1985 Tax Ct. Memo LEXIS 87 | Tax Ct. | 1985
MEMORANDUM FINDINGS OF FACT AND OPINION
COHEN,
(1) Whether petitioners are entitled to an investment tax credit in 1980;
(2) Whether petitioners are entitled to a deduction for employee business expenses, and if so, for what amount;
(3) Whether petitioners are entitled to a deduction for casualty and theft losses, and if so, for what amount; and
(4) Whether petitioners are liable for the addition to tax under
FINDINGS OF FACT
Some of the facts have been stipulated. The stipulation of facts and attached exhibits are incorporated1985 Tax Ct. Memo LEXIS 87" label="1985 Tax Ct. Memo LEXIS 87" no-link"="" number="3" pagescheme="<span class=">1985 Tax Ct. Memo LEXIS 87">*89 herein by this reference.
At the time of the filing of their petition, petitioners Morris A. Giles (petitioner) and Marjorie P. Giles resided in Los Angeles, California. On or after June 19, 1981, they filed their 1980 Federal income tax return with the Internal Revenue Service Center in Fresno, California.
Petitioner purchased a used automobile on December 17, 1979, for $10,000. The car remained parked in petitioner's garage because he was on vacation, he did not need the car, and the car did not have license plates. When he returned in January from his vacation, petitioner began to use to automobile in his work.
Petitioner was an outside salesman and used his automobile 90 percent for business travel. Petitioner received the following automobile expense reimbursements from his employer in 1980:
Total | ||||
Mileage | Parking/ | Fixed | Auto-related | |
Miles | Reimbursement * | Tolls | Allowance | Reimbursement |
9261 | $904.43 | $154.50 | $1,058.60 | $2,117.53 |
On January 8, 1980, the President declared Los Angeles a disaster area as a result of storms. On1985 Tax Ct. Memo LEXIS 87" label="1985 Tax Ct. Memo LEXIS 87" no-link"="" number="4" pagescheme="<span class=">1985 Tax Ct. Memo LEXIS 87">*90 August 4, 1980, Smith Brothers Construction prepared for petitioners an estimate of proposed roof and home repair work totaling $4,650. On September 23, 1980, petitioners paid $720 by two checks that were designated for "new roof" and "repayment for roof repair advance," respectively.
On their 1980 Federal income tax return, petitioners claimed an investment credit of $1,000, 2 a casualty loss of $3,400 ($3,500 minus $100), 3 and employee business expenses of $5,886. Petitioners computed their casualty loss as the difference in house value before and after the storm. The employee business expenses consisted of the following claimed auto-related expenses:
Depreciation $10,000/ 7 yr. | $1,429 |
Gas and oil | 2,471 |
Insurance | 1,575 |
License and taxes | 76 |
Repairs | 870 |
Tires and tubes | 560 |
Other | 225 |
$7,206 | |
Less: 10% personal use $720 | |
Reimbursement 600 | 1,320 |
$5,886 |
Respondent disallowed the investment credit, the employee business expense deduction, and the casualty loss deduction.
1985 Tax Ct. Memo LEXIS 87" label="1985 Tax Ct. Memo LEXIS 87" no-link"="" number="5" pagescheme="<span class=">1985 Tax Ct. Memo LEXIS 87">*91 OPINION
Respondent denied petitioners' investment credit for 1980 on the ground that petitioner's automobile was not placed in service in 1980. The burden is on petitioner to prove entitlement to the investment credit in 1980.
(d)
(i) The taxable year in which, under the taxpayer's depreciation practice, the period for depreciation with respect to such property begins; or
(ii) The taxable year in which the property is placed in a condition or state of readiness and availability for a specifically assigned function, whether in a trade or business, in the production of income, in a tax-exempt activity, 1985 Tax Ct. Memo LEXIS 87" label="1985 Tax Ct. Memo LEXIS 87" no-link"="" number="6" pagescheme="<span class=">1985 Tax Ct. Memo LEXIS 87">*92 or in a personal activity.
Thus, if property meets the condition of subdivision (ii) of this subparagraph in a taxable year, it shall be considered placed in service in such year notwithstanding that the period for depreciation with respect to such property begins in a succeeding taxable year * * *.
In applying the "placed in service" test of the statute,
In this case, petitioner's automobile was operational1985 Tax Ct. Memo LEXIS 87" label="1985 Tax Ct. Memo LEXIS 87" no-link"="" number="7" pagescheme="<span class=">1985 Tax Ct. Memo LEXIS 87">*93 when it was acquired in 1979. The failure to use it in that year was due solely to petitioner's convenience or lack of necessity. Thus, 1979 is the year in which the automobile was placed in service, and the investment tax credit is not allowable in 1980.
To support a business deduction for automobile expenses, a taxpayer must substantiate the expenditures.
The burden of proof is on petitioner.
A schedule in petitioner's 1980 tax return contained a list of automobile expenses. Petitioner, however, failed to produce any records or other evidence to substantiate any of the expenses except depreciation in the amount of $1,286 ($9,000 / 7). Petitioner argues in his post-trial brief that he incurred1985 Tax Ct. Memo LEXIS 87" label="1985 Tax Ct. Memo LEXIS 87" no-link"="" number="9" pagescheme="<span class=">1985 Tax Ct. Memo LEXIS 87">*95 repairs expense. Such argument, however, does not constitute evidence.
Petitioner's schedule reported an employer reimbursement of $600. It appears from petitioner's testimony that $600 was selected arbitrarily: "I gave in an additional $600 on my taxes which I really shouldn's have. It should have been a negative amount." Notwithstanding, petitioner argues in his post-trial brief that $904.43, the mileage reimbursement, should be used to offset his automobile expenses. Petitioner, however, must include
In lieu of determining the actual costs of operating an automobile for business use, the Commissioner permits employees to take a standard deduction, based upon the number of miles driven during the year for business purposes. For 1980, employees could deduct a standard rate1985 Tax Ct. Memo LEXIS 87" label="1985 Tax Ct. Memo LEXIS 87" no-link"="" number="10" pagescheme="<span class=">1985 Tax Ct. Memo LEXIS 87">*96 of 20 cents per mile for the first 15,000 miles of business use and 11 cents per mile for each mile of business use in excess of 15,000 miles.
On their tax return, petitioners computed the loss as the difference in value of their home before and after the storm. The amount claimed, however, has not been supported by expert appraisal or other competent evidence. At trial, petitioner offered an estimate of repair work.
Respondent determined an addition to tax for 1980 pursuant to
Footnotes
1. Unless otherwise indicated, all statutory references are to the Internal Revenue Code of 1954, as amended and in effect during the year in issue.↩
*.
↩ January - June, 19 $ .0885 per mile June, 20 - December $ .104 per mile 2. The parties agree that if petitioners are entitled to an investment credit in 1980, the proper amount is $900, not $1,000, because petitioners used the car 90 percent for business. ↩
3. At trial and in their brief, petitioners argued storm damage, as claimed in their return. In the petition, however, they alleged that the loss resulted from an auto theft. This inconsistency is unexplained.↩