T.C. Summary Opinion 2009-65
UNITED STATES TAX COURT
LAURA L. AND SCOTT M. BURLEY, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 20783-07S. Filed May 7, 2009.
Laura L. and Scott M. Burley, pro sese.
Frederic J. Fernandez and Mark J. Miller, for respondent.
CARLUZZO, Special Trial Judge: This case was heard pursuant
to the provisions of section 7463 of the Internal Revenue Code in
effect when the petition was filed.1 Pursuant to section
7463(b), the decision to be entered is not reviewable by any
1
Unless otherwise indicated, section references are to the
Internal Revenue Code of 1986, as amended, in effect for the
relevant periods. Rule references are to the Tax Court Rules of
Practice and Procedure.
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other court, and this opinion shall not be treated as precedent
for any other case.
In a notice of deficiency dated July 18, 2007, respondent
determined a $4,454 deficiency in petitioners’ 2003 Federal
income tax and a $2,771 deficiency in petitioners’ 2004 Federal
income tax. For both years, the deficiencies stemmed from the
disallowance of--or adjustments made to--petitioners’ claimed
unreimbursed employee business expenses and other itemized
deductions. For the reasons discussed below, and with a few
exceptions, we find that petitioners are not entitled to
deductions in excess of those respondent already permitted for
either 2003 or 2004.
Background
Some of the facts have been stipulated and are so found. At
the time the petition was filed, petitioners resided in Apple
Valley, Minnesota.
During the years at issue petitioners were both employed as
airline mechanics for Northwest Airlines, Inc. (Northwest), and
both belonged to the mechanics union.
When Northwest made workforce reductions in 2003, Mr. Burley
was “bumped” from his job in Minneapolis by a mechanic with more
seniority. He was forced to take an “off station” position with
Northwest in order to keep his job and his seniority. The only
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position Mr. Burley was able to find with Northwest was in
Milwaukee, Wisconsin.
Mrs. Burley remained in Minnesota (and in her job with
Northwest as a mechanic in Minnesota) while Mr. Burley commuted
between his job in Wisconsin and petitioners’ residence in
Minnesota.
When Mr. Burley accepted the Milwaukee position, he was
under the impression that it would not last longer than a year.
Further, because his union had filed a grievance against the
airline regarding the layoffs, Mr. Burley anticipated his forced
reassignment would not last more than a few months. In September
2004 Mr. Burley was able to return to his position in
Minneapolis.
Petitioners deducted various items on their 2003 and 2004
Federal income tax returns, including charitable contributions
and unreimbursed employee business expenses. Most of the
unreimbursed employee business expenses were attributable to the
costs Mr. Burley incurred while living in Milwaukee and traveling
between that city and Minneapolis.
The issues for decision are: (1) Whether petitioners are
entitled to unreimbursed business travel expense deductions for
2003 and 2004 for the expenses Mr. Burley incurred while working
in Milwaukee; (2) whether petitioners are entitled to other
unreimbursed employee business expense deductions for 2003 and
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2004 beyond those respondent already permitted; and (3) whether
petitioners are entitled to deduct charitable contributions made
in 2003 and 2004 beyond those respondent already permitted.
Discussion
1. Unreimbursed Business Travel Expenses: “Away From Home”
Ordinarily, a taxpayer may not deduct personal expenses,
such as the costs of meals and lodging. Sec. 262. However, if
properly substantiated, traveling expenses, including meals and
lodging, incurred by a taxpayer during the taxable year while
traveling away from home in the pursuit of a trade or business
are deductible. Secs. 162(a)(2), 274(d). To qualify for
deduction under section 162(a)(2), the traveling expense must be:
(1) Reasonable and necessary; (2) incurred while the taxpayer was
traveling “away from home”; and (3) directly related to the
conduct of the taxpayer’s trade or business. Commissioner v.
Flowers, 326 U.S. 465, 470 (1946). The reference to “home” in
section 162(a)(2) means the taxpayer’s tax home. Mitchell v.
Commissioner, 74 T.C. 578, 581 (1980); Foote v. Commissioner, 67
T.C. 1, 4 (1976); Kroll v. Commissioner, 49 T.C. 557, 561-562
(1968).
For each year in issue a portion of petitioners’ claimed
deductions includes amounts spent for meals, lodging, travel, and
Internet access while Mr. Burley was working in Milwaukee.
According to petitioners, Mr. Burley incurred the expenses while
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he was away from home for business purposes. According to
respondent, Mr. Burley was not “away from home” while working in
Milwaukee.
Generally, a taxpayer’s tax home is determined by the
location of the taxpayer’s regular or principal place of
business, regardless of where the taxpayer’s residence is
located. Mitchell v. Commissioner, supra at 581; Kroll v.
Commissioner, supra at 561-562; sec. 1.911-2(b), Income Tax Regs.
Usually, if the location of the taxpayer’s regular place of
business changes, so does the taxpayer’s tax home--from the old
location to the new location--unless the period of employment at
the new location is, or is reasonably expected to be, temporary.
Kroll v. Commissioner, supra at 562-563; Mitchell v.
Commissioner, T.C. Memo. 1999-283. By law, a “taxpayer shall not
be treated as being temporarily away from home during any period
of employment if such period exceeds 1 year.” Sec. 162(a).
Petitioners argue that Milwaukee, Wisconsin, should not be
treated as Mr. Burley’s tax home for the years in issue because
his assignment there was temporary. See Peurifoy v.
Commissioner, 358 U.S. 59, 60 (1958); Horton v. Commissioner, 86
T.C. 589, 593-595 (1986). Unfortunately, the fact that it turned
out to be temporary is not as critical to the analysis as is the
assignment’s actual duration–-14 months. See sec. 162(a).
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Further, this Court has previously dealt with the question
of whether bumped Northwest mechanics are entitled to deduct
expenses incurred while working away from their primary
residences. See, e.g., Alami El Moujahid v. Commissioner, T.C.
Memo. 2009-42; Riley v. Commissioner, T.C. Memo. 2007-153;
Wilbert v. Commissioner, T.C. Memo. 2007-152, affd. 553 F.3d 544
(7th Cir. 2009); Farran v. Commissioner, T.C. Memo. 2007-151;
Bogue v. Commissioner, T.C. Memo. 2007-150; Stockwell v.
Commissioner, T.C. Memo. 2007-149. In each case, we disallowed
the deductions upon the ground that the expenses to which the
deductions relate were not incurred away from the taxpayer’s
home. This case is no different.
Given the circumstances surrounding his employment during
2003 and 2004, we can understand why petitioners might consider
Mr. Burley’s “off station” assignment to be “temporary”, as that
word is commonly used and understood. After all, at all times
relevant it was his intention to return to Minneapolis as soon as
possible for business as well as personal reasons. Nevertheless,
because the assignment lasted for more than 1 year, it cannot be
treated as a temporary assignment for Federal income tax
purposes. See Wilbert v. Commissioner, 553 F.3d at 550; Alami El
Moujahid v. Commissioner, supra.
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Consequently, because Mr. Burley’s position with Northwest’s
Milwaukee site lasted for more than 1 year, that location is
considered his tax home for the period he worked there.
Because he was not “away from home” for business reasons,
the expenses Mr. Burley incurred while living in Milwaukee--and
while traveling back and forth between the Minneapolis metro area
and Milwaukee--were incurred for personal purposes, and
petitioners are not entitled to a deduction for those expenses.
See sec. 262(a); Commissioner v. Flowers, supra; Wilbert v.
Commissioner, 553 F.3d at 550.
2. Other Unreimbursed Employee Business Expenses
As has often been stated, deductions are a matter of
legislative grace, and the taxpayer bears the burden of proof to
establish entitlement to any claimed deduction.2 Rule 142(a);
INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). This
burden requires the taxpayer to substantiate deductions claimed
by keeping and producing adequate records that enable the
Commissioner to determine the taxpayer’s correct tax liability.
Sec. 6001; Hradesky v. Commissioner, 65 T.C. 87, 90 (1975), affd.
per curiam 540 F.2d 821 (5th Cir. 1976); Meneguzzo v.
Commissioner, 43 T.C. 824, 831-832 (1965).
2
Petitioners do not claim that the provisions of sec.
7491(a) are applicable, and we proceed as though they are not.
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Petitioners claimed deductions for various unreimbursed
employee business expenses for each of the years in issue,
including uniform maintenance, tool expenses, professional
publications, computer equipment, and office supplies.
Petitioners also claimed deductions for the depreciation related
to a computer.
As noted earlier, taxpayers are permitted deductions for
ordinary and necessary expenses paid or incurred in carrying on a
trade or business during the year; personal, living, or family
expenses are not deductible. Secs. 162(a), 262.
If a taxpayer establishes that he or she paid or incurred a
deductible expense but does not establish the amount of the
expense, 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). However, for the Cohan rule
to apply, there must be sufficient evidence in the record to
provide a basis for the estimate. Vanicek v. Commissioner, 85
T.C. 731, 743 (1985). Certain 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).
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Although both parties have made concessions regarding some
of the expense deductions, a few remain in dispute, and we
address those below.3
a. Computer Equipment
A computer is “listed property” and subject to the strict
substantiation requirements of section 274(d). Sec.
280F(d)(4)(A)(iv). Petitioners claimed to have used the computer
to check on Mr. Burley’s job status and visit the union Web site;
he used the scanner to assist with his informal teaching of other
mechanics. However, petitioners did not introduce evidence to
suggest that either of them was required by Northwest to have a
computer, nor did they explain how much of the computer’s overall
use was for business (as distinct from personal) purposes.
Petitioners’ purchase of computer equipment and/or upgrades to
that equipment was not shown to be an ordinary and necessary
business expense. See Riley v. Commissioner, T.C. Memo. 2007-
153; Wasik v. Commissioner, T.C. Memo. 2007-148. Accordingly,
any depreciation related to the computer and peripherals would
also not be considered an ordinary and necessary business
expense. We sustain respondent’s determination on this issue.
3
To the extent not specifically mentioned herein, we hold
that petitioners are not entitled to deductions beyond those
respondent already permitted.
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b. Office Supplies
The strict substantiation requirements of section 274(d) do
not apply to these types of expenses, and the Cohan rule may
apply; however, petitioners must still provide minimum
substantiation of such expenses because petitioners bear the
burden of proof. See sec. 6001; Rule 142(a).
Although they may have used binders and other office
supplies in their work, petitioners have not sufficiently
demonstrated that the purchase of these items was necessary for
their employment with Northwest. We sustain respondent’s
determination on this issue.
c. Safety Shoes and Uniform Maintenance
Like office supplies, items such as safety shoes are not
subject to the strict substantiation requirements of section
274(d). Because steel-toed safety shoes are both ordinary and
necessary for petitioners’ employment as mechanics, and because
we are sufficiently satisfied that petitioners met their burden
of proof on this issue, petitioners are entitled to deduct the
claimed $385 safety shoe expense for 2004.
As for the cost of caring for and cleaning petitioners’
uniforms, we remain unconvinced that the amounts already
permitted by respondent are unreasonable or that petitioners are
entitled to further deductions for that expense.
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d. Tools and Books
Like uniforms, tools and books are not subject to the
heightened substantiation requirements of section 274(d) and may
be estimated under Cohan.
Petitioners claimed a deduction for tools expenses on their
2003 return. Petitioners testified that aviation mechanics are
sometimes required to bring their own tools, or that their job is
more easily performed with better tools than those Northwest
provided. Respondent has already allowed a portion of that
expense, but, given the entire record, we are satisfied that
petitioners are entitled to the claimed $1,984 for tools and
books expenses for that year.
Similarly, we are satisfied that Mrs. Burley’s 2004 purchase
of a Handbook for Aviation Maintenance Technicians was both an
ordinary and necessary business expense, and petitioners are
entitled to a deduction for its cost.
3. Charitable Contribution Deductions
Petitioners claimed a noncash charitable contribution
deduction of $2,355 on their 2003 Federal income tax return for
the donation of their Chevy Blazer. At trial petitioners
explained that the amount should have been $2,375. Petitioners
also claimed a $3,847 deduction for cash contributions.
Petitioners claimed a $5,669 charitable contribution
deduction on their 2004 return, comprising of both cash and
noncash donations.
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In general, a taxpayer is allowed to deduct any donations,
contributions, or gifts made to a qualifying organization. See
sec. 170(a), (c). Nothing in the record suggests that the donees
to which petitioners made donations were not qualifying
organizations.
Petitioners regularly made cash donations to their church,
and respondent has already permitted petitioners a deduction for
some of those donations. Respondent has also already permitted
some of the other charitable deductions petitioners claimed.
We appreciate petitioners’ charitable spirit, both to their
church and other organizations, but a deduction for a charitable
contribution, whether made in cash or otherwise, must be
substantiated by at least one of the following: (1) A canceled
check; (2) a receipt from the donee charitable organization
showing the name of the donee, the date of the contribution, and
the amount of the contribution; or (3) in the absence of a
canceled check or receipt from the donee charitable organization,
other reliable written records showing the name of the donee, the
date of the contribution, and the amount of the contribution.
Sec. 170(f)(8); sec. 1.170A-13(a)(1), (b)(1), (3), Income Tax
Regs. The reliability of the records is determined on the basis
of all of the relevant facts and circumstances. See sec.
1.170A-13(a)(2), Income Tax Regs.
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Petitioners provided a “contemporaneous calendar” to support
many of their claimed deductions, including their cash charitable
contributions, for each of the years in issue. However, some of
the other expense notations made on the calendar did not actually
belong to either petitioner (such as a mileage notation and
attempted deduction for a friend’s use of petitioners’ truck) and
that calls into question the reliability of the calendar in
satisfaction of the charitable donation substantiation
requirements.
Further, petitioners provided no documentation whatsoever to
support their claimed deduction for the donation of their Chevy
Blazer in 2003. Although it does happen that taxpayers lose
their receipts, in this case, without even a letter from the
donee organization describing the donation, we are unable to
permit petitioners a deduction for it.
In sum, we do not find petitioners’ records sufficiently
persuasive or otherwise to satisfy the provisions of the
regulation cited above. Petitioners are not entitled to a
charitable contribution deduction for either year in excess of
the amounts already conceded by respondent.
4. Conclusion
After taking into account the concessions made by the
parties, as well as the various issues decided today, there may
be further mechanical adjustments to be made to petitioners’ 2003
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and 2004 returns. See, e.g., sec. 67(a) (providing a 2-percent
floor on miscellaneous itemized deductions).
Therefore, to reflect our disposition of the disputed
issues,
Decision will be entered
under Rule 155.