                  T.C. Summary Opinion 2009-190



                      UNITED STATES TAX COURT



                 JUSTIN M. ROHRS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 14109-08S.               Filed December 10, 2009.



     Justin M. Rohrs, pro se.

     Michael A. Skeen and Sarah Sexton (specially recognized),

for respondent.



     GERBER, 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 any other court, and




     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue.
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this opinion shall not be treated as precedent for any other

case.

       For petitioner’s 2005 tax year respondent determined a

$6,230 income tax deficiency and a $1,246 accuracy-related

penalty under section 6662(a).    The issues for our consideration

are:    (1) Whether petitioner is entitled to a casualty loss

deduction for 2005; and (2) whether petitioner is liable for the

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 this reference.    Petitioner resided in

California when his petition was filed.

       On August 12, 2005, petitioner purchased a 2006 Ford F-350

pickup truck for $40,210.65.    On October 28, 2005, petitioner

attended a gathering at a friend’s house.    Anticipating that he

would be drinking alcohol, he arranged for transportation to and

from his home.    After returning home petitioner decided to drive

to his parents’ house.    On the way there he failed to

successfully negotiate a turn, and his truck slid off an

embankment.    The truck rolled over and was severely damaged.

Because his blood-alcohol level was 0.09 percent, he was cited

and arrested for driving under the influence of alcohol (DUI).
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The legal threshold for blood-alcohol level in the State of

California is 0.08 percent.    He was then taken to the hospital.

     Petitioner’s loss claim filed with his automobile insurance

carrier was denied in accordance with the terms of his policy

because of his DUI citation and arrest.

     On April 13, 2006, petitioner filed his 2005 Form 1040, U.S.

Individual Income Tax Return.    On that return he claimed a

$33,629 casualty loss deduction for the damage to his truck.       On

March 25, 2008, respondent issued a notice of deficiency

disallowing petitioner’s casualty loss deduction and determining

a $6,230 income tax deficiency and a $1,246 section 6662(a)

accuracy-related penalty for petitioner’s 2005 tax year.       On June

9, 2008, petitioner filed a timely petition with this Court.

                              Discussion

     Section 165(a) allows a deduction for losses not compensated

for by insurance or otherwise.    If a loss is not incurred in

connection with a trade or business or in a transaction entered

into for profit, it may be deducted by an individual if it arises

from a fire, storm, shipwreck, or other casualty, or from theft,

except as provided in section 165(h).      Sec. 165(c)(3).   There is

no question about whether petitioner’s loss generally qualified

as a casualty loss under section 165.

     Although negligence may not be a bar to a casualty loss

deduction, courts have held that gross negligence may be.       Heyn
                                 -4-

v. Commissioner, 46 T.C. 302, 308 (1966).    In addition, section

1.165-7(a)(3), Income Tax Regs., provides that an automobile may

be the subject of a casualty loss when the damage is not due to

the willful act or willful negligence of a taxpayer.

     Petitioner concedes that his act of driving while

intoxicated constitutes negligence.    Petitioner, however,

disagrees with respondent’s contention that his behavior rose to

the level of gross or willful negligence, thereby barring a

casualty loss deduction.

     Neither the Internal Revenue Code nor the underlying

regulations define “willful negligence” for purposes of

section 1.165-7(a)(3), Income Tax Regs.   Respondent argues that

the definitions of “willful negligence” and “gross negligence”

are supplied by caselaw.    Respondent relies upon People v.

Bennett, 819 P.2d 849 (Cal. 1991), in support of his position.

     In People v. Bennett, supra, a driver was convicted of

vehicular manslaughter and gross negligence while driving under

the influence of alcohol.   Before driving, Mr. Bennett and three

friends shared the entire contents of a keg of beer.     He was then

involved in a single-car accident in which one of his friends

died.   Mr. Bennett’s blood-alcohol level was measured at 0.20

percent 2 hours after the accident.    In affirming his conviction,

the California Supreme Court defined gross negligence as “the

exercise of so slight a degree of care as to raise a presumption
                                 -5-

of conscious indifference to the consequences.”    Id. at 852.   The

court further explained that “The state of mind of a person who

acts with conscious indifferences to the consequences is simply,

‘I don't care what happens’.”    Id. (quoting People v. Olivas, 218

Cal. Rptr. 567, 569 (Ct. App. 1985)).    The court held that

conscious indifference could be inferred from the severity of

defendant’s intoxication:

     “one who drives with a very high level of intoxication
     is indeed more negligent, more dangerous, and thus more
     culpable than one who drives near the legal limit of
     intoxication, just as one who exceeds the speed limit
     by 50 miles per hour exhibits greater negligence than
     one who exceeds the speed limit by 5 miles per hour.”

Id. at 853 (quoting People v. Von Staden, 241 Cal. Rptr. 523, 527

(Ct. App. 1987)).

     We agree with petitioner that his actions did not amount to

willful or gross negligence.    While petitioner’s decision to

drive after drinking was negligent, that alone does not

automatically rise to the level of gross negligence.    “‘[G]ross

negligence cannot be shown by the mere fact of driving under the

influence and violating the traffic laws.’”    Id. at 852 (emphasis

added) (quoting People v. Von Staden, supra at 527).    The overall

circumstances of the defendant’s actions, including the level of

intoxication and/or the manner in which he drove must be

considered.   Id. at 853.

     The circumstances do not support a holding that petitioner

was willfully or grossly negligent.    Petitioner’s level of
                                 -6-

intoxication and the manner in which he drove do not suggest that

he was consciously indifferent to the hazards of drunk driving.

Unlike the defendant in People v. Bennett, supra, petitioner was

less impaired and not severely intoxicated when he chose to

drive.   At the time of the accident petitioner’s blood-alcohol

level was 0.09 percent, which is slightly over California’s legal

limit of 0.08 percent.   See Cal. Veh. Code sec. 23152 (West

2000).   Further and significantly distinguishing petitioner’s

situation from that in People v. Bennett, supra, petitioner made

arrangements not to drive immediately after consuming alcohol.

He arranged for transportation home and thus allowed some time

for his body to process the alcohol before driving.   If

petitioner truly did not care what happened, he would not have

gone to the trouble to arrange for transportation.

     Likewise, there is no evidence in the record that petitioner

was aware his actions would result in injury.   In addition, there

was no evidence that excess speed or alcohol directly caused

petitioner’s accident.   On brief, petitioner claimed he lost

control of his vehicle because of the windy conditions on the

road, and no evidence was presented at trial as to what the

precise cause of petitioner’s accident was.

     In the alternative, respondent contends that petitioner’s

casualty loss deduction should not be allowed because to do so

would frustrate public policy.
                                -7-

     Courts have disallowed deductions where national or State

public policy would be frustrated by the allowance of a

deduction.   Commissioner v. Heininger, 320 U.S. 467, 473 (1943).

However, this rule is not applied indiscriminately.    Tank Truck

Rentals, Inc. v. Commissioner, 356 U.S. 30, 35 (1958).    “[T]he

test of nondeductibility always is the severity and immediacy of

the frustration resulting from allowance of the deduction.”     Id.

     California, like most other States, has “a strong public

policy against * * * drunk driving.”   Carrey v. Dept. of Motor

Vehicles, 228 Cal. Rptr. 705, 708 (Ct. App. 1986).    But the fact

that petitioner’s loss may have resulted from his drunk driving

does not ipso facto mean a casualty loss deduction would severely

and immediately frustrate public policy.   “It has never been

thought * * * that the mere fact that an expenditure bears a

remote relation to an illegal act makes it non-deductible.”

Commissioner v. Heininger, supra at 474.

     In cases where a deduction has been denied, the taxpayers

typically knew their actions encouraged an illegal activity or

were illegal.   See Blackman v. Commissioner, 88 T.C. 677 (1987)

(arson), affd. without published opinion 867 F.2d 605 (1st Cir.

1988); Holt v. Commissioner, 69 T.C. 75 (1977) (drug

trafficking), affd. per curiam 611 F.2d 1160 (5th Cir. 1980);

Mazzei v. Commissioner, 61 T.C. 497 (1974) (counterfeiting);

Towers v. Commissioner, 24 T.C. 199 (1955) (extortion payment),
                                 -8-

affd. 247 F.2d 233 (2d Cir. 1957), affd. on other grounds sub

nom. Bonney v. Commissioner, 247 F.2d 237 (2d Cir. 1957);

Hackworth v. Commissioner, T.C. Memo. 2004-173 (illegal

gambling).

     In contrast, petitioner believed that he was no longer

impaired or intoxicated at the time he chose to drive.     Moreover,

he had taken precautions to avoid driving immediately after

drinking.    There was no evidence that intoxication, high speed,

or reckless driving was the ultimate cause of petitioner’s

accident.    Where the taxpayer is reasonably unaware that he is

doing something wrong, it is less likely that allowance of a

casualty loss deduction would so severely frustrate public policy

as to require disallowance.

     In Tank Truck Rentals, Inc. v. Commissioner, supra, the

taxpayer attempted to deduct as business expenses fines imposed

for violations of State maximum weight laws.   The Court

disallowed the deduction because the “Deduction of fines and

penalties uniformly has been held to frustrate state policy in

severe and direct fashion by reducing the ‘sting’ of the penalty

prescribed by the state legislature.”    Id. at 35-36.

     By contrast, allowing petitioner’s casualty loss deduction

would not in any way alleviate the “sting” of any punishment

imposed by the State of California.    In California, a first-time

DUI offense is punishable by imprisonment of at least 96 hours
                                 -9-

and a fine of at least $390.   See Cal. Veh. Code sec. 23536 (West

Supp. 2009).   Petitioner’s casualty loss deduction would have no

impact on either the sentence or the fine.

     This Court is not empowered to judge petitioner’s actions

from a criminal perspective or to punish him for his actions.     In

reaching our decision, we do not reflect upon or in any way

condone the act of driving under the influence of alcohol.     It is

our obligation to decide whether petitioner’s actions amounted to

gross or willful negligence and/or whether the allowance of a

casualty loss deduction in the setting of this Federal income tax

case would frustrate public policy.

     We hold that petitioner is entitled to the claimed casualty

loss deduction and, accordingly, is not liable for the section

6662(a) accuracy-related penalty.

     To reflect the foregoing,


                                            Decision will be entered

                                       for petitioner.
