TAX COURT OPINION

Case: Karl Thomas Ruesterholz
Docket Number: 9337-10S
Judge: Haines
Opinion Type: bench
Filed: 05/03/2011
Pages: 6

UNITED STATES TAX COURT WASHINGTON, DC 20217 KARL THOMAS RUESTERHOLZ, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) ) ) ) ) ) ) ORDER Docket No. 9337-10S. 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 transcript of Seattle, Washington on April 21, 2011, containing his oral findings of the conclusion of trial. the trial of this case before Judge Haines at fact and opinion rendered at the pages of the the In accordance with the oral findings of fact and opinion, decision will be entered under Rule 155. (Signed) Harry A. Haines Judge Dated: Washington, D.C. May 3, 2011 SERVED MY -5 2011 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 3 Bench Opinion By Senior Judge Harry A. Haines April 21, 2011 Ruesterholz v. Commissioner Docket No.: 9337-10S 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. Petitioner timely filed Form 1040, U.S. Individual Income 'Tax Return, for 2007. Petitioner claimed itemized deductions of $24,801 for unreimbursed employee business expenses for lodging, $5,184 for unreimbursed employee business expenses for meals and entertainment, $453 for general sales tax, and $1,107 for gifts to charity. On February 8, 2010, respondent mailed to petitioner a notice of deficiency disallowing the itemized deductions. On April 22, 2010, petitioner filed a petition with this Court in response to the notice of deficiency. Respondent has conceded that petitioner is entitled to itemized deductions of $7,316 out of the $24,801 claimed by petitioner for unreimbursed employee business expenses for lodging, $6,630 for unreimbursed employee business expenses for meals and Heritage Reporting Corporation (202) 628-4888 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 4 entertainment, $453 for general sales taxes, and $1,107 for gifts to charity. Therefore, the remaining issue for decision is what deduction, if any, is allowed for the $17,485 for unreimbursed employee business expenses for lodging that remains after the concession by respondent. The parties' stipulation of facts and the attached exhibits are incorporated herein by this reference. Petitioner is an individual who maintained his legal residence in the state of Washington at the time his petition was filed. During 2007 petitioner lived in Colorado and was employed by Northwest Airlines, Inc. (Northwest) as an equipment service employee. In 2007 petitioner volunteered for temporary work assignments in Seattle and Minneapolis and was away from home for over 170 days during the year. While on assignment petitioner incurred numerous expenses for meals, entertainment, and lodging. Northwest did not reimburse employees for these expenses. Therefore, petitioner deducted the expenses on his 2007 Federal income tax return. Petitioner used a per diem rate to establish the amount deducted for meals, entertainment, and lodging. The per diem rate he chose for meals and entertainment was lower than the Internal Revenue Heritage Reporting Corporation (202) 628-4888 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 5 Service allowed. Therefore, respondent increased the deduction for meals and entertainment from the $5,184 claimed by petitioner to $6,630. Petitioner also used the Federal per diem rate for lodging based on the days spent in Seattle and Minneapolis and claimed $24,801 as a deduction. Respondent only allowed $7,316 of the lodging expenses based upon actual expenses paid, not upon a per diem rate. Section 162 allows a deduction for all ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business. All section references are to the Internal Revenue Code in effect for 2007. Section 162(a) (2) also allows a deduction for ordinary and necessary traveling expenses incurred by a taxpayer while away from home including meals and lodging. Pursuant to section 274(d), a taxpayer must substantiate the amount, time, place, and business purpose of any travel expenses, including lodging expenses. However, the Commissioner may establish at method where a taxpayer may elect to use a per diem amount for meals in lieu of substantiating actual costs. See section 1.274-5A(h), Income Tax Regs.; Rev. Proc. 2007-63, 2007-42 I.R.B. 809. Petitioner argues that, in substantiating Heritage Reporting Corporation (202) 628-4888 6 1 2 3 4 5 6 7 8 9 10 11 12 13 his deductions for unreimbursed employee expenses for lodging, he was entitled to choose between using actual expenses or using a per diem rate. Petitioner maintains that because he relied on a standard per diem rate set by the Government, determination of actual lodging expenses was unnecessary. A per died rate may only be used to substantiate lodging expenses by employees who actually receive reimbursement for such expenses from their employer. See Rev. Proc. 2007-63, supra. Employees, such as petitioner, whose expenses are not reimbursed by their employer, may not use a per diem rate for lodging. Id. Instead, petitioner must 14 . provide records such as hotel receipts to prove his 15 16 17 18 19 20 21 22 23 24 25 actual lodging expenses in order to deduct those expenses. Sec. 274(d). Respondent has conceded that petitioner has proved $7,316 of actual expenses for lodging. However, no proof has been submitted relative to the $17,485 remaining of the claimed deduction. Therefore, we hold that petitioner is entitled to an itemized deduction for unreimbursed business expenses for lodging of $7,316. In reaching our.holding, we have considered all arguments made, and, to the extent not mentioned, Heritage Reporting Corporation (202) 628-4888 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 7 we conclude that they are moot, irrelevant, or without merit. To reflect the foregoing, decision will be entered under Rule 155. This concludes the Court's oral findings of facts and opinion. (Whereupon, at 2:39 p.m., the bench opinion in the above-entitled matter was concluded.) // // // // // // // // // // // // // // // // // Heritage Reporting Corporation (202) 628-4888