t c summary opinion united_states tax_court freddy w fuentes petitioner v commissioner of internal revenue respondent docket no 16020-07s filed date freddy w fuentes pro_se elizabeth s martini and michael shelton student for respondent dean special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case unless otherwise indicated subsequent section references are to the code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure for respondent determined an dollar_figure deficiency in petitioner’s federal_income_tax and a dollar_figure accuracy-related_penalty under sec_6662 the issues remaining for decision1 are whether petitioner is entitled to deductions for business_expenses claimed on his amended schedule c profit or loss from business entitled to itemized_deductions in an amount in excess of the standard_deduction entitled to a personal_exemption for his spouse yvonne fuentes and a dependency_exemption deduction for his father hector fuentes and liable for the accuracy-related_penalty under sec_6662 1in respondent’s pretrial memorandum he conceded that petitioner was entitled the following deductions dollar_figure for software purchased for his work with promesa systems hereinafter mis as petitioner referred to promesa systems as mis as an unreimbursed employee expense dollar_figure for a projector and screen used in petitioner’s soccer coaching activity coaching activity and dollar_figure for soccer training cds 2adjustments for the following are computational and are to be resolved consistent with the court’s decision petitioner’s liability for self-employment_tax and his deduction therefor whether petitioner is entitled to itemize his deductions or is limited to the standard_deduction and the amount of petitioner’s net medical and dental expenses and his entitlement to a deduction for medical and dental expenses background some of the facts have been stipulated and are so found the stipulation of facts and the exhibits received into evidence are incorporated herein by reference when the petition was filed petitioner resided in new york during petitioner worked as a telecommunications supervisor for mis and for the manhattan soccer club soccer club training boys’ and girls’ teams age levels u-9 and u-12 neither mis nor the soccer club reimbursed petitioner for his local expenditures petitioner’s contract with the soccer club provided that he was required to supply his own equipment but the soccer club would pay for coach’s lodging meals and car travel_expenses for any tournaments out of the tri-state area during he traveled to various locations for practices games and tournaments which included travel to long island and manhattan new york virginia and new jersey he also traveled to westchester pennsylvania to acquire a b license issued by the national soccer coaches association nsca petitioner’s return preparer timely filed petitioner’s form_1040 u s individual_income_tax_return electronically for on schedule c petitioner reported dollar_figure in gross_receipts and dollar_figure in total expenses discussed infra for a dollar_figure net_loss on schedule a itemized_deductions petitioner claimed dollar_figure in total itemized_deductions discussed infra he also filed as single and claimed one personal_exemption for himself upon examination of petitioner’s form_1040 respondent sent a notice_of_deficiency to his last_known_address respondent determined an dollar_figure deficiency and a dollar_figure accuracy-related_penalty and proposed the following adjustments item per return adjustment sched c supplies sched c car and truck expenses se agi adjustment self-employment_tax unreimbursed employee_expenses state and local_taxes noncash contributions cash contributions total itemized_deductions standard_deduction dollar_figure big_number -0- -0- big_number big_number big_number big_number big_number -0- dollar_figure big_number big_number big_number big_number big_number big_number big_number respondent allowed petitioner a dollar_figure deduction for medical and dental expenses before application of the 5-percent floor respondent also made a computational adjustment to petitioner’s net medical and dental expense to reflect changes to his adjusted_gross_income in response petitioner sought the advice of another return preparer who submitted for a form 1040x amended u s individual_income_tax_return and amended schedules to the irs 3by submitting amended schedules a and c petitioner effectively and is therefore deemed to have conceded that the continued on petitioner’s amended schedule c he claimed dollar_figure in gross_receipts and dollar_figure in total expenses discussed infra for a dollar_figure net_loss on petitioner’s amended schedule a he claimed continued following deductions were inaccurate item original amended schedules schedules advertising commissions and fees car and truck expenses office expense supplies utilities travel sch c taxes licenses meals and entertainment other expenses sch a state_and_local_income_taxes nysdi tobacco_tax real_estate_taxes charitable_contributions paid_by cash or check charitable_contributions -0- dollar_figure -0- dollar_figure dollar_figure dollar_figure dollar_figure big_number dollar_figure big_number dollar_figure big_number dollar_figure dollar_figure big_number dollar_figure dollar_figure big_number -0- dollar_figure -0- dollar_figure dollar_figure of property dollar_figure sch a vehicle expense dollar_figure sch a parking fees tolls and transportation dollar_figure professional subscriptions dollar_figure uniforms and protective clothing dollar_figure big_number big_number -0- -0- big_number big_number see 52_tc_532 taxpayer admitted by filing amended returns inter alia that his claimed deduction was excessive affd 424_f2d_639 2d cir 62_tc_739 statements made in a tax_return signed by a taxpayer may be treated as admissions affd without published opinion 521_f2d_1399 3d cir dollar_figure in itemized_deductions discussed infra he changed his filing_status from single to married_filing_jointly petitioner also claimed two personal exemptions for himself and his wife and a dependency_exemption deduction for his father discussion the commissioner’s determinations in a notice_of_deficiency are presumed correct and the taxpayer bears the burden to prove that the determinations are in error see rule a 290_us_111 but the burden_of_proof on factual issues that affect the taxpayer’s tax_liability may be shifted to the commissioner where the taxpayer introduces credible_evidence with respect to the issue and the taxpayer has satisfied certain conditions see sec_7491 petitioner has not alleged that sec_7491 applies and he has neither complied with the substantiation requirements nor maintained all required records see sec_7491 and b accordingly the burden_of_proof remains on him ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying_on_a_trade_or_business are generally deductible sec_162 but as a general_rule no deduction is allowed for travel meals and entertainment or listed_property unless the taxpayer complies with certain 4listed property is defined to include passenger automobiles computers and peripheral equipment and cell phones continued substantiation requirements sec_274 the court therefore may not estimate a taxpayer’s expenses with respect to the items enumerated in sec_274 see 50_tc_823 affd per curiam 412_f2d_201 2d cir i schedule c deductions a car and truck expenses in order to substantiate the amount of an automobile expense the taxpayer must prove the amount of the expenditure ie cost of maintenance repairs or other expenditures the amount of each business use and the amount of the vehicle’s total use by establishing the amount of its business mileage and total mileage time ie the date of the expenditure or use and the business_purpose of the expenditure or use sec_1_274-5t temporary income_tax regs fed reg date the taxpayer may substantiate the amount of mileage by adequate_records or sufficient evidence that corroborates his statements sec_274 a record of the mileage made at or near the time of the automobile’s use that is supported by documentary_evidence has a high degree of credibility not present with a subsequently continued sec_280f prepared statement sec_1_274-5t through temporary income_tax regs fed reg date to meet the adequate_records requirement the taxpayer must maintain an account book diary log statement of expense trip sheets or similar record and documentary_evidence that in combination are sufficient to establish each element of expenditure or use sec_1_274-5t temporary income_tax regs supra an adequate record must be prepared or maintained in such manner that each recording of an element of an expenditure or use is made at or near the time of the expenditure or use sec_1_274-5t temporary income_tax regs supra ‘ m ade at or near the time of the expenditure or use’ means that the elements of an expenditure or use are recorded at a time when in relation to the use or making of an expenditure the taxpayer has full present knowledge of each element of the expenditure or use sec_1_274-5t temporary income_tax regs supra petitioner claims a dollar_figure deduction for car and truck expenses on his amended schedule c consisting of big_number business miles big_number commuting miles and big_number other miles he provided a spreadsheet and an attached supplement that purports to reflect the miles he drove in the spreadsheet’s mileage categories consist of big_number miles for commuting from petitioner’s home to mis and big_number miles for travel with respect to his coaching activity the coaching activity’s mileage consists of mileage from mis to soccer fields tuesdays through fridays from a soccer field to another soccer field s return trips from a soccer field to his home and trips from his home to a soccer field on the weekends he also included various schedules for practices games and tournaments of his teams petitioner’s testimony established that he did not record the miles driven from day to day or for traveling in his coaching activity for rather his mileage records were created after the fact therefore his spreadsheet the attached supplement and the various schedules do not satisfy the adequate record requirement see sec_1_274-5t and ii a temporary income_tax regs supra although the court believes that petitioner accrued mileage in his coaching activity the court may not apply the cohan_rule to estimate his deductible expense see 39_f2d_540 2d cir 5the court also notes that any expenses petitioner incurred in commuting between his residence and either job are nondeductible personal expenses see sec_162 sec_262 413_us_838 sec_1_162-2 sec_1_262-1 income_tax regs but transportation_expenses incurred on trips between places of business may be deductible 335_f2d_496 5th cir affg and remanding tcmemo_1962_233 petitioner however did not substantiate his mileage for trips between places of employment additionally petitioner did not prove that the soccer club did not reimburse him for his expenses as provided in his contract see supra p sanford v commissioner supra pincite accordingly respondent’s determination is sustained b tolls on petitioner’s supporting statement attached to his form 1040x he claims a dollar_figure deduction computed as follows x trips x dollar_figure he also stated that the expenditures were made in his coaching activity with respect to car-truck wks kia rio the court assumes that the deduction was claimed for toll expenses which generally may be deducted as a separate item see revproc_2004_64 sec_5 2004_2_cb_900 but petitioner has not provided any receipts to substantiate his expenditures and he has not proven that he was not reimbursed by the soccer club for his expenditures as provided in his contract see supra p therefore petitioner is not entitled to the deduction respondent’s determination is sustained c expense for the business use of petitioner’s home expenses for the business use of a taxpayer’s residence are deductible under limited circumstances the taxpayer must show that a portion of the residence was exclusively used on a regular basis as his principal_place_of_business sec_280a the term ‘a portion of the dwelling unit’ refers to ‘a room or other separately identifiable space ’ a permanent partition marking off the area is not necessary hefti v commissioner tcmemo_1993_128 quoting sec_1 280a-2 g proposed income_tax regs fed reg date the term principal_place_of_business includes a place of business used by the taxpayer to perform administrative or management activities related to the trade_or_business if there is no other fixed location of the trade_or_business where substantial administrative or management activities are undertaken sec_280a petitioner claims a deduction of dollar_figure for office expense for the business use of his home in his coaching activity on his amended schedule c his expenses consist of dollar_figure for rent dollar_figure for electricity dollar_figure for paint dollar_figure for furniture dollar_figure for a computer dollar_figure for a printer and dollar_figure for a fax machine petitioner’s evidence consisted of an american express statement showing two purchases from futon beds more for dollar_figure and dollar_figure and a dollar_figure purchase from east islip paint a letter from his landlord stating that petitioner was renting an apartment in her house at dollar_figure per month in photographs which indicate that the room was used for nothing more than to store the equipment and his testimony petitioner testified that he rented a six-room apartment in which he had converted one of the three bedrooms into an office for which he claimed one-sixth of the rent and electricity for the year he testified that he purchased paint for dollar_figure and related equipment for dollar_figure these purchases were evidenced by the american express statement he also testified that the dollar_figure deduction for furniture consisted of a couch purchased in for his office finally he testified that he purchased a computer a printer and a fax machine in for his office but he did not have a receipt to substantiate those purchases petitioner however has not proven that the bedroom was exclusively used on a regular basis as his principal_place_of_business for his coaching activity see sec_280a in addition he has not adequately substantiated his expenses ie he did not provide receipts for his purchases and the american express statement does not prove that the expenditures were for furniture and paint for the office finally he has provided no evidence that substantiates his claimed deductions for the expenses related to his computer and peripheral equipment in accordance with sec_274 and the regulations thereunder accordingly petitioner is not entitled to a deduction for expenses related to the business use of his home respondent’s determination is sustained d utilities petitioner claims a dollar_figure deduction for utilities on his amended schedule c his deduction for utilities consists of description amount cell phone for soccer dollar_figure per month internet dollar_figure per month new cell phone dollar_figure dollar_figure dollar_figure expenses for cell phone use must be substantiated in accordance with sec_274 and the regulations thereunder sec_274 see supra note petitioner testified that he used one of his cell phones strictly for phone calls and e-mails in his coaching activity while his other cell phone was used for personal purposes he has provided no evidence that substantiates his cell phone expense in accordance with sec_274 and the regulations thereunder thus petitioner is not entitled to those deductions and the court may not apply the cohan_rule to estimate his deductible expense see 39_f2d_540 2d cir sanford v commissioner t c pincite 6petitioner claimed the expenditures as a separate item on line utilities on his amended schedule c rather than on line expenses for business use of your home generally utilities attributable to the taxpayer’s maintenance of a home_office are deductible as business_expenses under sec_280a sec_1 b income_tax regs because the expenditures are otherwise disallowed the court does not address whether petitioner mischaracterized his deductions the court has characterized internet expenses as utility expenses verma v commissioner tcmemo_2001_132 strict substantiation therefore does not apply and the court may apply the cohan_rule to estimate petitioner’s deductible expense provided that the court has a reasonable basis for making an estimate see 85_tc_731 an estimate must have a reasonable evidentiary basis pistoresi v commissioner tcmemo_1999_39 petitioner testified that he used the internet for researching different teams newer equipment and soccer camps in his coaching activity he also testified that he did not use the internet for personal_use because he had internet access at work petitioner however has provided no receipts or other documentation to substantiate his internet expense therefore petitioner is not entitled to the deduction and the court cannot estimate his expense because he has not provided the court with any basis for making an estimate respondent’s determination is sustained e supplies petitioner claims a dollar_figure deduction for supplies on his amended schedule c his supplies consist of description amount screening tv for games with projector office supplies soccer balls nets etc cds for training dollar_figure big_number uniforms--sweat suit shorts shirt sec_5 sets soccer cleats hats gloves laundry costs dollar_figure per week x petitioner testified that players coaches and managers came to his home once or twice a month to view presentations on how we would play and how they are going to defend and things like that he testified that the projector and screen was not used for any other purpose because it was just a plain wide screen and you project games on it he also testified that he had a sony tv in his apartment he submitted a receipt from tigerdirect com to substantiate his purchase of the projector and screen the receipt shows that he paid dollar_figure for the items the court concludes that petitioner is entitled to a dollar_figure deduction for the projector and screen rather than the dollar_figure that respondent conceded see supra note petitioner also testified that his office supplies consisted of papers pens pencils you name it to substantiate his deduction for office supplies he submitted a copy of his american express statement that shows a purchase was made from costco for dollar_figure but the statement does not prove that the amount was expended for paper pens or the like the court concludes that petitioner is not entitled to a dollar_figure deduction for office supplies and respondent’s determination is sustained to substantiate petitioner’s dollar_figure deduction for supplies he has submitted photographs of soccer equipment a team quote of dollar_figure from bigtoe sports an american express statement showing a purchase of dollar_figure from haydees sports soccer and a document setting forth item numbers descriptions quantities and prices for a total purchase_price of dollar_figure the document although the document shows shipping costs of dollar_figure and a total purchase_price of dollar_figure the document does not bear a retailer’s name or other evidence of proof of payment by petitioner upon the basis of the foregoing the court finds that petitioner is entitled to a deduction of only dollar_figure for the equipment see cohan v commissioner f 2d pincite estimates of a taxpayer’s deductions bear heavily against the taxpayer whose inexactitude is of his or her own making although the court believes because of the photographs that petitioner made expenditures_for the equipment he has not provided any reasonable evidentiary basis for making an estimate of his expenses other than the self-serving document see vanicek v commissioner supra pincite therefore respondent’s disallowance of the remaining dollar_figure is sustained to substantiate petitioner’s dollar_figure deduction for training cds he has submitted a receipt for the purchase of a soccer cd for dollar_figure and the aforementioned document alleging that he made payments of dollar_figure and dollar_figure for dvds entitled training sessions around the world and nscaa tactical development respectively the court concludes that petitioner is entitled to a deduction of dollar_figure for the training cds rather than the dollar_figure that respondent conceded see supra note respondent’s disallowance of the remaining dollar_figure is sustained because petitioner failed to produce credible_evidence to substantiate his expenditures or provide the court with a reasonable basis for estimating his deduction with respect to petitioner’s dollar_figure deduction for soccer cleats petitioner’s only evidence consisted of the aforementioned document alleging that he purchased one pair of predator pulsion cleats for dollar_figure and two pairs of lotto primato cleats for dollar_figure as stated earlier the document does not prove that petitioner made the purchases or provide the court with a reasonable basis for estimating his deduction therefore respondent’s determination is sustained with respect to the deductions for uniforms sweat suit five sets of shorts and shirts and hats and gloves petitioner has provided no evidence such as a receipt to substantiate his deductions the document does not provide the court with a reasonable basis for estimating his deduction accordingly respondent’s determination is sustained petitioner testified that his dollar_figure deduction for laundry included the cost of his wife’s washing of the teams’ pennies and his uniforms sweat suits or shorts he has provided no receipts to substantiate his expenditures_for laundry detergent or fabric softener and he has not provided any utility bills to establish his expenditures_for water gas or electricity he has not provided the court with a reasonable basis for estimating his deduction for laundry accordingly respondent’s determination is sustained f taxes and licenses petitioner claims a dollar_figure deduction for taxes and licenses on his amended schedule c on petitioner’s supporting statement attached to his form 1040x he set forth the following description amount license dollar_figure cost of taking tests-2 weeks dollar_figure meals--14 days dollar_figure day dollar_figure transport--l i to westchester mi x toll dollar_figure dollar_figure other than petitioner’s testimony that he spent weeks testing to obtain a b license from nsca there is no evidence substantiating a dollar_figure deduction in addition he has not substantiated the travel and meal expenses associated with his license in accordance with sec_274 and the regulations thereunder respondent’s determination is sustained g travel and meals and entertainment petitioner claims a dollar_figure deduction for travel and a dollar_figure deduction for meals and entertainment on his amended schedule c on petitioner’s supporting statement attached to his form 1040x he set forth the following description labor day tournament meals tournaments in new jersey meals meetings with managers and assistant coaches amount dollar_figure to substantiate deductions for travel and meals and entertainment taxpayers must substantiate the amount of the expense the time and place of the travel or entertainment the business_purpose of each expense and the business relationship to the taxpayer of the persons entertained sec_274 sec_1_274-5t temporary income_tax regs fed reg date petitioner has provided no evidence satisfying the strict substantiation requirements of sec_274 and the regulations thereunder he also has not proven that the soccer club did not reimburse him for the expenditures as provided in his contract see supra p petitioner is not entitled to the deductions and respondent’s determinations are sustained see sanford v commissioner t c pincite h other magazines books and publications petitioner claims a dollar_figure deduction for magazines books and publications on his amended schedule c he has provided no receipts or other evidence to substantiate his deduction therefore petitioner is not entitled to the deduction and the court cannot estimate his expense because he has not provided the court with any basis for making an estimate respondent’s determination is sustained ii schedule a deductions a state and local_taxes sec_164 allows a taxpayer deductions for state_and_local_income_taxes real_property_taxes and personal_property_taxes although respondent allowed a deduction of dollar_figure for schedule a state and local_taxes petitioner claims a deduction for state and local_taxes of dollar_figure his deduction consists of state_and_local_income_taxes of dollar_figure and real_property_taxes of dollar_figure with respect to a timeshare on his amended schedule a he provided an account detail history that shows that he made a dollar_figure payment for property_tax on date petitioner however has not shown that respondent has not already given him credit for this dollar_figure payment and he has not substantiated payments greater than the dollar_figure that respondent allowed accordingly respondent’s determination is sustained b charitable_contribution sec_1 gifts by cash or check in pertinent part sec_1_170a-13 income_tax regs provides that separate contributions of less than dollar_figure are not subject_to the contemporaneous written acknowledgment requirement of sec_170 regardless of whether the sum of the contributions to such organization equals dollar_figure or more rather monetary charitable_contributions of less than dollar_figure must be substantiated by a canceled check a receipt from the organization that shows the organization’s name the date of the contribution and the amount thereof or other reliable written records that show the organization’s name the date of the contribution and the amount thereof sec_1_170a-13 income_tax regs petitioner claims on his amended schedule a a dollar_figure deduction for charitable_contributions paid_by cash or checks he testified that his charitable_contributions paid_by cash or check were for the church that i gave to somebody and i think all of that is provided in there i think he has provided no other evidence to substantiate his deductions for charitable_contributions for the court does not accept his 7the court assumes that petitioner’s payments for charitable_contributions did not equal or exceed dollar_figure and therefore are not subject_to the more exacting standard of sec_170 and the regulations thereunder uncorroborated self-serving testimony see 294_f2d_328 4th cir affg 34_tc_845 87_tc_74 without other reliable evidence to substantiate petitioner’s purported charitable_contributions he is not entitled to claim a deduction for them and the court will not apply the cohan_rule to estimate a deductible amount see cohan v commissioner f 2d pincite see also 100_tc_32 the reporting requirements of sec_1_170a-13 income_tax regs are directory and not mandatory vanicek v commissioner t c pincite accordingly respondent’s determinations are sustained gifts other than by cash or check to verify a charitable_contribution of property other than money the regulations require the taxpayer to maintain a receipt from the organization for each contribution showing the organizations’s name the contribution’s date and location and the property’s description in detail reasonably sufficient under the circumstances sec_1_170a-13 income_tax regs a letter or other written communication from the organization acknowledging receipt of the contribution showing the date thereof and containing the required description of the property contributed constitutes a receipt id where it is impractical to obtain a receipt the taxpayer must maintain other reliable written records of the noncash contributions id the other reliable written records shall contain the organization’s name and address the contribution’s date and location the property’s description the property’s fair_market_value at the time of the donation the method utilized in determining the property’s fair_market_value the property’s basis if the taxpayer is required to reduce the contribution by the amount of ordinary_income or capital_gain that would have been realized had the taxpayer sold the property for its fair_market_value and any agreements or conditions that relate to the use sale_or_other_disposition of the contributed_property sec_1_170a-13 income_tax regs additionally where a taxpayer claims a deduction for a charitable_contribution of property in excess of dollar_figure the taxpayer is also required to attach form_8283 noncash charitable_contributions to the taxpayer’s form_1040 and maintain a written record that indicates how the property was acquired and the taxpayer’s basis in the property sec_1 170-13a b income_tax regs the reliability of the other reliable written records is determined on the basis of all of the facts and circumstances sec_1_170a-13 income_tax regs factors indicative of reliability include but are not limited to the contemporaneousness of the writing evidencing the contribution the regularity of the taxpayer’s recordkeeping procedures eg a contemporaneous diary entry stating the amount and date of the contribution and the organization’s name that is made by a taxpayer who regularly makes such diary entries and in the case of a de_minimis contribution any written or other evidence from the organization evidencing the contribution that would not otherwise constitute a receipt including a token traditionally associated with the organization and regularly given by it to persons making cash donations sec_1 170a- a i b i income_tax regs but deductions for contributions of cash or property of dollar_figure or more must be substantiated by a contemporaneous written acknowledgment from the organization sec_170 see also sec_1_170a-13 income_tax regs a written acknowledgment is contemporaneous if it is obtained by the taxpayer on or before the earlier of the date the taxpayer files the original return for the taxable_year of the contribution or the due_date including extensions for filing the original return for the year sec_170 sec_1_170a-13 income_tax regs the written acknowledgment must state the amount of cash and a description but not necessarily the value of any property other than cash that the taxpayer donated and whether the organization provided any consideration to the taxpayer in exchange for the donation sec_170 and ii sec_1_170a-13 and ii income_tax regs petitioner claims on his amended schedule a a dollar_figure deduction for charitable_contributions of property donated to the promesa foundation promesa on various dates in his purported donations consist of clothing jackets suits dresses gowns and a computer and related equipment he reported a total cost_basis of dollar_figure and a total fair_market_value of dollar_figure he also reported that the method used to determine the fair_market_value was fair_market_value with respect to the clothing jackets suits dresses and gowns petitioner has not provided a receipt from promesa or a reliable written record satisfying the requirements of sec_1_170a-13 income_tax regs the court does not accept his uncorroborated self-serving testimony regarding his purported donations see urban redev corp v commissioner f 2d pincite tokarski v commissioner t c pincite without other reliable evidence to substantiate those charitable_contributions petitioner is not entitled to claim a deduction for them and the court will not apply the cohan_rule to estimate a deductible amount see cohan v commissioner f 2d pincite- 8the court assumes that the deduction claimed for each of these items did not equal or exceed dollar_figure and therefore are not subject_to the more exacting standard of sec_170 and the regulations thereunder see also bond v commissioner t c pincite respondent’s determinations are sustained to substantiate petitioner’s contributions of the fax computer and related equipment he submitted a letter from promesa dated date the letter’s author claims that petitioner purchased the computer in and donated it later that year the letter’s author also claims based upon my knowledge and based upon a review of several catalogues available from the following are the values property printer hp model laserjet fax hp model fax with answering machine open model pentium iv-1 ghz gb hd mb ram windows xp professional office monitor value dollar_figure dollar_figure dollar_figure the court accords little weight to the letter acknowledging the contributions of the computer and related equipment because it was written about years after the contributions with respect to the computer and monitor the letter does not satisfy the contemporaneous written acknowledgment requirement of sec_170 and the regulations thereunder specifically the letter is not contemporaneous and it fails to satisfy the requirement that the organization provide a statement as to whether the organization provided any goods or services in consideration for the donation additionally the values of the contributions appear to be based upon the values of such equipment in a new rather than a used condition since the computer and related equipment were used this method overstated their actual values see mack v commissioner tcmemo_1980_401 affd without published opinion 690_f2d_906 11th cir petitioner did not introduce any other evidence supporting the estimated values he has not satisfied the requirements of sec_1_170a-13 and f income_tax regs therefore petitioner is not entitled to the claimed deductions and the court will not apply the cohan_rule to estimate a deductible amount see cohan v commissioner f 2d pincite- accordingly respondent’s determinations are sustained c unreimbursed employee_business_expense sec_1 professional subscriptions petitioner claims a dollar_figure deduction for professional subscriptions as an unreimbursed employee expense on his amended schedule a on petitioner’s supporting statement attached to his form 1040x he set forth the following description amount daily newspaper satellite for job dollar_figure per month magazines-dummy books dollar_figure big_number petitioner testified that his subscriptions expense related to magazines and stuff for soccer he has provided no receipts or other evidence to substantiate those deductions therefore petitioner is not entitled to the deductions and the court cannot estimate his expense because he has not provided the court with any basis for making an estimate respondent’s determination is sustained petitioner testified that the deductions for his satellite expense related to soccer games that his players and the other coaches watched at his home he also testified that he deducted only a portion of the expense ie dollar_figure and that his monthly satellite cost was dollar_figure or dollar_figure he provided respondent with a credit card statement reflecting a one-time fee to dish network for dollar_figure in petitioner has provided no other evidence to substantiate his monthly expenditures_for the satellite in his coaching activity in addition he has not provided any evidence that establishes either his personal or business use of the satellite therefore petitioner is not entitled to the deduction and the court cannot estimate his expense because he has not provided the court with any basis for making an estimate respondent’s determination is sustained uniforms and protective clothing petitioner claims a dollar_figure deduction for uniforms as an unreimbursed employee expense on his amended schedule a on petitioner’s supporting statement attached to his form 1040x he set forth the following description amount shirts x pants x special t-shirts x work shoes x socks pair jackets winter jacket hats gloves scarves laundry costs dollar_figure per week dry cleaning dollar_figure per week dollar_figure big_number big_number clothing is a deductible expense only if it is required for the taxpayer’s employment is unsuitable for general or personal wear and is not so worn see 74_tc_1266 30_tc_757 if the cost of acquiring clothing is deductible then the cost of maintaining the clothing is also deductible 23_tc_218 affd 230_f2d_79 7th cir petitioner testified that his uniform for mis consisted of jeans and long-sleeve shirts during the winter he testified that mis let him pick out what he wanted to wear and what he wanted to purchase he also testified that his laundry and dry cleaning costs were for expenditures he made for cleaning his mis uniforms petitioner admitted that mis did not require him to wear a specific uniform moreover his uniform consisted of clothing that is suitable for general or personal wear and he has failed to prove otherwise he also failed to substantiate either the cost of purchase or the cost of maintaining of his uniforms accordingly petitioner is not entitled to his claimed deductions and respondent’s determinations are sustained other supplies on petitioner’s original and amended schedules a he claimed a dollar_figure deduction for supplies as an unreimbursed employee expense petitioner presented neither evidence nor argument concerning his supplies expenses and is thus deemed to have conceded that issue see 61_tc_311 mikalonis v commissioner tcmemo_2000_281 iii exemptions a petitioner’s spouse petitioner did not claim a personal_exemption for his wife on his form_1040 but he did claim a personal_exemption for his wife on his form 1040x sec_151 provides a taxpayer with an exemption for a spouse if the taxpayer and the spouse do not file a joint_return the spouse had no gross_income and the spouse is not dependent on another taxpayer during the calendar_year in which the taxpayer’s tax_year began 9although petitioner submitted a form 1040x to respondent that purports to be a joint_return and claims a personal_exemption for his wife the form 1040x was not signed by his wife and has not been accepted by respondent as filed in addition sec_6013 provides that an election to file a joint_return after the filing of a separate_return may not be made where a continued petitioner did not prove that he satisfied the requirements of sec_151 he failed to prove that his wife did not have gross_income and that she was not dependent on another taxpayer during dollar_figure respondent’s determination is sustained b petitioner’s father petitioner did not claim a dependency_exemption deduction for his father on his form_1040 but he did claim a dependency_exemption deduction for his father on his amended form 1040x generally taxpayers may claim dependency_exemption deductions for their dependents as defined in sec_152 sec_151 the term dependent includes a qualifying_relative sec_152 under sec_152 a qualifying_relative is an individual who bears a qualifying relationship to the taxpayer such as the taxpayer’s father sec_152 whose gross_income for the year is less than the sec_151 exemption_amount dollar_figure for who receives over one-half of his support from the taxpayer for the continued notice_of_deficiency has been mailed to either spouse and such spouse has filed a petition with the court respondent mailed the notice_of_deficiency to petitioner’s last_known_address on date petitioner filed his petition on date and he submitted the form 1040x on date accordingly the court concludes that a joint_return was not filed and that sec_151 governs the court’s analysis of this issue 10petitioner did not call his wife as a witness to testify about these issues taxable_year and who is not a qualifying_child of the taxpayer or of any other taxpayer for the taxable_year petitioner provided a copy of his father’s social_security card and a letter purportedly written by his father the letter’s author claims that he lived with petitioner and petitioner’s wife during that he had no income for and that petitioner paid all of his expenses petitioner testified that his father lived with him during that his father was in his late fifties in and that his father stopped working or retired in because he had cancer and ecuador’s economy was not very good he also testified that nobody else supported his father because there were no other family members here to support him petitioner did not call his father or any other person as a witness in addition the court is reluctant to rely on the letter and petitioner’s self-serving testimony without other corroborative evidence petitioner is not entitled to the dependency_exemption deduction for his father respondent’s determination is sustained iv accuracy-related_penalty initially the commissioner has the burden of production with respect to any penalty addition_to_tax or additional_amount sec_7491 the commissioner satisfies this burden of production by coming forward with sufficient evidence that indicates it is appropriate to impose the penalty see 116_tc_438 once the commissioner satisfies this burden of production the taxpayer must persuade the court that the commissioner’s determination is in error by supplying sufficient evidence of reasonable_cause substantial_authority or a similar provision id in pertinent part sec_6662 and b and imposes an accuracy-related_penalty equal to percent of the underpayment that is attributable to negligence or disregard of rules or regulations or a substantial_understatement of income taxdollar_figure sec_6662 defines the term negligence to include any failure to make a reasonable attempt to comply with the provisions of this title and the term disregard to include any careless reckless or intentional disregard negligence also includes any failure by the taxpayer to keep adequate books_and_records or to substantiate items properly sec_1_6662-3 income_tax regs sec_6664 is an exception to the sec_6662 penalty no penalty is imposed with respect to any portion of an underpayment if it is shown that there was reasonable_cause therefor and the taxpayer acted in good_faith sec_11because the court finds that petitioner was negligent or disregarded rules or regulations the court need not discuss whether there is a substantial_understatement_of_income_tax see sec_6662 fields v commissioner tcmemo_2008_207 b income_tax regs incorporates a facts_and_circumstances_test to determine whether the taxpayer acted with reasonable_cause and in good_faith the most important factor is the extent of the taxpayer’s effort to assess his proper tax_liability id circumstances that may indicate reasonable_cause and good_faith include an honest misunderstanding of fact or law that is reasonable in light of the experience knowledge and education of the taxpayer id the court finds that respondent has met his burden of production and that petitioner was negligent petitioner did not properly substantiate his deductions as required by the code and the regulations in addition he conceded that several of his deductions were inaccurate see supra note petitioner did not establish a defense for his noncompliance with the code’s requirements respondent’s determination is therefore sustained to reflect the foregoing decision will be entered under rule


t c summary opinion united_states tax_court william franklin salzman ii petitioner v commissioner of internal revenue respondent docket no 2409-07s filed date william franklin salzman ii pro_se bruce m wilpon for respondent dawson judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect when the petition was filed pursuant to sec_7463 the decision to be entered is not reviewable by any other court and this opinion shall not be treated as precedent for any other case 1unless otherwise indicated all subsequent section references are to the internal_revenue_code in effect for the year in issue respondent determined a deficiency of dollar_figure in petitioner’s federal_income_tax for at issue is whether support payments petitioner made to his former wife in constitute alimony as defined by sec_71 and are thus deductible by him under sec_215 background all of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference when the petition was filed petitioner resided in san antonio texas petitioner was previously married to beverly salzman his former wife their marriage was dissolved through proceedings in the district_court of bexar county texas an agreed final decree of divorce divorce decree was approved and entered by that court on date it included a contractual agreement between petitioner and his former wife both having been represented by counsel as to spousal support and property division under the heading spousal support the divorce decree provides in pertinent part it is ordered that william franklin salzman ii is obligated to pay and shall pay to beverly june salzman spousal maintenance of dollar_figure per month for a period of no longer than four years with the first payment of dollar_figure being due and payable on date and a second payment of dollar_figure being due and payable on date and thereafter a like payment of dollar_figure being due and payable on the first day of each month for a period of no longer than four years neither the agreement nor the divorce decree specifies whether petitioner’s obligation to make such payments would terminate upon his former wife’s death in petitioner made spousal support payments totaling dollar_figure to his former wife for which he claimed an alimony deduction on his federal_income_tax return for that year respondent disallowed the claimed alimony deduction in the notice_of_deficiency discussion2 petitioner contends that because he always made timely support payments to his former wife in compliance with his agreement and the district court’s judgment he is entitled to his claimed alimony deduction to the contrary respondent contends that petitioner’s payments do not qualify as alimony under the internal_revenue_code sec_71 provides the general_rule that alimony payments are included in the gross_income of the payee spouse sec_215 provides the complementary general_rule that alimony payments are deductible by the payor spouse in an amount equal to the alimony or separate_maintenance payments paid during such individual’s taxable_year 2the issue for decision is essentially legal therefore we decide it without regard to the burden_of_proof the term alimony means any alimony as defined in sec_71 sec_71 provides in part sec_71 alimony or separate_maintenance payments defined --for purposes of this section-- in general --the term alimony_or_separate_maintenance_payment means any payment in cash if-- a such payment is received by or on behalf of a spouse under_a_divorce_or_separation_instrument b the divorce_or_separation_instrument does not designate such payment as a payment which is not includable in gross_income and not allowable as a deduction under sec_215 c in the case of an individual legally_separated from his spouse under a decree of divorce or of separate_maintenance the payee spouse and the payor spouse are not members of the same household at the time such payment is made and d there is no liability to make any such payment for any period after the death of the payee spouse and there is no liability to make any payment in cash or property as a substitute for such payments after the death of the payee spouse the parties agree that petitioner’s payments to his former wife satisfied the requirements set out in sec_71 b and c their disagreement is solely about whether petitioner’s payments satisfied the provisions of sec_71 ie whether his liability to make payments would have terminated in the event of his former wife’s death if so the payments would have been alimony because we think petitioner’s payments would not have terminated upon her death we agree with respondent that they are not alimony for the reasons stated below under sec_71 if the payor is liable for any qualifying payment after the recipient’s death none of the related payments required will be deductible as alimony by the payor see 407_f3d_186 3d cir affg tcmemo_2003_163 whether a postdeath obligation exists may be determined by the terms of the divorce_or_separation_instrument or if the instrument is silent on the matter by state law 309_us_78 see also kean v commissioner supra pincite the parties dispute whether the payments at issue meet the requirements of sec_71 they agree that the agreement and divorce decree do not provide any conditions for the termination of the payments respondent maintains that the payments made by petitioner to his former wife are not deductible from his income as alimony under sec_215 because the obligation to make the payments does not terminate at the death of either party under texas law petitioner argues that the payments are deductible because he intended them to be alimony and because the agreement reached with his former wife did not specifically state that the payments do not terminate upon the death of either of them although sec_71 as it was enacted in originally required that a divorce_or_separation_instrument affirmatively state that liability for payments terminates upon the death of the payee spouse in order to be considered alimony the statute was retroactively amended in so that such payments now qualify as alimony as long as termination of the liability would occur upon the death of the payee spouse by operation of state law 102_f3d_842 6th cir affg tcmemo_1995_183 petitioner’s agreement and the divorce decree are silent on whether his monthly payments of dollar_figure to his former wife totaling dollar_figure for the fixed 4-year period would survive her death as a matter of law consequently our analysis is guided by texas state law section of the texas family code provides for written agreements incident_to_divorce a to promote amicable settlement of disputes in a suit for divorce or annulment the spouses may enter into a written_agreement concerning the division of the property and the liabilities of the spouses and maintenance of either spouse the agreement may be revised or repudiated before rendition of the divorce or annulment unless the agreement is binding under another rule_of law tex fam code ann sec a vernon under texas state law contractual support payments do not terminate on the death of the former payee spouse absent agreement to the contrary shown by the contract or surrounding circumstances in cardwell v sicola-cardwell s w 2d tex app the state court_of_appeals holding that contractual alimony agreements in texas are governed by the law of contracts and generally survive the death of one of the parties stated neither the historical treatment of alimony in texas nor texas case law indicates that the general rules of alimony--ie court-ordered spousal support--should apply to contracts for spousal support particularly the rule that alimony presumptively terminates on the obligor’s death cf hutchings s w 2d pincite holding that agreement for periodic child_support payments is governed by law of contracts and under contract principles payments survive obligor’s death absent agreement to contrary shown by provisions of contract or surrounding circumstances while petitioner’s assertions are forthright and appealing unfortunately for him the internal_revenue_code is specific in its requirements and by virtue of texas state law his support payments to his former wife in did not meet the requirement outlined in sec_71 accordingly we hold that petitioner’s payments made to his wife in did not satisfy all the conditions set forth in sec_71 and thus are not properly deductible as alimony for the taxable_year in issue to reflect the foregoing decision will be entered for respondent


internal_revenue_service number release date index number --------------------- --------------------------------------------- --------------------------------------------- ------------- ---------------------- - department of the treasury washington dc third party communication date of communication month dd yyyy person to contact --------------------- id no ------------- telephone number --------------------- refer reply to cc fip b02 plr-160707-04 date may ------------ --------------------------------------------- legend company state dear --------------- this responds to your request for a ruling dated date submitted on behalf of company company requests a ruling that income and gains from certain net profits and overriding_royalty interests are qualifying_income under sec_851 of the internal_revenue_code_of_1986 as amended code facts company is organized as a state corporation and has elected to be treated as a business_development_company under the investment_company act of u s c 80a-1 et seq as amended the act company will be classified as a closed-end non-diversified management investment_company under the act company has elected under sec_851 of the code to qualify as a regulated_investment_company ric for federal_income_tax purposes company intends to use the proceeds of its initial_public_offering to make vertical loans and mezzanine loans as described below to small and mid-size energy companies these loans provide for a relatively high degree of risk the loans bear interest and may also entitle company to receive additional compensation in the form of warrants options to purchase equity securities of the borrower or the right to convert plr-160707-04 into equity securities of the borrower or a property-based equity_interest in the borrowing companies company represents that it will not enter into vertical loans or mezzanine loans nor detach and sell an overriding_royalty interest or net_profits_interest attached thereto with a speculative purpose or expectation of profiting from market fluctuations in the price of oil or gas vertical loans a vertical loan will consist of a senior secured loan and a subordinated loan with in addition a vertical loan may contain covenants that prohibit additional liens respect to a single facility the senior tranche will produce a current cash yield and typically will be secured_by a first lien on cash_flow producing assets the subordinated loan tranche typically will include a current cash yield component coupled with a property-based equity_interest in the form of an overriding_royalty interest or a net_profits_interest the subordinated loan generally will be secured_by the same lien as the senior tranche on the borrower’s assets assuming that the company is the borrower’s only secured creditor in some cases company may receive from the borrowing company either a warrant or an option to purchase equity securities of the borrower or the right to convert into such equity securities either in addition to or in lieu of an overriding_royalty interest or a net_profits_interest on the borrower’s assets limit additional debt or require maintenance of minimum loan- to-collateral value asset coverage ratios company anticipates that vertical loans usually will have a term of three to five years but expects that in many cases the vertical loans will be prepaid before maturity vertical loans may bear interest at either a fixed or floating rate mezzanine loans a mezzanine loan will generally take the form of subordinated debt coupled with an overriding_royalty interest or net_profits_interest the term may also be used to refer to preferred equity such as redeemable preferred_stock that bears a coupon interest rate in some cases company may receive from the borrowing company either a warrant or an option to purchase equity securities of the borrower or the right to convert into such equity securities either in addition to or in lieu of the overriding_royalty interest or net_profits_interest company anticipates that mezzanine loans usually will have a term of three to five years but expects that in many cases mezzanine loans will be prepaid before maturity mezzanine loans may bear interest at either a fixed or floating rate property-based equity interests plr-160707-04 a property-based equity_interest appended to a vertical loan or mezzanine loan may take the form of either a net_profits_interest or an overriding_royalty interest these property-based equity interests are a customary form of consideration for loans made to small and mid-size energy companies an overriding_royalty interest entitles the holder to a specified percentage of a borrower’s oil_and_gas production under a lease free of any expense for exploration drilling development operating and other costs incident to the production and sale of oil_and_gas produced from the lease a net_profits_interest entitles the holder to a stated percentage of the net profits from the operation of the borrower’s property unlike an overriding_royalty the income accruing to the net_profits_interest is reduced by specified development and operating costs to the extent of its share of the income both an overriding_royalty interest and a net_profits_interest entitle the holder to receive additional payments on a regular basis based upon the performance of specific assets of the borrower both are carved out of a working_interest the holder of either interest has no right to develop or operate the borrower’s property rather the holder is a passive investor entitled only to a stream of income when combined with a loan these interests are intended to compensate company for a lower coupon interest rate the taxpayer represents that the coupon interest rate on a loan coupled with an overriding_royalty interest or a net_profits_interest is significantly lower than it would be for the same loan without such an interest attached the use of an overriding_royalty interest or net_profits_interest in combination with a loan helps ensure that company receives a rate of return appropriate to the risk undertaken in making the vertical or mezzanine loan the use of an overriding_royalty interest or net_profits_interest in combination with a loan mitigates the borrower’s cash burden if its exploration and production activities are less successful than expected conversely company shares in the profits through the use of these property-based equity interests if the borrower’s activities are more successful than expected alienability of property-based equity_interest company will have the right to detach an overriding_royalty interest or net_profits_interest that has been issued in combination with a vertical loan or mezzanine loan from the corresponding loan only in very limited circumstances in general the interest will be sold back to the borrower when the loan is repaid company may however detach the interest and sell it to a party other than the borrower within twelve months before or twelve months after the loan is paid or prepaid this will afford company adequate time to market the interest permitting it to weather for example potential plr-160707-04 temporary downturns in the market or to give it time to effectuate necessary sale documents company’s ability to sell an interest to a third party will be further subject_to the borrower’s right_of_first_refusal the right_of_first_refusal would allow the borrower to purchase the interest on the same terms and in the same manner as the offer from a third party company’s ability to market and sell the detached interest to a third party is intended to help ensure that company can negotiate a fair price from the borrower if company has not sold the interest within twelve months after the corresponding loan is paid or prepaid the borrower will be required to purchase it at a formula price agreed to by the borrower and company at the time the loan is made finally company will have the right to detach the interest from the corresponding loan and sell it to a third party in the event that borrowing company is in default as defined in the loan documents law and analysis sec_851 defines a ric in part as a domestic_corporation that has in sec_851 limits the definition of a ric to a corporation meeting certain sec_851 provides that to qualify as a ric at least of its gross effect an election under the act to be treated as a business_development_company election gross_income and diversification requirements income must be derived from dividends interest payments_with_respect_to_securities_loans as defined in sec_512 and gains from the sale_or_other_disposition of stock_or_securities as defined in sec_2 of the act or foreign_currencies or other income including but not limited to gains from options futures or forward contracts derived with respect to its business of investing in such stock securities or currencies sec_2 of the act defines the term security to include inter alia any note bond debenture or evidence_of_indebtedness vertical loans and mezzanine loans are issued together with overriding_royalty interests and net profits interests as investment units the loan portion of such an investment_unit is an evidence_of_indebtedness and thus is a security as described in this section of the act as act securities the loans are securities within the meaning of the phrase stock_or_securities in sec_851 preferred equity such as redeemable preferred_stock also falls within the meaning of the phrase stock_or_securities in sec_851 plr-160707-04 the overriding_royalty interests and net profits interests are combined with vertical loans and mezzanine loans and are received by company as additional consideration for the making of these loans these interests compensate company for a lower coupon rate of interest on the loans and are customary forms of consideration for loans made to small and mid-size energy companies such as the borrowers company will not hold these interests independently of the loans for which they constitute consideration except in the very limited circumstances previously described nor will it have the right to sell these interests independently of the loans to which they relate except in the very limited circumstances previously described company will not detach and sell an overriding_royalty interest or net_profits_interest attached to a vertical loan or mezzanine loan with a speculative purpose or expectation of profiting from market fluctuations in the price of oil or gas the overriding_royalty interests and net profits interests are received held and sold by company therefore in direct connection with its business of investing in stock_or_securities within the meaning of sec_851 conclusion in accordance with the foregoing we rule that company shall treat income and gains from the overriding_royalty interests and net profit interests received by company in combination with and as consideration for the making of vertical loans and mezzanine loans to borrowing energy companies under the circumstances described in this letter as other income derived with respect to its business of investing in stock_or_securities for purposes of determining its qualification as a ric under sec_851 of the code except as specifically ruled upon above we express no opinion on the federal tax consequences of the transactions described above under any other provisions of the code and regulations no opinion is expressed concerning whether company otherwise qualifies as a ric under subchapter_m part i of the code this ruling is directed only to the taxpayers who requested it sec_6110 provides that it may not be used or cited as precedent sincerely susan thompson baker susan thompson baker assistant to the branch chief branch financial institutions products


t c summary opinion united_states tax_court matthew p brown petitioner v commissioner of internal revenue respondent docket no 8242-04s filed date matthew p brown pro_se michael r fiore for respondent panuthos chief special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure respondent determined deficiencies in petitioner’s federal income taxes for the taxable_year sec_2001 and sec_2002 of dollar_figure and dollar_figure respectively respondent also determined accuracy- related penalties under sec_6662 for the taxable_year sec_2001 and sec_2002 of dollar_figure and dollar_figure respectively the issues for decision are whether petitioner is entitled to deductions for employee business_expenses and whether petitioner is liable for accuracy-related_penalties under sec_6662 background some of the facts have been stipulated and they are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference at the time of filing his petition petitioner resided in medford massachusetts during the years in issue petitioner was employed by paychex inc paychex as an outside sales representative paychex provided payroll services to businesses petitioner sought to bring in new customers to utilize the payroll services provided by paychex petitioner’s sales territory consisted of southeastern new hampshire and northeastern massachusetts petitioner was responsible for separate towns in this geographic area paychex’s offices were located in woburn massachusetts and petitioner resided in sandown new hampshire during the years in issue petitioner’s round trip commute between his home and office wa sec_68 miles petitioner drove his automobile to visit existing and potential customers from the beginning of until date petitioner utilized his honda accord honda for both his business and personal transportation on or after date petitioner utilized a nissan maxima nissan for all of his transportation petitioner estimated use of his automobile as approximately percent personal and the remainder business petitioner calculated his mileage expense for each of the years in issue by reviewing the odometer of his automobile and designating a percentage of the miles driven as business miles petitioner submitted weekly activity reports to his employer petitioner submitted to the court copies of weekly activity reports for approximately weeks for and for the entire year the weekly activity reports do not reflect the number of miles driven nor do they contain other details as to specific business activity petitioner maintained a day planner however he lost the planner for sometime in early petitioner did not retain his day planner for on hi sec_2001 federal_income_tax return petitioner reported wages of dollar_figure and claimed itemized_deductions on schedule a itemized_deductions of dollar_figure the claimed itemized_deductions consisted of dollar_figure of employee business_expenses and dollar_figure of gifts to charities on hi sec_2002 federal_income_tax return petitioner claimed itemized_deductions of dollar_figure consisting of taxes paid of dollar_figure employee business_expenses of dollar_figure and gifts to charities of dollar_figure petitioner also received reimbursement of employee business_expenses of dollar_figure for each of the year sec_2001 and sec_2002 the dollar_figure that petitioner received in each of the years in issue was not dependent on the actual expenses_incurred or miles driven petitioner was not required to report the number of miles driven to his employer the payment was described by petitioner as an expense allowance petitioner did not report the dollar_figure as income on his respective returns in a notice_of_deficiency respondent disallowed all the itemized_deductions claimed on the and returns before trial the parties agreed that petitioner is entitled to deductions for gifts to charities as claimed on the and returns the parties further agreed that petitioner is entitled to the claimed deduction for taxes for respondent did not adjust petitioner’s income to include the dollar_figure in reimbursed the federal_income_tax return was not made part of the record however other evidence including copies of forms w- wage and tax statement reflect that petitioner received salary in the amount of dollar_figure the notice_of_deficiency allowed a standard_deduction in lieu of the claimed itemized_deductions for and it is not clear whether the allowance of the itemized_deductions for gifts to charity and for taxes will result in any_tax benefit to petitioner the court will enter a decision under rule and permit the parties to compute the tax_liability that is most advantageous to petitioner employee business_expenses which petitioner did not report on his returns for each of the year sec_2001 and sec_2002 the issues remaining for decision are the claimed employee business_expenses which is composed of mileage expenses relating to the business use of petitioner’s automobile for each of the years in issue and the accuracy-related_penalties burden_of_proof generally the burden_of_proof is on the taxpayer rule a under sec_7491 the burden_of_proof shifts from the taxpayer to the commissioner if the taxpayer produces credible_evidence with respect to any factual issue relevant to ascertaining the taxpayer’s liability sec_7491 petitioner has neither argued that the burden_of_proof should shift nor satisfied the criteria that would cause the burden_of_proof to shift given the lack of documentation and information provided by petitioner in this case we conclude that the burden_of_proof remains with petitioner mileage expense sec_162 permits a deduction for the ordinary and necessary expenses paid_or_incurred during the taxable_year in carrying_on_a_trade_or_business a trade_or_business includes the trade_or_business of being an employee 91_tc_352 expenses that are personal in nature are generally not allowed as deductions sec_262 a taxpayer is required to maintain records sufficient to establish the amount of his income and deductions sec_6001 sec_1_6001-1 e income_tax regs a taxpayer must substantiate his deductions by maintaining sufficient books_and_records to be entitled to a deduction under sec_162 when a taxpayer establishes that he has incurred a deductible expense but is unable to substantiate the exact amount we are permitted to estimate the deductible amount 39_f2d_540 2d cir we can estimate the amount of the deductible expense only when the taxpayer provides evidence sufficient to establish a rational basis upon which the estimate can be made 85_tc_731 sec_274 supersedes the general_rule of cohan v commissioner supra and prohibits the court from estimating the taxpayer’s expenses with respect to certain items 50_tc_823 affd per curiam 412_f2d_201 2d cir sec_274 imposes strict substantiation requirements for listed_property as defined in sec_280f gifts travel entertainment_and_meal_expenses sec_1_274-5t temporary income_tax regs fed reg date to obtain a deduction for a listed_property travel meal or entertainment expense a taxpayer must substantiate by adequate_records or sufficient evidence to corroborate the taxpayer’s own testimony the amount of the expense the time and place of the use the business_purpose of the use and in the case of entertainment the business relationship to the taxpayer of each person entertained sec_274 sec_1_274-5t temporary income_tax regs fed reg date sec_274 requires that expenses be recorded at or near the time when the expense is incurred sec_1_274-5t temporary income_tax regs fed reg date listed_property includes passenger automobiles sec_280f petitioner therefore must meet the strict requirements of sec_274 to be entitled to a deduction related to car expenses if a taxpayer is unable to fulfill the requirements of sec_274 he is not entitled to the deduction petitioner’s records with respect to his car expenses fail to satisfy the requirements of sec_274 the weekly activity sheets prepared by petitioner and provided to his employer do not contain sufficient information to satisfy the requirements of sec_274 petitioner’s day planners which may have contained additional detailed information were not available petitioner testified that he lost the planner for and disposed of the planner for petitioner did not provide a reconstruction of his mileage expenses in an attempt to satisfy the substantiation requirements petitioner failed to establish the amount of the expense the time and place of each use and the business_purpose of the use of the honda and nissan respondent is sustained on this issue accuracy-related_penalty respondent determined that petitioner is liable for the accuracy-related_penalties under sec_6662 for and the accuracy-related_penalty is equal to percent of any portion of an underpayment_of_tax required to be shown on the return that is attributable to the taxpayer’s negligence or disregard of rules or regulations sec_6662 and b negligence consists of any failure to make a reasonable attempt to comply with the provisions of the internal_revenue_code and also includes any failure to keep adequate books_and_records or to substantiate items properly sec_6662 sec_1 b income_tax regs disregard consists of any careless reckless or intentional disregard sec_6662 an exception applies to the accuracy-related_penalty when the taxpayer demonstrates there was reasonable_cause for the underpayment and he acted in good_faith with respect to such underpayment sec_6664 whether the taxpayer acted with reasonable_cause and in good_faith is determined by the relevant facts and circumstances the most important factor is the extent of the taxpayer’s effort to assess his proper tax_liability stubblefield v commissioner tcmemo_1996_537 sec_1 b income_tax regs sec_1_6664-4 income_tax regs specifically states circumstances that may indicate reasonable_cause and good_faith include an honest misunderstanding of fact or law that is reasonable in light of the experience knowledge and education of the taxpayer pursuant to sec_7491 the commissioner has the burden of production with respect to a sec_6662 accuracy-related_penalty to meet this burden the commissioner must produce sufficient evidence indicating that it is appropriate to impose the relevant penalty 116_tc_438 once the commissioner meets this burden of production the taxpayer continues to have the burden_of_proof with regard to whether the commissioner’s determination of the penalty is correct rule a higbee v commissioner supra further the taxpayer bears the burden of proving that he or she acted with reasonable_cause and in good_faith see sec_6664 respondent’s burden of production is satisfied in this case since petitioner failed to maintain records to substantiate expenses as required petitioner did not present any argument or evidence that the reporting of the claimed mileage deductions was based on reasonable_cause or good_faith petitioner did not attempt to satisfy the record-keeping requirements for his mileage expense deductions nor did he attempt to reconstruct the expense deductions at trial we conclude that petitioner has failed to show that he acted with reasonable_cause or in good_faith accordingly we hold petitioner is liable for the accuracy-related_penalties reviewed and adopted as the report of the small_tax_case division to reflect the foregoing decision will be entered under rule


significant index no department of the treasury internal_revenue_service washington d c mar c te na ada tax_exempt_and_government_entities_division re dear this letter constitutes notice that conditional approval has been granted for your request for a modification of the internal revenue service's service prior ruling approving a 7-year extension for amortizing the plan’s unfunded liabilities for the plan_year beginning date the unfunded liabilities are described in code sec_412 and sec_302 of the employee retirement security act of erisa prior to amendment by the pension_protection_act of ppa ‘06 the conditions of this approval are outlined in this letter your authorized representative accepted these conditions in a letter dated date the prior amortization extension was granted subject_to the following conditions that the plan maintain a credit balance that as the accumulation at the plan’s valuation rate of the amortized at the plan’s valuation rate over a period of years differences between the amortization payments of the extended bases amortized at the sec_6621 rate and the amortized payments of such bases had such bases been extended and amortized at the plan’s valuation rate large least as at is that the plan’s funded ratio calculated by dividing the plan’s market_value of assets by its actuarial accrued liability computed using the unit credit method and the plan’s assumptions as of date remain a b c no less than for each valuation_date from date through date inclusive no less than for each valuation_date from date through date inclusive no less than for each valuation_date from date through date inclusive and d for each valuation_date subsequent to date no less than per annum greater than the floor funded ratio as of the previous valuation_date and for each plan_year that the extension remains in effect beginning with the plan_year beginning date the plan provides the service with a copy of its actuarial valuation report consider modifications the prior ruling letter provided that the approval would be retroactively null and void if any of these conditions were not met however the ruling indicated that the service would event that unforeseen circumstances beyond the control of the plan might cause the actual experience of the plan to an example of such unforeseen circumstance would be market fluctuations which affect the value of the pian’s assets this unforeseen circumstance happened during the plan years ending date and date with a general decline in asset values worldwide fail the funded ratio condition conditions especially of these the in this approval a modifies condition sec_2 and d above b add sec_2 through g and c adds a new condition effective date as follows no other conditions are modified the plan's funded ratio calculated by dividing the plan’s market_value of assets by its actuarial accrued liability computed using the unit credit method and the plan assumptions as of date is c d e f g j no less than for each valuation_date from date through date inclusive no less than for each valuation_date from date through date inclusive no less than for each valuation_date from date through date inclusive no less than for each valuation_date from date through date inclusive for each valuation_date subsequent to date no less than greater than the required funded ratio of the previous valuation_date until a funded ratio of is achieved as of october for example because the floor funded ratio as of date is the funded ratio must be at least as of october and as of october within days after any amendment is made that is subject_to sec_412 of the code and sec_302 of erisa as discussed below or after any_action i sec_2u yt taken that has the effect of such an amendment the plan_sponsor must request a ruling approving the plan’s prospective amortization of unfunded liabilities and pay the applicable user_fee if any one of the prior and amended conditions is not satisfied the approval to extend the amortization periods of the unfunded liabilities would be null and void retroactive to date however the service will consider modifications of these conditions especially in the event that unforeseen circumstances beyond the control of the plan may cause the actual experience of the plan to fail the funded ratio conditions an example of such unforeseen circumstance would be market fluctuations which affect the value of the plan’s assets of course any request for a modification would be considered another ruling_request and would be subject_to an additional user_fee please note that the address has changed for filing copies of the actuarial valuation report to the following irs - ep classification metro tech center fulton street brooklyn ny your attention is called to sec_412 of the code and sec_302 of erisa which describe the consequences that would result in the event the plan is amended to increase benefits change the rate in the accrual_of_benefits or to change the rate of vesting while the amortization extension remains in place please note that any amendment that increases liabilities for a profit sharing plan or any other retirement plans whether qualified or unqualified maintained by the trustees for the plan or a sponsor that consists of substantially the same persons as the trustees for the plan and covering participants of the plan to which this ruling applies would be considered an amendment for purposes of sec_412 of the code and sec_302 of erisa similarly the establishment of a new profit sharing plan or any other retirement_plan whether qualified or unqualified maintained by the trustees for the plan or a sponsor that consists of substantially the same persons as the trustees for the plan and covering participants of the plan to which this ruling applies would be considered an amendment for purposes of sec_412 of the code and sec_302 of erisa this ruling is directed only to the taxpayer that requested it sec_6110 of the code provides that it may not be used or cited by others as precedent we have sent a copy of this letter to and to your authorized representatives pursuant to a power of attomey on file in this office to the if you require further assistance in this matter please contact sincerely yours dd cfg david m ziegler manager employee_plans actuarial group


internal_revenue_service number release date index number --------------------------- - -------------- --------------------------- -------------------------------------------------------- ------------------------- --------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact -------------------- - id no ------------------ telephone number -------------------- refer reply to cc psi plr-129288-17 date december legend p1 -------------------------------------------------- --------------------------------------- --------------------------- p2 --------------------------------------- state ----------------- state ----------------- date ------------------------ date --------------------------- q ------ a ----------------------- trust -------------------------------------------- --------------------------------------- year -------- dear ------------------ this letter responds to a letter dated date and subsequent correspondence submitted on behalf of p2 requesting an extension of time under sec_301_9100-3 of the plr-129288-17 procedure and administration regulations to file an election under sec_754 of the internal_revenue_code code facts the information submitted states that p1 was formed on date under the laws of state as a limited_partnership classified as a partnership for federal tax purposes p2 was formed on date under the laws of state as a limited_liability_company classified as a partnership for federal tax purposes p1 owns a q interest in p2 a owned a limited_partnership_interest in p1 through trust a grantor_trust a died during year p1 and p2‘s return was timely filed for year but a sec_754 election to adjust the basis of p1’s property was inadvertently not filed with the return p1 and p2 relied on its advisor to file an election under sec_754 however the advisor failed to make an election under sec_754 for year p1 and p2 represent that they acted reasonably and in good_faith that granting relief will not prejudice the interests of the government and that they are not using hindsight in making the election law and analysis sec_754 provides that if a partnership files an election in accordance with regulations prescribed by the secretary the basis of partnership property shall be adjusted in the case of a transfer of a partnership_interest in the manner provided in sec_743 such an election shall apply with respect to all distributions of property by the partnership and to all transfers of interests in the partnership during the taxable_year with respect to which such election was filed and all subsequent taxable years revrul_87_115 1987_2_cb_163 provides that the optional_adjustment_to_basis under sec_754 will be available to both an upper-tier partnership utp and a lower-tier partnership ltp when there is a sale_or_exchange of a partnership_interest or the death of a partner in utp and both utp and ltp have made an election under sec_754 to adjust the basis of partnership property on a sale_or_exchange of a partnership_interest or on the death of a partner sec_1_754-1 of the income_tax regulations provides that an election under sec_754 to adjust the basis of partnership property under sec_734 and sec_743 with respect to a distribution_of_property to a partner or a transfer of an interest in a partnership shall be made in a written_statement filed with the partnership return for the taxable_year during which the distribution or transfer occurs for the election to be valid the return must be filed not later than the time prescribed by sec_1 e including extensions thereof for filing the return for such taxable_year plr-129288-17 sec_301_9100-1 provides that the commissioner may grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the code except subtitles e g h and i sec_301_9100-1 defines the term regulatory election as including an election whose due_date is prescribed by a regulation published in the federal_register or a rev rule revenue_procedure notice or announcement published in the internal_revenue_bulletin sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make an election sec_301_9100-2 provides automatic extensions of time for making certain elections sec_301_9100-3 provides extensions of time for making regulatory elections that do not meet the requirements of sec_301_9100-2 requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence including affidavits described in sec_301_9100-3 to establish to the satisfaction of the commissioner that the taxpayer acted reasonably and in good_faith and grant of relief will not prejudice the interests of the government conclusion based on the facts submitted and the representations made we conclude that the requirements of sec_301_9100-1 and sec_301_9100-3 have been satisfied as a result p2 is granted an extension of time of days from the date of this letter to make an election under sec_754 effective for its year taxable_year and thereafter the election should be made in a written_statement filed with the appropriate service_center for association with p2's year tax_return a copy of this letter should be attached to the sec_754 election except as expressly provided herein we express or imply no opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express or imply no opinion as to whether p2 is a partnership for federal tax purposes pursuant to a power_of_attorney on file with this office we are sending a copy of this letter to p2’s authorized representatives plr-129288-17 this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent sincerely david r haglund david r haglund branch chief branch passthroughs special industries enclosures copy of letter copy of letter for sec_6110 purposes cc


internal_revenue_service number info release date index number -------------------------------- ----------------------- --------------------------- ------------------------- in re department of the treasury washington dc person to contact -------------------- id no ------------- telephone number --------------------- refer reply to cc psi - genin-169589-03 date january announcement copy enclosed provides guidance on seeking relief for late dear ----------------- we are answering correspondence submitted by your representative requesting relief under revproc_2003_43 in order to establish date as the effective date for your s_corporation_election in your situation automatic relief under revproc_2003_43 is only available for the taxable_year automatic relief is also unavailable under revproc_97_48 because the internal_revenue_service failed to receive a timely tax_return form_1120s for the year although we are unable to respond to your request as submitted this letter provides information relating to rectifying your situation s_corporation elections generally to request relief for a late s_corporation_election back to the date of incorporation you must request a private_letter_ruling from the national_office the information forwarded to our office is insufficient for us to process a private_letter_ruling request the procedures for requesting a private_letter_ruling are set forth in revproc_2003_1 copy enclosed in addition taxpayers must submit a user_fee along with their ruling_request the standard user_fee for a private_letter_ruling is dollar_figure however taxpayers with gross_income of less than dollar_figure million on their tax_return for the most recent 12-month taxable_year qualify for a reduced user_fee in the amount of dollar_figure if you are qualified for the reduced fee please include a statement certifying that your gross_income for the was less than dollar_figure million if you decide to submit a formal request for a private_letter_ruling please follow the sample format provided in appendix b of revproc_2003_1 your request should include all required procedural statements a check for the user_fee and any documents that substantiate your intent to be an s_corporation from inception please refer your request to our office by adding the following to the address room direct to cc psi in addition the irs has developed two new cd-roms to help educate small internal_revenue_service attn cc pa t p o box ben franklin station washington dc genin-169589-03 business owners on their tax responsibilities introduction to federal taxes for small_business self-employed and a virtual small_business workshop these two cd- roms are free and can be ordered by calling the irs also provides a special website www irs gov businesses small which is dedicated to providing information to small_business taxpayers please keep this letter with your tax records and feel free to provide a copy of it to your authorized representative we hope that the above information proves helpful s enclosures announcement revproc_2003_1 dianna k miosi chief branch associate chief_counsel passthroughs and special industries sincerely yours