DocketNumber: Docket No. 23438-91
Citation Numbers: 68 T.C.M. 378, 1994 Tax Ct. Memo LEXIS 387, 1994 T.C. Memo. 382
Judges: CLAPP
Filed Date: 8/15/1994
Status: Non-Precedential
Modified Date: 11/20/2020
*387 Decision will be entered under Rule 155.
MEMORANDUM FINDINGS OF FACT AND OPINION
CLAPP,
Additions to Tax | ||||
Sec. | Sec. | Sec. | ||
Year | Deficiency | 6651(a)(1) | 6653(a)(1) | 6653(a)(2) |
1985 | $ 11,708 | -- | $ 585 | 1 |
1986 | 9,711 | -- | -- | -- |
1987 | 7,289 | $ 1,677 | -- | -- |
1988 | 3,859 | 100 | 322 | -- |
Additions to Tax | |||
Sec. | Sec. | Sec. | |
Year | 6653(a)(1)(A) | 6653(a)(1)(B) | 6661 |
1985 | -- | -- | $ 2,927 |
1986 | $ 486 | 2 | 2,428 |
1987 | 364 | 3 | 1,822 |
1988 | -- | -- | -- |
After concessions by the parties, the issues for decision are:
(1) Whether Richard A. Semock (petitioner) is entitled to deductions under
(2) Whether petitioner is liable for additions to tax pursuant to
(3) Whether petitioner is liable for additions to tax pursuant to
(4) Whether petitioner is liable for additions to tax pursuant to
Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.
FINDINGS OF FACT
Some of the facts have been stipulated and are found accordingly. We incorporate by reference the stipulation of facts and attached exhibits. Petitioner resided in Cape Canaveral, Florida, at the time he filed his petition.
Petitioner is an engineer with a bachelor of science degree in math and computer science from California State University and a bachelor of science degree in electronics technology from Capitol Engineering Institute.
After graduating from California State University, petitioner was hired by Rockwell Space Operations (Rockwell) in Downey, California. At Rockwell, petitioner worked on the space shuttle project, *389 providing hardware and software systems expertise for development and testing of a shuttle simulator. After 7 months, the project was shipped to the Kennedy Space Center in Cape Canaveral, Florida. Wanting to continue his work with the space shuttle program, petitioner transferred to Cape Canaveral. Petitioner moved to Cape Canaveral in September 1982, and obtained employment with McDonnell Douglas, which then was using the system on which petitioner had worked at Rockwell.
Upon moving to Cape Canaveral, petitioner rented a one-bedroom apartment. His rent initially was $ 250 per month; later it was raised to $ 275 per month. Utilities for the apartment averaged approximately $ 50 to $ 60 per month.
Petitioner's employment with McDonnell Douglas was terminated in July 1983. Petitioner looked for permanent employment with the space shuttle program, but after a few months he decided to seek employment as a contract engineer. A contract engineer is an engineer who agrees to take temporary employment at an agreed-upon pay rate for an estimated period of time. As a contract engineer, petitioner sought employment both as a self-employed independent consultant and as an employee*390 of technical services firms. Petitioner decided to remain in the Cape Canaveral area because he believed that there were many firms in that area that might need his expertise. In addition, he felt that it was necessary for his independent consulting business to have a permanent home office where he could always be contacted.
During the years in issue, petitioner had temporary contract jobs with ITT Electro-optics in Roanoke, Virginia; Martin Marietta Aerospace in Orlando, Florida; ITT Telecom in Raleigh, North Carolina; Simmonds Precision Instruments in Vergennes, Vermont; Boeing S&TS in Huntsville, Alabama; Northern Telecom in Perimeter Park, North Carolina; and IBM in Research Triangle Park, North Carolina. On average, petitioner's contract jobs lasted 3 to 6 months.
Petitioner was paid an hourly wage for contract jobs. In addition to the base hourly wage, petitioner negotiated for and received per diem allowances for each of the jobs he obtained. These allowances were intended to defray the costs of travel, lodging, and meals.
Petitioner's accommodations while on contract jobs varied. Petitioner usually stayed in a hotel when he first arrived until he had a sense of how*391 long the job would last. If the job looked like it would last more than a few weeks, he obtained more permanent lodging. Typically, petitioner stayed in hotels that offered accommodations for extended stays or rented an apartment on a short-term lease. He did not sublease his apartment in Cape Canaveral while away on contract jobs.
There often were long periods between contracts when petitioner was unemployed. Petitioner was unemployed for approximately 6 months in 1985, for approximately 4 months in 1986, for approximately 6 months in 1987, and for approximately 5 months in 1988. During these periods of unemployment, petitioner returned to his apartment in Cape Canaveral and sought employment.
Petitioner attempted to buy a house in Cape Canaveral during the years in issue, but had trouble securing a mortgage because of the nature of his employment. He succeeded in securing a mortgage in 1992 and bought a house in Cape Canaveral at that time.
Petitioner prepared his 1985 income tax return himself, reporting all of his consulting income and deductions on Schedule C. On his 1985 return, petitioner claimed business deductions of $ 29,760.
Petitioner's 1986-88 returns were *392 prepared by a paid preparer. On his 1986, 1987, and 1988 returns, petitioner claimed business deductions of $ 31,301, $ 15,697, and $ 654, respectively, on Schedules C. In 1987 and 1988, petitioner claimed reimbursed employee business expenses in the amounts of $ 3,979 and $ 2,310, respectively, on Forms 1040, page 1. In 1988, petitioner also claimed unreimbursed employee expenses of $ 14,293 on Schedule A.
On his returns for the years 1985-88, petitioner claimed deductions either for office expenses or for rent on business property attributable to his use of a portion of his Cape Canaveral apartment as an office for his consulting business. In 1987 and 1988, petitioner based these deductions on his estimate that 15 percent of his apartment was used as an office. The record does not explain how the deductions claimed in 1985 and 1986 were calculated.
Petitioner concedes that in 1987 he received interest income of $ 197 and dividends totaling $ 959 that he failed to report on his return.
At some time in 1988, petitioner provided his records for 1987 to the same accountant who had prepared his 1986 return; however, this accountant never completed petitioner's 1987 return. Petitioner*393 found another accountant who said he would be willing to prepare the 1987 return, but he also failed to do so. Petitioner ultimately found a third accountant, who completed both the 1987 and 1988 returns. Petitioner filed his 1987 income tax return on September 11, 1989, and his 1988 income tax return on October 11, 1989.
OPINION
The principal issue in this case is whether petitioner was "away from home" while he was working on contract jobs during the years in issue. Petitioner contends that his tax home was Cape Canaveral, Florida; thus, his expenses while on contract jobs are deductible under
As a general rule, a taxpayer's principal place of business constitutes his "tax home", even though the personal residence of the taxpayer is in another city or is not in the same vicinity as the place of employment.
Respondent does not contest that petitioner's employment during the years in issue was temporary. Rather, respondent argues that petitioner had no tax*395 home from which he could be away. In order to deduct expenses at a temporary work site, a taxpayer must have a tax home away from his work site.
While the subjective intent of the taxpayer is to be considered in determining whether he has a tax home, for purposes of
Based on this record, we find that petitioner maintained a tax home in Cape Canaveral. Petitioner maintained an apartment for which he paid rent of $ 250, and later $ 275, per month, as well as*397 utilities. He did not attempt to defray these expenses by subleasing the apartment when he was away. While petitioner deducted as an office expense a percentage of the costs of maintaining his apartment, he bore the majority of the costs associated with maintaining the apartment.
We find this case to be distinguishable from Focusing on the objective evidence, petitioner's contacts with Glendora can be characterized as minimal. He ceased to be present in that city after mid-January. He had no business connection with Glendora. In light of the large number of layoffs, his prospects for future employment in that area lacked promise. He had no family there. His sole connection with the area was his apartment which he retained because he desired to return to Glendora. * * * [
While petitioner shares certain similarities with the taxpayer in
In 1987 and 1988, petitioner claimed $ 3,979 and $ 2,310, respectively, as reimbursed employee business expenses. Respondent determined that these deductions should be disallowed as petitioner received per diem allowances in the jobs he held during 1987 and 1988, and these allowances were not included in petitioner's income. Petitioner *400 acknowledges that he did not report the per diem allowances as income, but contends that the allowances were insufficient to cover his living expenses. If petitioner incurred business expenses in 1987 and 1988 that exceeded the reimbursements he received, it was necessary for him to report the reimbursements and related expenses in order to be able to deduct the unreimbursed expenses.
The record is not clear as to what petitioner's business expenses were, nor as to the total amount he received in per diem allowances during 1987 and 1988. Given the state of the record, we are unable to allow petitioner a deduction for expenses that exceeded the reimbursements he received. Accordingly, respondent's determination with respect to expenses deducted as reimbursed employee business expenses is sustained.
An addition to tax is imposed by
Petitioner filed his 1987 income tax return on September 11, 1989, and his 1988 income tax return on October 11, 1989, both well after the due dates prescribed by section 6072(a). There is no evidence indicating that petitioner applied for extensions of time to file his 1987 and 1988 returns. Petitioner testified that he failed to file timely his returns because two accountants refused to complete the 1987 return and this delayed completion of the 1988 return. While petitioner seems to have had particularly bad luck with accountants, reliance on a third party does not constitute reasonable cause for late filing under
Respondent also asserted that petitioner's underpayment of income taxes was due to negligence or intentional disregard of the rules or regulations.
Negligence is defined as the lack of due care, or the failure to do what a prudent person would do under the circumstances.
The remaining underpayments are attributable to deductions claimed for reimbursed employee business expenses in 1987 and 1988 and to income from interest and dividends that petitioner concedes he received but failed to report on his 1987 return. Petitioner's testimony regarding the reimbursed employee business expense deductions indicates *403 that he relied on the opinion of one or more accountants in choosing to claim deductions in that manner. If a taxpayer reasonably relies in good faith upon the advice of a competent and experienced accountant in the preparation of the taxpayer's return, the addition to tax for negligence or intentional disregard of the rules or regulations is not applicable. To show good faith reliance, the taxpayer must demonstrate that the return preparer was supplied with all the necessary information, and the incorrect return was a result of the preparer's mistakes.
With regard to the unreported interest and dividend income, petitioner failed to offer any testimony or evidence to meet his burden of proof. We hold that petitioner is liable for additions to tax under
If there is a substantial understatement of income tax for a taxable year,
As noted above, the remaining underpayments are attributable to deductions claimed for reimbursed employee business expenses in 1987 and 1988 and to income from interest and dividends that petitioner concedes he received but failed to report on his 1987 return. Petitioner has not shown that he had substantial authority for his position or that the facts affecting the tax treatment of these*405 items were adequately disclosed. In addition, petitioner does not claim that respondent should have waived the addition to tax under
To reflect the foregoing and the concessions by the parties,
Frank and Mary Scotten v. Commissioner of Internal Revenue , 391 F.2d 274 ( 1968 )
Carlos and Jacqueline Marcello v. Commissioner of Internal ... , 380 F.2d 499 ( 1967 )
United States v. Boyle , 105 S. Ct. 687 ( 1985 )
Carroll E. Burns and Gladys Burns v. William M. Gray, ... , 287 F.2d 698 ( 1961 )
Ludwig H. Brandl v. Commissioner of Internal Revenue , 513 F.2d 697 ( 1975 )
George Harvey James v. United States , 308 F.2d 204 ( 1962 )
Commissioner v. Flowers , 66 S. Ct. 250 ( 1946 )