1999 Tax Ct. Memo LEXIS 377">*377 Decision will be entered under Rule 155.
1999 Tax Ct. Memo LEXIS 377">*379 MEMORANDUM OPINION
WOLFE, SPECIAL TRIAL JUDGE: Respondent determined a deficiency in petitioner's Federal income tax for 1993 in the amount of $ 4,0081999 Tax Ct. Memo LEXIS 377">*380 and an accuracy-related penalty under
The issues for decision are: (1) Whether a settlement payment that petitioner received from Central Washington University (CWU) is excludable from his gross income under
For purposes of convenience and clarity, we have combined the findings of fact and discussion of1999 Tax Ct. Memo LEXIS 377">*381 pertinent legal issues. Some of the facts were stipulated, and those facts are so found and are incorporated herein by reference. Petitioner resided in Yakima, Washington, at the time the petition was filed in this case.
1. PAYMENT FROM CENTRAL WASHINGTON UNIVERSITY
Before December 8, 1992, petitioner was employed as a maintenance mechanic by CWU. During his employment with CWU, petitioner underwent an operation on his right shoulder for an injury unrelated to his employment. After the shoulder surgery, petitioner received medical advice that he should avoid lifting amounts greater than 50 pounds. On October 20, 1992, petitioner reinjured his right shoulder while at work. Petitioner contends that the reinjury resulted when CWU required him to use a 60-pound jackhammer. Petitioner did not return to work at CWU after reinjuring his shoulder.
During his employment with CWU, through the union, petitioner filed against CWU at least five separate grievances, including a grievance relating to his shoulder injury. Petitioner testified that the other four grievances relate to CWU's "unfair labor practices, like taking * * * [his] radio and making it unsafe for * * * [him] to work, or taking1999 Tax Ct. Memo LEXIS 377">*382 * * * [his] driving privileges so * * * [he] had to use a wheelbarrow." Petitioner further testified that CWU authorities "were harassing * * * [him] and * * * [that his] union representative asked * * * [him] to file grievances to remedy * * * [CWU's] unprofessional conduct."
On December 8, 1992, petitioner and CWU entered into a settlement agreement that petitioner "will through his Union representative, withdraw all appeals and grievances." Petitioner also agreed to the following:
all claims, demands, rights, causes of action, the
administrative remedies that [petitioner] has or may have
against [CWU], its successors and assigns, and each and every
one of the past or present employees, students, agents,
attorneys, or representatives of [CWU], in their individual and
official capacities arising from or related to his employment
are satisfied, discharged and settled.
CWU agreed to pay petitioner $ 25,000, reduced by any compensation benefits (other than medical benefits) received as a result of his shoulder injury. On account of his shoulder injury, petitioner received a benefit from the Washington State Department of Labor and Industries in the1999 Tax Ct. Memo LEXIS 377">*383 amount of $ 3,604.80, of which $ 2,926.80 represented a benefit for lost compensation and $ 678 represented medical benefits. Accordingly, in March 1993, CWU paid petitioner $ 22,073.20. Petitioner contends that the payment from CWU is excludable from gross income under
Where amounts are received pursuant to a settlement agreement,1999 Tax Ct. Memo LEXIS 377">*384 the nature of the claim that was the actual basis for settlement controls whether such amounts are excludable from gross income under
Petitioner has failed to establish what part, if any, of the settlement amount here was based upon tort or tort type rights and was received on account of personal injuries. During his1999 Tax Ct. Memo LEXIS 377">*385 employment with CWU, petitioner filed at least four other grievances against CWU in addition to the grievance that pertained to his shoulder injury. Petitioner's own testimony shows that these four grievances were not filed on account of physical injury but instead were filed because petitioner claimed that he was being subjected to unfair labor practices. We find that he has failed to prove that any of these four grievances were tort type claims for personal injuries.
From this record, we cannot determine the amount, if any, of the settlement payment allocable to tort type claims for personal injuries. The agreement contains broad language relieving CWU from liability, and the settlement agreement does not specifically allocate any portion of the amount paid to petitioner's shoulder injury. Under these circumstances, we hold that the payment from CWU is not excludable from petitioner's 1993 gross income. See
2. SCHEDULE C DEDUCTIONS
After leaving CWU, petitioner engaged in an activity known as "Total Video". The purpose of this activity was to produce videos. On the Schedule C attached to his 1993 Federal1999 Tax Ct. Memo LEXIS 377">*386 income tax return, petitioner claimed the following deductions with respect to the video activity:
Advertising $ 600
Car and truck 1,210
Depreciation 3,686
Insurance 243
Legal 100
Office 100
Repairs 1,500
Supplies 200
Meals and entertainment 600
Utilities 610
Petitioner did not report any revenue from the video activity on his 1993 Federal income tax return. Respondent has determined that petitioner failed to substantiate entitlement to deductions for meals, repairs, depreciation, and car expenses.
Taxpayers are required to keep sufficient records to enable respondent to determine their correct tax liability. See sec. 6001;
Under certain circumstances, where a taxpayer establishes entitlement to a deduction but does not establish the amount of the deduction, the Court is permitted to estimate the amount allowable. See
Petitioner contends that the repair expense claimed on his Federal income tax return relates to repairs he made on a pickup truck that was used exclusively for business. Passenger automobiles are listed property under
Petitioner also testified that the1999 Tax Ct. Memo LEXIS 377">*389 depreciation deduction claimed on his 1993 Federal income tax return was by mistake misclassified and that the expenditure actually was in the nature of a rental expense.
We are not persuaded by petitioner's testimony or by the evidence he presented regarding his claim for a rental expense deduction. Petitioner asserts that during 1993 he paid $ 3,500 to rent a raft, with boat gear and oarsmen, for use in his video business. To substantiate his claimed rental expense, petitioner introduced a handwritten receipt. Petitioner failed to provide any further testimony regarding these items. The receipt presented by petitioner is not persuasive. The person who allegedly wrote the receipt was not available at trial. Under these circumstances, and in view of petitioner's failure to provide substantiating detail, we are not convinced that petitioner paid $ 3,500 to rent a raft, with boat gear and oarsmen. Based upon the foregoing, we hold that petitioner has failed to substantiate his claimed entitlement to a depreciation or rental deduction.
After considering the other receipts petitioner presented, we find that, with one exception, petitioner has failed to demonstrate that he is entitled 1999 Tax Ct. Memo LEXIS 377">*390 to the Schedule C deductions claimed on his 1993 Federal income tax return in excess of amounts allowed by respondent. Most of the expenses claimed by petitioner are subject to the strict substantiation requirements of
3. CASUALTY LOSS
Petitioner contends that on March 15, 1993, he purchased a boat and trailer for $ 10,000 cash. Petitioner further claims that the boat and trailer were stolen the next day, on March 16, 1993. Petitioner never reported this supposed theft to the police, nor did he file an insurance claim. On his 1993 Federal income tax return, petitioner claimed that his adjusted cost basis in the stolen property was $ 9,500. Petitioner has not provided any explanation concerning the discrepancy between his claimed adjusted cost basis and the alleged purchase price.
Petitioner has failed to substantiate entitlement to a theft loss deduction. In support of his position, petitioner introduced a handwritten receipt from the purported seller of the boat and an affidavit from an alleged friend. Neither of these persons was available at the trial, and petitioner's documentation is not persuasive. Simply put, we find it difficult to believe that petitioner purchased a boat, had it stolen, and then failed to report the theft to the police. Petitioner's account of this supposed theft lacks credibility and in the absence of persuasive and admissible corroborating evidence, we refuse to rely on petitioner's self- serving testimony. See
4. CHARITABLE CONTRIBUTION
On his 1993 Federal income tax return, petitioner claimed charitable contributions in cash or check in the amount of $ 3,767. Respondent has determined that petitioner has not substantiated entitlement to a charitable contribution deduction in an amount greater than $ 267.
During the trial, petitioner presented an unsigned document entitled, "Quarterly Report of Giving", and a letter from his church. Both documents are unpersuasive. The document entitled "Quarterly Report of Giving" was not signed by a church official, even though it provided space for a signature. The church letter does not even state a definite contribution amount.
Petitioner also claims that he contributed electrical equipment to Perry Technical Institute and an organization known as "N.P.O.". 1 Petitioner has failed to introduce any evidence that demonstrates that these alleged donees were qualified charitable organizations. Moreover, these donees are not listed in IRS Publication 78, "Cumulative List of Organizations Described in
1999 Tax Ct. Memo LEXIS 377">*394 For the foregoing reasons, we hold that petitioner is not entitled to a deduction for charitable contributions in an amount greater than the amount determined by respondent.
5. UNREIMBURSED EMPLOYEE EXPENSES AND IRA CONTRIBUTION DEDUCTIONS
On his 1993 Federal income tax return, petitioner claimed a deduction for unreimbursed employee expenses in the amount of $ 5,700, and an IRA contribution deduction in the amount of $ 2,000. Respondent has determined that petitioner failed to substantiate the claimed IRA deduction and was entitled only to a deduction for unreimbursed employee expenses in the amount of $ 224. Petitioner has failed to present any documentation or testimony to support his claimed deductions. Accordingly, petitioner is not entitled to a deduction for unreimbursed employee expenses in an amount greater than the amount determined by respondent and is not entitled to a deduction for IRA contributions.
6. ACCURACY-RELATED PENALTY
To reflect the foregoing,
Decision will be entered under Rule 155.
1. We note that petitioner did not claim a contribution of property other than money on his 1993 Federal income tax return.↩