TAX COURT OPINION

Case: Janice K. Gore & Bruce G. Gore
Docket Number: 21499-16
Judge: Buch
Opinion Type: bench
Filed: 02/09/2018
Pages: 9

SYM UNITED STATES TAX COURT WASHINGTON, DC 20217 JANICE K. GORE & BRUCE G. GORE, Petitioners, v. ) ) ) ) Docket No. 21499-16. 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 petitioner and respondent a copy of the pages of the transcript of the trial in this case before Judge Ronald L. Buch at Columbus, Ohio, 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. (Signed) Ronald L. Buch Judge Dated: Washington, D.C. February 9, 2018 SERVED Feb 09 2018 1. Bench Opinion by Judge Ronald L. Buch 3 2 3 4 5 6 7 8 9 January 10, 2018 Janice K. Gore and Bruce G. Gore v. Commissioner of Internal Revenue Docket No. 21499-16 The following represents the Cour=t's oral findings of fact and opinion. The oral findings of fact and opinion may not be relied upon as precedent in any other case. This opinion is in conformity with Internal 10 Revenue Code section 7459(b) and Rule 152(a) of the Tax 1:. Court Rules of Practice and Procèdure.. Any section 12 references refer to the Internal Revenue Code or the 13 Treasury regulations in effect during the year ah issue, 14 15 16 1 1 1 and Rule references are to the Tax Court Rules of Practice and Procedure. . The Commissioner issued a notice of deficiency for 2013 to Mr..and Mrs. Gore. The Gores filed a petition challenging the deficiency. After concessions, the items .remaining for us to decide are whether the Gores may 20 deduct medical expenses beýond those already allowed, 21 whether the Gores may. deduct charitable contributions 22 beyond those a.lready allowed, whether the Gores may deduct 23 unreimbursed business expenses beyond what has been 24 25 allowed, and whether the Gores may deduct tax preparation fees beyond what has been allowed. 1 2 3 4 5 6 O 1 2 3 4 15 16 .17 18 I. .Background The record in this case is sparse. In 2013, Mrs. Gore's son had significant health issues, and she paid for her son's medical expenses. Some of those expenses she paid directly. Mrs. Gore testified that she also wrote checks to her son so that he could pay for his own medical expenses. Those checks were generally made out to "cash." Before trial, the Commissioner allowed the expenses for which Mrs. Gore provided substantiation. Some of those were substantiated through health insurance records; others were substantiated through bank and credit card statements. But the Commission.er did not allow amounts that could not be traced to a medical service. In 2013, the Gores claimed nearly $20,000 of charitable contribution deductions. Mrs. Gore claims that she donated clothing and household items to four separate charities. The only documentary evidence of the donations is a door hanger "receipt" left behind by one of the :.9 charities. It has no record of what was given. Mrs. Gore 20 thinks she might have an itemized list at home, but if 1 2 23 there is such a.list, it is not in the record of this case. In 2013, the Gores incurred expenses in relation 24 to their employment. Mrs. Gore worked for a bank and with 25 a retail store. Mrs. Gore did not provide documentation concerning the reimbursement policy of either employer. Mr. Gore worked as an independent contractor driver. The Gores provided bank statements and cancelled checks, but nothing to tie any particular expense to any particular 5 work. The Gores claimed tax preparation fees, most of which the Commissioner allowed. The Gores were unable to substantiate any fees beyond those that were allowed by the Commissioner. II. Burden of proof As a general matter, the Commissioner's 1 2 3 4 5 6 7 8 9 O 1 2 determinations in the notice of deficiency are presumed J3 correct, and the taxpayer bears the burden of proving an 4 error. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 15 16 (1933). In limited situations, the burden can shift to the Commissioner under section 7491(a), but the record 17 does not establish that the criteria under section 7491 18 19 have been established, therefore, the burden of proof remains on the Gores. 20 III. Itemized Deductions 21 Income tax deductions are considered "a matter 22 of legislative grace, " and the taxpayers bear the burden 23 of proving that they are entitled to any deductions. Rule 24 25 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). The Gores did not prove that they were entitled . . 1 2 3 4 5 6 7 8 9 13 1 L 12 13 l'1 15 to claim expenses beyond those.allowed. The Commissioner allowed all substantiated expenses. T.o be allowed any further. deduction, the Gores wduld need tò prove that they incurïed expenses abovê and beyond what the Commissioner allowed. They did not. Regarding medical expenses, there is no. docunientary evidence to tie chec s written to "cash" to a deductible medical expense. And while some portiòn of the checks written to cash. may have been used to pay medical expenses, we have no wäy to determine or . even estimate the amount . - Regarding charitablé contributions, section 170 (a) (1) allows a deduction. for any charitable contribution, as defined in section 170(c), as long as the contribution .can be verified under fegulations prescribed 16 by the Secretary. In order to· substantiate charitable l'1 18 contributions, the taxpayer must maintain one of the following: (-1) ' a cancelled .check; (2). a receipt from the 19 donee charitatile organization showing the name of the 20 donee, 'the date of the contribution, and the amount of the 2:. 22 23 contribution; or (3). Other reliable written records showing the name df the donee, the date of the contribution, and the amount of the contribution. Van 2e Dusen v. Commissioner, 136 T.C. 515, 533 (2011).; sec. 25 1.170A-13(a) (1),- Inc<öme Tax Regs. Mrs. Gore .has no such 1 2 records and her testimony was not credible. While we are convinced that she gave something to one or more charities, the amount and value of clothing and household goods.that she claims is not credible. And her statements about how she valued items were contradictory. While. she claims to have an itemized listing of donated items from which we might be able to estimate a value, if such a list exists, it is not in the record. Regarding unreimbursed èmployee business .0 expenses, we.have held that "an individual may be in the 11 trade or business of being an employee." Deely v. (cid:16)042 12 Commissioner, 73 T.C. 1081, 1101 (1980). In order for 13 unreimbursed employee business expenses to be deductible, 4 the employee must show that she was not entitlöd to - 15 reimbursement from her employer for the expenses. She 3 6 must also show that the expenses were "ordinary and 7 8 9 20 21 2 23 24 25 necessafy" and have proper substantiation. Sec. 274(e.)(3). Mrs. Gore did not substantiate her employee business expenses. Beyond that, however, she testified · that she was entitled to reimbursement from hèr employer. That makes the expenses nondeductible. IV. Schedule C Business Expenses Taxpayers can deduct "ordinary and necessaiy business expenses paid or incurred during.the1taxable year in carrying on any trade or business." Sec. 162(a). . .1 However, they are not allowed a deduction foro personal, 2 3 4 5 6 10 31 living, or family expenses except where specifically a.llowed in the Code. Sec. 262 (a) . Taxpayers are required to maintain sufficient records to "show whether or not such persön is liable to tax". Sec. 6001. Thes.e records must be retained for as long as the contents may become material and must be kept available for inspection. Sec. 280F(d) (4). Certain expenses require strict subs.tantiation under section 274 (d) . Such expenses include those related to travel, meals and entertainment, gifts, and listed 2 property under section 280F(d) (4). For the years at 3 4 issue, listed property included, among other things, passenger automobiles and other property us.ed as a means 5 of transportation. Sec. 280F(ci) (4) . Under t le strict 6 7 8 20 21 22 23 24 25 substantiation rules the taxpayer must have adequate records or sufficient evidence to corroborate (I) the amount of the expense, (2) the time and place the expense was incurred, (3) the business purpose of the expense, and (4) the business relatíorrship of the taxpayer to any others benefitted by the expense. Sec. 274 (.d) . To substantiate b^y adequate records, the täxpayer must maintain, an · a'ccoun book, a log, a diary, or. a similar reco.rd and documentar.y evidence to. establish each element of an .expense. Sec. 1.2 4-5T(c) (2) (I), Temporary Income 1. Tax Regs., 50 Fed. Reg. 46017 (Nov. 6, 1985). 2 3 4 5 6 7 8 9 10 11 In some instances the Court may approximate the amount if the taxpäyer cán establish a deductible expense but cannot substantiate the precise amount. Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d. Cir. 1930). However, the taxpayer must provide some basis for that estimate. Vanicek v. Commissioner, 85 T.C. 731, 742-743 (1985). And, the Court is precluded from making estimates of expenses that are subject to section 274(d) strict substantiation rules. Deely v. Commissioner, 73 T.C. 1081, 1101 (1980); sec. 1.274-5T(a), Temporary Income Tax 12 Regs., 50 Fed. Reg. 46014 (Nov. 6, 1985). 1.3 From the testimony in the record, the nature of 14 Mr. Gore's employment is unclear. The parties stipulated 15 that he was an independent contractor, and from Mrs. 15 Gore's testimony, he appears to be a driver. The expenses 17 18 claimed for Mr. Góre's work are not sufficiently substantiated; but moreover, they appear to be items that 19 require strict substantiation, which was not provided. 2 2 22 23 On the súbject of Mr. Gore, he is a party to this case. . He did not appear at trial and he did not sign the stipulation of facts. Because the stipulation included concessions by the Commissioner, we will give Mr. 24 Gore the benefit of that stipulÉtion. And because of 25 those concessions by the Commissioner, decision will be entered under Rule 155. 10 (Whereupon, at 10:18 a.m., the above-entitled matter was concluded.) (cid:16)042 1 2 3 4 5 6 8 9 10 11 3 14 5 16 17 8 19 20 21 22 23 24 25