TAX COURT OPINION

Case: Sonny B. & Marifi Buensalido
Docket Number: 4887-10
Judge: Wherry
Opinion Type: bench
Filed: 05/31/2011
Pages: 9

UNITED STATES TAX COURT WA SHINGTON, DC 20217 SONNY B. & MARIF : BUENSALIDO, Petitioners v . COMMISSIONER OF ::NTERNAL REVEhlUE, Rèspondent ) ) ) ) ) ) ) ) ) O R D E R Docket No . 4887-10 . Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith the pages of the to petitioners and to respondent a copy of transcript of Wherri, Jr. , at containing oral conclusion of findings of the trial. the trial in the above case before Judge Robert A. os Angeles, dalifornia, on March 14, 2011, fact and opinion rendered at the In accordance with the oi-al findings of fact and opinion, a decision will be entered under Rule 155. (Signed) Robert A. Wherry Judge Dated: Washington, D.C. May g, 2011 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 3 Bench Oýinion by Judge Robert A. Wherry, Jr. March 14, 2011 Buensalido v. Commissioner Docket No. 4887-10 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 NØT BE RELIED UPON AS PRECEDENT IN ANY OTHER CASE. This bench opinion is made pursuant to the authority granted by section 7459(b) and Rule 152 of the Tax Court Rules of Practice and Procedure. Unless otherwise indicated, all section references are to the Internal Revenue Code of 1986, as amended and in effect fior the years at issue, and all references are to the Tax Court Rules of Practice and Procedure. This case is before the Court on a petition for redetermination of a federal income tax deficiency that respondent determined for petitioners' 2006 tax year. The issue for decision is whether petitioners are entitled to a charitable contribution deduction. FINDINGS OF FACT Some of the facts have been stipulated and the stipulated facts and accompanying exhibits are hereby incorporated by reference into our findings. 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 4 At the time they filed their petition, petitioners resided in California. On his 2006 Form 1040, U.S. Individual Income Tax Return, petitioner Sonny B Buensalido (Mr. Buensal do) claimed a "gifts to charity -- gifts made by chec or check" in the amount of $9,447 on his Schedule A itemized deductions. Petitioners filed their 2006 Forms 1040 as "single", but during the audit of their 2006 tax returns petitioners asked that their returns be combined and the filing status changed to "married filing jointly". The examiner agreed that this was appropriate, however the filing status on the Form 5278 Statement - Income Tax Changes, attached to the notice of deficiency sent to Mr. Buensalido incorrectly lists the filing status as "single". Attached do Mr. Buensalido's Form 1040 for the 2006 tax year was a document entitled "Federal Statements" on which he explains the charitable contrib tion consists of a $9,000 contribution to "Church/Temple", and $447 in "miscellaneous cash". On November 30, 2009, respondent mailed to petitioners notices of deficiency for their 2006 tax year. The notice sent to Mr. Buensalido reflected an additional tax owed of $9,406, and the notice sent to petition r Mrs. Marifi Buensalido ,showed an additional 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 5 tax owed of $73. Petitioners filed a timely petition with the Court, and a trial was held on March 7, 2011, at the Court's trial session in Los Angeles, California. The only issue remaining is whether petitioners are entitled to a charitable contribution deduction in the amount of $9,447 for their 2006 tax year. The parties executed a stipulation of settled issues regarding the other adjustments listed in the notices of deficiency issued to petitioners for their 2006 tax year which is hereby incorporated by referende into our findings. During audit petitioners provided respondent with a document petitioners claim is a letter from petitioners' church, the "Seventh Day Adventist Church", relating to their contributions. The letter is a list of numerical figures organized by the "month received" and the "amount received". The "total amount" of contributions listed is $9,447. The letter is addressed to "Mr. Sonny Buensalido" and is signed by the "Church Pastor" and the "Church Treasurer". During discussions with respondent's counsel petitioners' counsel provided a second letter relating to their contributions. The second letter is exactly the same as the first letter except the name of the church ip slightly different and is.listed as "Seventh 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 Day Adventists Church". And under the name of the church it reads "Kabacan, North Cotabato, Philippines". Petitioner has not provided respondent with any additional aocumentation to substantiate the 2006 clåimed Schedule A charitable contribution. At trial, petitioners did not provide the Court with any additional evidence to substantiate the claimed Schedule A charitable contribution. OPINION Deductions are a matter of legislative grace and tax ayers bear the burden of proving entitlement to any claimed deduction. Rule 142(a); INDOPCO, Inc. v. Commilssioner, 503 U.S. 79, 84 (1992). Taxpayers are required to keep books or records to substantiate all claimed deductions. Sec. 6001; Roberts v. Commissioner, 62 T.C. 834,~ 836 (1974). Section 170(a) (1) allows a deduction for a charitable contribution as defined in Section 170(c) if verified under applicable regulations. Generally a cash contribution can be substantiated by (1) a canceled check, (2) a receipt from the donee organization, or (3) other reliable written records showing the name of the donee, the date of the contribu ion, and the amount of the contribution. The taxpayers bears the burden of proving that the written 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 records are reliable. The determination of reliability is made on the basis of all the facts and circumstances of a particular case. Sec. 1.170A- 13(a) (2) (i), Income Tax Regs. Sec. 1.170A-13(a) (1), Income Tax Regs. For a contribution of $250 or more, a taxpaye must substantiate the contribution by a contempdraneous written acknowledgment by the donee organization. Separate contributions of less than $250 are not subject to the requirements of Section 170(f) (8), regardless of whether the sum of the contributions made by a taxpayer to a donee organization during the taxable year equals $250 or more. See Secs. 170(f) (8) (A) and 1.170A-13(f) (1), Income Tax Regs. The written acknowledgment must include: (i) The amount of cash and a description (but not value) of any property other than cash contributed. (ii) Whether the donee organization provided any goods or services in consideration, in whole or in part, for any property described in clause (i). (iii) A description of and good faith estimate of the value of any goods or services referred to in clause (ii) or, if such goods or services consist solely of intangible religious 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 benefità, a statement to that effect. Sec. 170(f) (8) (B). To be considered contemporaneous, the written acknowledgment must be obtained by the taxpayer before the earlier of the due date of the return including extensions or the filing of the return. Sec.4170(f) (8) (C). Petitioners have not met the requirements of section 170. First, although churches are traditionally section 170(c) organizations, petitioners failed to prove that their charitable contributions were made to an organization specified in section 170(c). The letters petitioners presented to substantiate their claimed deduction do not contain the address or the pŠone number of the "Seventh Day Adventist(s) Church" other than to specify that the organization is located in the Philippines. Not only is it unclear from the evidence submitted whether the "Seventh Day Adventist(s) Church" is an organization specifie in section 170(c), it is also unclear if the organization is even section 170 eligible being located in the Philippines. Second, petitioners failed to adequately substantiate their claimed charitable contribution. The reco d relating to the claimed charitable contribution is limited to the letters submitted by 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 9 petitioners from the "Seventh Day Adventist(s) Church" and is unsupported by any additional substantiation in the form of canceled checks, bank records, or receipts from the donee organization to adequately show proof of payment. Additionally, the letters failed to meet the requiredents of section 170(f) as they are silent as to whether the donee organization provided any goods or services for the alleged contributions, a description and estimate of any goods or services provided, or if the donee organization provided any intangible religious benefits to petitioners. It is also unclear that the letters were obtained contemporaneously as they are both undated. Under the Cohan doctrine, if a taxpayer claims a deductible expense and cannot fully substantiate it, the Court may approximate the allowable amount. Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930). However, the taxpayer must provide reasonable evidence from which to estimate the deductible amount, and even then the Court will bear heavily against the taxpayer. Vanicek v. Commissioner,.85 T.C. 731, 742-743 (1985). The lack of evidence with respect to the claimed charitable contribution in this case precludes us from even 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 attempting to approximate the allowable amount of a deductièn. We further recognize that this Court has never "squarely [addressed] the potential conflict between section 170(a) (1) and our application of Cohan to unverified or inadequately substantiated charitable contributions." Kendrix v. Commissioner, T.C. Memo. 2006-9. In the instant case each individual contribution claimed is, or may have been (the record is unclear) , over $2$0, thus by statute each one may not qua ify as a section 170 charitable contribution absent a written receipt from the donee. See section 170 (f) (8) (A) . Sec . 170 (f) (8) (A) supplants Cohan, supra, in this factual situation. The Court has . considered all of petitioners' contentions, arguments, requests and statements. To the extent not discussed herein we concluded that they are meritless, moot, or irrelevant. To reflect the foregoing, Decision will be entered under Rule 155. This conclude the Court's oral findings of fact and opinion in this case. (Whereupon, at 1: 22 p . m. , the bench opinion in the above-entitled matter was concluded.) // // // Heritage Reporting Corporation (202) 628-4888