TAX COURT OPINION

Case: Steven McCullers
Docket Number: 7669-18
Judge: Goeke
Opinion Type: bench
Filed: 04/29/2019
Pages: 7

SYM UNITED STATES TAX COURT WASHINGTON, DC 20217 STEVEN MCCULLERS, Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 7669-18. ) ) ) ) ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Joseph Robert Goeke at Las Vegas, Nevada containing his oral findings of fact and opinion rendered at the trial session at which this case was heard. In accordance with the oral findings of fact and opinion, a decision will be entered for respondent. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. April 29, 2019 SERVED Apr 30 2019 Bench Opinion by Judge Joseph Robert Goeke April 16, 2019 3 Steven McCullers v. Commissioner of Internal Revenue Docket No. 7669-18 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 not be relied upon as precedent in any other case. This opinion is rendered pursuant to Rule 152 of the Tax Court Rules of Practice and Procedure, and section 7459(b) of the Internal Revenue Code. Hereinafter in this bench opinion Rule references are to the Tax Court Rules 1 2 3 4 5 6 7 8 9 10 11 12 13 14 of Practice and Procedure and section references are to 15 the Internal Revenue Code as in effect for the year before 16 17 18 19 the Court. The Court has jurisdiction over the present case based upon our authority to review determinations made by the Internal Revenue Service, and Notices of Deficiency 7 20 which are timely petitioned to this Court. See sections 21 22 6211, 6212, and 6213(a). The petitioner was a resident of Las Vegas when he filed his petition in this case. His 23 petition was to seek review of a Notice of Deficiency 24 25 issued to him by the Internal Revenue Service on April 9th, 2018 regarding his 2015 Income Tax Return. Respondent 73)4064150[operat nseescribers.net|wwwascribershet determined a deficiency in Income Tax for 2015 in the 4 amount of $4,908. This deficiency was triggered by the disallowance of certain itemized deductions for employee business expenses in the amount of $23,715. On petitioner's 2015 Federal Income Tax Return, which he filed married filing separately* he claimed on schedule A employee business expenses. On Form 2106 associated with his return, he reflected mileage expenses in the amount of $17,322, certain travel expense in the amount of $798, and business expense in the amount of $4,589. These amounts totaled to $22,709. A c,iIsode wed meál a At trial the petitioner did not seek to defend the business expense deduction in the amount of $4,589, nor the travel expense in the amount of $798. He did, however, seek an increase in the claim deduction for 176 vehicle mileage over the amount associated with his return. On his 2015 Income Tax Return he reflected business mileage of 32,568 miles of which he said 30,125 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 miles was deductible business mileage. At trial, he did 20 21 22 23 not seek to support mtakand the^other business expenses claimed, as I've previously stated. But he maintained that he drove 150 miles per day for business, 20 days a week, for 12 months of the year for a total of 36,000 business 24 miles. He arrived at the 150 miles per day based upon 25 average trips of 7.5 miles and claimed he took 20 trips cribers 1973)4064250loperationseescribertnetlwww.escrbennet each day, totaling 150 miles per day. 5 He also testified at trial that he was entitled to reimbursement by his employer, but he was told not to seek reimbursement. He did not produce a copy of any 1 2 3 4 5 written policy relative to reimbursement of mileage or 6 7 8 9 10 11 other employee business expenses by his employer. He was employed as a district small business specialist by USA Bank. According to the Form W-2 associated with his 2015 Federal Income Tax Return, the petitioner received wage income in 2015 in the amount of $58,854. He also claimed a Schedule C loss for activities as an insurance salesman, 12 which is not in dispute in this case. 13 14 15 16 17 Deductions are a matter of legislative grace and taxpayers have the burden to show they satisfy the specific requirements for any deduction claimed. Rule 142(a). See INDOPCO, Inc. v. Commissioner, 503 U.S. 59, 84 (1992). Section 7491(a) which would shift the burden 18 of Proof under certain circumstances is not applicable on 19 the facts before us, and the petitioner bears the burden 20 of proof in this case. 21 22 Taxpayers must maintain supporting records to substantiate their deductions, Section 6001, Roberts v. 23 Commissioner, 62 T.C. 834, 835-837 (1974); Sparkman v. 24 Commissioner, T.C. Memo. 2005-136, aff'd 509 F.3d 1149 25 (9th Cir. 2007) and Section 1.6001-1(a), Income Tax Regs. cribers Section 162(a) allows a taxpayer to deduct "all 6 the ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business". A necessary expense is one that is "appropriate and helpful" to the taxpayer's business; ordinary expenses are those that are common or frequent in the type of business which the taxpayer is engaged. Deputy v. du Pont, 308 U.S. 488, 495 (1940). Employee business expenses are subject to a 2 percent floor pursuant to section 67(a). Personal living and family expenses are generally not deductible, Sec. 262. Claiming a deduction on an Income Tax Return is not sufficient to substantiate the underlying expense. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Wilkinson v. Commissioner, 71 T.C. 633, 639 (1979). 15 Certain categories of expenses must satisfy the strict 16 17 18 19 substantiation requirements of section 274(d). However, there is no need to apply section 274 in this case because the petitioner has failed to provide any records to support the reported expenses in dispute, and they must be 20 disallowed as a matter of lack of substantiation and the 21 Petitioner's failure to carry his burden of proof. We are 22 23 24 25 not permitted to speculate or guess as to the appropriate expenses petitioner claimed in the context of section 274, or in general for that matter. Vanicek v. Commissioner, 85 T.C. 731, 742-743 (1985). In the present case it ) cribers 7 )406.2250 Joperat nséeserknet|www.esaibers.net appears that petitioner may have incurred employee eXPenses associated with automobile expense. It not clear he couldn't have obtained reimbursement for those expenses 7 based upon his own testimony. What is also clear is that he changed his testimony from the amounts claimed on his return to substantiate a figure which would support a deduction similar to the amount claimed on the return, which was a higher amount of mileage for his automobile expense. He 1 2 3 4 5 6 7 8 9 10 did not explain why he made this modification in his 11 12 13 14 estimate, but we find his estimate to be unrealistic and lack credibility because it would involve significant travel every day of the week, at least the work week, throughout the year with no consideration of vacation or 15 holidays. Nor does his estimate take into account that to 16 achieve the number of trips he estimates, his workday 17 would have exceeded the normal working hours of his 18 19 20 customers. Given these circumstances we find his testimony to lack credibility and we find that he has failed to meet 21 his burden of proof to substantiate the claimed expenses 22 23 24 25 on the return, and the claimed additional vehicle expenses he asserted at trial. Given this result we sustain respondent's position and will enter a decision for respondent in this case. ribers 73)40 2250 operat nsøescribesmetlwwwascriaersmet This concludes the Court's oral findings of 8 fact and opinion in this case. (Whereupon, at 12:16 p.m., the above-entitled matter was concluded.) 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 cribers (973)40 2250|operations@escribers.net ] wwwascribers.net .