T.C. Memo. 1996-461
UNITED STATES TAX COURT
ALONZO BRADLEY AND EMMA J. BRADLEY, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 4554-95. Filed October 15, 1996.
Alonzo Bradley and Emma J. Bradley, pro sese.
David E. Whitcomb, for respondent.
MEMORANDUM OPINION
DEAN, Special Trial Judge: This case was assigned pursuant
to the provisions of section 7443A(b)(3) and Rules 180, 181, and
182.1
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year at issue. All
Rule references are to the Tax Court Rules of Practice and
Procedure.
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Respondent determined a deficiency in petitioners' 1991
Federal income tax in the amount of $2,385 and an addition to tax
under section 6651(a)(1) in the amount of $100.
The issues for decision are: (1) Whether petitioners may
deduct vehicle expenses as unreimbursed employee business
expenses in excess of the amount allowed by respondent; (2)
whether petitioners may deduct uniform expenses as unreimbursed
employee business expenses; (3) whether petitioners are entitled
to a charitable contribution deduction in excess of the amount
allowed by respondent; and (4) whether petitioners are liable for
the section 6651(a)(1) addition to tax for failure to file timely
their 1991 Federal income tax return.
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by reference. Petitioners, Alonzo and Emma
J. Bradley, are husband and wife. They resided in League City,
Texas, at the time their petition in this case was filed.
Background
During the 1991 taxable year, petitioner Alonzo Bradley was
employed as a software engineer for Paramax Systems Corporation
(Paramax), an affiliate of Unisys Corporation, in Houston, Texas.
Mr. Bradley's office at Paramax was located at 600 Gemini.
Paramax required Mr. Bradley to use his own car to travel
frequently between his office at 600 Gemini and another facility
located at the Johnson Space Center.
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During 1991, Paramax had in effect a policy that would have
allowed Mr. Bradley to be reimbursed for all of his travel
between the two locations at the rate of 27 cents per mile.
Mr. Bradley, however, did not file a claim for reimbursement with
Paramax and was not reimbursed for any of his travel between the
two locations. Instead, he claimed a $9,143 deduction for
unreimbursed employee business expenses on Schedule A and Form
2106 (Employee Business Expenses) attached to petitioners' 1991
Form 1040. Mr. Bradley calculated the deduction by taking the
product of his actual vehicle expenses for 1991 and the business
use percentage of his automobile. The deduction was calculated
as follows:
Expenses
Gasoline, oil, repairs, vehicle insurance, etc. $2,787
Lease payments on a 1991 Infiniti, Model Q45 10,090
Total 12,877
1
Multiplied by business use percentage 71%
Vehicle expense claimed 9,143
1
Business use percentage = 9,968 business use miles / 14,039
total miles = 71%.
During the first 6 months of 1991, petitioner Emma Bradley
was employed as a nurse at Friendswood Medical Arts (Friendswood)
in Friendswood, Texas. Friendswood did not require Mrs. Bradley
to travel as part of her duties. During the last 6 months of
1991, Mrs. Bradley was employed as a nurse at Gastroenterology
Consultants (Gastroenterology) in Houston, Texas. Mrs. Bradley
was required to use her own car to travel between offices as part
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of her duties at Gastroenterology, and she was compensated for
such travel at the rate of 27 cents per mile. However,
Mrs. Bradley also claimed a $3,549 deduction for her vehicle
expenses as an unreimbursed employee business expense on Schedule
A and Form 2106 (Employee Business Expenses) attached to
petitioners' 1991 Form 1040. Mrs. Bradley calculated the
deduction by taking the product of her actual vehicle expenses
for 1991 and the business use percentage of her automobile. The
deduction was calculated as follows:
Expenses
Gasoline, oil, repairs, vehicle insurance, etc. $1,283
Depreciation expense 2,660
Total 3,943
1
Multiplied by business use percentage 90%
Vehicle expense claimed 3,549
1
Business use percentage = 11,428 business use miles /
12,698 total miles = 90%.
Mrs. Bradley also claimed a $375 deduction for the cost and
maintenance of uniforms as an unreimbursed employee business
expense on Schedule A and Form 2106 attached to petitioners' 1991
Form 1040.
Finally, petitioners also claimed a $4,640 deduction for
charitable contributions on Schedule A. Petitioners presented
receipts or canceled checks for only $205 of this amount.
Respondent determined that petitioners could deduct only
$1,773 of their claimed vehicle expenses. The remaining expenses
were not deductible because petitioners could have been or
actually were reimbursed for such expenses. Alternatively,
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respondent determined that such expenses were not substantiated.
Respondent disallowed the deduction for the cost and maintenance
of uniforms as not being an ordinary and necessary business
expense. Respondent disallowed all but $5 of petitioners'
charitable contribution deduction for lack of substantiation.
Finally, respondent determined that because petitioners did not
file their 1991 Federal income tax return until July 24, 1992,
they were liable for the late filing addition to tax under
section 6651(a)(1).
Discussion
Respondent's determinations are presumed correct, and
petitioners bear the burden of proving otherwise. Rule 142(a);
Welch v. Helvering, 290 U.S. 111, 115 (1933). Moreover,
deductions are a matter of legislative grace, and petitioners
bear the burden of proving that they are entitled to any
deduction claimed. Rule 142(a); New Colonial Ice Co. v.
Helvering, 292 U.S. 435, 440 (1934); Welch v. Helvering, supra at
115. This includes the burden of substantiation. Hradesky v.
Commissioner, 65 T.C. 87, 90 (1975), affd. per curiam 540 F.2d
821 (5th Cir. 1976).
1. Employee Business Expenses
a. Vehicle Expenses
Petitioners claim deductions for their vehicle expenses as
unreimbursed employee business expenses. Section 162(a) allows a
deduction for all ordinary and necessary expenses incurred in
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carrying on a trade or business. However, petitioners are not
entitled to deduct expenses under section 162(a) for which they
have been or could have been reimbursed. Orvis v. Commissioner,
788 F.2d 1406 (9th Cir. 1986) (deduction not allowable to the
extent that the employee is entitled to reimbursement from the
employer), affg. T.C. Memo. 1984-533; Lucas v. Commissioner, 79
T.C. 1, 7 (1982) (same); Kennelly v. Commissioner, 56 T.C. 936,
943 (1971) (same), affd. without published opinion 456 F.2d 1335
(2d Cir. 1972).
In order to deduct unreimbursed vehicle expenses,
petitioners must also substantiate the expenses in accordance
with the provisions of section 274. Section 274(d)(4) provides
that no deduction is allowable with respect to listed property,
as defined in section 280F(d)(4), unless the deductions are
substantiated in accordance with the strict substantiation
requirements of section 274(d) and the regulations promulgated
thereunder. Included in the definition of listed property in
section 280F(d)(4) is any passenger automobile. Sec.
280F(d)(4)(A)(i).
To substantiate a deduction attributable to listed property,
a taxpayer must maintain adequate records or present
corroborative evidence to show: (1) The amount of the expense,
(2) the time and place of use of the listed property, and (3) the
business purpose for the use. Sec. 1.274-5T(b)(6), Temporary
Income Tax Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985).
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In order to substantiate a deduction by means of adequate
records, a taxpayer must maintain a diary, a log, or a similar
record, and documentary evidence that, in combination, are
sufficient to establish each element of each expenditure or use.
Sec. 1.274-5T(c)(2)(i), Temporary Income Tax Regs., 50 Fed. Reg.
46017 (Nov. 6, 1985). To be adequate, a record must generally be
written. Each element of an expenditure or use that must be
substantiated should be recorded at or near the time of that
expenditure or use. Sec. 1.274-5T(c)(2)(ii)(A), Temporary Income
Tax Regs., 50 Fed. Reg. 46017 (Nov. 6, 1985).
Thus, under section 274(d) no deduction may be allowed for
expenses incurred for use of a passenger automobile on the basis
of any approximation or the unsupported testimony of the
taxpayer. Golden v. Commissioner, T.C. Memo. 1993-602.
The prerequisites to deductibility of vehicle expenses
incurred by an employee, therefore, are, first, that the expenses
be nonreimbursable outlays, and, second, that the expenses be
substantiated in accordance with the requirements of section 274.
For the 1991 taxable year, Mr. Bradley claimed a deduction
for actual vehicle expenses of $9,143. He could have been
reimbursed by his employer in the amount of $2,691.36 (9,968
business miles multiplied by 27 cents per mile). Thus, any
vehicle expenses in excess of $2,691.36 are nonreimbursable and
potentially deductible. However, Mr. Bradley substantiated the
amount of his vehicle expenses by presenting invoices and
canceled checks only in the amount of $3,567.74. Assuming,
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arguendo, that Mr. Bradley could substantiate the time, place,
and business purpose for each use of his car, only $876.38
($3,567.74 amount substantiated less $2,691.36 of reimbursable
expenses) of his vehicle expenses would be deductible. Register
v. Commissioner, T.C. Memo. 1988-390 (deduction allowed only to
the extent the taxpayer can substantiate expenses in excess of
the amount for which he was reimbursed).
Mrs. Bradley claimed a deduction for actual vehicle expenses
in 1991 of $3,549. She was reimbursed by her employer in the
amount of $3,085.56 (11,428 business miles multiplied by 27 cents
per mile). Thus, any vehicle expenses in excess of $3,085.56 are
nonreimbursable and potentially deductible. However,
Mrs. Bradley substantiated the amount of her vehicle expenses by
presenting invoices and canceled checks only in the amount of
$705.75. Even if Mrs. Bradley could substantiate the time,
place, and business purpose for each use of her car, no portion
of her vehicle expenses would be deductible. Id.
Petitioners have therefore established entitlement to a
deduction for vehicle expenses in the amount of $876.38, which is
less than the $1,773 deduction allowed by respondent. Because
they have failed to prove that the determination is erroneous, we
sustain respondent on this issue.
b. Uniform Expenses
The expense of uniforms is deductible under section 162(a)
if: (1) The uniforms are of a type specifically required as a
condition of employment; (2) the uniforms are not adaptable to
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general usage as ordinary clothing; and (3) the uniforms are not
so worn. Yeomans v. Commissioner, 30 T.C. 757, 767-769 (1958).
Mrs. Bradley was required to purchase uniforms while she
worked as a nurse at Gastroenterology. However, petitioners have
offered no evidence as to whether the uniforms were adaptable to
general usage as ordinary clothing. Thus, respondent's
disallowance of the entire $375 claimed for uniform expenses is
sustained.
2. Charitable Contributions
Section 170 allows a taxpayer to deduct a charitable
contribution "only if verified under regulations prescribed by
the Secretary." Sec. 170(a)(1). The regulations provide
specific record-keeping requirements. With respect to each
charitable contribution of money in a taxable year beginning
after December 31, 1982, a taxpayer is required to maintain one
of the following: (1) A canceled check; (2) a receipt or letter
from the donee indicating the name of the donee, the date of the
contribution, and the amount of the contribution; or (3) any
other reliable written record showing the name of the donee, the
date of the contribution, and the amount of the contribution.
Sec. 1.170A-13(a)(1), Income Tax Regs.
Petitioners attended, but were not members of, Brentwood
Baptist Church (Brentwood) in Houston, Texas. Of the $4,640
deduction for charitable contributions claimed on their 1991
return, $4,435 was for contributions to Brentwood. Petitioners
did not substantiate their contributions to Brentwood with
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canceled checks or a receipt from the church. Instead,
petitioners supported their contributions to Brentwood with a
printout of a computer spreadsheet. The spreadsheet indicates
that petitioners attended every Sunday service during 1991,
depositing cash in amounts ranging from $25 to $150 in the
collection plate. Mr. Bradley stated that he would update the
spreadsheet within a day or two of each contribution.
Brentwood records contributions from its members by
supplying envelopes coded with membership numbers to be used by
members when making their weekly offerings. Nonmembers can also
use the envelope system to ensure that Brentwood has a record of
their contributions. Upon entering the church, congregants are
given a worship bulletin and asked by an usher if they would like
an envelope. The ushers who pass the collection plate also carry
envelopes which are readily visible. The congregation is
reminded through the Sunday bulletins, pulpit announcements, and
the monthly membership newsletter to use contribution envelopes
or to retain their canceled checks to receive credit for their
contributions.
Petitioners did not present canceled checks or receipts from
Brentwood, and relied on the written records method of
substantiation instead. The reliability of the records is a
factual determination made on the basis of all relevant facts and
circumstances. Sec. 1.170A-13(a)(2)(i), Income Tax Regs. The
burden of proof is on the donor to establish the reliability of
the written records. Id. On this record, we conclude that
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petitioners have failed to prove that they maintained reliable
written records for the $4,435 deduction for charitable
contributions to Brentwood.2
The cases cited by petitioners are inapposite. In
Vieselmeyer v. Commissioner, T.C. Memo. 1978-315, the taxpayers
established entitlement to a charitable contribution deduction
based on notations recorded on a desk calendar. However, the
taxable year involved there was 1972, well before the effective
date of section 1.170A-13(a), Income Tax Regs. In Burns v.
Commissioner, T.C. Memo. 1988-536, the taxpayer established
entitlement to a charitable contribution deduction based on
notations recorded on a kitchen calendar. However, although the
taxable year involved was 1984, the Commissioner did not raise
the issue of compliance with the requirements of section 1.170A-
13(a)(1), Income Tax Regs. Consequently, we declined to rule on
whether the calendar notations constituted reliable written
records.
3. Section 6651(a)(1) Addition to Tax for Failure to File Timely
Section 6651(a)(1) provides for an addition to tax of 5
percent of the tax required to be shown on the return for each
month or fraction thereof for which there is a failure to file,
2
In the notice of deficiency, respondent disallowed for lack
of substantiation all but $5 of the $4,640 that petitioners
claimed as a charitable contribution deduction. However, on
brief and at trial respondent's argument is limited to the $4,435
deduction for charitable contributions to Brentwood.
Accordingly, we conclude that respondent has conceded the
deduction in the amount of $205. See Rybak v. Commissioner, 91
T.C. 524, 566 n.19 (1988).
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not to exceed 25 percent. The flush language of section 6651(a)
provides that in case of failure to file within 60 days of the
due date of the return, the addition to tax under section
6651(a)(1) will not be less than the lesser of $100 or 100
percent of the amount required to be shown as tax on the return.
The addition to tax for failure to file a return timely will be
imposed if a return is not timely filed unless the taxpayer shows
that the delay was due to reasonable cause and not willful
neglect. Sec. 6651(a)(1).
Petitioners' 1991 Federal income tax return was due on
April 15, 1992. Sec. 6072(a); sec. 1.6072-1(a), Income Tax Regs.
Petitioners filed their 1991 Federal income tax return on
July 24, 1992. Petitioners have not offered any evidence to show
that the delay was due to reasonable cause. We therefore sustain
respondent's determination that petitioners are liable for a $100
addition to tax under section 6651(a)(1).
To reflect the foregoing,
Decision will be entered
under Rule 155.