T.C. Summary Opinion 2004-141
UNITED STATES TAX COURT
JAMES BRIAN MEDIS, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10132-03S. Filed October 13, 2004.
James Brian Medis, pro se.
Thomas J. Fernandez, for respondent.
PANUTHOS, Chief 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 effect for the year in issue, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
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Respondent determined that petitioner is liable for a
deficiency in Federal income tax of $6,662 and an addition to tax
under section 6651(a)(1) of $999.30 for the 2000 taxable year.
After concessions,1 the issues for decision are: (1) Whether
petitioner is entitled to claimed itemized deductions and (2)
whether petitioner is liable for the alternative minimum tax
(sometimes referred to as AMT) for the 2000 taxable year.
Background
Some of the facts have been stipulated, and they are so
found. The stipulation of facts and the attached exhibits are
incorporated herein by this reference. At the time the petition
was filed petitioner resided in Blue Jay, California.
On June 17, 2001, petitioner filed a Form 1040, U.S.
Individual Income Tax Return, for the 2000 taxable year (2000
income tax return). Petitioner did not request, nor did he
receive, an extension to file his 2000 income tax return.
Petitioner reported wages of $50,921, such amount also being
reported as petitioner’s adjusted gross income for the 2000
taxable year. Petitioner claimed the following itemized
deductions on Schedule A:
1
Petitioner concedes that he is liable for the addition to
tax under sec. 6651(a)(1) for the 2000 taxable year. Petitioner
further concedes that he received, but failed to report wages of
$12,138 for the 2000 taxable year.
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Medical and dental expenses -0-
State and local income taxes $336
Interest -0-
Gifts to charity 400
Job expenses and most other miscellaneous deductions 33,645
Other miscellaneous deductions 500
1
Total itemized deductions $34,881
1
Petitioner incorrectly calculated the total itemized deductions and
claimed $34,145.
The $33,645 claimed for “Job expenses and most other
miscellaneous deductions” was calculated with reference to
miscellaneous itemized deductions of $34,663.2 Petitioner did
not report an AMT on his 2000 income tax return.
During an examination of the 2000 income tax return,
petitioner submitted a Form 1040X, Amended U.S. Individual Income
Tax Return, for the 2000 taxable year (amended return).
Petitioner reported additional wages of $12,138 and claimed
additional itemized deductions of $12,950. Specifically,
petitioner claimed the following itemized deductions on Schedule
A of the amended return:
Medical and dental expenses -0-
State and local income taxes $336
Interest -0-
Gifts to charity 400
Job expenses and most other miscellaneous deductions 47,095
Other miscellaneous deductions -0-
1
Total Itemized Deductions $47,831
1
Petitioner incorrectly reported the “Correct amount” as $47,950.
In the notice of deficiency, respondent determined that
petitioner failed to report additional wages of $12,138 (as
2
Taking into consideration the 2-percent floor on
miscellaneous itemized deductions.
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reported by petitioner on the amended return) and that petitioner
was liable for an AMT of $4,802 for the 2000 taxable year.
Respondent also determined that petitioner was not entitled to
the additional itemized deductions claimed on the amended return
and made a downward adjustment of $243 to the total itemized
deductions claimed for that taxable year.
Discussion
The Commissioner’s determination is presumed correct, and
generally, a taxpayer bears 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 the
taxpayer bears the burden of proving entitlement to any deduction
claimed. 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).
The burden as to a factual issue relevant to the liability
for tax may shift to the Commissioner if the taxpayer introduces
credible evidence and satisfies the requirements under section
7491(a)(2) to substantiate items, maintain required records, and
fully cooperate with respondent’s reasonable requests. Sec.
7491(a). In the present case, the burden of proof remains on
petitioner because he has neither taken a position as to whether
the burden of proof should be placed on respondent nor
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established that he has complied with the requirements of section
7491(a).
Itemized Deductions
Respondent determined that petitioner is not entitled to
$243 of the $34,881 claimed as total itemized deductions on his
2000 income tax return. This determination was made pursuant to
section 67, which provides that “miscellaneous itemized
deductions for any taxable year shall be allowed only to the
extent that the aggregate of such deductions exceeds 2 percent of
adjusted gross income.” Sec. 67(a). On the 2000 income tax
return, petitioner claimed miscellaneous itemized deductions of
$34,663 before the section 67 reduction. Petitioner’s adjusted
gross income for the 2000 taxable year increased from $50,921 to
$63,059, the difference being solely attributable to the
additional wages of $12,138 that petitioner failed to report on
the 2000 income tax return.3 Because of this difference, the 2-
percent floor on miscellaneous itemized deductions under section
67 was “raised” by $243. We conclude that respondent has
correctly computed this adjustment.
We note that respondent’s determination with respect to
itemized deductions was based upon the 2000 income tax return and
not the amended return. While petitioner has claimed additional
3
As indicated, petitioner reported this amount on his
amended return.
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itemized deductions on the amended return, he has not presented
any evidence to substantiate that he is entitled to these
additional deductions. Instead, petitioner contends that the
total itemized deductions should not be limited when he
accurately answered the following question on line 28 of Schedule
A: “Is Form 1040, line 34, over $128,950 (over $64,475 if
married filing separately)?” This limitation, however, is based
upon section 68 and not upon section 67, the latter of which, as
indicated earlier, is the basis of respondent’s determination.
We conclude that petitioner is entitled to claim total
itemized deductions of $34,638 for the 2000 taxable year, an
amount $243 less than $34,881 claimed on the 2000 income tax
return. Accordingly, we sustain respondent’s determination with
respect to this issue.
Alternative Minimum Tax
Respondent determined that petitioner is liable for an AMT
of $4,802 for the 2000 taxable year. Section 55 imposes, in
addition to all other taxes imposed by subtitle A, an AMT on
noncorporate taxpayers. The determination of a noncorporate
taxpayer’s AMT requires a recomputation of taxable income,
leading to a new tax base or an alternative minimum taxable
income. Sec. 55(b)(2). In making the recomputation, certain
(but not all) itemized deductions are not allowed, nor is the
personal exemption. In particular, miscellaneous itemized
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deductions are not allowed in the computation of the alternative
minimum taxable income. Sec. 56(b)(1)(A)(i). The sum of these
disallowed items may trigger a liability for the AMT. In the
present case, petitioner’s miscellaneous itemized deductions
alone total $33,402 after application of the 2-percent floor
under section 67. Coupled with the other unallowable expenses,
specifically spelled out in the statute, petitioner’s AMT
liability ensues.
Petitioner nevertheless contends that the AMT is confusing
and complex, and he is unclear as to why he is liable for the
AMT, which effectively deprives him of the benefit of his
itemized deductions. Congress established the alternative
minimum taxable income as a broad base of income in order to tax
taxpayers more closely on their economic income, intending for
all taxpayers to pay their fair share of the overall Federal
income tax burden. Allen v. Commissioner, 118 T.C. 1, 5 (2002).
However unfair this statute might seem to petitioner, the Court
must apply the law as written. As this Court noted in Hays Corp.
v. Commissioner, 40 T.C. 436, 443 (1963), affd. 331 F.2d 422 (7th
Cir. 1964): “The proper place for a consideration of
petitioner’s complaint is the halls of Congress, not here.”
Respondent, therefore, is sustained on this issue.
Reviewed and adopted as the report of the Small Tax Case
Division.
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To reflect the foregoing,
Decision will be entered
for respondent.