TAX COURT OPINION

Case: Randal Paul Knott
Docket Number: 9318-12
Judge: Goeke
Opinion Type: bench
Filed: 01/03/2014
Pages: 6

UNITED STATES TAX COURT WASHINGTON, DC 20217 RANDAL PAUL KNOTT, Petitioner, v. COMMISSIONER OF 1NTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 9318-12. ) ) ) ) OR D E R Pursuant to Rule 152(b), 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 trial in the above case before Judge Joseph Robert Goeke at New Orleans, Louisiana, on December 19, 2013 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, a decision will be entered under Rule 155. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. January 3, 2014 SERVED JAN - 7 20% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Capital Reporting Company Bench Opinion by Judge Joseph Robert Goeke 3 December 13, 2013 Randal Paul Knot Docket No. 9318-12 THE COURT: The Court has decided to render oral findings of fact and opinion in this case, and the following represents The Court's oral findings of fact and opinion. The oral findings of fact and opinion shall not be relied upon as precedent in any other case. This opinion is rendered pursuant to Rule 152 of the Tax Court Rules of Practice and Procedure, and the Internal Revenue Code, Section 7459(a). Hereinafter section references are to the Internal Revenue Code and rule references are to the Tax Court Rules of Practice and Procedure. The present case is before the Court based upon our jurisdiction to review deficiency determinations made by the Internal Revenue Service regarding the income tax, after the issuance of notices of deficiency by the Internal Revenue Service and the timely filing of petitions by the taxpayer. The Internal Revenue Service issued a notice of deficiency to the Petitioner for the year 2009 and asserted the deficiency in income tax in the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 2 amount of $2,656, and an addition to tax under Section 6662(a) in the amount of $531.20. The 3 Petitioner timely filed a petition and at the time 4 5 6 7 8 9 10 11 12 the petition was filed, Petitioner was a resident of the State of Louisiana. The issues remaining for resolution after the parties' settlement discussions in the course of the trial, are whether the Petitioner is entitled to roughly $2600 in employee business expenses for uniforms or $1,000, which has been allowed by the Respondent, and whether the Petitioner is entitled to $164.83 in expenses related to supplies for 13 maintaining records and files, and $167.02 related to 14 15 16 17 18 19 20 21 22 23 24 25 repairs apparently related to Petitioner's automobile. All these expenses and the addition to tax under Section 6662(a) are for the year 2009, as previously stated. The Petitioner bears the burden of proof in this case, because he has failed to establish Section 7491(a) (2) would apply to shift the burden of proof. So pursuant to Rule 142(a) (1), the burden of proof remains on the Petitioner, and that would apply to the remaining items in dispute. By way of background, the Petitioner worked 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 for Coastal Chemical Company as a pipeline technician in 2009. The parties stipulated various facts relative to the employee business expenses the 4 Petitioner claimed, which were disallowed in the 5 6 7 8 9 10 11 12 13 14 15 16 notice of deficiency. The parties also stipulated the reimbursement policy of Petitioner's employer and voluminous copies of receipts, which the Petitioner submitted in support of his position. At trial the Petitioner and his mother testified regarding the efforts that he took to substantiate the expenses claimed, and what activities went into the preparation of Petitioner's federal income tax return for 2009. Deductions and credits are a matter of legislative grace, and as stated previously, the 17 Petitioner bears the burden of proof relative to 18 19 20 21 substantiating the deductions claimed as employee business expenses, which remain in dispute. The Court has carefully reviewed the expenses in the record relative to clothes, which the 22 Petitioner testified credibly he had to purchase 23 24 25 because of the lumincuc nature of his job, which CT sometimes caused his work clothes to become unfit for further wear after wearing them on the job. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 The Court's careful review of the stipulated substantiation documents established that the Petitioner is entitled to a total expense for uniforms of $1,120. Respondent, having allowed $1,000; the Court would permit the Petitioner an additional $120 of expense over the amount previously agreed by Respondent at trial. However, this is substantially less than the roughly $2600 claimed by the Petitioner on his return. The Court was unable to substantiate the total amount claimed by the Petitioner, because the receipts simply did not support that and often the receipts were illegible or contained expenses for items which were not clothing. Turning to the other two remaining items, first the office or documentation type expense in the amount of $164.83 associated with the supplies for the Petitioner to maintain records We find the testimony of the Petitioner and his mother relative to this expense to be credible and we believe this expense is deductible in the amount of $164.83. The final expense item, $167.02 for automobile repairs is simply not deductible based upon the current record, based upon the substantiation requirements of Section 274. We 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company determine that this item must be disallowed. The final issue in the case is the application of the Section 6662 (a) penalties to the deficiencies which will result from the Court's determination and the prior agreement of the parties. The Court simply finds that based upon the testimony, the Petition has established that he had reasonable cause for the manner in which his return was filed and that his efforts to attempt to substantiate the expenses were reasonable, although certain of the expenses have been disallowed pursuant to agreement of the parties and the Court's determination. Therefore, the addition to tax is not applicable based upon the application of Section 6664 (c) (1). Based upon the Court's determinations a Rule 155 computation will be required. This ends the Court's oral findings of fact and opinion in this case. (Whereupon, at 10:12 a.m., the above- entitled matter was concluded.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com