, and Saker Aviation. These were
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[*39] nondeductible personal expenses, and expenses of providing charitable
services for individuals selected by a taxpayer are not deductible. Thomason v.
Commissioner, 2 T.C. at 443-445.
4. Communications (“Evangelization: Communications”--Petitioner’s
Group No. 7); Internet and Cable Service (“Evangelization:
Evangelization Support”--Petitioner’s Group No. 8)
Petitioner paid $3,334 for a home telephone and a mobile phone and $973
for internet and cable television service. Petitioner contends that he may deduct
these costs because he used the cable service for continuing education, which was
necessary for his evangelization activities. We disagree; these expenses are not
deductible because they produced a substantial, direct, personal benefit to
petitioner. See Tate v. Commissioner, 59 T.C. at 550; Seed v. Commissioner, 57
T.C. at 276. In addition, these expenses would have been paid even absent
petitioner’s evangelization. Payments which petitioner would have made even if
he had done no evangelizing do not qualify as gifts to or for the use of a charitable
organization. See Orr, 343 F.2d at 557.
F. Whether Respondent’s Denial of Petitioner’s Charitable Contribution
Deductions Violates the First Amendment to the Constitution
Petitioner contends that: (1) respondent violated the First Amendment of
the Constitution and the Religious Freedom Restoration Act of 1993 (RFRA), Pub.
- 40 -
[*40] L. No. 103-141, 107 Stat. 1488, by treating his evangelistic activities as if
they are not a service to the Catholic Church or BSDM and (2) respondent’s audit
of petitioner’s return unconstitutionally discriminated against his religious beliefs.
1. Treatment of Petitioner’s Evangelism Activities Was Not
Unconstitutional
Petitioner contends that respondent is characterizing his evangelism as if it
were not a religious activity and that respondent’s characterization violates the
First Amendment. Petitioner mischaracterizes respondent’s position, which is that
petitioner’s expenses for evangelistic activities are not deductible as charitable
contributions under section 170, not that they are not religious activities. Not all
religious activities are services “to or for the use of” a religious organization for
purposes of section 170. See, e.g., Churukian v. Commissioner, T.C. Memo.
1980-205. Contrary to petitioner’s view, respondent’s contentions neither require
inquiry into the sincerity of petitioner’s religious beliefs nor cause entanglement
with the “intricacies of petitioner’s religious activity”.
Petitioner contends that respondent is unconstitutionally burdening
petitioner’s free exercise of his religious beliefs and has violated RFRA sec. 3, 107
Stat. at 1488-1489, which provides in pertinent part:
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[*41] (a) In General.--Government shall not substantially burden a
person’s exercise of religion even if the burden results from a rule of
general applicability, except as provided in subsection (b).
(b) Exception.--Government may substantially burden a
person’s exercise of religion only if it demonstrates that application
of the burden to the person--
(1) is in furtherance of a compelling governmental interest; and
(2) is the least restrictive means of furthering that compelling
governmental interest.
Petitioner contends that disallowance of his section 170 deductions violates his
right to the free exercise of religion by placing a substantial burden on his
evangelization, in that it would result in his having less money to evangelize. We
disagree. In Hernandez v. Commissioner, 490 U.S. 680, 699 (1989), the Supreme
Court said that “we need not decide whether the burden of disallowing the § 170
deduction is a substantial one, for our decision in Lee establishes that even a
substantial burden would be justified by the ‘broad public interest in maintaining a
sound tax system’”.
Petitioner contends that the holding in Hernandez applies only to cases
involving quid pro quo contributions and therefore does not apply here. We
disagree. See Jimmy Swaggart Ministries v. Bd. of Equalization of Cal., 493 U.S.
378, 390-391, 394-396 (1990). Petitioner also asks us to not follow Hernandez
- 42 -
[*42] because, according to petitioner, the taxpayers (Scientologists) in Hernandez
“were not practicing their religion.” We decline to reach that conclusion, and we
note that the Supreme Court did not draw such a conclusion. See Hernandez v.
Commissioner, 490 U.S. 680.
2. Respondent’s Audits Did Not Unconstitutionally Discriminate
Against Petitioner’s Religious Beliefs
Petitioner contends that respondent’s three audits of his Federal income tax
returns within 10 years resulted in excessive Government entanglement with his
exercise of religion. We disagree. We do not look behind a notice of deficiency
to examine the Commissioner’s motives or the administrative policy or procedure
involved in making the determination without credible evidence of
unconstitutional conduct by the Commissioner. Greenberg’s Express, Inc. v.
Commissioner, 62 T.C. 324, 327 (1974). Petitioner has not provided a basis for us
to conclude that the Commissioner unconstitutionally discriminated against his
religious beliefs.
G. Whether Petitioner Is Liable for the Addition to Tax Under Section
6651(a)(1) for Failure To File Timely
An individual taxpayer is required to file a tax return on or before the 15th
day of April following the close of the calendar year. Sec. 6072(a). However, a
taxpayer can obtain an automatic six-month extension of time for filing a return,
- 43 -
[*43] see sec. 6081; sec. 1.6081-4, Income Tax Regs., by filing an application on
Form 4868, sec. 1.6081-4(b)(1), (2), and (3), Income Tax Regs. Petitioner’s 2012
tax return was due on April 15, 2013, but he filed a Form 4868 to obtain an
extension to file his return. Petitioner filed his 2012 tax return on August 16,
2014, 10 months after the extended due date.
Section 6651(a)(1) imposes an addition to tax of up to 25% for failure to file
timely Federal income tax returns unless the taxpayer shows that such failure was
due to reasonable cause and not willful neglect. United States v. Boyle, 469 U.S.
241, 245 (1985).
The Commissioner bears the burden of production with respect to the
taxpayer’s liability for penalties and additions to tax. Sec. 7491(c). Once this
burden is met, however, the burden shifts to the taxpayer to show that the
Commissioner’s determination is incorrect. Higbee v. Commissioner, 116 T.C.
438, 446-447 (2001). Respondent has met this burden of production because
petitioner filed his return after the extended due date.
To prove that he or she had reasonable cause, a taxpayer must show that he
or she exercised ordinary business care and prudence and was nevertheless unable
to file the return within the prescribed time. See sec. 6651(a)(1); Crocker v.
Commissioner, 92 T.C. 899, 913 (1989); sec. 301.6651-1(c)(1), Proced. & Admin.
- 44 -
[*44] Regs. Petitioner contends that he had reasonable cause to file late because
he was concerned about meticulously substantiating his expenses based on his
experience in prior audits.11 We disagree. The task of carefully keeping records
does not provide reasonable cause for late filing. Therefore, we sustain the
additions to tax under section 6651(a).
H. Whether Petitioner Is Liable for the Accuracy-Related Penalty Under
Section 6662
Respondent determined that petitioner is liable for the accuracy-related
penalty under section 6662(a) and (b)(2) for 2012 for un underpayment of tax
attributable to a substantial understatement of income tax. An understatement is
substantial if it exceeds the greater of 10% of the tax required to be shown on the
return or $5,000. Sec. 6662(d)(1)(A).
Petitioner is not liable for the penalty under section 6662 if the record does
not show that it was properly determined by respondent. See Graev v.
Commissioner, 149 T.C. 485, 492-493 (2017), supplementing and overruling in
part 147 T.C. 460 (2016). In order to meet the burden of production for this
11
See supra note 8. Respondent audited petitioner’s returns for 2008,
Oliveri v. Commissioner, T.C. Dkt. No. 14773-08S (filed June 16, 2008), and for
2010, Oliveri v. Commissioner, T.C. Dkt. No. 3494-11S (filed Feb. 11, 2011).
Petitioner agreed in both of those cases that he had a deficiency in tax for those
prior years.
- 45 -
[*45] penalty, respondent must show that there was written supervisory approval
of the initial penalty determination. See secs. 6751(b)(1), 7491(c); Chai v.
Commissioner, 851 F.3d 190, 221 (2d Cir. 2017), aff’g in part, rev’g in part T.C.
Memo. 2015-42; Graev v. Commissioner, 149 T.C. at 492-493. The record
contains no evidence of the requisite supervisory approval for this penalty. Thus,
respondent did not meet the burden of production and petitioner is not liable for
the accuracy-related penalty for 2012. See Platts v. Commissioner, T.C. Memo.
2018-31; Ford v. Commissioner, T.C. Memo. 2018-8.
I. Conclusion
Petitioner may deduct charitable contributions for 2012 to the extent stated
above and is liable for the addition to tax under section 6651(a)(1).
Decision will be entered under
Rule 155.