Zurstadt v. Commissioner
This text of 1986 T.C. Memo. 502 (Zurstadt v. Commissioner) is published on Counsel Stack Legal Research, covering United States Tax Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
Opinion
MEMORANDUM OPINION
PANUTHOS,
Resondent determined a deficiency in petitioner's Federal income tax for the taxable year 1982 in the amount of $605.
The issues presented for decision are: (1) whether expenses incurred by petitioner in 1982 are deductible under section 162(a) as ordinary and necessary expenses paid or incurred in carrying on a trade or business, and (2) whether Herbert J. Zurstadt (hereinafter petitioner) is entitled to a home office deduction for the business use of his home.
At the time the petition in this case was filed, petitioner resided in Orange, Connecticut. Petitioner and his wife, Betty K. Zurstadt, filed a joint Federal income tax return for 1982. 2
*105 Petitioner is an engineer and has been continually pursuing this profession since 1946. Since 1963, petitioner worked in research and development of "gas-absorbent thermometers". Petitioner worked on the development of the thermometer in his employment with several different companies. Petitioner worked at Dresser Industries (hereinafter Dresser) from 1970 until he was laid off in December of 1981. Petitioner was not employed by Dresser or any other employer during 1982. The only income received or reported by petitioner in 1982 was severance and vacation pay received from Dresser in the amount of $13,129.86.
During the year at issue, petitioner sought reemployment with Dresser, as well as new employment with other companies. In addition, petitioner continued his research and development of gas-absorbent thermometers. Petitioner believed that continued work and development on this type of thermometer would enable him to convince a potential employer of its profitability. Petitioner contends that through his sole proprietorship, Thermetics, he was engaged in an engineering consulting business. Petitioner received no income from Thermetics, and because he believed he was still*106 in the research and development stage, he did not make any attempt to sell his ideas concerning the gas absorbent thermometer during 1982.
On Schedule C of his 1982 income tax return, petitioner reported no gross receipts and claimed the following as business deductions:
| Automobile expenses | 34.10 |
| Legal services (patent attorney) | 150.00 |
| Office supplies | 11.96 |
| Steno services | 99.34 |
| Home office depreciation | 1,666.50 |
| Home office expenses | 3 683.75 |
Respondent disallowed the claimed auto expenses, legal fees, office supplies, and steno services as expenses not incurred in an activity engaged in for profit. Respondent disallowed the home office expenses and the home office depreciation based on the determination that the income requirements of section 280A(c)(5) were not met.
First we consider whether petitioner is entitled to claimed business expenses (other than the home office). Section 162(a) allows a taxpayer a deduction for the ordinary and necessary expenses paid or incurred during the taxable year in his trade or business. Deductions are, however, *107 a matter of legislative grace. . Petitioner must qualify under the specific rules and regulations imposed by Congress in order to be allowed business expense deductions. . Respondent's notice of deficiency is presumed correct, and petitioner has the burden of proving it is erroneous. ; Rule 142(a).4
Petitioner claimed a total of $295.40 in business expenses for 1982. Although petitioner paid these amounts, he has not produced persuasive evidence that these expenses are ordinary and necessary business expenses paid in his trade or business. Petitioner's overall testimony was ambiguous and conclusory with regard to the circumstances surrounding the claimed expenses. During trial, petitioner admitted the automobile expenses were, in fact, part of his itemized job search expenses. 5 Further, petitioner testified that he did not know whether the office supplies expense related to his*108 job search or business. Petitioner did assert the legal fee and steno service expenses were incurred by him for his business. Since petitioner has failed to establish these payments were ordinary and necessary business expenses and that his activities constituted a trade or business, we sustain respondent's determination on this issue. Rule 142(a);
Next we consider the deductibility of expenses for an office in the home. Section 280A(a) provides that "no deduction * * * shall be allowed with respect to the use of a dwelling unit which is used by the taxpayer * * * as a residence." Petitioner contends that he comes within the terms of the exception provided in section 280A(c)(1)(A) which excludes from the general rule those deductions allocable to a portion of the dwelling unit*109 which is exclusively used on a regular basis as the taxpayer's principal place of business for any trade or business of the taxpayer. Petitioner argues that he conducted his engineering consulting business in his home.
Free access — add to your briefcase to read the full text and ask questions with AI
Related
Cite This Page — Counsel Stack
1986 T.C. Memo. 502, 52 T.C.M. 745, 1986 Tax Ct. Memo LEXIS 103, Counsel Stack Legal Research, https://law.counselstack.com/opinion/zurstadt-v-commissioner-tax-1986.