T.C. Memo. 2005-159
UNITED STATES TAX COURT
KELVIN AND ARLENE JACKSON, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 8446-04. Filed June 29, 2005.
Kelvin and Arlene Jackson, pro se.
Kelli H. Todd, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
COHEN, Judge: Respondent determined a deficiency of $808
and a section 6662(a) penalty of $161.60 with respect to
petitioners’ Federal income tax for 2002. After concessions, we
must decide whether petitioners are entitled to additional
itemized deductions or business deductions beyond those conceded
by respondent and whether petitioners are liable for the penalty
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under section 6662(a). Unless otherwise indicated, all 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.
FINDINGS OF FACT
Petitioners resided in Austin, Texas, at the time that they
filed their petition. During 2002, petitioner Kelvin Jackson
(Mr. Jackson) was a driver for United Parcel Service (UPS), and
petitioner Arlene Jackson (Ms. Jackson) was a self-employed
writer. On their Form 1040, U.S. Individual Income Tax Return,
for 2002, among other things no longer in dispute, petitioners
claimed on Schedule A, Itemized Deductions, the following:
Medical and dental expenses $4,673
Home mortgage interest and points 14,466
Gifts to charity by cash or check 3,600
Noncash gifts to charity 500
Unreimbursed employee expenses
(small tools) 350
On Schedule C, Profit or Loss From Business, for Ms. Jackson’s
business as a writer, petitioners claimed a total of $30,878 in
business expenses. In addition to other items not now in
dispute, petitioners claimed a $706 mortgage interest deduction
on this Schedule C.
Prior to trial, respondent conceded petitioners’ entitlement
to various items that had been claimed on their return and
disallowed in the notice of deficiency, including $4,673 of
medical and dental expenses, subject to the 7.5-percent floor
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limitation, an $8,937 itemized deduction for home mortgage
interest, and a $50 charitable contribution deduction for a
contribution to United Way deducted from Mr. Jackson’s pay from
UPS. Thereupon, petitioners claimed additional medical expense
deductions allegedly not included in the amount reported on their
tax return. During a meeting with respondent’s counsel and at
trial, with respect to the disallowed charitable contributions
deductions, petitioners presented documents generated by
themselves and alleged receipts that were illegible, incomplete,
and some of which had been altered.
The mortgage interest remaining in dispute consists of
$5,800 in points withheld by the lender from a refinanced
mortgage loan obtained by petitioners during 2002. After
conceding that such points should be amortized over the life of
the loan, see sec. 461(g), Ms. Jackson contended at trial that
$6,779.58 of the loan proceeds was used for business purposes and
was therefore deductible on Schedule C.
Mr. Jackson did not appear at trial. In support of the
claimed $350 “small tools” deduction on Schedule A of their 2002
return, Ms. Jackson claimed that the deduction was really for
Mr. Jackson’s steel-toed safety shoes required by UPS. She
presented copies of receipts on which an unidentified person had
written “work shoes”. One of the receipts, however, reflected
hiking boots. Another receipt was for “corporate oxford”. A
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third receipt did not describe the item purchased. None of the
amounts shown equaled the $350 claimed on the return. The shoes
reflected in the receipts and testimony would be adaptable to
personal use.
OPINION
The details of the claims made on the 2002 return, the
claims belatedly made as the case proceeded, and the quality of
evidence produced by petitioners are set forth in our findings of
fact because this case depends on the credibility of petitioners
and their documentation. Because petitioners did not retain
required records and did not introduce credible evidence with
respect to the disputed deductions, the burden of proof remains
with them. See sec. 7491(a). For the reasons set forth below,
we conclude that petitioners’ evidence is not reliable and that
they are not entitled to any deductions beyond those conceded by
respondent.
With respect to the medical expenses in issue, besides
introducing incomplete and illegible documents, Ms. Jackson
presented vague and uncertain testimony as to the date certain
medical expenses were paid, the nature of the treatment, and the
family member who received treatment. She belatedly attempted to
reconstruct mileage expenses for travel to medical providers, but
the reconstruction is unreliable because there are no reliable
records supporting the trips alleged. We cannot conclude on this
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record that petitioners’ allowable medical expenses exceed those
conceded by respondent.
With respect to the charitable contributions, Ms. Jackson
did not present any independent corroboration of her claims,
notwithstanding prior advice by respondent’s counsel and by the
Court that she do so at the time of trial. The documents
presented at trial included alleged records of noncash
contributions, but respondent had already conceded the amount
claimed on the return for those contributions. Original records
were not produced for any contributions, and it was unclear who
had supplied information on certain of the alleged receipts,
including Mr. Jackson’s name on some and the payee on others.
Certain “receipts” had been altered to increase the dollar
amounts shown. Even so, amounts shown on the documentation
presented totaled far less than the $3,600 claimed by petitioners
on their tax return. The evidence did not satisfy the
substantiation requirements of section 1.170A-13(a)(1), Income
Tax Regs., and does not give us a reliable basis for estimating
petitioners’ deductible contributions.
With respect to petitioners’ belated claim that a portion of
the mortgage loan proceeds should be deductible as business
expenses, petitioners have not shown that the amount that they
now claim was not previously included and allowed on the
Schedule C that they filed. Moreover, as respondent argues,
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petitioners must amortize points deducted from the proceeds of
the refinanced mortgage loan over the life of the loan,
determined as of 2002, even if the loan was business-related.
See sec. 461(g)(1); Rubnitz v. Commissioner, 67 T.C. 621, 626-628
(1977); see also Schubel v. Commissioner, 77 T.C. 701 (1981).
In their posttrial memorandum, petitioners make various
additional assertions that they are entitled to a deduction for a
particular type of safety-related shoes used by Mr. Jackson in
his job. Assertions in a brief and attachments to a brief are
not evidence. Rule 143(b). In any event, their contentions are
contradicted by the documents that they produced to respondent
and at trial. Accordingly, petitioners have not satisfied the
requirements for an employee expense deduction. See Pevsner v.
Commissioner, 628 F.2d 467, 470 (5th Cir. 1980), revg. T.C. Memo.
1979-311.
Petitioners attempt to blame the problems with their tax
return on their tax return preparer. Their failure to maintain
and produce the required documentation to support their
deductions, however, is negligence that is not attributable to
the preparer. Rather, the deficiency resulting from disallowance
of the items in dispute is attributable to petitioners’
negligence or to petitioners’ disregard of rules or regulations
relating to those deductions. The penalty under section 6662
will be sustained.
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To reflect respondent’s concessions,
Decision will be entered
under Rule 155.