Court Opinion

ID: 6499069
Source: CourtListenerOpinion
Date Created: 2022-07-11 14:01:21.886321+00
Date Added: 2024-06-11T09:10:10.655575
License: Public Domain

United States Tax Court
                                Washington, DC 20217

Damian Peter Daly & Jeanne Daly, ET
AL.,
              Petitioners

                v.                            Docket Nos. 23070-19S,
                                                           7787-20S.
COMMISSIONER OF INTERNAL
REVENUE,

                Respondent

                     ORDER OF SERVICE OF TRANSCRIPT

      Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is

       ORDERED that the Clerk of the Court shall transmit herewith to petitioner
and respondent a copy of the pages of the transcript in the above case before Judge
Richard T. Morrison, at Los Angeles, California, on May 19, 2022, containing his
oral findings of fact and opinion rendered at the conclusion of trial.

      In accordance with the oral findings of fact and opinion, a decision will be
entered for each case.

                        (Signed) Richard T. Morrison
                                    Judge

                                 Served 07/11/22
                                                                 3
1    Bench Opinion by Judge Richard T. Morrison

2    May 19, 2022

3    Damian Peter Daly & Jeanne Daly Et al v. Commissioner

4    Docket No. 23070-19S, 7787-20S

5                THE COURT:   The Court has decided to render oral

6    findings of fact and opinion in this case, and the

7    following represents the Court's oral findings of fact and

8    opinion.    The oral findings of fact and opinion shall not

9    be relied on as precedent in any other case.

10               Unless otherwise indicated, all references to

11   sections are to the Internal Revenue Code of 1986, as

12   amended and in effect at all relevant times.    All Rule

13   references are to the Tax Court Rules of Practice and

14   Procedure.   This bench opinion is made pursuant to the

15   authority granted by section 7459(b) and Rule 152.

16               The respondent, or the IRS, mailed the

17   petitioners, Damian Peter Daly and Jeanne Daly, notices of

18   deficiency for both 2016 and 2017.    The notices determined

19   a $6,768 deficiency for 2016, a section 6662 penalty of

20   $1,306 for 2016, a $9,707 deficiency for 2017, and a

21   section 6662 penalty of $1,921 for 2017.     The Dalys filed

22   timely petitions for redetermination of the deficiencies.

23   When the petitions were filed, the Dalys resided in South

24   Carolina.

25               We have jurisdiction under section 6214(a).
                                                                6
1    exceeded the taxpayer's tax liability are to be refunded

2    to the taxpayer under section 24(d).     The refundable

3    amount under section 24(d) is referred to as an additional

4    child tax credit.

5               For 2016, the Dalys reported that they owed tax

6    of $226.   They claimed a $226 child tax credit and an

7    additional child tax credit of $2,774.    The adjustments in

8    the notice of deficiency resulted in an increase in the

9    tax liability of the Dalys above $3,000.    As a result, the

10   notice of deficiency disallowed the $2,774 additional

11   child tax credit and increased the child tax credit by the

12   same amount, $2,774.

13              In summary, the notice of deficiency allowed

14   $3,000 for the total of both the child tax credit and the

15   additional child tax credit, which is the total amount the

16   Dalys claimed for both credits.

17              For 2017, the Dalys reported they owed tax of

18   $236.   They claimed a child tax credit of $236 and an

19   additional child tax credit of $2,764.    The 2017 notice of

20   deficiency, because of adjustments resulting in an

21   increase in the 2017 tax liability, disallowed the

22   additional child tax credit and increased the child tax

23   credit by the amount of the disallowance.    Thus, for 2017

24   as for 2016, the disallowance of the additional child tax

25   credit was required by the Internal Revenue Code and did
                                                                    9
1              During 2016 and 2017, Mr. Daly worked as an

2    adjunct professor of political science at Florence-

3    Darlington Tech.    To teach there, Mr. Daly made various

4    trips from the Dalys' home in the Charleston area.       The

5    Dalys seek to compute the deduction by multiplying the

6    miles Mr. Daly traveled to Florence each year by a mileage

7    allowance.     However, Mr. Daly's testimony gives us only a

8    vague idea of how many days in each year he taught at

9    Florence-Darlington Tech.

10             Section 162(a) allows a deduction for the

11   expenses of carrying on a business, including travel away

12   from home.     Even if Mr. Daly were entitled to deduct his

13   mileage for his trips to Florence under section 162(a),

14   section 274(d) imposes an additional limitation.       Section

15   274(d) imposes what are called strict substantiation

16   requirements for deductions claimed for expenses of travel

17   away from home and for listed property.     Under section

18   274(d), no such deduction is allowed unless the taxpayer

19   substantiates by adequate records or by sufficient

20   evidence corroborating the taxpayer's own statements as to

21   the amount, time and place, and business purpose for each

22   expenditure.    For travel away from home, Temporary

23   Treasury Regulation § 1.274-5T(b)(2) subdivision (ii)

24   defines the term "time" as "[d]ates of departure and

25   return for each trip away from home, and number of days
                                                             10
1    away from home spent on business," and subdivision (iii)

2    defines the term "place" as "[d]estinations or locality of

3    travel, described by name of city or town or other similar

4    designation." The Dalys must therefore substantiate

5    through records, or through evidence other than Mr. Daly's

6    testimony, the dates of Mr. Daly's travel to Florence.

7    There is no evidence about these trips other than Mr.

8    Daly's testimony.   Therefore, no deduction is allowable.

9              Alternatively, the Dalys argue that because the

10   trips to Florence were taken in a rental car, and because

11   they paid $800 per month to rent the car, they should

12   be allowed a deduction of the rental cost of the car, or

13   some fraction of that rental cost.   But, as we have

14   explained, the cost of travel must be strictly

15   substantiated, and the Dalys have failed to meet these

16   requirements.   Furthermore, for listed property, such as

17   an automobile, the strict-substantiation requirements

18   require the taxpayer to establish the amount of business

19   use "based on the appropriate measure (i.e., mileage for

20   automobiles . . .), and the total use of the listed

21   property for the taxable period." Id. subpara.   (6)(i)(B).

22   Thus, to deduct the cost of renting the car, the Dalys are

23   required to substantiate through records, or through

24   evidence other than Mr. Daly's testimony, the number of

25   miles the car was used for business (i.e., for Mr. Daly's
                                                             11
1    trips to Florence-Darlington Tech), as well as the total

2    use of the rental car (i.e., for these trips and for

3    personal use).    Again, there is no evidence about these

4    trips other than Mr. Daly's testimony.    Thus, the Dalys

5    have failed to strictly substantiate the business and

6    personal use of the car.    Furthermore, no evidence other

7    than Mr. Daly's testimony was adduced about the cost of

8    the rental vehicle, which in this situation is the

9    "amount" of the expense to be claimed as a deduction, and

10   therefore, which also must be strictly substantiated.       For

11   these reasons, no deduction is allowable corresponding to

12   any fraction of the alleged $800 per month cost of the

13   rental vehicle.

14             We conclude that no deduction is allowed for the

15   cost of Mr. Daly's travel to Florence-Darlington Tech.

16             Fifth, the Dalys contend that they are entitled

17   to a federal income tax deduction for state income taxes

18   withheld from Mrs. Daly's wages.

19             Section 164(a) allows a deduction for state

20   income taxes.    However, the Dalys provided no proof of the

21   amounts of state income taxes withheld from Mrs. Daly's

22   salary.

23             Therefore, they have not proven they are

24   entitled to a deduction for state income taxes.

25             Even had they proven an entitlement to a
                                                             12
1    deduction for state income taxes, such a deduction would

2    have no computational effect on their income because it

3    would be their only itemized deduction.   Itemized

4    deductions are of no use to a taxpayer unless they exceed

5    the standard deduction.   The Dalys claimed a standard

6    deduction of $12,600 in 2016 and a standard deduction of

7    $12,700 in 2017.

8               No deduction is allowable for the amounts of

9    state income taxes withheld from Mrs. Daly's wages.

10              A decision will be entered sustaining the

11   deficiencies determined by respondent and determining the

12   petitioners are not liable for the section 6662 penalties.

13   This concludes the Court's oral findings of fact and

14   opinion.

15              (Whereupon, at 1:15 p.m., the above-entitled

16              matter was concluded.)

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                                                               13
1            CERTIFICATE OF TRANSCRIBER AND PROOFREADER

2    CASE NAME:    Damian Peter Daly & Jeanne Daly Et al v.

3                  Commissioner

4    DOCKET NO.:   23070-19S, 7787-20S

5        We, the undersigned, do hereby certify that the

6    foregoing pages, numbers 1 through 13 inclusive, are the

7    true, accurate and complete transcript prepared from the

8    verbal recording made by electronic recording by Meribeth

9    Ashley on May 19, 2022 before the United States Tax Court

10   at its remote session in Los Angeles, CA, in accordance

11   with the applicable provisions of the current verbatim

12   reporting contract of the Court and have verified the

13   accuracy of the transcript by comparing the typewritten

14   transcript against the verbal recording.

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18       _______________________________________________

19       Meribeth Ashley, CET-507                 6/6/22

20       Transcriber                              Date

21

22

23       _______________________________________________

24       Lori Rahtes, CDLT-108                    6/6/22

25       Proofreader                              Date