T.C. Summary Opinion 2011-84
UNITED STATES TAX COURT
LESTER DALE ANDERSON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 9042-10S. Filed July 6, 2011.
Lester Dale Anderson, pro se.
Anna A. Long, for respondent.
JACOBS, 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.
- 2 -
Respondent determined a deficiency of $4,472 in petitioner’s
Federal income tax and an addition to tax under section
6651(a)(1) of $861.75 for 2005. After concessions by respondent,
the issues remaining for decision are: (1) Whether petitioner is
entitled to deduct any of the medical expenses claimed on
Schedule A, Itemized Deductions, of his 2005 income tax return
remaining in dispute; (2) whether petitioner is entitled to
deduct any of the charitable contributions claimed on Schedule A
of his 2005 income tax return; (3) whether petitioner is entitled
to deduct any of the miscellaneous expenses claimed on Schedule A
of his 2005 income tax return; and (4) whether petitioner is
liable for an addition to tax pursuant to section 6651(a)(1).
All section references are to the Internal Revenue Code in
effect for 2005, and all Rule references are to the Tax Court
Rules of Practice and Procedure.
Background
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. Petitioner resided in
California when the petition was filed.
I. Introduction
Petitioner has worked as a procurement agent for numerous
manufacturing companies throughout his career. However, in 2005
he was unemployed from January through June. Throughout this
- 3 -
period, petitioner sought permanent employment. Petitioner filed
a claim for unemployment benefits with the State of California on
March 27, 2005.
Petitioner filed his 2005 Form 1040, U.S. Individual Income
Tax Return, on May 19, 2008, more than 2 years after it was due,
computing his tax using a filing status of “Married filing
separately”. Petitioner claimed an exemption for his wife.
Petitioner’s wife did not file a tax return for 2005.1
Petitioner did not file Form 4868, Application for Automatic
Extension of Time To File U.S. Individual Income Tax Return, and
the record does not indicate that he otherwise requested an
extension of time to file his 2005 income tax return.
Respondent disputes three deductions that petitioner claimed
on Schedule A of his 2005 income tax return. The first of the
disputed deductions is $15,749 in medical expenses incurred for
petitioner’s and petitioner’s wife’s medical treatments.
Respondent now concedes $11,456 of these medical expenses. The
second disputed deduction is $7,660 in charitable contributions.
The third involves $7,538 of miscellaneous expenses related to
petitioner’s search for permanent employment. The relevant facts
relating to the disputed deductions follow.
1
Petitioner’s wife is disabled and receives nontaxable
disability and Social Security benefits.
- 4 -
II. Petitioner’s Medical Expenses
On Schedule A of his 2005 income tax return, petitioner
deducted $15,749 in unreimbursed medical expenses for both
himself and his wife. Respondent initially disallowed the entire
deduction, but after reviewing petitioner’s documentation he
conceded $11,456 of the claimed medical expenses. At trial
petitioner informed the Court that he was in contact with
insurance companies to procure additional documentation with
respect to his wife’s medical expenses for 2005. The Court
agreed to keep the record open for 30 days to permit petitioner
to submit additional documentation. Petitioner ultimately
provided a document from Prescription Solutions detailing his
wife’s prescriptions in 2005 totaling $796.60. Concurrently with
the submission of this document, petitioner claimed an additional
deduction for medical-related mileage totaling $211.12 (520 miles
driven at 40.6 cents per mile).
III. Charitable Contributions
Petitioner deducted $7,660 for charitable contributions with
respect to donations to two organizations. The first of these
donations (noncash donations) relates to books, clothing, and
drapes petitioner gave to AMVETS Service Foundation (AMVETS). At
trial petitioner submitted a receipt from AMVETS for: (1) “Bags
of Clothing”; (2) “Miscellaneous”; (3) “Drapes”; and (4)
- 5 -
“Other”.2 In addition, petitioner submitted a list (prepared in
2008) setting forth values which he had assigned to the noncash
donations, as follows:
Value of Each Item Total
Item Quantity Assigned by Petitioner Value
Craftmaking 52 books $30 $1,560
books
Other hardback 44 books 10 440
books
Clothing 14 bags 40 560
Drapes & drapery 1 set 100 100
rod
Miscellaneous 1 200 200
The craftmaking books were given to petitioner by his
sister-in-law, who had collected them over a 25-year period.3
Petitioner and/or his wife had purchased the remaining items
donated, but he presented no receipts or other documentation as
to their costs.
The second donation relates to cash contributions petitioner
allegedly made to his church totaling $4,800. Petitioner avers
that each time he attended church services he put “about $100”
2
The AMVETS Service Foundation receipt includes a disclaimer
which states that “AMVETS is not required to value the property
it receives from the donor. I.R.S. Code places the
responsibility for estimating the ‘fair market value’ upon the
donor.”
3
Petitioner had previously attempted to sell the books but
was unable to do so. Therefore, he decided to donate the books
to charity.
- 6 -
cash into the collection basket. Petitioner asked his minister
to give him a letter corroborating the amounts of his
contributions, but the minister declined to do so, stating: “I
don’t think it would be the best thing to do.”
IV. Miscellaneous Expenses
Petitioner actively searched for a permanent job during his
period of unemployment (January to June) in 2005. He ultimately
found temporary employment following the period in which he was
unemployed.
On Schedule A of his 2005 income tax return, petitioner
deducted $7,538 in miscellaneous expenses. These expenses
consisted of the following:
Item Monthly Amount No. of Months Total
Cellular telephone $43.80 12 $526
Newspaper 10.00 12 120
In addition, petitioner claimed mileage expenses of $6,677 with
respect to his job search (16,486 miles driven at 40.5 cents per
mile).4 No documentation corroborating any of the miscellaneous
expenses was submitted.
The cellular telephone expenses petitioner deducted were an
estimate of the portion of his telephone bill that were job-
4
We are mindful that the aforementioned miscellaneous
expenses total $7,323, not $7,538. No explanation for the $215
difference was given.
- 7 -
search related calls. At trial he acknowledged that he “probably
overstated the estimate for cell phone” expenses.
The newspaper expenses deducted relate to the monthly
charges petitioner incurred for newspaper delivery. Petitioner
maintains he reviewed the want-ads for job opportunities and
pursued all promising job openings. He claims he read the
newspapers not for their news content, but rather for the want-
ads.
Petitioner did not keep a log detailing the mileage for each
job-seeking trip or listing the nature of each trip, and he
admitted error in calculating the specific mileage. He stated
that he had actually driven 6,486 miles, which at 40.5 cents per
mile would reduce the amount claimed for job search mileage to
$2,627.
Discussion
It is well established that deductions are a matter of
legislative grace, and taxpayers bear the burden of proving they
are entitled to all deductions claimed. 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). Moreover, taxpayers
must substantiate the amount and purpose of the item deducted.
Hradesky v. Commissioner, 65 T.C. 87, 89-90 (1975), affd. per
curiam 540 F.2d 821 (5th Cir. 1976). Taxpayers are required to
maintain records that are sufficient to enable the Commissioner
- 8 -
to determine their correct tax liability. See sec. 6001;
Meneguzzo v. Commissioner, 43 T.C. 824, 831-832 (1965); sec.
1.6001-1(a), Income Tax Regs. Under certain circumstances, if a
taxpayer establishes entitlement to a deduction but not the
amount, the Court may estimate the amount allowable. Cohan v.
Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930). We generally
will not estimate a deductible expense unless the taxpayer
presents sufficient evidence to provide some basis upon which an
estimate may be made. Vanicek v. Commissioner, 85 T.C. 731, 742-
743 (1985).
Section 274(d) supersedes the Cohan doctrine for certain
categories of expenses. Sanford v. Commissioner, 50 T.C. 823,
827-828 (1968), affd. per curiam 412 F.2d 201 (2d Cir. 1969).
Generally, a deduction is disallowed for travel expenses, meals
and entertainment, and listed property unless the taxpayer
properly substantiates: (1) The amount of the expense; (2) the
time and place of the expense; (3) the business purpose of the
expense; and (4) in the case of meals and entertainment (not
relevant here), the business relationship between the taxpayer
and the persons being entertained. Sec. 274(d). Listed property
includes passenger automobiles, sec. 280F(d)(4)(A)(i), and
cellular telephones, sec. 280F(d)(4)(A)(v). Generally,
deductions for expenses subject to the strict substantiation
requirements of section 274(d) must be disallowed in full unless
- 9 -
the taxpayer satisfies every element of those requirements.
Sanford v. Commissioner, supra at 827-828; Robinson v.
Commissioner, T.C. Memo. 2011-99; sec. 1.274-5T(a), Temporary
Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6, 1985).
Contemporaneous logs are not required, but corroborative evidence
to support a taxpayer’s reconstruction of the elements of an
expenditure or use must have “a high degree of probative value to
elevate such statement” to the level of credibility of a
contemporaneous record. Sec. 1.274-5T(c)(1), Temporary Income
Tax Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985).
Deductions for listed property used for both personal and
business purposes are disallowed unless the taxpayer establishes
the amount of business use of the property. Robinson v.
Commissioner, supra; Olsen v. Commissioner, T.C. Memo. 2002-42,
affd. 54 Fed. Appx. 479 (9th Cir. 2003); sec. 1.274-
5T(b)(6)(i)(B), Temporary Income Tax Regs., 50 Fed. Reg. 46016
(Nov. 6, 1985).
I. Petitioner’s Medical Expenses
A taxpayer may deduct medical expenses not compensated for
by insurance or otherwise for himself or herself, his or her
spouse, or a dependent as defined in section 152. Sec. 213(a).
Respondent concedes that petitioner is entitled to $11,456 of the
claimed $15,749 of medical expenses for 2005. With respect to
the remaining $4,293, as stated supra p. 4, petitioner produced
- 10 -
documentation sufficient to substantiate an additional $796.60 of
medical expenses.
With respect to petitioner’s claimed medical automobile
mileage, petitioner has not satisfied the heightened
substantiation requirements of section 274(d). We therefore
sustain respondent’s disallowance of the deduction.
In sum, petitioner is entitled to deduct medical expenses of
$12,252.60 for 2005.
II. Charitable Contributions
Petitioner claimed a charitable contribution deduction of
$7,660 on Schedule A of his 2005 income tax return.
In general, section 170(a) allows a deduction for any
charitable contribution the payment of which is made within the
taxable year. Charitable contributions, however, are deductible
only if verified under regulations prescribed by the Secretary.
Sec. 170(a)(1); Hewitt v. Commissioner, 109 T.C. 258, 261 (1997),
affd. without published opinion 166 F.3d 332 (4th Cir. 1998).
A. Cash Contribution to Petitioner’s Church
Section 1.170A-13(a), Income Tax Regs., provides that if a
taxpayer makes a cash contribution, he shall maintain for each
contribution one of the following: (i) A canceled check; (ii) a
receipt from the donee; or (iii) other reliable written records
showing the name of the donee, the date of the contribution, and
the amount of the contribution. Petitioner maintained none of
- 11 -
these records. Because petitioner did not substantiate his cash
contributions, we sustain respondent’s disallowance of the
deduction.
B. Noncash Contribution to AMVETS
For charitable contributions made in property other than
cash, the value of the contribution is the fair market value at
the time of contribution. Hewitt v. Commissioner, supra at 261;
sec. 1.170A-1(c)(1), Income Tax Regs. The fair market value of
contributed property is the price at which the property would
change hands between a willing buyer and a willing seller,
neither being under any compulsion to buy or sell and both having
reasonable knowledge of relevant facts. Sec. 1.170A-1(c)(2),
Income Tax Regs.
In general, for noncash charitable contributions, a taxpayer
must maintain for each contribution a receipt from the donee
showing the name of the donee, the date and location of the
contribution, and a description of the donated property in detail
reasonably sufficient under the circumstances. See sec. 1.170A-
13(b)(1), Income Tax Regs.
Petitioner provided no documentation describing the
contributed property beyond referring to the noncash
contributions as “lace books” (i.e., the craftmaking books),
“hardback books”, bags of clothing, drapes and drapery rod, and
“miscellaneous”. The reliability of the list of property
- 12 -
petitioner donated to AMVETS is weakened by the fact it was
prepared in 2008, not 2005. Moreover, it appears that in many
cases (e.g., the craftmaking books) petitioner’s valuations are
high. And petitioner candidly admitted that the valuation for
the property contributed was simply a “fair number” that he
“arbitrarily” estimated. Consequently, we are unable to
determine or estimate with any degree of certainty the correct
value of the noncash property petitioner donated to AMVETS. We
therefore sustain respondent’s disallowance of the deduction.
III. Miscellaneous Expenses
Miscellaneous expenses are deductible to the extent they are
allowable and exceed 2 percent of adjusted gross income. Sec.
67(a). Miscellaneous expenses include job-seeking expenses so
long as the taxpayer seeks employment in his current trade or
business and the expenses are directly connected with the trade
or business. Secs. 67(b), 162; Rev. Rul. 77-16, 1977-1 C.B. 37.
A. Newspaper Expenses
Petitioner deducted newspaper expenses of $120, asserting
that he purchased the newspapers solely to assist in his job
search. Section 262(a) disallows a deduction for personal,
living, or family expenses. The taxpayer bears the burden of
proving that an expense was for business or income-producing
purposes rather than for personal reasons. Walliser v.
Commissioner, 72 T.C. 433, 437 (1979).
- 13 -
The purchase of general circulation newspapers is a personal
expense that taxpayers may not deduct. Stemkowski v.
Commissioner, 690 F.2d 40, 47 (2d Cir. 1982), affg. in part and
revg. in part 76 T.C. 252 (1981). We therefore sustain
respondent’s disallowance of the deduction for newspaper
expenses.
B. Cellular Telephone and Automobile Expenses
As noted supra p. 8, cars and trucks and cellular telephones
are “listed property” pursuant to section 280F(d)(4)(A)(i) and
(v), respectively.
With respect to petitioner’s cellular telephone expenses,
petitioner did not present his telephone bills or any other
documents evidencing that the expenses were incurred. Further,
he did not present any evidence to demonstrate the business
purpose of the expenses. Moreover, petitioner admitted at trial
that the estimate he used on his self-prepared list was
incorrect. At trial he said the monthly cost was “probably
around $25”. However, that, too, was only a guess. We do not
doubt that petitioner used his cellular telephone to assist in
his job hunt, but petitioner’s testimony alone is not sufficient
to meet the requirements of section 274(d).
With respect to petitioner’s automobile mileage deductions,
again petitioner failed to demonstrate the business purpose of
the automobile use or distinguish between his personal use vis-a-
- 14 -
vis business use of the automobile. Moreover, petitioner’s list
contained, by his own admission, numerous errors, and is not an
adequate record within the purview of section 274(d). Again, we
do not doubt that petitioner used his car in his job search, but
his testimony is not sufficient to meet the requirements of
section 274(d).
We therefore sustain respondent’s denial of petitioner’s
cellular telephone and automobile expense deductions.
IV. Addition to Tax Under Section 6651(a)(1)
Section 6651(a)(1) imposes an addition to tax for a
taxpayer’s failure to timely file an income tax return unless the
failure to file is due to reasonable cause and not willful
neglect. This addition to tax consists of adding to the amount
required to be shown as tax on the return 5 percent of the amount
of such tax for each complete or partial month in which the
failure to file continues, up to a maximum of 25 percent in the
aggregate. Id. Respondent has the burden of production pursuant
to section 7491(c). To satisfy that burden, respondent must
produce sufficient evidence demonstrating that it is appropriate
to impose the addition to tax. See Higbee v. Commissioner, 116
T.C. 438, 446 (2001). Once respondent has met his burden of
production, petitioner must come forward with evidence sufficient
to persuade the Court that respondent’s determination is
incorrect. Id. at 447.
- 15 -
Respondent has satisfied his burden of production. The
record clearly reflects that petitioner did not timely file his
2005 income tax return. And petitioner has not demonstrated that
his failure to timely file his 2005 income tax return was due to
reasonable cause and not due to willful neglect.5
At trial petitioner candidly admitted that he would not file
Federal income tax returns if he believed he was due a refund.
“If they owe me money, I don’t file.” Petitioner believed that
he was owed a refund in 2005; hence he did not file a tax return
for 2005. However, by 2008, petitioner’s wife convinced him to
file a tax return for 2005. As it happened, respondent, upon
reviewing the late-filed tax return, determined that petitioner
had a deficiency in tax, which according to petitioner,
“dumbfounded” him.
Petitioner has not demonstrated reasonable cause for the
delay in filing his 2005 Federal income tax return. He is
therefore liable for the section 6651(a)(1) addition to tax.
To reflect concessions, and to take into account the
additional $796.60 of medical expenses petitioner substantiated,
5
Reasonable cause requires a taxpayer to demonstrate that he
exercised ordinary business care and prudence but nonetheless was
unable to file a return within the prescribed time. United
States v. Boyle, 469 U.S. 241, 245-246 (1985); Bruner v.
Commissioner, T.C. Memo. 1998-246.
- 16 -
respondent must recompute both the tax deficiency and the
addition to tax for 2005.6
Decision will be entered
under Rule 155.
6
When petitioner submitted posttrial medical expense
documentation, he requested that his filing status for 2005 be
changed from married filing separately to married filing jointly.
While a taxpayer in general may change his filing status, this
change may not be made after the Commissioner has mailed a notice
of deficiency to either spouse and there has been a timely filing
of a petition in this Court with respect to the notice. Sec.
6013(b)(2)(B). Moreover, petitioner provided no evidence that
his wife intended to file jointly with him for 2005. See, e.g.,
Etesam v. Commissioner, T.C. Memo. 1998-73.