DocketNumber： Docket No. 84020.
Filed Date： 6/16/1961
Status： Non-Precedential
Modified Date： 11/20/2020
*168 Respondent's determination disallowing petitioners' deductions in computing adjusted gross income of an alleged $2,250 loss on sale of a trailer home used as a dwelling and $251 of alleged business expenses, sustained.
Memorandum Findings of Fact and Opinion
BRUCE, Judge: This proceeding involves a deficiency in Federal income tax for the year 1958 in the amount of $465.03. The issues are whether, in computing their adjusted gross income, petitioners are entitled to deduct a loss on the sale of a trailer home used as a personal residence, *170 and depreciation and cost of small tools, and telephone expenses.
Findings of Fact
Richard C. and Ena Aline Disney resided during the year 1958 at Sigourney, Iowa. They filed a timely joint Federal income tax return for the year 1958 with the district director of internal revenue for the district of Iowa. On August 3, 1959, they filed an amended joint income tax return for the year 1958 with the same district director.
During 1958 Richard was employed by Century Motors, Sigourney, Iowa, as an auto body mechnic and body shop manager, for which he was paid compensation in the total amount of $5,281.51. Ena Aline was employed by C. J. Lambert, attorney at law, Sigourney, Iowa, for which she was paid compensation in the total amount of $1,456. Petitioners also received interest income in the amount of $25.27 during the year 1958.
On their return for the year 1958 petitioners claimed on Schedule D attached to said return a loss allegedly sustained on the sale of their personal residence in the amount of $2,250. This item was referred to as "Trailer Home used as dwelling." It was purchased in 1952 and sold in 1958. During the intervening period it was occupied as their personal residence.
*171 On their return for the year 1958 petitioners claimed a loss from business in the total amount of $251 on Schedule C (entitled "Profit (or loss) from business or profession") attached to said return. There was an error in addition in this schedule and the amount, correctly totaled, is $351.35 as shown below:
| Depreciation on Business Tools | $ 60.00 |
| Taxes | 117.30 |
| State Income Tax | 76.69 |
| Small Tools (new) | 15.81 |
| Liability Insurance | 56.25 |
| Bank Expense and Tax Service | 17.50 |
| Interest on Loan | 7.80 |
| $351.35 |
Petitioners deducted the foregoing amounts of $2,250 and $251 in computing their adjusted gross income for the year 1958. Respondent disallowed both deductions.
On their amended income tax return petitioners claimed a loss from business on Schedule C in the amount of $158.38 as follows:
| Depreciation on Business Tools | $ 80.00 |
| Telephone | 45.00 |
| Small Tools | 15.88 |
| Bank Expense and Tax Service | 17.50 |
| $158.38 |
On the amended income tax return petitioners claimed itemized deductions in the amount of $444.22 (excluding the alleged $2,250 loss on the sale of petitioners' residence) as follows:
| Red Cross, Polio, Crippled Children, | |
| Cancer | $ 10.00 |
| Interest on Loan | 7.80 |
| State Sales Tax on Material for | |
| Building Home in 1958 | 100.00 |
| Car License (9 months) | 30.00 |
| Personal Property Tax | 40.97 |
| Sales Tax on New Furniture & Gro- | |
| ceries | 48.18 |
| 1958 Chevrolet Sales Tax | 46.33 |
| 1957 State Income Tax | 76.69 |
| State Gas Tax | 28.00 |
| Insurance (Liability) | 56.25 |
| $444.22 |
*172 Opinion
In computing their adjusted gross income for the year 1958, petitioners deducted $2,250 as a loss allegedly incurred in the sale of a trailer home which had been used by them as their personal dwelling or residence. Respondent disallowed the deduction for the stated reason that "The loss of $2,250.00 on sale of 'Trailer Home Used as Dwelling' is disallowed since such loss fails to qualify as a deductible loss under
Under the applicable statute and regulations, which are set forth marginally,
*174 Petitioner, on brief apparently recognizes the force of
The second issue relates to the deduction claimed by petitioners for depreciation and cost of small tools purchased by Richard and used by him in connection with his employment as a mechanic by Century Motors, and the cost of maintaining a telephone in their residence.
Section 62(1) provides as follows:
SEC. 62. ADJUSTED GROSS INCOME DEFINED.
For purposes of this subtitle, the term "adjusted gross income" means, in the case of an individual, gross income minus the following deductions:
(1) Trade and*175 business deductions. - The deductions allowed by this chapter (other than by part VII of this subchapter) which are attributable to a trade or business carried on by the taxpayer, if such trade or business does not consist of the performance of services by the taxpayer as an employee. [Italics supplied.]
Both petitioners were engaged in performing services as employees during the year in question. Neither was an independent contractor and they have not shown that the expenses in question fall within any of the categories of trade and business deductions allowable to employees under section 62(2).
*176 Petitioners have also failed to establish that the maintenance of a telephone in their residence was made a condition of their employment.
While some of the expenses which petitioners have claimed as business expense deductions might have been deductible (if substantiated) as itemized deductions from adjusted gross income (see sections 61, 63(a) and 161), in lieu of the standard deduction, it is to be noted that their total, together with other itemized deductions ($158.38 + $444.22 =$602.60), not including the claimed loss on the sale of their trailer-home, would not exceed the 10 percent standard deduction under section 141 ($676.28) which respondent has allowed. Accordingly, respondent's determination with respect to the second issue is likewise sustained.
Decision will be entered for the respondent.
1. Internal Revenue Code of 1954.
(a) General rule. - There shall be allowed as a deduction any loss sustained during the taxable year and not compensated for by insurance or otherwise.
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(c) Limitation on losses of individuals. In the case of an individual, the deduction under subsection (a) shall be limited to -
(1) losses incurred in a trade or business;
(2) losses incurred in any transaction entered into for profit, though not connected with a trade or business; * * *
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Income Tax Regulations.
Sec. 1.165-1 Losses. - (a) Allowance of deduction.
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(e) Limitation on losses of individuals. In the case of an individual, the deduction for losses granted by
(1) Losses incurred in a trade or business;
(2) Losses incurred in any transaction entered into for profit, though not connected with a trade or business; * * *
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Sec. 1.165-9. Sale of residential property. - (a) Losses not allowed. A loss sustained on the sale of residential property purchased or constructed by the taxpayer for use as his personal residence and so used by him up to the time of the sale is not deductible under
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2. SEC. 62. ADJUSTED GROSS INCOME DEFINED.
For purposes of this subtitle, the term "adjusted gross income" means, in the case of an individual, gross income minus the following deductions:
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(2) Trade and business deductions of employees. -
(A) Reimbursed expenses. - The deductions allowed by Part VI (sec. 161 and following) which consist of expenses paid or incurred by the taxpayer, in connection with the performance by him of services as an employee, under a reimbursement or other expense allowance arrangement with his employer.
(B) Expenses for travel away from home. - The deductions allowed by part VI (sec. 161 and following) which consist of expenses of travel, meals, and lodging while away from home, paid or incurred by the taxpayer in connection with the performance by him of services as an employee.
(C) Transportation expenses. - The deductions allowed by part VI (sec. 161 and following) which consist of expenses of transportation paid or incurred by the taxpayer in connection with the performance by him of services as an employe.
(D) Outside Salesmen. - The deductions allowed by part VI (sec. 161 and following) which are attributable to a trade or business carried on by the taxpayer, if such trade or business consists of the performance of services by the taxpayer as an employee and if such trade or business is to solicit, away from the employer's place of business, business for the employer.
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