T.C. Memo. 1997-151
UNITED STATES TAX COURT
MARVIN ZIPORYN, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 12515-95. Filed March 24, 1997.
Marvin Ziporyn, pro se.
Edith E. Siler, for respondent.
MEMORANDUM OPINION
GOLDBERG, Special Trial Judge: The case was heard pursuant
to section 7443A(b)(3) of the Code and Rules 180, 181, and 182.1
Respondent determined a deficiency in petitioner's Federal income
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue. All
Rule references are to the Tax Court Rules of Practice and
Procedure.
2
tax for 1990 in the amount of $7,035. The issues for decision
are: (1) Whether petitioner is entitled to a Schedule C
deduction for business expenses in excess of the amounts allowed
by respondent; and (2) whether petitioner is entitled to a
deduction for travel expenses in excess of the amount allowed by
respondent.2
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated by this reference. Petitioner resided in Chicago,
Illinois, at the time his petition was filed.
Petitioner is a psychiatrist specializing in forensic
psychiatry. Petitioner had acted as a court psychiatrist for the
county of Los Angeles, California, and thus had become well known
in Southern California. In 1988, petitioner began working as a
forensic psychiatrist for a group based in Santa Monica,
California. This work lasted approximately 14 months. In 1990,
petitioner was hired by the Department of Mental Health for the
county of Riverside, California, to perform psychiatric services
in the county jails. Petitioner's contract with the county of
Riverside, California, was not for a fixed period of time, but
his employment actually lasted for 11 months in 1990. Petitioner
2
In a stipulation of settled issue filed with the Court,
petitioner conceded that he is not entitled to a Schedule A
deduction for unreimbursed employee expenses in the amount of
$10,877 claimed on his return.
3
was hired to set up a forensic unit at the jail. Petitioner was
originally assigned to a jail in Indio, California, and later was
relocated to the main jail in Riverside, California.
Petitioner's psychiatric work required his presence at the jail
on Wednesday, Thursday, and Friday of each week.
Petitioner was also engaged in business as a musician. On
Friday nights, petitioner played the violin at Ajetis Balkan
Cafe, which is located in Hermosa Beach, California.
Each Saturday morning for 11 months during the year in
issue, petitioner flew from Los Angeles, California, to Chicago,
Illinois. Petitioner's personal residence was located in
Chicago, Illinois, and petitioner's family resided in the area.
Petitioner returned to Los Angeles, California, on Monday nights
or Tuesday mornings each week. Petitioner did not maintain a log
or records of travel expenses.
During 1990, petitioner rented an office suite in a building
known as the Fine Arts Building, located at 410 South Michigan
Avenue in Chicago, Illinois. Petitioner maintained a private
psychiatry practice there with office hours from 3:00 p.m. to
7:00 p.m. on Mondays. Petitioner had several patients, some of
whom he had been seeing for a number of years.
After working for the county of Riverside, California,
during the year in issue, petitioner continued to work as a
forensic psychiatrist in California, working for approximately 6
months consecutively for two other organizations in Southern
4
California. After that time, petitioner returned to Chicago,
Illinois.
For tax year 1990, petitioner reported on line 7 of his Form
1040 $37,945 in wages, comprising of $37,834.89 from the county
of Riverside, California, and $110 from TALCO Enterprises. The
expenses incurred with respect to his California wage income were
claimed on line 20 of Schedule A as "unreimbursed employee
expenses" in the amount of $11,660, before the 2-percent floor.
According to Form 2106, Employee Business Expenses, this total
consisted of $10,340 for travel expenses while away from home
overnight including lodging, airplane, car rental and other
expenses, and $1,650 less 20 percent for meals and entertainment.
Petitioner reported income and expenses related to his
Chicago, Illinois, practice on Schedule C. Petitioner reported
gross receipts of $12,700 from his psychiatric practice. This
figure was based upon petitioner's estimate of the number of
hours that he saw patients and the rate that petitioner charged
per hour. Petitioner claimed the following expenses on Schedule
C:
Amount
Expense Claimed
Car and truck expense $2,420
Legal and professional services 240
Rent
Other business property 5,600
Taxes and licenses 600
Travel 7,920
Meals and entertainment
$1,650 less 20 percent 1,320
Parking 250
5
Dues and subscriptions 500
Telephone 4,043
Total $22,893
Petitioner did not maintain any books or records with respect to
his practice.
Petitioner reported income and expenses related to being a
musician on a separate Schedule C which is not at issue.
In the notice of deficiency, respondent determined that
petitioner was not entitled to claim the following Schedule C
expense deductions totaling $11,172 for lack of substantiation:
Amount
Expense Disallowed
Car and truck expense $1,523
Rent
Other business property 831
Travel 5,651
Meals and entertainment 1,011
Telephone 2,156
Respondent completely disallowed petitioner's claimed Schedule A
deductions for unreimbursed employee expenses for lack of
substantiation. Respondent further determined that petitioner's
home for tax purposes was California and that the disallowed
expenses represented nondeductible personal and commuting
expenses. Respondent also determined a computational increase in
petitioner's self-employment taxes as a result of the above
adjustments.
At the end of trial, the Court requested that the parties
file a supplemental stipulation of facts setting forth the
expenses which petitioner claimed to have incurred, to be
6
segregated between his psychiatric practice in Chicago, Illinois,
and his employment in California. The Court requested that the
parties also stipulate to the amounts for which petitioner had
provided substantiation.
Petitioner's substantiation of rent and telephone expenses,
claimed on his Schedule C for 1990, consisted of canceled checks
as follows:
Payee Amount Date Memo
Fine Arts Building $770.16 1/16/90 #210
Fine Arts Building 813.66 3/24/90 March 1990 - #210
Fine Arts Building 799.45 11/30/90 November #210
Fine Arts Building 798.68 12/26/90 #210 - December
Illinois Bell 229.02 1/29/90 312-922-3880
Illinois Bell 209.53 3/28/90 312-922-3880
Illinois Bell 222.28 5/25/90 312-922-3880
Illinois Bell 381.03 12/31/90 312-922-3880
General Tele-Communication 29.15 1/10/90 312-922-3880
General Tele-Communication 84.55 12/15/90 --
Petitioner approximated his rent expense for 1990 as $9,552 based
upon an estimated expense of $796 per month. Petitioner
estimated his telephone expense as an average monthly amount of
$260.47 based on the four checks paid to Illinois Bell.
Petitioner provided account statements from credit and
charge card companies to substantiate the amounts of his travel
expenses. These amounts are summarized as follows:
Estimated Substantiated
Expense Expense Expense
Airfare $7,240 $640.00
Lodging in California 4,680 765.35
Rental cars 5,720 1,130.79
$17,640 $2,536.14
7
Petitioner estimated his meals expense as an average weekly
amount of $100. Petitioner provided no substantiation for this
amount.
Respondent's determinations are presumed correct, and
petitioner bears the burden of proving them erroneous. Rule
142(a); Welch v. Helvering, 290 U.S. 111 (1933). Deductions are a
matter of legislative grace. New Colonial Ice Co. v. Helvering,
292 U.S. 435, 440 (1934). Taxpayers must maintain adequate
records to substantiate the amount of any deductions. Sec. 6001;
Sec. 1.6001-1(a), Income Tax Regs.
Section 162 allows a deduction for ordinary and necessary
expenses paid or incurred in carrying on a trade or business.
Generally, except as provided by section 274(d), when evidence
shows that taxpayers incurred a deductible expense, but the exact
amount cannot be determined, the Court may approximate the
amount. Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930).
However, the Court must have some basis upon which an estimate
may be made. Vanicek v. Commissioner, 85 T.C. 731, 742-743
(1985).
Car and Truck Expense
Petitioner claimed a deduction for car and truck expense in
the amount of $2,240. Respondent disallowed $1,523 of this
deduction for lack of substantiation.
8
Petitioner has offered no evidence to prove that
respondent's determination is incorrect. Therefore, we deem
petitioner to have conceded this issue. Rule 149(b).
Rent Expense
Petitioner claimed rent expense of $5,600. Respondent
disallowed $831 of this amount due to lack of substantiation.
Petitioner now claims that he incurred rent expense of $9,552 for
the year.
Petitioner testified that he signed a lease and rented the
office in Chicago, Illinois, throughout the year, but at trial he
did not produce any written documentation of this. Three of
petitioner's patients testified that they saw petitioner
regularly throughout the year in issue, and at least one of his
patients testified that petitioner held sessions with him at this
particular location. The problem we have is with petitioner's
proof as to the amount of this expense. His evidence is
inadequate to overcome the fact that he claimed rent expense of
only $5,600 on his return. There is no explanation for this
discrepancy. On this record, we find that petitioner is entitled
to deduct rent expense of $5,600 as claimed.
Telephone Expense
Petitioner claimed telephone expense of $4,043. Respondent
disallowed $2,156 of this amount.
Petitioner has not established that he incurred telephone
expense in excess of the amount allowed by respondent.
9
Petitioner's estimated expense is based on an average of the
amounts of the four checks which were paid to Illinois Bell.
However, petitioner has not introduced any evidence to show that
these payments were each for a single month or that the charges
were representative of his typical usage. There is nothing in
the record enabling us to determine that petitioner incurred
telephone expenses in excess of $1,887. Respondent is sustained
on this issue.
Travel, Meals, and Entertainment Expenses
Section 162(a)(2) allows a deduction for travel expenses,
including meals and lodging. An exception to the Cohan rule is
section 274(d), which prohibits the estimation of expenses for
travel. Section 274(d) requires substantiation of travel
expenses either "by adequate records or by sufficient evidence
corroborating the taxpayer's own statement". Sec. 274(d). The
records must show the amount, date, place, and business purpose
of each travel expense. Id.; sec. 1.274-5T(b)(2), Temporary
Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6, 1985).
In order to be deductible as an expense incurred while "away
from home", a travel expense must be reasonable and necessary,
and incurred in pursuit of business. Commissioner v. Flowers,
326 U.S. 465, 470 (1946). For purposes of section 162(a)(2),
generally a taxpayer's home is his principal place of business.
Michaels v. Commissioner, 53 T.C. 269, 273 (1969). When a
taxpayer has two places of business or employment located a
10
considerable distance from each other, generally, he is entitled
to deduct expenses incurred in traveling between such locations
and for meals and lodging incurred while away from his principal
place of business under section 162. Puckett v. Commissioner, 56
T.C. 1092, 1097 (1971). In determining which of two locations is
a taxpayer's principal place of business, the courts have
considered: the amount of time spent at each place; the
proportion of the taxpayer's income earned in each position; the
degree of activity engaged in by the taxpayer in each location;
where the taxpayer maintains his permanent residence; and whether
employment at one location is temporary. Puckett v.
Commissioner, supra at 1097; Sherman v. Commissioner, 16 T.C. 332
(1951); Hoeppner v. Commissioner, T.C. Memo. 1992-703.
Petitioner conceded the amount claimed on Schedule A of his
return for unreimbursed employee expenses. Respondent stated
that the concession was based on the fact that petitioner's
accountant had claimed identical travel expenses on Schedules A
and C of petitioner's return; thus the deductions were
duplicated. It is clear that petitioner's meals and
entertainment expenses were claimed both on Schedule A and
Schedule C in identical amounts. However, it is not clear from
the amounts claimed that the same is true for petitioner's travel
expenses consisting of amounts paid for airfare, lodging, and car
rentals. Petitioner could not explain how his accountant came up
with the total expenses as reported on his tax return. It
11
appears from the evidence that petitioner's airfare expense was
reported on Schedule C while his lodging and rental car expenses
incurred in California were reported on Schedule A as
unreimbursed employee expenses. This is consistent with
petitioner's employment status in California. In addition, the
total expenses claimed on Schedules A and C for travel in the
amount of $18,260 more closely approximate petitioner's total
estimated expenses of $17,640 as set forth in the supplemental
stipulation of facts. Petitioner's concession would appear to
render moot the issue of the character of his employment in
California as his major or minor post of duty, or as temporary or
indefinite. However, it is clear from the record, including the
testimony and arguments presented at trial, that neither
petitioner nor respondent believed that petitioner conceded his
claimed lodging and car rental expenses but instead believed that
such expenses had been reported on petitioner's Schedule C.
Therefore, we shall address the issue as framed by the parties.
Based on the record, we find that petitioner's principal
place of business, and therefore his home for purposes of section
162, was located in California for the year in issue. For the 11
months during which petitioner worked for the county of
Riverside, exclusive of travel, petitioner spent approximately
the same number of days in California and Illinois. However,
petitioner was present in California on business for 3 days each
week while his practice in Chicago, Illinois, required that he be
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present on only one afternoon each week. Petitioner earned
significantly more of his income from his employment in
California than he earned from his private practice in Chicago,
Illinois. In addition, petitioner's employment in California was
not temporary. Petitioner's actual employment in the State
lasted over 3 years. See Rev. Rul. 83-82, 1983-1 C.B. 45 (actual
stay of over 2 years will be considered indefinite regardless of
facts and circumstances). Petitioner was hired by the county of
Riverside to set up the forensic unit at its jails, and he
testified that he expected the job to be of short duration based
on his experience with a similar job in Santa Monica which lasted
14 months. However, by his own admission petitioner was well
respected in Southern California, and his prospects for
employment within that area were of an indefinite, not temporary,
nature. See Ellwein v. United States, 778 F.2d 506 (8th Cir.
1985). Although petitioner maintained his residence in Chicago,
Illinois, we find that petitioner's principal place of business
during the year in issue was California. Therefore, petitioner
is not entitled to deduct the costs of lodging, meals, or other
expenses incurred in California, because these expenses were not
incurred while petitioner was away from home. Petitioner is
entitled to deduct the expense of traveling between California
and Chicago, Illinois.
Petitioner has substantiated airline expense of $640 by his
records and testimony. Petitioner has not established that he is
13
entitled to a deduction for travel, meals, or entertainment
expenses in excess of the amounts allowed by respondent.
To reflect the foregoing,
Decision will be entered
under Rule 155.