DocketNumber: No. 14909-04S
Citation Numbers: 2008 T.C. Summary Opinion 132, 2008 Tax Ct. Summary LEXIS 132
Judges: \"Vasquez, Juan F.\"
Filed Date: 10/15/2008
Status: Non-Precedential
Modified Date: 4/18/2021
PURSUANT TO INTERNAL REVENUE CODE SECTION 7463(b), THIS OPINION MAY NOT BE TREATED AS PRECEDENT FOR ANY OTHER CASE.
VASQUEZ,
Respondent determined a $ 5,795 deficiency in petitioner's Federal income tax for 2002 and a $ 1,159 accuracy-related penalty under
After concessions, 2 the issues for decision are: (1) Whether petitioner had allowable business expense deductions for tax year 2002; and (2) whether petitioner is liable for the accuracy-related penalty under
Some *133 of the facts have been stipulated and are so found. The stipulation of facts and the attached exhibits are incorporated herein by this reference. At the time she filed the petition, petitioner resided in Texas.
During 2002 petitioner was employed by both Raytheon Co. (Raytheon) and YMCA of Greater El Paso (YMCA). In 2002 petitioner reported wages from both Raytheon and YMCA on her Federal income tax return. For the YMCA she facilitated group exercise classes on an average of three nights per week. As a group exercise instructor she was not reimbursed by the YMCA for mileage, music, or clothing. Petitioner therefore purchased her own clothing, music, and drove her personally owned vehicle to and from the YMCA for the aerobics classes. The distance between her jobs at Raytheon and the YMCA averaged 9.7 miles. 3 In addition to transportation between work sites, petitioner used her vehicle for personal purposes.
Petitioner also worked as a Mary Kay consultant. As a Mary Kay *134 consultant she purchased cosmetics, attended meetings, downloaded information and brochures, and performed one-on-one skin care classes. She conducted this business out of her home.
For tax year 2002 petitioner reported $ 550 as cost of goods sold on her Schedule C, Profit or Loss From Business, associated with her Mary Kay consulting; however, she reported no sales and no income. She deducted $ 3,016 in car and truck expenses, 4 $ 563 for homeowners insurance, 5 $ 1,850 in interest expenses, 6 $ 1,496 in office expenses, $ 1,409 in repairs and maintenance, 7 $ 2,942 for supplies, and $ 2,322 for utilities. 8*135
In the notice of deficiency, respondent disallowed all of petitioner's claimed Schedule C deductions due to a lack of substantiation. 9
Petitioner has neither claimed nor shown that she satisfied the requirements of
Business expenses are deductible from gross income pursuant to
Petitioner has claimed business expense deductions for office expenses, repairs, maintenance, supplies, utilities, and other expenses. Specifically petitioner has indicated that the $ 2,322 she claimed in utilities expenses included water, gas, telephone, electric, cell phone, and Internet access fees.
For expenses that include both personal and business uses, the taxpayer must show that the total expense was greater than what would have been made for personal use only, and if it is not, then the expense is entirely nondeductible. See
For utility expenses that are not listed items under
Automobile expenses are not deductible as a business expense and will be disallowed in full unless the taxpayer satisfies the substantiation requirements under
Respondent concedes that petitioner is entitled to a deduction for the cost of driving between her job at Raytheon and her aerobics instruction classes at the YMCA. The average distance between petitioner's places of employment is 9.7 miles, and petitioner traveled between workplaces 3 times a week during tax year 2002, for a total of 1,513.2 miles. As such respondent concedes that petitioner may properly claim a deduction of $ 552.32 for mileage on Schedule A as a miscellaneous itemized deduction. Petitioner did not, however, substantiate that she incurred any mileage in pursuance of her Mary Kay consulting activities. We therefore find that petitioner has not adequately substantiated these expenses and they are nondeductible.
Petitioner has provided receipts that she claims represent deductible business expenses associated with her work as a fitness instructor. The receipts include expenses for music, 11 clothing, laundry, and hairstyling. Petitioner argues that these *141 expenses should be deductible because she was required to be "presentable" 12 during the course of her aerobics instruction.
Clothing is deductible as a business expense only if it is required for the taxpayer's employment, unsuitable for general wear, and not worn for personal use. See
Hairstyling and grooming expenses are generally considered nondeductible personal expenses. See
Pursuant to
A taxpayer, however, may avoid the application of the accuracy-related penalty by proving that he or she acted with reasonable cause and in good faith. See
Petitioner failed to maintain adequate records relating to claimed business expenses. Petitioner knew or should have known at all times that the claimed expenses were personal expenses and not deductible business expenses. Petitioner argues that she should be excused from the accuracy-related penalties because she relied on her tax return preparer. Reliance on a return preparer may relieve a taxpayer from the accuracy-related penalty where the taxpayer's reliance is reasonable.
The ultimate responsibility for a correct return lies with the taxpayer, who must furnish the necessary information to the agent who prepared the return.
Respondent has shown that petitioner has failed to keep adequate *146 books and records or to properly substantiate the items in question. Accordingly, we conclude that respondent has produced sufficient evidence to show that the
In reaching our holdings herein, we have considered all arguments made by the parties, and to the extent not mentioned above, we conclude they are irrelevant or without merit.
To reflect the foregoing,
1. Unless otherwise indicated, all subsequent section references are to the Internal Revenue Code in effect for the year in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.↩
2. Respondent concedes that there is no self-employment tax due for tax year 2002, and that petitioner is entitled to deduct $ 218.34 for music used as a group exercise instructor.↩
3. During tax year 2002 petitioner worked at three different YMCA work sites in El Paso, Texas. The distance between petitioner's Raytheon work location and the YMCA work locations was 7.5 miles, 16.5 miles, and 5.1 miles.↩
4. This amount differs from the amounts claimed at trial. At trial petitioner claimed $ 2,910.95 in car and truck expenses, including $ 776.72 in gasoline, $ 1,200 in maintenance, and $ 934.23 in auto insurance.↩
5. Petitioner acknowledges that this amount is inaccurate and should have been $ 349.↩
6. Petitioner acknowledges that this amount is inaccurate and should have been $ 658.74.↩
7. Petitioner acknowledges that this amount is inaccurate and should have been $ 548.44.↩
8. The claimed amount for utilities includes $ 353.34 for water, $ 144.54 for gas, $ 463.33 for telephone, $ 386.87 for electricity, and $ 964.36 for cell phone.
9. In the notice of deficiency, respondent set forth self-employment tax of $ 3,920 based on a $ 27,746 increase in self-employment income. Respondent concedes that petitioner had no self-employment income and therefore owes no self-employment tax.
At trial respondent attempted to raise issues regarding filing status, capital loss, and receipt of rental income. These issues were not referenced in the statutory notice of deficiency nor did respondent assert a claim for an increased deficiency pursuant to
10. Petitioner does not contend that
11. Respondent concedes that petitioner is entitled to deduct $ 218.34 for music used as a group exercise instructor for the YMCA.↩
12. Petitioner believes that it is through her appearance that she is able to bring them (YMCA) a profit.↩
13.
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James Donnelly v. Commissioner of Internal Revenue , 262 F.2d 411 ( 1959 )
Jake Z. Schrum Ruby E. Schrum Dannie L. Schrum Jeanette v. ... , 33 F.3d 426 ( 1994 )
William F. Sanford v. Commissioner of Internal Revenue , 412 F.2d 201 ( 1969 )
Jonathan D. Korshin v. Commissioner of the Internal Revenue ... , 91 F.3d 670 ( 1996 )
Cohan v. Commissioner of Internal Revenue , 39 F.2d 540 ( 1930 )
Frank F. And Judith J. Foil v. Commissioner of Internal ... , 920 F.2d 1196 ( 1990 )
Swain v. Comm'r , 118 T.C. 358 ( 2002 )
Barry D. And Sandra J. Pevsner v. Commissioner of Internal ... , 628 F.2d 467 ( 1980 )
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Welch v. Helvering , 54 S. Ct. 8 ( 1933 )
Freytag v. Commissioner , 111 S. Ct. 2631 ( 1991 )
Indopco, Inc. v. Commissioner , 112 S. Ct. 1039 ( 1992 )
Donnelly v. Commissioner , 28 T.C. 1278 ( 1957 )
Yeomans v. Commissioner , 30 T.C. 757 ( 1958 )
Sanford v. Commissioner , 50 T.C. 823 ( 1968 )
Enoch v. Commissioner , 57 T.C. 781 ( 1972 )