TAX COURT OPINION

Case: Diane Lynn Heller
Docket Number: 17242-14
Judge: Holmes
Opinion Type: bench
Filed: 11/09/2015
Pages: 13

UNITED STATES TAX COURT WASHINGTON, DC 20217 DIANE LYNN HELLER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 17242-14. ) ) ) ) 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 petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Mark V. Holmes at Los Angeles, California, 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, an appropriate ... decision will be entered. Dated: Washington, D.C. November 9, 2015 (Signed) Mark V. Holmes Judge SERVED NOV 1 3 2015 Capital Reporting Company IN THE UNITED STATES TAX COURT In the Matter of: DIANE LYNN HELLER, Petitioner, ) ) ) v. ) Docket No: 17242-14 COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) to o mm< Pages: 1 through 11 Place: Los Angeles, California Date: October 30, 2015 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company IN THE UNITED STATE.S TAX COURT 1 In the Matter of: ) DIANE LYNN HELLER, .. v.. petitioner, ) ) ) ) ) Docket No: 17242-14 COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) Room 1167, Edward R. Roybal U.S. Tax Court 255 E. Temple Street Center Los Angeles, California 90012 & Federal Building October 30, 2015 The above-entitled matter came on for bench opinion, pursuant to notice at 10:10 a.m. BEFORE: HONORABLE MARK V. HOLMES Judge APPEARANCES: the Petitioner: For (NO APPEARANCE) the Respondent: For (NO APPEARANCE) 1 2 3 4 5 6 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company P R O C E E D I N G S 2 (10:10 a.m.) THE CLERK: Calling Docket Number 17242-14, Diane Lynn Heller. (Whereupon, a bench opinion was rendered.) 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 Capital Reporting Company 3 1 Bench Opinion by Judge Mark V. Holmes 2 October 30, 2015 3 4 5 Diane Lynn Heller v. Commissioner Docket No. 17242-14 THE COURT: In the case of Diane Lynn 6 Heller v. Commissioner, Docket Number 17242-14, The 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Court has decided to render oral findings of fact and ooinion. And the followino is The Court's oral findings of fact and opinion. This bench opinion is made pursuant.to the authority granted by Section 7459(b) of the Internal Revenue Code of 1986 as amended and Rule 152 of the Tax Court's Rules of Practice and Procedure. Ms. Heller is a California resident, and she is now a the time she filed the petition. She did not engage in the stipulation process in a normal way, but, however, moved for an order to show cause under 91F and that gave us a stipulation. Ms. Heller also appeared and testified. Together with the stipulation, that testimony is the record in this case. And there was one procedural challenge that Ms. Heller made saying that the IRS had not given her the notice of deficiency in this case with adequate time and, therefore, her own case should be 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 dismissed. She also challenged the disallowance of $14,990 in noncash charitable contributions and unreimbursed employee or job search expenses of $19,258, consisting of the vehicle expenses of $12,600, parking fees of $61, travel expenses of $1,411, other business expenses of $4,521, and meals and entertainment expenses of $665, which is 50 percent of the amount that she claimed of $1,330. She also contested the disallowance by the IRS of the American Opportunity Credit in the amount of $502. And The Court allowed her to challenge the - imposition of an accuracy-related penalty under 6662 even though she didn't put it in her petition. Let me deal with the procedural challenge, her motion to dismiss, first. I entered an order yesterday denying it, but I wanted to explain the reasons a little bit more on the record so that she 18 might understand why I had to rule against her. 19 In this situation, The Court's following 20 what's called the harmless error rule. Now, this is 21 particularly the case in the Ninth Circuit, the 22 Circuit Court of Appeals that would hear appeals in 23 24 25 this case. See Elings v. Commissioner, 324 F3d 1110, 1113 (Ninth Circuit 2003). What this means is that if a taxpayer 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 4 5 6 7 actually gets notice of the deficiency even without 90 days and if there is not prejudice, by which I mean her ability to file a p.etition in Tax Court is unaffected, then it is harmless error if there is error at all) on the part of the IRS and there will be no motion to dismiss granted by any court, see McKay v. Commissioner, 886 F3d 1237, 1238-39 (Ninth 8 Circuit 1984). So that's why I'm denying Ms. 9 Heller's motion tc dismiss her whake case. 10 11 12 13 14 15 16 17 Moving cn to the merits, I wanted to make some comments first about her credibility. It was -r not good. She produced numerous records of the business use of her car and charitable contributions. These were simply unreadeb4e. One in particular reported that she had donated over 5,400 pounds of canned goods and boxed food, some of them re-gifts from her elderly mother that had been donated to her 18 mother and set aside for charity, some just purchased 19 20 21 22 23 24 25 as extras and stored -- and all of which were stored in her garage, she said. This was perhaps 11,000 containers, cans, and boxes. Perhaps half that if you bought it in pounds rather than 8-ounce containers. There were also extraordinary job expenses, for instance, going up the Pacific Coast Highway 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 interviewing each and every day for the similarly named occupational therapy group all the way up to and including Vancouver, British Columbia. As was true with Pacific Coast Highway, most of her entries, in fact, almost all of her entries, were similarly vaguely named. These records were simply not credible. So turning to each of the contested deductions one at a time, I'll start with those noncash charitable contributions of $14,990 perhaps reflecting an enhanced substantiation requirements of= the Internal Revenue Code for noncash contributions of more than $5,000. Ms. Heller claimed three noncash contributions in the amounts of $4,999, $4,996, and . $4,995. She provided receipts that showed a contribution on March 20th, 2010, to Out of the 18 Closet of furniture and clothing, probably used; 19 April 5th, 2010, from an organization called Sova 20 21 22 23 24 25 that was the 5,445 pounds of food; and on May 6th, 2010, from Goodwill for a truckload of used home goods. Now, for noncash contributions in excess of $500, the taxpayer must maintain reliable written records IRC Section 170(f)(11) (A) (D); 26 CFR Section 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 3 4 5 1.170A-13(e)(2) and (3). These records must include the approximate date and manner in which she acquired the property donated, a description of that property and detail reasonable under the circumstances, that property's cost or other basis, the property's fair 6 market value at the time of contribution, and the 7 method by which its fair market value is determined. 8 9 10 11 12 13 14 15 16 17 18 19 20 See 26 CFR Section 1.170A-13(b)(2)(ii)(B), (C), and (D), 3(i)A and B. Even if I took the approach of saying that ·these were cumulatively over $500, that each individual can or used piece of furniture or used piece of clothing was less than $500, I would have to find that Ms. Heller filled out receipts herself, and I simply don't trust her description of the goods or their valuation. I was particularly struck again by her donation -- her claimed donation of more than two tons of food to a firm in Van Nuys, California, while at the same time claiming travel expenses of 100 21 miles to a supposed job interview in East LA on the 22 23 24 25 same day. This is all just inherently implausible, so my conclusion is to sustain the determination of the Respondent on that issue. The next issue were Ms. Heller's claims of 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 8 1 2 3 4 unreimbursed employee business expenses and job search expenses. Documents that she provided in support of this deduction included a copy of a handwritten notebook and service records from 5 maintenance performed on her Audi automobile. The 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 notebook is written in her handwriting and it's titled "2010 Mileage Book, Job Search, 25,200 Miles." In order to deduct the $12,600 of vehicle expenses claimed on her Form 2106, she must have driven exactly 25,200 business miles using the 50 centg standard mileage rate applicable in 2010. However, the sum of the total mileage listed in her book is only 11,513 miles, but she lists the sum as 16,926 miles on the last page of the notebook. How she decided to claim 25,200 remains a mystery and, indeed, I just don't find this notebook credible evidence in support of her position. I, therefore, sustain the disallowance by the Commissioner of these unreimbursed employee business and job search expenses. Last up is the American Opportunity Education Credit. This was available in tax year 2010. See Internal Revenue Code Section 25A(i). This credit provides for a tax credit equal to "100 percent of so much of the qualified tuition and 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 related expenses paid by the taxpayer during the taxable year ... this does not exceed $2,000 plus 25 percent of such expenses so paid as exceeds $2,000 but does not exceed $4,000." See Code Section 25A(i)(1). Up to 40 percent of this credit may be refundable. See Code Section 25A(i)(5). The only evidence in the record that Ms. Heller provided, wh4+49 was a registration statement from a local college, but it was from 2009 and it was for only a lesser amount than she claimed. Again, I find here for the Respondent. The last issue in the case is the applicability of the accuracy-related penalty in 6662(a). That section provides for a penalty in the amount of 20 percent of the portion of the underpaid and to which the penalty applies. Section 6662(b) provides in part that the penalty imposed by Section 6662(a) shall apply to the portion of any underpayment, which is attributable to negligence or disregard of the rules and regulations. 21 Negligence is a lack of due care or failure to do 22 23 24 25 what a reascnable and ordinarily prudent person would do under the circumstances. Neely v. Commissioner, 85 T.C. 934, 947 (1985). Section 6662(c) defines negligence to 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 include any failure to make a reasonable attempt to comply with the provisions under the corresponding title of the Internal Revenue Code. The term disregard means any careless, reckless, or intentional disregard of the rules and regulations. Here I must, as well, sustain the determination of the Commissioner. Ms. Heller presented what I believe to be intentionally fabricated evidence in support of her case. Documents that were vague, were inaccurate, and were simply not to be believed. It's the obligation of taxpayers to at least make an effort to keep records in support of their claims and not to make things up. Ms. .Heller failed in her obligation to do so and, therefore, I sustain the penalty under 6662 as well. So a decision will be entered in favor of Respondent in a deficiency found of $5,889 in additional income tax for tax year 2010 and in addition to tax under 6662(a) of $1,177.80. This concludes The Court's oral findings of fact and opinion of this case. (Whereupon, at 10:24 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 Capital Reporting Company 11 CERTIFICATE OF TRANSCRIBER AND PROOFREADER CASE NAME: Diane Lynn Heller v. Commissioner DOCKET NO.: 17242-14 We the undersigned, do hereby certify that the foregoing pages, numbers 1 through 11, inclusive, are the true, accurate and complete transcript prepared from the verbal recording made by electronic recording by Steve Hopkins, on October 30, 2015, before the United States Tax Court at its session in Los Angeles, California, in accordance with 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. , Lisa Beauchamp 11/3/15 (Transcriber) (Date) Connie F. Armstrong 11/3/15 ( Proof reader ) ( Date ) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 2 4 25 866.488.DEPO www.Capita1ReportingCompany.com