                               T.C. Memo. 2018-56



                        UNITED STATES TAX COURT



          BERNARD A. DAVIS AND WILLETTE T. DAVIS, Petitioner v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 28381-15.                         Filed April 24, 2018.


      Bernard A. Davis and Willette T. Davis, pro sese.

      Brian A. Pfeifer, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


      PUGH, Judge: In a notice of deficiency dated November 2, 2015,

respondent determined that petitioners had a deficiency for the 2012 tax year.1



      1
        All 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, unless otherwise indicated. All monetary amounts are rounded to the
nearest dollar.
                                        -2-

[*2] After concessions,2 the issues for decision are (1) whether petitioners are

entitled to deduct $3,091 of charitable contributions on their Schedule A, Itemized

Deductions, (2) whether petitioners are entitled to deduct unreimbursed business

expenses on Form 2106-EZ, Unreimbursed Employee Business Expenses, and (3)

whether petitioners are entitled to deduct $109 for tax preparation fees.

                               FINDINGS OF FACT

      Some of the facts have been stipulated and are so found. Petitioners resided

in Florida when their petition was timely filed.

I. Charitable Contributions

      Petitioners claimed $3,091 of charitable contribution deductions to the

South Broward Church of Christ (Church) for 2012--including $1,700 of cash and

$1,391 of noncash contributions. Petitioners and another family founded the

Church in 1994 in petitioners’ house, and they registered the Church as a nonprofit

corporation in Florida in 1995. Mr. Davis was the Church’s president and the

senior minister. The Church collected money and clothing to donate to the poor

and held weekly services and fellowship until the 2008 economic crisis forced Mr.

Davis to seek employment outside Florida. The Church had no bank accounts in

      2
       Respondent conceded that petitioners were entitled to deduct $7,119 of
medical and dental expenses for medical and dental insurance premiums paid
during 2012.
                                        -3-

[*3] 2012 and no longer held weekly services and congregational meetings. The

only activities of the Church during 2012 that Mr. Davis specifically identified

consisted of petitioners’ giving away clothing and other items to individuals they

considered needy.

      The record includes a letter on Church letterhead--dated April 19, 2013, and

signed by Mr. Davis--confirming the amounts of petitioners’ cash and noncash

contributions to the Church in 2012. Petitioners described the noncash

contributions as clothing, footwear, accessories, and household items on their

2012 Form 8283, Noncash Charitable Contributions.

II. Unreimbursed Employee Business Expenses

      Mr. Davis worked as a right of way consultant through his business, Davis

Consulting. He was unable to find work in 2011 and was forced to search for

work outside Florida in 2012. He signed a contract with Briggs Field Services

(Briggs) in Denver, Colorado, to work on a project that lasted from January

through October 2012. Mr. Davis drove from petitioners’ home in Hollywood,

Florida, and continued to search for clients along the way, driving through Texas

and New Mexico on his way to Denver. Briggs paid Mr. Davis $30 per hour and

provided to him a $95 per diem and a $2,000 travel advance. Briggs also

reimbursed Mr. Davis for $850 worth of mileage.
                                       -4-

[*4] Petitioners reported that Davis Consulting incurred $49,723 of business

expenses on their Schedule C, Profit or Loss From Business. This total includes

$27,431 for car and truck expenses, which Mr. Davis calculated using his mileage

and gasoline costs, $10,200 for travel expenses, and $5,984 for deductible meal

and entertainment expenses. Petitioners also reported on their Form 2106-EZ

$26,928 of business expenses for which Briggs did not reimburse Mr. Davis.

This total includes $25,530 for vehicle expenses (mileage), $120 for parking fees,

$550 for travel expenses, $238 for meals and entertainment, and $490 for other

business expenses. The unreimbursed employee business expenses for mileage,

travel, and meals and entertainment claimed on petitioners’ 2012 Form 2106-EZ

also were included on petitioners’ 2012 Schedule C. Respondent did not disallow

any of the deductions petitioners claimed on their 2012 Schedule C.

      The record includes several of Briggs’ reimbursement request forms on

which Mr. Davis listed a total of 1,119 miles, only one of which has an approval

signature from Briggs, and several motel receipts totaling close to $6,000 for Mr.

Davis’ accommodations in Denver. It also includes receipts for parking, which

total $40, and several pages of petitioners’ checking account statements for 2012.
                                         -5-

[*5] III. Petitioners’ 2012 Tax Return

      Petitioners were married and filed a joint Federal income tax return in 2012.

They used TurboTax software to assist them in preparing their 2012 tax return.

Petitioners paid TurboTax $109 in 2012.

                                     OPINION

I. Burden of Proof

      Ordinarily, the burden of proof in cases before the Court is on the taxpayer.

Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 (1933). Under section

7491(a), in certain circumstances the burden of proof may shift from the taxpayer

to the Commissioner. Petitioners have not claimed or shown that they meet the

specifications of section 7491(a) to shift the burden of proof to respondent as to

any relevant factual issue.

II. Deductions

      Deductions are a matter of legislative grace, and a taxpayer must prove his

or her entitlement to deductions. INDOPCO, Inc. v. Commissioner, 503 U.S. 79,

84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).

Taxpayers, therefore, are required to substantiate expenses underlying each

claimed deduction by maintaining records sufficient to establish the amount of the

deduction and to enable the Commissioner to determine the correct tax liability.
                                        -6-

[*6] Sec. 6001; Higbee v. Commissioner, 116 T.C. 438, 440 (2001). Under the

Cohan rule, the Court may estimate the amount of the expense if the taxpayer is

able to demonstrate that he or she has paid or incurred a deductible expense but

cannot substantiate the precise amount, as long as he or she produces credible

evidence providing a basis for the Court to do so. Cohan v. Commissioner, 39

F.2d 540, 544 (2d Cir. 1930).

      A. Charitable Contributions

      Section 170(a)(1) allows a deduction for any charitable contribution made

within the taxable year. If a taxpayer makes a charitable contribution of property

other than money, the amount of the contribution is generally equal to the fair

market value of the property at the time of the contribution. See sec. 1.170A-

1(c)(1), Income Tax Regs. The nature of the required substantiation depends on

the value of the contribution and on whether the contribution is of cash or other

property. See sec. 1.170A-13, Income Tax Regs.

      For monetary contributions, taxpayers must maintain canceled checks,

receipts from the donee organizations showing the date and amount of the

contributions, or other reliable written records showing the name of the donee,

date, and amount of the contributions. See id. para. (a)(1).
                                        -7-

[*7] Under section 1.170A-13(b)(1), Income Tax Regs., a taxpayer must

maintain for each noncash contribution a receipt from the donee organization

unless doing so is impractical. The donee receipt must show: (1) the name of the

donee organization; (2) the date and location of the contribution; and (3) a

description of the property in detail reasonably sufficient under the circumstances.

Id. The reliability of these records is determined on the facts and circumstances of

each case. Id. para. (b)(2)(i). We consider the contemporaneous nature of the

records and the regularity of the taxpayer’s recordkeeping procedures in making

this determination, though our consideration is not limited to those factors. Id.

Further, no deduction is allowed for “any contribution of clothing or a household

item” unless such property is “in good used condition or better.”3 Sec.

170(f)(16)(A).

      The only documentation petitioners offered to substantiate their

contributions to the Church in 2012 was a letter signed by Mr. Davis as the

Church’s president and senior minister. Not only does the letter fail to meet the

substantiation requirements for both cash contributions and noncash contributions;


      3
        Sec. 170(f)(16)(C) provides that the requirement that a contribution of
clothing or household property be in good used condition or better may not apply
when the taxpayer includes a qualified appraisal of the property with his or her
return, which was not done here.
                                         -8-

[*8] we also find the letter unreliable. The letter was not contemporaneous with

the alleged contributions, and petitioners offered no evidence at all of regular

recordkeeping procedures. Additionally, we did not find Mr. Davis’ testimony to

be credible on this issue, and the fact that Mr. Davis signed the letter himself

weighs heavily against its reliability. Finally, petitioners have introduced no

evidence regarding the condition of the clothing and household items that they

allegedly donated to the Church. Rather, based on the record, it appears that

petitioners may have used their otherwise inactive church to try to deduct their

direct gifts to their friends. Therefore, we sustain respondent’s disallowance of

petitioners’ charitable contribution deductions.

      B. Unreimbursed Employee Business Expenses

      Ordinary and necessary business expenses incurred during the taxable year

in carrying on a trade or business are generally allowed as deductions. Sec.

162(a). A taxpayer’s unreimbursed employee business expenses are allowed as

miscellaneous itemized deductions to the extent they exceed 2% of the taxpayer’s

adjusted gross income. Sec. 67(a) and (b).

      Certain business expenses, including those petitioners reported, are subject

to the heightened substantiation requirements of section 274(d). To meet these

strict requirements, a taxpayer must substantiate by adequate records or by
                                        -9-

[*9] sufficient evidence corroborating the taxpayer’s own statement: (1) the

amount of the expense; (2) the time and place of the travel or use; and (3) the

business purpose of the expense. Sec. 274(d). To substantiate by adequate

records, the taxpayer must provide: (1) an account book, log, or similar record;

and (2) documentary evidence, which together are sufficient to establish each

element with respect to an expenditure. Sec. 1.274-5T(c)(2)(i), Temporary Income

Tax Regs., 50 Fed. Reg. 46017 (Nov. 6, 1985). Section 274(d) supersedes the

Cohan rule. Sec. 1.274-5T(a), Temporary Income Tax Regs., 50 Fed. Reg. 46014

(Nov. 6, 1985).

      We need not consider whether petitioners met the strict substantiation

requirements of section 274(d) with regard to their reported unreimbursed

employee business expenses because petitioners claimed those same expenses on

their Schedule C.4 Mr. Davis testified that he operates for business purposes as

Davis Consulting. Petitioners reported the income that they received and expenses

      4
         Even so, petitioners were unlikely to have satisfied the requirements of
sec. 274(d). They provided no records to support the claimed deduction for
mileage; Mr. Davis only testified that he noted his car’s mileage at the beginning
of his trip to Denver and then at the end. The receipts for $40 that Mr. Davis paid
for parking are not enough to substantiate the $120 of parking expenses that he
reported. Likewise, petitioners’ checking account statement is not sufficient to
show the total amount or the business purpose of petitioners’ claimed meal and
entertainment expenses. Finally, petitioners provided no supporting
documentation for the other $490 of business expenses claimed on Form 2106-EZ.
                                       - 10 -

[*10] they incurred through Davis Consulting on their Schedule C. Mr. Davis

testified that the mileage for which petitioners claimed a deduction on their Form

2106-EZ is included in the mileage for which they claimed a deduction on their

Schedule C. Mr. Davis further testified that the expenses for travel and for meals

and entertainment reported on petitioners’ Schedule C included the expenses that

Mr. Davis incurred while working for Briggs. As we noted above, respondent has

not disputed any of the expenses that petitioners reported on their Schedule C.

Petitioners cannot be allowed to deduct the same expenses twice. See Huang v.

Commissioner, T.C. Memo. 1997-257, slip op. at 7-8; Cavalaris v. Commissioner,

T.C. Memo. 1996-308, slip op. at 12-13; Cheh v. Commissioner, T.C. Memo.

1992-658, 1992 WL 323606, at *12. Therefore, we sustain respondent’s

disallowance of miscellaneous itemized deductions for Mr. Davis’ unreimbursed

employee business expenses.

      C. Tax Preparation Costs

      A taxpayer may deduct ordinary and necessary expenses incurred in

connection with the determination, collection, and refund of taxes. Sec. 212(3).

Such deductible expenses include expenses incurred in connection with the

preparation of tax returns. Sec. 1.212-1(l), Income Tax Regs.
                                        - 11 -

[*11] Mr. Davis credibly testified at trial that he used TurboTax software to assist

him in preparing petitioners’ 2012 tax returns, and the parties stipulated that

petitioners paid $109 for TurboTax software in 2012. Accordingly, we hold that

petitioners are entitled to a deduction of $109 for tax preparation fees.

      Any contentions we have not addressed we deem irrelevant, moot, or

meritless.

      To reflect the foregoing,


                                                 Decision will be entered under

                                       Rule 155.
