NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 11-3362
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DONALD T. ROBINSON;
MARLENE B. ROBINSON,
Appellants
v.
COMMISSIONER OF INTERNAL REVENUE SERVICE
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On Appeal from the United States Tax Court
(Tax Court Action No. 20544-08)
Tax Court Judge: Honorable Thomas B. Wells
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Submitted Pursuant to Third Circuit LAR 34.1(a)
July 2, 2012
Before: CHAGARES, VANASKIE and BARRY, Circuit Judges
(Opinion filed: July 12, 2012 )
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OPINION
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PER CURIAM
Donald T. Robinson and Marlene B. Robinson (“the Robinsons”), husband and
wife proceeding pro se, appeal a United States Tax Court decision sustaining the Internal
Revenue Service’s (“IRS”) determination of income tax deficiencies and penalties for the
years 2004 and 2005. For the following reasons, we will affirm.
I.
Because we write primarily for the parties, who are familiar with the facts, we will
not recite them except as necessary to the discussion. During 2004 and 2005, the years
relevant to this appeal, Donald Robinson was employed as a full-time professor at Rowan
University. He also taught classes at Temple University, which treated him as an
employee for tax purposes. 1 During those years, Marlene Robinson was employed as the
general manager for Influence Marketing, a wholly owned subsidiary of QVC, Inc. The
Robinsons filed their joint tax returns for 2004 and 2005 in April 2007 and June 2007,
respectively. On a Schedule C attached to their 2004 return, Donald claimed $1,795 in
income and $25,164 in expenses relating to his work for Temple. On a Schedule A, the
Robinsons claimed a miscellaneous deduction of $23,597, the largest portion of which
was allegedly from Marlene’s unreimbursed employee business expenses. They reported
similar expenses for 2005: on their Schedule C, Donald reported $4,045 of Temple
income, with $26,826 in expenses, and they claimed a miscellaneous deduction of
$24,030 on their Schedule A.
The IRS mailed the Robinsons letters in November 2007 and December 2007,
stating that it was examining their 2004 and 2005 tax returns. Thereafter, in June 2008,
1
From 1985 until 1996, Temple treated Donald Robinson as an independent
contractor. In 1996, Temple began treating him as an employee. Donald asked that
Temple continue to treat him as an independent contractor, but they declined.
Nevertheless, the Robinsons continued to report his Temple income as if he was an
independent contractor.
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the IRS issued the Robinsons a notice of deficiency for 2004 and 2005. The deficiency
stated that Donald was an employee, not an independent contractor, of Temple, and that
the Robinsons were not entitled to deduct their reported Schedule C or Schedule A
expenses. The Robinsons filed a timely petition for redetermination.
In May 2011, the Tax Court determined that the Robinsons bore the burden of
proof as to any claimed deduction, and that they had failed to meet that burden for their
claimed Schedule C expenses and Schedule A deductions. The Tax Court also upheld the
IRS’s determination that the Robinsons were liable for additions to tax under 26 U.S.C. §
6651(a)(1) and for accuracy-related penalties under § 6662(a). The Tax Court did,
however, disagree with the IRS that Donald was an employee of Temple, and concluded
that Donald was an independent contractor. After the Tax Court issued its decision in
August 2011, the Robinsons filed a timely notice of appeal.
II.
We have jurisdiction to review decisions of the Tax Court under 26 U.S.C. §
7482(a)(1). We review the Tax Court’s factual findings for clear error and exercise
plenary review over its conclusions of law. See PNC Bancorp, Inc. v. Comm’r, 212 F.3d
822, 827 (3d Cir. 2000).
III.
A. The Robinsons’ Claims on Appeal
Initially, the Robinsons claim that the IRS improperly denied them an extension of
time to prepare and produce documents for their audit. In the November and December
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2007 letters, the IRS requested substantiation of the expenses the Robinsons claimed as
deductions. During the course of the examination, the Robinsons never presented any
substantiating documentation. On April 25, 2008, the Robinsons’ tax representative
requested a thirty-day extension, which the IRS declined. The Robinsons argue that by
not allowing their representative the extension to prepare for the audit, the IRS essentially
denied them both an audit and representation. The Robinsons’ argument is unavailing.
They had over six months to produce the requested documents. Moreover, the Robinsons
admit that they weighed the costs of obtaining counsel to represent them in the Tax
Court, and decided to proceed pro se in the hope that the parties would settle the matter.
Their assertion that the IRS retaliated against them by refusing to settle is conclusory,
and, in any event, the IRS had no duty to settle with them.
The Robinsons also claim that the Tax Court should have shifted the burden of
proof to the IRS pursuant to 26 U.S.C. § 7491(a)(1). Under § 7491(a)(1), if a taxpayer
presents credible evidence with respect to any factual issue relevant to ascertaining the
liability of the taxpayer, and substantiates that evidence and cooperates with the IRS, the
burden of proof does shift to the IRS. The Robinsons assert that they produced
“voluminous” records, and that the IRS and Tax Court “cherry picked” examples that did
not appear to be business related. We agree with the Tax Court that such burden shifting
was unwarranted because, as discussed below, the Robinsons presented no credible
evidence to substantiate their claimed deductions and expenses.
B. The Tax Court Decision
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Taxpayers bear the burden of establishing that they are entitled to deductions they
claim. See INDOPCO, Inc. v. Comm’r, 503 U.S. 79, 84 (1992). The IRS requires
taxpayers to keep records to support deductions. See 26 U.S.C. § 6001. Section 162(a)
permits deductions for “ordinary and necessary expenses paid or incurred during the
taxable year in carrying on any trade or business.” Additionally, § 212 allows for
deductions of ordinary and necessary expenses incurred “(1) for the production or
collection of income; (2) for the management, conservation, or maintenance of property
held for the production of income; or (3) in connection with the determination, collection,
or refund of any tax.” Certain expenses carry a higher burden of substantiation, absent
which “no deduction . . . shall be allowed.” § 274 (disallowing deductions for travel,
meals, entertainment, and listed property absent adequate substantiation). Taxpayers may
not deduct personal, living, or family expenses. § 262(a).
The Robinsons do not challenge the Tax Court’s specific findings relating to their
claimed expenses with any specific argument or evidence. They merely state that they
produced “voluminous” records and that the Tax Court “cherry picked” from those
records.
1. Schedule C Deductions
Most of the Robinsons’ claimed expenses on their Schedule C for each year relate
to Donald’s use of his home office, e.g., for the business use of the home, office
expenses, repairs and maintenance, supplies, and utilities. Such deductions are permitted
only for the allocable portion of a residence that is used exclusively and on a regular basis
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as a taxpayer’s principal place of business. § 280A(a) and (c); Comm’r v. Soliman, 506
U.S. 168, 173 (1993). The business use must be more than occasional or incidental.
Jackson v. Comm’r, 76 T.C. 696, 700 (1981). The Tax Court considered the evidence
that Donald, a full-time employee of Rowan University, completed only minimal work
for Temple each year. The Tax Court properly concluded that Donald had failed to offer
evidence that proved regular use of the office to satisfy § 280A, and therefore correctly
sustained the disallowance of those expense deductions.
A portion of their claimed home expenses was for use of a cellular phone and
computer. Such expenses are subject to the strict substantiation requirements of § 274(d)
because they are “listed property” under that section and under § 280F(d)(4). The
Robinsons failed to present any evidence establishing the business use of these items, and
thus, the Tax Court properly concluded that the claimed expenses were unallowable.
Likewise, the Robinsons failed to substantiate the business use of Donald’s 2004
Chrysler Pacifica. See §§ 274(d) and 280F(d)(4) (listing passenger automobiles). The
Robinsons did not provide a travel log documenting business trips or any evidence
explaining how and why he traveled tens of thousands of miles for relatively few days of
teaching at Temple, nor did they explain how they allocated expenses including loan
payments and repairs to Donald’s business use. Accordingly, we find no error with the
Tax Court’s decision sustaining the disallowance of the Robinsons’ car and truck
expenses.
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Finally, the Tax Court did not err in sustaining the disallowance of the deductions
claimed for travel, meals, and entertainment, as the Robinsons provided no evidence to
support the business purpose of those expenses. The Tax Court also correctly sustained
the IRS on the matter of the Robinsons’ claimed “other expenses,” which allegedly
represented necessary publications that Donald used in his work for Temple. However,
they provided only canceled checks and credit card statements for the 2004 expenses,
with no details about specific purchases. For the 2005 expenses, the Robinsons provided
receipts. However, the receipts totaled less than the amount they claimed as a deduction,
most were clearly not related to Donald’s work with Temple, and Donald did not explain
or provide evidence of the business purposes of the remainder. 2
2. Schedule A Deductions
Employees can deduct unreimbursed business expenses using Schedule A only to
the extent such expenses exceed two percent of the individual’s adjusted gross income. §
67(a). For both years, the Robinsons claimed gasoline, oil, repairs, vehicle insurance,
and mileage for Marlene’s use of the couple’s Chrysler Sebring as unreimbursed business
expenses. However, as with Donald’s car, the Robinsons failed to provide any evidence
to substantiate the business purposes of the claimed expenses, as § 274(d) requires.
2
The Robinsons do argue that the Tax Court erred in considering one of his
purchases—a biography of Frank Lloyd Wright—personal in nature. However, we
cannot say that the Tax Court clearly erred, and in any event, such an error would be de
minimis in nature in light of the thousands of dollars in unsubstantiated deductions.
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Accordingly, the Tax Court properly found that they were not entitled to those
deductions.
From the little evidence provided, the Tax Court could not determine how the
Robinsons arrived at the remainder of the expenses they reported for Marlene. They did
not produce any records to document the purposes of their claimed expenses, and what
records and receipts they did provide were uncategorized and not tied to the amounts
reported on their Schedule A. Marlene testified that she and her family took trips and
visited museums and tourist sites for business purposes (“benchmarking”). The Tax
Court rejected her claim, as the evidence provided showed expenditures for family trips
to Disneyland and Disney World, hotel stays, retail items, and airfare for Marlene,
Donald, their daughter, and, in one case, for Marlene’s mother and Donald’s mother. The
Tax Court reasonably determined that the Robinsons failed to demonstrate that their
expenses were not primarily personal, and were ordinary and necessary for Marlene’s
employment. See § 162(a).
Finally, the Tax Court noted that the Robinsons had failed to offer any evidence
whatsoever to substantiate the Schedule A expenses claimed by Donald as unreimbursed
business expenses or for their tax preparation expenses. Accordingly, we find no error in
the Tax Court’s decision to sustain the IRS’s disallowance of those expenses.
3. Additional Penalties
We also conclude that the Tax Court properly sustained the additions to tax. An
addition to tax shall be added if a taxpayer fails to file a timely tax return without
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reasonable cause. § 6651(a)(1); see also Calloway v. Comm’r, 135 T.C. 26, 45 (2010).
The Robinsons do not dispute that they filed their returns late. They claim that their
delay was due to reasonable cause because they were waiting for the Tax Court to rule on
a prior dispute. However, as the Tax Court pointed out, the decision in the prior case was
entered in November 2004. The Robinsons’ 2004 and 2005 returns were due in April
2005 and April 2006, respectively. They did not file either until late 2007. Accordingly,
their argument is unpersuasive.
Likewise, the Tax Court properly sustained the accuracy-related penalties. Section
6662(a) imposes a twenty percent tax on the portion of an underpayment attributable to,
inter alia, a “substantial understatement of income tax.” § 6662(a) and (b). A substantial
understatement is an amount exceeding the greater of ten percent of the tax required to be
shown on the return or $5,000. § 6662(d)(1)(A). The amount by which the Robinsons
underestimated their tax liability exceeded both ten percent of the tax required and
$5,000.
Finally, the Robinsons’ argument that this Court should bar enforcement of the
deficiency as a matter of fairness is not persuasive.
IV.
For the foregoing reasons, we will affirm the Tax Court’s judgment.
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