TAX COURT OPINION

Case: Tatek F. Teka & Sefanit G. Regassa
Docket Number: 25130-21S
Judge: Choi
Opinion Type: bench
Filed: 12/28/2022
Pages: 10

Docket No.: 25130-21S United States Tax Court Washington, DC 20217 Page 1 of 1 TATEK F. TEKA & SEFANIT G. REGASSA, v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 25130-21S ORDER OF SERVICE OF TRANSCRIPT On November 4, 2022, the Court rendered its oral ﬁndings of fact and opinion. Tax Court Rule 155 requires the parties to ﬁle computations within 90 days of service of the opinion before the Court can enter a decision. Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is hereby ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to the Commissioner a copy of the pages of the transcript of the trial in this case before the undersigned judge at the Washington, D.C., trial session containing the Court's 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 in due course. It is further ORDERED that, on or before March 28, 2023, the parties shall submit computations under Rule 155. If, however, the parties cannot ﬁle agreed computations, each party shall submit its proposed computation and decision document by the aforementioned date. (Signed) Eunkyong Choi Special Trial Judge Served 12/28/22 RECEIVED 12/01/22 IN THE UNITED STATES TAX COURT In the Matter of: TATEK F. TEKA & SEFANIT G. REGASSA, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. Docket No. 25130-21S ) ) ) ) ) ) ) ) ) ) ) ) ) Pages: 1 through 8 Place: Washington, DC Date: November 4, 2022 1 2 3 4 5 6 7 8 9 10 11 12 13 14 1 IN THE UNITED STATES TAX COURT In the Matter of: TATEK F. TEKA & SEFANIT G. REGASSA, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. Docket No. 25130-21S ) ) ) ) ) ) ) ) ) ) ) ) ) United States Tax Court 400 Second Street, NW Room 400 Washington, DC 20217 November 4, 2022 The above-entitled matter came on for bench opinion, 15 pursuant to notice at 1:01 p.m. 16 17 18 19 20 21 22 23 24 25 HONORABLE EUNKYONG CHOI Judge BEFORE: APPEARANCES: For the Petitioner: NO APPEARANCE For the Respondent: NO APPEARANCE 2 P R O C E E D I N G S (1:01 p.m.) THE CLERK: Recalling from the docket number 25130-21S, Tatek F. Teka & Sefanit G. Regassa. (Whereupon, a bench opinion was rendered.) 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 Bench Opinion by Judge Eunkyong Choi November 5, 2022 3 Tatek F. Teka & Sefanit G. Regassa v. Commissioner Docket No. 25130-21S THE COURT: Good afternoon. This 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 case is a small tax case, subject to the provisions of section 7463 and Rules 170 through 174. The oral findings of fact and opinion are made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code and Tax Court Rule 152. Rule references in this opinion are to the Tax Court Rules of Practice and Procedures, and section references are to the Internal Revenue Code, in effect at all relevant times. This is a tax deficiency redetermination case. Petitioners challenge the Notice of Deficiency, dated April 9th, 2021, in which respondent determined a deficiency in petitioner's federal income tax in the amount of $9,856 and a section 6662(a) accuracy-related penalty of $1,971 for taxable year 2017. Respondent conceded the section 6662(a) accuracy-related penalty prior to trial. After 1 2 3 4 5 6 7 8 9 10 11 12 13 concession, the issue for decision is whether petitioners 4 are allowed to deduct $9,800 of rent/lease expenses and $17,818 of Other Expenses on their Schedule C for taxable year 2017. Trial in this was case conducted during the Court's Washington, DC trial session on November 3, 2022. Petitioner represented himself and petitioner Regassa. Respondent was represented by Ka (Matt) Tam. The parties' stipulation of facts was admitted into evidence along with the attached exhibits. On the evidence before us, and using the burden-of-proof principles explained below, the Court finds the following facts: FINDING OF FACT 14 Petitioners resided in Maryland at the time they 15 filed their petition in this case. 16 In 2017 Petitioners had a Schedule C business 17 18 19 20 21 22 23 24 25 named "With Resources Enterprise Services, LLC," which was in the information technology (IT) business, owned solely by petitioner Tatek F. Teka (petitioner Teka), located in New York. Petitioners also both held W-2 jobs in IT. Petitioners claimed a total expense deduction of $27,618 on their Schedule C for taxable year 2017. Specifically, petitioners claim rental expenses in the amount of $9,800, PC software expenses in the amount of $2,589, book expenses in the amount of $568, cell phone 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 expenses in the amount of $780, job training expenses in 5 the amount of $2,580, and gas/parking/toll expenses in the amount of $11,301. Petitioners also took unreimbursed business expenses in the amount of $22,189 on their Schedule A. The $22,189 consisted of $5,974 for home office costs, $753 for cell phone expenses, $2,675 for IT training books and PC software, and the remaining $12,787 was not identified. These expenses were not examined but were adjusted by $555 due to the change in petitioner's adjusted gross income after the disallowance of petitioners' Schedule C expenses. Petitioner Teka's rental expenses and gas/parking/toll expenses were incurred as the result of his traveling from his home in Maryland to his job in North Carolina on a weekly basis. He lived in North Carolina Monday through Friday for work. Petitioner Teka worked as a network engineer for a telecommunications 19 company. 20 21 22 23 24 25 Petitioner Teka also earned a 1099-Misc income for work he performed from September to December 2017. He purchased books and software to maintain the knowledge necessary to perform his job. Petitioners did not maintain receipts of their purchases. Petitioner's bank statements show charges for 1 2 3 apartment rent, cell phone service, and purchases made at 6 gas stations, metro stations, and retail stores. OPINION 4 Generally, the Commissioner's determinations in 5 6 7 8 9 10 11 a notice for deficiency are presumed correct, and the taxpayer bears the burden of proving those determinations erroneous. Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 (1933). Regarding deductions for ordinary and necessary business expenses pursuant to section 162(a), the taxpayer bears the burden of proving that the expenses were of a business nature rather than personal. Id. 12 An ordinary expense is one that commonly or 13 14 15 16 17 18 19 20 21 22 23 24 25 frequently occurs in the taxpayer's business, Deputy v. du Pont, 308 U.S. 488, 495 (1940), and a necessary expense is one that is appropriate and helpful in carrying on the taxpayer's business, Commissioner v. Heininger, 320 U.S. 467, 471 (1943); Treas. Reg. § 1.162-1(a). Taxpayers may deduct the cost of working away from home if they show that they were working away home temporarily rather than indefinitely. Commissioner v. Peurifoy, 254.F.2d 483, 486 (1957). Taxpayers may not deduct personal, living, or family expenses unless the Code expressly provides otherwise, § 262(a). Taxpayers may not deduct commuting expenses. Commissioner v. Flowers, 326 U.S. 465, 473-74 (1946). Taxpayers may not deduct expenses that were 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 deducted elsewhere on their return. See Kazhukauskas v. 7 Commissioner, T.C. Memo 2012-191 at *7. Petitioners have not met their burden of showing that the expenses included in petitioner Teka's Schedule C were related to his business and have not shown that the expenses were ordinary and necessary. We find that the apartment rental expenses and gas/parking/toll expenses were personal in nature and, therefore, not deductible. These expenses were the housing and commuting costs necessary for Petitioner Teka's W-2 job, not business expenses, as petitioner Teka did not allege or show that his W-2 job was temporary. We further find that petitioner Teka's other expenses are duplicative of the expenses petitioners took in their Schedule A as unreimbursed employee expenses and therefore are not 16 deductible. 17 18 This concludes the Court's oral Finding of Fact and Opinion in this case. A decision will be entered on 19 the Rule 155. (Whereupon, at 1:12 p.m., the above-entitled matter was concluded.) 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 CERTIFICATE OF TRANSCRIBER AND PROOFREADER 8 CASE NAME: Tatek F. Teka & Sefanit G. Regassa v. Commissioner DOCKET NO.: 25130-21S We, the undersigned, do hereby certify that the foregoing pages, numbers 1 through 8 inclusive, are the true, accurate and complete transcript prepared from the verbal recording made by electronic recording by Barrington Moxie on November 4, 2022 before the United States Tax Court at its session in Washington, DC, in accordance with the applicable provisions of the current verbatim reporting contract of the Court and have verified the accuracy of the transcript by comparing the typewritten transcript against the verbal recording. _______________________________________________ Amy Alessi, CDLT-209 11/22/22 Transcriber Date _______________________________________________ Meredith Meyer Proofreader 11/29/22 Date