Fuentes v. Comm'r

T.C. Summary Opinion 2009-39
UNITED STATES TAX COURT
FREDDY W. FUENTES, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 16020-07S. Filed March 23, 2009.
Freddy W. Fuentes, pro se.
Elizabeth S. Martini and Michael Shelton (student), for
respondent.
DEAN, Special Trial Judge: This case was heard pursuant to
the provisions of section 7463 of the Internal Revenue Code
(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,
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subsequent section references are to the Code in effect for the
year in issue, and all Rule references are to the Tax Court Rules
of Practice and Procedure.
For 2005 respondent determined an $8,238 deficiency in
petitioner’s Federal income tax and a $1,647.60 accuracy-related
penalty under section 6662(a). The issues remaining for
decision1 are whether petitioner is: (1) Entitled to deductions
for business expenses claimed on his amended Schedule C, Profit
or Loss From Business; (2) entitled to itemized deductions in an
amount in excess of the standard deduction; (3) entitled to a
personal exemption for his spouse, Yvonne Fuentes, and a
dependency exemption deduction for his father, Hector Fuentes;
and (4) liable for the accuracy-related penalty under section
6662(a).2
1
In respondent’s pretrial memorandum, he conceded that
petitioner was entitled the following deductions: (1) $525 for
software purchased for his work with Promesa Systems (hereinafter
MIS as petitioner referred to Promesa Systems as “MIS”) as an
unreimbursed employee expense; (2) $1,200 for a projector and
screen used in petitioner’s soccer coaching activity (coaching
activity); and (3) $59.95 for soccer training CDs.
2
Adjustments for the following are computational and are to
be resolved consistent with the Court’s decision: (1)
Petitioner’s liability for self-employment tax and his deduction
therefor; (2) whether petitioner is entitled to itemize his
deductions or is limited to the standard deduction; and (3) the
amount of petitioner’s net medical and dental expenses and his
entitlement to a deduction for medical and dental expenses.
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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 New York.
During 2005 petitioner worked as a telecommunications
supervisor for MIS and for the Manhattan Soccer Club (soccer
club), training boys’ and girls’ teams age levels U-9 and U-12.
Neither MIS nor the soccer club reimbursed petitioner for his
2005 local expenditures.
Petitioner’s contract with the soccer club provided that he
was required to supply his own equipment. But the soccer club
would “pay for coach’s lodging, meals and car travel expenses for
any tournaments out of the tri-state area.” During 2005 he
traveled to various locations for practices, games, and
tournaments, which included travel to Long Island and Manhattan,
New York, Virginia, and New Jersey. He also traveled to
Westchester, Pennsylvania, to acquire a “B” license issued by the
National Soccer Coaches Association (NSCA).
Petitioner’s return preparer timely filed petitioner’s Form
1040, U.S. Individual Income Tax Return, electronically for 2005.
On Schedule C, petitioner reported $19,643 in gross receipts and
$26,211 in total expenses (discussed infra) for a $6,568 net
loss. On Schedule A, Itemized Deductions, petitioner claimed
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$21,083 in total itemized deductions (discussed infra). He also
filed as single and claimed one personal exemption for himself.
Upon examination of petitioner’s Form 1040, respondent sent
a notice of deficiency to his last known address. Respondent
determined an $8,238 deficiency and a $1,647.60 accuracy-related
penalty and proposed the following adjustments:
Item Per Return Adjustment
Sched. C supplies $6,422 $6,422
Sched. C car and truck
expenses 11,191 11,191
SE AGI Adjustment -0- 781
Self-employment tax -0- 1,561
Unreimbursed employee
expenses 10,597 10,597
State and local taxes 2,588 181
Noncash contributions 2,315 2,315
Cash contributions 3,120 3,120
Total itemized
deductions 21,083 21,083
Standard deduction -0- 5,000
Respondent allowed petitioner a $4,671 deduction for medical
and dental expenses (before application of the 7.5-percent
floor). Respondent also made a computational adjustment to
petitioner’s “Net Medical and Dental Expense” to reflect changes
to his adjusted gross income.
In response, petitioner sought the advice of another return
preparer, who submitted for 2005 a Form 1040X, Amended U.S.
Individual Income Tax Return, and amended schedules to the IRS.3
3
By submitting amended Schedules A and C, petitioner
effectively, and is therefore deemed to have, conceded that the
(continued...)
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On petitioner’s amended Schedule C, he claimed $19,643 in gross
receipts and $24,649 in total expenses (discussed infra) for a
$5,006 net loss. On petitioner’s amended Schedule A, he claimed
3
(...continued)
following deductions were inaccurate:
Original Amended
Item Schedules Schedules
Advertising $400.00 -0-
Commissions and fees 300.00 -0-
Car and truck expenses 11,191.00 $7,961
“Office expense” 3,240.00 5,120
Supplies 6,422.00 6,235
Utilities 1,320.00 2,485
Travel 1,038.00 281
Sch. C taxes & licenses 1,200.00 2,047
Meals and
entertainment 1,100.00 400
Other expenses -0- 120
Sch. A State and local
income taxes 2,407.00 2,376
“NYSDI” 31.20 -0-
“TOBACCO TAX” 150.00 -0-
Real estate taxes -0- 550
Charitable contributions
paid by cash or check 3,120.00 1,300
Charitable contributions
of property 2,315.00 1,735
Sch. A vehicle expense 7,477.00 -0-
Sch. A parking fees, tolls
and transportation 300.00 -0-
Professional subscriptions 630.00 1,464
Uniforms and protective
clothing 1,100.00 3,615
See Neaderland v. Commissioner, 52 T.C. 532, 540 (1969)
(taxpayer admitted by filing amended returns, inter alia, that
his claimed deduction was excessive), affd. 424 F.2d 639 (2d Cir.
1970); Lare v. Commissioner, 62 T.C. 739, 750 (1974) (statements
made in a tax return signed by a taxpayer may be treated as
admissions), affd. without published opinion 521 F.2d 1399 (3d
Cir. 1975).
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$14,475 in itemized deductions (discussed infra). He changed his
filing status from single to married filing jointly. Petitioner
also claimed two personal exemptions for himself and his wife and
a dependency exemption deduction for his father.
Discussion
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. See 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. See 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.
Ordinary and necessary expenses paid or incurred during the
taxable year in carrying on a trade or business are generally
deductible. Sec. 162(a). But as a general rule no deduction is
allowed for travel, meals and entertainment, or “listed
property”4 unless the taxpayer complies with certain
4
Listed property is defined to include passenger
automobiles, computers and peripheral equipment, and cell phones.
(continued...)
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substantiation requirements. Sec. 274(d). The Court therefore
may not estimate a taxpayer’s expenses with respect to the items
enumerated in section 274(d). See Sanford v. Commissioner, 50
T.C. 823, 827 (1968), affd. per curiam 412 F.2d 201 (2d Cir.
1969).
I. Schedule C Deductions
A. Car and Truck Expenses
In order to substantiate the amount of an automobile
expense, the taxpayer must prove: (1) The amount of the
expenditure (i.e., cost of maintenance, repairs, or other
expenditures); (2) the amount of each business use and the amount
of the vehicle’s total use by establishing the amount of its
business mileage and total mileage; (3) time (i.e., the date of
the expenditure or use); and (4) the business purpose of the
expenditure or use. Sec. 1.274-5T(b)(6), Temporary Income Tax
Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985). The taxpayer may
substantiate the amount of mileage by “adequate records” or
sufficient evidence that corroborates his statements. Sec.
274(d). A record of the mileage made at or near the time of the
automobile’s use that is supported by documentary evidence has a
high degree of credibility not present with a subsequently
4
(...continued)
Sec. 280F(d)(4)(A).
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prepared statement. Sec. 1.274-5T(c)(1) through (3), Temporary
Income Tax Regs., 50 Fed. Reg. 46016-46020 (Nov. 6, 1985).
To meet the adequate records requirement, the taxpayer must
maintain an account book, diary, log, statement of expense, trip
sheets, or 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., supra. An adequate record must be prepared or maintained
in such manner that each recording of an element of an
expenditure or use is made at or near the time of the expenditure
or use. Sec. 1.274-5T(c)(2)(ii), Temporary Income Tax Regs.,
supra. “‘[M]ade at or near the time of the expenditure or use’
means [that] the elements of an expenditure or use are recorded
at a time when, in relation to the use or making of an
expenditure, the taxpayer has full present knowledge of each
element of the expenditure or use”. Sec. 1.274-5T(c)(2)(ii)(A),
Temporary Income Tax Regs., supra.
Petitioner claims a $7,961 deduction for car and truck
expenses on his amended Schedule C, consisting of 11,660
“business” miles, 21,780 “commuting” miles, and 20,800 “other”
miles. He provided a spreadsheet and an attached supplement that
purports to reflect the miles he drove in 2005. The
spreadsheet’s mileage categories consist of 21,780 miles for
commuting from petitioner’s home to MIS and 19,360 miles for
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travel with respect to his coaching activity. The coaching
activity’s mileage consists of mileage from MIS to soccer fields
(Tuesdays through Fridays), from a soccer field to another soccer
field(s), return trips from a soccer field to his home, and trips
from his home to a soccer field (on the weekends).5 He also
included various schedules for practices, games, and tournaments
of his teams.
Petitioner’s testimony established that he did not record
the miles driven from day to day or for traveling in his coaching
activity for 2005. Rather, his mileage records were created
after the fact. Therefore, his spreadsheet, the attached
supplement, and the various schedules do not satisfy the adequate
record requirement. See sec. 1.274-5T(c)(2)(i) and (ii)(A),
Temporary Income Tax Regs., supra. Although the Court believes
that petitioner accrued mileage in his coaching activity, the
Court may not apply the Cohan rule to estimate his deductible
expense. See Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930);
5
The Court also notes that any expenses petitioner incurred
in commuting between his residence and either job are
nondeductible personal expenses. See secs. 162, 262; Fausner v.
Commissioner, 413 U.S. 838 (1973); secs. 1.162-2(e),
1.262-1(b)(5), Income Tax Regs. But transportation expenses
incurred on trips between places of business may be deductible.
Steinhort v. Commissioner, 335 F.2d 496, 503-504 (5th Cir. 1964),
affg. and remanding T.C. Memo. 1962-233. Petitioner, however,
did not substantiate his mileage for trips between places of
employment. Additionally, petitioner did not prove that the
soccer club did not reimburse him for his expenses as provided in
his contract. See supra p. 3.
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Sanford v. Commissioner, supra at 827. Accordingly, respondent’s
determination is sustained.
B. Tolls
On petitioner’s “Supporting Statement” attached to his Form
1040X, he claims a $2,772 deduction computed as follows: 44 x 7
= 308 Trips x $9. He also stated that the expenditures were made
in his coaching activity with respect to “Car-Truck Wks (KIA
RIO)”. The Court assumes that the deduction was claimed for toll
expenses, which generally may be deducted as a separate item.
See Rev. Proc. 2004-64, sec. 5.04, 2004-2 C.B. 900, 924. But
petitioner has not provided any receipts to substantiate his
expenditures, and he has not proven that he was not reimbursed by
the soccer club for his expenditures as provided in his contract.
See supra p. 3. Therefore, petitioner is not entitled to the
deduction. Respondent’s determination is sustained.
C. Expense for the Business Use of Petitioner’s Home
Expenses for the business use of a taxpayer’s residence are
deductible under limited circumstances. The taxpayer must show
that a portion of the residence was exclusively used on a regular
basis as his principal place of business. Sec. 280A(c)(1). The
term “‘a portion of the dwelling unit’” refers to “‘a room or
other separately identifiable space;’” a permanent partition
marking off the area is not necessary. Hefti v. Commissioner,
T.C. Memo. 1993-128 (quoting section 1.280A-2(g)(1), Proposed
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Income Tax Regs., 48 Fed. Reg. 33324 (July 21, 1983)). The term
“principal place of business” includes a place of business used
by the taxpayer to perform administrative or management
activities related to the trade or business if there is no other
fixed location of the trade or business where substantial
administrative or management activities are undertaken. Sec.
280A(c)(1).
Petitioner claims a deduction of $5,120 for “Office expense”
for the business use of his home in his coaching activity on his
amended Schedule C. His expenses consist of $2,600 for rent,
$120 for electricity, $150 for paint, $700 for furniture, $1,200
for a computer, $200 for a printer, and $150 for a fax machine.
Petitioner’s evidence consisted of an American Express
statement showing two purchases from “Futon Beds & More” for
$1,738 and $81.46 and a $211.29 purchase from “East Islip Paint”,
a letter from his landlord stating that petitioner was renting an
apartment in her house at $1,300 per month in 2005, photographs
(which indicate that the room was used for nothing more than to
store the equipment), and his testimony.
Petitioner testified that he rented a six-room apartment in
which he had converted one of the three bedrooms into an office
for which he claimed one-sixth of the rent and electricity for
the year. He testified that he purchased paint for $150 and
related equipment for $215. These purchases were evidenced by
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the American Express statement. He also testified that the $700
deduction for furniture consisted of a couch purchased in 2005
for his office. Finally, he testified that he purchased a
computer, a printer, and a fax machine in 2005 for his office,
but he did not have a receipt to substantiate those purchases.
Petitioner, however, has not proven that the bedroom was
exclusively used on a regular basis as his principal place of
business for his coaching activity. See sec. 280A(c)(1). In
addition, he has not adequately substantiated his expenses; i.e.,
he did not provide receipts for his purchases and the American
Express statement does not prove that the expenditures were for
furniture and paint for the office. Finally, he has provided no
evidence that substantiates his claimed deductions for the
expenses related to his computer and peripheral equipment in
accordance with section 274 and the regulations thereunder.
Accordingly, petitioner is not entitled to a deduction for
expenses related to the business use of his home. Respondent’s
determination is sustained.
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D. Utilities
Petitioner claims a $2,485 deduction for “Utilities”6 on his
amended Schedule C. His deduction for utilities consists of:
Description Amount
Cell phone for soccer $160 per month $1,920.00
Internet $29 per month 348.00
New cell phone 216.74
Expenses for cell phone use must be substantiated in
accordance with section 274 and the regulations thereunder. Sec.
274(d); see supra note 4.
Petitioner testified that he used one of his cell phones
strictly for phone calls and e-mails in his coaching activity
while his other cell phone was used for personal purposes. He
has provided no evidence that substantiates his cell phone
expense in accordance with section 274 and the regulations
thereunder. Thus, petitioner is not entitled to those
deductions, and the Court may not apply the Cohan rule to
estimate his deductible expense. See Cohan v. Commissioner, 39
F.2d 540 (2d Cir. 1930); Sanford v. Commissioner, 50 T.C. 827.
6
Petitioner claimed the expenditures as a separate item on
line 25, Utilities, on his amended Schedule C rather than on line
30, Expenses for business use of your home. Generally, utilities
attributable to the taxpayer’s maintenance of a home office are
deductible as business expenses under sec. 280A. Sec. 1.262-
1(b)(3), Income Tax Regs. Because the expenditures are otherwise
disallowed, the Court does not address whether petitioner
mischaracterized his deductions.
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The Court has characterized Internet expenses as utility
expenses. Verma v. Commissioner, T.C. Memo. 2001-132. Strict
substantiation therefore does not apply, and the Court may apply
the Cohan rule to estimate petitioner’s deductible expense,
provided that the Court has a reasonable basis for making an
estimate. See Vanicek v. Commissioner, 85 T.C. 731, 742-743
(1985) (an estimate must have a reasonable evidentiary basis);
Pistoresi v. Commissioner, T.C. Memo. 1999-39.
Petitioner testified that he used the Internet for
researching different teams, newer equipment, and soccer camps in
his coaching activity. He also testified that he did not use the
Internet for personal use because he had Internet access at work.
Petitioner, however, has provided no receipts or other
documentation to substantiate his Internet expense. Therefore,
petitioner is not entitled to the deduction, and the Court cannot
estimate his expense because he has not provided the Court with
any basis for making an estimate. Respondent’s determination is
sustained.
E. Supplies
Petitioner claims a $6,235 deduction for supplies on his
amended Schedule C. His supplies consist of:
Description Amount
Screening TV for games with projector $1,200
Office supplies 300
Soccer balls, nets, etc. 3,000
CDs for training 300
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Uniforms--sweat suit 175
Shorts & shirts 5 sets 300
Soccer cleats 250
Hats & gloves 50
Laundry costs $15 per week x 44 660
Petitioner testified that players, coaches, and managers
came to his home once or twice a month to view “presentations on
how we would play, and how they are going to defend, and things
like that.” He testified that the projector and screen was not
used for any other purpose because “it was just a plain wide
screen and you project games on it.” He also testified that he
had a Sony TV in his apartment. He submitted a receipt from
“Tigerdirect.com” to substantiate his purchase of the projector
and screen. The receipt shows that he paid $1,376.13 for the
items. The Court concludes that petitioner is entitled to a
$1,376.13 deduction for the projector and screen rather than the
$1,200 that respondent conceded. See supra note 1.
Petitioner also testified that his office supplies consisted
of “papers, pens, pencils, you name it.” To substantiate his
deduction for office supplies, he submitted a copy of his
American Express statement that shows a purchase was made from
Costco for $174.52. But the statement does not prove that the
amount was expended for paper, pens, or the like. The Court
concludes that petitioner is not entitled to a $300 deduction for
office supplies, and respondent’s determination is sustained.
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To substantiate petitioner’s $3,000 deduction for supplies,
he has submitted photographs of soccer equipment, a “Team Quote”
of $290.83 from “BigToe Sports”, an American Express statement
showing a purchase of $63.05 from Haydees Sports Soccer, and a
document setting forth item numbers, descriptions, quantities,
and prices for a total purchase price of $3,225.54 (the
document). Although the document shows shipping costs of $94.03
and a total purchase price of $3,225.54, the document does not
bear a retailer’s name or other evidence of proof of payment by
petitioner. Upon the basis of the foregoing, the Court finds
that petitioner is entitled to a deduction of only $63.05 for the
equipment. See Cohan v. Commissioner, 39 F.2d at 544 (estimates
of a taxpayer’s deductions bear heavily against the taxpayer
whose inexactitude is of his or her own making). Although the
Court believes because of the photographs that petitioner made
expenditures for the equipment, he has not provided any
reasonable evidentiary basis for making an estimate of his
expenses (other than the self-serving document). See Vanicek v.
Commissioner, supra at 742-743. Therefore, respondent’s
disallowance of the remaining $2,936.95 is sustained.
To substantiate petitioner’s $300 deduction for training
CDs, he has submitted a receipt for the purchase of a soccer CD
for $64.95 and the aforementioned document alleging that he made
payments of $26.99 and $22.49 for DVDs entitled “Training
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Sessions Around the World” and “NSCAA Tactical Development”,
respectively. The Court concludes that petitioner is entitled to
a deduction of $64.95 for the training CDs rather than the $59.95
that respondent conceded. See supra note 1. Respondent’s
disallowance of the remaining $235.05 is sustained because
petitioner failed to produce credible evidence to substantiate
his expenditures or provide the Court with a reasonable basis for
estimating his deduction.
With respect to petitioner’s $250 deduction for soccer
cleats, petitioner’s only evidence consisted of the
aforementioned document alleging that he purchased one pair of
Predator Pulsion cleats for $80.99 and two pairs of Lotto Primato
cleats for $107.98. As stated earlier, the document does not
prove that petitioner made the purchases or provide the Court
with a reasonable basis for estimating his deduction. Therefore,
respondent’s determination is sustained.
With respect to the deductions for uniforms (sweat suit),
five sets of shorts and shirts, and hats and gloves, petitioner
has provided no evidence, such as a receipt, to substantiate his
deductions. The document does not provide the Court with a
reasonable basis for estimating his deduction. Accordingly,
respondent’s determination is sustained.
Petitioner testified that his $660 deduction for laundry
included the cost of his wife’s washing of the teams’ pennies and
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his uniforms, sweat suits, or shorts. He has provided no
receipts to substantiate his expenditures for laundry detergent
or fabric softener, and he has not provided any utility bills to
establish his expenditures for water, gas, or electricity. He
has not provided the Court with a reasonable basis for estimating
his deduction for laundry. Accordingly, respondent’s
determination is sustained.
F. Taxes and Licenses
Petitioner claims a $2,047 deduction for taxes and licenses
on his amended Schedule C. On petitioner’s “Supporting
Statement” attached to his Form 1040X, he set forth the
following:
Description Amount
License $986.00
Cost of taking tests-2 weeks 300.00
Meals--14 days $50 day 700.00
Transport--L.I. to Westchester
125 Mi x .415 51.87
Toll 9.00
Other than petitioner’s testimony that he spent 2 weeks
testing to obtain a “B” license from NSCA, there is no evidence
substantiating a $2,047 deduction. In addition, he has not
substantiated the travel and meal expenses associated with his
license in accordance with section 274(d) and the regulations
thereunder. Respondent’s determination is sustained.
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G. Travel and Meals and Entertainment
Petitioner claims a $281 deduction for travel and a $400
deduction for meals and entertainment on his amended Schedule C.
On petitioner’s “Supporting Statement” attached to his Form
1040X, he set forth the following:
Description Amount
Labor Day Tournament $125
Meals 100
Tournaments in New Jersey 6
Meals 50
Meetings with managers and
assistant coaches 400
To substantiate deductions for travel and meals and
entertainment, taxpayers must substantiate the amount of the
expense, the time and place of the travel or entertainment, the
business purpose of each expense, and the business relationship
to the taxpayer of the persons entertained. Sec. 274(d); sec.
1.274-5T, Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6,
1985).
Petitioner has provided no evidence satisfying the strict
substantiation requirements of section 274(d) and the regulations
thereunder. He also has not proven that the soccer club did not
reimburse him for the expenditures as provided in his contract.
See supra p. 3. Petitioner is not entitled to the deductions,
and respondent’s determinations are sustained. See Sanford v.
Commissioner, 50 T.C. 827.
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H. Other: Magazines, Books, and Publications
Petitioner claims a $120 deduction for magazines, books, and
publications on his amended Schedule C. He has provided no
receipts or other evidence to substantiate his deduction.
Therefore, petitioner is not entitled to the deduction, and the
Court cannot estimate his expense because he has not provided the
Court with any basis for making an estimate. Respondent’s
determination is sustained.
II. Schedule A Deductions
A. State and Local Taxes
Section 164(a) allows a taxpayer deductions for State and
local income taxes, real property taxes, and personal property
taxes.
Although respondent allowed a deduction of $2,407 for
Schedule A State and local taxes, petitioner claims a deduction
for State and local taxes of $2,926. His deduction consists of
State and local income taxes of $2,376 and real property taxes of
$550 with respect to a “TIMESHARE” on his amended Schedule A. He
provided an “Account Detail/History” that shows that he made a
$93.61 payment for “Property TAX” on November 22, 2005.
Petitioner, however, has not shown that respondent has not
already given him credit for this $93.61 payment, and he has not
substantiated payments greater than the $2,407 that respondent
allowed. Accordingly, respondent’s determination is sustained.
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B. Charitable Contributions
1. Gifts by Cash or Check
In pertinent part, section 1.170A-13(f)(1), Income Tax
Regs., provides that separate contributions of less than $250 are
not subject to the “contemporaneous written acknowledgment”
requirement of section 170(f)(8) regardless of whether the sum of
the contributions to such organization equals $250 or more.
Rather, monetary charitable contributions of less than $250 must
be substantiated by a canceled check, a receipt from the
organization that shows the organization’s name, the date of the
contribution, and the amount thereof; or “other reliable written
records” that show the organization’s name, the date of the
contribution, and the amount thereof. Sec. 1.170A-13(a)(1),
Income Tax Regs.7
Petitioner claims on his amended Schedule A a $1,300
deduction for charitable contributions paid by cash or checks.
He testified that his charitable contributions paid by “Cash or
check [were] for the church that I gave to somebody and I think
all of that is provided in there, I think.” He has provided no
other evidence to substantiate his deductions for charitable
contributions for 2005. The Court does not accept his
7
The Court assumes that petitioner’s payments for charitable
contributions did not equal or exceed $250 and therefore are not
subject to the more exacting standard of sec. 170(f)(8) and the
regulations thereunder.
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uncorroborated, self-serving testimony. 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).
Without other reliable evidence to substantiate petitioner’s
purported charitable contributions, he is not entitled to claim a
deduction for them, and the Court will not apply the Cohan rule
to estimate a deductible amount. See Cohan v. Commissioner, 39
F.2d at 543-544; see also Bond v. Commissioner, 100 T.C. 32, 41
(1993) (“the reporting requirements [of section 1.170A-13, Income
Tax Regs.,] are directory and not mandatory.”); Vanicek v.
Commissioner, 85 T.C. 742-743. Accordingly, respondent’s
determinations are sustained.
2. Gifts Other Than by Cash or Check
To verify a charitable contribution of property other than
money, the regulations require the taxpayer to maintain a receipt
from the organization for each contribution showing: (1) The
organizations’s name; (2) the contribution’s date and location;
and (3) the property’s description in detail reasonably
sufficient under the circumstances. Sec. 1.170A-13(b)(1), Income
Tax Regs. A letter or other written communication from the
organization acknowledging receipt of the contribution, showing
the date thereof, and containing the required description of the
property contributed constitutes a receipt. Id. Where it is
impractical to obtain a receipt, the taxpayer must maintain
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“other reliable written records” of the noncash contributions.
Id. The other reliable written records shall contain: (1) The
organization’s name and address; (2) the contribution’s date and
location; (3) the property’s description; (4) the property’s fair
market value at the time of the donation; (5) the method utilized
in determining the property’s fair market value; (6) the
property’s basis if the taxpayer is required to reduce the
contribution by the amount of ordinary income or capital gain
that would have been realized had the taxpayer sold the property
for its fair market value; and (7) any agreements or conditions
that relate to the use, sale, or other disposition of the
contributed property. Sec. 1.170A-13(b)(2)(ii), Income Tax Regs.
Additionally, where a taxpayer claims a deduction for a
charitable contribution of property in excess of $500, the
taxpayer is also required to attach Form 8283, Noncash Charitable
Contributions, to the taxpayer’s Form 1040 and maintain a written
record that indicates how the property was acquired and the
taxpayer’s basis in the property. Sec. 1.170-13A(b)(3), Income
Tax Regs.
The reliability of the other reliable written records is
determined on the basis of all of the facts and circumstances.
Sec. 1.170A-13(a)(2), Income Tax Regs. Factors indicative of
reliability include but are not limited to: (1) The
contemporaneousness of the writing evidencing the contribution;
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(2) the regularity of the taxpayer’s recordkeeping procedures,
e.g., a contemporaneous diary entry stating the amount and date
of the contribution and the organization’s name that is made by a
taxpayer who regularly makes such diary entries; and (3) in the
case of a de minimis contribution, any written or other evidence
from the organization evidencing the contribution that would not
otherwise constitute a “receipt” (including a “token”
traditionally associated with the organization and regularly
given by it to persons making cash donations). Sec. 1.170A-
13(a)(2)(i), (b)(2)(i), Income Tax Regs.
But deductions for contributions of cash or property of $250
or more must be substantiated by a contemporaneous written
acknowledgment from the organization. Sec. 170(f)(8); see also
sec. 1.170A-13(f)(1), Income Tax Regs. A written acknowledgment
is contemporaneous if it is obtained by the taxpayer on or before
the earlier of the date the taxpayer files the original return
for the taxable year of the contribution or the due date
(including extensions) for filing the original return for the
year. Sec. 170(f)(8)(C); sec. 1.170A-13(f)(3), Income Tax Regs.
The written acknowledgment must state the amount of cash and a
description (but not necessarily the value) of any property other
than cash that the taxpayer donated and whether the organization
provided any consideration to the taxpayer in exchange for the
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donation. Sec. 170(f)(8)(B)(i) and (ii); sec. 1.170A-13(f)(2)(i)
and (ii), Income Tax Regs.
Petitioner claims on his amended Schedule A a $1,735
deduction for charitable contributions of property donated to the
Promesa Foundation (Promesa) on various dates in 2005. His
purported donations consist of clothing, jackets, suits, dresses,
gowns, and a computer and related equipment. He reported a total
cost basis of $3,665 and a total fair market value of $1,735. He
also reported that the method used to determine the fair market
value was “FAIR MARKET VALUE”.
With respect to the clothing, jackets, suits, dresses, and
gowns, petitioner has not provided a receipt from Promesa or a
reliable written record satisfying the requirements of section
1.170A-13(b)(2)(ii), Income Tax Regs.8 The Court does not accept
his uncorroborated, self-serving testimony regarding his
purported donations. See Urban Redev. Corp. v. Commissioner, 294
F.2d at 332; Tokarski v. Commissioner, 87 T.C. 77. Without
other reliable evidence to substantiate those charitable
contributions, petitioner is not entitled to claim a deduction
for them, and the Court will not apply the Cohan rule to estimate
a deductible amount. See Cohan v. Commissioner, 39 F.2d at 543-
8
The Court assumes that the deduction claimed for each of
these items did not equal or exceed $250 and therefore are not
subject to the more exacting standard of sec. 170(f)(8) and the
regulations thereunder.
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544; see also Bond v. Commissioner, 100 T.C. 41. Respondent’s
determinations are sustained.
To substantiate petitioner’s contributions of the fax
computer and related equipment, he submitted a letter from
Promesa, dated June 10, 2008. The letter’s author claims that
petitioner purchased the computer in 2005 and donated it later
that year. The letter’s author also claims: “Based upon my
knowledge and based upon a review of several catalogues available
from 2005 the following are the values:”
Property Value
Printer HP Model 1022 LaserJet $199.98
Fax HP Model 1050 fax with
answering machine 149.99
Open model Pentium IV–1.2 GHZ
40 GB HD 256 MB RAM Windows
XP Professional Office
2003 15" Monitor 1,200.00
The Court accords little weight to the letter acknowledging
the contributions of the computer and related equipment because
it was written about 3 years after the contributions. With
respect to the computer and monitor, the letter does not satisfy
the contemporaneous written acknowledgment requirement of section
170(f)(8) and the regulations thereunder. Specifically, the
letter is not contemporaneous, and it fails to satisfy the
requirement that the organization provide a statement as to
whether the organization provided any goods or services in
consideration for the donation. Additionally, the values of the
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contributions appear to be based upon the values of such
equipment in a new rather than a used condition. Since the
computer and related equipment were used, this method overstated
their actual values. See Mack v. Commissioner, T.C. Memo.
1980-401, affd. without published opinion 690 F.2d 906 (11th Cir.
1982). Petitioner did not introduce any other evidence
supporting the estimated values. He has not satisfied the
requirements of section 1.170A-13(b) and (f), Income Tax Regs.
Therefore, petitioner is not entitled to the claimed deductions,
and the Court will not apply the Cohan rule to estimate a
deductible amount. See Cohan v. Commissioner, 39 F.2d at 543-
544. Accordingly, respondent’s determinations are sustained.
C. Unreimbursed Employee Business Expenses
1. Professional Subscriptions
Petitioner claims a $1,464 deduction for professional
subscriptions as an unreimbursed employee expense on his amended
Schedule A. On petitioner’s “Supporting Statement” attached to
his Form 1040X, he set forth the following:
Description Amount
Daily newspaper $234
Satellite for job $90 per month 1,080
“Magazines-Dummy Books” 150
Petitioner testified that his subscriptions expense related
to magazines and “stuff” for soccer. He has provided no receipts
or other evidence to substantiate those deductions. Therefore,
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petitioner is not entitled to the deductions, and the Court
cannot estimate his expense because he has not provided the Court
with any basis for making an estimate. Respondent’s
determination is sustained.
Petitioner testified that the deductions for his satellite
expense related to soccer games that his players and the other
coaches watched at his home. He also testified that he deducted
only a portion of the expense, i.e., $90, and that his monthly
satellite cost was $160 or $180. He provided respondent with a
credit card statement reflecting a one-time fee to Dish Network
for $234.17 in 2005.
Petitioner has provided no other evidence to substantiate
his monthly expenditures for the satellite in his coaching
activity. In addition, he has not provided any evidence that
establishes either his personal or business use of the satellite.
Therefore, petitioner is not entitled to the deduction, and the
Court cannot estimate his expense because he has not provided the
Court with any basis for making an estimate. Respondent’s
determination is sustained.
2. Uniforms and Protective Clothing
Petitioner claims a $3,615 deduction for uniforms as an
unreimbursed employee expense on his amended Schedule A. On
petitioner’s “Supporting Statement” attached to his Form 1040X,
he set forth the following:
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Description Amount
Shirts x 7 $175
Pants x 7 245
Special T-shirts x 7 105
Work shoes x 2 160
Socks 10 pair 30
Jackets 125
Winter jacket 75
Hats, gloves, & scarves 100
Laundry costs $20 per week 1,040
Dry cleaning $30 per week 1,560
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.
1266, 1290 (1980); Yeomans v. Commissioner, 30 T.C. 757, 767
(1958). If the cost of acquiring clothing is deductible, then
the cost of maintaining the clothing is also deductible. Fisher
v. Commissioner, 23 T.C. 218 (1954), affd. 230 F.2d 79 (7th Cir.
1956).
Petitioner testified that his “uniform” for MIS consisted of
jeans and long-sleeve shirts during the winter. He testified
that MIS let him pick out what he wanted to wear and what he
wanted to purchase. He also testified that his laundry and dry
cleaning costs were for expenditures he made for cleaning his MIS
uniforms.
Petitioner admitted that MIS did not require him to wear a
specific uniform. Moreover, his uniform consisted of clothing
that is suitable for general or personal wear, and he has failed
to prove otherwise. He also failed to substantiate either the
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cost of purchase or the cost of maintaining of his uniforms.
Accordingly, petitioner is not entitled to his claimed
deductions, and respondent’s determinations are sustained.
3. Other: Supplies
On petitioner’s original and amended Schedules A he claimed
a $345 deduction for supplies as an unreimbursed employee
expense. Petitioner presented neither evidence nor argument
concerning his supplies expenses and is thus deemed to have
conceded that issue. See Nielsen v. Commissioner, 61 T.C. 311,
312 (1973); Mikalonis v. Commissioner, T.C. Memo. 2000-281.
III. Exemptions
A. Petitioner’s Spouse
Petitioner did not claim a personal exemption for his wife
on his Form 1040, but he did claim a personal exemption for his
wife on his Form 1040X.
Section 151(b) provides a taxpayer with an exemption for a
spouse if the taxpayer and the spouse do not file a joint return,
the spouse had no gross income, and the spouse is not dependent
on another taxpayer during the calendar year in which the
taxpayer’s tax year began.9
9
Although petitioner submitted a Form 1040X to respondent
that purports to be a joint return and claims a personal
exemption for his wife, the Form 1040X was not signed by his wife
and has not been accepted by respondent as filed. In addition,
sec. 6013(b)(2) provides that an election to file a joint return
after the filing of a separate return may not be made where a
(continued...)
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Petitioner did not prove that he satisfied the requirements
of section 151(b). He failed to prove that his wife did not have
gross income and that she was not dependent on another taxpayer
during 2005.10 Respondent’s determination is sustained.
B. Petitioner’s Father
Petitioner did not claim a dependency exemption deduction
for his father on his Form 1040, but he did claim a dependency
exemption deduction for his father on his amended Form 1040X.
Generally, taxpayers may claim dependency exemption
deductions for their dependents (as defined in section 152).
Sec. 151(c). The term “dependent” includes a “qualifying
relative.” Sec. 152(a). Under section 152(d)(1) a qualifying
relative is an individual: (1) Who bears a qualifying
relationship to the taxpayer, such as the taxpayer’s father, sec.
152(d)(2)(C); (2) whose gross income for the year is less than
the section 151(d) exemption amount ($2,000 for 2005); (3) who
receives over one-half of his support from the taxpayer for the
9
(...continued)
notice of deficiency has been mailed to either spouse and such
spouse has filed a petition with the Court. Respondent mailed
the notice of deficiency to petitioner’s last known address on
July 2, 2007. Petitioner filed his petition on July 16, 2007,
and he submitted the Form 1040X on July 24, 2007. Accordingly,
the Court concludes that a joint return was not filed and that
sec. 151(b) governs the Court’s analysis of this issue.
10
Petitioner did not call his wife as a witness to testify
about these issues.
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taxable year; and (4) who is not a qualifying child of the
taxpayer or of any other taxpayer for the taxable year.
Petitioner provided a copy of his father’s Social Security
card and a letter purportedly written by his father. The
letter’s author claims that he lived with petitioner and
petitioner’s wife during 2005, that he had no income for 2005,
and that petitioner paid all of his expenses.
Petitioner testified that his father lived with him during
2005, that his father was in his “late fifties” in 2005, and that
his father stopped working or retired in 2004 because he had
cancer and Ecuador’s economy was not very good. He also
testified that nobody else supported his father because there
were no other family members “here to support him.”
Petitioner did not call his father (or any other person) as
a witness. In addition, the Court is reluctant to rely on the
letter and petitioner’s self-serving testimony. Without other
corroborative evidence, petitioner is not entitled to the
dependency exemption deduction for his father. Respondent’s
determination is sustained.
IV. Accuracy-Related Penalty
Initially, the Commissioner has the burden of production
with respect to any penalty, addition to tax, or additional
amount. Sec. 7491(c). The Commissioner satisfies this burden of
production by coming forward with sufficient evidence that
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indicates it is appropriate to impose the penalty. See Higbee v.
Commissioner, 116 T.C. 438, 446 (2001). Once the Commissioner
satisfies this burden of production, the taxpayer must persuade
the Court that the Commissioner’s determination is in error by
supplying sufficient evidence of reasonable cause, substantial
authority, or a similar provision. Id.
In pertinent part, section 6662(a) and (b)(1) and (2)
imposes an accuracy-related penalty equal to 20 percent of the
underpayment that is attributable to: (1) Negligence or
disregard of rules or regulations; or (2) a substantial
understatement of income tax.11 Section 6662(c) defines the term
“negligence” to include “any failure to make a reasonable attempt
to comply with the provisions of this title,” and the term
“disregard” to include “any careless, reckless, or intentional
disregard.” Negligence also includes any failure by the taxpayer
to keep adequate books and records or to substantiate items
properly. Sec. 1.6662-3(b)(1), Income Tax Regs.
Section 6664(c)(1) is an exception to the section 6662(a)
penalty: no penalty is imposed with respect to any portion of an
underpayment if it is shown that there was reasonable cause
therefor and the taxpayer acted in good faith. Section
11
Because the Court finds that petitioner was negligent or
disregarded rules or regulations, the Court need not discuss
whether there is a substantial understatement of income tax. See
sec. 6662(b); Fields v. Commissioner, T.C. Memo. 2008-207.
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1.6664-4(b)(1), Income Tax Regs., incorporates a facts and
circumstances test to determine whether the taxpayer acted with
reasonable cause and in good faith. The most important factor is
the extent of the taxpayer’s effort to assess his proper tax
liability. Id. “Circumstances that may indicate reasonable
cause and good faith include an honest misunderstanding of fact
or law that is reasonable in light of * * * the experience,
knowledge and education of the taxpayer.” Id.
The Court finds that respondent has met his burden of
production and that petitioner was negligent. Petitioner did not
properly substantiate his deductions as required by the Code and
the regulations. In addition, he conceded that several of his
deductions were inaccurate. See supra note 3. Petitioner did
not establish a defense for his noncompliance with the Code’s
requirements. Respondent’s determination is therefore sustained.
To reflect the foregoing,
Decision will be entered
under Rule 155.