T.C. Summary Opinion 2003-22
UNITED STATES TAX COURT
NORMAN J. SUTER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 11492-00S. Filed March 18, 2003.
Norman J. Suter, pro se.
Jeanne Gramling, for respondent.
DINAN, Special Trial Judge: This case was heard pursuant to
the provisions of section 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
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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 of $6,752 and $675 for the taxable years 1997 and
1998. The issue for decision is whether petitioner is entitled
to disallowed deductions claimed as business supplies expense.1
Some of the facts have been stipulated and are so found.
The stipulations of fact and the attached exhibits are
incorporated herein by this reference. Petitioner resided in
Matthews, North Carolina, on the date the petition was filed in
this case.
During the years in issue, petitioner worked as an
independent contractor for Imperial Construction, Inc., and was
paid commissions for the jobs he completed. He filed a Schedule
C, Profit or Loss From Business, in each year in issue, claiming
deductions for supplies expense of $26,250 in 1997 and $3,588 in
1998. In the statutory notice of deficiency, respondent
disallowed $19,441 and $2,655 of these deductions, respectively.
A taxpayer may deduct the ordinary and necessary expenses
paid or incurred during the taxable year in carrying on a trade
or business. Sec. 162(a). A taxpayer, however, generally must
keep records sufficient to establish the amounts of the items
1
The remaining adjustments in the statutory notice of
deficiency are computational and will be resolved by the Court’s
holding on the issue in this case.
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reported on his Federal income tax return. Sec. 6001; sec.
1.6001-1(a), (e), Income Tax Regs. In the event that a taxpayer
establishes that a deductible expense has been paid but is unable
to substantiate the precise amount, we generally may estimate the
amount of the deductible expense bearing heavily against the
taxpayer whose inexactitude in substantiating the amount of the
expense is of his own making. Cohan v. Commissioner, 39 F.2d
540, 543-544 (2d Cir. 1930). We cannot estimate a deductible
expense, however, unless the taxpayer presents evidence
sufficient to provide some basis upon which an estimate may be
made. Vanicek v. Commissioner, 85 T.C. 731, 743 (1985).
Petitioner testified that his tax return preparer may have
erroneously characterized certain expenses, primarily related to
advertising, causing otherwise deductible expenses to be listed
on the return under the category of “supplies”. However,
petitioner was unable to provide any substantiation of either the
disallowed portion of the supplies expense or of any other
business expenses incurred but unclaimed on the returns. Because
petitioner has failed to provide any credible evidence regarding
the existence or amount of any such expenses, petitioner bears
the burden of proving respondent’s determination in the notice of
deficiency to be error. Sec. 7491(a)(1); Rule 142(a). Because
petitioner has failed to substantiate the expenses, we sustain
respondent’s disallowance of the deductions therefor.
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Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be entered
for respondent.