                          T.C. Summary Opinion 2013-93


                         UNITED STATES TAX COURT



                    JOSE A. ALONSO, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 8828-12S.                          Filed November 21, 2013.



      Jose A. Alonso, pro se.

      Peter N. Scharff, for respondent.



                                SUMMARY OPINION


      DEAN, 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.

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.
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      Unless otherwise indicated, subsequent section references are to the Internal

Revenue Code in effect for the year in issue, and all Rule references are to the Tax

Court Rules of Practice and Procedure.

      Respondent issued petitioner a notice of deficiency for 2009 in which he

determined a Federal income tax deficiency of $5,802 and a section 6662(a)

accuracy-related penalty of $1,160.40. The issues for decision are whether

petitioner: (1) is entitled to unreimbursed employee business expense deductions

claimed on Schedule A, Itemized Deductions; (2) is entitled to charitable

contribution deductions; (3) is entitled to medical and dental expense deductions;

and (4) is liable for a section 6662(a) accuracy-related penalty.

                                    Background

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

facts and the attached exhibits are incorporated herein by reference. Petitioner

resided in New York when he filed his petition.

      Petitioner was a program administrator for the Department of Social

Services for the County of Westchester, New York (county) in 2009. As a

program administrator, petitioner managed an electronic system that tracked over

8,000 cases of in-home pediatric and geriatric care patients. Petitioner managed

this system at the county’s office in New York during regular business hours. As
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a county employee, petitioner received both medical and dental benefits.

Although the county did not require petitioner to work from home, he used the

third floor of his home as office space, where he held meetings and performed

work-related activities.

      Petitioner commuted to work daily with his personal vehicle and also used

his vehicle to attend work-related meetings, including travel to Cincinnati, Ohio.

Although these meetings pertained to his position with the county, the county did

not require petitioner to attend any of these meetings.

      In 2009 petitioner engaged in fundraising activities for numerous charitable

organizations, including Heart Walk for Westchester County and the American

Cancer Society. He often solicited donations from friends, family members,

colleagues, and vendors. Some of these individuals made their donations online,

while others gave money directly to petitioner to donate on their behalf.

      Petitioner deposited the cash donations he received from others into his

checking account and then wrote a check to the organization. When he calculated

the amount of his charitable contributions for Federal income tax purposes,

petitioner included all the amounts paid from his checking account to fundraising

organizations. Petitioner did not produce any copies of the checks he wrote to

fundraising organizations during the year at issue.
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      Petitioner timely filed his 2009 Federal income tax return, claiming

deductions on Schedule A for medical and dental expenses of $7,934, charitable

contributions of $8,688, and unreimbursed employee business expenses of

$9,606.1

      Petitioner attached Form 2106-EZ, Unreimbursed Employee Business

Expenses, to his Federal income tax return. On Form 2106-EZ petitioner claimed

unreimbursed employee business expense deductions consisting of: (1) vehicle

expenses of $2,919, (2) parking fees, tolls, and transportation expenses of $575,

(3) travel expenses of $1,385, and (4) other business expenses of $5,648. Other

claimed employee business expense deductions included home office expenses of

$3,692, supply expenses of $196, cell phone expenses of $694, telephone

expenses of $352, and Internet expenses of $714. On Schedule A petitioner

claimed a deduction of $691 for union and professional dues.

      Respondent issued petitioner a notice of deficiency disallowing all of the

claimed medical and dental expense deductions, charitable contribution

deductions, and unreimbursed employee business expense deductions for 2009.




      1
       The amount deducted is $9,606 after the sec. 67(a) reduction of
miscellaneous itemized expense deductions by 2% of adjusted gross income.
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Respondent also determined that petitioner was liable for a section 6662(a)

accuracy-related penalty of $1,160.40.

                                     Discussion

      Generally, the Commissioner’s determinations are presumed correct, and the

taxpayer bears the burden of proving that those determinations are erroneous.

Rule 142(a); see INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); Welch

v. Helvering, 290 U.S. 111, 115 (1933). In some cases the burden of proof with

respect to relevant factual issues may shift to the Commissioner under section

7491(a). Petitioner did not argue or present evidence showing that he satisfied the

requirements of section 7491(a). See sec. 7491(a)(2)(B).

I. Schedule A Deductions

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

bears the burden of proving that he or she is entitled to any claimed deduction or

credit. Rule 142(a); Deputy v. du Pont, 308 U.S. 488, 493 (1940); New Colonial

Ice Co. v. Helvering, 292 U.S. 435, 440 (1934); Segel v. Commissioner, 89 T.C.

816, 842 (1987) (credits, like deductions, are a matter of legislative grace). A

taxpayer must substantiate all expenses by maintaining books and records

sufficient to establish the amounts of his income and deductions. Sec. 6001;
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Hradesky v. Commissioner, 65 T.C. 87, 89 (1975), aff’d per curiam, 540 F.2d 821

(5th Cir. 1976); sec. 1.6001-1(a), (e), Income Tax Regs.

      As a general matter, petitioner asserts that the records substantiating all the

deductions at issue were destroyed during Hurricane Sandy. Respondent,

however, requested petitioner’s documentation months before the occurrence of

Hurricane Sandy. Between the time respondent initiated an examination for

petitioner’s 2009 tax year and the occurrence of Hurricane Sandy, petitioner failed

to provide any documents substantiating his claimed deductions. When respondent

requested documents during the examination, petitioner’s response consisted

largely of faxes of blank pages. In addition, petitioner did not attempt to

reconstruct his records following Hurricane Sandy and did not provide any

corroborating evidence to establish the elements of his expenses. The Court

specifically addresses each claimed Schedule A deduction below.

      A. Unreimbursed Employee Business Expenses

      Section 162 allows a taxpayer to deduct all ordinary and necessary expenses

paid or incurred by the taxpayer in carrying on a trade or business. The

performance of services as an employee is considered a trade or business. Primuth

v. Commissioner, 54 T.C. 374, 377 (1970). Thus, an employee may deduct

expenses that are ordinary and necessary to his or her employment. Lucas v.
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Commissioner, 79 T.C. 1, 6 (1982). In order to deduct unreimbursed employee

business expenses, a taxpayer must not have received reimbursement and must not

have had the right to obtain reimbursement from his employer. See Orvis v.

Commissioner, 788 F.2d 1406 (9th Cir. 1986), aff’g T.C. Memo. 1984-533.

      Generally, if a taxpayer establishes that he or she paid or incurred a

deductible business expense but does not establish the amount of the deduction,

the Court may estimate 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). In order for the Court to

estimate the amount of an expense, there must be some basis upon which an

estimate may be made. Vanicek v. Commissioner, 85 T.C. 731, 742-743 (1985).

Without such a basis, an allowance would amount to unguided largesse. Williams

v. United States, 245 F.2d 559, 560 (5th Cir. 1957).

             1. Parking Fees, Tolls, and Transportation

      Petitioner offered no testimony or documentation to substantiate his claimed

deductions for parking fees, tolls, and transportation expenses. Respondent’s

determination on this issue is sustained.
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             2. Expenses Subject to Strict Substantiation Requirements

      Business expenses with respect to any listed property may not be estimated

under the Cohan rule 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), aff’d per curiam, 412 F.2d 201 (2d Cir. 1969). Listed property includes

any passenger automobile and cellular telephone. Sec. 280F(d)(4)(A). For these

expenses, only certain types of “other sufficient evidence” will suffice. Sec.

1.274-5T(c)(3), Temporary Income Tax Regs., 50 Fed. Reg. 46020 (Nov. 6, 1985).

Petitioner did not provide any such evidence to substantiate his claimed

deductions for automobile and cell phone expenses. Since he has not met the strict

substantiation requirements of section 274, petitioner is not entitled to any claimed

deductions for travel and transportation expenses and cell phone expenses with

respect to listed property.

             3. Other Unreimbursed Employee Business Expenses

      Other claimed employee business expense deductions which are not subject

to the strict substantiation requirements under section 274 may be estimated under

the Cohan rule; however, there must be a reasonable basis for the Court to make

an estimate. See Vanicek v. Commissioner, 85 T.C. at 742-743. Petitioner did not

provide any documentation to substantiate his claimed unreimbursed employee
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business expense deductions for union and professional dues, supplies, Internet,

and telephone2 expenses. See Tokarski v. Commissioner, 87 T.C. 74, 77 (1986).

      Finally, petitioner has not shown that he was ineligible for reimbursement

from the county for any of his employee business expenses. He did not present

any evidence regarding the County’s reimbursement policy, nor did he claim that

the County lacked a reimbursement policy. Accordingly, petitioner is not entitled

to any employee business expense deductions. The Court sustains respondent’s

determination on this issue.

             4. Home Office Expenses

      As a general rule, section 280A(a) denies deductions with respect to the use

of a dwelling unit that the taxpayer uses as a residence during the taxable year.

Section 280A(c)(1)(A), however, permits the deduction of expenses allocable to a

portion of a dwelling unit that the taxpayer uses exclusively and regularly as the

principal place of business for the taxpayer’s trade or business. Petitioner alleged

that he held work-related meetings in his home. In the case of an employee, the

exception applies only if the use of the home office is for the convenience of the

employer and if there is no other fixed location of the trade or business where the



      2
       Under sec. 262(b), basic service on the first telephone line in a taxpayer’s
residence is considered a nondeductible personal expense.
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taxpayer conducts substantial administrative or management activities of the trade

or business. See sec. 280A(c)(1)(C). Petitioner did not show that the

requirements of section 280A(c)(1)(C) had been met.

      The County provided office space for petitioner, which he used regularly

during normal business hours. Given that petitioner’s employer provided him

office space and did not require him to work from home, petitioner may not deduct

any portion of his home office expenses.

      The Court finds that petitioner has not substantiated any of the above

claimed unreimbursed employee business expenses. Accordingly, the Court

sustains respondent’s determination.

      B. Charitable Contributions

      Section 170(a) allows a deduction for any charitable contribution made by a

taxpayer during the taxable year. A charitable contribution is defined as a

“contribution or gift to or for the use of” a charitable organization. Sec. 170(c).

Certain charitable contributions may be verified by maintaining a canceled check.

Sec. 1.170A-13(a)(1), Income Tax Regs. Charitable contributions of more than

$250 must be verified by a written acknowledgment of the contribution by the

donee organization. Sec. 170(f)(8)(A).
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       At trial petitioner claimed that he did not make donations on behalf of

others; however, he admitted to commingling solicited donations with his personal

donations. Petitioner deposited the solicited donations into his personal checking

account and then drafted checks from that account to various fundraising

organizations. At trial, in an effort to substantiate his charitable contributions,

petitioner produced a copy of a computer screen printout of donations to the

American Cancer Society, some of which were associated with his name. The

printout indicates that petitioner made six separate donations to the American

Cancer Society on the same day, September 2, 2009, for $200, $563, $320, $20,

$55, and $255. The printout also indicates that petitioner again made five separate

donations to the American Cancer Society on the same day, October 16, 2009, for

$10, $20, $1,710, $255, and $150. When questioned by the Court as to why he

made multiple contributions to the same organization in one day, petitioner

explained that he made the multiple contributions “because [he] felt [he could]

afford it.”

       Petitioner failed to provide any canceled checks or written

acknowledgments from a donee organization verifying his charitable

contributions. While the Court agrees that petitioner may have participated in

fundraising activities and may have made personal donations, the Court is unable
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to conclude that the claimed charitable contributions were petitioner’s personal

donations alone.

      Petitioner has not substantiated his charitable contributions; therefore, the

Court sustains respondent’s determination.

      C. Medical and Dental Expenses

      Under section 213, individuals are allowed to deduct medical and dental

expenses paid during the taxable year that are not compensated for by insurance or

otherwise, but only to the extent the expenses exceed 7.5% of adjusted gross

income.

      A taxpayer must substantiate claims for deductible medical expenses by

furnishing the name and address of each payee and the amount and date paid. Sec.

1.213-1(h), Income Tax Regs. Claims must be substantiated by a statement or

invoice from the payee that identifies the patient, type of service rendered, specific

purpose of the expense, and the amount and date of payment. Id. Petitioner failed

to provide documentation to show that he made any payments for medical and

dental expenses in 2009; accordingly, respondent’s determination is sustained.

II. Section 6662(a) Accuracy-Related Penalty

      Section 6662(a) and (b)(1) and (2) authorizes the Commissioner to impose a

penalty equal to 20% of the portion of an underpayment of tax that is attributable
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to negligence or disregard of rules or regulations or any substantial understatement

of income tax. The Commissioner bears the initial burden of production with

respect to the taxpayer’s liability for the section 6662(a) penalty. Sec. 7491(c). At

trial the Commissioner must introduce sufficient evidence “indicating that it is

appropriate to impose the relevant penalty.” Higbee v. Commissioner, 116 T.C.

438, 446 (2001).

      If the Commissioner satisfies his initial burden of production, the burden of

producing evidence to refute the Commissioner’s evidence shifts to the taxpayer

and the taxpayer must prove that the penalty does not apply. Id. at 447.

      Respondent determined that petitioner was liable for a section 6662(a)

accuracy-related penalty of $1,160.40 due to negligence or disregard of rules or

regulations and/or to a substantial understatement of income tax. We address only

respondent’s claim that petitioner’s underpayment for 2009 was attributable to a

substantial understatement of income tax under section 6662(b)(2). The Court

does so because a finding that there was a substantial understatement of income

tax alone would be determinative that petitioner is liable for the section 6662(a)

accuracy-related penalty. See sec. 1.6662-2(c), Income Tax Regs.

      For purposes of section 6662(b)(2), an understatement is equal to the excess

of the amount of tax required to be shown on the tax return over the amount of tax
                                        -14-

shown. Sec. 6662(d)(2)(A). The difference is considered “substantial” in the case

of an individual if the amount of the understatement for the taxable year exceeds

the greater of 10% of the tax required to be shown in the return for that taxable

year or $5,000. Sec. 6662(d)(1)(A).

      Petitioner’s 2009 return reported tax of $8,541. Respondent determined,

and the Court agrees, that the tax required to be shown on the return was $14,343.

Thus, the understatement of tax is $5,802. Ten percent of the tax required to be

shown is $1,434.30. The $5,802 understatement exceeds $5,000, which is greater

than 10% of the tax required to be shown on the return. Respondent has therefore

met his burden of production for the accuracy-related penalty on the basis of a

substantial understatement of income tax.

      A taxpayer may avoid the application of an accuracy-related penalty by

proving he acted with reasonable cause and in good faith. See sec. 6664(c)(1); see

also Higbee v. Commissioner, 116 T.C. at 446-447; sec. 1.6664-4(a), Income Tax

Regs. We analyze whether a taxpayer acted with reasonable cause and in good

faith by examining the relevant facts and circumstances and, most importantly, the

extent to which the taxpayer attempted to determine his proper tax liability. See

Neely v. Commissioner, 85 T.C. 934 (1985); Stubblefield v. Commissioner, T.C.

Memo. 1996-537; sec. 1.6664-4(b)(1), Income Tax Regs. In order for the
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reasonable cause exception to apply, the taxpayer must prove that he exercised

ordinary business care and prudence as to the disputed items. Neonatology

Assocs., P.A. v. Commissioner, 115 T.C. 43, 98 (2000), aff’d, 299 F.3d 221 (3d

Cir. 2002).

      Petitioner did not contest the application of the accuracy-related penalty.

The Court finds that petitioner is liable for the accuracy-related penalty.

      We have considered all of petitioner’s arguments, and, to the extent not

addressed herein, we conclude that they are moot, irrelevant, or without merit.

      To reflect the foregoing,


                                                      Decision will be entered

                                                for respondent.
