TAX COURT OPINION

Case: Joseph C. Malek & Melinda J. Malek
Docket Number: 9082-21S
Judge: Panuthos
Opinion Type: bench
Filed: 07/27/2022
Pages: 7

Docket No.: 9082-21S United States Tax Court Washington, DC 20217 Page 1 of 1 JOSEPH C. MALEK & MELINDA J. MALEK, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 9082-21S 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 petitioners and to respondent a copy of the pages of the transcript of the trial in the above case before Special Trial Judge Peter J. Panuthos at Chicago, Illinois, on June 13, 2022, 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 except with respect to I.R.C. section 6662(a) accuracy-related penalty for taxable year 2017. (Signed) Peter J. Panuthos Special Trial Judge Served 07/27/22 Bench Opinion by Judge Peter J . Pa nuthos Ju ne 16 , 2022 Jos e ph C. Malek & Melinda J . Malek v . Commissioner Docket No . 9082 - 21S 3 THE COURT : The Cou rt ha s decided to ren de r oral findings of fact and opinion in th ~s cas e and the fol l owing represents the Court ' s oral f i ndings of fa ct and opinion (bench opi n io n). The oral findings of fac t and opinion are made pursuant to the a u thority granted by 1 2 3 4 5 6 7 8 9 10 section 7459(b) o f the Internal Re ve nue Code and Ta x Cou rt 1 1 Rule 152 (a). Rule r efe renc es in t h is opinion are to the 12 Tax Court Rules of Practi~e and Procedur e , and section 1 3 references are t o the Internal Revenue Code , i n effe ct at 1 4 all releva nt time s . 15 This proceeding for the redetermination of a 1 6 deficiency i s a s mal l tax case s ub jec t t o the p rovi sions 17 of section 7463 and Rules 170 through 174 . Except as 18 provided in Rule 152(c), this bench opinion sha ll not be 19 cited as author i ty, a nd purs uant t o section 7 4 63(b ) the 20 decision en tered in this case shal l not be treated as 21 precedent for any other case . 22 In a no tice o f de f iciency dat e d December 28 , 23 2020 , responden t determined a deficiency in petitioner ' s 24 Federa l i nc ome tax in the amount of $4 , 834 and a sect ion 25 6662(a) accuracy-related penal ty of $966 . 80 fo r ta xable lliiiiMAh (973> •0,.22,0 I op,mtions9't!CJ ;1»,._,,., f ·,.ww.tsaib«u,tt 4 1 2 3 4 5 6 7 8 9 year 20 1 7. Respondent conceded the a ccu racy-re l ated p enalt y under sect i on 6662 (a) . After conce ssion, the issues f o r decision are whether petit ioners a r e entit l ed t o itemi zed deduction s beyond t hos e a l ready al l owed by respondent f o r : (1) $16 , 757 i n miscellaneous deductions, and (2) $5, 1 50 in cash charitable contribution deductions . Some of the f acts have been s t ipulated and are so found. We i ncorporate the First Stipula t ion of Fact s 1 0 and the attached exhibi ts by this r eference. The record 11 cons i sts o f th e First Stipu l ation of Facts with a tt ached 12 exhibits and Mr . Ma l e k 's t estimony. Pe t i t i oners res i ded 13 in Ill i no i s when the petition was t imel y fi l ed. 1 4 In 2017, Joseph Malek , he reinafter sometimes 15 peti t ioner, was empl oyed b y t he Cit y of Chicago as a 16 Ch i cago Police Department patrol of f i cer and Mel inda Ma le k 17 was an underwrite r for Ac c u r a t e I n s urance . 18 Du ring the re l evant time peri od, Officer Ma l ek 1 9 was a member of t he Fraterna l Orde r of Pol ice Chicago 20 Lodge No . 7 (FOP) . Some of the te r ms and condi tio n s o f 2 1 peti tioner ' s e mp l oymen t was sub j ect to an a greement 22 between the FOP and t he City of Chicago . Th e agreeme n t 23 provided t hat a pol ice o f f icer could be entitled to 2 4 reimbursement for certain expenses related to emp l o ymen t . 25 In orde r to ma ke a c l aim, police o f fice r s we r e requi re d to &Sii•¥H (973) 406-2250 I OJ)Q1>tions,Jltscribe"·""' I www.escriben.net provide receipts to the Chicago Pol i ce Depart men t . Peti t ioner d i d not provi de any rece i pts nor make a c l a i m for employee r e i mbursement with the Chicago Pol i ce 5 Department i n 2017 . I n addition to his duties as a patro l officer, petitioner was sometimes obligated to appear in l ocal court proceedi ngs on behalf of the Chicago Police Department. Petitioners timely filed a joint 20 1 7 Federal 1 2 3 4 5 6 7 8 9 10 income tax return . The retu r n incl uded a Schedule A, 11 Itemized Deductions, on which petitioners c l a i med var i ous 12 itemi zed deductions, includi ng $250 in tax preparation 13 fees a nd $ 1 6,50 7 in unreimbursed employee business 14 expenses (before the appl i cati on o f the 2 % l imitation 1 5 imposed by section 67(a)), noncash c h aritable 16 contri butions of $500 , and cash cha r itab l e con t ributions 17 of $5,150 . 18 In t he notice of deficiency, respondent : ( 1 ) 19 disal l owed Schedule A deductions for cash charitable 20 contri butions and miscel l aneous itemized deductions, and 2 1 (2) imposed a section 6662(a) accuracy- r elated penalty. 22 As we have obser ved i n c o untless opinions, 23 deductions are a matter of legisla t ive grace , and the 24 taxpayer bears the b u rden o f p r ovi ng enti t l emen t to any 25 claimed deduction . Rule 142(a); INDOPCO, I nc. v . ) ~Aii·i3H (.)73)406-2250 I op>r>tions;J>ts.:rib.rs.net I v,ww.escribers.net Commissioner, 50 3 U. S . 7 9 , 84 6 (1 992 ) ; New Colon ial Ice Co . v . Helvering , 292 U. S . 435 , 440 (1934) . Thi s burden re quires the taxpayer to substanti ate deductions claimed by keeping and p r oducing adequate re co r ds that enable the Commissioner to determine the taxpaye r ' s corre ct tax liability . Sect i on 6001 ; Hradesky v . Commiss i oner , 65 T . C . 87, 90 (1975) , aff'd per curiam, 540 F . 2d 821 (5th Cir . 1976 ). A taxpayer c laimi ng a deduction on a Federal income ta x return must demonstrate th at the deduc tion is 1 2 3 4 s 6 7 8 9 1 0 a l l owable p ursuant to some stat uto r y p r ovis i o n and must 11 further subs tant i a te tha t the expense to which the 12 deduction relates has bee n paid or incurred . See sec tion 13 6001 ; Hradesky v . Commissioner , 65 T . C . at 90 . 14 A taxpaye r may deduc t ordinary and necessary 1 5 expenses pa id in co nnec t ion with operating a trade or 16 business . See section 162 ; Boyd v. Commissioner , 122 T . C . 1 7 305 , 313 (2004) . Generally perfor:'lling services as an 18 employee consti tut es a trade or business . Primuth v . 19 Commissioner , 5 4 T . C . 374 , 377 - 378 (1970) . To be 20 deductible , however , t he taxpayer must not have a right to 2 1 reimbursement for the e xpense from the taxpayer ' s 22 employer . See Orvis v . Commissioner, 788 F . 2d 1406 , 1408 23 (9 t h Cir . 1 986 ) a ff ' g T .C. Memo 1984 - 533. 24 Further, when a taxpayer establishes that he has 25 pa id a ded uctible trade o r busine ss e xpe nse bu t is un a ble li3ii•t#H (973) 40,-22S0 I op;ontions'i)►escrib?n.rwt I •_.,,_.,crif:>«1.n.i 7 1 2 3 4 5 6 7 8 9 to adequatel y substantiate t he amount , the Court may estimate the amount to al low a deduction to that extent . Cohan v . Commissioner , 39 F . 2d 540, 543 - 544 (2d Cir . 1930) . To apply the Coha n rule , however, the Court must have a re as onable basis upon which to make t he estimat e. Vanicek v . Commi ssi oner , 85 T .C 73 1 , 742-743 (1985) . Congress overrode the Cohan rule with section 27 4(d) , wh ich requir es s trict subs t ant iation for ce rtain categories of expenses , including c ravel and meal 1 0 expenses , as wel l a s vehicle exp enses . A taxp ayer mus t 11 substantiate by adequate records or by su f ficient evidence 12 co r r oborat i ng the i r own s t atemen t , the a mou nt, time , 13 place , and business purpose of the s e expenditures . 14 Section 27 4 (d ) ; Temp. Treas. Reg . 1 . 274- 5 (c ) (1) . 15 Despite the fact t hat pe t itioner was entitled to 16 reimburseme nt for a t l eas t some bus iness-related e xpenses , 17 pe t i tioner d id not make a c l aim , nor did he provide 18 det a iled testimony or documentary e vide nce at trial , to 19 support t he claimed dedu ct ions . Eve n if the fa ilure t o 20 seek reimbursement was not an issue , the Court has no 21 reasonable basis upon which to ma ke any est ima tes for any 22 expenses under the Cohan ru le becau se of petitioners ' 23 fa i lure t o substantiate a ny of t he claimed e xp enditures . 24 To the extent some of the claimed e xpense deductions are 25 sub j ect to sectio n 27 4 (d ), peti t ione rs likewise fai led to 1Ali•¥H 07 l ) 406-2250 I op;mtions,J>tsct ib..".Nt I •1oww.,scriben.ne1 8 1 2 3 4 5 6 7 8 9 substantiate the claimed deductions. Accordingly, petitioners a r e not ent i t l ed to any miscellaneous itemized deduction . Respondent's determi na t ion is sustained as to this issue . A taxpayer may be entitle d to deduct a charitable contribution if he sati sfies all the requisites of the Internal Revenue Code. Sect ion 1 70 (a) (1). Petitioners fa i led to provide any d ocuments or detailed testimony to support the charitable contribution 1 0 deductions. Accordingly, petitioners are not entitled to 11 addit i onal chari table cont r ibut i ons deductions beyond 12 those a l ready allowed by responden t in the notice of 13 def i ciency . Respondent ' s de t ermina tion is sustained on 1 4 th i s issue . 15 To reflec t the foregoing, decis i on wi l l b e 1 6 entered for respondent as t o t he deficiency and f o r 17 petitioner as to the section 6662( a ) penal ty . Thi s c onc l udes the Court's o r al find i ngs o f fac e and opinion in this case . (Whereupon, at 1 1 :4 1 a.rn. , the above - entitled mat t er was concluded.) 18 19 20 21 22 23 24 25 IMU·AH ~7 3) 406-2 250 I o~tion,.iJ>tscri~n.net I www.ucriberrnet