TAX COURT OPINION

Case: Charles Asong-Morfaw
Docket Number: 10629-14
Judge: Holmes
Opinion Type: bench
Filed: 11/21/2017
Pages: 8

RMM UNITED STATES TAX COURT WASHINGTON, DC 20217 CHARLES ASONG-MORFAW, Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 10629-14. ) ) ) ) ) ) ) ) ) ORDER This case was tried during the Court's September 18, 2017 trial calendar for St. Paul, Minnesota. The Court gave an oral opinion after trial. It is therefore ORDERED that under Tax Court Rule 152(b), the Clerk of the Court will send a copy of the transcript pages that contain that oral opinion to all the parties in this case. In accordance with the opinion, decision will be entered for respondent. (Signed) Mark V. Holmes Judge Dated: Washington, D.C. November 21, 2017 SERVED Nov 22 2017 (cid:16)042 3 1 2 3 4 5 6 7 8 9 . Bench Option. by Judge Mark V. Holmes September 21, 2017 Charles Asong-Morfaw v. Commissioner of Internal Revenue; Docket Nos. 10629-14 THE COURT: In the case of Charles Asong-Morfaw, docket number 10629-14 and 13601-14, the Court has decided to render oral .findings of fact and opinion, and the following represents the Court's oral findings and fact and opinion. 10 This bench opinion is made pursuant to the 11 authority granted .by section 7459(b) of the Internal 12 Revenue Code of 1986 as amended and Rule 152 of the Tax 13 Court's Rules of Practice and Procedure. 14 15 16 There were two cases, as I said. They were consolidated, but one settled before trial. The one that was still not settled was docket number 10629-14; the 17 parties were able to reach a stipulation which, together 18 with the exhibits and testimony in the case, constitutes 19 the record. Mr. Asong-Morfaw was a Minnesota resident 20 when he filed his petition and remains one today. 21 The tax year iñvolved is 2010. In 2010, 22 Mr. Asong-Morfaw earned a living as a translator, a tax 23 preparer, and a part-time employee at a center in Anoka 24 25 for the mentally ill. The issue that was involved, after cóncessions and settlemen.ts of other issues, (43)406-2250(gerationsgescribetuiet|w.vw.esc,hers.net 4 were the deductions for the use of cars in 2010. On his original return, Mr. Asong-Morfaw claimed 16,251 dollars in car expenses for his translation business, AJ & A. He said on that return that his vehicle had been placed in service on January 1st, 2009, and that he had accumulated 3,485 business miles during the 2010 tax year. At trial, he produced a mileage log showing only 1,416 miles. This was local travel in the Twin Cities area from his home in 1 2 3 4 5 6 7 8 9 10 Champlin for his business. 11 12 13 14 It's also important to note that he testified, and on this point I find him credible, that he had three cars at the beginning of the 2010 year that he used, together with members of his family, for mixed business 15 and personal use. At trial, he also introduced an invoice 16 for the purchase of a Toyota RAV for 7,600 dollars in 17 April 2010. 18 He claimed that he used this only for his 19 business, and thus he wanted to deduct $1,390.45 for the 20 repair of its transmission and $419.56 for the replacement 21 of a serpentine belt on that Toyota. 22 It's important to note that in the notice of 23 deficiency, the auditor disallowed .all but 1,743 dollars 24 of this over 16,000 dollars in claimed car expenses for 25 2010. 5 1 2 3 4 5 6 7 8 9 Mr..Asong-Morfaw also submitted an amended return, which I generously allowed into evidence, but it showed ño change to the car expenses, and so it's really quite irrelevant. He also orally asked for bonus depreciation on this car that he bought in 2010. Now, how do we figure this out? The sections on depreciation and car and truck expenses are actually fairly complicated. But we'll begin by noting that Mr.. Asong-Morfaw's cars, both the three that he shared 10 with members of his family and the Toyota, are what are 11 called "listed property" under section 280F(d) (4) (A) (i) 12 13 14 and if the RAV being an SUV is not regarded as an automobile, it's still a vehicle used for personal transportation, which would make it listed property under 15 280F(d)(4)(A)(ii). 16 To further analyze this, we have .to look at two 17 parts of the 2010 tax year. One is before April 17th, 18 19 2010, when he bought his RAV. He used other cars, and those are reflected in the mileage log, and he shared them 20 with his family, as I said. But he made no allocation 21 between personal and business use of those three cars, so 22 23 24 he gets, at most, mileage for any proven business expenses for those use of those three cars. But of course, he argues that things changed on 25 April 17th, 2010, when he bought the Toyota and began F3)4®2250joperationseesc,1be,Lnet|.www.escribers et 6 1 2 3 4 5 6 7 8 9 10 11 12 using it, he says., one hundred percent on business use. However, remember that Mr. Asong-Morfaw also had a job which he said was roughly half-time at this hospital in Anoka, Minnesota. And he said that he sometimes used his Toyota RAV to go back and forth to that job as well. That makes those trips personal commuting expenses, which are not deductible, and it also triggers an obligation, if he wants to take other than mileage as a deduction, an obligation to segregate and figure out the percentage of the qualifying business use for his RAV because he was using it and it was available for personal use. He needed to show some allocation between personal and business use, 13 which he didn't say. 14 This is also especially true in his case because 15 there were some things on his return that were simply not 16 accuraté at all: the date the vehicle was placed in 17 18 19 20 21 22 23 24 25 service., for instancé, and his failure to reveal that there were three, maybe four vehicles available for him to use in his business in 2010. So I find, therefore, that it's impossible to figure out, on the basis of the record, what percentage of use was personal and what percentage of use was business, even for the Toyota that he initially claimed was one hundred percent for business. This,. then, triggers a problem for his oral n)406-2250|operationseescribenmt I www.escriben.net . 7 1 2 3 4 5 6 7 8 9 claim for bonus depreciation that he made at trial. Section 168(k) typically allows bonus depreciation of fifty percent of adjustèd basis in the first year that "qualified property" is placed in service. See section 168 of (k)(1)(A).. As relevant here, Ccngress increased this deductibie amount to one hundred percent for "qualified property" that was acquired between September 8, 2010, and January 1st, 2012 and placed in sérvice before Jánuary la 1st, 2012. See section 168(k)(5). So Mr. Asong-Morfaw's 11 12 13 14 15 16 17 claim to bonus depreciation of a hundred percént has to fail here because he placed his Toyota in service on April 17th, 2010. But bonus depreciation is also used to refer to this fifty percent of adjusted basis in the first year. So I have to continue on in my analysis and can't simply rely on the effective date of this extra bonus 18 depreciation created for a couple of years earlier in this 19 décade. . 20 The key question here, of course, under section 21 168(k) is that Mr. Asong-Morfaw has to show that his 2002 22 Toyota RAV was "qualified property". What is "qualified 23 property"? Well, section 168(k)(2)(A)-(C) tells us what 24 25 is "qualified property". It also tells us what's not "qualified property", and the section says that . . . 8 1 2 3 4 5 6 7 8 9 10 11 "'qualified property' shall not include any property to which the alternative depreciation system under subsection (g) applies, determined... after application of section 280F(b)." So we have to turn to section 280F(b) to answer the question. We turn there. Under section 280F(b)(1), "If any listed property is not predominantly used in a qualified business use for any taxable year, the deduction allowed under section 168 with respect to such property. . .shall be I determined under section 168(g). In other words, if you have listed property that is not predominantly used in a 12 qualified business use for any taxable year, it would be 13 14 subject to that alternative depreciation system under section 168(g) and it would not be considered "qualified I 15 property" under section 168(k). If it isn't "qualified 16 property", it is not eligible for bonus depreciation. 17 18 I've already determined that Mr. Asong-Morfaw's 2002 Toyota that he bought in 2010 is listed property, but 19 · because he had the burden of proof to show that he used 20 this Toyota predominantly for business purposes, and he 21 did not, I cannot grant him bonus depreciation. All he 22 23 24 25 gets, in other words, is mileage. But turning back to the notice of deficiency, we find that the auditor allowed 1,743 dollars of his claimed over 16,000 dollars in car and truck expenses. Oddly 973)406-2250|cperatiorwipescrbers.net www.escribertnet 1 .. . 9 1 2. 3 4 5 .6 7 8 9 enough, when one checks the IRS récords, $0.50 a mile was the business deduction for mileage back in 2010. So the 1,743 is the equivalent of the 3,485 miles that Mr. Asong- Morfaw claimed on his Schedule C, and not, by the way, on his mileage lög produced at trial. So the government was being generous to Mr. Asong-Morfaw in its drafting of the notice of deficiency. But he got exactly what he claimed and all that hë is entitled to. The decision will be entered in. favor of the 10 renpondent on that issue. I'll check to see whether a 11 decision needs to be entered under Rule L55 becausé of 12 other settlements and concessions. That concludes the bench opinion. in this case, and we're done until 1 p.m. (Whereupon, at 9:22 AM, the above-entitled matter was concluded.) 13 14 15 16 17 18 19 20 21· 22 23 24 25 733406-2250|operationseescribersæt|wwyr.escribersáet