TAX COURT OPINION

Case: Peter Changching Lai & Kaiting Su
Docket Number: 5699-17S
Judge: Buch
Opinion Type: bench
Filed: 02/15/2018
Pages: 10

SYM UNITED STATES TAX COURT WASHINGTON, DC 20217 PETER CHANGCHING LAI & KAITING SU, Petitioners, v. ) ) ) ) Docket No. 5699-17S. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit with this order to petitioners and respondent a copy of the pages of the transcript of the trial in this case before Judge Ronald L. Buch at Los Angeles, California, 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 under Rule 155. Dated: Washington, D.C. February 15, 2018 (Signed) Ronald L. Buch Judge SERVED Feb 15 2018 £ 3 1 2 3 4 Bench Opinion by Judge Ronald L. Buch January 24, 2018 Peter Changching Lai and Kaiting Su v. Commissioner of Internal Revenue 5. Docket No. 5699-17S 6 7 8 9 10 11 12 13 THE COURT: The following represents the Court's oral findingsjof fact and opinion. The oral findinys of fact and opinion may not be relied upon as precedent in (cid:16)042 any other casé This opinion is in conformity with Internal Revenue Code.sectiòn 7459(b) and Rule 152(a) of the Tax Court Rules of Practice and Procedure. Any section references refer to the Interñal Revenue Code or the Treasury regulations in effect during the year at 14 issue, and Rule references.are to the Tax Court Rules of 15 Practice and Procedure. 16 This case was heard pursuant to section 74.63. 17 Under section 7463(b), the decision to bé entered in this 18 case is not reviewable by any other cöurt, and this 19 , opinion may not be treated as prëcedent for any other 20 case. 21 22 As a general.matter, the Commissióner's determinations in the no.tice of deficiency are presumed 23 correct, and the taxpayer bears the burden of proving an (cid:16)042 24 error. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 25. (1933). In limited situations, the burden can shift to 1 2 3 4 5 6 7 8 9 the Commissioner under section 7491(.a), but the record does not establish that the criteria under section 7491 have been met, therefore, the burden of proòf remains on the Mr. Lai. Backgròund Mr. Lai is a rocket scientist. We meah that literally. He is.an aerospace engineer who principally . worked in southern California. The items remaining for the Court to decide center around two life events for Mr. 10 Lai. He was laid off from his job in southern California 11 12 and took a job in northern California. Around that same time, he wed, and his wife remained in southern 13 California. After concessions by both sides, some by 14 written stipulation and some orally on the record, the 15 16 17 18 items remaining for the Court to decide are as foll.ows:. Whether Mr. Lai may deduct $8,234 of expenses for working away from home in 2012. Whether Mr. Lai may déduct $12,962 of expenses 19 for working away from home in 2013. 20- Whether Mr. Lai may deduct $4;409 of charitable 21. contributions for 2012. 22 2.3 24 Whether.Mr. Lai may deduct $1,110 of charitable contributions for 2013. . A little more background may be helpful. Mr. 25 Lai has spent his gareer working in southern California. 5 1 2 3 4 5 6 7 In 2012,. he was laid off twice. He looked for various jobs. and ended up working in a related field for an employer in northern California. He incurred travel and other expenses related to his job search, and the deductibility of those expenses has been resolved by agreement. In late 2012, Mr. Lai relocated to northern 8 California to take up his new job. It was not his dream 9 job, but it was related to his area of expertise. He 10 hoped to land something back in southern California that . 11 would be more in line with his work history. Mr. Lai 1 continued to work for his3northern California employer for 13 more than three years. Mr. Lai claims $8,.234 of expenses 14 for working temporarily away from home in 2012. 1 By 2013, Mr. Lai claims.that he ,made northern 16 Californi.a his new tax home. But then his employer 17 assigned him to work on a project in southern California 1 for mpst of the year. He again claims $12,962 of expenses 19 for working temp.orarily away from his new tax home. 2 21 22 2 2 2 -In addition to the issue of expenses while working temporarily away from home, there is a tangentially related issue as to charitable contribution deductions. Mr. Lai wed in late 2012, around the same time he was laid off. At the same time that he and his new wife were consolidating households, Mr. Lai's former . 6 employer shipped all of his belongings frod his office to his.home. This co.nsolida.tion of two households and an office resulted in Mr. Lai and his wife making considerable donations to charity. Many of those donations are supported by contemporaneous recòrds; some are not. One item is a piece of self-created..art that he donated to a church and for which Mr. Lai claims the cost of materials. Discussions 1 2 3 4 5 6 7 8 9 10 Taxpayers generally bear the burden of proving 11 entitlement to any deduction claimed. Rule 142(a); 12 13 14 15 16 17 18 19 20 21 22 INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). A taxpayer must substantiate deductions by keeping and producïng adequate records that enable the Commissioner.to determine the taxpayer's correct tax liability. Sec. 6001. A taxpayer claiming a deduction on a Federal income tax return must demonstrate that the dëduction is allo.wable under the law 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. 87, 89-90 (1975). Undër s.ection 162(a), a deduction is allowed for 23 ordinary and necessary expenses paid or incurred -during 24 the taxable year iñ carrying on any trade of business. 25 The term "trade or business" includes perfo.rming services 1 2 3 4 5 as an employee. Primut.h. v. Commissioner, 54 T. C. 374, 3774378 (1970) . However, an employee business expense is (cid:16)042 not ordinary and necessary if the employee is entitled to reimbursement from his or her employer. See Podems v. Commissioner, 24 T'.C. 21., 22-23 (1955) ; Noz v. 6· Commi.ssioner, T. C. Memo. 2012 272. In addition, a 7 8 9 deduction normally is not available for personal, living, or family expenses. Sec. 262 (a) . Section 162 (a) (2) allows a taxpayer to deduct 10 travel expenses, including expenditures for meals and 11 12 13 14 15 16 17 lodging, - if the ·expenses are reasonable and necessary, incurred "while away from home", and made in pursuit of a trade or business. Commissioner v. Flowers, 326 U.S. 465, 470 (1946) . The term "home" (or "tax hoine") in section 162(a) (2) normally means a taxpayer's principal place of employment (and not the taxpayer's persona.1 residence). See Mitchell v. Commissioner, 74 T.C. 578, 581 '(1980).. An 18 exception to this rule arises when a taxpayer accepts 1 2 employment away from his pr her personal residence and the employment is temporary rather than indefinite. See 21 Peurifoy v; Commissioner, 358 U. S. 59, 60 (1958) ; Deamer 22 23 v. Commissioner, T.C. Memo. 1984-63, aff'd, 752 F.2d 337 (8th Cir. 1985) . The purpose underlying this exception is to relieve the taxpayer of the burden of duplicate living 25 expenses while at a temporary employment location, since . .8 1 2 3 4 5 6 7 . 8 9 it would be unreasonable to expect him to move his tesidence under such circumstances. Tucker v. Commissioner, 55 T.C. 783, 786 (1971). Section 162(a) provides that "the taxpayer shall not be treated as.being temporarily away from homé during any period of employment if..such period exceeds 1 year." Employment is considered temporary if the engagement is expected to last for only a shört period. Norwood v. Commissioner, 66 T.C. 467, 469 (1976). Temporary 10 employment may beäome indefinite, however, if it is 1 1 expected to 1-ast for a substantial, indefinite, or indeterminate duration or due to changed circumstances or 13 the passage of time. Id. at 469-470; Kroll v. 14 Commissioner.,, 49 T.C. 557, 562 (1968). Whether an 15 16 employment opportunity is temporary or indefinite normally depends on the facts and circumstances of each case, and 1T the burden of proving that employment was temporary rests 18 19 20 21 22 23 24 25 on the taxpayer. Rule 142(a); Peurifoy v. Commissioner, 358 U.S. at 60-61; Welch v. Helvering, 290 U.S. at 111. Applying these rules to Mr. Lai, it is apparent that his employment in northern California was indefinite. Mr. Laif in essence, takes the position that his northern California j'ob was not permanent, but that is not the questiön. The issue is whether it was temporary or indefinite. By his own testimony, and as events 1 2 transpired, it was indefinite. He may not deduct the expenses for liviñg away fröm. home, because northern . 3 - California became his work home, .even if his heart lie .4 elsewhere. 5 6 7 8 9 We must also disallow the business travel expenses for 2013, but for a different reason. - We previously stated that an employee business expense is not ordinary and necessary if the employee is entitled to reimbursement from his or her employer. Mr. Lai has not 10 established that he was not entitled to reimbursemeñt from 11 his northern California employer dur.ing the time he spent 1 working in southern California. Indeed, according to his 13 own testimony, .it appears that Mr. Lai was entitled to 1. reimbursement even if it was not in. fact received. 1 1 1 Charitable Contributions Section 170(a)(1) allows a deduction for any charitable contribution, as defined in section 170(c), as 18 long. as the contribution can be.vérified under regulations 1: prescribed by the Secretary. A deduction for a 20 contributioñ over $250 must be substantiated by a 2 22 23 2 25 contemporaneous written acknowleddment of the contribution by the donee organization. The acknòwledgment must contain: (1) the amount of cash ör a description of any property contributed, (2) whether the donee organization provided any goods or services in considerati-on for any . 10 1 2 3 4 5 6 7 8 9 10 11 l' 13 14 15 property contributed, and (3) a description and good-faith estimate of the value of any provided goods ör services or if such goods or services óonsist of intangible benefits, a statement to that effect. See sec. 170(f)(8). In 2012., Mr. Lai made many donations to charity, and with one exception no single item or group of items exceeded $250. Twd items, however, exceeded that amount, and Mr. Lai did not provide a written acknowledgment that satisfies section 170(f)(8) for either of those items. Those contribution deductions we will limit to $250. One item, Mr. Lai's self-created art, we estimate the cost of materials (particularly, Jthe frame) to be in excess of $250, and we will 1.ikewise limit that.item to $250. Of the remaining. items,. some of Mr. Lai/s other donations are supported by his contemporaneous and reasonable estimates of the value of the property. His donations of books, 17 however, are not supported by contemporaneous records, and 18 19 20 21 22 we will not allow those. For 2012, Mr. Lai substantiated $3,958 of charitable contribution.deductions. The Commissioner allowed $2,.000 of charitable contribution deductions during the examination, thus Mr. Lai éstablished that he . 23 may deduct $1,958 more than what was previously allowed for 2012. 2 25 For 2013, Mr. Lai substantiated $991 of 1 2. 3 4 5 6 7 charitable contribution deductions. The Con1missioner . allowed $376 of charitable contributioñ deductions during the examination, thus Mr. Lai establi(cid:0)541hédthat he may déduct $615 more than what was previously allowed for 2013. Bebause of concessions by the parties and the split decision by the Court, decision must be entered 8 ' under Rule- 155. (Whereupön, at 9:53 a.m.e, the above"entitled mátter was concluded. ) · 9 10 12 15 17 1 20 21 2.