TAX COURT OPINION

Case: Ashley T. Adams
Docket Number: 6096-08
Judge: Colvin
Opinion Type: bench
Filed: 03/12/2009
Pages: 8

UNITED STATES TAX COURT WASHINGTON , DC 2021 7 ASHLEY T . ADAMS, Petitione r V . COMMISSIONER OF INTERNAL REVENUE , Respondent O R D E R Docket Nos . 6096-08 . t t_ . . STA-T :Ti3&G Pursuant to Rule 152(b), Tax Court Rules .of Practice and Procedure, it i s 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 David Gustafson at Philadelphia, Pennylvania, on February 25, 2009, containing his oral findings of fact and opinion rendered at the conclusion of the trial . In accordance with the oral findings of fact and opinion, decision will be entered for respondent . (Signed) David Gustafson Judge Dated : Washington, D .C . March 12, 2009 SERVED Mar 12 2009 3 1 Bench Opinion by Judge David Gustafson 2 February 25, 200 9 3 Adams v . Commissioner Docket No . 6096-08 4 THE COURT : The Court has decided to render 5 oral Findings of Fact and Opinion in this case, an d 6 the following represents the Court's oral Findings of 7 Fact and Opinion . The oral Findings of Fact and 8 Opinion .shall not be relied on as precedent in any 9 other case . 10 This Bench Opinion is made pursuant to the 11 authority granted by section 7459(b) of the Internal 12 Revenue Code-of 1986, as amended, and Rule 152 of the 13 Tax Court Rules of Practice and Procedure . 14 By a notice of deficiency dated December 31., 15 2007, Respondent determined a deficiency in th e 16 -Federal income tax of Petitioner Ashley T . Adams for 17 the year 2005 in the amount of $1,882, .but ha s 18 subsequently made certain-concessions . For the 19 reasons explained hereafter, we will redetermine a 20 deficiency in the reduced amount of $1,147 . 21 Trial of this case was conducted o n 22 February 23, 2009, in Philadelphia, Pennsylvania, and 23 Petitioner Ashley T . Adams gave her testimony . The 24 parties' Stipulation of Facts, with Exhibits 1- J 25 through 4-J was admitted into evidence, except that Heritage Reporting Corporatio n (202) 628-4888 4 1 Exhibits 3-J and 4-J were admitted for the limite d 2 purpose of summarizing Ms . Adams's contentions about 3 the alleged expenditures at issue . Exhibits 5- P 4 through 8-P were also admitted . We find the following 5 facts : 6 Ms . Adams resided in Delaware when she filed 7 the . petition in this suit . 8 Ms . :Adams filed a timely tax return o n 9 April 15, 2006 . She claimed, among other things, job- 10 hunting expenses totaling $13,360 . After initially 11 disallowing all of those expenses in its notice o f 12 deficiency, the IRS determined to concede $5,845 of 13 that total, consisting of mileage expense, which 14 leaves $7,515 still in issue . 15 Ms . Adams alleges that after years o f 16 unemployment, she engaged for a period of months in a 17 job-hunting "marathon" that took her to numerou s 18 cities by car and train . She did not name any of the 19 potential employers with whom she allegedl y 20 interviewed . She did not present a copy of any resume 21 . or other material she used for those job applications . 22 Ms . Adams claims $2,171 in travel-related job-hunting 23 expenses ($1,153 in: parking and tolls, $747 in train 24 tickets, and $271 in meals ; see Ex . 3-P) . However , 25 there appear to be math errors on the spreadsheet that Heritage Reporting Corporation (202) 628-4888 5 1 yields these numbers, since, for example, the train 2 tickets (under a column labeled "Travel Expense" ) 3 yield an actual total of $358, rather than the $747 4 listed. 5 Ms . Adams alleges that she also incurred 6 $5,523 in other expenses related to her job hunting, 7 which she presents as-21 undated items on a 8 spreadsheet (Ex . 4-P), .of which the largest ar e 9 "Computer" of $861 .74, "Telephone Service" of $687, 10 "Resume" of $393 .85, "Ink/Supplies" of $361 .74 , 11 "Resume writer" of $350 .00, "Dry cleaning" of $290 .11, 12 and "Internet service" of $283 .98 . Except in the most 13 general terms, she did not explain the business use of 14 the items, and she did not give testimony as t o 15 whether (for example) the telephone, Internet , 16 computer, and dry-cleaning expenses were exclusively 17 for business, or whether these were items of mixed 18 personal and business use . 19 She did not present any receipts to prove 20' the trips or the expenses related to them . Sh e 21 alleges that she kept a log of the expenses i n 22 notebooks, from which she would from time to time make 23 entries on the Excel spreadsheet that is her Exhibit 24 3-P . 25 However, she is unable to present either the Heritage Reporting Corporatio n (202) 628-4888 9 6 1 receipts or the log books . She alleges that they have 2 been lost, either because of three moves she mad e 3 after 2005 (during which she says movers discarde d 4 some of her things), or because housemates took them , 5 or because a sick pet soiled and ruined them . Sh e 6 testified that some of the records might be in storage 7 she maintains in New York, but that she is not sur e 8 and did not check . She did not attempt to get copies 9 of her old bank statements or credit card statements 10 from her bank, because it is expensive to do so . 11 For the non-travel, expenses, she presented 12 one receipt (Ex . 5-P) from Staples for office expenses 13 totaling $50 .18 . For the other expenses, her onl y 14 corroboration is her spreadsheet (Ex . 4-P) . Except in 15 the most general terms, she did not explain the. 16 business use of the items . 17 The taxpayer bears the burden to prove her 18 entitlement to the deductions she claims . Any amount 1.9 claimed as a business expense must be substantiated, 20 and taxpayers are required to maintain record s 21 sufficient to substantiate the expenses claimed . Sec . 22 6001 ; Hradesky v . Commissioner , 65 T .C . 87, 89-9 0 23 (1975), affd . 540 F .2d 821 (5th Cir . 1976) ; sec . 24 1 .6001-1(a), Income Tax Regs . When a taxpaye r 25 adequately establishes that she paid or incurred a Heritage Reporting Corporatio n (202) 628-4888 1 deductible expense but does not establish the precise 2 amount, the Court may in some instances estimate the 3 allowable deduction, bearing heavily against th e 4 taxpayer whose inexactitude is of her own making . 5 Cohan v . Commissioner , 39 F .2d 540, 543-544 (2d Cir . 6 1930) . There must, however, be sufficient evidence in 7 the record to provide a basis upon which an estimat e 8 may be made and to permit the Court to conclude that a 9 deductible expense, rather than a nondeductibl e 10 personal expense, was incurred in at least the amount 11 allowed . Vanicek v . Commissioner , 85 T .C . 731, 743 12 (1985) . 13 The Court finds that Ms . Adams did no t 14 substantiate either the fact or the business character 15 of the expenditures she alleges . The Cohan rule does 16 not excuse a taxpayer from the obligation t o 17 substantiate, but . simply permits alternate proof in 18 certain circumstances . Here, Ms . Adams's contentions 19 suffer from an almost wholesale failure of proof . If 20 her records were lost in the ways she speculates, it 21 shows a failure on her part to maintain records . This 22 is not an instance where a sudden and unanticipate d 23 circumstance like a fire or flood destroyed records 24 that were being kept in a reasonable manner . Rather, 25 by her own account, she simply allowed her records to Heritage Reporting Corporation (202) 628-4888 8 1 drift away through the circumstances of her life . She 2 did not even exhaust the admitted possible sources of 3 records she might have consulted . 4 Ms . Adams points to IRS publications (Exs . 5 6-P, 7-P, 8-P) that excuse a taxpayer from keeping a 6 receipt for an expenditure under $75 . Thes e 7 publications make it clear, however, that a taxpaye r 8 is to maintain her own orderly records of expenditures 9 as well as receipts, except that receipts for items 10 under $75 may be excused . Ms . Adams appears to take 11 this as a rule that expenditures under $75 require no 12 contemporaneous substantiation at all neithe r 13 records nor receipts . This is not the case . If Ms . 14 Adams had otherwise proved her case and had actually 15 kept credible log books showing all her expenses and 16 their business character, the Court might well hav e 17 excused a lack of receipts for expenditures under $75 . 18 But again, in this case, there is a wholesale lack of 19 proof beyond Ms . Adams's sketchy and self-servin g 20 testimony . 21 Decision will be entered, in favor o f 22 Respondent, of a deficiency in the reduced amount of 23 $1,147 . 24 This concludes the Court's oral Findings of 25 Fact and opinion in this case . Heritage Reporting Corporation (202 .) 628-4888 1 (Whereupon , at 11 : 08 a .m ., the bench opinion 2 in the above - entitled matter was concluded . ) 3 // 9 / / 4 5 7 8 9 10 11 12 13 14 15 16 / / 17 18 19 20 2 1 22 23 24 25 . // Heritage Reporting Corporation (202) 628-4888