Drentlaw v. Dept. of Rev.

CourtOregon Tax Court
DecidedFebruary 12, 2019
DocketTC-MD 180074N
StatusUnpublished

This text of Drentlaw v. Dept. of Rev. (Drentlaw 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
Drentlaw v. Dept. of Rev., (Or. Super. Ct. 2019).

Opinion

IN THE OREGON TAX COURT MAGISTRATE DIVISION Income Tax

JOHN DAVID DRENTLAW ) and LESLIE ANN DRENTLAW, ) ) Plaintiffs, ) TC-MD 180074N v. ) ) DEPARTMENT OF REVENUE, ) State of Oregon, ) ) Defendant. ) FINAL DECISION1

Plaintiffs appeal Defendant’s Notice of Assessment, dated October 17, 2017, issued for

the 2013 tax year. Plaintiffs also challenged Defendant’s letter, dated February 23, 2018,

requesting that Plaintiffs file amended returns for the 2014 and 2015 tax years and warning that

failure to do so would result in Defendant opening audits for those tax years. Defendant moved

to dismiss Plaintiffs appeal of the 2014 and 2015 tax years because Defendant had taken no

appealable actions for those tax years. In an Order entered June 25, 2018, the court granted

Defendant’s motion to dismiss the 2014 and 2015 tax years. That Order is hereby incorporated

in this Decision by reference.

A trial on the 2013 tax year was held in the Oregon Tax Courtroom on July 23, 2018, in

Salem, Oregon. John David Drentlaw (John) appeared and testified on behalf of Plaintiffs.2

Nicholas Odom (Odom) appeared and testified on behalf of Defendant. Plaintiffs’ Exhibits 1 to

22 and Defendant’s Exhibits A to H were received without objection. Following trial, the court

1 This Final Decision incorporates without change the court’s Decision, entered January 24, 2019. 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). 2 Ordinarily the court refers to individuals by their last names. However, two witnesses share the same last name, Drentlaw, so the court will use their first names.

FINAL DECISION TC-MD 180074N 1 left the record open until September 5, 2018, for the parties to discuss resolution of John’s

claimed home office deduction. Plaintiffs requested an extension of time to pursue resolution of

John’s claimed home office deduction. The court entered an Order on October 2, 2018, granting

Plaintiffs’ request and allowing the parties until November 1, 2018, to resolve the issue. On October

19, 2018, Plaintiffs filed Exhibit 23, a letter from Turner and Townsend (T & T). On October 31,

2018, Defendant filed a status report maintaining that John should not be allowed a home office

deduction. Plaintiffs requested another extension to obtain another letter from T & T. The court

denied Plaintiffs’ third request for an extension in a letter dated December 10, 2018.

I. STATEMENT OF FACTS

On their 2013 Schedule A, Plaintiffs claimed itemized deductions totaling $29,598,

including unreimbursed employee expenses totaling $19,134. (Ptfs’ Ex 16 at 1.) Leslie claimed

expenses of $9,660, composed of $5,041 for mileage and $4,619 for other business expenses.

(Id. at 4.) John claimed expenses of $9,474, composed of $2,126 for mileage; $893 for travel;

$6,257 for other business expenses; and $198 for meals and entertainment (M and E) after the 50

percent reduction. (Id. at 5.) On his 2013 Schedule C for JLD, LLC (JLD) John reported no

income and $627 in expenses, composed of $210 for office expenses and $417 for other

expenses, which were the LLC registration. (Ptfs’ Ex 16 at 2-3.)

Following an audit of Plaintiffs’ Schedule A itemized deductions, Defendant allowed $14,513

of the original $29,538 claimed. (Def’s Ex A at 2.) Defendant increased Leslie’s allowed mileage

deduction from $5,041 to $7,105 and disallowed her other business expenses of $4,619. (Id. at 3, 5, 8.)

Defendant disallowed John’s mileage, travel, M and E, and other business expenses. (Id. at 3-8.)

Additionally, Defendant increased Leslie’s employer reimbursements to $3,056. (Id. at 7-8.) Although

///

FINAL DECISION TC-MD 180074N 2 Defendant did not adjust John’s Schedule C, it noted that John intermingled his employee business

expenses with his Schedule C business expenses. (Id. at 8.)

A. John’s Employee Business Expenses

John was employed as a Senior Consultant by T & T from February 21, 2012, to July 15,

2014. (See Ptfs’ Ex 23.) He testified that he performed work for T & T from his home office

because T & T had no office in Oregon in 2013. John testified that T & T was trying to establish

a presence in Oregon in 2013, so T & T used John’s address as its Oregon location. (See Ptfs’

Ex 7 (web search result).) He testified that he had an agreement with a Senior Vice President of

T & T that he could work in the Portland area and try to establish an office but could not receive

reimbursement. A letter from T & T states that John “worked remotely and commuted to the

client site as required. Our company did not reimburse him for any home office expenses.”

(Ptfs’ Ex 23.) Defendant maintains that John should not be allowed a home office deduction

because he failed to establish that the home office was for the convenience of T & T, rather than

for John’s convenience. (Def’s Second Post Tr Status Report, Oct 31, 2018.)

John’s home office was 187 square feet within a house totaling 2,921 square feet of

finished, usable space. (Ptfs’ Ex 5 at 23 (diagram of house received from Clackamas County).)

John claimed a home office deduction of $2,683 based on the following home expenses:

Expense Amount (Total) Exhibits Electric (PGE) $1,988 Ptfs’ Exs 14, 20 Gas (NW Natural) $968 Ptfs’ Exs 14, 20 Sewer and Water (Lake Oswego) $2,140 Ptfs’ Exs 1, 14, 20 Lawn (Jose Velasco) $1,820 Ptfs’ Exs 14, 20 Rent $30,000 Ptfs’ Exs 5, 20 Insurance (Allstate) $240 Ptfs’ Exs 14, 20 Garbage (Republic Services) $919 Ptfs’ Exs 3, 14, 20 Phones (AT&T) $2,272 Ptfs’ Exs 14, 15, 20 Internet (Xfinity/Comcast) $1,567 Ptfs’ Ex 2 (user policies), 14, 20 Total $41,914 Ptfs’ Ex 20

FINAL DECISION TC-MD 180074N 3 With respect to the internet expenses paid to Xfinity/Comcast, John testified that the business

package included no breakdown of services (internet, television, etc.), so he used the square

footage allocation for his office to allocate to business use.

John provided a spreadsheet entitled “Deductions Claimed,” listing “total office expense

both JLD & T&T” of $9,350. (Ptfs’ Ex 22 at 1.) That figure includes parking totaling $891;

“membership & training/conf.” of $729; postage of $192; office supplies of $1,622; M and E of

$2,259; Portland office rent of $2,550; car rental of $536; and subscriptions of $571. (Id.) John

testified that he traveled to Manhattan, Houston, San Francisco, Long Beach, and other locations

for T & T. He testified that, for instance, he performed the initial cost consulting on Time

Warner’s office construction in New York. John testified that his claimed M and E expenses

were to entertain clients on behalf of T &T. (See, e.g., Ptfs’ Ex 14 at 9, 11.) He relied on email

records as well as bank and credit card statements showing travel. (See Ptfs’ Ex 15 at 4.)

T & T had a reimbursement policy in effect for its employees in 2013 and, as an

employee, John had a right to receive reimbursement for expenses including travel, personal car

usage, and M and E. (See Ptfs’ Ex 9.) The policy covered “expenditure of company funds

within your home office, on a business trip or short and long term domestic assignments.” (Id. at

3.) John testified that, in 2013, he submitted claims for reimbursement monthly and received

reimbursements totaling $4,447. He was unable to provide specific evidence of reimbursed

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Drentlaw v. Dept. of Rev., Counsel Stack Legal Research, https://law.counselstack.com/opinion/drentlaw-v-dept-of-rev-ortc-2019.