TAX COURT OPINION

Case: Yulin Shao
Docket Number: 8413-18S
Judge: Gustafson
Opinion Type: bench
Filed: 03/28/2019
Pages: 6

SR UNITED STATES TAX COURT WASHINGTON, DC 20217 YULIN SHAO, Petitioner, v. ) ) ) ) Docket No. 8413-18S. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ORDER Pursuant to Rule 152(b) of the Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the proceedings in the above case before the undersigned judge at Boston, Massachusetts, containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, decision will be entered for petitioner. (Signed) David Gustafson Judge Dated: Washington, D.C. March 28, 2019 SERVED Mar 28 2019 Bench Opinion by Judge David Gustafson March 12, 2019 Yulin Shao v. Commissioner of Internal Revenue Docket No. 8413-18S 3 THE COURT: The Court has decided to render the following as its oral Findings of Fact and Opinion in this case. This Bench Opinion is made pursuant to the authority granted by section 7459(b) of the Internal Rovanno nodo. and Rulo 192 of rho Tax nourt Rules of 1 2 3 4 5 6 7 8 a 10 Practice and Procedure; and it shall not be relied on as 11 Preceaent in any otner case. 12 13 14 15 16 17 By notice of deficiency dated February 5, 2018 (Ex. 2-J), the Internal Revenue Service ("IRS") determined a deficiency in the Federal income tax of petitioner Yulin Shao for the year 2015. After the Commissioner's concession of the deductibility of $7,937 of expenses for software development, the issue for decision is whether 19 Mr. Shao substantiated his entitlement to deduct travel 19 expenses claimed on Schedule C, which the IRS disallowed. zu vve nu1u in tävut ut nr. ando. 21 This case was tried in Boston, Massachusetts, on 22 March 11, 2019. Mr. Shao represented himself, and Brian 23 Howell represented the Commissioner. On the evidence 24 before us, we find the following facts: 25 FINDINGS OF FACT rnærs (973) 406-2250 l operations@escribetsmet| www.esenbetsmet 4 1 2 3 4 5 6 7 8 a 10 11 12 13 Mr. Shao's business and travel In 20lb Mr. Shao was the sole proprietor of a software development business called SunMotor Group. To find contractors whom he could hire and to solicit clients, Mr. Shao traveled to China in 2015. Before making his trips, he prepared for himself (in Chinese) detailed itineraries showing the dates and times of the meetings he had scheduled with contractors, clients, and othprs. Hp snont annroximarplv 90 davs conductina such business in China, and he spent additional time in China ror non-ousiness reasons. For his business-related travel, Mr. Shao incurred expenses of at least $7,750. 14 Mr. Shao's tax return and audit 15 On a Schedule C attached to his 2015 tax return, 16 Mr. Shao claimed on line 24(a) a deduction of $7,750 for 17 1R 19 21 22 travel. (Ex. 1-J, line 24.) The IRS examined Mr. Shao's return and disallowed the travel expense deduction (and another deduction they conceded at trial). The IRS issued Mr. Shao timely filed his petition in this Court on May 2, 2018. He elected, pursuant to Rule 171, to have 23 his case tried as a "small tax case". At the time he 24 25 filed his petition, Mr. Shao resided in Massachusetts. (Stip. 1.) OPINION 5 I. Applicable legal principles A. Burden of proof The IRS's determination is presumed correct, and taxpayers generally bear the burden to prove their entitlement to any deductions they claim. Rule 142(a). Taxpayers must satisfy the specific requirements for any deduction claimed. See INDOPCO, Inc. v. Commissioner, 503 n.s. 79. R4 (1992). B. Business expense deductions eursuant to section icz ta), a taxpayer may deduct "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business". C. Travel Taxpayers may deduct "traveling expenses * * * 1 2 3 4 5 6 7 8 o 10 11 12 13 14 15 16 17 while away from home in the pursuit of a trade or 1R business". Sec. 162(a)(2). Travel expenses are subiect 19 to section 274(d), under which a taxpayer must 21 corroborating the taxpayer's own statement: (1) the amount 22 of the expense; (2) the time and place the expense was 23 incurred; (3) the business purpose of the expense; and (4) 24 the business relationship of the taxpayer to other persons 25 benefitted by the expense or use, if any. Sec. 274(d)(4) Crir)Prs (973) 406-2 250 ! operations@escribersaet } www.escribersmet (flush language); see also Shea v. Commissioner, 112 T.C. 6 183, 18'/ (1999). For a "small tax case", however, "Trials of small tax cases will be conducted as informally as possible consistent with orderly procedure, and any evidence deemed by the Court to have probative value shall be admissible." Rule 174(b). II. Analysis On his Schedule C, Mr. Shao deducted $7,750 for "Travpl" pxnonsps on lino 24(a). At trial the 1 2 3 4 5 6 7 8 o 10 Commissioner conceded that Mr. Shao's receipts and other 11 12 13 14 15 16 17 1R aocumentary evloence suostantiatea tne ract tnat ne naa travelled to China, and also conceded that his evidence substantiated the amount of expenditures that he had claimed on his return. The only dispute was as to the character -- business vs. non-business -- of the travel at issue. However, we found Mr. Shao's evidence and testimony about the business purpose of his travel to be convincina. In addition to his credible testimony, his 19 English-language translation of his Chinese itineraries ZU suuweu Lue uusiness uudiduter ut nis idvel. 21 22 23 24 25 Decision will be entered in favor of Mr. Shao. This concludes the Court's oral Findings of Fact and Opinion in this case. (Whereupon, at 10:49 a.m., the above-entitled matter was concluded.) oiners 973)406-2250|operations@escribersmet|wwwesaibersaet CERTIFICATE OF TRANSCRIBER AND PROOFREADER 7 CASE NAME: Yulin Shao v. Commissioner DOCKET NO.: 8413-18S We, the undersigned, do hereby certify that the foregoing pages, numbers 1 through 7 inclusive, are the true, accurate and complete transcript prepared from the verbal recording made by electronic recording by Elaine LaRosee on March 12, 2019 before the United States Tax Conrr at its spssion in Roston. MA. in annordanno with thp 1 2 3 4 5 6 7 8 o 10 applicable provlslons of the current verbatim reporting 11 12 contract or tne Court ano nave verirlea tne accuracy or the transcript by comparing the typewritten transcript 13 against the verbal recording. 14 15 16 17 1R 19 ZU 22 23 24 25 Carrie Clouse, CDLT-143 Transcriber Stacey Post Proofreader 3/18/19 Date 3/18/19 Date Crinf3rs (973) 406-2250 j opentions@escribers.net ! www.esaibers.net