TAX COURT OPINION

Case: Ricky R. Ressen & Rosalind Ressen
Docket Number: 18959-18S
Judge: Morrison
Opinion Type: bench
Filed: 10/23/2019
Pages: 15

CLC UNITED STATES TAX COURT WASHINGTON, DC 20217 RICKY R. RESSEN & ROSALIND RESSEN, Petitioners v. Docket No. 18959-18S. COMMISSIONER OF INTERNAL REVENUE, Respondent ORDER OF SERVICE OF TRANSCRIPT 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 respondent a copy of the pages of the transcript in the above case before Judge Richard T. Morrison, at St. Paul, Minnesota, on September 12, 2019, containing his oral facts of finding and opinion rendered at the conclusion of trial. In accordance with the oral findings of fact and opinion, a decision will be entered under Rule 155. (Signed) Richard T. Morrison Judge Dated: Washington, D.C. October 23, 2019 SERVED Oct 24 2019 RECEIVED 9/18/19 IN THE UNITED STATES TAX COURT In the Matter of: RICKY R. RESSEN & ROSALIND RESSEN, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) Docket No. 18959-18S ) ) ) ) ) ) ) ) ) Pages: 1 through 13 Place: St. Paul, Minnesota Date: September 12, 2019 (973) 4b6-2250 j pperationseescrbers.ne tj www.escriberssiet IN THE UNITED STATES TAX COURT 1 In the Matter of: RICKY R. RESSEN & ROSALIND RESSEN, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) Docket No. 18959-18S ) ) ) ) ) ) ) ) ) & U.S. Cthse. W. E. Burger Federal Bldg. 316 North Robert Street Room 444, 4th Floor St. Paul, Minnesota 55101 September 12, 2019 The above-entitled matter came on for bench opinion, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 pursuant to notice at 10:06 a.m. 16 17 18 19 20 21 22 23 24 25 BEFORE: HONORABLE RICHARD T. MORRISON Judge APPEARANCES: For the Petitioners: No Appearance For the Respondent: No Appearance stem (973)406-2250ldperatÉnseescribers.netlwww.escribeis.net 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 P R O C E E D I N G S 2 (10:06 a.m.) THE CLERK: Recalling from the calendar docket number 18959-18S, Ricky R. Ressen and Rosalind Ressen. (Whereupon, a bench opinion was rendered.) . 19733406-2250|operations@escribers:net|www.escribers.net Bench Opinion by Judge Richard T. Morrison SePtember 12, 2019 Ricky R. Ressen & Rosalind Ressen v. Commissioner Docket No. 18959-18 3 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 ON AS PRECEDENT IN ANY OTHER CASE. . 1 2 3 4 5 6 7 8 9 10 This proceeding was heard as a small Tax Case 11 pursuant to the provisions of section 7463 of the Internal 12 Revenue Code of 1986, as amended, and Rules 170 through 13 14 174 of the Tax Court Rules of Practice and Procedure. This bench opinion is made pursuant to the 15 authority granted by section 7459(b) of the Internal 16 Revenue Code of 1986, as amended, and Rule 152 of the Tax 17 Court Rules of Practice and Procedure. 18 19 In this bench opinion, all section numbers refer to the Internal Revenue Code of 1986, as amended. All 20 Rule numbers refer to the Tax Court Rules of Practice and 21 Procedure. 22 23 Findings of Fact In 2016, the Ressens lived in a house in 24 Brainerd, Minnesota. 25 In 2015 or 2016, Mr. Ressen bought a mobile home (973)406-2250loperationseescribers.net|www.escnbetsmet. for $151,407.17. 4 During 2016, Mr. Ressen was an employee of Sachse Construction. He generally worked on three construction jobsites as a construction manager during 2016. These three jobsites were a restaurant called Blackfinn in Ashburn, Virginia; an H&M store in Newport News, Virginia; and an H&M store in Salisbury, Maryland. He owned a truck, which he used when working away from Brainerd. He lived in the mobile home at the jobsites. 1 2 3 4 5 6 7 8 9 10 He moved the mobile home using the truck when he had to 11 move the mobile home. 12 On their 2016 federal tax return, the Ressens 13 claimed a deduction for $15,207 of mileage expense for Mr. 14 Ressen's driving his truck. The $15,207 was equal to 15 16 17 18 28,161 miles multiplied by a dollar-per-mile rate of 54 cents. On the 2016 return, the Ressens also claimed a $30,800 depreciation expense deduction for the mobile 19 home. 20 21 22 The two deductions formed $46,007 of unreimbursed employee business expense deductions claimed. The tax liability reported on the 2016 return 23 was $2,839. 24 On April 9, 2018, the IRS sent a letter to the 25 Ressens informing them that it was auditing their return 973)406-2250|opentions@escribersätlwww.escribersmet for 2016 and requesting additional information to support 5 their deductions for employee business expenses. On August 6, 2018, the IRS sent a notice of deficiency to the Ressens for tax year 2016. The notice of deficiency disallowed both the $15,207 mileage expense deduction for the truck and the $30,800 depreciation expense deduction for the mobile home. With these disallowances, the notice of deficiency computed a tax liability of $9,349 and determined a deficiency of $6,510. 1 2 3 4 5 6 7 8 9 10 This deficiency amount is equal to $9,349 minus the $2,349 11 12 tax reported. The notice of deficiency also determined that the Ressens were liable for a 20% accuracy-related 13 penalty of $1,302, equal to 20% of the deficiency. 14 15 16 17 18 19 The Ressens filed a timely petition. They were residents of Minnesota when the petition was filed. The case was tried in St. Paul, Minnesota, on September 9, 2019. Discussion As the taxpayers, the Ressens have the burden of 20 Proof. Rule 142(a). There are exceptions to this rule, 21 but the record does not show that any exception is 22 applicable. 23 24 25 The first issue to be resolved is whether there should be a $15,207 deduction for 28,161 of the miles the truck was driven during 2016. During 2016, Mr. Ressen (973)406-2250| operations@escríbenaet jwww.escribersmet 1 2 3 4 5 6 7 8 9 kept a weekly total of the miles that he drove the truck for work. The annual total of these weekly totals was 28,161 miles. His testimony corroborated that these miles related only to his work for Sachse Construction away from Brainerd. He recorded his work activities in Sachse Construction's corporate records. These records corroborated where he was working at various times. He credibly testified that he received no reimbursement from Sachse Construction for most of the 10 mileage he put on the truck that he claimed as a 11 deduction. He admitted that there was some mileage for 12 which he was reimbursed. His testimony and the record 13 14 suggest there were three truck trips in particular the expenses of which were deducted on his tax return, but for 15 which he received reimbursement. 16 The first such trip was a 158-mile trip from 17 Norfolk, Virginia, to Salisbury, Maryland. 18 The second trip was a 181-mile trip from 19 Manassas, Virginia, to Norfolk, Virginia. 20 The third trip was a 238-mile trip from Dulles 21 Airport to Ft. Monroe, Virginia. 22 The total mileage for these three trips is 577 23 miles. We note that Mr. Ressen's testimony about the 24 reimbursements for these three trips is confusing. 25 Although we have some doubts as to whether the Ressens 973)406-2250|operadonseescribers.net|www.escribers:net deducted expenses for the 577 miles and as to whether Mr. 7 Ressen was reimbursed for these miles, we have resolved these doubts against the Ressens. The Ressens have the burden of proof. We find that the evidence as to the remaining 1 2 3 4 5 6 miles. met the strict substantiation requirements of 7 8 9 section 274(d). The IRS's general challenge to the deductions for the truck mileage, made in its closing argument, was 10 that Mr. Ressen's tax home was at the jobsites and not in 11 Brainerd. Section 162(a)(2) allows taxpayers to deduct 12 travel expenses incurred while away from "home" in pursuit 13 of a trade or business. Commissioner v. Flowers, 326 U.S. 14 465, 469 (1946). In order to deduct travel expenses a 15 taxpayer generally must show that he or she was away from 16 home overnight when the expenses were incurred. United FMA 17 States v. Correll, 389 U.S. 299, 300-302 (1967). The 18 19 purpose of the deduction is to alleviate the burden on taxpayers whose business or employment requires them to 20 incur duplicate living expenses. Kroll v. Commissioner, 21 22 49 T.C. 557, 562 (1968). For purposes of section 162(a)(2), the word "home" generally means the vicinity of 23 a taxpayer's principal place of work or employment, not 24 25 the taxpayer's personal residence. Daly v. Commissioner, 72 T.C. 190, 195 (1979), aff'd, 662 F.2d 253 (4th Cir. (973)406-2250|operaticmsøescribets.net.|www.escribers.net 1981); Kroll v. Commissioner, supra at 561-562. A taxpayer may be treated as having no principal place of 8 work UW:n ths location of Lia suti when the location of K his work is always temporary. Kroll v. Commissioner, supra at 562-563; Albert v. Commissioner, 13 T.C. 129, 131 (1949); Farran v. Commissioner, T.C. Memo 2007-151, slip op. at 8. However, when a taxpayer has no principal place of work, and when the taxpayer maintains a personal or family residence remote from his temporary jobsite, the taxpayer's personal family residence may be treated as his tax home if (1) the taxpayer incurs duplicate living expenses while traveling and maintaining the personal or family residence; (2) the taxpayer has personal and 1 2 3 4 5 6 7 8 9 10 11 12 13 14 historical connections to the personal or family 15 16 17 18 residence; and (3) the taxpayer has a business justification for maintaining the personal or family residence. Hantzis v. Commissioner, 638 F.2d 248, 253-255 (1st Cir. 1981), rev'g T.C. Memo 900-299; Minick v. A 19 Commissioner, T.C. Memo 2010-12, slip op. at 10; see also 20 Rev. Rul. 73-529, 1973-2 C. B. at 37-38. TL7%4 Mr. Ressen's work consisted of temporary jobs b oietek poco that lasted only a few months. Because his jobs were 21 22 23 temporary, during 2016 he had no principal place of work. 24 His living expenses were duplicated when he traveled from 25 his personal residence in Brainerd to his temporary 73)4064250|operations@escribersnet|wwwsescnbetsnet 9 jobsites. His personal residence has historically been in and around Brainerd. The Brainerd personal residence is connected to Mr. Ressen's business of managing construction in three ways. First, Minnesota was the state where he was licensed. Second, his house in 1 2 3 4 5 6 Minnesota was where he kept his construction-related 7 8 9 files. Third, Mr. Ressen worked on construction sites in Minnesota in years other than the year at issue. Thus, Mr. Ressen had an adequate business justification for 10 maintaining a home in Brainerd. We conclude that for 11 12 2016, Brainerd should be treated as Mr. Ressen's tax home. We hold that the Ressens are entitled to a 13 deduction for 27,584 miles, equal to 28,161 miles that Mr. 14 Ressen drove his truck for business minus the 577 miles 15 for which he received reimbursement. At 54 cents per 16 mile, this means the Ressens are entitled to a deduction 17 of $14,895, rounded to the nearest dollar. 18 The second issue to resolve is whether the 19 Ressens should be allowed to deduct $30,800 in 20 depreciation expenses for the mobile home for 2016. In 21 Geer v. Commissioner, 28 T.C. 994, 996 (1957), we held 22 23 24 25 that no depreciation deduction is allowable in a situation in which the taxpayer has not proven that the depreciation expense exceeds the amount the employer reimbursed the taxpayer for the depreciation expense. The record shows (973p406-180loperations©escdbers.net|.www.escribersnet that during 2016 Mr. Ressen's employer paid him a weekly amount, usually $720 per week, to cover lodging expenses. These payments totaled $34,280 for the year. Because Mr. 10 Ressen used the mobile home as lodging while he was working on construction sites, the depreciation of his 1 2 3 4 5 6 mobile home was a lodging expense. Therefore, the weekly 7 8 9 Payment Mr. Ressen received to cover lodging expenses corresponds to the depreciation of Mr. Ressen's mobile home. Although it is possible that a portion of the 10 weekly reimbursement for lodging expenses could be 11 12 characterized as reimbursing Mr. Ressen for things other than the depreciation expense for the mobile home, we do 13 not have enough information in the record to estimate what 14 Portion should be characterized. 0° A We therefore conclude PJWA 15 that the entire amount he received as reimbursement for 16 lodging expenses was reimbursement for depreciation of his 17 mobile home. The amount reimbursed, $34,280, exceeded the 18 amount of depreciation expenses, $30,800. Therefore the 19 Ressens are not entitled to the $30,800 depreciation 20 21 expense deduction. The third issue to resolve is whether the 22 Ressens are liable for the accuracy-related penalty equal 23 to 20% of underpayment for 2016. The IRS asserts that the 24 Ressens are liable for the penalty because there is a 25 substantial understatement for the year. See sec. 4973)406-2250loperations@escribers.net|wwnesalbers.net 6662(b) (2). 11 There is a substantial understatement if the underpayment is greater than $5,000 and the underpayment is greater than 10% of the correct tax. See sec. 6662(d)(1) (A). The Ressens did not assert any defenses to the accuracy-related penalty, such as the reasonable cause exception of section 6664(c)(1). Computations from the parties will be necessary to determine whether there is a substantial understatement. Although the accuracy-related Penalty also applies if the return was prepared 1 2 3 4 5 6 7 8 9 10 negligently, see sec. 662(b) (1), the record does not show 11 12 13 14 15 that the return's reporting of deductions for which we have sustained the IRS's disallowance were anything other than a reasonable attempt to comply with the tax laws. The IRS has satisfied its burden of producing evidence that it computed the accuracy-related penalty 16 automatically and therefore does not need to satisfy the 17 requirement in section 6751(b)(1) that the initial 18 determination of the penalty be approved in writing by a 19 20 supervisor. See sec. 6751(b)(2). We hold that the Ressens are liable for the 21 accuracy-related penalty if computations show that there 22 was a substantial understatement for 2016. 23 24 25 To reflect the foregoing, A decision will be entered under Rule 155. This concludes the Court's oral findings of fact Cribers and opinion in this case. 12 (Whereupon, at 10:20 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 CERTIFICATE OF TRANSCRIBER AND PROOFREADER 13 CASE NAME: Ricky R. Ressen & Rosalind Ressen v. Commissioner DOCKET NO.: 18959-18S We, the undersigned, do hereby certify that the foregoing pages, numbers 1 through 13 inclusive, are the true, accurate and complete transcript prepared from the verbal recording made by electronic recording by Mason Booker on September 12, 2019 before the United States Tax 1 2 3 4 5 6 7 8 9 10 Court at its session in St. Paul, MN, in accordance with 11 12 13 14 15 16 18 19 20 21 22 23 24 25 the applicable provisions of the current verbatim reporting contract of the Court and have verified the accuracy of the transcript by comparing the typewritten transcript against the verbal recording. , Meribeth Ashley, CET-507 Transcriber 9/17/19 Date Frances Marcu, CDLT-136 Proofreader 9/17/19 Date (973)406-2250|operations@escribers.net|www.ascribers.net •