TAX COURT OPINION

Case: Byron G. Walker
Docket Number: 24648-07S
Judge: Colvin
Opinion Type: bench
Filed: 11/03/2008
Pages: 8

UNITED STATES TAX COURT WASHINGTON , DC 2021 7 $vb 1 boe ~.- BYRON G . WALKER, Petitione r V . Docket No . 24648-07S . 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 herewith to petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Joseph Robert Goeke at Hartford, Connecticut, on October 7, 2008, 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, a decision will be entered under Rule 155 . (Signed) Joseph Robert Goeke Judg e Dated : Washington, D .C . November 3, 2008 SERVED MN - 4 2W8 2 1 P R O C E E D I N G S 2 (9 :26 a .m .) 3 Bench Opinion by Judge Joseph Robert Goeke, 10/7/2008 4 Byron G . Walker, 24648-07 S 5 THE CLERK : Recalling from the calendar, 6 Docket Number 24648-07S, Byron G . Walker . 7 THE COURT : The Court has decided to render 8 oral findings of fact and opinion in this case and the 9 following represents the Court's oral findings of fact 10 and opinion . 11 The oral findings of fact and opinion shall 12 not be relied upon as precedent in any other case . 13 This case was heard pursuant to Internal 14 Revenue Code Section 7463B . And the decision to the 15 entered is not reviewable by any other Court . 16 Hereinafter, references to section, refer to 17 the Internal Revenue Code sections . 18 This case was tried in Hartford, Connecticut 19 on October 6, 2008 . And a stipulation of facts an d 20 exhibits were filed as part of the evidentiary record . 21 In addition, the Petitioner testified . 22 The case is before the Court based upo n 23 deficiency determinations by Respondent for the years 24 2004 and 2005 as determined in a notice of deficiency 25 issued to the Petitioner which was then timel y Heritage Reporting Corporation (202) 628-4888 3 1 petitioned to this Court . 2 All the issues in the case have been settled 3 to the diligent efforts of the Respondent and the 4 Petitioner, with the exception of repair and aut o 5 expenses reflected on Petitioner's Schedule E for 2004 6 which remain in dispute . 7 The parties have stipulated that there is no 8 deficiency due from, nor overpayment of tax due to the 9 Petitioner for 2005 . 10 The parties have also stipulated that an 11 adjustment in the year 2004, reflected in the notice 12 of deficiency, increasing Petitioner's taxable income 13 in the amount of $17,600 and described as Schedule E 14 repairs is an erroneous adjustment and is no longer at 15 issue . Respondent having agreed to concede thi s 16 amount . 17 Petitioner was employed full-time in 2004 as 18 a machine operator . He also owned a multi unit house 19 located in East Hartford, Connecticut . All the units 20 of that dwelling were held for the production of rent : 21 That was the only rental property th e 22 Petitioner owned in 2004 . 23 The parties stipulated a summary of receipts 24 which Respondent agrees reflect expenses allowable as 25 repairs in 2004 in the amount of $6,741 .31 . Heritage Reporting Corporation (202) 628-4888 4 1 Petitioner maintains that he is entitled to 2 additional repairs as reflected on the federal income 3 tax return Schedule E he filed for 2004 . 4 Respondent further stipulates that th e 5 expenditures agreed to by Respondent were currently 6 deductible in 2004 and are not required to b e 7 capitalized and therefore are not the source of 8 depreciation . 9 Although the Respondent, in stipulating the 10 expenses in the amount of $6,741 .31 provided tha t 11 Respondent was not stipulating these expenses were all 12 allowable as currently deductible expenses . 13 Nevertheless, based upon the Petitioner's 14 testimony and the documentation provided, the Court 15 finds that these are allowable expenses . 16 This leaves the Court left to determine 17 whether Petitioner is entitled to any additiona l 18 automobile expenses over and above the amounts allowed 19 by Respondent and whether Petitioner is entitled t o 20 any additional repair expenses in 2004 . 21 Respondent allowed automobile expenses based 22 upon miles -- miles driven in connection with th e 23 operation of the rental property in the amount of 6670 24 miles . 25 The Petitioner argues that he should be Heritage Reporting Corporatio n (202) 628-4888 5 1 entitled to additional miles which he claims wer e 2 based upon more regular visits to the rental property 3 in a van and a Path Finder he owned in 2004 . 4 Regarding the automobile miles, pursuant to 5 Section 280F, automobiles are listed property . An d 6 pursuant to Section 274D, substantiation of automobile 7 expense is required by adequate records and sufficient 8 evidence . And further, a deduction is barred for any 9 expenditures governed by Section 274 where th e 10 deduction is claimed on the basis of unsupported 11 testimony of the taxpayer and on the basis o f 12 approximations . 13 Section 1 .274-5T(C)(1), temporary income tax 14 regs 50 Fed Register 46016, (November 6, 1985) . 15 Where the taxpayer's testimony is general 16 and conclusory and uncorroborated, the Court is not 17 required to accept this testimony at substantiation 18 under Section 274 . 19 Lerch, L-E-R-C-H, v Commissioner TC mem o 20 1987-295 affirmed 877F 2nd 624 (Seventh Circuit 1989) . 21 Accordingly , although the Petitione r 22 testified and attempted to be candid jell the Court', 23 we find that his testimony is simply not sufficient to 24 substantiate the automobile expenses under code 25 Section 274, because he failed to provide Heritage Reporting Corporation (202) 628-4888 6 1 contemporaneous records or to reconstruct th e 2 contemporaneous situation in a fashion that would 3 allow the Court to permit any automobile expenses in 4 addition to those allowed by the Respondent noted 5 previously . 6 We now turn to the other Schedule E expenses 7 for 2004 which remain in dispute . And those expenses 8 relate to repairs . 9 As previously stated, the Court finds that 10 Petitioner is entitled to deduct repairs in the amount 11 of $6,741 .31 based upon the party's stipulation an d 12 the information Petitioner supplied Respondent, 13 coupled with Petitioner's testimony . 14 The remaining item in dispute relates to 15 repairs done in June, and later in the year in 2004, 16 related to two of the units of the four unit rental 17 property . 18 Petitioner maintains that, in addition to 19 the amount of $3710 reflected in the record as having 20 been paid to R and R general contractor, that ther e 21 was an additional amount which Petitioner estimated to 22 be as much as $1500 . 23 Petitioner also believes that he ha d 24 additional expenses when he supplied the information 25 to H&R Block which is reflected on the amounts he Heritage Reporting Corporatio n (202) 628-4888 7 1 deducted on his return . 2 However, those pieces of corroboration ir e 3 simply not available to the Petitioner at trial . 4 The Petitioner was unable to explain wha t 5 the additional amounts were, with the exception of his 6 estimate of the additional expenses paid to R and R 7 general contractor . 8 While we found Petitioner's testimony to be 9 candid, and his efforts to improve his property an d 10 develop an investment for himself to be subject to the 11 -- yaow , _ the best efforts of an American citizen 12 to try to improve himself, we cannot allow the total 13 amount of expenses Petitioner claimed on the return, 14 because they were not substantiated . 15 However, due to the Petitioner's candi d 16 testimony, we think it is appropriate to apply Cohan v 17 Commissioner 39F 2nd 540 (Second Circuit, 1930), t o 18 permit the Petitioner a certain amount of deduction 19 based upon his testimony and his estimates o f 20 additional expenses incurred with R and R general 21 contractor relative to two of the units of the four 22 unit rental property . 23 In that regard, we would hold tha t 24 Petitioner is entitled to an additional amount over 25 and above the $6,741 .31 in the amount of $1100 . Heritage Reporting Corporatio n (202) 628-4888 A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 1 7 1 8 1 9 2 0 2 1 22 23 2 4 25 8 Based upon the parties' concessions, and the Court ' s findings as noted previously herein, a Rul e 155 computation for the year 2004 will be necessary . We also note that, under Tax Court Rul e 142 (A)(1), the burden of proof is on the Petitioner i n this case . While section 7491 would allow a shifting o f the burden of proof under certain circumstances , Petitioner ' s failure to keep adequate records make s that section inapplicable and thus, the burden remain s on the Petitioner . This concludes the Court ' s oral findings o f fact and opinion in this case . THE CLERK : All rise . (Whereupon , at 9 :39 a .m ., the bench opinio n in the above - entitled matter was concluded . ) Heritage Reporting Corporation (202) 628-4888