TAX COURT OPINION

Case: Shatavia Victoria Williams
Docket Number: 10372-14S
Judge: Carluzzo
Opinion Type: bench
Filed: 05/13/2015
Pages: 7

UNITED STATES TAX COURT WASHINGTON, DC 20217 SHATAVIA VICTORIA WILLIAMS, Petitioner(s), v. ) ) ) CZ ) Docket No. 10372-14S COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ORDER Pursuant to the determination of the Court as set forth in its bench opinion rendered on April 30, 2015, 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 Special Trial Judge Lewis R. Carluzzo at Miami, Florida, 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 respondent. (Signed) Lewis R. Carluzzo Special Trial Judge Dated: Washington, D.C. May 13, 2015 SERVED May 14 2015 Capital Reporting Company 1 Bench Opinion by Special Trial Judge Lewis Carluzzo 2 April 30, 2015 3 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Shatavia Victoria Williams v. Commissioner Docket No. 10372-14S 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 (bench opinion). Section references made in this bench opinion are to the Internal Revenue Code of 1986, as amended, in effect for the relevant period, and Rule references are to the Tax Court Rules of Practice and Procedure. This bench opinion is made pursuant to the authority granted by section 7459(b) and Rule 152. This proceeding for the redetermination of a deficiency is a small tax case subject to the provisions of section 7463 and Rules 170 through 175. Pursuant to section 7463(b) the decision entered in this case shall not be treated as precedent for any other case. Except as provided in Rule 152(c), this bench opinion shall not be cited as authority. Shatavia Victoria Williams appeared on her own behalf. Andrew Tiktin appeared on behalf of respondent. In a notice of deficiency dated February 866.488.DEPO www.CapitalReportingCompany.com _| Capital Reporting Company 4 1 2 3 4 5 6 7 8 24, 2014 (notice), respondent determined a $2,437 deficiency in petitioner's 2010 Federal income tax. The issue for decision is whether petitioner is entitled to various deductions claimed on a Schedule C, Profit or Loss From Business, included with her 2010 Federal income tax return (return). Some of the facts have been stipulated and are so found. At the time the petitioner was filed, 9 petitioner resided in Florida. 10 11 12 13 14 15 Petitioner was employed by BellSouth Telecommunications, Inc. (BellSouth) during 2010 and the income she earned from that employment is shown on her return. The Schedule C included with her return also suggests that she was the proprietor of a trade or business not related to her employment with 16 BellSouth. There are numerous deductions claimed on 17 18 19 20 21 22 23 24 25 the Schedule C that, after taking into account the $350 of reported income, result in a net loss of $23,682, which loss along with her earnings from BellSouth, is taken into account in the adjusted gross income and taxable income reported on her return. Most, but not all of the deductions claimed on the Schedule C are disallowed in the notice because, according to the notice, petitioner failed 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company . . 5 1 2 3 4 5 6 7 8 to show that the expense to which each deduction relates was "paid or incurred during the taxable year and that the expense was ordinary and necessary" to petitioner's business. In general, the Commissioner's determinations in a notice of deficiency are presumed correct, and the taxpayer bears the burden of proving that those determinations are erroneous. Rule 9. 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). 10 Moreover, as we have often noted, deductions are a 11 matter of legislative grace, and a taxpayer bears the 12 13 burden of proving entitlement to any deduction claimed. Rule 142(a); New Colonial Ice Co. v. 14 Helvering, 292 U.S. 435, 440 (1934); Welch v. 15 Helvering, 290 U.S. at 115. This includes the burden 16 17 18 19 20 21 22 23 24 25 of substantiation. Hradesky v. Commissioner, 65 T.C. 87,90 (1975), aff'd per curiam, 540 F.2d 821 (5th 1976). Furthermore, section 6001 required the taxpayer to keep records sufficient to show whether the taxpayer "is liable for tax". Petitioner does not suggest that respondent bears any burden under section 7491(a), and from the evidence submitted at trial we are certain that the provisions of that section are not applicable here. If only by implication, petitioner takes 866.488.DEPO www.Capita1ReportingCompany.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 position that the deductions here in dispute are trade or business expense deductions. We note that in general section 162(a) allows as a deduction "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business". Like all deductions, and as noted above, trade or business expenses to which such deductions relate must be substantiated by adequate records, and the evidence submitted by petitioner in an attempt to do so hardly shows that she is entitled to the deductions here in dispute. Petitioner explains the lack of substantiating business records on a burglary, but our concern with her entitlement to any of the disallowed deductions focuses on a point more fundamental than the lack of substantiating records. As noted, not all of the deductions claimed on the Schedule C have been disallowed in the notice. This could lead to an inference that the items shown on the Schedule C relate to a "trade or business" as those terms are used in section 162. Petitioner's presentation at trial however constrains us from drawing such as inference. After hearing her testimony at trial, we seriously doubt whether petitioner was engaged in any activity that would support any of the deductions claimed on the Schedule 866.488.DEPO www.CapitaIReportingCompany.com Capital Reporting Company 7 C. At trial petitioner explained that the income and expenses shown on the Schedule C are attributable to some sort of "home based business" system she purchased from her return preparer. According to petitioner, she paid $500 for the system that included a website on the internet through which she offered certain services, although the exact nature of those services cannot be determined from the record. Furthermore, she could not explain the nature of the various disallowed deductions or the amounts shown for any of those deductions. According to petitioner, the deductions and the amounts of the deductions were claimed upon the advice of her return preparer. Petitioner neither identified her return preparer nor called her return preparer as a witness at trial. Our review of the record in this case leaves us with the distinct impression that the deductions claimed on the Schedule C are nothing more than numbers on a page. Assuming, without finding, that petitioner was engaged in some sort of activity that would qualify as a "trade or business" within the meaning of section 162(a), she has failed to explain the nature or the amounts of the expenses to 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 Capital Reporting Company 1 which the disputed deductions relate. That being so, 8 she has hardly satisfied her.burden of proving that the expenses are ordinary and necessary business expenses or that those expenses have been paid or incurred in carrying on some sort of trade or business. Respondent's disallowances of those deductions are sustained. To reflect the foregoing and respondent's concession, decision will be entered for respondent. This concludes the bench opinion in this case. (Whereupon, at 2:27 p.m., the above- entitled matter was concluded.) 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