TAX COURT OPINION

Case: Diane J. Sanderlin
Docket Number: 13612-07
Judge: Cohen
Opinion Type: memo
Filed: 08/28/2008
Pages: 7

T .C . .Memo . 2008-20 9 UNITED STATES TAX COURT ' DIANE J . SANDERLIN ,- Petitioner v . COMMISSIONER OF INTERNAL REVENUE, Responden t Docket No . 136.12-07 . Filed August 28, 2008 . Diane J . Sanderlin , pro se . Nhi T . Luu , for respondent . MEMORANDUM FINDINGS OF FACT AND OPINIO N COHEN, Judge : Respondent determined deficiencies and penalties with respect to petitioner' s' Federal income taxes as follows : SERVED AUG 2 8 2008 Year '2'003 2004 2005 Deficiency $3,689 3,389 2,305 Penalty Sec . 6662(a ) $73 8 67 8 46 1 The issues for decision are whether petitioner is entitled to deductions reported on Schedules A, Itemized Deductions , attached to' .her , returns, and whether she is liable for penaltie s determ .ned by respondent . Unless otherwise indicated, al l section references are to the Internal Revenue Code in effect fo r the years in issue . FINDINGS OF FAC T Some of the facts have been stipulated, and the stipulate d facts are incorporated in our findings by this reference . Petitioner resided in Oregon at the time that she filed he r petition .. During 2003 , 2004 , and 2005 petitioner was employed as a licensed practical nurse . Petitioner worked for multiple employers to whom she was referred by employment agencies . Her income from employment was reported on her tax returns as wage s and salaries . On her Federal income tax returns petitioner reported adjusted gross income of $49,138 for 2003,-$ 45,634 for 2004, and $34,015 for 2005 . On the Schedule A attached to each return, petitioner claimed job expenses and other miscellaneous deductions totaling $ 15,408 for 2003, $ 24,423 for 2004, and 3 $12,531 for 2005 . Also attached to each return was a ' Form 8283, Noncash Charitable Contributions , in which the description of items allegedly donated - was shown as "Misc Household" or "Household Misc ",' the-dates of acquisition and contribution of the items were 'omitted ," and the value of ' each item was claimed as "thrift shop - value" .. The "thrift shop value " claimed was approximately 46 percent ,~ 33 percent , and 24 percent of the alleged purchase price for-2003 ;° 2004 ' and'2005 deductions, respectively . The' statutory notice of'deficiency that~is the basis of this case 'disallowed the claimed deductions which remai n in dispute,' as follows : ' Deductions 2003 2004 200 5 Unreimbursed employe e business expenses '$15,408 $22,299 $12,53 1 Noncash charitable deduction Cash charitable deduction Medical expenses 6,500 2,500 4,431 - 7,200 3,500 5,822 4,92 3 =0 _ -0 - Petitioner's returns for the years in issue were prepared by Demara Guaspari , also known as Demara Lucker, a' return ~preparer .in Clackamas , Oregon . For the preparation' of her returns , petitioner ' provided the preparer with only a handwritten summar y of deductions and amounts of deductions to be claimed . Petitioner shredded original receipts and other records o f her deductions after entering them on a computer program , Quicken . She provided neither receipts nor a computer printout to her preparer , and she °~did not produce . any receipts or other corroborating documents during the subsequent examination of her returns by, the Internal Revenue Service, during . pretrial proceedings in this ..case,, or during-,,trial . Because of petitioner's lack of cooperation .during,the audit, the examiner issued a summons to compel, testimony and production-of documents . Because petitioner- failed to appear .in response .to the summons, an action was commenced in Federal4,district court . Petitioner did not make a ..reasonable attempt to reconstruct the expenses claimed on her tax returns for 2003, 2004, and 2005 . She refused to .secure-copies of canceled checks . because she did-- not want to pay the $2 per check fee that would have been charged, by her bank . OPINION The facts found above are sparse because petitioner faile d provide any explanation of the items that she claimed a s deductions on her tax returns . The findings include, however, facts occurring during and after the examination of her returns because this case depends entirely on the credibility o f petitioner . Because she did not retain required records, did no t cooperate with reasonable requests .for records, and did not introduce credible evidence with respect .to the disputed deductions, the burden of proof remains with her . See sec . 7491(a), Rockwell v . Commissioner , 512 F .'2d 882, 885 (9th Cir . 1975), affg . T .C . Memo . 1972-133 . For the reasons set forth . below , we conclude that her te;stimony. is=not reliable and that she is riot entitled' to any "of' the deductions in "issue . .Petitioner testified that she shredded all original documents reflecting deductible ' expenditures after making entries on her 'computer and that the computer was stolen . Her testimony failed to identify "any specific expenses which she was entitled to deduct ., and she had riot made reasonable attempts to reconstruct the missing records . ' She claimed that she was a traveling nurse incurring mileage and "nursing items", but she did not even suggest -that . she maintained a log of her mileage or other required records . i " She claimed that's.he had been following the same format for many years and'had not (cid:127)had -a problem with her tax reporting before . She-suggested that' the Court allow her deductions under the rule ~' of -' Cohan v ., Commissioner , 39 F . 2d 4540 , 543-54'4 .':( 2d Cit . 1930 ) The so-called Cohan rule- is that , when a taxpayer adequately establishes that he or she paid or incurred - a deductible expense but does not establish the precise amount, we-may estimate the allowable deduction , bearing . heavily against the taxpayerwhose inexactitude . caused the inadequacy of the evidence . Id . Estimates are not permitted .-with respect to vehicle - expenses and other types of expenses covered'by-section 274(d ) . .' See Sanford v . . Commissioner , 50 T .C . 823, 827-828 .( 1968 ), affil . 412 F . 2d-201 (2d Cir . 1969 ) . In any event, there must be sufficient evidence in the record .to provide a basis upon which_,an estimate may be , made and to permit us to-,conclude that a deductible expense was..? incurred in : at least some amount .,-No such evidence has been presented here ., . Petitioner admittedly shredded .the original records,-and the alleged loss of records does not excuse- .the, necessity of production of evidence . See, e ..,g ., Malinowski-v . Commissioner , 71 .T .C . 11'20r,-1124-1125 (1979) ; Priestly v; . Commissioner , T .C . Memo . 2003-267 ; affd . 125' Fed . Appx . :201 (9t h Cir .-2005) . Moreover, we are not required to accept,testimony-that-is, .,~ improbable,or .vague . Geiger v .- Commissioner , 440 F .2d 688, 689 690 ,(9th .Cir .- 1971) :<, affg . : T . C . (cid:127) Memo . .-1969-159 : Petitioner.' s ' , claimed deductions against her reported income were-so large as, be improbable ; Her destruction-of .evidence and failure t o make a :reasonable attempt to identify specific items suggest s that-her .claimed deductions were, exaggerated-and perhaps fabricated . We--are certainly not persuaded ..that the amounts . claimed were incurred . Section 6662(a) imposes a 20-percent, .accuracy,-related penalty . on-the portion of an-underpayment of tax-attributable to any one of various-factors ; including negligence or,disregard .of rules,-or regulations . See .sec . .6662(b),( :1) . Under section . 7491(c), respondent bears the .,burden,of production with .regard .to penalties and must .come forward .=:with sufficient evidence 7 - indicating that it is appropriate .to impose the penalty . Higbee v. Commissioner ,. 116 T .C . 438, 446 (2001) . . However, once respondent has met the burden of production, the burden of proof remains with the taxpayer, including the burden of proving that the penalty is inappropriate because of reasonable cause or substantial authority . Id . at 446-447 . Respondent's burden of production is met by showing petitioner's negligence and disregard for rules and regulations through her failure to maintain records to support the deductions claimed, as required by section 6001 . Petitioner's lack of compliance justifies the imposition of the section 6662(a) penalty in this case . To reflect the foregoing, Decision will be entered for respondent .