                  T.C. Summary Opinion 2003-46



                     UNITED STATES TAX COURT



                  JACK H. MEYER, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 14430-01S.              Filed April 29, 2003.


     Jack H. Meyer, pro se.

     Susan S. Canavello, for respondent.



     PAJAK, 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.   Unless otherwise

indicated, 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.   The decision to be

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

should not be cited as authority.
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     Respondent determined a deficiency in petitioner’s 1998

Federal income tax in the amount of $1,507.   After concessions by

respondent and deemed concessions by petitioner, this Court must

decide:   (1) Whether petitioner is entitled to deductions claimed

on his Schedule C, Profit or Loss From Business; (2) whether

petitioner is entitled to a net operating loss deduction in

excess of that allowed by respondent; and (3) whether petitioner

is entitled to credits for excess Social Security taxes and for

Medicare taxes withheld from his wages during 1998.

     Some of the facts in this case have been stipulated and are

so found.   Petitioner resided in Jefferson, Texas, at the time he

filed his petition.

     Petitioner timely filed his Federal tax return for the

taxable year 1998 (1998 return).   Petitioner’s principal source

of income for the 1998 taxable year was from his activity as a

cross-country truck driver.

     During 1998, petitioner also operated a machine shop from

his building located on the property of his mother.

     Petitioner attached to his 1998 return a Form W-2c,

Corrected Wage and Tax Statement, from his employer, Key Boys

Inc. (Key Boys).   The Form W-2c reported petitioner’s wages from

Key Boys during 1998 as $50,334 (all amounts are rounded) and

$2,199 as Federal income tax withheld.   The Form W-2c reported

petitioner’s Social Security tax withheld and Medicare tax
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withheld for 1998 as $3,120, and $730, respectively.

     Petitioner properly reported $50,334 of wage income and

$2,199 of Federal income tax withheld on his 1998 return.

Petitioner claimed the $3,199.72 Social Security tax withheld and

the $729.91 Medicare tax withheld as a credit for excess Social

Security payments and as a credit for “other payment”,

respectively, on his 1998 return.   Respondent disallowed these

purported credits.

     Petitioner filed a Schedule C for his machine shop activity

as part of his 1998 return.   During 1998, petitioner reported

gross income of zero with respect to his machine shop activity.

On his Schedule C, petitioner claimed the following deductions:

                        Expense              Amount

               Car and truck                   $575
               Depreciation                   4,859
               Office expense                 7,900
               Rent or lease                    200
               Repairs and maintenance           99
               Taxes and licenses               876
               Utilities                        295
               Other expenses:
                  Membership/Dues                30
                  Bank                          222
                  Trucking supplies, etc.     2,453
                  Trucking daily credit      10,255
                  Uninsured damages           2,082
                  Losses brought forward     13,532
                                   Total     43,378

     Respondent determined that all of the car and truck

expenses, trucking supplies expenses, and uninsured damages were

employee business expenses incurred by petitioner as a cross-
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country truck driver during 1998 and properly deductible on

Schedule A, Itemized Deductions, as miscellaneous itemized

deductions, subject to the 2-percent adjusted gross income

limitation.   Petitioner mischaracterized the deduction for meals

expense as a so-called “trucking daily credit” of $10,255.

Respondent allowed a Schedule A miscellaneous itemized deduction

of $5,801 with respect to petitioner’s meals expense.    The

remaining $4,454 of petitioner’s deduction for meals was

disallowed.   Additionally, respondent determined that $4,613 of

petitioner’s office expense deduction was attributable to

charitable contributions and properly deductible on Schedule A.

Respondent disallowed petitioner’s membership/dues deduction and

the $13,352 “losses brought forward” deduction.    Respondent

determined that petitioner is entitled to a net operating loss

(NOL) carryforward from 1995 of $5,524 and an NOL carryforward

from 1996 of $3,394.   Respondent determined that petitioner was

entitled to a $6,944 NOL deduction in 1998.   Respondent also

allowed petitioner an additional depreciation deduction of

$2,870.   Respondent allowed all of petitioner’s remaining

Schedule C deductions.

     The parties agree that the correct Schedule C depreciation

for the taxable year 1998 is $7,728 ($2,870 of depreciation in

addition to the $4,859 claimed by petitioner).    Petitioner did

not offer any evidence with respect to the portion of the office
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expenses recharacterized as charitable contributions or with

respect to the membership expense which was disallowed.    These

issues are deemed conceded.

     Taxpayers generally bear the burden of proving that the

Commissioner’s determination is incorrect.   Rule 142(a); Welch v.

Helvering, 290 U.S. 111 (1933).   Section 7491 does not change the

burden of proof where a taxpayer has failed to substantiate

deductions.   Higbee v. Commissioner, 116 T.C. 438 (2001).

     Deductions are strictly a matter of legislative grace.

INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New

Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).

Taxpayers must substantiate claimed deductions.   Hradesky v.

Commissioner, 65 T.C. 87, 89 (1975), affd. per curiam 540 F.2d

821 (5th Cir. 1976).   Moreover, taxpayers must keep sufficient

records to establish the amounts of the deductions.   Meneguzzo v.

Commissioner, 43 T.C. 824, 831 (1965); sec. 1.6001-1(a), Income

Tax Regs.

     Section 162(a) allows a taxpayer to deduct all ordinary and

necessary business expenses paid or incurred during the taxable

year in carrying on any trade or business.   If a taxpayer’s trade

or business is that of being an employee, section 162 deductions

are subject to the limitations of section 62(a)(1) and are

miscellaneous itemized deductions subject to the 2-percent floor.

Sec. 67; Alexander v. Commissioner, T.C. Memo. 1995-51, affd. 72
                                 - 6 -

F.3d 938 (1st Cir. 1995).     No deduction is allowed for personal,

living, or family expenses.    Sec. 262.

     Section 274(n)(1) limits a deduction for meals and

entertainment to 50 percent of the expenses incurred.    The

percentage limitation may be increased in special circumstances.

Sec. 274(n)(3).   Petitioner did not take into account the section

274(n) limitation with respect to his claimed meals expense

deduction of $10,255.

     Petitioner incurred his trucking supplies expenses and car

and truck expenses as an employee truck driver.    With respect to

the amounts that respondent determined to be unreimbursed

employee expenses attributable to petitioner’s employment as a

truck driver, petitioner is entitled to deduct these expenses as

miscellaneous itemized deductions subject to the 2-percent floor

of section 67.    Secs. 62, 67, 162; Gonzalez v. Commissioner, T.C.

Memo. 1997-430.   Additionally, petitioner’s meal expenses are

subject to the limitation of section 274(n).    On this record, we

sustain respondent’s recharacterization of these Schedule C

deductions as Schedule A miscellaneous itemized deductions

subject to the 2-percent adjusted gross income limitation.     We

also sustain the disallowance of a portion of petitioner’s

deduction for meals expenses.

     Next, we consider whether petitioner is entitled to an NOL

deduction in excess of the amount allowed by respondent.
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Section 172(a) allows a deduction for an NOL, which may be

carried back to each of the 2 years preceding the taxable year of

the loss and carried over to each of the 20 taxable years

following the year of the loss.    Sec. 172(b)(1)(A).      Generally,

the entire amount of the NOL must first be carried to the

earliest eligible carryback year.        Id.   Thereafter, the excess

(if any) of the NOL over the taxable income for each of the prior

taxable years to which such loss was carried must be carried to

each of the succeeding years.     Id.     A taxpayer may, however,

elect to relinquish the carryback period.        Sec. 172(b)(3).     The

election must be made, in a prescribed manner, by the due date

(including extensions) for filing the taxpayer’s return for the

NOL year in which the election is to be in effect.         Id.   A

taxpayer claiming an NOL deduction for any taxable year must file

with his return for such year a statement which computed the

amount of the NOL deduction claimed and sets forth certain

pertinent information.

     Petitioner testified that the “losses brought forward”

deduction in the amount of $13,532 claimed on his Schedule C was

the result of “business expenses that exceeded the income” from

prior years.   Petitioner presented no authority in support of his

position that the NOL carried forward to 1998 should be included

in the computation of his 1998 net earnings from self-employment

and we reject that contention.
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     Petitioner offered several prior years tax returns and

schedules which attempted to explain his claimed NOL deduction.

A tax return is merely a statement of the taxpayer’s claim and

does not establish the truth of the matters set forth therein.

Wilkinson v. Commissioner, 71 T.C. 633, 639 (1979).    Petitioner’s

prior years tax returns do not, by themselves, adequately explain

the claimed NOL deduction.   Additionally, petitioner’s schedules

also failed to substantiate his claimed NOL deduction.    Triplett

v. Commissioner, T.C. Memo. 2001-320, affd. 53 Fed. Appx. 339

(6th Cir. 2002).   For instance, in calculating his NOL deduction,

petitioner did not apply the applicable carryback rule of section

172(b)(1) to the prior taxable years.   Petitioner did not elect

to waive the applicable carryback period with respect to any of

the prior taxable years.   Petitioner testified that the carryback

requirement was “something I haven’t been aware of.”   While

petitioner’s schedules attempted to explain how he computed his

NOL deduction, his explanation makes no sense.   Accordingly, we

find that petitioner is not entitled to an NOL deduction under

section 172 for the taxable year 1998 in excess of that allowed

by respondent.

     Finally, we must consider whether petitioner is allowed

credits for excess Social Security and Medicare taxes withheld

from his wages.

     The Federal Insurance Contributions Act (FICA), ch. 736, 68A
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Stat. 415 (1954), currently codified as secs. 3101-3125, imposes

Social Security and Medicare taxes (collectively referred to as

“FICA taxes”) on a portion of the wages paid to an employee.

Under FICA, the employer and the employee each pay a like amount

of FICA taxes based on the employee’s wages as defined in section

3121(a).   Secs. 3101, 3111.   The employer withholds the

employee’s half of the FICA taxes and remits it, along with the

employer’s half, to the Treasury Department.    Sec. 3102.   Section

3121(a) defines wages and establishes the annual ceiling which

limits the amount of wages subject to the Social Security portion

of the FICA taxes.   The taxable wage base applies separately to

each employer.   Veterinary Surgical Consultants, P.C. v.

Commissioner, 117 T.C. 141, 151 (2001), affd. sub nom. Yeagle

Drywall Co. v. Commissioner, 54 Fed. Appx. 100 (3d Cir. 2002).

Thus, if an employee receives wages from more than one employer,

the annual wage limitation does not apply to the aggregate

compensation received.   Id.; secs. 31.3121(a)(1)-1(a)(3),

31.3306(b)(1)-1(a)(3), Employment Tax Regs.

     Section 3502(a) provides that the FICA taxes imposed on the

employee’s portion of his wages shall not be allowed as a

deduction to the taxpayer in computing taxable income.      However,

the employee may be eligible for a credit or refund of the excess

employee portion of the FICA tax that applies with respect to

wages in excess of the applicable wage limitation.    Veterinary
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Surgical Consultants, P.C. v. Commissioner, supra at 151; secs.

31.3121(a)(1)-1(a)(3), 31.3306(b)(1)-1(a)(3), Employment Tax

Regs.   Moreover, this Court’s jurisdiction in determining a

credit of FICA taxes is expressly limited by section 31(b) to

FICA taxes withheld as a result of receiving wages from more than

one employer.

     Petitioner worked for Key Boys during 1998.    Petitioner

testified that he was an employee during 1998.    Petitioner did

not claim that he worked for more than one employer in 1998.

Petitioner provided no evidence and no legal basis for claiming a

tax credit for FICA taxes on his 1998 return.    Accordingly, we

sustain respondent’s determination that petitioner is not

entitled to credits for excess Social Security and Medicare taxes

withheld from the wages he earned in 1998 as an employee of Key

Boys.

     We have considered all other arguments made by petitioner

and conclude they are either irrelevant or without merit.

     Reviewed and adopted as the report of the Small Tax Case

Division.



                                         Decision will be entered

                                    under Rule 155.
