TAX COURT OPINION

Case: John M. Majcher
Docket Number: 1903-16S
Judge: Carluzzo
Opinion Type: bench
Filed: 02/24/2017
Pages: 8

UNITED STATES TAX COURT WASHINGTON, DC 20217 JOHN M. MAJCHER, Petitioner, v. ) ) ) SR ) Docket No. 1903-16S 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 herewith to petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Special Trial Judge Lewis R. Carluzzo at Chicago, Illinois, 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 for respondent with respect to the deficiency and the section 6651(a)(1) addition to tax, and for petitioner with respect to the section 6662(a) accuracyrelated penalty. (Signed) Lewis R. Carluzzo Special Trial Judge Dated: Washington, D.C. February 24, 2017 SERVED Feb 27 2017 Capital Reporting Company 3 1 Bench Opinion by Special Trial Judge Lewis R. 2 Carluzzo 3 4 5 6 February 9, 2017 John M. Majcher v. Commissioner Docket No. 1903-16S THE COURT: The Court has decided to render 7 Oral Findings of Fact and Opinion in this case and 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the following represents the Court's Oral Findings of Fact and Opinion (bench opinion). Unless other noted, section references made in this bench opinion are to the Internal Revenue Code of 1986, as amended, in effect for the relevant period and Rule references are to the Tax Court Rules of Practice and Procedure. This bench opinion is made pursuant to the authority granted by section 7459(b) and Rule 152. This proceeding for the redetermination of a deficiency is a small tax case subject to the provisions of section 7463 and Rules 170 through 175. Pursuant to section 7463(b) the decision entered in this case shall not be treated as precedent for any other case. John M. Majcher appeared on his own behalf. Frederic J. Fernandez appeared on behalf of Respondent. In a Notice of Deficiency dated October 29, 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 2016 (notice), Respondent determined a deficiency in 2 Petitioner's 2011 Federal income tax, and imposed a 3 4 5 6 7 8 9 10 11 12 13 section 6651(a)(1) addition to tax and a section 6662( ) penalty. After a concession by Respondent, the issues for decision are: (1) whether Petitioner is entitled for a deduction for legal expenses incurred and paid in connection with a domestic dispute, and (2) whether Petitioner had reasonable cause for failing to file a timely 2011 Federal income tax return (return). Some of the facts have been stipulated and are so found. At the time the petition was filed 14 Petitioner lived in Illinois. 15 16 17 18 19 Before making specific references to those facts, and in order to place the facts in context, we find it helpful to summarize the principles of law that will inform our analysis. We begin by reciting some that are very familiar. That is, the 20 Commissioner's determinations in a Notice of 21 Deficiency are presumed correct, and the taxpayer 22 2-3 24 bears the burden of proving that those determinations are erroneous. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Moreover, deductions are a 25 matter of legislative grace, and the taxpayer bears 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 2 3 the burden of proving that he o she is entitled to any deduction claimed. Rule 142(a); New Colonial Ice Co. V. Helvering, 292 U.S. 435, 440 (1934); Welch v. 4 Helvering, supra. 5 6 7 8 9 10 11 12 13 14 As relevant here, we think it appropriate to note that section 162(a) allóws a taxpayer to deduct all ordinary and necessary expenses paid or incurred in connection with the|taxpayer's trade or business, including a taxpayer's trade or business as an employee. Lucas v. Commissioner, 79 T.C. 1 (1982). On the other hand, expenses paid or incurred by a taxpayer for family, living or other personal reasons are .only deductible as specifically provided in the Internal Revenue Code. See section 262(a). 15 With respect to a deduction forllegal fees, we look 16 17 18 19 20 21 22 23 24 25 to the origin of the claim gividg rise to those legal fees. See Gilmore v. Commissioner, 372 U.S. 39 (1963). If the legal fees relate to a taxpayer's trade or business, or other typ s of activities that specifically allow for deductio s, then the legal fees might be deductible. If the legal fees relate to a family or a personal matter, then the fees are not deductible. With these fundamental principles in mind, we turn to the facts in this case, which for the most 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 part are not in dispute and easily summarized. Petitioner and his former spouse married in 2008. They have one child together. Prior to the year in issue all members of the family lived in Illinois, where bo.th Petitioner and his former spouse were employed. Petitioner and his former spouse separated and were divorced not long after they were 8 married. Following their separation their child 9 lived with Petitioner's former spouse, but Petitioner 10 11 12 13 14 15 16 17 18 19 enjoyed, and took advantage of, liberal visitation rights with his child. At some point before the year in issue, Petitioner's former spouse became unemployed, and due to economic conditions had to move in with her mother in Arizona. Petitioner's child moved to Arizona with Petitioner's former spouse at some point in 2011, initially on a temporary basis. Concerned that his child's temporary living arrangements in Arizona might become permanent, and if that happened, what impact that 20 might have on his visitation rights, child support 21 obligations and his relationship with his child, 22 Petitioner hired a lawyer to protect and/or enforce 23 24 25 his parental rights. During 2011 he paid more than $24,000 in legal fees in this regard, which amount represents a substantial portion of his entire income 866.488.DEPO www.CapitalReportingCompany.com . Capital Reporting Company 7 1 2 3 4 5 6 7 8 9 for that year. He deducted those legal fees on a Schedule A, Itemized deductions, included with his return, which he prepared and filed late. That deduction is disallowed in the notice and that deduction is here in dispute. As noted, Respondent also imposed a section 6651(a) addition to tax and a section 6662(a) accuracy-related penalty (now conceded) in the notice. Other adjustments made in the notice are computational and need not be 10 addressed in this bench opinion. - 11 12 13 14 15 16 17 According to Petitioner, the legal expenses are deductible because .they were incurred so that he would not have to move to Arizona to ensure or enforce his parental rights. Petitioner goes on to argue that if he had to move to Arizona, he would have had to give up his employment in Illinois and probably could not have secured similar employment in 18 Arizona. So, as he views the matter, the legal 19 expenses were incurred and paid, in effect, to 20 maintain his employment. According to Petitioner the (cid:16)042 21 22 23 24 fees should be deductible as unreimbursed employee business expenses.. Respondent sees it differently, and so do we. Maintaining his relationship with his child in 25 Arizona, while at the same time continuing his 866.488.DEPO www.CapitalReportingCompany.com . . Capital Reporting Company 8 1 employment in Illinois, obviously are, and were at 2 all times relevant, important to Petitioner. Like 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Respondent, however, we connect the legal expenses here in dispute to petiti.oner's relationship with his child, not to his employment in Illinois. That being so, we find that Petitioner's personal, family and living circumstances are the origin of the claim for legal fees, the deduction of which is precluded by section 262, and reject Petitioner's claim that the legal fees represent ordinary and necessary employee business expenses otherwise deductible under section 162. It follows that Petitioner is not entitled to the deduction here in dispute and we so hold. At trial Petitioner was asked why his return was not timely filed. In general terms he explained the difficult time he was going through as a result of his domestic dispute, but he did not provide a specific reason for the delay in filing. 19 Although we sympathize with his for the personal 20 difficulties he was experiencing at the time, his 21 22 23 24 25 explanation does not excuse the late filing of his 2011 return. Respondent's imposition of the section 6651(a) late filing addition to tax is sustained. To reflect the foregoing and Respondent's concession, decision will be entered for Respondent 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 1 with respect to the deficiency and the section 6651(a) addition to tax, and for Petitioner with respect to the section 6662(a) accuracy-related penalty. This concludes the Court's bench opinion in this matter. (Whereupon, at 1:44 p.m., the above- entitled matter was concluded.) 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com