1978 Tax Ct. Memo LEXIS 394 | Tax Ct. | 1978
1978 Tax Ct. Memo LEXIS 394">*394 Petitioner owned two automobiles, one of which was used primarily in petitioner's trade or business.
MEMORANDUM FINDINGS OF FACT AND OPINION
STERRETT,
Calendar Year | Deficiency |
1968 | $4,078.53 |
1969 | 1,818.54 |
1970 | 830.40 |
The following questions have been presented for our determination: (1) whether petitioners are entitled to a deduction for operational costs and depreciation for one of their automobiles in excess of the 75 percent1978 Tax Ct. Memo LEXIS 394">*396 deduction of such costs allowed by respondent for their taxable years 1969 and 1970; (2) whether petitioners are entitled to a deduction for operating costs and depreciation of their yacht for their taxable years 1968, 1969 and 1970; and (3) whether petitioners are entitled to deduct a casualty loss for their taxable year 1968 as a result of damage, if any, sustained by their yacht during a hurricane.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The stipulation of facts, together with the exhibits attached thereto, are incorporated herein by this reference.
Petitioners, F. Tyler Morgan and Helen W. Morgan, husband and wife, resided in Hixson, Tennessee at the time of filing their petition herein. Their joint Federal income tax returns for their taxable years 1968, 1969 and 1970 were filed with the internal revenue service center, Chamblee, Georgia. Helen W. Morgan is a party to this action only because she joined in the filing of these returns and, accordingly, F. Tyler Morgan will hereinafter be referred to as petitioner.
Petitioner, during the years in issue, was a combustion engineer. He was a manufacturer's representative, designing and1978 Tax Ct. Memo LEXIS 394">*397 supervising the installation of heavy firing equipment for industrial and commercial use. Additionally 2 weeks per month he did consultant work for East Tennessee Natural Gas. His office was located approximately 3-1/2 miles from his home. Both jobs required that petitioner travel extensively.
Petitioner owned two automobiles during 1969 and 1970. One car was primarily, but not exclusively, used in his trade or business. On his Federal income tax returns for his taxable years 1969 and 1970 petitioner claimed deductions related to the business use of his automobile calculated in the following manner:
Year | Amount | Explanation |
1969 | $2,328.11 | gas and oil |
1,666.67 | depreciation | |
$3,994.78 | ||
1970 | $1,865.93 | gas and oil |
1,666.67 | depreciation | |
$3,532.60 |
During the taxable years in issue petitioner owned a yacht known as "Southern Lass IV". Petitioner purchased the yacht in 1967 for $33,000. The yacht is a Chris-Craft Constellation, 55 feet in length and1978 Tax Ct. Memo LEXIS 394">*398 14-1/2 feet wide. When purchased it was 12 years old and had a sleeping capacity of 10 people.
The log maintained by petitioner on the yacht reflects the dates, places and names of persons on board at various times. Subsequent to the initiation of respondent's tax audit, petitioner made notations on the logs to indicate petitioner's recollection of the business relationship of such persons.
According to the yacht's log and guest register the following persons boarded it during the years in issue:
Business relationships | ||
per notations made | ||
Dates | Persons on board | during 1974 audit |
1968 | ||
Florida | ||
Jan. 29 | Catherine Gladish | Sold heating equipment to |
Raymond Gladish | machine shop | |
Herman Dowlin | ||
Opal Dowlin | ||
Lynn Challis | ||
Feb. 1-2 | Herman & Opal Dowlin | Buy structual steel prods. |
Fred & Lynn Challis | ||
Tyler & Helen Morgan | ||
March 9-11 | [no names entered] | |
April 14-15 | Tyler & Helen Morgan | |
Fred & Lynn Challis | ||
Raymond & Catherine Gladish | ||
May 4-11 | Tyler & Helen Morgan | |
Fred & Lynn Challis | ||
Polly & Luther Wikerson | Prospt. Tenant | |
May 16-18 | Patsy & Clayton Burton | Employees |
Glen, Catherine & | ||
Glenn, Jr. Patterson | Employees | |
Capt. Ferrell | ||
June 1-4 | [no names entered] | |
Florida to Chattanooga | ||
June 5-25 | ||
June 11 | Fred & Lynn Challis departed | |
June 13 | Capt. Paul Ferday came aboard | |
June 15 | Mrs. Byrd - Friend of Ernest Holmes | |
June 21 | Capt. Ferday signed off | |
Katherine & Raymond came aboard | ||
June 23 | Gene & Chip Allen | Sold Equipment |
Tennessee | ||
July 6-7 | Tommy Rutledge, Mary Gill, | |
Frank & Trudie Jones | ||
July 7 | Catherine & Raymond Gladish | |
July 13 | Lanny & Enis Bosion & Cindy | |
July 20 | Glenn & Mary E. Card | |
1969 | ||
April 17 | This is a trip requested by the | |
Tennessee Valley Authority. | ||
Harry & Eileen Bank | ||
Ruth & Graham Wells | ||
Peter Billam | ||
Bud & Mary Cliff | ||
Joy & Dennis Gilliman | ||
Bill Carsworth | ||
Mr. & Mrs. James E. Watson | ||
June 2 | Mr. & Mrs. Raymond Gladish | |
Mr. & Mrs. Gene Allen | ||
August 10 | D. B. Jordan | |
Sarah Robbins | ||
Frances & E.B. "Spider" Favre | ||
Joe & Irene Renfroe | ||
Aug. 29- | Maggie & Gene Allen | |
Sept. 4 | Bill Morgan | |
August 29 | Jim Watson | |
Dennis | ||
Graham & Ruth Wells | ||
Harry & Eileen Bank | ||
Deno Jordan | ||
August 30 | Joyce, Mrs. Marler, Children | |
were waiting for Bill | ||
Mr. & Mrs. Dan W. Davis, Reba | ||
Sept. 2 | Jake & Melba Hull | Bought Equipment |
Oct. 5 | Sarah Robbins | |
Frances & E.B. Favre | ||
1970 | ||
July 31 | Betty Baker | E.T.N.G. Employees did |
Jeane & daughter Woolsey | consulting work for firm | |
Barbara Herron | ||
Don Richardson | ||
Marty Richardson |
1978 Tax Ct. Memo LEXIS 394">*399 On June 1, 1968 petitioner left Florida intending to sail to Chattanooga, Tennessee. Dur to bad weather and warnings that an approaching hurricane would cause torrential rains the yacht was returned to its mooring. On June 5 the trip was resumed. Unbeknownst to petitioner the hurricane's course had reversed. It was headed back in the direction of the route chosen by petitioner. The impact of the hurricane hit the yacht while crossing Lake Okeechobee. As a result of damages incurred during the storm, petitioner submitted an insurance claim of $2,136.88 for "hull" damage to the exterior of the yacht. The policy had a $400 deductible clause. Petitioner recovered $1,736.88. He submitted no claim for damages to the interior of the yacht.
The insurance policy covered the following damages:
Upon the said Vessel, including its Hull, Spars, Sails, Materials, Tenders, Boats, Furniture, Machinery and other fittings, for the value stipulated under the heading "Agreed Value" in the Hull coverage.
due to marine perils, losses and misfortunes.
Petitioner did not claim a
OPINION
Petitioner has presented three issues for our determination. The first of these concerns the availability of a deduction in 1969 and 1970 for operational costs and depreciation for an automobile in excess of the 75 percent deduction allowed by respondent.
Of petitioner's two cars, one was used primarily in his trade or business. He testified that this car was occasionally used for other purposes. This car was also used for travel between his home and office when it was necessary for him to stop there. Petitioner offered no records delineating the amount of use that was personal to him. We find, therefore, that there was an appreciable degree of personal use of this car.
The burden of proving that respondent's determination is erroneous rests on petitioner.
The second issue for our determination is whether petitioner is entitled to a deduction for operating costs and depreciation of the yacht for each of his taxable years 1968, 1969 and 1970. Because of the typically nonbusiness nature of boating a deduction under section 162 will not be allowed unless we find that petitioner has complied with the substantiation requirements of section 274(a) and (d). 1
1978 Tax Ct. Memo LEXIS 394">*402 In
The third issue concerns the allowance of a
Respondent contends that this motion must be denied due to its untimeliness. He contends that he lacked adequate notice to prepare a rebuttal to petitioner's allegation. In
Petitioner claims that he sustained damages to his yacht in 1968 during a hurricane that should result in a
In general,
1978 Tax Ct. Memo LEXIS 394">*405 The damages that petitioner alleges gave rise to his loss were to the interior of the yacht and were covered under the insurance policy.
When damages are covered by an insurance policy but not claimed for fear of cancellation or other business reasons, they no longer are considered to be the result of a casualty but rather losses voluntarily incurred.
Therefore, we need not determine the amount, if any, of damages incurred to petitioner's yacht during the hurricane. We find that petitioner sustained a casualty loss in his taxable year 1968 only to the extent of the amount of the insurance policy's deductible clause, $400. This amount is subject to the $100 floor. Therefore, his deductible
Footnotes
1. SEC. 274. DISALLOWANCE OF CERTAIN ENTERTAINMENT, ETC., EXPENSES.
(a) Entertainment, Amusement, or Recreation.--
(1) In General.--No deduction otherwise allowable under this chapter shall be allowed for any item--
(A) Activity.--With respect to an activity which is of a type generally considered to constitute entertainment, amusement, or recreation, unless the taxpayer establishes that the item was directly related to * * * the active conduct of the taxpayer's trade or business, or
(B) Facility.--With respect to a facility used in connection with an activity referred to in subparagraph (A), unless the taxpayer establishes that the facility was used primarily for the furtherance of the taxpayer's trade or business and that the item was directly related to the active conduct of such trade or business,
and such deduction shall in no event exceed the portion of such item directly related to * * * the active conduct of the taxpayer's trade or business.
* * *
(d) Substantiation Required.--No deduction shall be allowed--
* * *
(2) for any item with respect to an activity which is of a type generally considered to constitute entertainment, amusement, or recreation, or with respect to a facility used in connection with such an activity * * *
* * *
unless the taxpayer substantiates by adequate records or by sufficient evidence corroborating his own statement (A) the amount of such expense or other item, (B) the time and place of the * * * entertainment, amusement, recreation, or use of the facility * * * (C) the business purpose of the expense or other item, and (D) the business relationship to the taxpayer of persons entertained, using the facility * * *.↩
2.
SEC. 165 . LOSSES.(a) General Rule.--There shall be allowed as a deduction any loss sustained during the taxable year and not compensated for by insurance or otherwise.
* * *
(c) Limitation on Losses of Individuals.--In the case of an individual, the deduction under subsection (a) shall be limited to--
(1) losses incurred in a trade or business;
* * *
(3) losses of property not connected with a trade or business, if such losses arise from fire, storm, shipwreck, or other casualty, or from theft. A loss described in this paragraph shall be allowed only to the extent that the amount of loss to such individual arising from each casualty, or from each theft, exceeds $100. For purposes of the $100 limitation of the preceding sentence, a husband and wife making a joint return under section 6013 for the taxable year in which the loss is allowed as a deduction shall be treated as one individual.↩