                   T.C. Summary Opinion 2002-4



                     UNITED STATES TAX COURT



       BRAUN MICHAEL AND TWANDA B. CAMERON, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 13845-99S.           Filed January 17, 2002.


     Braun Michael and Twanda B. Cameron, pro sese.

     Chang Ted Li, for respondent.



     GOLDBERG, Special Trial Judge:    This case was heard pursuant

to the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed.    The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority.    Unless otherwise indicated,

subsequent section references are to the Internal Revenue Code in

effect for the years in issue, and all Rule references are to the

Tax Court Rules of Practice and Procedure.
                                - 2 -

     Respondent determined deficiencies in petitioners’ Federal

income taxes for the taxable years 1996 and 1997 of $11,032 and

$9,142, respectively.

     After concessions by the parties,1 the issues remaining for

decision are:    (1) Whether petitioners are entitled to charitable

contribution deductions claimed on Schedules A, Itemized

Deductions, for the years in issue, and (2) whether the amount of

petitioners’ 1996 State income tax refund is includable as income

for the 1997 tax year.

Background

     The stipulation of facts and the attached exhibits are

incorporated herein by this reference.      At the time the petition

was filed, petitioners resided in Severn, Maryland.        Petitioners

are husband and wife.

     During 1996 and 1997 petitioners were actively involved with

the Boy Scouts of America, troop No. 524 (BSA 524), at the Shiloh

Baptist Church in Washington, D.C.      Twanda B. Cameron (Mrs.



     1
          At trial, petitioners conceded respondent’s adjustment
of the $2,312 employee business expense deduction claimed on
their Schedule A, Itemized Deductions, for 1996.
     Respondent concedes that petitioners substantiated the
following Schedule A deductions:

         Deduction                 1996             1997

   State income tax               $6,612           $6,563
   Real estate tax                 1,992            3,970
   Mortgage interest paid         11,243           23,176
                               - 3 -

Cameron) was the den mother and Braun Michael Cameron

(petitioner) was the scoutmaster of BSA 524 during the years in

issue.   Petitioners have one daughter who was not involved with

the Boy Scouts of America.   In 1996 petitioner purchased

equipment to strip and repave the parking lot of the Shiloh

Baptist Church, the sponsor of BSA 524.   Through the parking lot

repavement project, which was not completed until May 1997, scout

members were able to receive merit badges for their work.

Petitioners used their own financial resources to purchase two

stripping machines and various supplies necessary for the parking

lot repavement project.   After the completion of the project, one

stripping machine was donated to the church and the other was

given to Mrs. Cameron’s father.   Petitioners were not reimbursed

for the cost of the equipment or supplies to complete the parking

lot repavement project.

     At trial, petitioners provided a two-page document

describing their purported charitable contributions for 1996.

Listed in this exhibit were the following:

Dec. 1996    Purple Heart clothing (18 bags)              $3,200
             Purple Heart furniture (several pieces)       1,800
             Salvation Army street                            60
             Goodwill Ind.                                   400
             Lolita Perry                                  2,935
             United Way                                    1,190
             Twanda–cash                                     375
             Braun--payroll                                  120

In addition to the above, petitioners provided a self-created

document itemizing donations, made with the following
                                - 4 -

information: check number, organization, date, purpose, and

amount.   Most of the items listed related to BSA 524.   It appears

that the totals for 1996 and 1997 itemized on this list were

$4,350.65 and $607.25, respectively.

     Petitioners financially assisted petitioner’s elderly aunt,

Lolita Perry (Ms. Perry) during 1996.   Petitioner visited Ms.

Perry at her residence, often purchasing groceries and offering

other financial assistance.

     Petitioners claimed $3,200 as the value of 18 bags of

clothes and $1,800 for several pieces of furniture donated to the

Purple Heart in 1996.   Petitioners generally testified that the

bags included “several pairs of jeans, * * * several blouses, T-

shirts, comforters * * * a couple of coats * * * [and] shoes.”

Petitioners valued the donated items on the basis of the purchase

price.    Petitioners also testified that they donated furniture to

the Purple Heart and the Salvation Army, including beds,

headboards, dressers, and chairs.

     Petitioners also claimed deductions for donations made to

the United Way, cash donations, and petitioner’s payroll

deduction, all related to contributions made through the Combined

Federal Campaign (CFC).

     At the close of trial, the record was held open for

submission of further evidence by petitioners.   Upon the receipt
                                - 5 -

of various documents from petitioners, the record was closed by

an Order of the Court dated January 22, 2001.

     Petitioners timely filed their joint 1996 and 1997 Federal

income tax returns.   Petitioners claimed charitable contribution

deductions of $17,212 and $5,020 for 1996 and 1997, respectively.

Petitioners reported adjusted gross incomes of $98,782 and

$97,960 for 1996 and 1997, respectively.

     In a notice of deficiency, respondent disallowed

petitioners’ deductions for charitable contributions on the

ground that petitioners failed to substantiate the claimed

contributions.   Respondent further determined that a 1996 State

income tax refund of $2,552 was includable in their gross income

for 1997.

1.   Charitable Contributions

     Deductions are a matter of legislative grace, and a taxpayer

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

deductions claimed.   INDOPCO, Inc. v. Commissioner, 503 U.S. 79,

84 (1992).   A taxpayer is required to maintain records sufficient

to establish the amount of his or her income and deductions.

Sec. 6001; Hradesky v. Commissioner, 65 T.C. 87, 90 (1975), affd.

per curiam 540 F.2d 821 (5th Cir. 1976); sec. 1.6001-1(a), (e),

Income Tax Regs.2


     2
          We note that sec. 7491(a) does not affect the burden of
proof where a taxpayer fails to substantiate a deduction. Higbee
                                                   (continued...)
                               - 6 -

     Section 170 allows as a deduction any charitable

contribution actually paid during the taxable year.   Sec.

170(a)(1); sec. 1.170A-1(a), Income Tax Regs.   A taxpayer may

claim a deduction for a “charitable contribution”, which is

defined as a contribution made “to or for the use of” a qualified

organization.   Sec. 170(c); Davis v. United States, 495 U.S. 472,

478 (1990).   The regulations provide specific record-keeping

requirements.   With respect to each charitable contribution of

money in a taxable year beginning after December 31, 1982, a

taxpayer is required to maintain one of the following:   (1) A

canceled check; (2) a receipt or letter from the donee indicating

the name of the donee, the date of the contribution, and the

amount of the contribution; or (3) any other reliable written

record showing the name of the donee, the date of the

contribution, and the amount of the contribution.   Sec. 1.170A-

13(a)(1), Income Tax Regs.

     To begin with, we note that petitioners claim a deduction

for contributions made to Ms. Perry, petitioner’s elderly aunt.

Although petitioners generously provided their time and financial

resources to Ms. Perry, these contributions were not donations

for which section 170 allows a deduction.   Ms. Perry is not a

qualified charitable organization, and contributions to her are


     2
      (...continued)
v. Commissioner, 116 T.C. 438, 444 (2001); Caralan Trust v.
Commissioner, T.C. Memo. 2001-241.
                                  - 7 -

in effect gifts.   Sec. 170(c).    Accordingly, petitioners are not

entitled to deduct $2,935 attributable to contributions made for

the maintenance of Ms. Perry in 1996.

     The substantiation requirements are clear.    We find

petitioners credible and believe that petitioners donated

furniture and clothing to the Purple Heart and Salvation Army in

1996.   However, petitioners failed to substantiate the specific

amounts of the donated clothing and furniture.    Therefore, we

find that for 1996 petitioners are entitled to deduct $25 for

each bag of clothing, totaling $450, and $100 for the furniture.

     Petitioners failed to provide any substantiation for the

United Way donation, cash donations, and petitioner’s payroll

deduction in conjunction with the CFC.    With regard to Mrs.

Cameron’s cash donation of $375, we believe that, on the basis of

their gross income, the $375 claimed for a cash deduction is not

unreasonable.   Therefore, we will allow petitioners to deduct

this amount.    Petitioners were afforded an opportunity to submit

the necessary documentation to substantiate the claimed

deductions for the United Way and the CFC; however, they failed

to do so.   Accordingly, petitioners are not entitled to

deductions for the purported $1,190 United Way donation and

petitioner’s $120 payroll deduction in 1996.

     Petitioners submitted an itemized list of additional

contributions made to various organizations (i.e., St. Jude
                               - 8 -

Children’s Hospital, the Boy Scouts of America, and Shiloh

Baptist Church).   After reviewing this list and comparing it with

petitioners’ check receipts, we conclude that petitioners

substantiated $2,910.80 for 1996 and $249.29 for 1997.

Accordingly, petitioners are entitled to deduct these amounts.

     We note that petitioners did not offer any documentation or

testimony as to the value of the stripping machines used for the

repavement project.   Because we are unable to decide this value,

we hold that petitioners are not entitled to any deduction

therefor.

     Therefore, petitioners are entitled to charitable

contribution deductions for 1996 and 1997 of $3,835.80 and

$249.29, respectively.

2.   State Income Tax Refund

     Refunds of State taxes are includable in gross income in the

year received to the extent that they reduced a taxpayer’s

Federal income tax liability for a prior taxable year.   Secs.

61(a); 111(a); sec. 1.111-1(a), Income Tax Regs.

     In the notice of deficiency, respondent determined that

petitioners failed to include in gross income for 1997 $2,552

representing their 1996 Maryland State Income Tax refund.

     Petitioners contend that they did not receive a refund in

that amount from the State of Maryland, and thus should not be

required to include any additional amount as income.
                              - 9 -

     By letter dated December 27, 2000, the Comptroller of

Maryland confirmed that petitioners’ 1996 Maryland State Tax

Return, as filed, resulted in an overpayment of $2,532.853 of

which $2,191.32 was refunded to petitioners and $361.53 was

offset to the Maryland State Central Collections Unit.    There is

no evidence in the record explaining what the offset represents.

     With certainty, we can state that this deduction reduced

petitioners’ 1996 Federal income tax liability, and, therefore,

the Maryland State tax refund received in 1997 is includable in

gross income.

     Accordingly, we sustain respondent and hold that $2,552 is

includable in petitioners’ income for 1997.

     We have considered all arguments made by the parties, and,

to the extent not discussed above, conclude they are irrelevant

or without merit.

     Reviewed and adopted as the report of the Small Tax Case

Division.

                                           Decision will be entered

                                      under Rule 155.




     3
          The letter from the Comptroller of Maryland appears to
have a typographical error, i.e., this number should be $2,552.85
instead of $2,532.85 ($2,191.32 + $361.53 = $2,552.85).
