                  T.C. Summary Opinion 2008-155



                      UNITED STATES TAX COURT



         DONALD W. AND PENNY N. NICHOLAS, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 18199-07S.              Filed December 15, 2008.



     Henry Anthony Ebarb, for petitioners.

     Christopher J. Sheldon, 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 2005, the taxable year in
issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
                                 - 2 -

this opinion shall not be treated as precedent for any other

case.

     Respondent determined a deficiency of $712 in petitioners’

Federal income tax for the taxable year 2005.     The sole issue

remaining is whether petitioners are entitled to deduct noncash

contributions of $4,906.

                             Background

     Petitioners are married and resided in Arizona at the time

that their petition was filed.    Mr. Nicholas is retired, and Mrs.

Nicholas is a kindergarten teacher.      Petitioners were very active

in their church and involved in charitable activities, and they

are generous contributors.   Although their adjusted gross income

(AGI) from all sources was $89,092, on their original return they

reported $43,637 in charitable contributions.     Petitioners’

pattern of charitable giving and the relatively large amount of

contributions reported compared to their income have been their

established long-term practice.    Petitioners had a $6,012

carryover of contributions from their 2004 return in which they

had exceeded the 50-percent-of-AGI limitation on deductions for

any taxable year.

     With respect to the 2005 tax year, Mrs. Nicholas, as she had

in prior years, totaled the cash and noncash contributions for

the year and provided her return preparer with the total amount
                                 - 3 -

of $37,6252 for the year.   That amount comprised $32,875 of cash

contributions and $4,906 of noncash contributions.    The

accountant, thinking that the total comprised solely cash

contributions, reported the entire amount on petitioners’ 2005

return as a cash contribution.

     Respondent decided to examine petitioners’ 2005 return and

requested that petitioners substantiate their contributions.

When petitioners realized that $4,906 of the claimed

contributions consisted of noncash contributions to various

charities, they timely filed an amended income tax return for

their 2005 tax year including a Form 8283, Noncash Charitable

Contributions, reporting information that petitioners believed

would account for the noncash contributions of assets to

charitable entities for 2005.    On the amended 2005 return

petitioners reported $32,875 in cash and $4,906 in noncash

contributions, along with the $6,012 carryover from prior years.

     Respondent reviewed petitioners’ documentation for the

$32,875 in cash contributions and allowed deduction of the entire

amount that petitioners had claimed on their amended 2005 return.

Respondent, after reviewing petitioners’ documentation and

considering Mrs. Nicholas’s oral statements, disallowed the




     2
      The total contribution for 2005 was $43,637, which
comprised the $37,625 for 2005 and a $6,012 carryover from prior
years.
                               - 4 -

entire $4,906 of noncash contributions claimed on the 2005

return.

     For the 2005 tax year Mrs. Nicholas maintained notes on

envelopes and on other documents recording the types of asset,

names of charitable recipients, costs, and estimated values of

petitioners’ noncash contributions.    In substantially all

instances petitioners had a receipt and/or letter from the

charitable recipient.   As is typical with contributions of assets

valued under $500, the charitable organization left it to the

donor to fill out the items and values, which Mrs. Nicholas did.

Although Mrs. Nicholas did not have receipts to substantiate the

original cost of each item, she had been the purchaser and had

recollection of the amounts.   More critically, Mrs. Nicholas

frequented garage sales and flea markets and had a keen sense of

the value of her contributed items.    The items contributed

included books, CDs, used furniture and lamps, and similar types

of items.   Petitioners were avid readers and accumulated large

volumes of books which they stored in their home.    Many of the

books concerned religious topics, and some were children’s books

that petitioners regularly purchased for their children.      On

regular occasions, as books and other items accumulated, Mrs.

Nicholas would make a trip to the Salvation Army or some other

charitable organization and make a donation.
                                 - 5 -

                            Discussion

     The sole issue for our consideration is whether petitioners

have substantiated the $4,906 of noncash contributions claimed.

Respondent was suspicious of petitioners because they did not

claim any noncash contributions on their original 2005 income tax

return.   When respondent decided to audit petitioners’ return,

petitioners realized that the $37,625 in contributions claimed

included both cash and noncash amounts.    Accordingly, they

amended their 2005 income tax return and revised their reporting

to break their contributions down into cash contributions of

$32,875 and noncash of $4,906.    Respondent, however, remained

suspicious and did not accept petitioners’ documentation and

explanation of the noncash amount.

     Questions respondent’s counsel asked at trial seem to

indicate that respondent believed petitioners fabricated the

noncash amount to back up the figure claimed on the original

return.   Conversely, we note that petitioners’ documentation of

cash contributions of $32,875 was accepted in full.

     The Court’s role in this controversy is exclusively that of

fact finder to decide to what extent petitioners have

substantiated their claimed noncash contributions.    The parties

did not raise the question of who had the burden of proof or

whether it shifted.   See sec. 7491(a).   In general, the

Commissioner's determination set forth in a notice of deficiency
                               - 6 -

is presumed correct, and the taxpayer bears the burden of showing

that the determination is in error.    Rule 142(a); Welch v.

Helvering, 290 U.S. 111, 115 (1933).   Petitioners accepted their

burden of showing that they were entitled to the claimed noncash

contribution deductions.   Respondent does not question whether

petitioners’ Form 8283 filed with their amended return met the

statutory and regulatory requirements for reporting noncash

contributions.   Respondent questions only whether petitioners’

documentary and oral explanations are sufficient to support their

claimed noncash contribution deductions.

     We begin our analysis by noting that Mrs. Nicholas’s

testimony was consistent and forthright even though it was

subjected to extensive and vigorous cross-examination.   She

adequately explained why petitioners’ original return did not

separate out the noncash contribution deductions.   Mrs. Nicholas

explained her approach to recollecting the cost of the

contributed assets; but more significantly, she explained how she

was able to place a reasonable current value on the assets.

Petitioners’ evidence supporting their noncash contributions was

less precise than the evidence of their cash contributions, but

the Court was persuaded that the assets were contributed and

values were appropriately derived.

     The Court was persuaded by Mrs. Nicholas’s forthright

testimony and the documentary evidence petitioners provided.    In
                                 - 7 -

addition, we are cognizant that petitioners are extremely

generous in their charitable giving as reflected by their cash

contributions, which approximated one-half of their income.

Respondent was fully satisfied with petitioners’ proof of $32,875

of cash contributions, and that amount of verified cash

contributions represents almost 90 percent of the total amount of

2005 contributions.   The income tax deficiency attributable to

the disallowance of the noncash contribution deductions was only

$712, and petitioners pursued this matter, with representation,

as a matter of principle.

     Ultimately, the Court believes Mrs. Nicholas’s testimony and

accepts her documentation, and we hold that petitioners are

entitled to deduct $4,906 in noncash contributions for their 2005

tax year.

     To reflect the foregoing,


                                         Decision will be entered

                                 under Rule 155.
