TAX COURT OPINION

Case: Michael Ray Tolleson
Docket Number: 15864-06S
Judge: Goeke
Opinion Type: summary
Filed: 08/25/2008
Pages: 6

T .C . Summary, Opinion 200810 9 . UNITED STATES TAX COURT MICHAEL RAY TOLLESON, Petitioner v . COMMISSIONER OF INTERNAL REVENUE, Responden t Docket No . 15864-06S . .Filed-August 25, 2008 . Michael Ray Tolleson, pro se . Paul R . Zamolo and Jon Feldhammer (specially recogni zed) , for respondent.. GOEKE Judge : This .case was -heard pursuant to the provisions of section 7463 of the InternalRevenue Code,i effect when the petition was filed .' Pursuant.h'to section 7463(b), the decision to be entered is not reviewable by any other cou t, an d 'Unless otherwise indicated, all section references the Internal Revenue Code, and all Rule references are to Court Rules of Practice and Procedure . re to .the Tax SERVED Aug 25 2008 this-opinion shall not be treated as precedent for any othe r case . Respondent determined deficiencies . in petitioner's Federal income taxes of $12,832 and $9,171 for 2001 and 2002, respectively . After concessions,2 the issue before the Court is whether petitioner is entitled to business expense deductions for an alleged independent architectural practice claimed on his Schedules C, Profit or Loss From Business . Background At the time the petition was filed, petitioner was a resident of California . Petitioner was employed full time by the firm of Richard Pollack-& Associates,(cid:127)(Pollack), an architecture and interior- design company, during 2001 and by WHL Architects Planners, Inc . (WHL), during 2001 and 2002 . Both . .firms issued to petitioner Forms W-2, . Wage and Tax Statement . Petitioner, was occasionally permitted to work from home, but Pollack and WHL provided him with office space . Petitioner included Schedules C with his 2001 and .2002, Federal income tax returns . Each Schedule C related to an alleged, architecture business with a listed address identical .to petitioner's home address . On the Schedules C, petitione r 2 The parties agreed to the allowable amounts of short-term capital loss deductions . - 3 - claimed business expense deductions of $65,563 .for 2001 a $57,743 for 2002 . On May 25 , 2006 , respondent mailed torpetitioner .a s noticeof deficiency. that disallowed petitioner's--claimed business expense deductions . for 200.1 and 2002 .4 Petition e petitioned this Court . ° Discussio n Section 162(a) provides that "There shall be allowed as a deduction all ordinary and necessary expenses paid or Inc rred . during the taxable year in carrying on any trade or busin ss -3 However, in .order tobe entitled to deduct business expen es on 'a Schedule C petitioner must prove that he was carrying on a trade . or business other than that of being an employee . See We er v . Commissioner , 103 T .C . 378, 386 (1994) a,ffd . 60 .F .3d 110 (4th' Cir . 1995) .'-"Petitioner has not alleged or shown that .sec io n 7491(a) applies . Accordingly, petitioner bears ..the .burd e proving that he is entiitled 'to the : claimed business expen e deductions . See'Rule 142(a) ;'Welch v .'Helverina , 290 .U .S . 111, . 115 (1933) . Petitioner contends that during the years at issue h was ., operating an independent architectural practice and the c aimed business expenses relate to this business . Petitioner co tends that he provided services for both firms as an independen - 4 - contractor and that he elected'employee status in lieu of . independent contractor status for personal accounting, reasons . Whether a taxpayer was an independent-contractor depends o n various factors such -as .: (1) The degree of control exercised .b y the. principal overthe details of the work ; (2 .)~which part y invests in the facilities used in the work ; (3) the opportunity of the individual for profit or loss ; (4) whether or not the principal has the right to discharge the .individual =(5) : whether the work is part of the principal's regular .business ; : ( .6) the_ permanency of the relationship ; and (7) the relationship the parties believe they are creating ., Weber v . Commissioner , supra ., at 387 . Petitioner provided no evidence that any of these factors weigh' in favor of a finding, that he worked for Pollack .or,WHL as an independent contractor . To .the contrary, . the .presidents'of both firms-testified that he was a full-time employee during they . years at issue, and'petitioner has provided no evidence- .to the contrary . "Therefore,' we find that petitioner worked- .for Pollack and WHL as an employee during 2001 and 2002, not as .an independent contractor . . Petitioner also argued that while he was working for Pollack and WHL he ..operated his own separate business . Petitioner ., claimed that during the years at issue he was continuously- . developing plans for new houses and researching vacant lots in 5 the surrounding locales . in hopes of creating'a base of prospective properties to use in his independent practice However, petitioner purchased no properties and completed no services during 2001 or 2002 . Petitioner made . no showing that h e was actively seeking contracts during 2001 and 2002 . Petitioner also claimed that he provided consulting ervice s to former students and took on interns during both years . However, petitioner could not provide any invoices, pay statements, or other documentation to substantiate those laims . Petitioner's only income from the years at issue was from his work at both Pollack and WHL . See Owen v . Commissioner , 3 T .C . 377 (1954 ) The only documentation petitioner provided concerning hi s independent practice during 2001 and 2002 were models of- theoretical projects and ideas, and the only invoices petitioner could provide-regarding services rendered from his indepe dent practice were from subsequent tax years not at issue . Wh'le it . is possible that some of petitioner's expenses may qualif as startup expenditures deductible under section 195, there is no evidence in the record that petitioner began a trade or b siness during the years at issue . Accordingly, we find that petitioner was not carryin on a trade or business as an independent architect during 2001 or 2002 . Therefore, we need not reach the question of wheth r the associated expenses would qualify for a ,deduction under sectio n 162 . To .reflect the foregoing, Decision will be entere d under Rule 155 .