TAX COURT OPINION

Case: Van B. Douglas, Jr.
Docket Number: 7213-10S
Judge: Kroupa
Opinion Type: bench
Filed: 04/13/2011
Pages: 11

UNITED STATES TAX COURT WASHINGTON, DC 20217 RMM VAN B. DOUGLAS, JR., Petitioner, v. ) Docket No. 7213-10 S COMMISSIONER OF INTERNAL REVENUE, Respondent. O R 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 petitioner and to respondent a copy of transcript of February 16, 2011, containing her oral opinion rendered in this case. the above case before Judge Diane L. Kroupa on transmit the to the pages of findings of fact and In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) Diane L. Kroupa Judge Dated: Washington, D.C. April 13, 2011 SERVEDApr142011 I 3 Bench Opi ion by Judge Dia e L. Kroupa e February 16, 2011 Van B. Douglas, Jr. v. Commissioner Docket No. 7213-10S THE COURT: The urt has decided to render oral findings of Fa t and pinion in this*case and the following represent the C urt's oral findings of Fact ana -Opinion. These oral f ndings of fact and opinion shall not be relied upon a prebedent in any other case. This proce ding w s conducted as® a Small Tax Case under section 7463 an Rules 170 through 175. All section references are to tihe Internal Revenue Code "for 2007, and all Rule references are to the Tax Court Rules of Practice and Procedure. This bench opinion is made purs a t to the authority granted by section 7459(b) and ule 15 . Petitioner appeared on his own behalf, and Paulmikell sFabian appeaèed n behalf of respondent. FINDINGS OF FACT Certain fa tE have been stipulated. The stipulation of facts and the supplemental stipulation of facts the parties filed, with accompanying exhibits, are incorp rated y this reference. The facts are so found. Heritage eporting Corporation ( 02) 62 -4888 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 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 4 Petitione resided in Gardena, California at the time he filed tl e petit ion. Petitione is a single individual who timely filed his Federal income tax return for 2007. He claimed $12,026 in chedule A medical and dental expenses and approx mately $12, 000 for charitable contributions made n 2007, of which $6, 012 was attributable to casl contributions and $6, 429 was attributable to pro erty c ntributions. Petitioner also claimed $2,506 of taxes and $8,173 of miscellaneous deductions or Schedule A. Respondent disallowed all the Schedule A expenses because petitioner failed to substantiate any of them. Respondent instead determined during examination that petitioner was entitled to. the standard deduction rather than any itemized deduction on Schedule A. In disallowing the Schedule A xpenses, respondent determined a $3, 475 deficie cy in Federal income tax against petitioner for 2007/. Petitioner provided documentation to respondent to establish tha petitioner incurred $8,160 of dental cos s, $28 of medical expenses, $646 of union dues as a postal w rker and a $50 charitable contribution for AIDS Dance A Thon during 2007. Respondent and petitioner still dispute the remaining Heritage Reporting Corporation (202) 628--4888 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 expenses . At trial, petiticner provided copies of receipts from certain charities and provided handwritten notes of the i ems he contributed noting that he estimated the amounts he claimed for charitable contribudions i 2007 as well as he estimated the amound of other miscellaneous itemized deductions. This is primarily a substantiation case involving whether petitioner is entitled to deduct certain expenses . OPINION We begin w th two fundamental principles of tax litigation. First, the Commissioner's determinations are generall presumed correct, and the taxpayer bears the burden of proving that those determinations are e roneou . Rule 142 (a) ., This principle is not aff cted by section 7491(a) because petitioner failed to comply with the substantiation requirements and fai l.ed to inaintain adequate records . See sec. 7491(a) (2) (Å) and (B) ; see also Higbee v. Commissioner, 116 T.C. 438 (2001) . Second, deductions are a matter of legislative grace, a d the axpayer must show that he or she is entitled to any deduction claimed. Rule Heritage Reporting Corporation (202) 628-4888 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 6 142 (a) ; Deputy v. d Pont , 308 U. S. 488, 493 (1940) ; Welch v. Helvering, 290 IJ. . 111 (1933) . This includes the burden of sub tantiation. Hradesky v. Commissioner, 65 T. . 87, O (1975) , affd. per curiam 540 F.2d 821 (5th Cir. 1976) . Substantiation means that a taxpayer sha 1 keep such permanent records or books of account as are su ficient to establish the amount of deductions claim d on the return. Sec. 6001; sec. 1.6001-1(a), (e), Income Tax Regs. The Court need not acce t a taxpayer's self-serving testimony when the taxpaye fails to present other probative evidence. Beam v. Commissioner, T.C. Memo. 1990-304 (citing Tokarski v. Commissioner, 87 T.C. 74, 77 (1986 ) ) . We first cbnsider petitioner's miscellaneous expenses . Petitioner contends that he should be allowed to deduct the cost to clean his postal worker uniform. Clothing expenses are generally not deductible as a business ex,ense even when specific types of clothing ar a necessary condition of the business or employmeht . Hynes v. Commissioner, 74 T.C. 1266, 1290 (1980) . A recognized exception exists for clothing that is not suitable for general or personal wear and th cloth ng is not so worn. Id. This test has been h ld to be an objective standard. Heritage Reporting Corporation (202) 628-4888 7 1 2 3 4 5 6 '7 8 9 10 11 12 13 14 15 Pevsner v. Commissi ner, 6d8 F.2d 467, 470-471 (5th Cir. 1980). Petitioner's postal uniform was not suitable for general wear, and thus falls within the exception. Petitioner estimated that the expenses were $25 a week for 28 years. Though we find this a bit unlikely givén hat he did not work every week of * the year and $25 is an exc ssive cleaning bill," we will permit petitioner to deduct $500 for cleaning his uniform as a miscellaneous expense in 2007. We also disallow petitioner from a ducting. any commuting expenses he may have claim d. We now co s er petitioner's charitable contrïbutions. As entioned previously, petitioner claimed he contributed $6, 012 of -cash and $6, 429 of roperty to charities in 2007. He now admits that he 16. estimated that amount when he filed his return. At 17 18 19 20 21 22 23 24 25 trial, he offered c rtain r ceipts along with his handwritten notes of what items were contributed in 2007. He was unable to establish that he contributed any "other cash to charity other than the $50 allowed for the AIDS Walk A Thon. Charitable còntributions a taxpayer makes are generally deductible un er section 170(a). No deduction is allowed howev r for any contribution of $250 or more unless he taxpayer substantiates the Heritage Reporting Corporation 202) 628-4888 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 8 contribution by a c ntempo aneous written acknowledgment of t cont bution by a qualified donee organization. Sec. 70 (f) (8) (A) . We note there are now more stringent requirements for contributions of money. Sec. 170 (f) (17) . After August 17, 2006, as here, no deduction for a cqntribution of money in any amounttis allowed u less tl e donor maintains a bank record or written cdmmunication from the donee showing the name of the donee orga ization, the date of the contribution, and the amou t of the contribution. Pension Protection Act of 2006, Pub. L. 109-280, sec. 1217, 120 Stiat . 108 0 . The deduction for a contribution of property equals the fair market value of the property on the date contributed. ec. 1.170A 1(c) (1), Income Tax Regs. A taxpayer cl iming a charitable contribution is generally r quired to maintain for each contribution a cancele check, a receipt from the donee charitable organizati n showing the name of the organization and the date and amount of the contribution, or ther reli ble written records showing the name of he don e and the date and amount òf contribution . Se . 1.17 A-13 (a) (1) , Income Tax Regs. Heritage Reporting Corporation (202) 628-4888 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 9 We first onsider petitioner's cash contributions. Pet tioner claimed he donated $6,012 of cash to unspecified charities during 2007. Petitioner provided no nam s or addresses of any qualified donee nor did he provide any receipts or documentation to quantify the amounts contributed other than the $50 llowed. Moreover, because we are dealing with cash cdntributions in 2007, we may not estimate cash charitable contributions under the Cohan rule. .See Fontanil a v. Co issioner, T.C. Memo. 1999-156. We conclude that petitioner is not entitled to deduct any cash charitable contributions other than the deductions res ondent allowed before trial. We next turn to petitioner's contributions of property. Petiti ner cl imed he contributed $6,429 of property to variops char ties during 2007. Because of the dollar amount involv d, there are additional rules for the deduct bility ofs property to charities. No deduction is allowed for a contribution in excess of $5,000 unless the taxpayer meets certain substantiation requirements. Sec. 1.170A-13(c) (2), Income Tax Regs; sec. 1.170A-13(c) (1) (I), Income Tax Regs. A taxpayer must comply with the following three requirements. First, the t xpayer must obtain a qualified appraisal Eor such property. Second, the Heritage Reporting Corporation (202) 628-4888 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 10 taxpayer must attac a fully completed appraisal summary to the tax return n which the deduction for the contribution is first claimed by the donor. Third, the taxpayer must m intain reasonably detailed records containing descr ption of the property, the fair market value of the pgoperty at the time of donation, the method used in determining the fair market value, and t e cost or other basis of the property contributed. Sec. 1.170A-13(c) (2), Income Tax Regs . " Petitioner failed to comply with any of these requirements. The only e idence petitioner provided regarding property contributions were receipts from Goodwill~ Industri s Boys d Girls Club and Amvets Service Foundation. Most o the receipts were undated and were duplicate opies. Petitioner did not provide any itemization of the property he contributed in 2007, nor did he pr vide an evidence that shows the price he paid when h acquired the property, the date he acquired the peoperty or how he determined the fair market value of the property at the time of contribution. We accept th t petitioner was dealing with a lot of issues in 200 including both grandparents' deaths, his e gagement and his coping with his diabetes di gnosis that may explain why he Heritage Reporting Corporation (202) 628-4888 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 11 had a lot of clothing and furniture to contribute. We are left to speculate, however, what property petitioner may have contri uted and the quality of that property. It is hard to believe that a grandparent would be buying new furniture in 2005, as petitioner testified which was two years before he contributed it to a charity. Based upon the Cohan rule, however, we allow hind a contribution of $2, 000 of property as a charikable contribution. Moreover, axpayers may not deduct contribution of services. Sec. 1.170-2(a) (2), Income Tax Regs. Due to this regullation's longevity, this regulation is treated as ha ing"the effect of a statute. Levine v. Commissioner, T.C. Memo. 1987-143. Accordingly, petitio er is not entitled to deduct any sertices he may have contributed in 2007 as a charitable contribution. I addition, lacking any receipts for ninety percent of his cash contributions and minimal receip s for property contributions seems implausible to the Court. Accordingly, based on the record as a whole, we find that petitioner is entitled to deduct $2,000 as a charitable contribution of property and a $50 c sh con ribution in 2007. The parties did not present any evidence regarding the $2,506 of taxes petitioner laimed on Schedule A. We Heritage Reporting Corporation ( 02) 62 -4888 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 12 give petitioner the benefit of the doubt that these were California state incone taxes withheld from his wages . Notwithstanding the amount we allow petitioner to deduct under any of thes provisions, the resulting amount would stili be less han the standard deduction that respondent allo ed in he deficiency notice. To reflect the fo egoing, decision will be entered for Responde t . This conc1 des th Court ' s oral f indings of fact and opinion in his ca e. (Whereupon at 3: 7 p.m., the bench opinion in the abovementitled matte was concluded.) / / Heritage Reportiigg Corporation (202) 628 4888