TAX COURT OPINION

Case: Godfrey & Rhonda T. Grant
Docket Number: 13387-08S
Judge: Colvin
Opinion Type: bench
Filed: 06/04/2009
Pages: 11

UNITED STATES TAX COURT WASHINGTON , DC 2021 7 GODFREY AND RHONDA T . GRANT, Petitioners , v . ) Docket No . 13387-08S . 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 David Gustafson at Washington, D .C ., on April 22, 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, decision will be entered for respondent . (Signed ) David Gustafson Judge Dated : Washington, D .C . June 4, 2009 SERVED Jun 08 2009 2 1 Bench Opinion by Judge David Gustafson April 22, 200 9 2 Grant v . Commissioner Docket No . 13387-08 S 3 The Court has decided to render ora l 4 findings of fact and opinion in this case and th e 5 following represents the Court's oral findings of fact 6 and opinion . The oral findings of fact and opinio n 7 shall not be relied upon as precedent in any other 8 case . 9 This bench opinion is made pursuant to the 10 authority granted by Section 7459(b) of the Internal 11 Revenue Code of 1986, as amended, and Rule 152 of the 12 Tax Court Rules of Practice and Procedure . 13 By notice of deficiency dated March 10, 14 2008, Respondent determined a deficiency in th e 15 --federal income tax of Petitioners Godfrey G . Grant and 16 Rhonda T . Grant for the year 2005 in the amount o f 17 $4,170 . For the reasons explained hereafter, we will 18 sustain that deficiency . 19 Trial of this case was conducted on Apri l 20 20, 2009, in Washington, D .C ., and Petitioners Godfrey 21 G . Grant and Rhonda T . Grant both gave thei r 22 testimony . The parties' stipulation of facts with 23 Exhibits 1-J through 5-P was admitted into evidence . 24 Exhibits 6-P through 10-P were also admitted . We find 25 the following facts : Heritage Reporting Corporation (202) 628-4888 3 1 The Grants resided in Washington, D .C ., when 2 they filed the petition in this suit . 3 In 2005, Ms . Grant worked as a speech 4 language pathologist for the D .C . public schoo l 5 system . Her work required her to travel between two 6 different schools and to attend other events and 7 meetings at various locations for which travel sh e 8 used her personal vehicle . Ms . Grant alleges that she 9 traveled 12,948 miles in 2005, but she did no t 10 maintain a contemporaneous log showing the trips she 11 made and the distances they required . 12 In preparation for trial, Ms . Grant was able 13 to construct a log of her trips to some of thes e 14 locations by reviewing her day planner from 2005 for 15 which trips she calculated a total of 1,048 miles . 16 For the other trips she gave no estimates of the 17 frequency of the trips or the distance between regular 18 points of travel ; she gave only a gross total o f 19 estimated miles with no explanation of how the total 20 was reached . 21 'Respondent concedes the 1,048 miles that Ms . 22 Grant so calculated but does not concede an y 23 additional miles, and we find that Ms . Grant has not 24 substantiated any miles beyond the ones she coul d 25 calculate from her 2005 day planner . Heritage Reporting Corporation (202) 628-4888 4 1 Ms . Grant also claimed that she incurred 2 $4,544 in "educational" expenses relating to he r 3 employment in 2005 . Specifically, Ms . Grant bought a 4 variety of incentives for her students and attende d 5 two recertification courses . 6 In her work with students, Ms . Gran t 7 provided prizes and incentives, such as stickers , 8 candy, small toys, et cetera . On occasion, Ms . Grant 9 also purchased clothing, i .e ., winter coats and 10 dresses) and paid for haircuts for her students when 11 they needed them . Ms . Grant says that she was not 12 conscious of tax issues and therefore she did no t 13 retain receipts to substantiate these expenses . 14 She alleges she made many of thes e 15 expenditures by check or credit card but she did not 16 produce at trial her credit card statements, banks 17 statements, canceled checks or checkbook register to 18 substantiate these expenditures . 19 Respondent concedes that Ms . Grant incurred 20 $250 in these incentive expenses in 2005 but does not 21 concede any of the additional expenses claimed . We 22 find that Ms . Grant has not substantiated any of the 23 additional incentive expenses claimed for 2005 . 24 As part of her recertification as a speech 25 pathologist, Ms . Grant attended two professional Heritage Reporting Corporatio n (202) 628-4888 5 1 courses in 2005 for which she alleges a total cost of 2 approximately $565 ; however, Ms . Grant did not provide 3 any registration records, proof of payment o r 4 certificates of completion from either course . 5 - Respondent has not conceded that Ms . Grant 6 incurred any expense for these professional courses 7 and we find that Ms . Grant has not substantiated any 8 of these educational expenses for 2005 . 9 In 2005, Mr . Grant worked as a 10 communications technician for the Washingto n 11 Metropolitan Area transit Authority at four subway 12 stations on one of the suburban subway lines . Hi s 13 work required him to travel between the various subway 14 stations for which Mr . Grant could ride the Metro a t 15 no cost . However, he sometimes used his personal 16 vehicle when the Metro was running slow or wa s 17 otherwise not a viable option . 18 Mr . Grant alleges that he incurred 11,258 of 19 unreimbursed work-related miles in 2005 . However, Mr . 20 Grant did not maintain a contemporaneous log showing 21 the trips he made and the distances they required . 22 Nor was he able to reconstruct any such log for trial 23 as Ms . Grant did . He presented no calendar or leave 24 record . He gave no estimates of the distances between 25 his regular points of travel or the frequency of hi s Heritage Reporting Corporation (202) 628-4888 6 1 trips . Rather, Mr . Grant gave only a gross total of 2 estimated miles with no explanation of how the total 3 was reached . 4 Respondent has not conceded any of th e 5 travel expenses Mr . Grant alleges, and we find that he 6 has not substantiated any of his travel expenses fo r 7 2005 . 8 As part of his employment, Mr . Grant was 9 required to wear a uniform . The uniforms wer e 10 provided to Mr . Grant by his employer but it was Mr . 11 Grant's responsibility to have the uniforms cleaned . 12 Mr . Grant testified that he would sometimes clean and 13 iron the uniforms at home, but mostly they wer e 14 professionally dry-cleaned . Mr . Grant did not provide 15 any dry cleaning receipts for his uniforms from 2005 . 16 Mr . Grant estimated that it cost $10 to have eac h 17 uniform cleaned . 18 Respondent concedes that Mr . Grant incurred 19 $570 in dry cleaning expenses to clean his work 20 uniforms in 2005, which, at $10 per cleaning amounts 21 to more than one cleaning per week, but Respondent 22 does not concede any of the additional dry cleaning 23 expense claimed . We find that Mr . Grant has no t 24 substantiated any of the additional dry cleaning 25 expenses for 2005 . Heritage Reporting Corporation (202) 628-4888 7 1 The Grants employed a tax return preparer to 2 prepare their 2005 tax return . They did not provid e 3 receipts to him so the return preparer simpl y 4 interviewed the Grants about their employment and 5 related expenses and then prepared a return on which 6 he proposed that the Grants' claim, among othe r 7 things, unreimbursed employee travel expenses o f 8 $19,594, $1,568 in miscellaneous expenses for uniforms 9 and dry cleaning, and $4,544 in educational expenses . 10 The Grants timely filed their income ta x 11 return for 2005 showing these amounts, but at trial 12 the Grants could not provide any details about how 13 their tax preparer arrived at these figures . They 14 simply argued for the gross total claimed for eac h 15 expense without giving an explanation of how the total 16 was reached . 17 The Grants allege that a file or folder of 18 their tax-related materials, including materials for 19 2005, was in a car of theirs that was stolen sometime 20 after 2005 . They offered no police report or other 21 substantiation of the theft . They do not allege with 22 any particularity the tax-related materials that were 23 taken in the alleged theft, and their other testimony 24 indicates that they did not retain and file any 25 significant number of receipts that would have been in Heritage Reporting Corporatio n (202) 628-4888 8 1 such a file or folder . .2 We find that if this theft occurred it has 3 no bearing on their ability to substantiate thei r 4 deductible expenses . 5 The IRS's determination is presumed correct 6 and the taxpayer bears the burden to prove hi s 7 entitlement to the deductions he claimed . Rule 8 142(a) ; Welch v . Helvering , 290 U .S . 111, 115 (1933) . 9 Any amount claimed as a business expense must b e 10 substantiated and taxpayers are required to maintain 11 records sufficient to substantiate the expense s 12 claimed . Sec . 6001 ; Hradesky v . Commissioner , 65 T .C . 13 87, 89-90 (1975), affd . 540 F .2d 821 (5th Cir . 1967) ; 14 Sec . 1 .6001-1(a), Income Tax Regs . 15 When a taxpayer adequately establishes that 16 he paid or incurred a deductible expense but does not 17 establish the precise amount the Court may, in some 18 instances, estimate the allowable deduction bearing 19 heavily against the taxpayer whose inexactitude is of 20 his own making . Cohan v . Commissioner , 39 F .2d 540, 21 543-544 (2d Cir . 1930 ) 22 There must, however, be sufficient evidence 23 in the record to provide a basis upon which a n 24 estimate may be made and to permit the Court to 25 conclude that a deductible expense, rather than a Heritage Reporting Corporation . (202) 628-4888 9 1 nondeductible personal expense, was incurred in a t 2 least the amount allowed . Vanicek v . Commissioner , 85 3 T .C . 731, 743 (1985) . 4 Beyond the amounts conceded by Respondent, 5 the Court finds that the Grants did not substantiat e 6 the expenditures they allege . The Cohan rule does not 7 excuse a taxpayer from the obligation to substantiate 8 but simply permits alternate proof in certai n 9 circumstances . Here, the Grants' contentions suffer 10 from an almost wholesale failure of proof . 11 The Grants provided receipts from other 12 years as illustrative of the types of expenditure s 13 they also made in tax year 2005, but those receipts do 14 not enable the Court to determine with any certainty, 15 nor even to estimate roughly, the expenditures tha t 16 the Grants may have made in 2005 . 17 Even if we were able to confirm that the 18 Grants spent some amounts more than Respondent has 19 already conceded, we could not confirm thei r 20 expenditures in an amount that would have an y 21 beneficial tax effect for the Grants in 2005 . All of 22 the disallowed expenses at issue here are unreimbursed 23 employee expenses . 24 By definition, all of these expenses ar e 25 miscellaneous itemized deductions which are subject to Heritage Reporting Corporatio n (202) 628-4888 1 0 1 a two percent floor, meaning the Grants could deduct 2 these expenses only. to the extent that they exceeded 3 two percent of their adjusted gross income for 2005 . 4 Sec . 67 . 5 - The Grants' adjusted gross income for 2005 6 was $117,518 . Consequently, they would be able t o 7 deduct their unreimbursed employee expenses only to 8 the extent that those expenses exceeded $2,350, i .e ., 9 two percent of the Grants' income . Respondent ha s 10 conceded that the Grants incurred a total of only 11 $1,270 in unreimbursed employee expenses . 12 Therefore, before the Grants would be 13 entitled to any actual deduction for unreimburse d 14 employee expenses, they would have to prove at least 15 $1,080 in additional expenses . The most libera l 16 application of the Cohan rule to the deductions-i n 17 dispute could not substantiate additional expenses in 18 that amount . 19 Although we found the Grants' testimony to 20 be sincere, they were not able to provide any direct 21 substantiation for the expenses claimed on their 2005 22 return, nor to provide us with enough information to 23 be able to even estimate reasonably any of th e 24 expenses . We must therefore hold that the Grants are 25 not entitled to deduct the unreimbursed employee Heritage Reporting Corporatio n (202) 628-4888 1 1 expenses claimed on their 2005 return due to lack o f substantiation . Decision will be entered, in favor o f Respondent, of a deficiency in the amount of $4,170 . This concludes the Court's oral findings o f fact and opinion in this case . (Whereupon, at 2 :15 p .m ., the bench opnio n in the above-entitled matter was concluded . ) 1 2 3 4 5 6 9 10 // . 11 // 1 2 1 3 14 15 1 6 17 18 19 20 21 22 23 24 25 // Heritage Reporting Corporation (202) 628- 4 888