TAX COURT OPINION

Case: Chuanlei Lu & Yuan Yuan
Docket Number: 19597-08S
Judge: Colvin
Opinion Type: bench
Filed: 07/13/2009
Pages: 6

UNITED STATES TAX COURT WASHINGTON , DC 2021 7 CHUANLEI LU-AND YUAN YUAN , Petitione r V . COMMISSIONER OF INTERNAL REVENUE , Respondent O R D E R Pursuant to Rule 152 ( b), Tax Court Rules of Practice and Procedure, it i s ORDERED that the Clerk of the Court , shall transmit herewith to Petitioners and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Joseph Robert Goeke at Honolulu , Hawaii, on June . 18, 2009 , containing his oral findings of fact and opinion rendered at the conclusion of the trial . In accordance with the oral findings of fact and , opinion, a decision will be entered under Rule 15 5 (Signed) Joseph Robert Goeke Judg e Dated : Washington, D .C . July 13, 2009 SERVED JUL 15 2009 3 1 Bench Opinion by Judge Joseph Goeke June 18, 2009 2 Lu & Yuan v . Commissioner Docket No . 19597-08S 3 THE COURT : The Court has decided to render 4 oral findings of fact and opinion in this case, an d 5 the following represents the Court's oral findings of 6 fact and opinion . The oral findings of fact an d 7 opinion shall not be relied upon as precedent in any 8 other case . 9 This bench opinion i rendered pursuant to 10 Tax Court Rule of Practice and Procedure 152 . 11 Hereinafter, Rule references are to the Tax Court 12 Rules of Practice and Procedure . 13 This case was heard pursuant to th e 14 provisions of § 7463 of the Internal Revenue Code in 15 effect when the petition was filed . Pursuant to § 16 7463(b), the decision to be entered is not reviewable 17 by any other court . Hereinafter, section references 18 are to the Internal Revenue Code . 19 This is a deficienc y case involving the yea r 20 2005 . The first issue for the Court to decide i s 21 whether Respondent's determination that the Petitione r 22 was no longer actively engaged in a trade or business 23 with respect to his taxi business in the year 2005 is 24 correct . 25 The facts of the case are such that it is Heritage Reporting Corporatio n (202) 628-,888 4 1 clear the Petitioner was actively engaged in a trad e 2 or business with respect to transportation services in 3 years prior to 2005 . Petitioner then suffere d 4 financial setbacks in that business which caused him 5 to seek employment as a wage earner . However, he 6 maintained some of the assets associated with his 7 transportation business in hopes of reinvigorating 8 that business or at a minimum avorably disposing of 9 those assets . 10 The deductions Petitioner claimed on th e 11 return he filed jointly with his wife were computed in 12 an incorrect manner . However, the Court doe s 13 determine that Petitioner continued to be engaged in 14 the transportation business in the year in questio n 15 and is entitled to trade or business expenses relative 16 to his Schedule C transportation business in 2005 to 17 the extent there are ordinary and necessary expenses 18 that are allowable . 19 Petitioner computed the expenses claimed on 20 the return based upon amounts he paid to creditors of 21 the business for debts incurre~ in prior years , 22 including expenses associated with the loans fo r 23 certain vehicles . This method of computing the 24 expenses is incorrect . However, the record of trial 25 establishes that certain busin~ss expenses ar e Heritage Reporting Corporation (202) 628-,888 5 1 allowable relative to the transportation business i n 2 2005 . 3 These allowable expenses includ e 4 depreciation on a Ford van . The amount of allowable 5 depreciation in 2005 would be $6,000 . In addition, 6 the record establishes that Petitioner incurred $600 7 in deductible expense for parking the Ford van i n 8 2005 . Finally the record establishes that th e 9 Petitioner is entitled to $2,000 in business interest 10 expense, which amount the Court estimates based upo n 11 Petitioner's credible testimon and the amount of 12 business debts Petitioner had n 2005 . The final 13 allowable deduction is $137 in miscellaneous expense . 14 In all other respects , Respondent' s 15 determinations in disallowing Schedule C expenses and 16 itemized deductions in the yea 2005 is sustained to 17 the extent that Respondent did not concede any 18 adjustments prior to trial . 19 The final issue for decision is whethe r 20 Petitioner correctly reported the amount of state tax 21 refund which was ordinary income to the Petitioners in 22 the year 2005 . The joint return for 2005 reflects an 23 amount of $5,106 as taxable re~unds . The record of 24 trial establishes that the Petitioner incorrectl y 25 included in that amount a Federal income tax refund i n Heritage ReportinglCorporation (202) 628-4888 6 1 the amount of $2,557 . The Court finds that thi s 2 amount, $2,557, is not taxable to the Petitioners i n 3 2005 and that therefore the coIrect amount of state 4 tax refund should be $2,549 . 5 Because of the Court' s determinations, a 6 Rule 155 computation will be necessary to finall y 7 resolve the Petitioners' Feder .l income tax liabilit y 8 for the year 2005 . 9 This concludes the Court's oral findings o f 10 fact and opinion in this case . 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 2 0 2 1 2 2 2 3 2 4 25 (Whereupon, at 2 :10 p .m ., the bench opinion in the above-entitled matter w~s concluded . ) Heritage ReportinglCorporation (202) 628-4888 Certificate of Transcriber and Proofreade r CASE NAME : 1LC GCY1l f ~1,tOsX 3k[Ln V ; (1'M l i SSA G~tU~- ~ DOCKET NUMBER : lq~;C11 - 0 We, the undersigned , do iereby certify that th e foregoing pages, numbers through inclusive , are the true , accurate and complete transcript prepared from the tape made b~ electronic recording b y JGY1L5 , on Q before the United States Tax Court at its session in _CL&k , ______ in Lccordance with th e applicable prcvisions of the current verbatim reporting contract of the Court, and have verified th e accuracy of the transcript by comparing the printe d transcript against the verbal recording . (Signature of Transcriber ) (Print-Transcriber Name ) Wcea L QQ (Sign?Ltur,e- of Proofreader ) (Print-Proofreader Name ) (Date) Heritage Reporting Corporation (202) 628-4888