                            T.C. Summary Opinion 2013-49



                           UNITED STATES TAX COURT



    RONALD EUGENE THOMPSON, SR., AND GENINE Z. THOMPSON,
    Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 8893-12S.                           Filed June 18, 2013.



      Ronald Eugene Thompson, Sr., and Genine Z. Thompson, pro sese.

      Susan K. Bollman, for respondent.



                                SUMMARY OPINION


      GUY, 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


      1
          Section references are to the Internal Revenue Code (Code), as amended,
                                                                        (continued...)
                                         -2-

any other court, and this opinion shall not be treated as precedent for any other

case.

        Respondent determined a deficiency of $4,172 in petitioners’ Federal

income tax for 2009. Petitioners filed a timely petition for redetermination with

the Court pursuant to section 6213(a). At the time the petition was filed,

petitioners resided in Illinois.

        After concessions,2 the issues remaining in dispute are whether petitioners

are entitled to deductions for charitable contributions, unreimbursed employee

business expenses, and business use of their home. To the extent not discussed

herein, other issues are computational and flow from our decision in this case.

                                     Background

        Some of the facts have been stipulated and are so found. The stipulation of

facts and the accompanying exhibits are incorporated herein by this reference.



        1
      (...continued)
and Rule references are to the Tax Court Rules of Practice and Procedure. All
monetary amounts are rounded to the nearest dollar.
        2
        The parties stipulated that petitioners substantiated medical and dental
expenses of $1,033. Because that amount is less than 7.5% of petitioners’
adjusted gross income of $106,474 for 2009, it follows that petitioners may not
claim a deduction on Schedule A, Itemized Deductions, for these expenses. See
sec. 213(a). Petitioners concede that they are not entitled to a deduction of $606
for an item identified only as “comp” on line 21 of Schedule A.
                                        -3-

      During 2009 Mr. Thompson was employed by Casino One Corp. and by the

Village of Alorton as a “code enforcement” officer. Mrs. Thompson was

employed as a civil servant in the Federal court system.

I. Petitioners’ 2009 Tax Return

      A. Income

      Petitioners timely filed a joint Federal income tax return for 2009, reporting

total wages of $77,491,3 a distribution from a retirement account of $31,892,

interest income of $36, and other income of $625.

      B. Itemized Deductions

      Petitioners claimed itemized deductions on Schedule A totaling $34,402,

including $12,075 for charitable contributions and $9,475 for unreimbursed

employee business expenses.

            1. Charitable Contributions

      After petitioners’ 2009 return was selected for examination, Mr. Thompson

forwarded to the Internal Revenue Service (IRS) two letters from Friendship

Missionary Baptist Church (Friendship Church) in an effort to substantiate the

deduction they claimed for charitable contributions. Although the letters were

      3
       Casino One Corp. and the Village of Alorton paid Mr. Thompson wages of
$20,107 and $5,899, respectively, and Mrs. Thompson received wages of $51,484
from the Federal Government.
                                        -4-

titled “2009 church contribution statement”, they stated that Mr. and Mrs.

Thompson contributed $5,935 and $6,140, respectively, to Friendship Church

during 2008.

      Petitioners testified at trial that they were members of the Centerville

Church of Christ (Centerville Church) during 2009, and they never attended or

made contributions to Friendship Church. Mr. Thompson explained that his tax

return preparer mistakenly placed the Friendship Church letters in petitioners’ tax

file and “sent the wrong forms” to him to submit to the IRS.

      Petitioners subsequently provided the IRS with two letters from Centerville

Church, dated September 27, 2012. The letters state that Mr. and Mrs. Thompson

contributed $6,140 and $5,936, respectively, to Centerville Church during 2009.

Petitioners testified that they made weekly contributions to Centerville Church by

cash and/or check. The letters from Centerville Church did not include a schedule

listing the dates or amounts of petitioners’ weekly contributions.

             2. Unreimbursed Employee Business Expenses

      Petitioners claimed a deduction for unreimbursed employee business

expenses related to Mr. Thompson’s employment with the Village of Alorton,

including vehicle expenses, the cost of a new computer, and uniform expenses.
                                         -5-

                    a. Vehicle Expenses

      It was the Village of Alorton’s policy not to reimburse employees for

transportation or vehicle expenses. On Form 2106-EZ, Unreimbursed Employee

Business Expenses, Mr. Thompson reported that he drove 13,520 miles in the

course of conducting inspections for the Village of Alorton during 2009.

Applying the standard mileage rate of 55 cents per mile, he reported total

transportation expenses of $7,436.4

                    b. Computer Expense and Business Use of Home5

      The Village of Alorton did not provide Mr. Thompson with an office or a

computer. Mr. Thompson testified that, after conducting inspections, he used a

personal computer in his home to prepare written reports to submit to the Village

of Alorton. Petitioners purchased a new computer in 2009 and claimed a

deduction of $1,010 for the full purchase price. Mr. Thompson testified that both




      4
       The Commissioner generally updates the optional standard mileage rates
annually. See sec. 1.274-5(j)(2), Income Tax Regs. The standard mileage rate of
55 cents per mile for 2009 is set forth in Rev. Proc. 2008-72, sec. 2.01, 2008-50
I.R.B. 1286.
      5
        Petitioners first claimed that they were entitled to a deduction for the
business use of their home shortly before trial. Respondent did not object to
petitioners’ testimony related to that issue at trial, and we therefore deem the
matter to have been tried by consent pursuant to Rule 41(b).
                                        -6-

the computer and the room in his home where he prepared reports were used for

both business and personal purposes.

                   c. Uniform Expense

      Petitioners claimed a deduction of $423 for uniforms. The Village of

Alorton required Mr. Thompson to wear a dress shirt and tie when performing

inspections. The shirts and ties that Mr. Thompson purchased for work did not

include a company logo, nor were they limited to a particular style or color.

II. Notice of Deficiency

      Respondent disallowed the deductions for charitable contributions and

unreimbursed employee business expenses described above and determined

petitioners’ tax liability for 2009 by allowing a standard deduction of $11,400

using married filing jointly status and an additional deduction of $3,595 for

qualified motor vehicle tax.6




      6
        The American Recovery and Reinvestment Act of 2009 (ARRA), Pub. L.
No. 111-5, sec. 1008(a) and (b), 123 Stat. at 317-318, amended sec. 164(a) and (b)
to include qualified motor vehicle taxes (a term defined in sec. 164(b)(6)) among
the various taxes allowed as a deduction. The provisions are effective for
qualifying vehicles purchased on or after February 17, 2009, and before January 1,
2010. Sec. 164(b)(6)(G); ARRA sec. 1008(a) and (b).
                                        -7-

                                     Discussion

      As a general rule, the Commissioner’s determination of a taxpayer’s liability

in a notice of deficiency is presumed correct, and the taxpayer bears the burden of

proving that the determination is incorrect. Rule 142(a); Welch v. Helvering, 290

U.S. 111, 115 (1933).

      As discussed in detail below, petitioners did not comply with the Code’s

substantiation requirements and have not maintained all required records.

Therefore, the burden of proof as to any relevant factual issue does not shift to

respondent under section 7491(a). See sec. 7491(a)(1) and (2); Higbee v.

Commissioner, 116 T.C. 438, 442-443 (2001).

      Deductions are a matter of legislative grace, and the taxpayer generally

bears the burden of proving entitlement to any deduction 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). A taxpayer must 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, 89-90 (1975), aff’d per curiam, 540 F.2d 821 (5th Cir.

1976); Meneguzzo v. Commissioner, 43 T.C. 824, 831-832 (1965). A taxpayer

claiming a deduction on a Federal income tax return must demonstrate that the
                                        -8-

deduction is allowable pursuant to a statutory provision and must further

substantiate that the expense to which the deduction relates has been paid or

incurred. Sec. 6001; Hradesky v. Commissioner, 65 T.C. at 89-90.

I. Charitable Contributions

      Section 170(a)(1) provides the general rule that a taxpayer is allowed as a

deduction any charitable contribution made within the taxable year and verified

under regulations prescribed by the Secretary. Sec. 1.170A-13(a)(1), Income Tax

Regs. Section 170(f)(17) provides that no deduction shall be allowed for any

contribution in the form of cash, a check, or other monetary gift unless the donor

maintains as a record of such contribution a bank record or a written

communication from the donee showing the name of the donee organization, the

date of the contribution, and the amount of the contribution. See sec. 1.170A-

13(a)(1), Income Tax Regs. The taxpayer has the burden of demonstrating that

records relating to charitable contributions are reliable. Sec. 1.170A-13(a)(2)(i),

Income Tax Regs.

      Petitioners claimed a deduction of $12,075 for charitable contributions

which they purportedly made to Centerville Church through weekly contributions

during 2009. However, petitioners were unable to produce bank records (such as

canceled checks) or documentation from Centerville Church showing the specific
                                          -9-

dates and amounts of individual contributions. Taking into account all the facts

and circumstances, we do not find the two letters from Centerville Church to be

reliable. The Centerville Church letters are dated September 27, 2012, more than

two years after petitioners filed their 2009 tax return, they first surfaced after

petitioners’ tax return preparer provided petitioners with the admittedly erroneous

letters from Friendship Church, and they do not include any detail that would

substantiate petitioners’ claim that they made weekly contributions to the church.

Without more, we hold that petitioners have failed to substantiate the disputed

charitable contributions and respondent’s determination disallowing the deduction

is sustained.

II. Unreimbursed Employee Business Expenses

      Under section 162(a), a deduction is allowed for ordinary and necessary

expenses paid or incurred during the taxable year in carrying on any trade or

business. The determination of whether an expenditure satisfies the requirements

for deductibility under section 162 is a question of fact. See Commissioner v.

Heininger, 320 U.S. 467, 475 (1943). The term “trade or business” includes

performing services as an employee. Primuth v. Commissioner, 54 T.C. 374, 377-

378 (1970). A deduction normally is not available, however, for personal, living,

or family expenses. Sec. 262(a).
                                        - 10 -

      Section 274(d) prescribes more stringent substantiation requirements before

a taxpayer may deduct certain categories of expenses, including expenses related

to the use of listed property as defined in section 280F(d)(4). See Sanford v.

Commissioner, 50 T.C. 823, 827 (1968), aff’d, 412 F.2d 201 (2d Cir. 1969). As

relevant here, the term “listed property” includes, inter alia, passenger automobiles

and computers and peripheral equipment. Sec. 280F(d)(4)(A)(i), (iv). To satisfy

the requirements of section 274(d), a taxpayer generally must maintain records and

documentary evidence which, in combination, are sufficient to establish the

amount, date, and business purpose for an expenditure or business use of listed

property. Sec. 1.274-5T(b)(6), Temporary Income Tax Regs., 50 Fed. Reg. 46016

(Nov. 6, 1985).

      A. Vehicle Expenses

      Mr. Thompson reported that he drove 13,520 miles for business purposes

during 2009. However, he failed to keep a contemporaneous mileage log, record

the dates, times, destinations, and business purposes for individual trips, or

provide any other substantiation in support of the deduction claimed for vehicle

expenses. On the record presented, petitioners failed to meet the strict

substantiation requirements of section 274(d). See sec. 1.274-5(j)(2), Income Tax

Regs. (providing that the strict substantiation requirements of section 274(d) for
                                        - 11 -

vehicle expenses must be met even where the standard mileage rate is used).

Consequently, respondent’s determination disallowing the deduction for vehicle

expenses petitioners reported on Schedule A is sustained.

      B. Computer Expense and Business Use of Home

      Petitioners assert that they are entitled to a deduction for the business use of

their home and the cost of a computer used in connection with Mr. Thompson’s

work for the Village of Alorton.

      A taxpayer generally is not entitled to deduct any expenses related to a

dwelling unit used as a residence during the taxable year. Sec. 280A(a). Expenses

attributable to a home office are excepted from this general rule, however, if the

expenses are allocable to a portion of the dwelling unit which is exclusively used

on a regular basis as the principal place of business for the taxpayer’s trade or

business. Sec. 280A(c)(1); Lofstrom v. Commissioner, 125 T.C. 271, 277-278

(2005). If the taxpayer is an employee, the exception under section 280A(c)(1)

will apply only if the exclusive use of the office space is for the convenience of the

taxpayer’s employer. Sec. 280A(c)(1); Hamacher v. Commissioner, 94 T.C. 348,

353-354 (1990).

      Mr. Thompson testified that he used a room in his home to prepare reports

in connection with his work for the Village of Alorton. He also testified, however,
                                        - 12 -

that he used the room for personal purposes as well. Because petitioners did not

use the room exclusively for a business purpose, it follows that they are not

entitled to a deduction for business use of their home.

      Personal computers fall within the definition of listed property and are

subject to the strict substantiation requirements of section 274(d). Sec.

280F(d)(4)(A)(iv). Mr. Thompson testified that he used a newly purchased

computer to prepare reports for the Village of Alorton and for personal purposes.

He did not maintain a log or other record, however, detailing the amount of time

he used the computer for business as opposed to personal purposes. In short, the

evidence petitioners introduced on this issue does not satisfy the strict

substantiation requirements of section 274(d). See Riley v. Commissioner, T.C.

Memo. 2007-153. As a result, respondent’s determination disallowing the

deduction petitioners claimed for the cost of the computer is sustained.

      C. Uniforms

      Petitioners claimed a deduction of $423 for clothing that Mr. Thompson

wore to work. The cost of clothes that are “required or essential in an employment

and which are not suitable for general or personal wear and are not so worn” is a

deductible expense. Yeomans v. Commissioner, 30 T.C. 757, 767-769 (1958); see
                                       - 13 -

Wasik v. Commissioner, T.C. Memo. 2007-148; Beckey v. Commissioner, T.C.

Memo. 1994-514.

      Mr. Thompson was required to wear a shirt and tie while conducting

inspections for the Village of Alorton. He was not required to wear a uniform to

work, and the clothes that he wore were adaptable to general use. Therefore, we

sustain respondent’s determination disallowing the deduction petitioners claimed

for uniform expenses.

      In sum, petitioners failed to substantiate the deductions they claimed for

charitable contributions, unreimbursed employee business expenses, and business

use of their home.

      To reflect the foregoing,


                                                Decision will be entered

                                      under Rule 155.
