Balvaneda v. Dept. of Rev.

CourtOregon Tax Court
DecidedJanuary 25, 2017
DocketTC-MD 160156R
StatusUnpublished

This text of Balvaneda v. Dept. of Rev. (Balvaneda v. Dept. of Rev.) is published on Counsel Stack Legal Research, covering Oregon Tax Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Balvaneda v. Dept. of Rev., (Or. Super. Ct. 2017).

Opinion

IN THE OREGON TAX COURT MAGISTRATE DIVISION Income Tax

ISRAEL BALVANEDA ) and NORMA K. AGUILAR, ) ) Plaintiffs, ) TC-MD 160156R ) v. ) ) DEPARTMENT OF REVENUE, ) State of Oregon, ) ) Defendant. ) FINAL DECISION1

Plaintiffs appeal Defendant’s Notice of Assessment dated February 26, 2016, for the

2012 tax year. A trial was held in the Oregon Tax Courtroom on July 7, 2016, in Salem, Oregon.

Israel Balvaneda (Balvaneda) and Geoffrey Kossak (Kossak) testified on behalf of Plaintiffs.

Amanda Gomulinski (Gomulinski), Tax Auditor, appeared and testified on behalf of Defendant.

Plaintiffs’ Exhibits 1 to 104 were received without objection. Defendant’s Exhibits A to H were

received without objection.

I. STATEMENT OF FACTS

Balvaneda testified that he lives in Albany, Oregon, which is in Linn County, and is a

journeyman cement mason and a member of the Cement Masons Local Union No. 555 (union).

(Ptfs’ Ex 20, 22.) Balvaneda testified that he has lived in Albany since 2007. The union

dispatches Balvaneda to work for, or on behalf of, signatory contractors; the union itself does not

employ Balvaneda. (Ptfs’ Ex 20.) During 2012 Balvaneda worked for Hoffman Construction

Company and Industrial Concrete, LLC at job sites in the following Oregon cities: Hillsboro

1 This Final Decision incorporates without change the court’s Decision, entered January 6, 2017. The court did not receive a statement of costs and disbursements within 14 days after its Decision was entered. See Tax Court Rule–Magistrate Division (TCR–MD) 16 C(1).

FINAL DECISION TC-MD 160156R 1 (Washington County), Sandy (Clackamas County), McMinnville (Yamhill County), and Eugene

(Lane County). (Ptfs’ Ex 23–24; Def’s Ex C-2, D-1.) Balvaneda worked approximately 88 days

in Hillsboro, 51 days in Sandy, 21 days in McMinnville, and 66 days in Eugene, which yields a

total of 226 days and consists of the following percentages: 39 percent in Hillsboro, 23 percent

in Sandy, and 9 percent in McMinnville (71percent combined), and the remaining 29 percent in

Eugene. (Ptfs’ Exs 38–87; Def’s Exs D-2–D-54.) Balvaneda is required to use his own vehicle

to travel to and from construction sites, and he is not reimbursed for the cost of fuel or the

maintenance of his vehicle. (Ptfs’ Ex 20.) He is also not reimbursed for the cost of the “normal

hand tools” or work attire needed for work. (Id.; Def’s Ex C-6.)

On his 2012 tax return, Balvaneda deducted business expenses arising from 18,000 miles

of travel to and from the aforementioned construction sites ($9,990), his union dues ($4,068),

and the cost of tools ($557)—totaling $14,615 in unreimbursed employee expenses. (Ptfs’ Ex 6,

14.) In 2015, Defendant audited Balvaneda’s 2012 Oregon income tax return and denied the

deductions for all $9,990 of the travel expenses, $14 of the union dues, $522 of the tool costs,

and the undisclosed cost of work boots—increasing Balvaneda’s taxable income by $10,526 and

resulting in a tax deficiency of $945. (Def’s Ex H-1–H-4.)

Defendant issued a Notice of Deficiency on November 5, 2015, to which Balvaneda

objected by a letter, and Defendant responded to Balvaneda’s objection by a letter dated

February 22, 2016. (Def’s Ex G-1.) In that response letter to Balvaneda, Defendant granted only

the deduction for work boots ($338), thereby decreasing the tax deficiency, and reiterated that

the travel expenses are not deductible. (Id.) Finally, on February 26, 2016, Defendant issued a

Notice of Assessment, and Balvaneda timely appealed to the Tax Court on April 16, 2016.

(Def’s Ex A-1.)

FINAL DECISION TC-MD 160156R 2 II. ANALYSIS

The issue in this case is whether Balvaneda may deduct certain unreimbursed business

expenses for the 2012 tax year, and if so, whether such expenses are sufficiently substantiated.

Balvaneda is specifically challenging Defendant’s disallowance of his claimed deductions for

travel between his personal residence and various work sites.2

In analyzing Oregon income tax cases the court starts with several general guidelines.

First, the court is guided by the intent of the legislature to make Oregon’s “personal income tax

law identical in effect” to the federal Internal Revenue Code (IRC) for the purpose of

determining taxable income of individuals, where possible. ORS 316.007.3 Second, in cases

before the tax court, the party seeking affirmative relief bears the burden of proof and must

establish his or her case by a “preponderance of the evidence.” ORS 305.427. Third, allowable

deductions from taxable income are a “matter of legislative grace,” and the burden of proof

(substantiation) is placed on the individual claiming the deduction. INDOPCO, Inc. v. Comm’r,

503 US 79, 84, 112 S Ct 1039, 117 L Ed 2d 226 (1992). Finally, “[i]n an appeal to the Oregon

Tax Court from an assessment made under ORS 305.265, the tax court has jurisdiction to

determine the correct amount of deficiency * * *.” ORS 305.575.

A. 2012 Tax Home

IRC section 162(a) allows deductions for “all the ordinary and necessary expenses paid

or incurred during the taxable year in carrying on any trade or business[.]” Conversely, IRC

section 262(a) disallows deductions for “personal, living, or family expenses.” Generally, a

taxpayer cannot deduct the cost of commuting between the taxpayer’s residence and the

2 In his Complaint and at trial, Balvaneda did not challenge Defendant’s disallowance of the deductions claimed for his tool costs, therefore, the court will not address those deductions in its analysis. 3 The court’s references to the Oregon Revised Statutes (ORS) are to 2011.

FINAL DECISION TC-MD 160156R 3 taxpayer’s place of business, except when the taxpayer travels “away from home in the pursuit of

a trade or business[.]” IRC § 162(a)(2); see Treas Reg § 1.162-2(e) (1960).

The phrase “away from home” means “away from the taxpayer’s tax home”—thus, “tax

home” is not necessarily the taxpayer’s residence. See Comm’r v. Flowers, 326 US 465, 473-74,

66 S Ct 250, 90 L Ed 203 (1946); Kroll v. Comm’r, 49 TC 557, 562-63 (1968); Rev Rul 93-86,

1993-2 CB 71, 1993 IRB LEXIS 508 (Nov 1993) (Rev Rul 93-86). A taxpayer’s tax home is

“located at (1) the taxpayer’s regular or principal (if more than one regular) place of business, or

(2) if the taxpayer has no regular or principal place of business, then at the taxpayer’s regular

place of abode in a real and substantial sense.” Rev Rul 93-86. If a taxpayer has neither a

regular place of business nor a regular abode in a real and substantial sense, then the taxpayer is

an itinerant whose tax home is wherever he or she happens to work, in which case travel

expenses are generally nondeductible under IRC section 162(a)(2). Id.

Revenue Ruling 99-7 provides three exceptions by which expenses incurred from

traveling between a taxpayer’s residence and work location may be deducted, the first of which

is a two-prong test: First, the work location must be “temporary,” which means “realistically

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Related

Commissioner v. Flowers
326 U.S. 465 (Supreme Court, 1946)
Indopco, Inc. v. Commissioner
503 U.S. 79 (Supreme Court, 1992)
Hintz v. Department of Revenue
13 Or. Tax 462 (Oregon Tax Court, 1996)

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