Danny M. Knight v. Commissioner

T.C. Summary Opinion 2009-106
UNITED STATES TAX COURT
DANNY M. KNIGHT, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 1370-08S. Filed July 13, 2009.
Lawrence D. Rouse, for petitioner.
Wesley J. Wong, for respondent.
DEAN, Special Trial Judge: This case was heard pursuant to
the provisions of section 7463 of the Internal Revenue Code in
effect when 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 Revenue Code in effect for the year in issue,
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and all Rule references are to the Tax Court Rules of Practice
and Procedure.
Respondent determined a $10,465 deficiency in petitioner’s
2004 Federal income tax. The issue for decision is whether
petitioner is entitled to his claimed deduction for unreimbursed
employee expenses.
Background
Some of the facts have been stipulated and are so found.
The stipulation of facts and the exhibits received into evidence
are incorporated herein by reference. When the petition was
filed, petitioner resided in Nevada.
Petitioner is a retired inside journeyman wireman
(electrician), drawing a pension from his local union in Topeka,
Kansas (Topeka). He is allowed to work only 39 hours per month
in Kansas; otherwise, the local union will deduct a certain
amount from his pension. But petitioner can work for any other
non-Kansas union as much as he wants. Therefore, he travels for
work to places such as Fairbanks, Alaska (Fairbanks), Las Vegas,
Nevada (Las Vegas), and Bakersfield, Castorville, and San
Francisco, California.
During 2004 petitioner signed the out-of-work list (book) at
his local union in Topeka. As a “Book One Member”, he could sign
the book in person or by certified or registered mail. As a
“traveler”, however, he could sign only a nonlocal union’s “book
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two” because he was a nonresident. He was required to sign a
nonlocal union’s book in person and had to be present at the
nonlocal union in order to “catch a call” (i.e., accept an
assignment). Once petitioner accepted an assignment, he was not
given any guaranty by the contractor as to how long or whether
the work would last.
During 2004 petitioner resided for 4 to 6 months in a fifth-
wheel travel trailer that was kept at an “RV park” in Las Vegas.
And later in 2004 he moved into his then girlfriend’s house at
“609 Greenhurst” in Las Vegas. Petitioner also owned a few
properties in Topeka in 2004. Before petitioner’s 2003 divorce,
he resided with his then wife and two daughters on “25th Street”.
Thereafter, he resided with his daughter and three grandchildren
on “21st Street”. He also owned a piece of his grandfather’s
property that he had “a structure on”.
Petitioner kept certain vehicles at his Topeka and Las Vegas
residences. For example, he kept two motorcycles in Topeka for
his personal use. He kept a Jeep and a Ford F-250 pickup in Las
Vegas that were used for driving to and from “the union hall, or
the house, and transporting tools, safety clothing, and whatever”
during 2004. But occasionally he drove the Jeep or the Ford F-
250 pickup for personal purposes in Las Vegas during 2004 if he
“went to dinner or something on the weekend.”
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Petitioner was not reimbursed by his various employers or
the unions for the expenditures he made in 2004. Instead, he
claimed $41,723 in unreimbursed employee expenses on his 2004
Schedule A, Itemized Deductions (before application of the
section 67(a) 2-percent floor). Petitioner’s unreimbursed
employee expenses consist of:
Description Amount
Vehicle expenses $15,900
Parking fees, tolls, and transportation 43
Travel expenses 11,375
Unspecified business expenses 2,879
1
Meals and entertainment 15,641
Safety clothing 1,559
“Workingdues” (union dues) 970
“ToolDEP” (tool repairs) 1,176
1
Before application of the 50-percent ceiling of sec.
274(n).
Petitioner’s vehicle expense is based on 42,400 business
miles at the standard mileage rate of 37.5 cents.
Petitioner’s travel expenses consist of $9,757 for rent,
$806 for laundry,1 $746 for “MISC”,2 and $66 for heat.
Petitioner’s rent consists of charges incurred at the RV Park
where he kept his fifth-wheel travel trailer and expenditures he
made to maintain his then girlfriend’s house.
1
Petitioner reported expenditures for laundry of $15 per
week, except he reported an additional expenditure for laundry
of $26 on or about Jan. 20, 2004.
2
The Court notes that the record indicates that petitioner’s
“MISC” expenses include expenditures for personal items, such as
a birthday card, a $300 gun, and a Sam’s Club renewal.
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Petitioner’s unspecified business expenses consist of:
(1) $120 for licenses; (2) $130 for “OFFICE”; (3) $241 for
postage; and (4) $2,385 for “PHONE”.3
Petitioner’s meals and entertainment expenses consist of:
(1) $13,744 for meals; (2) $206 for water; and (3) $1,691 for
entertainment.
Discussion
I. Burden of Proof
The Commissioner’s determinations in a notice of deficiency
are presumed correct, and the taxpayer bears the burden to prove
that the determinations are in error. Rule 142(a); Welch v.
Helvering, 290 U.S. 111, 115 (1933). But the burden of proof on
factual issues that affect the taxpayer’s tax liability may be
shifted to the Commissioner where the taxpayer introduces
credible evidence with respect to the issue and the taxpayer has
satisfied certain conditions. Sec. 7491(a)(1). Petitioner has
not alleged that section 7491(a) applies, and he has neither
complied with the substantiation requirements nor maintained all
required records. See sec. 7491(a)(2)(A) and (B). Accordingly,
the burden of proof remains on him.
3
Although petitioner claimed a $2,879 deduction for
unspecified business expenses, the correct total is $2,876.
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II. Parties’ Arguments
Petitioner argues that his expenditures in Alaska,
California, and Las Vegas for “travel away from home” are
deductible as unreimbursed employee expenses because his tax home
is Topeka, where he maintains a home with his daughter and
“grandkids”, two motorcycles, his driver’s license, and his voter
registration. Alternatively, he argues that his expenditures are
deductible as job search expenses.
Respondent argues that the expenditures are not deductible
as travel away from home expenses because either petitioner is an
itinerant or his tax home is Las Vegas. Alternatively, he argues
that the expenditures are not deductible for lack of
substantiation and that the expenditures during July to December
2004 are not deductible as job search expenses because petitioner
“worked primarily for” a certain contractor.
The Court, however, need not decide whether petitioner had a
tax home (or its location) for purposes of his “travel away from
home” expenditures or whether the expenditures constitute job
search expenses. Petitioner’s expenses are not deductible under
section 162(a) on either theory because he has not complied with
the substantiation requirements of section 274(d) or 6001 and the
regulations thereunder (discussed infra) except as otherwise
noted.
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III. Unreimbursed Employee Expenses
Section 162(a) authorizes a deduction for all the ordinary
and necessary expenses paid or incurred during the taxable year
in carrying on any trade or business. But as a general rule,
deductions are allowed only to the extent that they are
substantiated. Secs. 274(d) (no deductions are allowed for
gifts, listed property,4 or traveling, entertainment, amusement,
or recreation unless substantiated), 6001 (taxpayers must keep
records sufficient to establish the amount of the items required
to be shown on their Federal income tax returns). If the
taxpayer establishes that he has incurred a deductible expense
yet is unable to substantiate the exact amount, the Court may
estimate a deductible amount in some circumstances. Cohan v.
Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930). But the Court
cannot estimate a taxpayer’s expenses with respect to the items
enumerated in section 274(d). Sanford v. Commissioner, 50 T.C.
823, 827 (1968), affd. per curiam 412 F.2d 201 (2d Cir. 1969);
Rodriguez v. Commissioner, T.C. Memo. 2009-22 (the strict
substantiation requirements of section 274(d) preclude the Court
and taxpayers from approximating expenses).
Specifically, section 274(d) and the regulations thereunder
require taxpayers to substantiate their deductions by adequate
4
The term “listed property” is defined to include passenger
automobiles and cell phones. Sec. 280F(d)(4)(A)(i), (v).
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records or sufficient evidence to corroborate the taxpayers’ own
testimony as to: (1) The amount of the expenditure or use;
(2) the time of the expenditure or use; (3) the place of the
expenditure or use; (3) the business purpose of the expenditure
or use; and (4) the business relationship to the taxpayer of the
persons entertained or receiving the gift. See also sec. 1.274-
5T(a) and (b), Temporary Income Tax Regs., 50 Fed. Reg. 46014
(Nov. 6, 1985).
As to the “Rules of substantiation”, the temporary
regulation provides that taxpayers must maintain and produce such
substantiation as will constitute proof of each expenditure or
use. Sec. 1.274-5T(c)(1), Temporary Income Tax Regs., 50 Fed.
Reg. 46016 (Nov. 6, 1985). Written evidence has considerably
more probative value than oral evidence. Id. To satisfy the
“adequate records” requirement of section 274(d), the taxpayer
shall maintain an account book, a diary, a log, a statement of
expense, trip sheets, or a similar record and documentary
evidence that in combination are sufficient to establish each
element of expenditure or use. Sec. 1.274-5T(c)(2)(i), Temporary
Income Tax Regs., 50 Fed. Reg. 46017 (Nov. 6, 1985).
To substantiate petitioner’s deductions for unreimbursed
employee expenses or job search expenses, he has provided his
logbook, certain receipts, his testimony, and a letter from his
union that explained the application process and stated: “no
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reimbursement is made by the Local Union to an applicant for
travel, lodging, tools, or any other expenses that might be
incurred while trying to obtain a job”.
A. Petitioner’s Deduction for Vehicle Expenses
1. Deduction Based on the Standard Mileage Rate
Petitioner admitted that his mileage was a “guesstimation”
or an “approximation of the mileage [he] drove that day or for
the trip.” He would “get like a Mapquest or something of that
nature, * * * or a road map” to determine his mileage or if he
looked at the odometer and it had “500 miles in a full week [he]
divided it by seven.” He also admitted that: (1) His estimates
were not accurate because he recorded 75 miles traveled per day
round trip from Summerlin to various work sites, but the mileage
from Summerlin to the community college was only about 10 to 15
miles round trip and the mileage from Summerlin to Caesar’s
Palace was about 25 or 26 miles round trip; (2) his business
mileage included personal miles “if [he] went to dinner or
something on the weekend”; (3) he recorded 75 miles per day as
business miles even for days when he was not working such as the
weekends; (4) he recorded 75 miles per day as business miles
accrued in Las Vegas, but he was actually in Topeka on “a non-
business trip”; (5) he claimed deductions for mileage from Las
Vegas to Fairbanks and back, even though it was not his vehicle
that was driven to Fairbanks; and (6) he inaccurately reported
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his mileage on his Form 2106, Employee Business Expenses; e.g.,
he reported 42,400 business miles as “Total miles” driven in 2004
and did not include mileage for “Commuting miles”, “Other miles”,
or personal use miles.
The Court therefore finds that petitioner has not
sufficiently substantiated either the business use of his
vehicles or the business purpose of his expenditures or uses.
See sec. 274(d); sec. 1.274-5T(b)(6), (c)(1) through (2)(i),
Temporary Income Tax Regs., 50 Fed. Reg. 46016, 46017 (Nov. 6,
1985); see also Rodriguez v. Commissioner, supra. Petitioner is
not entitled to a deduction for vehicle expenses based on the
standard mileage rate, and respondent’s determination is
sustained.
2. Deduction Based on Actual Transportation Expenses
Although petitioner did not claim a deduction for actual
costs of his transportation expenses, he has submitted various
receipts and statements purporting to substantiate the actual
costs of his transportation expenses. See Rev. Proc. 2003-76,
sec. 5.02, 2003-2 C.B. 924, 926 (taxpayers generally may deduct
an amount based on the standard mileage rate or actual costs).
The Court has concluded that petitioner’s evidence is not
sufficient to substantiate either his business use of his
vehicles or the business purpose of his claimed deduction based
on the standard mileage rate. It also is insufficient to
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substantiate his business use or business purpose for a deduction
based on the actual costs of his transportation expenses.
Petitioner therefore is not entitled to a deduction based on the
actual costs of his transportation expenses. See sec. 274(d);
sec. 1.274-5T(b)(6), (c)(1) through (2)(i), Temporary Income Tax
Regs., supra; see also Sanford v. Commissioner, 50 T.C. at 827;
Rodriguez v. Commissioner, T.C. Memo. 2009-22.
3. Petitioner’s Deduction for Toll Expenses
Expenditures for tolls may generally be deducted as a
separate item. See Rev. Proc. 2003-76, sec. 5.04, 2003-2 C.B. at
926. Petitioner has not provided any receipts to substantiate
his expenditures for tolls. Petitioner therefore is not entitled
to the deduction. See sec. 6001. Respondent’s determination is
sustained.5
B. Petitioner’s Deduction for Travel Expenses
1. Travel Expenses Based on Per Diem Rates
In a letter to respondent, petitioner asserted that his 2004
travel expenses were based on per diem rates for travel inside
and outside the continental United States. He listed his travel
expenses as follows: (1) Las Vegas $122 per day; (2) “California
5
Although petitioner submitted a ticket stub from a
convention center in Las Vegas for parking, the ticket stub does
not set forth the amount that he expended. The Court therefore
cannot provide an allowance for parking. See Cohan v.
Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930); Vanicek v.
Commissioner, 85 T.C. 731, 742-743 (1985) (an estimate must have
a reasonable evidentiary basis).
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Average” $150 per day; (3) “[Fairbanks] Average” $232 per day;
and (4) “Canada Average” $247 per day. The evidence indicates,
however, that petitioner’s assertion is incorrect. Indeed, the
$11,375 petitioner claimed is derived from the sum of his “actual
costs” for rent, laundry, “MISC”, and heat as reported in his
logbook.6
Rev. Proc. 2003-80, sec. 1, 2003-2 C.B. 1037, 1037, states
that its purpose is to provide:
rules under which the amount of * * * [an employee’s
business expenses] for lodging, meal, and incidental
expenses * * * incurred while traveling away from home
will be deemed substantiated under § 1.274-5 of the
Income Tax Regulations when a payor (the employer, its
agent, or a third party) provides a per diem allowance
under a reimbursement or other expense allowance
arrangement to pay for the expenses. * * * [Emphasis
added.]
While Rev. Proc. 2003-80, sec. 1, authorizes the per diem
method to substantiate those traveling expenses, the per diem
method is available only to employees whose employers pay a per
diem allowance in lieu of reimbursing the actual expenses an
employee pays while traveling away from home. Moreover, IRS
Publication 463, Travel, Entertainment, Gift, and Car Expenses,
explains that in the case of an employee “There is no optional
6
The Court also notes that petitioner’s expenses for rent
varied as much as $2.12 on Jan. 26, 2004, $198.90 on Feb. 14,
2004, $6.41 on Mar. 2, 2004, $306.31 on July 29, 2004, $930.67 on
Aug. 21, 2004, to zero on several days throughout 2004.
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standard lodging amount similar to the standard meal allowance.
Your allowable lodging expense deduction is your actual cost.”
Petitioner’s claimed travel expenses do not come within Rev.
Proc. 2003-80, sec. 4.01, 2003-2 C.B. at 1039, because he was an
employee who did not receive a per diem allowance from his
employer. Therefore, he is not entitled to his deduction for
travel expenses based on per diem rates.
2. Travel Expenses Based on Actual Costs
Petitioner provided no receipts to substantiate his payment
of certain expenses; e.g., laundry, heat, or the $100 for “RV
Rent” reported on January 28, March 30, and May 24, 2004. He
also reported in his logbook and claimed on his Form 1040, U.S.
Individual Income Tax Return, that he had paid certain travel
expenses in Las Vegas, but he conceded at trial that he was
actually in Topeka; e.g., he reported rent of $49.39 on December
4, 2004, and rent of $29.78 and laundry expense of $15 on
December 5, 2004. Like petitioner’s vehicle expenses, the actual
costs of his travel expenses are not sufficiently substantiated.
See sec. 1.274-5T(b)(2), Temporary Income Tax Regs., 50 Fed. Reg.
46014, 46015 (Nov. 6, 1985). Accordingly, petitioner is not
entitled to a deduction for travel expenses based on actual
costs.
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C. Petitioner’s Deduction for Unspecified Business Expenses
1. $120 Deduction for Licenses
Petitioner testified that his deduction for licenses related
to a Washington State electrician’s license for which he had
reciprocity with Alaska. But he did not submit a copy of his
license. In addition, as reported in petitioner’s logbook and
deducted on his Form 1040, his expenditures for licenses actually
include amounts paid for “Auto” licenses (e.g., “tags”) of:
Amount Date Paid in 2004
$28.50 Jan. 19
43.50 June 24
19.50 July 24
28.25 Sept. 3
Petitioner has provided no receipts or canceled checks
substantiating his payment of those amounts. See sec. 6001. In
addition, the amounts were paid in relation to listed property
and therefore are subject to the strict substantiation
requirements of section 274(d) and the regulations thereunder.
As discussed supra, he has not sufficiently substantiated his
vehicle expenses in accordance with those provisions. Also, the
amounts paid on July 24 and September 3, 2004, bear the notation
“MC”, which the Court infers to mean in relation to motorcycle
tags. He testified that his motorcycles were used only in Topeka
for personal purposes. Consequently, those personal expenditures
are also not deductible under section 262(a). In sum, petitioner
is not entitled to a $120 deduction for licenses.
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2. $130 Deduction for “OFFICE”
As reported in petitioner’s logbook and deducted on his Form
1040, his expenditures for “OFFICE” include:
Amount Date Paid in 2004
$5.49 May 3
7.40 May 6
93.21 July 13
15.58 Dec. 26
7.77 Dec. 30
Petitioner submitted copies of an Office Depot receipt dated
December 26, 2004, substantiating a $15.49 purchase of office
items. He also submitted copies of OfficeMax and Kinko’s
receipts that are illegible because of the poor copy quality. He
has not proven that he paid the remaining $114.51 for office
items. See sec. 6001. Accordingly, the Court finds that
petitioner is entitled to a deduction of $15.49 for office items.
See Cohan v. Commissioner, 39 F.2d at 544 (in estimating a
taxpayer’s deductions, the Court bears heavily against the
taxpayer whose inexactitude is of his or her own making).
3. $241 Deduction for “Postage”
As reported in petitioner’s logbook and deducted on his Form
1040, his expenditures for postage include:
Amount Date Paid in 2004
$10.00 Feb. 5, June 29
1
14.68 Feb. 12
3.00 Feb. 25, Mar. 24,
Mar. 29
2.25 Mar. 3
11.50 Mar. 30
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14.80 Apr. 21
9.25 May 3
5.00 May 8
8.00 May 10, Sept. 6,
Nov. 15
7.40 July 20
1.20 July 17
100.00 Sept. 22
11.00 Oct. 25, Nov. 2
1
Petitioner submitted a UPS shipping receipt for $14.48 on
Feb. 12, 2004, addressed to a Jamie Knight at his former
residence on “21st Street”.
Although deductions for the following were not claimed on
petitioner’s Form 1040, he has submitted a post office receipt
for a “mailer” and postage of $7.28 paid on February 3, 2004, a
receipt for “postage book” of $7.40 paid on December 30, 2004, a
receipt for postage stamps of $7.40 paid on June 22, 2004, and a
receipt for postage stamps (amount illegible) paid on April 22,
2004. He has not submitted any other receipts to substantiate
his expenditures for postage.
Petitioner has not proven that he paid the postage expenses
set forth in the table except as noted supra. And he offered no
testimony explaining how his postage expenses related to either
his trade as an electrician or to job search expenses. The
record supports an inference that his expenditures for postage
were personal expenses and as such are not deductible. See sec.
262(a). Indeed, he testified that he could sign his local
union’s books (in Topeka) either in person or by sending
something in by certified or registered mail, but there is no
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evidence that he used the mail option, other than his
uncorroborated self-serving statements. See Urban Redev. Corp.
v. Commissioner, 294 F.2d 328, 332 (4th Cir. 1961), affg. 34 T.C.
845 (1960); Tokarski v. Commissioner, 87 T.C. 74, 77 (1986).
Petitioner testified that as a “traveler”, he had to sign
nonlocal unions’ books in person every Wednesday to keep his name
active and that “you have to be present for * * * [daily calls at
a nonlocal union] in order to take the” job.
Because petitioner has failed to prove that his postage
expenditures were either paid or related to his trade as an
electrician or to job search expenses, he is not entitled to the
deduction. See secs. 162(a), 262(a); INDOPCO, Inc. v.
Commissioner, 503 U.S. 79, 84 (1992) (stating that deductions are
strictly a matter of legislative grace, and taxpayers bear the
burden of proving that they are entitled to any claimed
deduction). Respondent’s determination is sustained.
4. $2,385 Deduction for “PHONE”
As reported in petitioner’s logbook and deducted on his Form
1040, his expenditures for “PHONE” include:
Amount Date Paid in 2004
$128.41 Jan. 8, Feb. 5
97.50 Feb. 7
120.32 Mar. 9
199.53 Mar. 29
88.77 Apr. 20
88.26 May 20, June 16,
Dec. 25
90.71 July 17
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88.36 Aug. 16
450.00 Aug. 21
1
42.98 Aug. 26
89.29 Sept. 15
430.93 Sept. 16
89.43 Oct. 21
2
89.80 Nov. 17
1
Petitioner provided a T-Mobile receipt of $42.98 for the
purchase of a “VPC with HS” and an “EARBUD” on Aug. 26, 2004.
2
Although petitioner claimed a deduction of $2,385, the
correct total is $2,399.22.
Petitioner provided no canceled checks or statements of
“Monthly Charges” to substantiate his payment of his phone
expenses in 2004 except as noted supra. He, however, provided a
statement of monthly charges dated December 26, 2003, bearing the
name of his then girlfriend. He testified that they added
another cell phone to her account, and he paid the bill.
Petitioner’s deduction for “PHONE” relates to listed
property that must be strictly substantiated in accordance with
section 274(d) and the regulations thereunder. See secs. 274(d),
280F(d)(4)(A)(v); sec. 1.274-5T(b)(6), Temporary Income Tax
Regs., supra. Petitioner has provided no evidence establishing
the amount of his expenditures, the amount of his business and
total use, the date of the expenditure or use, or the business
purpose of his use. See sec. 1.274-5T(b)(6), Temporary Income
Tax Regs., supra. To the extent that his deduction for phone
expenses consisted of charges relating to his then girlfriend’s
cell phone use, the deduction is not allowable. See secs.
162(a), 262(a), 274(d); Trujillo v. Commissioner, T.C. Memo.
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1992-481 (gifts to certain persons are nondeductible personal
expenses). Respondent’s determination is sustained.
D. Petitioner’s Deduction for Meals and Entertainment
Expenses
Deductions for meals and entertainment expenses are
generally subject to the strict substantiation rules of section
274(d) and the regulations thereunder. But Rev. Proc. 2003-80,
sec. 4.03, 2003-2 C.B. at 1040, provides that employees who pay
meals expenses may use an amount computed at the Federal meals
and incidental7 expenses (M&IE) rate for the locality of travel
for each calendar day that the employee is away from home in lieu
of using actual expenses to compute an allowable amount as a
deduction. Rev. Proc. 2003-80, sec. 4.03, also explains that the
“amount will be deemed substantiated for purposes of paragraphs
(b)(2) and (c) of § 1.274-5, provided the employee * * *
substantiates the elements of time, place, and business purpose
of the travel for that day”. [Emphasis added].
Petitioner’s deduction for meals expenses consisted of
amounts he expended for groceries and so-called per diem rates.
7
The term “incidental expenses” means fees and tips given to
certain persons, certain transportation expenses between places
of lodging or business and places where meals are taken, if
suitable meals cannot be obtained at the temporary duty site, and
mailing costs for filing travel vouchers and payment of employer-
sponsored charge cards. See generally IRS Publication 463,
Travel, Entertainment, Gift, and Car Expenses.
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As reported in petitioner’s logbook, his “per diem rates” ranged
anywhere from $15 to $30, $25, $45, $55, $60, $69.82,8 and $115.
As reflected in petitioner’s logbook and deducted on his
Form 1040, his entertainment expenses were based on his actual
costs. As reported in his logbook, some of his entertainment
expenses consist of amounts for “movies” of $75 on October 16,
2004. In addition, he submitted a Sam’s Club receipt for the
purchase of a DVD for $19.63 on August 26, 2004. He also
submitted a receipt of $11.83 for books purchased at “Barnes &
Noble” with titles such as “Bath Floorpl”, “Guide to Freshw”,
“Gardens: Every”, “Book of Knots”, and “Flour, Eggs” (as shown
on the receipt), for which he reported the expenditure as
entertainment in his logbook and deducted on his Form 1040.
Because petitioner’s deduction for meals expenses were not
based on the Federal M&IE rates of the various localities, he
does not come within the provisions of Rev. Proc. 2003-80, sec.
4.03. In addition, he also has not satisfied the requirement of
substantiating the business purpose of his travel since he
claimed deductions for meals expenses on December 4 and 5, 2004–-
dates for which he admitted that he was in Topeka for personal
reasons and not in Las Vegas for business reasons. See id.
8
This “pier diem rate”, as reflected in petitioner’s logbook
on Apr. 17, 2004, was his actual cost of $69.82 for a buffet at
Riviera Hotel & Casino on Apr. 17, 2004, according to the sales
draft.
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Similarly, because he has not substantiated the business purpose
of his travel to allow a deduction for meals expenses based on
Federal M&IE rates, he also has not substantiated the business
purpose of his travel to allow a deduction for meals expenses
based on actual costs. See sec. 1.274-5T(b)(2), (4), Temporary
Income Tax Regs., 50 Fed. Reg. 46014, 46015 (Nov. 6, 1985).
Moreover, it would strain credulity to believe that petitioner
paid the following meals expenses in his trade as an electrician
or as job search expenses: (1) White Zinfandel and “Ridley”
Sauvignon Blanc; (2) “Smirnoff” beer; (3) “Miller” beer;
(4) “BEER”; (5) “COCKTAILS” and “Captain Morgans”;
(6) “Monistat”, “Kotex Tampons”, and “Midol”; (7) razors,
deodorant, toothpaste, “Chapstick”, shampoo, “Robitussin”, broom,
“Downy”, “ERA”, magazines, or candles; (8) “Brandy” and “Cuervo”
mix; and (9) “Malibu Rum” and “Jose Cuervo”. He also admitted
that $206 of his meals expenses related to charges for “Sierra
Spring” water that was billed to his then girlfriend and
delivered to her residence.
Petitioner also has not substantiated his deduction for
entertainment expenses as required by section 274(d) and the
regulations thereunder. Specifically, he has not substantiated
certain amounts of his expenditures, e.g., with a receipt, the
place of the expenditures such as the name, address, or location;
and the business purpose of the entertainment; i.e., the business
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reason for the entertainment, the nature of the business benefit
derived or expected to be derived as a result of the
entertainment, or the nature of any business discussion or
activity. See sec. 1.274-5T(b)(3) and (4), Temporary Income Tax
Regs., 50 Fed. Reg. 46015, 46016 (Nov. 6, 1985). Indeed, the
evidence supports an inference that his expenditures for
entertainment related to personal expenses and were not paid in
his trade as an electrician or as job search expenses; e.g., the
“Barnes & Noble” purchase for books and Sam’s Club purchase for
the DVD.
In sum, the Court holds that petitioner is not entitled to
his deduction for meals and entertainment expenses. Respondent’s
determination is sustained.
E. Petitioner’s Deduction for Safety Clothing
Petitioner testified that his deduction for safety clothing
consisted of amounts expended for fire-retardant work clothing
and steel-toed boots. Petitioner submitted the following
receipts to substantiate his expenditures: (1) “Work World” of
$48.24; (2) “Workboot Warehouse” of $106.96; (3) “American
Worker” of $103.40; and (4) “Las Vegas Country Store” of $107.46.
Clothing is a deductible expense only if it is required for
the taxpayer’s employment, is unsuitable for general or personal
wear, and is not so worn. See Hynes v. Commissioner, 74 T.C.
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1266, 1290 (1980); Yeomans v. Commissioner, 30 T.C. 757, 767
(1958).
The Court accepts petitioner’s testimony that his fire-
retardant work clothing and steel-toed boots were not suitable
for general or personal wear. But the Las Vegas Country Store
receipt indicates that the amount was expended for three shirts
and a pair of jeans. This expenditure was for clothing that is
suitable for general and personal wear, and petitioner has not
proven otherwise. Therefore, the Court finds that petitioner is
entitled to a deduction of $258.64 for safety clothing.
F. Petitioner’s Deduction for Union Dues
Petitioner testified that he paid his local union dues
yearly at his local union office. He also testified that he paid
union dues based either on a percentage or a set figure to the
nonlocal unions when he worked as a traveler.
Petitioner provided receipts or statements to substantiate
his payment of local union dues of $741.09 and nonlocal union
dues for “YEAR-TO-Date” of $531.51.
According to the receipt, petitioner paid $294.60 of local
union dues on “12/05/2003”. Therefore, he is not entitled to
deduct that amount in 2004. See sec. 461(a); sec. 1.461-1(a)(1)
and (2), Income Tax Regs. In short, the Court finds that
petitioner is entitled to a deduction of $978 ($741.09 + $531.51
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- $294.60) for union dues. See sec. 162(a); secs. 1.162-15(c),
1.162-20(c)(3), Income Tax Regs.
G. Petitioner’s Deduction for Tool Repairs
Petitioner submitted a receipt from “TOOL SERVICE” of
$117.94 for the repair of a saw that he uses in his trade. He
also submitted a “Sears” receipt of $32.24 for an extractor.
Petitioner has not otherwise substantiated his expenditures for
tools or repairs.9 The Court therefore finds that petitioner is
entitled to a deduction of $150.18.
To reflect the foregoing,
Decision will be entered
under Rule 155.
9
The Court notes again that several receipts are illegible
because of poor copy quality.