PURSUANT TO INTERNAL REVENUE CODE SECTION 7463(b),THIS OPINION MAY NOT BE TREATED AS PRECEDENT FOR ANY OTHER CASE. T.C. Summary Opinion 2013-49
UNITED STATES TAX COURT
RONALD EUGENE THOMPSON, SR., AND GENINE Z. THOMPSON, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 8893-12S. Filed June 18, 2013.
Ronald Eugene Thompson, Sr., and Genine Z. Thompson, pro sese.
Susan K. Bollman, for respondent.
SUMMARY OPINION
GUY, Special Trial Judge: This case was heard pursuant to the provisions
of section 7463 of the Internal Revenue Code in effect when the petition was
filed.1 Pursuant to section 7463(b), the decision to be entered is not reviewable by
1 Section references are to the Internal Revenue Code (Code), as amended, (continued...) -2-
any other court, and this opinion shall not be treated as precedent for any other
case.
Respondent determined a deficiency of $4,172 in petitioners’ Federal
income tax for 2009. Petitioners filed a timely petition for redetermination with
the Court pursuant to section 6213(a). At the time the petition was filed,
petitioners resided in Illinois.
After concessions,2 the issues remaining in dispute are whether petitioners
are entitled to deductions for charitable contributions, unreimbursed employee
business expenses, and business use of their home. To the extent not discussed
herein, other issues are computational and flow from our decision in this case.
Background
Some of the facts have been stipulated and are so found. The stipulation of
facts and the accompanying exhibits are incorporated herein by this reference.
1 (...continued) and Rule references are to the Tax Court Rules of Practice and Procedure. All monetary amounts are rounded to the nearest dollar. 2 The parties stipulated that petitioners substantiated medical and dental expenses of $1,033. Because that amount is less than 7.5% of petitioners’ adjusted gross income of $106,474 for 2009, it follows that petitioners may not claim a deduction on Schedule A, Itemized Deductions, for these expenses. See sec. 213(a). Petitioners concede that they are not entitled to a deduction of $606 for an item identified only as “comp” on line 21 of Schedule A. -3-
During 2009 Mr. Thompson was employed by Casino One Corp. and by the
Village of Alorton as a “code enforcement” officer. Mrs. Thompson was
employed as a civil servant in the Federal court system.
I. Petitioners’ 2009 Tax Return
A. Income
Petitioners timely filed a joint Federal income tax return for 2009, reporting
total wages of $77,491,3 a distribution from a retirement account of $31,892,
interest income of $36, and other income of $625.
B. Itemized Deductions
Petitioners claimed itemized deductions on Schedule A totaling $34,402,
including $12,075 for charitable contributions and $9,475 for unreimbursed
employee business expenses.
1. Charitable Contributions
After petitioners’ 2009 return was selected for examination, Mr. Thompson
forwarded to the Internal Revenue Service (IRS) two letters from Friendship
Missionary Baptist Church (Friendship Church) in an effort to substantiate the
deduction they claimed for charitable contributions. Although the letters were
3 Casino One Corp. and the Village of Alorton paid Mr. Thompson wages of $20,107 and $5,899, respectively, and Mrs. Thompson received wages of $51,484 from the Federal Government. -4-
titled “2009 church contribution statement”, they stated that Mr. and Mrs.
Thompson contributed $5,935 and $6,140, respectively, to Friendship Church
during 2008.
Petitioners testified at trial that they were members of the Centerville
Church of Christ (Centerville Church) during 2009, and they never attended or
made contributions to Friendship Church. Mr. Thompson explained that his tax
return preparer mistakenly placed the Friendship Church letters in petitioners’ tax
file and “sent the wrong forms” to him to submit to the IRS.
Petitioners subsequently provided the IRS with two letters from Centerville
Church, dated September 27, 2012. The letters state that Mr. and Mrs. Thompson
contributed $6,140 and $5,936, respectively, to Centerville Church during 2009.
Petitioners testified that they made weekly contributions to Centerville Church by
cash and/or check. The letters from Centerville Church did not include a schedule
listing the dates or amounts of petitioners’ weekly contributions.
2. Unreimbursed Employee Business Expenses
Petitioners claimed a deduction for unreimbursed employee business
expenses related to Mr. Thompson’s employment with the Village of Alorton,
including vehicle expenses, the cost of a new computer, and uniform expenses. -5-
a. Vehicle Expenses
It was the Village of Alorton’s policy not to reimburse employees for
transportation or vehicle expenses. On Form 2106-EZ, Unreimbursed Employee
Business Expenses, Mr. Thompson reported that he drove 13,520 miles in the
course of conducting inspections for the Village of Alorton during 2009.
Applying the standard mileage rate of 55 cents per mile, he reported total
transportation expenses of $7,436.4
b. Computer Expense and Business Use of Home5
The Village of Alorton did not provide Mr. Thompson with an office or a
computer. Mr. Thompson testified that, after conducting inspections, he used a
personal computer in his home to prepare written reports to submit to the Village
of Alorton. Petitioners purchased a new computer in 2009 and claimed a
deduction of $1,010 for the full purchase price. Mr. Thompson testified that both
4 The Commissioner generally updates the optional standard mileage rates annually. See sec. 1.274-5(j)(2), Income Tax Regs. The standard mileage rate of 55 cents per mile for 2009 is set forth in Rev. Proc. 2008-72, sec. 2.01, 2008-50 I.R.B. 1286. 5 Petitioners first claimed that they were entitled to a deduction for the business use of their home shortly before trial. Respondent did not object to petitioners’ testimony related to that issue at trial, and we therefore deem the matter to have been tried by consent pursuant to Rule 41(b). -6-
the computer and the room in his home where he prepared reports were used for
both business and personal purposes.
c. Uniform Expense
Petitioners claimed a deduction of $423 for uniforms. The Village of
Alorton required Mr. Thompson to wear a dress shirt and tie when performing
inspections. The shirts and ties that Mr. Thompson purchased for work did not
include a company logo, nor were they limited to a particular style or color.
II. Notice of Deficiency
Respondent disallowed the deductions for charitable contributions and
unreimbursed employee business expenses described above and determined
petitioners’ tax liability for 2009 by allowing a standard deduction of $11,400
using married filing jointly status and an additional deduction of $3,595 for
qualified motor vehicle tax.6
6 The American Recovery and Reinvestment Act of 2009 (ARRA), Pub. L. No. 111-5, sec. 1008(a) and (b), 123 Stat. at 317-318, amended sec. 164(a) and (b) to include qualified motor vehicle taxes (a term defined in sec. 164(b)(6)) among the various taxes allowed as a deduction. The provisions are effective for qualifying vehicles purchased on or after February 17, 2009, and before January 1, 2010. Sec. 164(b)(6)(G); ARRA sec.
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PURSUANT TO INTERNAL REVENUE CODE SECTION 7463(b),THIS OPINION MAY NOT BE TREATED AS PRECEDENT FOR ANY OTHER CASE. T.C. Summary Opinion 2013-49
UNITED STATES TAX COURT
RONALD EUGENE THOMPSON, SR., AND GENINE Z. THOMPSON, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 8893-12S. Filed June 18, 2013.
Ronald Eugene Thompson, Sr., and Genine Z. Thompson, pro sese.
Susan K. Bollman, for respondent.
SUMMARY OPINION
GUY, Special Trial Judge: This case was heard pursuant to the provisions
of section 7463 of the Internal Revenue Code in effect when the petition was
filed.1 Pursuant to section 7463(b), the decision to be entered is not reviewable by
1 Section references are to the Internal Revenue Code (Code), as amended, (continued...) -2-
any other court, and this opinion shall not be treated as precedent for any other
case.
Respondent determined a deficiency of $4,172 in petitioners’ Federal
income tax for 2009. Petitioners filed a timely petition for redetermination with
the Court pursuant to section 6213(a). At the time the petition was filed,
petitioners resided in Illinois.
After concessions,2 the issues remaining in dispute are whether petitioners
are entitled to deductions for charitable contributions, unreimbursed employee
business expenses, and business use of their home. To the extent not discussed
herein, other issues are computational and flow from our decision in this case.
Background
Some of the facts have been stipulated and are so found. The stipulation of
facts and the accompanying exhibits are incorporated herein by this reference.
1 (...continued) and Rule references are to the Tax Court Rules of Practice and Procedure. All monetary amounts are rounded to the nearest dollar. 2 The parties stipulated that petitioners substantiated medical and dental expenses of $1,033. Because that amount is less than 7.5% of petitioners’ adjusted gross income of $106,474 for 2009, it follows that petitioners may not claim a deduction on Schedule A, Itemized Deductions, for these expenses. See sec. 213(a). Petitioners concede that they are not entitled to a deduction of $606 for an item identified only as “comp” on line 21 of Schedule A. -3-
During 2009 Mr. Thompson was employed by Casino One Corp. and by the
Village of Alorton as a “code enforcement” officer. Mrs. Thompson was
employed as a civil servant in the Federal court system.
I. Petitioners’ 2009 Tax Return
A. Income
Petitioners timely filed a joint Federal income tax return for 2009, reporting
total wages of $77,491,3 a distribution from a retirement account of $31,892,
interest income of $36, and other income of $625.
B. Itemized Deductions
Petitioners claimed itemized deductions on Schedule A totaling $34,402,
including $12,075 for charitable contributions and $9,475 for unreimbursed
employee business expenses.
1. Charitable Contributions
After petitioners’ 2009 return was selected for examination, Mr. Thompson
forwarded to the Internal Revenue Service (IRS) two letters from Friendship
Missionary Baptist Church (Friendship Church) in an effort to substantiate the
deduction they claimed for charitable contributions. Although the letters were
3 Casino One Corp. and the Village of Alorton paid Mr. Thompson wages of $20,107 and $5,899, respectively, and Mrs. Thompson received wages of $51,484 from the Federal Government. -4-
titled “2009 church contribution statement”, they stated that Mr. and Mrs.
Thompson contributed $5,935 and $6,140, respectively, to Friendship Church
during 2008.
Petitioners testified at trial that they were members of the Centerville
Church of Christ (Centerville Church) during 2009, and they never attended or
made contributions to Friendship Church. Mr. Thompson explained that his tax
return preparer mistakenly placed the Friendship Church letters in petitioners’ tax
file and “sent the wrong forms” to him to submit to the IRS.
Petitioners subsequently provided the IRS with two letters from Centerville
Church, dated September 27, 2012. The letters state that Mr. and Mrs. Thompson
contributed $6,140 and $5,936, respectively, to Centerville Church during 2009.
Petitioners testified that they made weekly contributions to Centerville Church by
cash and/or check. The letters from Centerville Church did not include a schedule
listing the dates or amounts of petitioners’ weekly contributions.
2. Unreimbursed Employee Business Expenses
Petitioners claimed a deduction for unreimbursed employee business
expenses related to Mr. Thompson’s employment with the Village of Alorton,
including vehicle expenses, the cost of a new computer, and uniform expenses. -5-
a. Vehicle Expenses
It was the Village of Alorton’s policy not to reimburse employees for
transportation or vehicle expenses. On Form 2106-EZ, Unreimbursed Employee
Business Expenses, Mr. Thompson reported that he drove 13,520 miles in the
course of conducting inspections for the Village of Alorton during 2009.
Applying the standard mileage rate of 55 cents per mile, he reported total
transportation expenses of $7,436.4
b. Computer Expense and Business Use of Home5
The Village of Alorton did not provide Mr. Thompson with an office or a
computer. Mr. Thompson testified that, after conducting inspections, he used a
personal computer in his home to prepare written reports to submit to the Village
of Alorton. Petitioners purchased a new computer in 2009 and claimed a
deduction of $1,010 for the full purchase price. Mr. Thompson testified that both
4 The Commissioner generally updates the optional standard mileage rates annually. See sec. 1.274-5(j)(2), Income Tax Regs. The standard mileage rate of 55 cents per mile for 2009 is set forth in Rev. Proc. 2008-72, sec. 2.01, 2008-50 I.R.B. 1286. 5 Petitioners first claimed that they were entitled to a deduction for the business use of their home shortly before trial. Respondent did not object to petitioners’ testimony related to that issue at trial, and we therefore deem the matter to have been tried by consent pursuant to Rule 41(b). -6-
the computer and the room in his home where he prepared reports were used for
both business and personal purposes.
c. Uniform Expense
Petitioners claimed a deduction of $423 for uniforms. The Village of
Alorton required Mr. Thompson to wear a dress shirt and tie when performing
inspections. The shirts and ties that Mr. Thompson purchased for work did not
include a company logo, nor were they limited to a particular style or color.
II. Notice of Deficiency
Respondent disallowed the deductions for charitable contributions and
unreimbursed employee business expenses described above and determined
petitioners’ tax liability for 2009 by allowing a standard deduction of $11,400
using married filing jointly status and an additional deduction of $3,595 for
qualified motor vehicle tax.6
6 The American Recovery and Reinvestment Act of 2009 (ARRA), Pub. L. No. 111-5, sec. 1008(a) and (b), 123 Stat. at 317-318, amended sec. 164(a) and (b) to include qualified motor vehicle taxes (a term defined in sec. 164(b)(6)) among the various taxes allowed as a deduction. The provisions are effective for qualifying vehicles purchased on or after February 17, 2009, and before January 1, 2010. Sec. 164(b)(6)(G); ARRA sec. 1008(a) and (b). -7-
Discussion
As a general rule, the Commissioner’s determination of a taxpayer’s liability
in a notice of deficiency is presumed correct, and the taxpayer bears the burden of
proving that the determination is incorrect. Rule 142(a); Welch v. Helvering, 290
U.S. 111, 115 (1933).
As discussed in detail below, petitioners did not comply with the Code’s
substantiation requirements and have not maintained all required records.
Therefore, the burden of proof as to any relevant factual issue does not shift to
respondent under section 7491(a). See sec. 7491(a)(1) and (2); Higbee v.
Commissioner, 116 T.C. 438, 442-443 (2001).
Deductions are a matter of legislative grace, and the taxpayer generally
bears the burden of proving entitlement to any deduction claimed. Rule 142(a);
INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co.
v. Helvering, 292 U.S. 435, 440 (1934). A taxpayer must substantiate deductions
claimed by keeping and producing adequate records that enable the Commissioner
to determine the taxpayer’s correct tax liability. Sec. 6001; Hradesky v.
Commissioner, 65 T.C. 87, 89-90 (1975), aff’d per curiam, 540 F.2d 821 (5th Cir.
1976); Meneguzzo v. Commissioner, 43 T.C. 824, 831-832 (1965). A taxpayer
claiming a deduction on a Federal income tax return must demonstrate that the -8-
deduction is allowable pursuant to a statutory provision and must further
substantiate that the expense to which the deduction relates has been paid or
incurred. Sec. 6001; Hradesky v. Commissioner, 65 T.C. at 89-90.
I. Charitable Contributions
Section 170(a)(1) provides the general rule that a taxpayer is allowed as a
deduction any charitable contribution made within the taxable year and verified
under regulations prescribed by the Secretary. Sec. 1.170A-13(a)(1), Income Tax
Regs. Section 170(f)(17) provides that no deduction shall be allowed for any
contribution in the form of cash, a check, or other monetary gift unless the donor
maintains as a record of such contribution a bank record or a written
communication from the donee showing the name of the donee organization, the
date of the contribution, and the amount of the contribution. See sec. 1.170A-
13(a)(1), Income Tax Regs. The taxpayer has the burden of demonstrating that
records relating to charitable contributions are reliable. Sec. 1.170A-13(a)(2)(i),
Income Tax Regs.
Petitioners claimed a deduction of $12,075 for charitable contributions
which they purportedly made to Centerville Church through weekly contributions
during 2009. However, petitioners were unable to produce bank records (such as
canceled checks) or documentation from Centerville Church showing the specific -9-
dates and amounts of individual contributions. Taking into account all the facts
and circumstances, we do not find the two letters from Centerville Church to be
reliable. The Centerville Church letters are dated September 27, 2012, more than
two years after petitioners filed their 2009 tax return, they first surfaced after
petitioners’ tax return preparer provided petitioners with the admittedly erroneous
letters from Friendship Church, and they do not include any detail that would
substantiate petitioners’ claim that they made weekly contributions to the church.
Without more, we hold that petitioners have failed to substantiate the disputed
charitable contributions and respondent’s determination disallowing the deduction
is sustained.
II. Unreimbursed Employee Business Expenses
Under section 162(a), a deduction is allowed for ordinary and necessary
expenses paid or incurred during the taxable year in carrying on any trade or
business. The determination of whether an expenditure satisfies the requirements
for deductibility under section 162 is a question of fact. See Commissioner v.
Heininger, 320 U.S. 467, 475 (1943). The term “trade or business” includes
performing services as an employee. Primuth v. Commissioner, 54 T.C. 374, 377-
378 (1970). A deduction normally is not available, however, for personal, living,
or family expenses. Sec. 262(a). - 10 -
Section 274(d) prescribes more stringent substantiation requirements before
a taxpayer may deduct certain categories of expenses, including expenses related
to the use of listed property as defined in section 280F(d)(4). See Sanford v.
Commissioner, 50 T.C. 823, 827 (1968), aff’d, 412 F.2d 201 (2d Cir. 1969). As
relevant here, the term “listed property” includes, inter alia, passenger automobiles
and computers and peripheral equipment. Sec. 280F(d)(4)(A)(i), (iv). To satisfy
the requirements of section 274(d), a taxpayer generally must maintain records and
documentary evidence which, in combination, are sufficient to establish the
amount, date, and business purpose for an expenditure or business use of listed
property. Sec. 1.274-5T(b)(6), Temporary Income Tax Regs., 50 Fed. Reg. 46016
(Nov. 6, 1985).
Mr. Thompson reported that he drove 13,520 miles for business purposes
during 2009. However, he failed to keep a contemporaneous mileage log, record
the dates, times, destinations, and business purposes for individual trips, or
provide any other substantiation in support of the deduction claimed for vehicle
expenses. On the record presented, petitioners failed to meet the strict
substantiation requirements of section 274(d). See sec. 1.274-5(j)(2), Income Tax
Regs. (providing that the strict substantiation requirements of section 274(d) for - 11 -
vehicle expenses must be met even where the standard mileage rate is used).
Consequently, respondent’s determination disallowing the deduction for vehicle
expenses petitioners reported on Schedule A is sustained.
B. Computer Expense and Business Use of Home
Petitioners assert that they are entitled to a deduction for the business use of
their home and the cost of a computer used in connection with Mr. Thompson’s
work for the Village of Alorton.
A taxpayer generally is not entitled to deduct any expenses related to a
dwelling unit used as a residence during the taxable year. Sec. 280A(a). Expenses
attributable to a home office are excepted from this general rule, however, if the
expenses are allocable to a portion of the dwelling unit which is exclusively used
on a regular basis as the principal place of business for the taxpayer’s trade or
business. Sec. 280A(c)(1); Lofstrom v. Commissioner, 125 T.C. 271, 277-278
(2005). If the taxpayer is an employee, the exception under section 280A(c)(1)
will apply only if the exclusive use of the office space is for the convenience of the
taxpayer’s employer. Sec. 280A(c)(1); Hamacher v. Commissioner, 94 T.C. 348,
353-354 (1990).
Mr. Thompson testified that he used a room in his home to prepare reports
in connection with his work for the Village of Alorton. He also testified, however, - 12 -
that he used the room for personal purposes as well. Because petitioners did not
use the room exclusively for a business purpose, it follows that they are not
entitled to a deduction for business use of their home.
Personal computers fall within the definition of listed property and are
subject to the strict substantiation requirements of section 274(d). Sec.
280F(d)(4)(A)(iv). Mr. Thompson testified that he used a newly purchased
computer to prepare reports for the Village of Alorton and for personal purposes.
He did not maintain a log or other record, however, detailing the amount of time
he used the computer for business as opposed to personal purposes. In short, the
evidence petitioners introduced on this issue does not satisfy the strict
substantiation requirements of section 274(d). See Riley v. Commissioner, T.C.
Memo. 2007-153. As a result, respondent’s determination disallowing the
deduction petitioners claimed for the cost of the computer is sustained.
C. Uniforms
Petitioners claimed a deduction of $423 for clothing that Mr. Thompson
wore to work. The cost of clothes that are “required or essential in an employment
and which are not suitable for general or personal wear and are not so worn” is a
deductible expense. Yeomans v. Commissioner, 30 T.C. 757, 767-769 (1958); see - 13 -
Wasik v. Commissioner, T.C. Memo. 2007-148; Beckey v. Commissioner, T.C.
Memo. 1994-514.
Mr. Thompson was required to wear a shirt and tie while conducting
inspections for the Village of Alorton. He was not required to wear a uniform to
work, and the clothes that he wore were adaptable to general use. Therefore, we
sustain respondent’s determination disallowing the deduction petitioners claimed
for uniform expenses.
In sum, petitioners failed to substantiate the deductions they claimed for
charitable contributions, unreimbursed employee business expenses, and business
use of their home.
To reflect the foregoing,
Decision will be entered
under Rule 155.