T.C. Memo. 2003-232
UNITED STATES TAX COURT
DIETER STUSSY, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 4088-02. Filed August 4, 2003.
Dieter Stussy, pro se.
Angelique M. Neal, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
LARO, Judge: Petitioner petitioned the Court to redetermine
a $2,983 deficiency in his 1998 Federal income tax. Following
concessions by respondent, we are left to decide:
1. Whether petitioner may deduct interest paid on his
personal income tax liability. We hold he may not.
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2. Whether petitioner may deduct charitable contributions
claimed for expenditures made to his personal residence which
were allocable to space used exclusively by a section 501(c)(3)
organization named the Jan Stussy Foundation (Foundation). We
hold he may not.
3. Whether petitioner may deduct at the standard mileage
rate his automobile expenses connected to the determination of
his personal income tax liability. We hold he may.
Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the years in issue. Rule
references are to the Tax Court Rules of Practice and Procedure.
Dollar amounts are rounded.
FINDINGS OF FACT
Some facts were stipulated. The stipulated facts and the
accompanying exhibits are incorporated herein by this reference.
We find the stipulated facts accordingly. Petitioner resided in
Los Angeles, California, when his petition was filed.
During 1998, petitioner resided in a single family residence
(residence). The residence measured 2,085 square feet and was
titled in the name of the Stussy Family Trust (Trust).
Petitioner’s father, Jan Stussy (Dean Stussy), was the Trust’s
beneficial owner up until his death on July 31, 1990. Dean
Stussy was an active professional painter, and he was the Dean of
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the School of Art at the University of California at Los
Angeles.1 Dean Stussy resided in the residence until his death.
The Foundation is a section 501(c)(3) organization that was
formed in 1990. The Foundation is responsible for storing,
cataloging, and selling the paintings and other artwork of Dean
Stussy (collectively, Dean Stussy artwork). The Foundation began
storing the Dean Stussy artwork at the residence at or about the
time the Foundation was formed and continued to store the Dean
Stussy artwork there throughout the subject year. The Dean
Stussy artwork stored at the residence included approximately 100
pieces which measured 4 feet by 8 feet and approximately 1,000
pieces which measured 4 feet by 4 feet. The Foundation valued
its Dean Stussy artwork at $820,934 as of December 31, 1998.
Pursuant to a “Deed of Gift and License” dated April 30,
1990, Dean Stussy made two gifts to the Foundation. The first
gift was the Dean Stussy artwork. The second gift was a license
to the exclusive use of four rooms (collectively, rooms) in the
residence. The rooms, none of which during the subject year were
used by petitioner for personal purposes, totaled 900 square
feet. Petitioner was not entitled to collect from the Foundation
any rent on the rooms, and the Foundation was liable for only the
payment of insurance.
1
Dean Stussy painted more than 7,000 paintings.
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During 1998, petitioner paid the following expenses with
respect to the residence: Insurance of $841, utilities of
$1,729, homeowner’s association dues of $30, pest control of
$478, and repairs and maintenance of $1,704 (to replace a water
heater, to clear brush around the perimeter of the residence, and
to repair the furnace). Petitioner allocated these expenses to
the Foundation using a percentage allocation and claimed a
charitable contribution for the portion of the allocated
expenses. Petitioner did not receive any written acknowledgment
from the Foundation for any contributions purportedly made to the
Foundation by petitioner during 1998. Nor did the Foundation
report its receipt of any contributions during 1998.
During 1998, petitioner drove 275.1 miles for which he
claims a miscellaneous itemized deduction at the standard mileage
rate. The breakdown of these miles was: 165.5 miles for
petitioner’s copying and filing of his personal Federal and State
income tax returns, 82.7 miles for petitioner’s meetings with
Internal Revenue Service personnel related to the examination of
his personal income tax returns, 14.5 miles for petitioner’s trip
to the Santa Monica law library, and 12.4 miles for petitioner’s
copying of a document entitled “Response to AG of IRS
Investigation”.
Petitioner’s 1998 Federal income tax return included 2
Schedules C, Profit or Loss From Business. One of these
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schedules was for petitioner’s return preparation business. This
Schedule C reported $550 of gross receipts and a net loss of $20.
The other Schedule C listed the proprietor as “D. Stussy, as
successor per IRC section 691(b)” and reported that the
proprietor’s principal business activity was “Artist”. This
Schedule C reported no gross receipts and one expense. This
expense, in the amount of $4,665, was Federal and State income
tax deficiency interest paid as to petitioner’s 1992 through 1995
personal income tax returns. Petitioner’s income tax liabilities
for 1992, 1993, and 1994 were determined by respondent on the
basis of this Court’s memorandum opinion in Stussy v.
Commissioner, T.C. Memo. 1997-293.
OPINION
1. Burden of Proof
The parties dispute who bears the burden of proof. We need
not and do not decide that issue. The record is sufficient for
us to decide this case on its merits.
2. Interest
Petitioner claims as a sole proprietorship expense a
deduction for interest that he paid with respect to his personal
Federal and State income taxes. Petitioner recognizes that the
Court of Appeals for the Ninth Circuit, the court to which this
case is appealable, held in Redlark v. Commissioner, 141 F.3d 936
(9th Cir. 1998), revg. and remanding 106 T.C. 31 (1996), that
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this type of interest is nondeductible personal interest under
section 1.163-9T, Temporary Income Tax Regs., 52 Fed. Reg. 48409
(Dec. 22, 1987). Petitioner argues that section 1.163-9T,
Temporary Income Tax Regs., supra, does not apply here (and,
hence, neither does Redlark v. Commissioner, supra) in that, he
claims, those regulations have expired under section 7805(e)(2).
We disagree with petitioner that the referenced regulations
have expired under section 7805(e)(2). Whereas petitioner notes
correctly that the regulations in section 1.163-9T, Temporary
Income Tax Regs., supra, are temporary regulations and that
section 7805(e)(2) provides that “Any temporary regulation shall
expire within 3 years after the date of issuance of such
regulation”, petitioner fails to observe that section 7805(e)(2)
applies only to regulations issued after November 20, 1988.
Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647,
sec. 6232(a), 102 Stat. 3734. Section 1.163-9T, Temporary Income
Tax Regs., supra, was issued on December 22, 1987, approximately
11 months before the effective date of section 7805(e)(2). On
the basis of Redlark v. Commissioner, supra, and, more recently,
our opinion in Robinson v. Commissioner, 119 T.C. 44 (2002)
(holding that this Court shall no longer follow our opinion in
Redlark as to this issue), we sustain respondent’s determination
on this issue.
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3. Charitable Contributions
Petitioner argues that the expenses connected to the
residence are deductible as charitable contributions to the
extent that they benefited the Foundation. Respondent argues
that petitioner may not deduct any of these expenses in that he
does not have a written acknowledgment from the Foundation as to
them.
We agree with respondent that none of the expenses are
deductible given the absence of a written acknowledgment. Under
section 170(f)(8)(A), an individual taxpayer may deduct a
contribution of $250 or more only if he or she substantiates the
deduction with a contemporaneous written acknowledgment that
meets the requirements of that section. See also Addis v.
Commissioner, 118 T.C. 528, 533-534 (2002). That acknowledgment,
which must be furnished by the donee organization, must state the
amount of cash and describe other property contributed, indicate
whether the donee organization provided any goods or services in
consideration for the contribution, and provide a description and
good faith estimate of the value of any goods or services
provided by the donee organization. Sec. 170(f)(8)(B); see also
sec. 1.170A-13(f)(5), Income Tax Regs. (goods or services include
cash, property, services, benefits, and privileges). Given that
petitioner does not have such a written acknowledgment from the
Foundation as to the disputed expenses, we conclude that he is
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precluded from deducting them. See Weyts v. Commissioner, T.C.
Memo. 2003-68. A contrary conclusion would contravene the
statutory text and the purpose of recordkeeping for contributions
in excess of $250.
4. Mileage
Petitioner argues that he may deduct as a miscellaneous
itemized deduction an amount for the 275.1 miles that he drove
during the year in connection with the determination of his
personal income tax liabilities. Respondent argues that all of
this mileage is personal and, hence, nondeductible. Respondent
also argues that the mileage was not incurred either in
connection with the determination, collection, or refund of a
tax, or as an ordinary and necessary expense related to the
determination, collection, or refund of a tax. Yet, respondent
does not dispute (and in fact has stipulated) that the 275.1
miles were driven for the purposes which we have described supra
at p. 5.
We hold that petitioner may deduct all of the disputed
mileage at the standard mileage rate. Section 212(3) allows an
individual to deduct “all the ordinary and necessary expenses
paid or incurred during the taxable year * * * in connection with
the determination, collection, or refund of any tax.” The
Treasury Department has interpreted this section as follows:
Expenses paid or incurred by an individual in
connection with the determination, collection, or
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refund of any tax, whether the taxing authority be
Federal, State, or municipal, and whether the tax be
income, estate, gift, property, or any other tax, are
deductible. Thus, expenses paid or incurred by a
taxpayer for tax counsel or expenses paid or incurred
in connection with the preparation of his tax returns
or in connection with any proceedings involved in
determining the extent of tax liability or in
contesting his tax liability are deductible. [Sec.
1.212-1(l), Income Tax Regs.]
We find that all of the disputed mileage was an ordinary and
necessary expense paid by petitioner during 1998 in connection
with the determination of his Federal and State income taxes.2
We conclude on the basis of this finding that the mileage is
properly deductible as a miscellaneous itemized deduction under
section 212(3). Whereas we agree with respondent that section
262 generally precludes any deduction for personal expenses, and
that this mileage is all attributable to petitioner’s personal
income taxes, we also observe that the exception in section
212(3) for expenses of contesting tax liabilities was prescribed
specifically by the Congress to allow taxpayers to deduct a
2
Although the 165.5 miles which petitioner claims to have
driven for the copying and filing of his personal income tax
returns appear to be high considering that petitioner lived in a
large metropolis, the parties have stipulated that petitioner
incurred all of these miles for the “copying and filing of his
personal federal and state income tax returns”. Respondent does
not claim that the amount of these miles is excessive.
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personal expense that would otherwise be nondeductible. United
States v. Gilmore, 372 U.S. 39, 48 n.16 (1963).
Decision will be
entered under Rule 155.