TAX COURT OPINION

Case: Jose A. Romero
Docket Number: 28845-15S
Judge: Holmes
Opinion Type: bench
Filed: 11/15/2016
Pages: 11

UNITED STATES TAX COURT WASHINGTON, DC 20217 JOSE A. ROMERO, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ) ) ) O R D E R Docket Nos. 28845-15S. 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 Holmes at El Paso, Texas, containing his oral and opinion rendered at heard. the trial in the above case before Judge Mark V. findings of fact the trial session at which the case was the pages of the In accordance with the oral findings of fact and opinion, a decision under Rule 155 will be entered. (Signed) Mark V. Holmes Judge Dated: Washington, D.C. November 15, 2016 SERVED NOV 22 2016 Capital Reporting Company 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Bench Opinion by Judge Mark V. Holmes November 1, 2016 Jose A. Romero v. Commissioner Docket No. 28845-15S In the case of Jose A. Romero v. Commissioner, Docket Number 28845-15S, the Court has decided to render oral findings of fact and opinion, and the following 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. The Romero case was also a case of substantiation. Mr. Romero was a claims representative at Social Security Administration back in 2012, the tax year at issue. His ex-wife was a 18 marketing representative. He was a Texas resident 19 20 21 22 23 24 25 when he filed his petition and remains one now. I found him generally to be honest, not sot always with the most detailed testimony about individual expenses. He, too, was able to reach a stipulation with the Government, which, in combination with his testimony, is the record of the case. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 The substantiation questions in his case were all about Schedule A deductions, and a major problem with this case is that many of those deductions actually were generated by his ex-wife, who left him without the records that he needed to substantiate them. I'll talk about this a little bit later in the opinion, but welæe otherwise just go through these expenses. The first category weëe medical expenses of $8,806. He did not keep extremely detailed receipts but did give us a copy of his records from the Government Employees Credit Union here in El Paso. Together with his testimony I was able to make out that some of these seem to be legitimate medical expenses, which I will allow based on a preponderance of the evidence. These include -- and I will just go through these for the record -- Exhibit 3-J, page 1; he lists four pharmacy oÑ medical expenses. I'm excluding the ill matrix which is just a check of unknown original there. Page 2 he has one labeled as pharmacy and 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 medical expense at Walmart or Sam's Club. Again, the 24 bill matrix is just the record of a check that was 25 being paid. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 The reason that I'm excluding the items 2 marked "bill matrix" is that they are too imprecise a 3 4 5 6 7 record. They don't give the name or address of the provider, as required by 26 CFR Section 1.213-1(h). On page 3 of Exhibit 3-J there are, again, three pharmacy or eyeglass expenses, which I will. allow. Page 4 has one from Sam's Club and one from 8 Walgreens that were labeled as pharmacy or medical 9 expenses. I'm excluding the CNR McCrag. Mr. 10 11 12 13 14 Romero's testimony on those expenses was too vague. He was unsure whether they were an eye. doctor, an urgent care center, or something else. So those are excluded. On page 5 he listed, again, expenses of 15 medical -- two medical and one pharmacy expenses. I 16 will allow those, excluding the CNR McCrag on page 5 17 18 19 that he lists as dental on that page. On page 6 the medical expense is allowed. On page 7 that which he labeled the pharmacy or 20 medical expense is allowed. Page 8 the one expense 21 22 23 24 25 for Del Sol Medical Center is allowed as a medical expense. Page 9 there are two pharmacies -- I'm sorry -- there's one pharmacy and one surgery. These are both allowed. The next allowable expense is page 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 9 10 11 12 11 -- and this is all Exhibit 3-J -- there are three pharmacy expenses there I will allow. There are two pharmacy expenses on page 12 I will allow. There is three pharmacy expenses on page 13 I will allow, plus a doctor's visit to Summit Urgent Care that I will allow. The next allowable expense is page 15, a pharmacy expense I will allow. Page 16 has a doctor's visit to a Michael DeLuca which I will allow. Page 17 has a pharmacy medical expense for June 4 at Sam's Club that I will allow; a check number that is listed as a medical deductible which I 13 will not allow, for failure to be specific enough; a 14 15 16 17 18 19 20 21 22 23 24 25 pharmacy expense on June 5 at Sam's Club which I will allow, and eyeglasses purchased at Sam's Club on 6/11 that I will allow. On page 19 there's a pharmacy expense that I will allow. On page 21 there are three pharmacy expenses I will allow. Page 22 has two pharmacy expenses I will allow. Page 23 has a pharmacy expense at Sam's Club on 8/31 I will allow, and that's the only thing I will allow on page 23. Page 24 has three Sam's Club pharmacy expenses that I will allow. Page 25 has two Sam's Club expenses I will allow. Page 26 has one Sam's 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Club expense I will allow as a pharmacy expense. Page 27 has two Sam's Club expenses listed as pharmacy I will allow. Page 28 has three Sam's Club pharmacy expenses I will allow. Page 30 has three Sam's Club pharmacy expenses I will allow. Page 32 has one Sam's Club pharmacy expense I will allow. Page 33 has three pharmacy expenses at Sam's Club that I will allow. Page 34 has two pharmacy expenses at Sam's Club I will allow. Page 36 has two pharmacy expenses at Sam's Club I will allow. Page 40 has a pharmacy expense at Sam's Club I will allow and a Del Sol Medical expense listed.as an emergency room visit for one of his extremely active young sons that I will allow. Page 41 has a Walgreens expense that he lists as pharmacy that I will allow, an urgent care center expense I will allow on 12/26, and then three 20 more pharmacy expenses at Walgreens Urgent Care and 21 22 23 24 25 CVS that I will allow. And that wraps up a very busy and active year for Mr. Romero and his family. This may or may not bring him up to the 7.5 percent threshold for deductibility of medical expenses; I'll leave that to 155. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 The next category of deduction that was contested were charitable contributions of $13,187. This was $7,100 in cash for what he described as a 4 Christian drug rehab facility that his wife made. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 This is really bad. We don't even have the name of the donee on this one, much less any canceled checks or receipts for this cash contribution. Moreover, he testified that the family claims $6,087 in noncash charitable contributions. There were no receipts at all. I can't allow any of these expenses. There simply was no proof of the condition of goods that were delivered. There was no testimony that they were delivered, what they were exactly. It's all much too vague and unsubstantiated to allow any of that charitable contribution deduction expense. The third category was tax preparation. The Romeros' return for that year was self-prepared, and Mr. Romero didn't really have a good explanation for why he was deductie tax preparation money for what didn't seem to be a cost at all to him that year. The fourth category were attorney's fees of $2500. This he testified -- and I find him credible -- that he was trying to recover -- or his 866.488.DEPO www.Capita1ReportingCompany.com i Capital Reporting Company 9 1 wife was trying to recover for damage caused by a 2 hit-and-run driver to their personal vehicle. 3 Attorney's fees for this kind of personal expense, 4 5 6 7 however, are not deductible. The fifth category were unreimbursed employee business expenses of $13,410. $850 were for clothing; $1494 were for uniforms. Much as in the 8 Guerrero case, this is subject to the general rule 9 that if clothing is capable of being worn on the 10 11 12 13 street as a member of the general public, you can't take a deduction for it. There was no proof, even testimonial, as to what this kind of clothing was. His wife being in 14 marketing, it is unclear why she couldn't wear the 15 16 17 18 19 20 21 22 23 24 clothes that she wore in her business life on the street, even if they were embroidered with her name. They were capable of being worn in public, and so I have to deny the deductions for those two categories of expense. There was a $650 union dues but no proof of who was paid the union dues or how much they were. There were also phone expenses, again, and no records at all. The same with meals and travel expenses. In addition, as in the other cases this 25 morning, those meal and travel expenses were subject 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 10 1 2 to the heightened substantiation requirements of Section 274(d) of the Code. A taxpayer generally 3 must substantiate, either by adequate records or by 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 sufficient evidence corroborating his own statement the amount of those expenses, the time and place that they were incurred, the business purpose of those expenses and, in the case of an entertainment expense, the business relationship of the taxpayer of each expense incurred. I am sympathetic with the fact that after the breakup of his marriage Mr. Romero had severe problems in getting records from his ex-wife. And I had thought that perhaps his testimony would be sufficient here; however, on checking the law in this area, it turns out that there are precedents on point, particularly the case of Gizzi v. Commissioner, 65 TC 342 (1975). This is a TC opinion; it's precedential, and I have to follow it. In this Gizzi case, sometime after 1969 Mr. 20 Gizzi began to experience marital problems and moved 21 22 23 24 25 out of his home. Then he ended up getting audited, but his records had disappeared during the breakup of his marriage. The Court believed that he had kept a voucher system in which he kept the detailed records 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 1 2 3 that are required by the Code to substantiate expenses, but then he couldn't produce them because something had happened during the breakup of his 4 marriage. In other words, this is a very similar 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 case to Mr. Romero's. There is an exception, as we recognized, to the requirement that records be produced for these categories of expenses. 26 CFR Section 1.274-5(c)(3) of the regulations says that if the taxpayer can "establish that, one, he at one time possessed adequate records and, two, that his present lack of records is due to fire, flood, or other casualty beyond his control, then he is free of the normal substantiation requirements. The taxpayer in such a situation must instead reasonably reconstruct his expenditures...marital difficulties and their consequences, no matter how seemingly independent oof the taxpayer's will, do not sufficiently resemble floods or fire to be considered a casualty. See 20 William C. Silver, Jr., v. Commissioner, 31 TCM 401 21 22 23 24 25 (1972)." In the Silver case we held that moving from one residence to another was not a casualty; similarly the breakup of a marriage and the attendant loss of records is not a casualty. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 12 1 2 Moreover, as in the Gizzi case, even if I were to view the loss of Mr. Romero's records or his 3 wife's records that he needed in this case as a 4 5 6 7 8 9 casualty, he failed to fulfill the additional requirement of trying to reconstruct those records, despite the obstacles he faced. The one remaining category of expense not subject to 274 was marketing equipment. He had no clue as to what this deduction was for. Given his 10 wife's lack of cooperation, it's not surprising. It's not culpable, but it does mean that I can't grant any of those expenses. Because I ruled in his favor on some of these issues, decision will have to be entered under Rule 155. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon,.at 9:40 a.m., the above- entitled matter was concluded.) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com