T.C. Summary Opinion 2010-142
UNITED STATES TAX COURT
ROULETTE WILLIAM SMITH, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 6129-06S, 9684-07S. Filed September 22, 2010.
Roulette William Smith, pro se.
Heather K. McCluskey and Sherri Wilder, for respondent.
GERBER, Judge: These consolidated cases were 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 decisions to be entered are not reviewable by any
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all 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.
Respondent determined deficiencies in petitioner’s Federal
income taxes of $12,948 in 2002 and $9,116 in 2003. After
concessions, the sole issue remaining for consideration is
whether petitioner is entitled to deduct certain business
expenses.
Background2
Petitioner resided in California when he filed his
petitions. During the years in issue petitioner was employed as
a member of the faculty at Cal State University, Dominguez Hills
(CSUDH) in Carson, California, and at the Institute of
Transpersonal Psychology (ITP) in Palo Alto, California.
Petitioner also owned rental real estate in Santa Barbara,
California, and operated a business named Institute for
Postgraduate Interdisciplinary Studies (IPIS).
On Schedules C, Profit or Loss From Business, attached to
his Forms 1040, U.S. Individual Income Tax Return, petitioner
claimed business deductions of $44,149 for 2002 and $52,589 for
2003.3 Petitioner also claimed a $35,833 loss from his rental
2
The stipulation of facts, the supplemental stipulation of
facts, and the attached exhibits are incorporated herein by this
reference.
3
All figures have been rounded to the nearest dollar.
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real estate on Schedule E, Supplemental Income and Loss, attached
to his 2002 income tax return.
On February 7, 2006, respondent issued a notice of
deficiency for petitioner’s 2002 tax year disallowing
petitioner’s Schedule C deductions for lack of substantiation and
$23,889 of $35,833 petitioner claimed as a real estate loss,
determining that it was a passive activity loss. On February 5,
2007, respondent issued a notice of deficiency for petitioner’s
2003 tax year disallowing all $52,589 of the Schedule C
deductions for lack of substantiation.
Petitioner filed timely petitions in response to the notices
of deficiency. On November 7, 2007, the Court granted
respondent’s oral motion to consolidate petitioner’s cases.
Petitioner has conceded that his real estate loss was a
passive activity loss, and respondent has conceded that
petitioner is entitled to deduct $25,000 of the real estate loss
under section 469(i) because petitioner actively participated in
his rental real estate activity.
Discussion
Deductions are a matter of legislative grace, and taxpayers
bear the burden of establishing entitlement to any claimed
deduction. Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S.
79, 84 (1992). Taxpayers must maintain records sufficient to
allow the Commissioner to determine their correct tax liability.
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Sec. 6001; sec. 1.6001-1(a), Income Tax Regs. Additionally,
taxpayers bear the burden of substantiating the amount and
purpose of each item they claim as a deduction. Hradesky v.
Commissioner, 65 T.C. 87, 89 (1975), affd. per curiam 540 F.2d
821 (5th Cir. 1976).
For most business deductions claimed, petitioner failed to
maintain adequate or any records. To the extent petitioner
produced substantiating records at trial, they were disorganized
and incomplete. The Court has carefully reviewed the record and,
to the extent possible, refined petitioner’s documentation and
testimony to bring some clarity to an otherwise unfathomable sea
of murky material. The disallowance of most of petitioner’s
claimed deductions is attributable to his failure to properly
document his expenses.
Section 162(a) allows a taxpayer to deduct all ordinary and
necessary business expenses paid or incurred during the taxable
year. A taxpayer’s personal or living expenses are not
deductible. Sec. 262.
On Schedules C of his 2002 and 2003 returns petitioner
claimed the following business expenses4 for his IPIS business
activity:
4
The amounts listed as petitioner’s expenses throughout this
opinion do not reflect any limitations on deductions, such as the
50-percent limitation on meals and entertainment expenses under
sec. 274(n).
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Expense 2002 2003
1 2
Car and truck $13,211.91 $11,110.80
Insurance 34.00 ---
Legal and professional 656.63 2,295.00
Office 114.00 5,855.63
3 4
Travel 20,474.20 21,018.61
5 6
Meals and entertainment 9,583.95 8,637.00
Utilities 3,115.07 2,750.00
Other 1,750.99 5,374.87
1
Petitioner calculated his 2002 car and truck expense by
multiplying the standard mileage rate of 36.5 cents per mile by
36,197 business miles. See Rev. Proc. 2001-54, sec. 5, 2001-2
C.B. 530, 531. However, the entries in petitioner’s log total
36,329 miles, and there is no explanation in the record for the
132-mile discrepancy.
2
Petitioner should have claimed a 2003 car and truck expense
of $11,111.04 using the standard mileage rate of 36 cents per
mile and the 30,864 business miles he purportedly drove. See
Rev. Proc. 2002-61, sec. 5, 2002-2 C.B. 616, 618. There is no
explanation in the record for the 24-cent discrepancy.
3
Petitioner claimed $14,250 in lodging expenses and
$6,224.20 in other travel expenses. Petitioner improperly
calculated his lodging expenses using a per diem rate of $150 for
95 days in Palo Alto (discussed infra). See Rev. Proc. 2001-47,
2001-2 C.B. 332; 41 C.F.R. ch. 301, app. A (2003).
4
Petitioner’s 2003 travel expenses consisted entirely of
lodging expenses which he improperly and incorrectly calculated
using the 2004 per diem rates (discussed infra).
5
Petitioner claimed $4,508 in meals expenses and $5,075.95
in entertainment expenses. Petitioner calculated his meals
expense using a per diem rate of $46 for 98 days in Palo Alto.
See Rev. Proc. 2001-47, supra; 41 C.F.R. ch. 301, app. A (2003).
6
Petitioner’s 2003 meals and entertainment expenses
consisted entirely of meals expenses which he calculated using
incorrect per diem rates (discussed infra).
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Petitioner claims he was in the business of medical
research.5 As part of that research, petitioner asserts that he
studied people who did not know they needed help and people who
mistakenly believed they needed help. Petitioner claimed he gave
individuals gifts in order to study how they were physiologically
affected by his generosity.
Because he defined his business activity so broadly and
considered almost any expenditure remotely connected to that
activity to be a business expense, petitioner claimed business
expense deductions for hundreds of questionable expenditures for
the years in issue. Respondent disallowed nearly all of these
deductions in the notices of deficiency.
Petitioner’s records provide substantiation for a limited
number of his claimed deductions. Petitioner failed to produce a
receipt or other documentation of payment for most of his claimed
expenses, and some of the receipts he did submit show that he
spent less than the amount claimed. In addition, his records
fail to identify the purpose of some expenses. In other
instances the records indicate that expenditures were incurred in
5
It is unclear how petitioner expected to profit from this
research activity. Petitioner claimed that his research would
lead to patents that would generate income, but the record
evidences only a single patent application, for a garment bag.
Petitioner did not explain how that patent related to a business
in medical research. Respondent has, however, conceded that
petitioner operated the Institute for Postgraduate
Interdisciplinary Studies with a profit objective.
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connection with his teaching positions, as opposed to his
business.
Respondent has since conceded that petitioner did
substantiate a number of his expenses and is thus entitled to
deduct them on his Schedules C. Respondent also conceded that
petitioner is entitled to deduct on Schedule A, Itemized
Deductions, expenses that his records designated as having been
incurred in connection with his teaching jobs. However,
respondent maintains that petitioner is not entitled to deduct
the remaining expenses for which petitioner’s records do not
substantiate payment and/or a business purpose.6
At trial petitioner testified as to why each of the expenses
allowed as a deduction on Schedule A were in fact an IPIS expense
and as to the purpose of each of the expenses disallowed for lack
of business purpose. We address each of these items below.
A. Amounts Allowed on Schedules C
Respondent conceded that petitioner has substantiated the
following amounts as business expenses:
6
Our review of petitioner’s records and the record as a
whole reveals that respondent’s concessions were generous.
-8-
Expense 2002 2003
Car and truck $8,213.59 $2,425.68
Insurance 34.00 ---
Legal and professional 378.00 2,295.00
Office 114.00 2,259.52
1 2
Travel 5,044.26 1,008.70
3 4
Meals and entertainment 2,576.00 3,116.00
Utilities 1,645.09 1,369.52
Other 555.62 122.28
1
Because taxpayers are not allowed to use the per diem rate
to calculate their lodging expenses on Schedule C, respondent
allowed only the $1,491.97 of lodging expenses for which
petitioner actually substantiated payment. See Duncan v.
Commissioner, T.C. Memo. 2000-269.
2
Respondent conceded the $1,008.70 of lodging expenses for
which petitioner actually substantiated payment.
3
Respondent conceded that petitioner is entitled to use the
per diem rate for 56 days.
4
Respondent conceded that petitioner is entitled to use the
per diem rate for 53 days in Palo Alto, 8 days in Schenectady,
New York, and 4 days in San Diego, California. Petitioner
improperly used a per diem rate of $34 per day for the days in
Schenectady and the 2004 per diem rates for all of the days in
Palo Alto and San Diego. The correct rates are: (1) $51 per day
for the 26 days in Palo Alto between Oct. 1 and Dec. 31, 2003;
(2) $50 per day for the 27 days in Palo Alto between Jan. 1 and
Sept. 30, 2003; (3) $30 per day for the 8 days in Schenectady;
and (4) $50 per day for the 4 days in San Diego. See Rev. Proc.
2002-63, 2002-2 C.B. 691; Rev. Proc. 2003-80, 2003-2 C.B. 1037;
41 C.F.R. ch. 301, app. A (2004).
On the basis of the record, we hold the following items to
be business expenses properly deductible on Schedule C.
For 2002 petitioner claimed a $34 legal and professional
expense for a subscription to the National Geographic magazine.
He did not have a receipt for his subscription for that year, but
he was able to provide respondent with a receipt for 2003.
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Petitioner has thus provided the Court an evidentiary basis for
allowing a deduction for the 2002 subscription, and we may do so
even though petitioner was unable to fully substantiate the
expense. See Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d
Cir. 1930).
Petitioner claimed a 2002 legal and professional expense of
$28.49 and a 2002 other expense of $72.81 for the purchase of
books which he discussed with business associates as part of his
IPIS research.
Petitioner also claimed a 2003 office expense of $165 for
the purchase of video recorders “for people who were working with
* * * [him] to record events which * * * [he] would like to have
them record”.
In addition, petitioner claimed a 2003 office expense of
$297.69 for the purchase of a travel bag and a briefcase which
were used only for IPIS business.
After review of the evidence, we hold that petitioner is
entitled to deductions for the following expenses.7
7
These amounts include amounts respondent conceded or
allowed.
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Expense 2002 2003
Car and truck $8,213.59 $2,425.68
Insurance 34.00 ---
Legal and professional 440.49 2,295.00
Office 114.00 2,722.21
Travel 5,044.26 1,008.70
Meals and entertainment 2,576.00 3,116.00
Utilities 1,645.09 1,369.52
Other 628.43 122.28
B. Amounts Allowed on Schedules A
1. Charitable Contributions
Section 170(a) generally allows a taxpayer a deduction for
any charitable contribution made during the taxable year subject
to certain limitations. For individual taxpayers, a charitable
contribution is deducted on Schedule A as an itemized deduction.
Petitioner claimed $100 for 2002 legal and professional
expenses and $150 for 2003 office expenses for donations to
nonprofit organizations. Respondent allowed charitable
contribution deductions for these donations. Petitioner has not
adequately shown that these contributions were other than
personal. Accordingly, we hold that petitioner is entitled to
deduct $100 for 2002 and $150 for 2003 as charitable
contributions on Schedules A.
2. Unreimbursed Employee Expenses
An employee may generally deduct unreimbursed employment
expenses on Schedule A subject to a floor of 2 percent of
adjusted gross income. See secs. 62(a), 67(a).
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Respondent contends that a number of petitioner’s claimed
IPIS expenses were actually incurred in connection with his job
at ITP instead. Respondent thus allowed the following expenses
as unreimbursed employee expenses.
Expense 2002 2003
1
Car and truck $3,631.75 $3,674.52
Legal and professional 13.64 ---
Office --- 22.34
2 3
Travel 3,600.00 6,962.00
4 5
Meals and entertainment 1,748.00 3,508.00
Other 39.17 244.25
1
This figure does not include a car and truck expense of
$195.28 which respondent listed as allowed on Schedule A.
Because respondent disallowed the $885 in travel expenses and the
$138 in meals and entertainment expenses associated with the same
trip (discussed infra), it appears that respondent included this
car and truck expense by mistake and did not concede its
deductibility.
2
Respondent did concede that petitioner is entitled to use
the per diem rate for 24 days.
3
Respondent also conceded that petitioner is entitled to use
the per diem rate for 47 days in Palo Alto. The $106 rate
petitioner used applies only for the 2 days that fall during the
period Oct. 1 through Dec. 31, 2003. See Rev. Proc. 2003-80,
supra; 41 C.F.R. ch. 301, app. A (2004). The 2003 per diem rate
of $150 applies to the remaining 45 days falling between Jan. 1
and Sept. 30, 2003. See Rev. Proc. 2002-63, supra; 41 C.F.R. ch.
301, app. A (2003).
4
Respondent conceded that petitioner is entitled to use the
per diem rate for 38 days.
5
Respondent conceded that petitioner is entitled to use the
per diem rate for 70 days in Palo Alto. The $51 rate petitioner
used applies only for the 8 days that fall during the period
between Oct. 1 and Dec. 31, 2003. See Rev. Proc. 2003-80, supra;
41 C.F.R. ch. 301, app. A (2004). The 2003 per diem rate of $50
applies to the remaining 62 days falling between Jan. 1 and
Sept. 30, 2003. See Rev. Proc. 2002-63, supra; 41 C.F.R. ch.
301, app. A (2003).
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Petitioner argues, without providing adequate documentation,
that the expenses respondent allowed on Schedules A were IPIS
expenses that belong on Schedules C.
a. Car and Truck, Travel, and Meals and
Entertainment Expenses
During the years in issue petitioner routinely drove from
CSUDH to Palo Alto almost weekly. Respondent contends that
petitioner drove to his job at ITP and therefore the expenses
belong on Schedules A as unreimbursed employee expenses.
Petitioner claims he always drove straight to the Stanford
University library to perform research for IPIS and therefore
claimed these amounts on Schedules C as IPIS business expenses.
We do not find petitioner’s claim to be credible, for two
reasons. First, petitioner’s claim is contradicted by his own
records. In his logs petitioner labeled these trips “ITP”. The
log entries for these trips make no mention of IPIS at all.
Second, petitioner’s claim is not credible because
petitioner’s testimony contradicted the documentary evidence.
Petitioner claimed that on the way home from Palo Alto he
frequently stopped by his property in Santa Barbara to remove
weeds. Petitioner claims that this work added up to at least 750
hours of work on his property in 2002 and that he therefore
satisfied section 469(c)(7)(B)(ii) (discussed infra). Even if we
were generous in assuming that petitioner made this trip every
single week, his claim converts to spending over 14 hours
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removing weeds during each visit. Since the approximately 300-
mile trip to Santa Barbara would have taken approximately 5
hours, petitioner would have arrived in Santa Barbara in the
afternoon (assuming that he left Palo Alto in the morning) and
would have been removing weeds into the middle of the night.
Considered in its entirety, petitioner’s story is thus without
substance and beyond reality.
For these reasons we find that petitioner incurred these
expenses in connection with his job at ITP and hold that these
are itemized deductions that belong on Schedule A.
b. Legal and Professional, Office, and Other
Expenses
Respondent allowed the following expenses on Schedules A of
petitioner’s 2002 and 2003 returns, but petitioner insists these
were IPIS business expenses.
Expense Amount Reason Claimed for Expense
2002
Legal and $13.64 FedEx service to ITP’s dean
professional of students
Other 39.17 Book purchase
2003
1
Office 20.23 Printing expenses
2
Office 2.11 Book purchase
Other 244.25 Business purchases
1
Petitioner claimed a deduction of $70.18, but the receipt
he submitted shows a purchase of only $20.23.
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2
Petitioner claimed a $480.67 deduction. Respondent allowed
$207.54 on Schedule C, allowed $2.11 on Schedule A, and
disallowed the remaining $271.02.
Despite petitioner’s contentions to the contrary, the
receipts submitted for these expenses and the entries in
petitioner’s log are labeled “ITP”. The record thus reveals
these expenses were incurred in his capacity as an employee of
ITP rather than in connection with IPIS. Accordingly, we hold
these expenses to be unreimbursed employee expenses deductible on
Schedules A.
3. Conclusion
We hold that petitioner is entitled to deductions for the
following expenses.8
Expense 2002 2003
Car and truck $3,631.75 $3,674.52
Legal and professional 113.64 ---
Office --- 172.34
Travel 3,600.00 6,962.00
Meals and entertainment 1,748.00 3,508.00
Other 39.17 244.25
C. Amounts Disallowed
1. No Direct Connection With Petitioner’s Business
Only ordinary and necessary business expenses “directly
connected with or pertaining to the taxpayer’s trade or business”
may be deducted. Sec. 1.162-1(a), Income Tax Regs.
8
The amounts include those respondent conceded or allowed.
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Petitioner claimed a $123.74 2002 car and truck expense in
connection with a trip to his rental property. Petitioner claims
his rental property was a business address for IPIS, but he did
not identify the business purpose of this particular trip.
Petitioner claimed a $39.50 2002 other expense for a ticket
to a play about AIDS in Africa. Petitioner contended that this
was a business expense because he was studying AIDS as part of
his business.
He also claimed the following expenditures as business
expenses because they were spent on business associates.
Expense Amount Reason for Claimed Expense
2002
Car and truck $342.74 Trip to attend associate’s
memorial service
Legal and 19.55 Payment to former employees
professional
Legal and 70.00 Gifts for associates
professional
Meals and 3,178.88 Appreciation party for
entertainment associates
Travel 313.77 Trip to visit associates
Other 272.13 Gifts for associate
2003
Office 548.05 Gifts for associates
Office 586.00 Payments to or on behalf of
associates
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Petitioner is not entitled to deduct these payments because
he has supplied, at best, a tangential connection between the
expenditures and his business. The fact that petitioner spent
these amounts on business associates does not, by itself,
establish a direct connection with his business. Petitioner’s
past dealings with his associates do not automatically convert
future interactions with them into business transactions.
Furthermore, these expenses are classified as automobile,
travel, entertainment, or business gift expenses that are subject
to more rigorous substantiation under section 274(d). To deduct
these expenses, petitioner must substantiate: (a) The amount of
the expense, (b) the time and place the expense was incurred; the
business purpose of the expense, and (c) in the case of an
entertainment or gift expense, the business relationship to
petitioner of each expense incurred. See id. Each element must
be substantiated by adequate records or by sufficient evidence
corroborating petitioner’s own statement. See id. Although
petitioner testified as to the business purpose of these
expenses, he did not provide appropriate records or evidence to
corroborate his testimony.
Accordingly, we hold that petitioner is not entitled to
deduct these expenses.
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2. Section 274(d)
For 2002 petitioner deducted numerous items which constitute
automobile, travel, or entertainment expenses.
Expense Amount Reason Claimed for Expense
Car and truck $303.32 Trip to discuss repayment of a
loan
Travel 300.00 Trip to discuss repayment of a
loan
Car and truck 35.41 Trip to hospital for IPIS
research
Car and truck 313.90 Trip to interview person with
bipolar disorder
Expense Amount Reason Claimed for Expense
Car and truck 100.38 Trip to interview head of
charitable organization
Meals and 1,710.95 Entertaining head of charitable
entertainment organization
Other 80.00 Staff luncheon for CSUDH
Because these expenses constitute automobile, travel, and
entertainment expenses, petitioner must satisfy the more rigorous
substantiation requirements of section 274(d). Petitioner failed
to provide evidence to corroborate his testimony as to the
business purpose of these expenses.
Accordingly, we hold that petitioner is not entitled to
deduct these expenses.
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3. Unnecessary Expenses
Petitioner claimed 2003 office expenses of $33.54 and $37.45
for the purchase of books. Each of these expenses represented a
purchase of two copies of a book. Respondent allowed deductions
of $16.77 and $18.73 for the purchase of a single copy of each
book, but petitioner could not explain why he needed the second
copies.
Petitioner also claimed a 2003 office expense of $264.94 for
the purchase of a travel bag and a briefcase. Petitioner claims
this luggage was different from the travel bag and briefcase he
had purchased earlier (discussed supra), but the receipt he
presented indicates otherwise.
Petitioner did not offer a reason he needed duplicates of
these items and has therefore failed to prove the expenses were
necessary. See sec. 1.162-1(a), Income Tax Regs.
Petitioner also claimed utilities expenses of $629.82 in
2002 and $248.77 in 2003 for a phone line at his collaborator’s
home in Palo Alto (Palo Alto line). Petitioner claims the line
was used only for his personal voice mail. Even if we assume
that petitioner’s testimony is credible, the expense is redundant
and not ordinary and necessary because petitioner already
maintained a toll-free line for which he claimed--and respondent
mostly allowed--utilities expenses in 2002 and 2003. Petitioner
testified that the toll-free line “was a business phone so that
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when I am traveling anywhere in the world I can pick up messages
and emergencies”. Because petitioner already had a line where
people could leave him messages, he had no need for a Palo Alto
line.
Accordingly, we hold that petitioner is not entitled to
deduct these expenses.
4. Personal Expenses
Petitioner claimed 2003 office expenses of $67 for the cost
of repairing his wristwatch and $250 for the purchase of art for
his apartment in Long Beach. These expenses are inherently
personal and thus nondeductible. See sec. 262(a).
5. Nondeductible Charitable Contributions
Petitioner attended a charity dinner hosted by ITP.
Petitioner claimed a 2003 office expense for a $125 donation to
ITP. According to a letter from ITP, the fair market value of
the dinner was $125. Petitioner also claimed a 2003 office
expense of $100 for the purchase of five books at the dinner.
Petitioner testified that the purchase “acts as a contribution
from * * * [his] business to ITP”.
Because petitioner received goods and services in exchange
for and equal to the amount of his contributions, they cannot be
considered charitable contributions. “The sine qua non of a
charitable contribution is a transfer of money or property
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without adequate consideration.” United States v. Am. Bar
Endowment, 477 U.S. 105, 118 (1986).
Accordingly, we hold that petitioner is not entitled to
deduct these expenses.
6. No Business Purpose Offered
Petitioner claimed a utilities expense of $495.13 in 2002
for a phone line at his rental property. Petitioner claimed that
the line was used (1) for IPIS business and (2) so that anyone,
including the tenants of the rental property, could call
petitioner for any purpose. Petitioner’s claim is not plausible
because, according to his own testimony, he spent what little
time he was at his rental property removing weeds. Petitioner
offered no explanation as to how the phone line was used in his
business, and there is no evidence of any business use
whatsoever. Furthermore, even if there had been some business
use of the phone line, petitioner would not be entitled to deduct
this expense because he failed to identify the amount of business
use of the line as opposed to the tenants’ personal use of the
phone line.
Petitioner also claimed a 2003 utilities expense of $990.14
for another phone line. Petitioner did not offer any explanation
as to how this line was used in his business.
-21-
Petitioner claimed a 2003 office expense of $50 for a
payment to an executive of CSUDH. Petitioner did not explain
what this payment was for.
Petitioner claimed 2003 car and truck expenses totaling
$5,010.84, 2003 travel expenses totaling $7,015, 2003 meals and
entertainment expenses totaling $510, and 2003 other expenses
totaling $1,488.57 for which he offered no business purpose.
Accordingly, we hold that petitioner is not entitled to
deduct these expenses.
7. Petitioner’s Testimony Contradicted by His Own Records
For 2002 petitioner claimed $195.28 in car and truck
expenses, $885 in travel expenses, and $138 in meals and
entertainment expenses which were purportedly incurred while
attending a Centers for Disease Control and Prevention conference
in Atlanta, Georgia. Petitioner’s log, however, indicates he
visited friends and went to his family’s home in South Carolina
instead.
Petitioner claimed a 2002 meals and entertainment expense of
$186.12 purportedly incurred while entertaining a business
associate. Petitioner’s receipts show that this expense
consisted of $100 spent at a restaurant and $86.12 spent on
groceries. Petitioner, however, testified that he neither bought
the groceries for his associate nor entertained her at his home.
-22-
Petitioner claimed a 2002 other expense of $89.71 for
purported AIDS research. The receipt petitioner submitted for
this expense, however, shows a purchase of groceries.
Petitioner claimed a 2002 other expense of $18.50 for
postage. Petitioner claimed that postage was for mail sent to
his associate, Ricki Lewis. Respondent allowed $5.20 in postage
to Schenectady, where Ricki Lewis lived. Respondent disallowed
the remaining $13.30 because that amount constituted postage to
Atlanta, Georgia, where petitioner’s daughter resided.
Petitioner has failed to substantiate these deductions
because his records refute his testimony regarding the business
purpose of these expenses. Accordingly, we hold that petitioner
is not entitled to deduct these expenses.
8. Failure To Substantiate Payment
Respondent disallowed the remainder of petitioner’s claimed
deductions for petitioner’s failure to substantiate payment of
the expenses claimed.
Petitioner claimed a 2002 per diem meals expense of $46 for
a day in December for which he did not have a corresponding
travel expense. Petitioner is not entitled to deduct this
expense because taxpayers are not entitled to claim per diem
meals expenses without traveling away from home. See sec.
162(a)(2); Rev. Proc. 2002-63, sec. 3.01(1), 2002-2 C.B. 691,
693.
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For the remainder of the expenses respondent disallowed for
lack of substantiation, petitioner claimed that he had receipts
evidencing payment but did not provide them to respondent or the
Court.
Accordingly, we hold that petitioner is not entitled to
deduct these expenses.
9. Conclusion
For these reasons, we hold that petitioner is not entitled
to deductions for the following expenses.
Expense 2002 2003
Car and truck $1,366.57 $5,010.60
Legal and professional 102.50 ---
Office --- 2,961.08
Travel 11,829.94 13,047.91
Meals and entertainment 5,259.95 2,013.00
Utilities 1,469.98 1,380.48
Other 1,083.39 5,008.34
To reflect the foregoing,
Decisions will be entered
under Rule 155.