TAX COURT OPINION

Case: Salvador Leyva & Araceli Rosales
Docket Number: 8630-15S
Judge: Buch
Opinion Type: bench
Filed: 03/18/2016
Pages: 8

JRN UNITED STATES TAX COURT WASHINGTON, DC 20217 SALVADOR LEYVA & ARACELI ROSALES, Petitioners, v. ) ) ) ) Docket No. 8630-15S. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit with this order to petitioners and respondent a copy of the pages of the transcript of the trial in this case before Judge Ronald L. Buch at San Diego, California, 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 under Rule 155. (Signed) Ronald L. Buch Judge Dated: Washington, D.C. March 18, 2016 SERVED Mar 21 2016 Capital Reporting Company 3 1 Bench Opinion by Judge Ronald Buch 2 March 9, 2016 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 23 Salvador Leyva and Araceli Rosales v. Commissioner Docket No. 8630-15S THE COURT: The following represents the Court's oral findings of fact and opinion. These oral findings of fact and opinion may not be relied upon as precedent in any other case. This opinion is in conformity with Internal Revenue Code section 7459(b) and Rule 152(a) of the Tax Court Rules of Practice and Procedure. Any section references refer to the Internal Revenue Code or the Treasury regulations in effect during the year at issue, and Rule references are to the Tax Court Rules of Practice and Procedure. This case was heard pursuant to section 7463. Under section 7463(b), the decision to be entered in this case is not reviewable by any other court, and this opinion may not be treated as precedent for any other case. After concessions, the remaining issues in this case are (1) whether Mr. Leyva and Ms. Rosales are entitled to education credits, and (2) whether Mr. Leyva can deduct his business expenses, which primarily consist of travel miles. 866.488.DEPO twww.CapitalReportingCompany.com Capital Reporting Company BACKGROUND Mr. Leyva works in the construction 4 industry. He worked in this capacity during 2011 and 2013 at different job sites for varying periods of time of 2 days to 20 weeks. Mr. Leyva transported his tools back and forth from home to the various job sites. He measured the distance with his vehicle's odometer and made contemporaneous entries in a notebook of how many days he worked at the various locations. At the end of each year he compiled those notes into a handwritten summary that he gave to his return preparer. Mr. Leyva presented these handwritten summaries for 2011 and 2013 at trial. The summaries contain the name or address of the job site location, dates traveled, and the distance per trip. For the years at issue Mr. Leyva and Ms. Rosales filed joint tax returns. On March 5, 2015, the Commissioner issued a Notice of Deficiency for 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 20 2011 and 2013 that increased their tax by $4,151 and $2,286 respectively. The Commissioner determined that for both years they were not entitled to the unreimbursed employee expenses and education credits, and the charitable contributions for 2011. The Commissioner also reduced their 2011 home mortgage 22 23 24 25 866.488.DEPO twww.CapitalReportingCompany.com Capital Reporting Company 5 1 2 interest expense from the $2,400 they reported to $1,206. At trial the Respondent agreed that the 3 mortgage interest expense should be $1856. While 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 residing in California Mr. Leyva and Ms. Rosales timely petitioned to challenge the Commissioner's determinations. By agreement of the parties Ms. Rosales did not attend trial. DISCUSSION As a general matter the Commissioner's determinations in the Notice of Deficiency are presumed correct and the taxpayer bears the burden of proving an error. Rule 142(a), Welch v. Helvering, 290 U.S. 111, 115 (1933). In limited situations the burden can shift to Respondent under Section 7491, but the record does not establish that the criteria under Section 7491 have been met. Therefore, the burden of proof remains on Mr. Leyva and Ms. Rosales. Income tax deductions are considered a 19 matter of legislative grace, and taxpayers bear the 20 burden of proving that they are entitled to any deductions. Rule 142(a), INDOPCO, Inc. v. 22 23 24 25 Commissioner, 503 U.S. 79, 84 (1992). Taxpayers are required to maintain sufficient records to show whether or not such person is liable to tax. Section 6001. These records must be retained for as long as 866.488.DEPO twww.CapitalReportingCompany.com Capital Reporting Company 6 the contents may become material and must be kept available for inspection. Section 280F(d)(4). I. Education Credits Section 25A provides education credits for taxpayers who pay qualified tuition and related expenses for themselves or their dependents. In order for Mr. Leyva and Ms. Rosales to be entitled to these credits they must provide sufficient evidence to prove they paid educational expenses. The only document they provided showed that their son received scholarships or grants in excess of the tuition for 2013. At trial their son testified that the total tuition paid by Mr. Leyva and Ms. Rosales exceeded that scholarship. However, the son merely provided an oral estimate of the total tuition paid for the academic year. Accepting his estimate, but reducing the amount to only that portion for 2013, puts his tuition as less than the scholarships or grants. Accordingly, Mr. Leyva and Ms. Rosales have failed to meet their burden to prove that they paid qualified education expenses in excess of the scholarships or grants, and they are not entitled to the education credits thep claimed. II. Business Expenses Taxpayers can deduct ordinary and necessary 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 18 19 20 21 22 23 24 25 866.488.DEPO twww.CapitalReportingCompany.com Capital Reporting Company 7 expenses paid or incurred during the taxable year in carrying on any trade or business. Section 162(a). However, they are not allowed a deduction for personal, living, or family expenses except where specifically allowed in the Code. Section 262(a). Generally taxpayers cannot deduct their commuting expenses when traveling between their home and work. Fausner v. Commissioner, 413 U.S. 838 (1973). On occasion taxpayers can deduct their transportation costs between their home and local job sites if their home serves as their principal place of business. Strohmaier v. Commissioner, 113 T.C. 106, 113 (1999). That typically occurs when the taxpayer is an independent contractor and the taxpayer's principal place of business is his or her home. Principal place of business is defined as including "a place of business which is used by the taxpayer if there is no other fixed location of such trade or business where the taxpayer conducts substantial administrative or management activities of such trade or business." Section 280A(c) (1 ) (C). Mr. Leyva's income from 2011 and 2013 is from his work as an employee, not as an independent contractor. His own travel logs show that he reported to a single job site at a time and for a 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 22 23 24 25 866.488.DEPO twww.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 5 single employer, typically for extended periods of time. On this record we cannot find that his home is his principal place of business. As a result, he is not allowed a deduction for his commuting expenses. Mr. Leyva's travel log shows aggregate 6 miles traveled while seeking employment. Taxpayers 7 8 9 10 11 12 13 14 15 16 20 21 22 23 24 25 can deduct ordinary and necessary business expenses they pay while searching for new employment in the same trade or business in which they are currently engaged. Cremona v. Commissioner, 58 T.C. 219 (1972). Job search expenses an include travel and transportation expenses. Murata v. Commissioner, 7 T.C. Memo,1000 515. While Mr. Leyva's logs show some detail related to his work travel, his mileage log was insufficiently detailed as it related to his job search, in that it only reported aggregate miles. So we cannot allow expenses for that mileage either. In the future Mr. Leyva would be well- served to keep a log book in his vehicle to record the date, location, miles driven, and business purpose for each of his trips, and to make his entries at or near the time of the trip. He should then keep this detailed log book to substantiate his mileage, even if he decides to make a year-end summary to provide to his return preparer. 866.488.DEPO twww.CapitalReportingCompany.com 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 Capital Reporting Company Decision will be entered under Rule 155. (Whereupon, at 8:57 a.m. the above- entitled matter was concluded.) 9 866.488.DEPO twww.CapitalReportingCompany.com