Some of the facts have been stipulated by the parties. The stipulation of facts and attached exhibits and the supplemental stipulation of facts and attached exhibits are incorporated herein by this reference.
Petitioner's automobiles were registered at Atlantic Beach, but insurance rates were also lower there. The telephone charges for the 2 years show little or no activity at the Atlantic Beach residence during the winter months, some use in April and May, heavy use in June, July and August which slacked off in the fall. The use of the telephones in the apartment was complementary except that use was still relatively high in April and May.
Inwood was approximately 3 miles from the Atlantic Beach residence. Petitioners have1982Tax Ct. Memo LEXIS569">*581 been members of a synagogue in Atlantic Beach for 17 years but they have also been members of the Fifth Avenue Synagogue, which was near the apartment.
An audit of the partnership returns for the fiscal year ending April 30, 1972 and April 30, 1973 resulted in a single adjustment attributable to the disallowance of two-sevenths of claimed partnership auto expense. As a result of this disallowance, petitioners concede that they earned additional income from the partnership in the amounts of $ 1,891 (1972) and $ 1,771 OPINION
At the outset we think it necessary to comment briefly on one matter persistently stressed at trial and on brief by petitioner in that he was subjected to extensive audits prior to the issuance of the notice of deficiency pertaining to his 1972 and 1973 returns, which resulted in respondent's disallowance of the items at dispute herein. As a general rule, this Court will not look behind a notice of deficiency to examine the evidence used or the propriety of the Commissioner's1982Tax Ct. Memo LEXIS569">*582 motives or administrative policy or procedure in making the determination. Greenberg's Express, Inc. v. Commissioner,62T.C.324">62T.C.324, 62T.C.324">327 (1974). The rationale for this rule is that since a trial before the Tax Court is a proceeding de novo, our determination of a petitioner's tax liability must be based on the merits of the case and not any previous record developed at the administrative level. Jackson v. Commissioner,73T.C.394">73T.C.394, 73T.C.394">400 (1979).
Deductions are a matter of legislative grace and the taxpayer has the burden of establishing that he is entitled to them. Deputy v. Dupont,308U.S.488">308U.S.488 (1940). The Commissioner's determination is presumptively correct and the taxpayer has the burden of proof, i.e., of overcoming that presumption. Welch v. Helvering,290U.S.111">290U.S.111 (1933); Rule 142(a), Tax Court Rules of Practice and Procedure.
Section 162 allows a deduction for all ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. However, the deductibility of business-related entertainment and travel expenses is limited under section 274 to items directly related1982Tax Ct. Memo LEXIS569">*583 to and associated with the active conduct of the taxpayer's trade or business. Section 274(d) requires those items be substantiated by adequate records or by sufficient evidence to corroborate the taxpayer's statements as to amount, time and place, business purpose, and business relationship of the persons entertained.
Club dues and fees to social, athletic and sporting facilities are treated as entertainment facility expenses. Section 274(a)(2). Club dues and expenses are deductible only if the taxpayer establishes "(i) That the facility was used primarily for furtherance of the taxpayer's trade or business and (ii) That the expenditure was directly related to the active conduct of such trade or business. Such deduction shall not exceed the portion of the expenditure directly related to the active conduct of the taxpayer's trade or business." Section 1.274-2 (a)(2), Income Tax Regs.
Petitioner did not use the Yale Club during 1972 or 1973 for his own use or to meet clients. Moreover, he kept no records regarding the uses of that facility. Clearly petitioner's unsupported testimony does not meet the strict requirements of section 274.
As to the dues for use of Inwood, 1982Tax Ct. Memo LEXIS569">*584 petitioner must first establish that the facility "was used primarily for the furtherance of his trade or business." By petitioner's own testimony more than 50 percent of the use of the club each year was for the pleasure of himself and his family.Therefore, petitioners are not entitled to a deduction under sections 162 and 274 for dues to the Inwood Country Club as a business expense. Mathews v. Commissioner,61T.C.12">61T.C.12 (1973), revd. on another ground 520F.2d323">520F.2d323 (5th Cir. 1975). In regard to the charges incurred for each visit, petitioner was unable to show what charges were incurred for each visit. Petitioner maintained that such information was unavailable, since only monthly bills were sent. However, the monthly bills were not introduced; only a summary of petitioner's diary stating the date of the visit and with whom is in evidence. Again, petitioner has failed to comply with the requirements of section 274. "* * * Section 274(d) contemplates that no deduction shall be allowed a taxpayer for such expenditures on the basis of such approximations [as used in Cohan v. Commissioner,39F.2d540">39F.2d540 (2d Cir. 1930)], or unsupported1982Tax Ct. Memo LEXIS569">*585 testimony of the taxpayer." Section 1.274-5(a), Income Tax Regs. See also Andress v. Commissioner,51T.C.863">51T.C.863 (1969), affd. 423F.2d679">423F.2d679 (5th Cir. 1970).
For traveling expenses, the substantiation requirements of section 274(d) require listing the amount of each separate expenditure for transportation, lodging, meals, etc. Section 1.274-5(b)(2), Income Tax Regs. The dates of departure and return, destination and business purpose of the trip must be documented. Petitioner has satisfied none of those requirements and thus his claimed deduction for travel cannot be allowed.
Petitioner is not required to comply with section 274 in seeking the telephone expense deduction. Respondent allowed 25 percent of the total telephone bills. Here, petitioner's unsupported testimony is inadequate to overcome the presumption that the Commissioner's determination is correct. 290U.S.111">Welch v. Helvering,supra.
Section 1034(a) allows the nonrecognition of gain on the sale of the taxpayer's principal residence if a new principal residence is purchased within the period 12 months before or up to 12 months after the sale of the old principal residence.1982Tax Ct. Memo LEXIS569">*586 The gain on the sale of the old principal residence is not recognized if the cost of the new residence exceeds the adjusted sales price of the old residence as defined by section 1034(b).
Respondent agrees that all requirements of section 1034 have been met with the sale of the Atlantic Beach residence except that such residence was not petitioner's principal residence. Petitioner asserts that they lived in Atlantic Beach more than one-half the year and they've always intended to make their home at Atlantic Beach their only residence.
However, petitioner, by his own testimony, admits that they lived in the apartment during the school year and they continued to do so until 1975 when the apartment was rented and the children were old enough to commute the 20 miles to school each day. The evidence in the record overwhelmingly supports our conclusion that petitioner's principal residence in 1973 was their apartment at 910 Fifth Avenue, New York. The children's school year was 9 months and the phone usage during that period reflects their residence at the apartment. The apartment had a home office and all correspondence in the record shows that the 910 Fifth Avenue address was used1982Tax Ct. Memo LEXIS569">*587 as their principal residence.
As we said in Stolk v. Commissioner,40T.C.345">40T.C.345, 40T.C.345">355 (1963), affd. 326F.2d760">326F.2d760 (2d Cir. 1964), "The phrase 'used by the taxpayer as his principal residence' means habitual use of the old residence as the principal residence. The antithesis is nonuse of property as the principal residence." Decision will be entered for the Respondent.
Footnotes
1. All statutory references are to the Internal Revenue Code of 1954, as amended and in effect for the years in issue, unless otherwise indicated. ↩
2. Pursuant to General Order No. 6, dated March 8, 1978, the post-trial procedures set forth in Rule 182, Tax Court Rules of Practice and Procedure↩, are not applicable to this case.
3. Since Carole H. Friedman did not appear at trial, Michael Friedman will be referred to herein as petitioner.↩
*. The items noted by asterisks, above, were conceded by petitioner at trial.↩
*. The items noted by asterisks, above, were conceded by petitioner at trial. ↩
4. This amount was rounded off to $ 5,468 in the return.↩
**. The items noted by double-asterisks, above, were conceded by petitioner at trial.↩
**. The items noted by double-asterisks, above, were conceded by petitioner at trial.↩
5. There is nothing in this record to show that he ever met any clients at the Yale Club in 1972 or 1973.↩
6. $ 906.80 minus $ 430 equals $ 476.80. There is no explanation in the record as to why petitioners took a $ 630 deduction.↩
7. Thus, respondent disallowed $ 350 in 1972 and $ 271 in 1973 for telephone expenses.↩
8. Petitioners originally claimed an adjusted basis in this residence of $ 70,000 on their 1973 return but they concede that the adjusted basis of that property is $ 61,217, as determined by respondent in his notice of deficiency.↩
9. Petitioner's testimony varied at times with respect to living at the Atlantic Beach residence from June through August and from April through October. We believe it was the former and have so found.↩
10. Which was computed as follows -- $ 1,105 (monthly rent) times 12 (months) divided by 8 (no. rooms in apartment) equals $ 1,658.↩
11. The tax on this adjustment was paid by petitioners on May 31, 1976 and respondent has given them credit for that payment in his determination of the 1973 deficiency.↩
12. See also, McDowell v. Commissioner,T.C. Memo. 1980-160 and Evans v. Commissioner,T.C. Memo. 1962-61↩.