TAX COURT OPINION

Case: Barry Gracier
Docket Number: 19157-08
Judge: Colvin
Opinion Type: bench
Filed: 05/05/2010
Pages: 9

UNITED STATES TAX COURT WASHINGTON, D.C. 20217 BARRY GRACIER, Petitioner, v . ) Docket No . 19157-0 8 COMMISSIONER OF INTERNAL REVENUE, Respondent . O R D E R Pursuant to Rule 152(b), Tax Court Rules of Practice and, Procedure, it i s ORDERED that the Clerk of the Court shall transmit'to petitioner and to respondent a copy of the pages of the transcript of the proceedings of the above case before Judge Diane L . Kroupa at San Francisco, California, on April 21, 2010, containing her oral findings of fact and opinion . In accordance with the oral findings of fact and opinion, decision will be entered pursuant to Rule 155 . (Signed ) Diane L. Kroupa Judg e Date : Washington, D .C . May 5, 2010 SERVED MAY - 7 2010 3 1 Bench Opinion by Judge Diane L . Kroupa April 21, 2010 2 Barry Gracier v . Commissioner Docket No . 19157-0 8 3 4 THE COURT : The Court has decided to render ora l 5 findings of fact and opinion in this case, and the following 6 represents the Court's oral findings of fact and opinion . 7 These oral findings of fact and opinion shall not 8 be relied upon as precedent in any other case . This benc h 9 opinion is made pursuant to the authority granted by section 10 7459(b) and Rule 152 . All section references are to th e 11 Internal Revenue Code for 2005, the year at issue, and all 12 rule references are to the Tax Court Rules of Practice & 13 Procedure . 14 Barry Gracier appeared pro se, and Kim Kazda 15 appeared on behalf of Respondent . 16 FINDINGS OF FAC T 17 Certain facts have been stipulated . Th e 18 stipulation of facts filed by the parties with accompanying 19 exhibits is incorporated by this reference . 20 Petitioner resided in Rocklin, California, at the 21 time he filed the petition . Petitioner claimed $36,487 of 22 medical and dental expenses before the adjusted gross income 23 limitation ; claimed $28,680 unreimbursed employee business 24 expenses ; claimed $513 cash charitable contributions, and 25 $9650 non-cash charitable contributions on the return fo r Heritage Reporting Corporation (202) 628-4888 te : 1 2005 . 4 2 Respondent disallowed the claimed expenses in a 3 statutory deficiency notice dated May 2nd, 2008, determining 4 an $8272 deficiency for 2005 . This is primarily a 5 substantiation case involving whether Petitioner is entitled 6 to deduct the medical, dental expenses, unreimburse d 7 employee business expenses, and charitable contributions . 8 The parties agree that all other issues ar e 9 computational matters that are dependent on our disposition 10 of the substantiation issues . 11 OPINION 12 We begin with two fundamental principles of ta x 13 litigation in dealing with substantiation cases . First, the 14 Commissioner's determinations are generally presumed correct 15 and the taxpayer bears the burden of proving that thos e 16 determinations are erroneous . Rule 142(a) . 17 This principle is not affected by section 7491(a) 18 because Petitioner failed to comply with the substantiation 19 requirements and failed to maintain adequate records . See 20 sec . 7491(a) (2) (A) and - (B) ; see also Higbee v . 21 Commissioner , 116 T .C . 438 (2001) . 22 Second, deductions are a matter of legislativ e 23 grace and the taxpayer must show that he or she is entitled 24 to any deduction claimed . Rule 142(a) ; Welch v Helvering , 25 290 US 111 (1933) . Heritage Reporting Corporation (202) 628-4888 5 1 This includes the burden of substantiation . 2 Hradesky v . Commissioner , 65 T .C . 87, 90 (1975), affd . per 3 curiam, 540 F .2d 821 (5th Cir . 1976) . 4 Substantiation means that a taxpayer shall kee p 5 such permanent records or books of account as are sufficient 6 to establish the amount of deductions claimed on the return . 7 Sec . 6001 ; sec . 1 .6001-1(a), -(e), Income Tax Regs . 8 The Court need not accept a taxpayer's self- 9 serving testimony when the taxpayer fails to present other 10 probative evidence . Beam v . Commissioner ,(cid:127)T .C . Memo 1990- 11 304, citing Tokarski v . Commissioner , 87 T .C . 74, 77 (1986) . 12 The Cohan rule allows the Court in certai n 13 situations to approximate the amount of allowabl e 14 deductions . Cohan v . Commissioner , 39 F .2d 540, 543, 544 15 (2nd Cir . 1930) . 16 Certain expenses such as those for automobile 17 expenses as well as other listed properties may not b e 18 estimated, because of the strict substantiation requirements 19 mandated by section 274(d) . See sec . 280F(d) (4) (A) ; Sanford 20 v . Commissioner , 50 T .C . 823, 827 (1968), affd . per curiam 21 412 F .2d 201 (2nd Cir . 1969) ; sec . 1 .274-5T(a), Temporary 22 Income Tax Regs ; sec . 1 .280F-6T(b)(2), Temporary Income Tax 23 Regs . 24 For such expenses only documentary substantiation 25 will suffice . Heritage Reporting Corporation (202) 628-4888 6 1 We now apply these rules to the facts here . 2 Before we do, however, we note that this is a sad case . 3 Petitioner had a lot of unfortunate things happen in 2005 . 4 His wife of 16 years died of an overdose to prescribed drugs 5 on Saturday, September 24th, 2005, and his mother i n 6 Arkansas was involved in a car accident and he needed to 7 attend to her medical needs . 8 The record is unclear when his mother was 9 hospitalized in 2005 and where she was hospitalized . 10 Petitioner claimed a $3809 .55 chairlift was installed in her 11 home in Arkansas, yet he claimed a $3884 .53 hospital bed he 12 bought for his home in California for his mother . 13 In addition to all these personal and medica l 14 needs of his loved ones, Petitioner had a job that required 15 him to travel from jobsite to jobsite . He provide d 16 reconstructed travel logs that showed he worked six days a 17 weeks, four weeks a month, 52 weeks a year, includin g 18 Thanksgiving and the day his wife died . Petitioner admitted 19 that he should not have claimed business mileage for the day 20 that his wife died . 21 The Court notes that these travel logs reflected 22 the same mileage for the same three locations with n o 23 variation whether his employer changed during the year, 24 which it did, or whether he was unable to work because he 25 needed to tend to his wife's or mother's medical needs . Heritage Reporting Corporation (202) 628-4888 7 1 In addition, one of his jobs that year require d 2 him to commute from Rocklin, California, to Reno, Nevada, an 3 approximate two-hour commute each way, yet he testified that 4 he was not claiming any commuting cost . At trial Petitioner 5 now concedes he is not entitled to certain unreimburse d 6 employee business expenses . He concedes he is not entitled 7 to the $1850 travel expenses, the 1756 other busines s 8 expenses, and the $3750 of meals and entertainment expenses 9 he claimed on the return for 2005 . 10 The balance of the unreimbursed business expenses 11 consists of $21,328 for mileage, representing approximately 12 49,000 miles claimed on three vehicles Petitioner used in 13 2005 . These vehicles included a Sequoia, Honda, an d 14 Corvette . Petitioner failed to maintain any contemporaneous 15 logs for business use of the vehicles, nor did he presen t 16 any credible testimony of reasonable personal use of the 17 three vehicles . 18 Petitioner failed to produce any credible evidence 19 to support his claim for unreimbursed mileage in excess of 20 the $550 monthly vehicle allowance he received . Busines s 21 use of a car requires strict substantiation . Petitioner has 22 failed to so provide . We therefore sustain Respondent' s 23 disallowance of the unreimbursed business expenses . 24 During examination and at trial, Petitioner failed 25 to substantiate, either through cancelled checks o r Heritage Reporting Corporation (202) 628-4888 9 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 8 receipts , either the cash or non - cash charitable deduction s claimed . Petitioner also failed to produce credibl e information on the age of most of the property donated t o charity , or how he determined that the property had a craigslist value or retail value of $25 , 000 . Stric t substantiation is not required , however, for charitabl e contributions . Stockwell v . Commissioner , T .C . Memo 2007 - 149 ; Hooks v . Commissioner , T .C . Memo 1993-437 . We may estimate the amount of charitabl e contributions under Cohan and find 4t $3,000 to be the dc". maximum amount that Petitioner is entitled to deduct for charitable contributions in 2005 . See Id . We give Petitioner the benefit of the doubt tha t he contributed the items he did in 2005 because his wife died in that year and he wanted to remove the painfu l memories of her death . We now focus on the $36,487 in medical , denta l expenses that Petitioner claimed in 2005 . We are no t convinced that Petitioner can deduct depreciation on the swimming pool or maintenance expenses to heat the pool . See Haines v . Commissioner , 71 T .C . 644, 647 ( 1979 ) ; see also Worden v . Commissioner , T .C . Memo 1981-366 . Capital items are suspect . Why is a backyard poo l required over the local YWCA or community pool, especiall y in California where the life choice may be to have a Heritage Reporting Corporation (202) 628-4888 9 1 swimming pool in the backyard? Petitioner failed to provide 2 any medical prescription for the backyard pool, which doctor 3 prescribed it, or what disease was being treated . 4 Petitioner has failed to prove that the expenses incurred 5 with the swimming pool were for the primary purpose of and 6 were related directly to his wife's medical care . Se e 7 Worden v . Commissioner , sutra . 8 Petitioner also failed to convince us that he can 9 deduct any medical expenses attributable to his mother, who 10 failed to live with him the requisite amount of time in 2005 11 for her to be claimed as his dependent . See Beretta v . 12 Commissioner , T .C . Memo 1997-570 . 13 None of these expenses is represented on a receipt 14 or is based-mot-a, on his asserted, medical necessity . Its 15 is well settled that personal items are not deductible . 16 Sec . 262 . 17 We find that Petitioner was able to substantiate 18 some of -~°-' ; ^,'- his claimed medical, dental expenses G 19 for him and his dependents in 2005 . This amount is less, Q~ . 20 however, than the AGI limitation for Petitioner in 2005 . We 21 therefore sustain Respondent's disallowance of any medical , 22 dental expenses beyond the AGI limitation . 23 In closing, we note that this case was originally 24 on the October 19th, 2009, trial calendar . Petitione r 25 appeared at calendar call and asked for a continuance . Heritage Reporting Corporation (202) 628-4888 10 1 Judge Richard Morrison granted Petitioner's continuance and 2 informed Petitioner that he was to provide Respondent with 3 all of the documentation upon which he intended to rely b y 4 January 19th, 2010 . Petitioner failed to provide Respondent 5 with any additional documentation by the deadline . Th e 6 Court could have entertained a motion from Respondent for 7 entry of decision for the deficiency amount . We allowed 8 Petitioner to have his day in court . 9 Petitioner failed to maintain adequate records and 10 failed to provide the necessary documentation . Hopefully, 11 Petitioner will learn from this experience . 12 To give effect to the foregoing, decision will be 13 entered under Rule 155 to reflect that we sustai n 14 Respondent's disallowance of all disputed expenses except 15 $3000 of charitable expenses for 2005 . 16 This concludes the Court's oral findings of fact 17 and opinion in this case . 18 (Whereupon, at 9 :21 a .m ., the bench opinion in the 19 above-entitled matter was concluded . ) 20 21 22 23 24 25 Heritage Reporting Corporation (202) 628-4888