TAX COURT OPINION

Case: Merle David Hoover
Docket Number: 6134-12S
Judge: Carluzzo
Opinion Type: bench
Filed: 07/18/2013
Pages: 10

UNITED STATES TAX COURT WASHINGTON, D.C. 20217 MERLE DAVID HOOVER, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) Docket No. 6134-12S ) ) ) ) ORDER Pursuant to the determination of the Court as set forth in its bench opinion rendered on June 20, 2013, 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 Oklahoma City, Oklahoma, 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. (Signed) Lewis R. Carluzzo Special Trial Judge Dated: Washington, D.C. July 18, 2013 86RVED JUL 192013 Capital Reporting Company 3 1 Bench Opinion by Special Trial Judge Lewis R. 2 Carluzzo 3 June 20, 2013 4 Merle David Hoover v. Commissioner 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Docket No. 6134-12S 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 (bench opinion). Unless otherwise 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. Except as provided in Rule 152(c), this bench opinion shall not be cited as authority, and pursuant to section 7463(b), the decision entered in this case shall not be treated as precedent for any other case. Merle David Hoover appeared on his own behalf. Britton G. Wilson appeared on behalf of 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 respondent. In a notice of deficiency dated January 3, 2012 (notice), respondent determined a $4,632 deficiency in petitioner's 2009 Federal income tax. The issue for decision is whether petitioner is entitled to a deduction for unreimbursed employee business expenses. Some of the facts have been stipulated and are so found. At the time the petition was filed, petitioner resided in Oklahoma. For the past thirty years, including the year in issue, petitioner has been employed as an emergency medical technician (EMT). He typically works, as he did during the year in issue, 24-hour shifts, eight to ten days a month. When on duty and not out on call, petitioner remained at one of the three ambulance stations maintained by his employer. Petitioner's employer required that he wear a uniform while on duty. The uniform consists of a shirt, a pair of pants and boots. Petitioner routinely kept two uniforms with him while on duty and sometimes had to change uniforms during a shift. It was his usual practice to launder his uniforms at the end of each shift. Petitioner was entitled to 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 reimbursement from his employer for the cost of his 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 uniforms up to $500 per year. During 2009 petitioner paid approximately $80 for two subscriptions to publications related to his profession as an EMT. He also maintained a cell phone at a cost that averaged around $50 per month. The split between business use and personal use of the cell phone was about 75% and 25%, respectively. Because of the nature of his responsibilities while on duty, petitioner did not break for meals at traditional or regular times. Instead, he had to eat his meals when doing so did not interfere with an emergency call or other of his responsibilities. Petitioner's employer did not require that he consume his meals at one or the other of the stations, but because of the distance between the geographical area where petitioner worked and his residence, he was not allowed to return home for his 18 meals while on duty. From time to time he brought 19 20 21 22 23 24 25 food from home and ate at the station; other times he left the station for meals at an area restaurant or "fast food" facility. Petitioner's timely 2009 Federal income tax return (return), which he prepared, includes a Schedule A, Itemized Deductions. As relevant here, that return shows adjusted gross income of $47,648. 866.488.DEPO www.CapitalReportingCompany.com ·Capital Reporting Company 6 1 After application of section 67(a), the Schedule A 2 3 4 includes a $28,517 unreimbursed employee business experience deduction. According to the Form 2106 EZ, Unreimbursed Employee Business Expenses, included 5 with the return, the unreimbursed employee business 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 expense deduction does not include amounts for "vehicle expenses," "parking fees, tolls and transportation expenses," or "travel expenses while away from home overnight." The Form 2106 EZ also shows that the deduction does "not include amounts for meals." A line on the Form 2106 EZ designated for "Meals and entertainment expenses" is left blank. In the notice, respondent disallowed the unreimbursed employee business expense deduction claimed on the Schedule A, because, according to the notice, petitioner "did not establish that the business expense shown on * * * [the return] was paid or incurred during the taxable year and that the expense was ordinary and necessary" to petitioner's business (disallowed deduction). The other adjustment in the notice allowing the standard deduction, see section 63, in lieu of the otherwise allowable itemized deductions shown on the Schedule A 24 will not be discussed because it is, in effect, 25 computational and works to petitioner's advantage. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 As we have observed in opinions too numerous to counsel, deductions are a matter of legislative grace, and the taxpayer bears the burden of proof to establish entitlement to any claimed deduction. Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Commissioner, 292 U.S. 435, 440 (1934). (Petitioner does not claim that the provisions of section 7491(a) are applicable, and we proceed as though they are not.) The taxpayer's burden requires the taxpayer to substantiate deductions claimed by keeping and producing adequate records that enable the Commissioner to determine the taxpayer's correct tax liability. Section 6001; Hradesky v. Commissioner, 65 T.C. 87, 90 (1975), aff'd per curiam, 540 F.2d 821 (5th Cir. 1976); Meneguzzo v. Commissioner, 43 T.C. 824, 831-832 (1965). A taxpayer claiming a deduction on a Federal income tax return must demonstrate that the deduction is allowable pursuant to some statutory provision and 21 must further substantiate that the expense to which 22 23 24 25 the deduction relates has been paid or incurred. See section 6001; Hradesky v. Commissioner, 65 T.C. at 90; section 1.6001-1(a), Income Tax Regs. It is generally well-known that a taxpayer 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 5 6 7 8 9 may deduct ordinary and necessary expenses paid in connection with operating a trade or business. See section 162(a); Boyd v. Commissioner, 122 T.C. 305, 313 (2004). Generally, for purposes of section 162, the phrase "trade or business" includes performance of services as an employee. Primuth v. Commissioner, 54 T.C. 374, 377 (1970). Section 162(a) (2) specifically allows a decision for travel expenses, including the costs of meal and lodging incurred 10 while the taxpayer is away from home for business 11 12 13 14 15 16 purposes. Although petitioner does not expressly cite to any of these fundamental principles of Federal income taxation, it is clear that he relies upon them in support of his entitlement to the disallowed deduction. Petitioner could not, however, explain 17 with any degree of certainty what expenses are 18 19 20 included in the disallowed deductions. In general terms, he explained that he computed the disallowed deductions with reference to amounts for uniform 21 maintenance, cell phone usage, professional reading 22 materials, and meals (even though with respect to 23 meals, the Form 2106 EZ suggests otherwise), but he 24 25 has not presented any work paper, written document, or testimony to show the amount of each type of the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 1 2 3 4 5 6 7 8 above-referenced expenses included in the disputed deduction. Be that as it may, considering the amount of the disallowed deduction and petitioner's vague explanation as to how it was computed, it is clear that a great majority of the deduction is attributable to petitioner's estimate of the cost of the meals he consumed while on duty, even if his 9 method of estimating those costs has not been 10 11 12 established. That being so, we turn our attention first to petitioner's entitlement to an unreimbursed employee business expense deduction for the cost of 13 meals consumed while working. 14 Little need be said on the point. 15 Petitioner is not entitled to include the cost of 16 meals in the deduction for a variety of reasons. 17 First, in general, the cost of a taxpayer's meals are 18 19 20 21 22 23 24 25 nondeductible personal expenses, see section 262(a), unless the cost of the meals is incurred while the taxpayer was traveling away from home on business, see section 162(a) (2), which is not the situation here. (The reference to "home" means the taxpayer's "tax home," generally determined by the location of the taxpayer's principal place of employment, not the taxpayer's residence. See Mitchell v. Commissioner, 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 1 2 3 4 5 6 7 8 74 T.C. 578, 581 (1980)). Second, unlike the situation in Sibla v. Commissioner, 68 T.C. 422, 432 (1977), aff'd, 611 F.2d 1260 (9th Cir. 1980) (firefighter required as a condition of employment to contribute to a meal fund at the fire station entitled to a deduction for such contributions.), petitioner was not required by his employer to contribute to, or participate in, a meal fund for 9 meals consumed at one or the other of the ambulance 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 stations. Third, a deduction for the cost of a meal is subject to strict substantiation requirements, see section 274 (d); section 1.274-5T(a) (1), (c), Temporary Income Tax Regs., 50 Fed. Reg. 46014-46017 (Nov. 6, 1985), and petitioner has failed to show that he has complied with those requirements. Denying petitioner a deduction for the cost of meals consumed while he was working, in effect, denies him a deduction for any unreimbursed employee business expenses. This is so because section 67(a) provides that unreimbursed employee business expenses in combination with other allowable miscellaneous itemized deductions (here there are none) are deductible only to the extent that the expenses exceed two percent of the taxpayer's adjusted gross income. In this case, that threshold number is $953. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 Accepting petitioner ' s testimony as to the expenses he incurred for professional reading materials, approximately $80, and his estimate of the cost of his cell phone usage attributable to his employment, approximately $450, and adding to the sum of those items a reasonable estimate for the cost of laundering his uniforms, the total would not exceed $953. It follows that respondent's adjustment disallowing the unreimbursed employee business expense deduction claimed on petitioner's return is sustained. To reflect the foregoing, decision will be entered for respondent. This concludes the Court's bench opinion in this case. (Whereupon, at 9:45 a.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 25 866.488.DEPO www.CapitalReportingCompany.com