TAX COURT OPINION

Case: Shash Schaekar f.k.a. Shashishekar Basavaraju
Docket Number: 1578-14
Judge: Holmes
Opinion Type: bench
Filed: 12/07/2015
Pages: 9

UNITED STATES TAX COURT WASHINGTON, DC 20217 SHASH SCHAEKAR f.k.a. SHASHISHEKAR BASAVARAJU, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) ) ) ) ) ) O R D E R Docket No. 1578-14. Under Tax Court Rule 152(b), it is ORDERED that the Clerk of the Court send petitioner and respondent a copy of in this case before Judge Mark V. Holmes at San Francisco, California on October 21, 2015. op1nlon. the transcript pages from the trial These contain his oral findings of fact and In accordance with this bench opinion, a decision will be entered for respondent. (Signed) Mark V. Holmes Judge Dated: Washington, D.C. December 7, 2015 SERVED DEC 1 1 2015 Capital Reporting Company 3 1 Bench Opinion by Judge Mark Holmes 2 October 21, 2015 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Shash Schaekar f.k.a. Shashishekar Basavaraju v. Commissioner Docket No. 1578-14 THE COURT: In the case of Shash Schaekar, formerly known as Shashishekar Basavaraju, Docket No. 1578-14, the Court has decided to render oral findings of fact and opinion, and the following represents the Court's oral findings of fact and opinion. This bench opinion is made pursuant to the authority granted by Section 7459(b) of the Internal Revenue Code of 1986, as amended, and Rule 152 of the Tax Court's Ru]es of Practice & Procedure. This case was about the 2010 and 2011 taxes owed by Mr. Schaekar, an Oregon resident when he filed his petition. He stipulated and through his testimony we have a record consisting of the stipulation with attached exhibits and his testimony. I do normally at this point in a bench opinion make some statement about the general credibility of the taxpayer and other witnesses. Here I did not find Mr. Schaekar, in general, to be a 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 credible witness. The government proved that he had altered receipts, during the course of the audit, substituting 2012 for documents from 2008. He tried to explain this by saying that he had merely attempted to show to the revenue agent that these were the types of expenses that he was deducting. This, obviously, greatly undermines the credibility of a witness. Moreover, he claimed on his tax return obviously invalid tax benefits like the educator expense under 66?la)(2) of the Internal Revenue Code, which further undermines his credibility. However, at the start of the trial, Mr. Schaekar conceded all the remaining issues but three. So that was helpful in managing what would otherwise be a longer trial. Those three remaining deductions are the value of his noncash contributions to charity in 2011 and 2012; his moving expenses in 2011; and his unreimbursed business expenses, specifically those for his car for 2011 and 2012. He also conceded the 6662 accuracy-related penalty, except insofar as the Court decided to change the amount of any of his allowable deductions. This, of course, would have happened anyway in the computation at the end of a case. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 I will take these in order, starting first 2 with his noncash contributions to charities. For his 3 4 5 2011 tax year, Mr. Schaekar claimed a Schedule A, charitable contribution totaling $12,365. This consisted of cash gifts in the amount of $600 and a 6 prior year carryover in the amount of $565, which the 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 IRS allowed. However, he also claimed noncash contributions that year, for that year, in the amount of $11,200, and the government allowed only 50 percent of this amount, which consisted of two donations to Goodwill of clothes and furniture, one of 3500 and one of 5500 dollars, and one contribution to Head Start of clothes and furniture of $2200. For the 2012 tax year, Mr. Schaekar claimed $18,800 in noncash contributions -- I'm sorry, in contributions, cash contributions in the form of 36 -- in the amount of $3600, and noncash contributions in the amount of $15,200. Those noncash contributions, again, were to Goodwill and Head Start, as well as a shelter; to Goodwill, clothes, books, and electronics, furniture and furnishings, and household furniture totaling $12,000; and a donation of clothes to Head Start; and fa shelter of $3200. The IRS disallowed the noncash contribution 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 9 10 11 portion of this for 2012, as well, in part because the requirements for noncash contributions in excess of $500 were not met. On this particular point, I do find in favor, in part, for Mr. Schaekar because the relevant regulation, 26 CFR, Section 1.170(a)-13(b)(3)(i) says that "if a taxpayer makes a charitable contribution of property other than money ... and claims a deduction in excess of $500 in respect of the contribution of such item," I construe that to mean that a particular item has to be more than $500. As 12 Mr. Schaekar pointed out, he was donating numerous 13 14 15 16 17 18 19 items and got what he claimed was a receipt for their collective or aggregate value. However, that aside, many of the receipts that he claimed to have received from these charities were in his own writing. They don't match up with the dates that he claimed. He introduced as evidence of charitable deductions things like charge accounts 20 with his own writing on them, receipts and quotations 21 22 23 24 25 for repair of hot tubs. He made notes on some of these receipts, but I'm unsure whether those receipts actually were generated by the organization. The printed forms certainly seem to be but the entries on them appear to be in Mr. Schaekar's own handwriting. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 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 The description of the goods that he donated doesn't match, and indeed, he admitting back- dating at least one of the receipts, further undermining his credibility. This makes, in my view, his records of charitable contributions unreliable, his testimony equally unreliable, and so my conclusion is not to grant him more than the 50 percent of these noncash contributions that the IRS already allowed. Moving on to the second category of contested expenses, his moving expenses for the year 2011, for that year he claimed a moving expense deduction in the amount of five -- I'm sorry, in the amount of $8958, of which the revenue agent allowed him $385 for storage and $753 paid for a rental car for one-month car rental, between May and June of 2011. It is, of course, true that moving expenses are deductible. Section 217(a) of the code allows a deduction for them if paid during a taxable year by an individual taxpayer in connection with the commencement of work as an employee or as a self- employed individual at a new principal place of work. /hoes on to say that "no deduction is allowed under Section 217 unless the taxpayer's new principal place 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 1 2 3 4 of work is at least 50 miles farther from the taxpayer's old residence than was the taxpayer's old principal place of work. See Section 217(c) (1) (A)." Now, in 2011 in April of that year, 5 Mr. Schaekar got a new job in Wilsonville, Oregon, 6 7 and he had moved around a bit both before and after getting that new position. When he got it, he was in 8 West Linn, Oregon, which is 13 miles away from his 9 new place of employment; but after he got the 10 employment, he moved 32 miles for a couple of months 11 until August of 2011. That month he said he moved to 12 13 14 15 16 17 18 19 20 21 22 23 24 25 St. (sic) Joseph, Oregon, which is more than 50 miles away; it's about 370 miles away. After staying there for a month on the ranch of his ex-girlfriend's parents, he moved back to West Linn, 370 -- 336 or so miles, and then finally in February of 2012, he moved 14 miles to his current address (sic) in Portland, Oregon. The regulations for Section 217 make clear, 26 CFR, Section 1.217-2(a) (3) (i), "To be deductible, the moving expenses must be paid or incurred by the taxpayer in connection with his commencement of work at a new principal place of work." He had already started work when he made the one move that was more than 50 miles away for his 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 1 month in the country with his ex-girlfriend's 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 parents, on their ranch. My conclusion here is that no -- he gets no additional deduction here, either. That leaves the third issue, unreimbursed business expenses for the use of his car. These are, of course, subject to the enhanced substantiation rules of Section 274 of the code, which includes cars as listed property and thus subject to those enhanced substantiation requirements. Under the regulations, 26 CFR, Section 1.274-5T(c)(3), only certain types of evidence suffice to support a deduction. Mr. Schaekar did not establish that he incurred these expenses, but more important, his mileage summary doesn't meet the strict substantiation requirements, required by that section of the code. He had no listings of the specific dates he used his car, no specific listing of the miles for the trips that he used his car in, nor what the business purpose of each trip was. My conclusion, therefore, is a decision entirely for the Respondent in this case. This concludes the Court's oral findings of fact and opinion. (Whereupon, at 5:15 p.m., the above- 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 entitled matter was concluded.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com