T.C. Summary Opinion 2007-39
UNITED STATES TAX COURT
JEAN ERICK FORTIUS, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 23746-05S. Filed March 12, 2007.
Jean Erick Fortius, pro se.
Laura A. Price, 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 a $9,303 deficiency in petitioner’s
2002 Federal income tax and a $1,982 addition to tax under
section 6651(a)(1). The issues for decision are: (1) Whether
petitioner qualifies as a head of household; (2) whether
petitioner is entitled to an earned income credit; (3) whether
petitioner can deduct $28,600 for business-related expenses; and
(4) whether petitioner is liable for an addition to tax under
section 6651(a)(1) for failure to file a timely tax return.1
Background
Some of the facts have been stipulated and 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 Orlando, Florida.
Petitioner lived in Massachusetts in 2002 with his wife and
son. Petitioner worked as a taxi cab driver that year and leased
a cab from a company in Boston. Petitioner was responsible for
purchasing gasoline for the cab.
Petitioner and his wife did not file a joint 2002 Federal
income tax return. Petitioner instead filed as a “head of
household” and claimed an earned income credit with respect to
his son. Petitioner reported the income and expenses related to
the taxi cab on Schedule C, Profit or Loss From Business.
1
Adjustments not addressed in this opinion are
computational.
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Petitioner claimed a total of $28,600 of expenses on Schedule C.
Petitioner filed his 2002 return on April 15, 2004.
Respondent issued petitioner a notice of deficiency in
September 2005 denying the claimed credit and deductions.
Respondent also changed petitioner’s filing status to married
filing separately and determined a late-filing addition to tax.
Petitioner filed a timely petition with the Court.
Discussion
In general, the Commissioner’s determinations set forth in a
notice of deficiency are presumed correct, and the taxpayer bears
the burden of showing that the determinations are in error. Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Pursuant
to section 7491(a), the burden of proof as to factual matters
shifts to the Commissioner under certain circumstances.
Petitioner has neither alleged that section 7491(a) applies nor
established his compliance with the requirements of section
7491(a)(2)(A) and (B) to substantiate items, maintain records,
and cooperate fully with respondent’s reasonable requests.
Petitioner therefore bears the burden of proof.
1. Head of Household
Section 1(b) imposes a special income tax rate on a taxpayer
filing as head of household. An individual shall be considered a
head of household if, inter alia, he is not married at the close
of the taxable year. Sec. 2(b)(1). Because petitioner was
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married at the close of 2002, he is not considered a head of
household. Respondent’s determination on this issue is
sustained.
2. Earned Income Credit
An eligible individual may be allowed a credit which is
calculated as a percentage of the individual’s earned income.
Sec. 32(a)(1). In the case of an individual who is married, the
earned income credit is allowed only if a joint return is filed
for the taxable year under section 6013. Sec. 32(d). As
mentioned above, petitioner did not file a joint return for 2002.
Section 6013(b)(1) provides generally that where a taxpayer
has filed a separate return for a taxable year and the time
prescribed for filing has expired, the taxpayer nevertheless may
make a joint return with his spouse. Petitioner and his wife
have not attempted to file a joint return, however, and the
election under section 6013(b)(1) cannot be made after either
spouse timely petitions the Court in response to a notice of
deficiency for the year in issue. Sec. 6013(b)(2)(B); Millsap v.
Commissioner, 91 T.C. 926, 929 (1988). Respondent’s
determination on this issue is sustained.
3. Schedule C Deductions
A taxpayer who is carrying on a trade or business generally
may deduct ordinary and necessary expenses paid or incurred in
connection with the operation of the business. Sec. 162(a); FMR
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Corp. & Subs. v. Commissioner, 110 T.C. 402, 414 (1998).
Deductions are a matter of legislative grace, and the taxpayer
bears the burden of proving that he is entitled to any deduction
claimed. Rule 142(a); New Colonial Ice Co. v. Helvering, 292
U.S. 435, 440 (1934). The taxpayer is required to maintain
records that are sufficient to enable the Commissioner to
determine his correct tax liability. See sec. 6001; sec.
1.6001-1(a), Income Tax Regs.
At trial, petitioner asserted that he incurred the following
expenses in connection with driving a taxi cab: (1) $28,100 for
leasing the cab; (2) $2,500 for gasoline; and (3) $1,100 for
cleaning and washing the cab.2 Petitioner credibly testified
that he leased a cab for an average of 4 or 5 days a week at a
cost of $70 to $80 a day. Petitioner also testified that he paid
for gasoline for each day he drove. Petitioner used cash to pay
the lease and to purchase gasoline.
Respondent disallowed the claimed expenses because of
petitioner’s failure to maintain records in accordance with
2
As mentioned above, petitioner claimed $28,600 of expenses
on Schedule C. This amount represents $28,100 of leasing expense
and $500 of bad debt expense. A notation on Schedule C suggests
that petitioner may have intended to claim the $500 as car and
truck expense. In any event, petitioner offered no testimony
with respect to the claimed deduction for $500, and we therefore
consider that petitioner has conceded this amount of the
adjustment. See Nicklaus v. Commissioner, 117 T.C. 117, 120 n.4
(2001). Petitioner did not claim any amount for gasoline or
cleaning and washing expenses on Schedule C.
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section 6001. Respondent acknowledges, however, that petitioner
drove a taxi cab during the year in issue and incurred some
amount of expenses.
Where a taxpayer establishes that he incurred a business
expense but cannot prove the amount of the expense, the Court may
approximate the amount allowable, bearing heavily against the
taxpayer whose inexactitude is of his own making. Cohan v.
Commissioner, 39 F.2d 540, 544 (2d Cir. 1930); King v.
Commissioner, T.C. Memo. 2006-112. To apply the Cohan rule, the
Court must have a reasonable basis for estimating the amount of
the expense. Vanicek v. Commissioner, 85 T.C. 731, 742-743
(1985); Keenan v. Commissioner, T.C. Memo. 2006-45.3
Based on petitioner’s credible testimony and respondent’s
acknowledgment that petitioner incurred expenses, we conclude it
is appropriate to apply the Cohan rule. We conclude that in 2002
petitioner leased a cab 4 days a week for 50 weeks at a cost of
$70 a day, for a total of $14,000. We also conclude that
petitioner spent $2,500 on gasoline for the year, representing an
3
The rule announced in Cohan v. Commissioner, 39 F.2d 540
(2d Cir. 1930), does not apply to expenses relating to listed
property, which generally includes any passenger automobile.
Secs. 274(d)(4), 280F(d)(4)(A)(i); Sanford v. Commissioner, 50
T.C. 823, 827-828 (1968), affd. per curiam 412 F.2d 201 (2d Cir.
1969); Seidel v. Commissioner, T.C. Memo. 2005-67. However, the
term “passenger automobile” does not include any vehicle used by
the taxpayer directly in the trade or business of transporting
persons for compensation or hire. Sec. 280F(d)(5)(B)(ii); sec.
1.280F-6(c)(3)(ii), Income Tax Regs. The cab that petitioner
leased therefore is not listed property.
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average of $12.50 a day. Petitioner offered no testimony or
other evidence with respect to cleaning and washing expenses.
Petitioner therefore is not entitled to a deduction for this
item. See Vanicek v. Commissioner, supra. Respondent’s
determination on this issue is modified to the extent that
petitioner is entitled to a deduction of $16,500.
4. Addition to Tax Under Section 6651(a)(1)
If a tax return is not timely filed, an addition to tax will
be assessed “unless it is shown that such failure is due to
reasonable cause and not due to willful neglect”. Sec.
6651(a)(1). The Commissioner has the burden of production with
respect to the liability of any individual for an addition to tax
under section 6651(a)(1). Sec. 7491(c). The burden of showing
reasonable cause under section 6651(a) remains on the taxpayer.
Higbee v. Commissioner, 116 T.C. 438, 446-448 (2001).
The parties stipulated that petitioner filed his 2002 tax
return on April 15, 2004. Respondent therefore has met his
burden of production. At trial, petitioner offered no testimony
with respect to this issue. Accordingly, respondent’s
determination is sustained.
Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be entered
under Rule 155.