Lamb v. Comm'r

RUWE, 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 this opinion shall not be treated as precedent for any other case.

Respondent determined a deficiency of $ 4,575 in petitioner's 2004 Federal income tax. The issue for decision is whether petitioner is entitled to a deduction pursuant to section 162 for alleged unreimbursed employee business expenses.

Some of the facts have been stipulated and are so found. The stipulation of facts and the attached exhibits are incorporated herein by this reference. At the time the petition was filed, petitioner resided in Anderson, South Carolina.

Petitioner is a journeyman pipefitter welder. He has been a member of Pipefitters Local Union 72 for more than 28 years. Petitioner's *154 trade provides him with the opportunity to work for different companies.

During 2004 petitioner worked for only one company, Player & Co. (Player), and earned wages of $ 54,989. Player is located in downtown Atlanta, Georgia, approximately 120 miles from petitioner's residence. Player provided petitioner with a gas card and a service truck to commute to the job sites where he worked. Player also had a reimbursement policy to "reimburse dollar for dollar for material, rentals, equipment, etc, with valid receipts." Under the reimbursement policy, Player also had a per diem expense policy. The per diem expense policy provided reimbursement for "An agreed to sum set by Player and Company to cover meals, tips and/or miscellaneous subsistence cost for those personnel working away from their home base (home base includes a 100 mile radius)." In order to avoid a long trip back and forth each day between petitioner's residence and the job sites he was assigned to work at in and around Atlanta, petitioner paid his own expenses, including vehicle expenses for driving between his residence and the job sites and meals and lodging expenses at job sites. Although most of petitioner's work was in the *155 Atlanta area, petitioner stated that it was by choice that he continued to reside in Anderson. Petitioner testified that he never applied for reimbursement or for per diem expenses because he did not "think" he was eligible.

Petitioner timely filed his 2004 Form 1040, U.S. Individual Income Tax Return. On Schedule A, Itemized Deductions, petitioner claimed $ 19,660 as unreimbursed employee expenses. ² On October 9, 2007, respondent issued to petitioner a notice of deficiency, which disallowed petitioner's deduction for his claimed unreimbursed employee expenses. Petitioner timely filed a petition asserting his claimed unreimbursed employee expenses were "actual job expenses incurred working for Player & Co. as a journeyman Pipefitter Welder."

At trial petitioner submitted evidence consisting of a handwritten summary of his claimed unreimbursed employee expenses. Petitioner testified that the handwritten summary was made especially for trial from a log *156 he had prepared in March of 2005. Petitioner further testified that he no longer has the receipts that were used to construct the March 2005 log.

As a general rule, the Commissioner's determinations set forth in a notice of deficiency are presumed correct, and the taxpayer bears the burden of proving that these determinations are in error. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Deductions are a matter of legislative grace, and the taxpayer bears the burden of proving he is entitled to the deductions claimed. Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). Petitioner has neither claimed nor shown that he satisfied the requirements of section 7491(a) to shift the burden of proof to the Secretary with regard to any factual issue. See also Rule 142(a).

Section 162(a) allows as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. A taxpayer may be in the trade or business of being an employee and, as such, may deduct business expenses which no employer directs him to incur. O'Malley v. Commissioner, 91 T.C. 352, 363-364 (1988); *157 Lucas v. Commissioner, 79 T.C. 1, 6 (1982). Section 262(a), however, prohibits deductions for personal, living, or family expenses.

Petitioner seeks to deduct as ordinary and necessary expenses the expenses that he incurred while traveling to and from his residence and the job sites and while staying at the job sites.

Three conditions must be satisfied before a traveling expense deduction may be claimed under section 162(a): (1) The expense must be a reasonable and necessary traveling expense; (2) the expense must be incurred "while away from home"; and (3) the expense must be incurred in the pursuit of a trade or business. See sec. 162(a)(2); see also Commissioner v. Flowers, 326 U.S. 465, 470 (1946); Daly v. Commissioner, 72 T.C. 190, 194 (1979), affd. 662 F.2d 253 (4th Cir. 1981). In order to be deductible, the expenditure must satisfy all three conditions. Daly v. Commissioner, supra at 194. Because petitioner's expenditures fail to satisfy condition (2), discussed infra, we will not belabor conditions (1) and (3).

Petitioner contends that his "tax home" is Anderson, South Carolina, and therefore the expenses incurred in traveling from his residence to the Atlanta area job sites are *158 deductible under section 162(a)(2). Petitioner claims to have driven 28,350 miles for work during 2004 despite the fact that Player provided him with a service truck and a gas card. In applying the standard mileage rate of 37.5 cents per mile, Rev. Proc. 2003-76, sec. 5, 2003-2 C.B. 924, 925, petitioner's calculated vehicle expenses would be $ 10,631.25. Petitioner also claims to have expended $ 2,775 for meals and $ 5,717 for lodging in 2004. ³

This Court has consistently defined the word "home" in section 162 to "refer to the vicinity of a taxpayer's principal place of employment and not the place where his personal residence is located, if different from the principal place of employment." Daly v. Commissioner, supra at 195; see also Foote v. Commissioner, 67 T.C. 1, 4 (1976); Kroll v. Commissioner, 49 T.C. 557, 561-562 (1968). This rule applies as long as the principal place of business is indefinite as opposed to temporary. Kroll v. Commissioner, supra at 562-563.

Temporary employment has been defined as that which is foreseeably terminable *159 or lasting for a relatively short, fixed duration. Boone v. United States, 482 F.2d 417, 419 (5th Cir. 1973). Whether a taxpayer's employment is temporary or indefinite is determined by the facts and circumstances of each case. Peurifoy v. Commissioner, 358 U.S. 59, 61 (1958).

Petitioner stated that when he began working for Player he believed it would be a "short job." After petitioner completed the initial "short job" for Player, however, he chose to continue working for Player at other job sites. It is not clear when petitioner began working for Player, but all of petitioner's work in 2004 was with Player.

Petitioner accepted the job with Player knowing that the company was in Atlanta, Georgia. The locations of the job sites where he worked in 2004 were in and around the Atlanta area. While we are aware that all of the jobs that petitioner worked on in 2004 were by themselves temporary, we are convinced that petitioner's employment with Player became indefinite shortly after he began working for Player and that petitioner was aware that Player would assign him to job sites in the vicinity of Atlanta.

On the basis of the entire record, we conclude that petitioner made a personal decision *160 to accept employment with Player knowing that its office location and its job sites were a considerable distance away from his residence. Furthermore, petitioner testified that it was a personal choice to continue to reside in Anderson. Accordingly, petitioner's tax home in 2004 was Atlanta, Georgia. There is nothing in the record to determine the length of the initial "short job" with Player or when it began. Thus, we conclude that petitioner has not established that he was "away from home" while working for Player in 2004, and that the additional costs of travel as well as the costs of meals and lodging are personal and nondeductible. See sec. 262(a).

Alternatively, respondent contends that petitioner has not adequately substantiated his traveling expenses as required by section 274(d) and has not shown that his traveling expenses were not reimbursable by Player. Section 274(d) generally requires a taxpayer to substantiate each element of an expenditure by adequate records or sufficient evidence corroborating his statements. Sec. 1.274-5T(c)(1), Temporary Income Tax Regs., 50 Fed. Reg. 46017 (Nov. 6, 1985). Taxpayers are required to maintain records sufficient to enable the Commissioner *161 to determine their correct tax liability. Sec. 6001; sec. 1.60011(a), Income Tax Regs.Section 1.6001-1(e), Income Tax Regs., further provides that the "books or records required by this section * * * shall be retained so long as the contents thereof may become material in the administration of any internal revenue law."

Petitioner's proffered substantiation consisted of a handwritten summary of his traveling expenses, which he had prepared for trial. Petitioner claims that the information contained in the summary was compiled from his receipts. Petitioner has not, however, produced those receipts because, as he stated: "I don't have them anymore." Petitioner did not offer an explanation as to why he no longer has the receipts. We find petitioner's handwritten summary that was prepared for trial insufficient to meet the heightened substantiation requirements of section 274(d) and the recordkeeping requirement of section 6001.

Finally, a trade or business expense deduction is not allowable to an employee to the extent that the employee is entitled to reimbursement from his employer for an expenditure related to his status as an employee. Lucas v. Commissioner, 79 T.C. at 7 (citing Heidt v. Commissioner, 274 F.2d 25 (7th Cir. 1959), *162 affg. T.C. Memo. 1959-31; Kennelly v. Commissioner, 56 T.C. 936, 943 (1971), affd. without published opinion 456 F.2d 1335 (2d Cir. 1972); Stolk v. Commissioner, 40 T.C. 345, 356 (1963), affd. 326 F.2d 760 (2d Cir. 1964); Podems v. Commissioner, 24 T.C. 21, 22-23 (1955)). Player had a reimbursement policy, which included a per diem expense policy. While we find it unlikely that most of petitioner's traveling expenses would have been eligible for reimbursement under Player's per diem expense policy, petitioner has failed to establish that his traveling expenses were not reimbursable under Player's reimbursement policy.

To reflect the foregoing,

Decision will be entered for respondent.