DocketNumber: No. 8482-07
Citation Numbers: 2008 T.C. Memo. 280, 96 T.C.M. 450, 2008 Tax Ct. Memo LEXIS 279
Judges: \"Swift, Stephen J.\"
Filed Date: 12/15/2008
Status: Non-Precedential
Modified Date: 4/18/2021
MEMORANDUM FINDINGS OF FACT AND OPINION
SWIFT,
Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for 2004, and all Rule references are to the Tax Court Rules of Practice and Procedure.
At issue is petitioner Moshe Shafrir's entitlement to deductions for business expenses, dependency exemptions, and Hope Scholarship credits beyond those allowed by respondent. Petitioner Lilia Valitova is a petitioner only because she filed a 2004 joint Federal income tax return with her husband. References to petitioner are to Moshe Shafrir.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. At the time the petition was filed petitioner resided in California.
In 1980 petitioner graduated from the Technion-Israel Institute of Technology in Israel with a bachelor's degree in architecture and town planning. Thereafter, petitioner married, moved *280 to the United States, and eventually became licensed as an architect in California.
In 2004 petitioner was employed as an architect in San Jose, California, and in San Francisco, California. Petitioner also worked as an independent architect.
At his home petitioner maintained a cellular telephone line and three telephone land lines. All of the telephone lines were used by petitioner and his family in their personal affairs and also by petitioner in his work as an independent architect.
In 2004 petitioner took 29 automobile trips totaling 7,320 miles to various cities in California, and petitioner kept a mileage log relating thereto. The trips were described in petitioner's mileage log as being taken for the purpose of either "meeting with potential clients" (837 miles) or "marketing, urban, and architectural study" (6,483 miles). With respect to trips described as made for the purpose of meeting with potential clients, petitioner also noted in his log the client's name, the location and subject of the meeting, and the architectural work involved.
With respect to trips described as made for the purpose of marketing, urban, and architectural study, petitioner made no further notes in his *281 log, but petitioner explained at trial that these trips were not made in connection with a particular client or a particular architectural work assignment but were made to generally inform petitioner as to the current urban planning and architecture of the cities visited. On these trips petitioner generally stayed overnight with friends or at campsites in National parks, and petitioner occasionally brought his family along with him.
In 2004 petitioner's son and daughter attended college as full-time students, and petitioner's son also worked as a full-time chef at a restaurant.
On his 2002 and 2003 Federal income tax returns, petitioner claimed Hope Scholarship credits for education expenses he incurred in 2002 and 2003 on behalf of his son and daughter. In 2005 petitioner's son timely filed his own 2004 individual Federal income tax return on which he claimed himself as a dependent and on which he reported $ 27,309 in income relating to his employment as a chef.
On January 18, 2006, petitioner late filed his 2004 return to which petitioner attached a Schedule C, Profit or Loss From a Business (Sole Proprietorship), relating to his work as an independent architect, petitioner reported *282 business expenses of $ 11,478. Petitioner also claimed $ 6,200 in dependency exemptions and $ 3,000 in Hope Scholarship credits with respect to his son and daughter.
On audit respondent determined that petitioner had not substantiated and therefore was not entitled to the claimed $ 11,478 Schedule C expenses, the $ 6,200 dependency exemptions, and the $ 3,000 Hope Scholarship credits. Respondent also determined that petitioner was liable for the addition to tax under
On April 16, 2007, petitioner filed with this Court his petition relating to respondent's statutory notice of deficiency.
On April 26, 2008, petitioner's son filed with respondent a Form 1040X, Amended U.S. Individual Income Tax Return, for 2004 on which he disclaimed himself as a dependent and with which he included a $ 493 payment for the additional taxes owed in connection with his disclaimer of his dependency exemption.
Before trial the parties entered into various settlement concessions with respect to the disallowed Schedule C expenses relating to petitioner's work in 2004 as an independent architect. The schedule below reflects the expenses claimed *283 by petitioner on the Schedule C attached to his 2004 return, the amounts conceded by either petitioner or respondent, and the amounts still in dispute:
Claimed | Conceded | Conceded | Still | |
Claimed Schedule | by | by | by | in |
C Expenses | Petitioner | Petitioner | Respondent | Dispute |
Advertising | $ 495 | $ 0 | $ 0 | $ 495 |
Computer depreciation | 328 | 328 | 0 | |
Software depreciation | 976 | 0 | 0 | 976 |
Heater depreciation | 5 | 0 | 0 | 5 |
Legal/prof. services | 416 | 0 | 300 | 116 |
Office supplies | 358 | 0 | 0 | 358 |
Repairs/maintenance | 385 | 0 | 0 | 385 |
Prof. literature | 756 | 0 | 0 | 756 |
Mailing/shipping | 321 | 0 | 0 | 321 |
Printing/copying | 401 | 0 | 0 | 401 |
Prof. training | 1,305 | 0 | 0 | 1,305 |
Architect's license | 200 | 0 | 200 | 0 |
Telephone | 1,973 | 0 | 0 | 1,973 |
Trips | 2,711 | 0 | 314 | 2,397 |
Total amount | $ 10,630 * | $ 328 | $ 814 | $ 9,488 |
*5** It is unclear from the record the reason for the discrepancy | ||||
*5*between the $ 11,478 claimed expenses on the Schedule C attached to | ||||
*5* petitioner's 2004 tax return and the $ 10,630 total expenses | ||||
*5*listed in the above schedule. |
The parties also agreed that the claimed dependency exemption for petitioner's daughter was allowable.
OPINION
Generally, as to claimed deductions a taxpayer bears the burden of proof, and respondent's determinations are entitled to a presumption of correctness. 1
Where appropriate, the Court may estimate the amount of the expenses and allow deductions therefor.
Under
At trial petitioner submitted documentation relating only to the telephone and travel expenses. No documentation was submitted with regard to the other claimed Schedule C expenses still in dispute.
With regard to the telephone expenses of $ 1,973, the documentation petitioner submitted does not provide sufficient information to distinguish which expenses were incurred in petitioner's work as an architect and which expenses *285 were incurred in petitioner's personal and family affairs. Petitioner has not properly substantiated the claimed telephone expenses and has not submitted sufficient evidence for us to make an estimate of deductible telephone expenses. See
Regarding the $ 2,397 travel expenses still in dispute (relating just to the trips described as made for the purpose of marketing, urban, and architectural study), expenses incurred by a taxpayer to further his general education are generally treated as nondeductible personal expenses unless they qualify as business expenses under
In
The business purpose of the $ 2,397 travel expenses still in dispute has not been adequately substantiated and the $ 2,397 are not allowed as ordinary and necessary business expenses.
Regarding petitioner's claimed dependency exemption for his son, generally a taxpayer is allowed an exemption for a dependent if, among other things, the taxpayer has provided over one-half of the dependent's support and the dependent has not claimed himself as a dependent for the same year.
In determining whether a taxpayer provided over one-half of the support for a claimed dependent, the amount of support provided by the taxpayer is compared to the total amount of support which the claimed dependent received from all sources.
Where a claimed dependent has income in the year in which he is claimed as a dependent, only that *287 portion of the claimed dependent's income which is actually spent on the claimed dependent's support is considered in determining total "support" under
Petitioner claims that in 2004 his son did not spend any of the $ 27,309 earned as a chef for his own support, that petitioner provided over one-half of his son's support, and that because of his son's disclaimer on his son's amended 2004 tax return, petitioner should be allowed the exemption for his son.
Petitioner has submitted no credible evidence to corroborate that he provided over one-half of his son's support for 2004 and that his son did not provide over one-half of his own support. Petitioner's son does not qualify under
Under
Petitioner provided no explanation and submitted no evidence to suggest that his failure to timely file his 2004 return was due to reasonable cause. We sustain respondent's imposition of the section 6651(a)(1) addition to tax.
For purposes of
Where a taxpayer can demonstrate reasonable cause for the underpayment, an exception to the
Petitioner *289 has not explained his failure to keep and maintain proper documentation to substantiate the Schedule C expenses that we disallow and his expenses relating to the dependency exemption for his son that we disallow. The claimed Hope Scholarship credits for his son and daughter were clearly not allowable.
We sustain respondent's imposition of the accuracy-related penalty under
To reflect the foregoing,
1. Petitioner makes no argument that he qualifies under
Cohan v. Commissioner of Internal Revenue , 39 F.2d 540 ( 1930 )
Antonio R. Durando Naomiann N. Durando v. United States , 70 F.3d 548 ( 1995 )
United States v. Boyle , 105 S. Ct. 687 ( 1985 )
Welch v. Helvering , 54 S. Ct. 8 ( 1933 )
Boser v. Commissioner , 77 T.C. 1124 ( 1981 )