T.C. Summary Opinion 2007-120
UNITED STATES TAX COURT
MICHAEL AND CALVINETA BYARD, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 7042-06S. Filed July 17, 2007.
Michael and Calvineta Byard, pro se.
Ashley F. Giles, for respondent.
COHEN, Judge: This case was heard pursuant to the
provisions of section 7463 of the Internal Revenue Code in effect
when the petition was filed. Pursuant to section 7463(b), the
decision to be entered is not reviewable by any other court, and
this opinion shall not be treated as precedent for any other
case.
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Respondent determined deficiencies in petitioners’ Federal
income taxes and penalties for 2003 and 2004 as follows:
Year Deficiency Penalty, Sec. 6662(a)
2003 $7,684 $1,536.80
2004 4,451 890.20
After concessions by petitioners, the sole remaining issue for
decision is whether petitioners are entitled to a deduction under
section 179 of $24,000 for 2003. Unless otherwise indicated, all
section references are to the Internal Revenue Code in effect for
the years in issue.
Background
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference.
Petitioners resided in Atlanta, Georgia, at the time that they
filed this petition.
During 2003, petitioner husband was employed as a computer
analyst, and petitioner wife was employed as a school nurse.
Petitioners also had a janitorial cleaning business during that
year. Petitioners’ Federal income tax returns for 2003 and 2004
were prepared by Joseph L. Wilson (Wilson).
Respondent disallowed various deductions claimed by
petitioners on their 2003 and 2004 Federal income tax returns.
The only adjustment that petitioners contested was the
disallowance of a $24,000 expense deduction claimed on Form 2106,
Employee Business Expenses, for 2003. Petitioners’ Form 2106 for
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2003 lists the employee’s name as “Michael Byard” and the
occupation in which the expenses were incurred as “Comp Progra”.
The $24,000 expense deduction at issue was recorded on the 2003
Form 2106 on line 2 entitled “Parking fees, tolls, and
transportation, including train, bus, etc., that did not involve
overnight travel or commuting to and from work”.
On Schedule C, Profit or Loss From Business, of their Form
1040, U.S. Individual Income Tax Return, petitioners listed both
their names under business proprietor and stated their principal
business as a “Janitorial Cleaning Service”. Petitioners
reported $9,864 in gross receipts on their Schedule C and $20,344
in total expenses, resulting in a net loss of $10,480. Line 13,
entitled “Depreciation and section 179 expense deduction”, of
their Schedule C has no entry. On line 9, entitled “Car and
truck expenses”, of that same form, petitioners claimed a
deduction of $5,054.
Discussion
The issue in this case is whether petitioners made a valid
section 179 election to deduct $24,000 of the cost of a sport-
utility vehicle (SUV) purchased in 2003 and used in their part-
time janitorial cleaning business. Petitioners argue that the
$24,000 expense deduction claimed on Form 2106 was placed on the
wrong form, was related to the purchase of the SUV allegedly used
100 percent in the cleaning business, and that their intent was
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to claim a depreciation deduction for the cost of the SUV in the
maximum amount allowed under section 179. Respondent maintains
that petitioners failed to make a valid election as required
under section 179 to depreciate the SUV and that the $24,000
expense deduction claimed on the 2003 return should be disallowed
because petitioners have not substantiated that expense as an
employee business expense.
Under section 179, a taxpayer may elect to treat the cost of
certain property used in an active trade or business as a current
expense in the year such property is placed in service. Sec.
179(a). The aggregate cost that a taxpayer can deduct under
section 179 for 2003 is $25,000. Sec. 179(b). Section 179(c)(1)
provides that an election must:
(A) specify the items of section 179 property to
which the election applies and the portion of the cost
of each of such items which is to be taken into account
under subsection (a), and
(B) be made on the taxpayer’s return of the tax
imposed by this chapter for the taxable year.
The benefits of section 179 require an affirmative election to be
made on a taxpayer’s original return or a timely filed amended
return. See Starr v. Commissioner, T.C. Memo. 1995-190, affd.
without published opinion 99 F.3d 1146 (9th Cir. 1996).
Petitioners failed to elect explicitly to deduct the cost of
their SUV as a section 179 expense on their 2003 return.
Although they attached a Schedule C to their return listing their
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claimed receipts and expenses from their janitorial cleaning
business, petitioners left blank line 13 of that form, entitled
“Depreciation and section 179 expense deduction”. They did not
file with their 2003 return Form 4562, Depreciation and
Amortization (Including Information on Listed Property), which
the Commissioner has designed for taxpayers wishing to expense,
rather than depreciate, qualifying section 179 property. See
Visin v. Commissioner, T.C. Memo. 2003-246, affd. 122 Fed. Appx.
363 (9th Cir. 2005).
At trial, petitioners presented a reproduced document that
they allege was attached to their original 2003 return.
Respondent has no record of receiving the document, and it was
not attached to the 2003 return that respondent received from
petitioners. The typewritten document bears Wilson’s name and
contact information and states:
2003 Supporting Schedule Form 2106 -
Line 2 $24,000 represents section 179 expense deduction
for use of 2003 Yukon in janitorial business. This
vehicle replaced truck previously used 100% in
business. [Reproduced in its entirety.]
The document does not include petitioners’ names, Social Security
numbers, or any other form of taxpayer identification. The
document does not include the vehicle’s original cost. The
document appears to be something prepared in response to an audit
inquiry, and we are not persuaded that it was a part of the filed
return. There was no disclosure regarding the SUV or section 179
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on petitioners’ Schedule C, and the $24,000 amount was clearly
mislabeled on their return. Petitioners did not make a valid
election to expense currently their SUV under section 179.
Petitioners offered no evidence supporting the use of the
SUV as an employee business expense of petitioner husband in his
computer analyst position. Rather, they argue that the SUV was
not used in his job as computer analyst, but instead was used in
petitioners’ janitorial business. Because petitioners have not
substantiated the deduction for unreimbursed transportation costs
claimed on their return as an employee business expense, the
$24,000 deduction claimed cannot be allowed.
We sustain respondent’s determination to disallow the
$24,000 deduction claimed by petitioners. To reflect the
foregoing,
Decision will be entered
for respondent.