T.C. Summary Opinion 2007-37
UNITED STATES TAX COURT
TRENT DESHAWN ALLSTON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 15547-05S. Filed March 7, 2007.
Trent Deshawn Allston, pro se.
Diana P. Hinton, for respondent.
COUVILLION, Special Trial Judge: This case was heard
pursuant to section 7463 of the Internal Revenue Code in effect
at the time the petition was filed.1 The decision to be entered
1
Unless otherwise indicated, subsequent section references
are to the Internal Revenue Code in effect for the year at issue.
All Rule references are to the Tax Court Rules of Practice and
Procedure.
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is not reviewable by any other court, and this opinion should not
be cited as authority.
Respondent determined a deficiency of $4,482 in petitioner’s
Federal income tax for 2002. After a concession by respondent,2
the issues for decision are: (1) Whether petitioner is entitled
to deduct certain unreimbursed employee expenses; (2) whether
petitioner is entitled to a deduction for charitable
contributions; and (3) whether petitioner is entitled to a
deduction for medical and dental expenses incurred in 2002.
At the time the petition was filed, petitioner’s legal
residence was Brooklyn, New York.3
During taxable year 2002, petitioner was employed as a
campus police officer at Borough of Manhattan Community College.
He also took courses at the college toward a degree in writing
and literature. Upon the advice of some of his coworkers,
petitioner engaged someone in the payroll department at Borough
of Manhattan Community College to prepare his income tax return
for 2002. He filed his 2002 Federal income tax return timely,
2
Petitioner claimed itemized deductions on a Schedule A,
Itemized Deductions, of $30,010 on his 2002 income tax return.
In the notice of deficiency, respondent disallowed all of the
Schedule A itemized deductions. At trial, respondent conceded
petitioner’s entitlement to deduct $2,965 for State and local
income taxes paid. The remaining issues are all itemized
deductions.
3
The parties did not submit an agreed stipulation of facts
at trial. Exhibits, however, were offered into evidence during
the course of the trial.
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which included a Schedule A, Itemized Deductions. Petitioner
reported adjusted gross income of $41,392 and claimed Schedule A
itemized deductions of $30,010. He reported an overpayment of
tax for the year at issue and claimed a refund of $4,057.
On Schedule A of his return, petitioner claimed the
following deductions:
Amount
Line 1 Medical and dental expenses $6,970
Line 4 Net medical deduction 3,866
Line 5 State and local income taxes 2,965
Line 9 Total taxes 2,965
Line 15 Gifts by cash or check 3,860
Line 16 Gifts other than by cash or check 500
Line 18 Total gifts to charity 4,360
Line 20 Unreimbursed employee business expenses 19,647
Line 26 Net limited miscellaneous deductions 18,819
Line 28 Total itemized deductions 30,010
Petitioner’s return was selected for audit examination.
Respondent’s examination division requested documentation to
support petitioner’s claimed Schedule A itemized deductions.
Petitioner did not provide the requested documentation. In due
course, a notice of deficiency was issued to petitioner for 2002
disallowing the $30,010 of Schedule A itemized deductions for
lack of substantiation.
Petitioner filed a timely petition with this Court. He
alleged in his petition that he is not liable for the deficiency
in tax for 2002 because he relied on the representations of his
return preparer.
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In due course, an Appeals officer sent petitioner a letter
scheduling a conference and requested documentation to
substantiate the claimed Schedule A itemized deductions for 2002.
Petitioner telephoned the Appeals officer on the scheduled date
to reschedule the conference to a later date. Petitioner failed
to appear for the rescheduled conference, and he did not respond
to the request for documentation to support his claimed itemized
deductions.
Thereafter, petitioner was issued a letter for another
conference. Respondent again requested that petitioner provide
documentation to substantiate his Schedule A itemized deductions
for the year at issue. Petitioner telephoned respondent to
change the appointment to a subsequent date. Petitioner appeared
at the later conference but did not provide any of the requested
documentation. Moreover, as noted earlier, petitioner did not
cooperate in the preparation of a stipulation of facts to present
to the Court at commencement of the trial.
In general, the Commissioner’s determinations in a notice of
deficiency are presumed correct. Welch v. Helvering, 290 U.S.
111, 115 (1933). In pertinent part, Rule 142(a)(1) provides the
general rule that “The burden of proof shall be upon the
petitioner”. In certain circumstances, however, if the taxpayer
introduces credible evidence with respect to any factual issue
relevant to ascertaining the proper tax liability, section 7491
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places the burden of proof on the Commissioner. Sec. 7491(a)(1);
Rule 142(a)(2). Section 7491(a)(1) applies only if the taxpayer
complies with substantiation requirements, maintains all required
records, and cooperates with the Commissioner’s requests for
witnesses, information, documents, meetings, and interviews.
Sec. 7491(a)(2). The record shows that petitioner did not comply
with the substantiation requirements or cooperate with requests
for documentation, all of which would have facilitated trial of
this case.
Section 6001 and the regulations promulgated thereunder
require taxpayers to maintain records sufficient to permit
verification of income and expenses. As a general rule, if the
trial record provides sufficient evidence that the taxpayer has
incurred a deductible expense, but the taxpayer is unable to
adequately substantiate the precise amount of the deduction to
which he or she is otherwise entitled, the Court may estimate the
amount of the deductible expense and allow a deduction to that
extent. Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir.
1930). Such an estimate is made bearing heavily against the
taxpayer whose inexactitude in substantiating the amount of the
expense is of his own making. Id. at 544. However, in order for
the Court to estimate the amount of an expense, the Court must
have some basis upon which an estimate may be made. Vanicek v.
Commissioner, 85 T.C. 731, 742-743 (1985).
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Moreover, deductions are a matter of legislative grace and
are allowed only as specifically provided by statute. INDOPCO,
Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice
Co. v. Helvering, 292 U.S. 435, 440 (1934).
With these well-established principles in mind, the Court
must determine whether petitioner satisfied his burden of proving
that he is entitled to the itemized deductions at issue.
As previously stated, on his Schedule A for 2002, petitioner
deducted $18,8194 of unreimbursed employee expenses for the
following:
Amount
Uniforms and dry cleaning $8,860
Equipment 4,980
Tuition 2,960
Subscriptions 1,987
Union dues 860
Section 162 allows a deduction for ordinary and necessary
business expenses paid or incurred during the taxable year in
carrying on any trade or business. Sec. 162(a); Deputy v. du
Pont, 308 U.S. 488, 495 (1940). A trade or business includes the
trade or business of being an employee. O’Malley v.
Commissioner, 91 T.C. 352, 363-364 (1988). The taxpayer bears
the burden of substantiation. Hradesky v. Commissioner, 65 T.C.
87, 90 (1975), affd. per curiam 540 F.2d 821 (5th Cir. 1976).
4
The amount claimed before the 2-percent floor imposed by
sec. 67(a) was $19,647.
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At trial, petitioner did not offer any receipts or documents
to substantiate his claimed employee business expenses. Instead,
he testified as to his claimed business expenses. With respect
to the uniforms and dry cleaning, equipment, and professional
dues, the Court is satisfied that petitioner did incur deductible
expenses for these items. Although petitioner admitted he did
not have receipts to substantiate these expenses, he testified
credibly with respect to these items and their business purpose.
Petitioner did admit, however, that his return preparer
“exceeded” what was actually spent on uniforms, dry cleaning, and
equipment during the year at issue. Accordingly, petitioner
conceded that he spent, at most, $4,000 on uniforms and dry
cleaning and $1,200 to $1,500 on equipment in 2002.
In the absence of adequate substantiation, the Court may, if
convinced by the evidence, estimate the amount of deductible
expenses incurred. Cohan v. Commissioner, supra at 543-544.
Under the Court’s discretionary authority pursuant to Cohan, the
following amounts are allowed as unreimbursed employee business
expense deductions on Schedule A:
Amount
Uniforms and dry cleaning $ 500
Equipment 350
Professional dues 500
Total $1,350
With regard to the $2,960 in unreimbursed employee business
expense for tuition, petitioner testified that his coursework at
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Borough of Manhattan Community College had nothing to do with his
job as a campus security guard, conceding that the tuition
expense was not, as claimed on his Schedule A, an unreimbursed
employee business expense. See Evans v. Commissioner, T.C. Memo.
1974-267 (employee must show the relationship between the
expenditures and the employment), affd. 557 F.2d 1095 (5th Cir.
1977).
With regard to the subscriptions expense, petitioner
testified: “I have no idea what that is” and conceded that he
was not entitled to the $1,987 deduction.
As noted earlier, petitioner also claimed charitable
contributions for the following: (1) By cash or check in the
amount of $3,860, and (2) other than by cash or check in the
amount of $500. These contributions were disallowed for lack of
substantiation.
With respect to charitable contributions, section 170 allows
a deduction for charitable contributions during the taxable year
if verified as provided by the regulations. Sec. 170(a)(1). No
deduction is allowed for any contribution of $250 or more unless
the taxpayer substantiates the contribution by a contemporaneous
written acknowledgment of the contribution by the qualified donee
organization. Sec. 170(f)(8)(A). The standards for record
keeping and return requirements for deductions for charitable
contributions are set forth in section 1.170A-13, Income Tax
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Regs. Under the applicable provisions, a taxpayer claiming a
charitable contribution deduction is required to maintain for
each contribution a canceled check, some communication from the
donee organization acknowledging receipt of a contribution and
showing the date and amount of the contribution, or other
reliable written records showing the name of the donee, along
with the date and amount of the contribution. Sec. 1.170A-
13(a)(1)(i) to (iii), Income Tax Regs.
At trial, petitioner testified that he regularly made cash
contributions to the church where he and his former girlfriend
attended services. He admitted he did not go to church every
Sunday but claimed his cash contributions for the year 2002
totaled $3,860. Additionally, petitioner testified that he
donated two Sony Playstations to the church constituting the $500
portion of the charitable contributions made other than by cash
or check.
Petitioner did not offer any substantiating documents to
support his charitable contributions for the year at issue, nor
did he maintain records of the amount of his contributions.
Notwithstanding the Court’s discretionary authority pursuant to
Cohan, a taxpayer must provide some basis upon which an estimate
of the amount of a claimed deduction may be made. Vanicek v.
Commissioner, supra. Without such a basis, any allowance would
amount to unguided largesse. Williams v. United States, 245 F.2d
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559, 560-561 (5th Cir. 1957). The Court does not question, as
petitioner claimed at trial, that the church helped him while he
was experiencing a host of personal problems. Because petitioner
failed to provide any reliable evidence of his claimed
contributions, the Court finds that there is no basis upon which
to estimate petitioner’s charitable contributions for 2002.
Accordingly, respondent is sustained on this issue.
As previously stated, petitioner claimed an itemized
deduction for medical and dental expenses of $3,866 in excess of
the 7.5-percent limitation under section 213(a).5 Respondent
disallowed the deduction in full for a lack of substantiation.
Section 213(a) allows as a deduction any expenses that are
paid during the taxable year for the medical care of the
taxpayer, his spouse, and dependents and that are not compensated
for by insurance or otherwise. Estate of Smith v. Commissioner,
79 T.C. 313, 318 (1982). The deduction is allowed only to the
extent that the amount exceeds 7.5 percent of adjusted gross
income. Sec. 213(a).
Petitioner admitted at trial that the amount claimed for
medical and dental expenses was not correct and that his medical
expenses were limited to the amount he spent for insurance and
prescription drugs. He admitted his medical expenses were “not
5
The amount reported before the limitation imposed by sec.
213(a) was $6,970.
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that much” and that his total expenses likely did not exceed 7.5
percent of his adjusted gross income. Accordingly, respondent is
sustained on this issue.
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
under Rule 155.