McKeown v. Comm'r

T.C. Summary Opinion 2007-95

UNITED STATES TAX COURT

ROBERT AND CHERYL MCKEOWN, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 21967-05S. Filed June 13, 2007.

Robert and Cheryl McKeown, pro sese.

David L. Zoss, for respondent.

KROUPA, Judge: This case was heard pursuant to the

provisions of section 74631 of the Internal Revenue Code in

effect at the time the petition was filed. Pursuant to section

7463(b), the decision to be entered is not reviewable by any

1
All section references are to the Internal Revenue Code in
effect for 2003, and all Rule references are to the Tax Court
Rules of Practice and Procedure, unless otherwise indicated.
 - 2 -

other court, and this opinion shall not be treated as precedent

for any other case.

Respondent determined a $7,708 deficiency in petitioners’

Federal income tax for 2003. After concessions,2 we are asked to

decide two issues. First, we are asked to decide whether

petitioner Robert McKeown (Mr. McKeown) was away from home when

he worked as an airline mechanic for Northwest Airlines (NWA) in

Detroit, Newark, and New York to determine whether petitioners

are entitled to deduct expenses for his vehicle, meals, and

lodging while Mr. McKeown was away from Monticello, Minnesota, in

the Minneapolis area where he normally lived. We conclude that

he was not away from home. Second, we are asked to decide

whether petitioners substantiated various other expenses. We

conclude that petitioners have substantiated and are entitled to

deduct some of these other expenses.

Background

Some of the facts have been stipulated and are so found.

Petitioners resided in McDonough, Georgia, at the time they filed

the petition.

Mr. McKeown’s Employment With NWA

Mr. McKeown began working as a mechanic for NWA in 1996.

Although he was originally employed in Atlanta, Georgia, Mr.

2
See infra note 3 for the concessions each party made.
 - 3 -

McKeown and his family decided to relocate to the Minneapolis

area so Mr. McKeown could work for NWA in Minneapolis.

NWA sent layoff notices to some of its employees when it

experienced financial difficulties. The employees receiving the

notices could either choose to accept the layoff or exercise

their seniority. Seniority depended on the length of time an

employee had worked for NWA regardless of where the airline

facility was located. An employee with higher seniority could

exercise his or her seniority to bump an employee with less

seniority and take that employee’s position. The employee with

less seniority could then take the layoff or find another

employee with less seniority to bump. This seniority bumping

arrangement was in place across the country, so that an NWA

mechanic looking to keep his or her job at NWA had to look at

several different cities to find a less senior employee to bump.

Most employees exercised their seniority in the way that would

give them positions in cities as close as possible to their

families.

Mr. McKeown received a bump notice in April 2003. Mr.

McKeown chose to exercise his seniority and bump another employee

rather than accept the layoff. Mr. McKeown was first bumped to

Detroit, Michigan, effective on April 11, 2003. Mr. McKeown was

then bumped again and took a position in Newark, New Jersey,

effective on April 25, 2003. Mr. McKeown was bumped again and
 - 4 -

took a position at John F. Kennedy International Airport in New

York, effective on June 8, 2003.

Mr. McKeown received another bump notice on July 8, 2003,

and was laid off because he had no one else to bump. Mr. McKeown

spoke to a manager in Newark who told him he would attempt to

recall Mr. McKeown to Newark. Mr. McKeown was indeed recalled to

Newark and began working there later in July 2003. Mr. McKeown

worked in Newark for the rest of the year.

Once Mr. McKeown was bumped or displaced from Minneapolis,

there was no job available for him to return to in Minneapolis.

Mr. McKeown hoped to be able to return to Minneapolis as soon as

there was an NWA job there that he had enough seniority to

obtain. The timing of a return to Minneapolis would depend on

NWA’s needs for mechanics in that city as well as the choices of

other mechanics also subject to the seniority system.

Mr. McKeown and petitioner Cheryl McKeown (Mrs. McKeown)

decided that she and petitioners’ teenage daughter would remain

in the Minneapolis area while Mr. McKeown went to Detroit,

Newark, and New York. Petitioners did not want to uproot the

family, and thus Mr. McKeown incurred additional travel, lodging,

and meal expenses in those cities rather than have the entire

family move to his job locations. Mr. McKeown stayed in a travel

trailer in Newark and New York. Mr. McKeown traveled back to see

his family in Minnesota periodically.
 - 5 -

All three family members had cellular phones during 2003.

Mr. McKeown wore a uniform while he worked for NWA. Petitioners

claimed they contributed some items to charity in 2003.

Petitioners’ Return

Petitioners claimed certain expenses on Schedule A, Itemized

Deductions, on the joint return for 2003. Respondent examined

the return for 2003 and issued petitioners a deficiency notice in

which he disallowed many of the expenses. Of the expenses still

in dispute,3 petitioners assert they are entitled to deduct

claimed noncash charitable contributions as well as unreimbursed

employee business expenses. The unreimbursed employee business

expenses petitioners claimed include expenses for Mr. McKeown’s

vehicle, transportation, travel (including expenses related to

car rentals, airline pass travel, and lodging), and meals while

in Detroit, Newark, and New York as well as expenses for uniform

cleaning and depreciation.

Petitioners timely filed a petition.

3
Respondent concedes that petitioners are entitled to deduct
a portion of personal property taxes, a portion of cash
charitable contributions, a portion of certain amounts for tools,
a portion of union dues, and a portion of tax preparation fees.
Petitioners concede they are not entitled to deduct a portion of
personal property taxes, a portion of cash charitable
contributions, Internet expenses, a portion of certain amounts
for tools, certain amounts for uniforms, a portion of union dues,
and a portion of tax return preparation fees.
 - 6 -

Discussion

The parties resolved many of the disputed expenses before

trial. We are asked to determine whether petitioners are

entitled to deduct the remaining expenses. We begin by

considering whether Mr. McKeown was away from home when he

incurred expenses for his vehicle, transportation, and meals in

Detroit, Newark, and New York.

Travel Expenses While Away From Home

We begin by briefly outlining the rules for deducting travel

expenses. A taxpayer may deduct reasonable and necessary travel

expenses such as those for vehicles, meals, and lodging incurred

while away from home in the pursuit of a trade or business.

Secs. 162(a)(2), 262(a). A taxpayer must show that he or she was

away from home when he or she incurred the expense, that the

expense is reasonable and necessary, and that the expense was

incurred in pursuit of a trade or business. Commissioner v.

Flowers, 326 U.S. 465, 470 (1946). The determination of whether

the taxpayer has satisfied these requirements is a question of

fact. Id.

The purpose of the deduction for expenses incurred away from

home is to alleviate the burden on the taxpayer whose business

needs require him or her to maintain two homes and therefore

incur duplicate living expenses. Kroll v. Commissioner, 49 T.C.

557, 562 (1968). The duplicate costs are not deductible where
 - 7 -

the taxpayer maintains two homes for personal reasons. Sec. 262;

Commissioner v. Flowers, supra at 474.

A taxpayer may deduct the expenses he or she incurred while

away from home. Sec. 162(a)(2). The word “home” for purposes of

section 162(a)(2) has a special meaning. It generally refers to

the area of a taxpayer’s principal place of employment, not the

taxpayer’s personal residence. Daly v. Commissioner, 72 T.C.

190, 195 (1979), affd. 662 F.2d 253 (4th Cir. 1981); Kroll v.

Commissioner, supra at 561-562.

There is an exception to the general rule that a taxpayer’s

tax home is his or her principal place of employment. Peurifoy

v. Commissioner, 358 U.S. 59, 60 (1958). The taxpayer’s tax home

may be the taxpayer’s personal residence if the taxpayer’s

employment away from home is temporary. Id.; Mitchell v.

Commissioner, T.C. Memo. 1999-283. On the other hand, the

exception does not apply and the taxpayer’s tax home remains the

principal place of employment if the employment away from home is

indefinite. Kroll v. Commissioner, supra at 562.

It is presumed that a taxpayer will generally choose to live

near his or her place of employment. Frederick v. United States,

603 F.2d 1292, 1295 (8th Cir. 1979). A taxpayer must, however,

have a principal place of employment and accept temporary work in

another location to be away from home. Kroll v. Commissioner,

supra. A person who has no principal place of business nor a
 - 8 -

place he or she resides permanently is an itinerant and has no

tax home from which he or she can be away. Deamer v.

Commissioner, 752 F.2d 337, 339 (8th Cir. 1985), affg. T.C. Memo.

1984-63; Edwards v. Commissioner, T.C. Memo. 1987-396.

All the facts and circumstances are considered in

determining whether a taxpayer has a tax home. See Rev. Rul. 73-

529, 1973-2 C.B. 37 (describing objective factors the

Commissioner considers in determining whether a taxpayer has a

tax home). The taxpayer must generally have some business

justification to maintain the first residence, beyond purely

personal reasons, to be entitled to deduct expenses incurred

while temporarily away from that home. Hantzis v. Commissioner,

638 F.2d 248, 255 (1st Cir. 1981); Bochner v. Commissioner, 67

T.C. 824, 828 (1977); Tucker v. Commissioner, 55 T.C. 783, 787

(1971). Where a taxpayer has no business connections with the

primary residence, there is no compelling reason to maintain that

residence and incur substantial, continuous, and duplicative

expenses elsewhere. See Henderson v. Commissioner, 143 F.3d 497,

499 (9th Cir. 1998), affg. T.C. Memo. 1995-559; Deamer v.

Commissioner, supra; Hantzis v. Commissioner, supra. In that

situation, the expenses incurred while temporarily away from that

residence are not deductible. Hantzis v. Commissioner, supra;

Bochner v. Commissioner, supra; Tucker v. Commissioner, supra;
 - 9 -

see McNeill v. Commissioner, T.C. Memo. 2003-65; Aldea v.

Commissioner, T.C. Memo. 2000-136.

Once Mr. McKeown was bumped from Minneapolis, he had no job

to return to there. His choices were to be laid off and have no

work, or to bump other employees and move to different cities to

continue working. NWA no longer required Mr. McKeown to perform

any services whatsoever in the Minneapolis area once he was

bumped. Although Mrs. McKeown and petitioners’ daughter remained

in the family residence with occasional visits from Mr. McKeown

while he worked in Detroit, Newark, and New York, this fact alone

does not dictate that Mr. McKeown’s tax home was in Monticello,

Minnesota, where the family residence was located. Unlike

traveling salespersons who may be required to return to the home

city occasionally between business trips, Mr. McKeown’s business

ties to the Minneapolis area ceased when he was bumped.

The Court understands that the NWA mechanics’ lives were

unsettled and disrupted. Mechanics did not know how long they

would have a job in one specific location. They only knew the

system was based on seniority. They could bump less senior

employees, and they could be bumped by more senior employees.

While we acknowledge that Mr. McKeown would have liked to return

to the Minneapolis area to work for NWA, Mr. McKeown did not know

when such a return would be possible due to the seniority system.

The likelihood of Mr. McKeown’s return to a position in
 - 10 -

Minneapolis depended on NWA’s needs for mechanics there as well

as the choices of more senior mechanics. Mr. McKeown did not

know how long he would be in Detroit, Newark, or New York or

where he might go next. It was not foreseeable that he would be

able to return to Minneapolis at any time due to the seniority

system. Thus we conclude there was no business reason for

petitioners to maintain a home in the Minneapolis area.

Petitioners kept the family residence in the Minneapolis area for

purely personal reasons. Petitioners have failed to prove that

Mr. McKeown had a tax home in 2003. Accordingly, Mr. McKeown was

not away from home in Detroit, Newark, and New York, and the

expenses he incurred while there are not deductible.

Substantiation of Expenses

We next turn to the substantiation issues to determine

whether petitioners are entitled to deduct any remaining

expenses. We begin by noting the fundamental principle that the

Commissioner’s determinations are generally presumed correct, and

the taxpayer bears the burden of proving that these

determinations are erroneous.4 Rule 142(a); INDOPCO, Inc. v.

Commissioner, 503 U.S. 79, 84 (1992); Welch v. Helvering, 290

U.S. 111 (1933). Moreover, deductions are a matter of

4
Petitioners do not claim the burden of proof shifts to
respondent under sec. 7491(a). Petitioners also did not
establish they satisfy the requirements of sec. 7491(a)(2). We
therefore find that the burden of proof remains with petitioners.
 - 11 -

legislative grace, and the taxpayer has the burden to prove he or

she is entitled to any deduction claimed. Rule 142(a); Deputy v.

du Pont, 308 U.S. 488, 493 (1940); New Colonial Ice Co. v.

Helvering, 292 U.S. 435, 440 (1934); Welch v. Helvering, supra.

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).

A taxpayer must substantiate amounts claimed as deductions

by maintaining the records necessary to establish he or she is

entitled to the deductions. Sec. 6001; Hradesky v. Commissioner,

supra. The taxpayer shall keep such permanent records or books

of account as are sufficient to establish the amounts of

deductions claimed on the return. Sec. 6001; sec. 1.6001-1(a),

(e), Income Tax Regs. The Court need not accept a taxpayer’s

self-serving testimony when the taxpayer fails to present

corroborative evidence. Beam v. Commissioner, T.C. Memo. 1990-

304 (citing Tokarski v. Commissioner, 87 T.C. 74, 77 (1986)),

affd. without published opinion 956 F.2d 1166 (9th Cir. 1992).

Unreimbursed Employee Business Expenses

We shall now consider whether petitioners are entitled to

deduct the claimed expenses, beginning with the unreimbursed

employee business expenses petitioners claimed on Schedule A.

In general, all ordinary and necessary expenses paid or

incurred in carrying on a trade or business during the taxable
 - 12 -

year are deductible, but personal, living, or family expenses are

not deductible. Secs. 162(a), 262. Services performed by an

employee constitute a trade or business. O’Malley v.

Commissioner, 91 T.C. 352, 363-364 (1988); sec. 1.162-17(a),

Income Tax Regs.

If a taxpayer establishes that he or she paid or incurred a

deductible business expense but does not establish the amount of

the deduction, we may approximate the amount of the allowable

deduction, bearing heavily against the taxpayer whose

inexactitude is of his or her own making. Cohan v. Commissioner,

39 F.2d 540, 543-544 (2d Cir. 1930). For the Cohan rule to

apply, however, a basis must exist on which this Court can make

an approximation. Vanicek v. Commissioner, 85 T.C. 731, 742-743

(1985). Without such a basis, any allowance would amount to

unguided largesse. Williams v. United States, 245 F.2d 559, 560

(5th Cir. 1957).

Certain business expenses may not be estimated because of

the strict substantiation requirements of section 274(d). See

sec. 280F(d)(4)(A); Sanford v. Commissioner, 50 T.C. 823, 827

(1968), affd. per curiam 412 F.2d 201 (2d Cir. 1969). For such

expenses, only certain types of documentary evidence will

suffice.
 - 13 -

Cleaning Expenses for Uniforms

We now examine those expenses not subject to the strict

substantiation requirements. Petitioners claimed $722 for

cleaning expenses for Mr. McKeown’s NWA uniforms. Expenses for

uniforms are deductible if the uniforms are of a type

specifically required as a condition of employment, the uniforms

are not adaptable to general use as ordinary clothing, and the

uniforms are not worn as ordinary clothing. Yeomans v.

Commissioner, 30 T.C. 757, 767-769 (1958); Beckey v.

Commissioner, T.C. Memo. 1994-514.

We are satisfied that petitioners incurred deductible

expenses to clean Mr. McKeown’s uniforms. Petitioners each

attempted to explain how the cleaning costs were calculated but

gave unclear testimony. Petitioners introduced a document on the

letterhead of their certified public accountant that purports to

indicate how the sum was calculated, but it suggests an excessive

amount, 22 cleanings for shirts and pants per month, roughly

corresponding to the number of days per month Mr. McKeown worked.

We may estimate the amount of deductible cleaning expenses

under the Cohan rule. We adopt the unit cost of $1.35 listed on

petitioners’ exhibit as the cost to wash or dry one load of

laundry. We find that approximately eight loads of laundry per

month is a reasonable number to yield 22 clean shirts and pairs
 - 14 -

of pants per month. Petitioners are therefore entitled to deduct

$259.20 for cleaning expenses for Mr. McKeown’s uniforms in 2003.

Depreciation Expenses

Petitioners deducted $3,031 for depreciation of the tools he

used at his job at NWA. The costs of tools with useful lives

greater than a year are recoverable by depreciation. Secs.

167(a), 168(b); Seawright v. Commissioner, 117 T.C. 294, 305

(2001); Clemons v. Commissioner, T.C. Memo. 1979-273.

Petitioners introduced a list and photographs of Mr. McKeown’s

tools as well as a depreciation schedule indicating that he

purchased his tools on January 1, 2003. Petitioners did not

introduce any documentary evidence regarding the tools, however,

such as receipts that would show their purchase price or the

purchase date. Petitioners also did not introduce evidence

supporting the tools’ expected useful lives.

Petitioners have not substantiated that they are entitled to

a depreciation deduction. Further, we are unable to estimate any

amount for depreciation under the Cohan rule because the evidence

petitioners introduced is inadequate. Petitioners are therefore

not entitled to deduct any amount for depreciation.

Cellular Phone Expenses

Petitioners claimed $1,800 of cellular phone expenses for

2003. Cellular phones are included in the definition of “listed

property” for purposes of section 274(d)(4) and are thus subject
 - 15 -

to the strict substantiation requirements. Sec.

280F(d)(4)(A)(v); Gaylord v. Commissioner, T.C. Memo. 2003-273.

A taxpayer must establish the amount of business use and the

amount of total use for the property to substantiate the amount

of expenses for listed property. Nitschke v. Commissioner, T.C.

Memo. 2000-230; sec. 1.274-5T(b)(6)(i)(B), Temporary Income Tax

Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985). Expenses subject to

strict substantiation may not be estimated under the Cohan rule.

Sanford v. Commissioner, supra at 827.

Petitioners did not prove that NWA required Mr. McKeown to

have a cellular phone. Petitioners introduced evidence that NWA

required employees to have a telephone, but not necessarily a

cellular phone. Petitioners introduced copies of checks made out

to cellular phone providers totaling approximately $2,350 but

admitted at trial that they could not explain how they calculated

the $1,800 they claimed. Moreover, the amounts petitioners paid

for cellular telephones for 2003 included charges for the

cellular phones used by Mrs. McKeown and petitioners’ daughter.

Petitioners did not offer any evidence of how much of the

cellular phone expenses was for Mr. McKeown’s business use and

how much for personal use. Petitioners are therefore not

entitled to deduct any cellular phone expenses for 2003.
 - 16 -

Charitable Contributions

We finally consider petitioners’ charitable contributions.

Petitioners claimed they contributed property worth $3,014 to

charitable organizations in 2003.

Charitable contributions are generally deductible under

section 170(a). No deduction is allowed, however, for any

contribution of $250 or more unless the taxpayer substantiates

the contribution by a contemporaneous written acknowledgment of

the contribution by a qualified donee organization.5 Sec.

170(f)(8)(A). The deduction for a contribution of property

equals its fair market value on the date contributed. Sec.

1.170A-1(c)(1), Income Tax Regs.

Petitioners provided no documentation, substantiation, or

testimony concerning their contributions of property for 2003.

Petitioners are therefore not entitled to deduct any amount for

charitable contributions of property.

5
There are now stricter requirements for contributions of
money. Sec. 170(f)(17). No deduction for a contribution of
money in any amount is allowed unless the donor maintains a bank
record or written communication from the donee showing the name
of the donee organization, the date of the contribution, and the
amount of the contribution. Id. This new provision is effective
for contributions made in tax years beginning after Aug. 17,
2006. Pension Protection Act of 2006, Pub. L. 109-280, sec.
1217, 120 Stat. 1080.
 - 17 -

To reflect the foregoing and the concessions of the parties,

Decision will be entered

under Rule 155.