Decision will be entered for respondent.
During 1987, petitioner (P) was a business manager at two automobile dealerships. P claimed various employee business expense deductions, primarily for business meals.
1.
2.
3.
MEMORANDUM FINDINGS OF FACT AND OPINION
CHABOT,
Additions to Tax | ||||
Year | Deficiency | Sec. 6653(a)(1)(A) | Sec. 6653(a)(1)(B) | Sec. 6661 |
1987 | $ 20,272 | $ 1,014 | 11997 Tax Ct. Memo LEXIS 126">*127 | $ 5,068 |
After a deemed concession by petitioner, 2 the issues for decision are as follows: (1) Whether petitioner is entitled to various itemized employee business expense deductions; (2) Whether petitioner is liable for additions to tax under (3) Whether petitioner is liable for additions to tax under
FINDINGS OF FACT
Some of the facts have been stipulated; the stipulations and the stipulated exhibits are 1997 Tax Ct. Memo LEXIS 126">*128 incorporated herein by this reference.
When the petition was filed in the instant case, petitioner resided in Syosset, New York.
Petitioner has a degree from Baruch College (CUNY) and a Masters in Business Administration degree from Adelphi University. During 1987, petitioner was employed by Crabtree Toyota, Inc., and Crabtree Hyundai, Inc. (hereinafter sometimes collectively referred to as the Crabtree Dealerships). The Crabtree Dealerships were located in New Rochelle, Westchester County, New York, and were in the business of selling automobiles. In 1987, Crabtree also had Mazda, Cadillac, Mitsubishi, Suzuki, and Nissan dealerships in New Rochelle, and a Ford dealership in Larchmont, also in Westchester County.
Petitioner was employed at the Crabtree Dealerships as a business manager, which position was sometimes referred to as a finance and insurance manager. 3 The Crabtree Dealerships required business managers to be in the showrooms from 50 to 70 hours a week. Petitioner's duties at the Crabtree Dealerships were to (1) arrange financing, (2) sell insurance and warranties, (3) assist customers with their automobile registration, and (4) make leasing arrangements. Petitioner's 1997 Tax Ct. Memo LEXIS 126">*129 duties as a business manager generally took place after a deal was agreed to for the sale of an automobile. However, at times, petitioner arranged the automobile sale.
Petitioner received $ 163,289 commission income from the Crabtree Dealerships in 1987. Petitioner's business manager commissions were directly tied to the amount of financing and other arrangements he successfully concluded and were not based on a pool of all business managers at the Crabtree Dealerships. In those instances when petitioner arranged for sales of automobiles, not merely financing, etc., petitioner's commissions were based on the entire sales price. Petitioner sold about 50 automobiles in 1987.
When petitioner referred customers to other Crabtree Dealerships, he earned commissions from the resulting sales. Petitioner's Forms W-2 for 1987, report income only from Crabtree Hyundai, Inc., and Crabtree Toyota, Inc. 41997 Tax Ct. Memo LEXIS 126">*130
The Crabtree Dealerships had a busy year in 1987. Banks competed to obtain the Crabtree Dealerships' financing business in 1987. Petitioner maintained close relationships with representatives of banks and other financial institutions, such as insurance companies and leasing companies, in order to be sure that, once a deal was made between the customer and the dealership, the financing would be approved by a bank or other financial institution.
Crabtree sold the Crabtree Dealerships around mid-1989, and Crabtree no longer had access to the Crabtree Dealerships' books and records.
During 1987, petitioner resided in Syosset, New York, which is located in northeastern Nassau County, on Long Island. The Crabtree Dealerships are about 34 miles from petitioner's residence. Driving between Syosset and New Rochelle ordinarily requires 1997 Tax Ct. Memo LEXIS 126">*131 one to pass through Queens and Bronx Counties, and to cross the East River by one of three toll bridges.
Petitioner recorded in a diary the amounts he claims he spent each day for business meals. Each entry in petitioner's diary for meals lists the name of the restaurant, the names of the people present, the type of meal (breakfast, lunch, or dinner), and the cost of the meal. Petitioner's diary does not show the business purpose of any of these meals and does not show what was the business relationship to petitioner of any of the people present. The business meals shown in the diary include 274 dinners, 104 lunches, and 10 breakfasts. For 1987, petitioner made 388 such entries, showing a total cost of $ 65,777.39 over 304 days. Petitioner's diary shows entries for every day of 1987 except Sundays, six holidays, and one 3-day vacation.
Petitioner paid for many of his business meals in currency and others of his business meals by credit card. Petitioner's entries in his diary for business meals average about $ 5,481 a month.
Many of the restaurants listed in the diary, including those shown as lunch sites, are located within a few miles of 1997 Tax Ct. Memo LEXIS 126">*132 petitioner's home on Long Island. Some of the listed restaurants are in The Bronx, some in Manhattan, some in Westchester, and some in Connecticut.
Thomas Mercer (hereinafter sometimes referred to as Mercer) hired petitioner to work for the Crabtree Dealerships about 1985 or late 1984. In 1986, Mercer was the general manager of Crabtree Toyota, Inc., Crabtree Mazda, Inc., and Crabtree Hyundai, Inc. In 1986 or 1987, Mercer left those dealerships to become president of an unrelated auto leasing company. According to petitioner's diary, petitioner entertained Mercer once in 1987. In fact, Mercer had dinner with petitioner once or twice during 1987, but he (Mercer) paid for the meals.
Paula Wright (hereinafter sometimes referred to as Wright) was a senior credit analyst at Chemical Bank who dealt with the Crabtree Dealerships, among about 35 auto dealerships, during 1987. At that time, Wright worked in Jericho, which is about 3 miles southwest of Syosset. According to petitioner's diary, petitioner entertained Wright only once during 1987. In fact, Wright had business dinners with petitioner many times during 1987. These dinners, which sometimes involved others from the Crabtree Dealerships 1997 Tax Ct. Memo LEXIS 126">*133 and sometimes involved others from Chemical Bank, generally took place at restaurants in or near Syosset or Glen Cove. Glen Cove is about 7 miles northwest of Syosset and Jericho. Petitioner paid for these dinners with Wright.
John Sullivan (hereinafter sometimes referred to as Sullivan) was a retail sales representative with Chemical Bank until around the end of May or beginning of June 1987, at which time he became a credit specialist with Citibank. As a retail sales representative with Chemical Bank, Sullivan had a business relationship with petitioner. As a credit specialist with Citibank, Sullivan did not have a business relationship with petitioner. According to petitioner's diary, petitioner entertained Sullivan seven times in 1987--three times at lunch and four times at dinner. According to petitioner's diary, one lunch and one dinner took place while Sullivan was with Chemical Bank, and two lunches and three dinners took place while Sullivan was with Citibank. In fact, while working for Chemical Bank, Sullivan went out to lunch weekly or biweekly with petitioner; most of the time Chemical Bank paid for the lunches, sometimes petitioner paid. After Sullivan left Chemical Bank, 1997 Tax Ct. Memo LEXIS 126">*134 the few times he had lunch with petitioner, petitioner paid for the lunch. Sullivan never had dinner with petitioner. Sullivan does not know many of the restaurants at which petitioner's diary shows that he ate with petitioner. Sullivan does not know some of the people petitioner's diary shows as having shared a meal with him and petitioner.
In addition to his diary, petitioner presented the bottom perforated portion of restaurant checks (hereinafter sometimes collectively referred to as the stubs) as substantiation for his meals expenses. Less than half the stubs have the name of the restaurant imprinted on them. On most of the stubs there is a name of a restaurant, a month and day but not a year, and an amount, handwritten in pencil. Petitioner wrote the handwritten information on most, if not all, of the stubs that have handwritten information.
Table 1 shows the information recorded in petitioner's diary about meals at Frank's Steaks in 1987. All of these meals are shown in the diary as dinners.
Table 1 | ||
Date | Amount | Diners (in addition to petitioner) |
Jan 05 | $ 132.80 | B. Newman, A. McDermott |
Feb. 21 | 203.75 | A. Loomis, C. Walsh, N. Hawkins |
Mar. 14 | 235.50 | C. Shiflet, W. Keller, J. Orr |
May 08 | 193.50 | L. Lewis, M. Lewis, N. Hannon |
Jun. 01 | 196.85 | G. Becker, J. Ferraro, D. Voelker |
Aug. 04 | 212.45 | T. Schwitz, N. Annarella, C. Bouse |
Aug. 19 | 206.35 | G. Levy, N. Pierce, F. Loria |
Sep. 30 | 196.00 | J. Gold, M. Hong, J. Niceberg |
Oct. 09 | 265.00 | B. Ragan, R. Grossman, D. Dearney |
Oct. 22 | 223.35 | J. Paevor, N. Cohen, J. Cowen |
Dec. 30 | 246.60 | M. Smith, J. Fox, M. Hannon |
Total | 2,312.15 |
1997 Tax Ct. Memo LEXIS 126">*135 Nine of these 11 dinners at Frank's Steaks in 1987 were "substantiated" by stubs which do not have the name of the restaurant imprinted on them; there are not any stubs for the remaining two dinners.
Frank's Steaks, a restaurant on the border of Westbury and Jericho, opened under that name in July 1988. From January 1987 to July 1988 there was no Frank's Steaks, and there were not any restaurant operations at the Frank's Steaks location. For about a year before that hiatus, the restaurant at this location was named "The Peculiar Penguin". Before that, the restaurant at this location was named "The Great American Cafe". There are no other restaurants in the Westbury or Jericho area named "Frank's" or "Frank's Steaks". There were only two restaurants in the New York City metropolitan area in 1987 with "Frank's" in the name; one was "Frank's" in Manhattan at 14th St. and 9th Ave., and the other was "Frank's Pizzeria" in Huntington, in the northwest corner of Suffolk County, about 6 miles west of Syosset. The stubs that petitioner presented as substantiation of his dinners at Frank's Steaks were not the sort of stubs that had ever been used at Frank's Steaks or at its predecessor, The 1997 Tax Ct. Memo LEXIS 126">*136 Peculiar Penguin.
Petitioner presented two stubs to substantiate two meals at Montauk Yacht Club. Montauk is at the easternmost end of Long Island, more than 80 miles east of Syosset. One stub shows $ 219.35 for dinner on July 29; the other shows $ 211 for dinner on September 1. Both stubs are imprinted with the name of the restaurant. Both stubs have the serial no. 05284 imprinted on them. One stub is light paper, with the serial number in red; the other is heavy paper, with the serial number in dark gray. It is evident that the two stubs were parts of separate copies of a single bill, and not stubs for two separate bills almost 5 weeks apart (July 29 and Sept. 1).
Petitioner's diary shows that on Friday, June 26, 1987, he took three people to dinner at Smith & Wollensky, at a cost of $ 212.75. Petitioner's diary does not show any other meals for that day. Petitioner presented two stubs to substantiate meals on June 26, each in the amount of $ 212.75. One stub is imprinted with the name of the restaurant, Smith & Wollensky. The other stub does not have any name imprinted on it. The date and amount were hand-written on both stubs. That June 26 dinner is the only meal shown in the entire 1997 Tax Ct. Memo LEXIS 126">*137 diary as costing $ 212.75.
Petitioner's diary shows that on Tuesday, July 7, 1987, he took three people to dinner at Gian-Lorenzo Ristorante, at a cost of $ 193.50. Petitioner's diary does not show any other meals for that day. Petitioner presented two stubs to substantiate meals on July 7, each in the amount of $ 193.50. Neither stub has the name of the restaurant imprinted on it. The stubs are of the same style, but with different serial numbers. Petitioner's diary shows a $ 193.50 dinner for January 31 and another one for May 8; there are different stubs to "substantiate" each of these meals. The diary does not show any other meals costing $ 193.50.
Petitioner's diary shows that petitioner took people to meals at North Shore Steak House on four occasions in 1987--all were dinners during the 16-week period from September 4 through December 23. Petitioner presented stubs to substantiate each of these four dinners. None of these four stubs has a restaurant's name imprinted on it. Each of these four stubs is in a style different from the other three.
There are numerous instances in which a single restaurant is represented by stubs of different styles. There are numerous instances in 1997 Tax Ct. Memo LEXIS 126">*138 which stubs of a single style with close receipt numbers are represented as coming from different restaurants.
The Crabtree Dealerships did not have a formal reimbursement policy for meals and entertainment expenses incurred by an employee. The Crabtree Dealerships' informal policy was to reimburse an employee for meals and entertainment expenses if the employee was asked to incur the expense, but not otherwise.
In petitioner's diary he noted mileage amounts for each of the days on which he also noted business meals, intending to show how many business miles he had driven that day. The mileage amounts that petitioner so noted in his diary total 28,867. In petitioner's diary he noted parking and toll amounts for some of the days on which he also noted business meals, intending to show business parking and tolls. The parking toll amounts that petitioner so noted in his diary total $ 1,101.75.
The Crabtree Dealerships provided various demonstration vehicles to petitioner for his use during 1987. Petitioner had exclusive use of these vehicles while the vehicles were in his possession. Petitioner used these vehicles to commute to and from work and for other personal purposes. 1997 Tax Ct. Memo LEXIS 126">*139 Petitioner did not incur any repair expenses relating to these vehicles. Petitioner paid for gasoline, for oil and other maintenance, and $ 35 per month rental fee.
Petitioner's 1987 tax return was prepared by Morris A. Levine (hereinafter sometimes referred to as Levine), a C.P.A., who signed the tax return as preparer on April 10, 1988. This tax return was filed timely.
Petitioner's 1987 tax return was the first tax return Levine prepared for petitioner. Levine prepared this tax return primarily from statements made by petitioner and not from underlying books or records. In particular, petitioner did not give petitioner's diary to Levine.
On his 1987 tax return, petitioner claimed the deductions shown in table 2.
Table 2 | ||
Form 2106 | ||
Meals and entertainment | $ 62,500 | |
Less: 20 percent | 1 12,500 | $ 50,000 |
Vehicle expenses | 4,016 | |
Parking fees, tolls, and local trans. | 900 | |
Other business expenses | 840 | |
Total Form 2106 | $ 55,756 | |
Schedule A | ||
Form 2106 | $ 55,756 | |
Tax preparation fees | 250 | |
56,006 | ||
Less: 2 percent A.G.I. | 21997 Tax Ct. Memo LEXIS 126">*140 3,350 | |
Net miscellaneous deductions | 52,656 |
On the Form 2106 of his 1987 tax return, petitioner arrived at the $ 4,016 vehicle expenses amount shown in table 2, by the route described in table 3.
Table 3 | ||
Total mileage vehicle used | 35,000 | mi. |
Business use | 27,500 | mi. |
Percent of business use | 78.571 | |
"Average daily round trip commuting distance" | 10 | mi. 1 |
Total commuting | 2,500 | mi. 2 |
Other personal mileage | 5,000 | mi. |
Gasoline, oil, repairs, vehicle ins. | $ 3,361 | |
Vehicle rentals | 1,750 | |
Total | 5,111 | |
Total times percent business use (78.571) | 4,016 |
In the notice of deficiency, respondent disallowed all the deductions described
The information in petitioner's diary and the stubs was not recorded at or near the times of the events described therein. Petitioner's diary and the stubs are not "adequate 1997 Tax Ct. Memo LEXIS 126">*141 records" for purposes of
Petitioner paid for some meals that were expenses of his trade or business as an employee.
Petitioner's business use of his vehicles was well under 1,000 miles.
The entire underpayment is due to petitioner's negligence.
OPINION
Respondent contends that, under
Petitioner maintains that (1) he has satisfied the requirements of
We agree with respondent that petitioner has failed to establish that he is entitled to any of these deductions.
Deductions are a matter of legislative grace, and a taxpayer seeking a deduction has the burden of overcoming the presumption of correctness that attaches to respondent's factual determinations in the notice of deficiency.
However,
We consider first petitioner's claimed business meals expenses, then his other claimed business expenses.
The parties agree that petitioner's claimed business meals expenses 1997 Tax Ct. Memo LEXIS 126">*145 are not deductible if they fail to meet the requirements of
Petitioner's right to deduct his claimed meals and entertainment expenses turns on (1) whether the diary and the stubs constitute adequate records for purposes of
Under
Petitioner's diary paints a picture of an indefatigable worker (the diary shows that he had business meals on 304 days, even though his tax return showed that he worked only 250 days during 1987) who was, if anything, overly cautious on his tax return (his diary showed the meals cost him $ 65,777.39, but he deducted only $ 62,500).
However, neither the diary nor the stubs show (1) the business purpose of any of the claimed business meals or (2) the business relationship to petitioner of any of the people with whom he dined. In addition, substantially all the other information in the record about business meals contradicts the information that is presented in the diary and stubs. Mercer testified that he, not petitioner, paid for their dinners. Wright testified that she had many dinners with petitioner during 1987, 1997 Tax Ct. Memo LEXIS 126">*147 and that petitioner paid for them, but petitioner's diary shows Wright as a guest only once. Sullivan went to lunch with petitioner many times, but not to dinner, during 1987; petitioner's diary shows Sullivan as petitioner's guest for four dinners and only three lunches. Petitioner's diary shows 11 dinners at Frank's Steak in 1987; 9 were purportedly substantiated by stubs. However Frank's Steaks did not open until July 1988, and the predecessor restaurant, The Peculiar Penguin, closed in January 1987. Also, the stubs petitioner presented to substantiate the Frank's Steaks business meals were of a style that had never been used by either Frank's Steaks or The Peculiar Penguin. In addition, our findings set forth numerous inconsistencies among the stubs.
Petitioner's cause is not helped by his testimony that he relied on stubs that he filled in, even where he had paid the bill by credit cards and thus had credit card receipts. He testified that the stubs that he filled in were just as trustworthy as credit card receipts.
The record does not include meaningful evidence to corroborate the reliability of petitioner's diary or stubs. Nor has petitioner offered as adequate explanation for 1997 Tax Ct. Memo LEXIS 126">*148 the inaccuracies and inconsistencies which are identified with respect to the diary and stubs. Based on the record, we conclude, and we have found, that petitioner's diary and the stubs are not adequate records for purposes of
On brief, petitioner attempts to counter the Frank's Steaks evidence as follows: The one restaurant representative called by respondent, Brent Gindel, the owner of a restaurant known as Frank's Steaks, was unable to identify the receipts provided by the petitioner. Since the evidence showed there were other restaurants known as "Frank's" in the New York metropolitan area that were open during 1987, Mr. Gindel's testimony is incompetent to establish anything concerning the restaurant receipts proffered by Strong.
Before Brent Gindel testified, petitioner testified that the "Frank's" 1997 Tax Ct. Memo LEXIS 126">*149 in question was "on the Westbury Jericho border on Long Island". About half an hour later, petitioner testified that the "Frank's" in question was "I believe in Westbury." Although petitioner's responses between these two occasions were somewhat evasive, he did not suggest, in his pre-Gindel testimony, that the "Frank's" or "Frank's Steak" referred to in his diary and the stubs was in any other location than the Westbury-Jericho border. Two days after Gindel's testimony, petitioner was on the witness stand again. On this occasion, counsel for both sides "danced around" the question of what petitioner had stated about Frank's in a response to an interrogatory. Because of the form of respondent's counsel's questions, and respondent's counsel's tactical decision to not offer into evidence the interrogatory and petitioner's written response thereto, the evidence of record is not clear as to petitioner's statements in discovery. However, it is clear that, up to that point in the trial, petitioner had identified the Frank's Steaks mentioned in his diary and on some of the stubs as the restaurant on the border of Westbury and Jericho. Also, Brent Gindel's testimony clearly contradicted petitioner's 1997 Tax Ct. Memo LEXIS 126">*150 testimony. This point was important--petitioner claimed in his diary to have taken 32 different people to Frank's in 1987, and to have spent more than $ 50 per person per meal there that year.
We conclude, and 1997 Tax Ct. Memo LEXIS 126">*151 we have found, that petitioner's diary and the stubs are not "adequate records" for purposes of
Substantiation by "sufficient evidence corroborating the taxpayer's own statement" requires the cost, time, place, and date of the expenditure to be corroborated by "direct evidence," while business purpose or business relationship may be shown by "circumstantial evidence."
The witnesses who testified about sharing meals with petitioner were unable to support the specifics of petitioner's testimony or diary. None of the witnesses could identify (1) any particular date on which they had dined with petitioner, (2) where they had eaten, (3) who else was present during the meal, or (4) the amount of any bill. Some of the witnesses could not even recollect ever being at some of the restaurants that, according to the diary, they had dined at, nor could they recollect ever having met the people who, according to the diary, shared a meal with them. Indeed, with the exception of general assertions by some of the witnesses that they attended meals with petitioner, 1997 Tax Ct. Memo LEXIS 126">*152 the testimony did not provide an adequate description of the circumstances surrounding any of the meals. Not only was there a total failure of direct evidence to corroborate petitioner's statement as to cost, time, place, and date, but some of the witnesses' testimony directly contradicted at least some of petitioner's statements. See
Thus, we conclude, and we have found, that the record does not include "sufficient evidence" of corroboration for purposes of
Petitioner argues that he should not be held to strict compliance with
We believe that it is more likely than not that petitioner's diary and the stubs were created by petitioner well after the events they purport to describe. We are satisfied that petitioner did, indeed, have some business meals in 1987 for which deductions would have been allowable if contemporaneous records had been kept. However, petitioner failed to keep contemporaneous records, and his efforts to create contemporaneous-appearing records have succeeded only in destroying what modicum of credibility his testimony might otherwise have had. 8
Petitioner has wholly failed to meet the requirements 1997 Tax Ct. Memo LEXIS 126">*155 of
Under these circumstances, it is not necessary to examine the details of
We hold for respondent on this issue.
See
Expenses incurred in going from home to work, and from work to home, are generally treated as nondeductible personal expenses.
The claimed business use of the vehicles that the Crabtree Dealerships leased to petitioner is for business meetings 1997 Tax Ct. Memo LEXIS 126">*156 (such as with bank employees) and for demonstrations to customers and potential customers. Although we are satisfied that petitioner did have business meals in 1987, our efforts to determine the amount of business usage of petitioner's vehicles and the amount of petitioner's vehicle-related expenses have largely foundered on the inadequate record herein and on the contradictions in petitioner's contentions.
For reasons explained
Even if we were to find that petitioner substantiated some vehicle-related expenses, any such allowance would be well under $ 1,000. We note that both sides agree that the 2-percent floor on miscellaneous itemized deductions is $ 3,350.
We hold 1997 Tax Ct. Memo LEXIS 126">*158 for respondent on this issue.
Broadly speaking, for purposes of this provision, negligence is lack of due care or failure to do what a reasonable and ordinarily prudent person would do under the circumstances.
We agree with respondent. 1997 Tax Ct. Memo LEXIS 126">*160
Petitioner was obligated to keep and present adequate and accurate records of his trade or business expenses.
Levine testified that petitioner presented "papers" to Levine and gave certain information orally to Levine, but Levine could not recall the specifics. Petitioner's testimony on this 1997 Tax Ct. Memo LEXIS 126">*161 matter is consistent with, and no more detailed than, Levine's testimony. The following colloquy is illustrative: THE COURT: Mr. Strong, it appears that Mr. Levine prepared your 1987 tax return, is that correct? THE WITNESS: That's correct. THE COURT: When he prepared your tax return, did you simply give him the numbers or did you give him the documents and he figured out the numbers from the documents? THE WITNESS: No, I gave him the numbers. I provided the information to him. THE COURT: Did you give him the diary? THE WITNESS: No, sir. THE COURT: So, did you then total the information on the diary? You add up the mileage, the dollar amounts and so on? THE WITNESS: Yes, Your Honor.
As a general rule, the duty of filing accurate tax returns cannot be avoided by placing responsibility on an agent.
We hold for respondent on this issue.
If an item is not attributable to a tax shelter, then the understatement shall be reduced on account of the item, 1997 Tax Ct. Memo LEXIS 126">*163 and the addition to tax accordingly reduced, if (1) the taxpayer's treatment of the item was based on substantial authority, or (2) the taxpayer adequately disclosed on the tax return or in a statement attached to the tax return the relevant facts affecting the item's tax treatment.
Respondent has authority to waive this addition to tax, if the taxpayer shows there was reasonable cause for the understatement and the taxpayer acted in good faith.
Petitioner has the burden of proving error in respondent's determination that such an addition to tax should be imposed against him.
We hold for respondent on this issue.
To reflect the foregoing,
1. Unless indicated otherwise, all section references are to sections of the Internal Revenue Code of 1986 as in effect for the year in issue.↩
1. An amount equal to 50 percent of the interest due on $ 20,272.
2. In the notice of deficiency, respondent disallowed petitioner's claimed $ 250 tax preparation fee deduction. At the opening statement, this matter remained in dispute. On the third day of the trial, a witness was questioned about this matter. However, petitioner, who has the burden of proof, did not argue this matter on brief. We treat petitioner's failure to argue as, in effect, a concession by petitioner of this matter. See subpars. (4) and (5) of Rule 151(e);
3. The parties stipulated that petitioner was employed by the Crabtree Dealerships as a "salesperson" in 1987. Our finding, contrary to the stipulation, is in accord with petitioner's trial testimony and with both parties' proposed findings of fact.↩
4. The record in the instant case does not indicate how the amount of referral commission was determined, or what the mechanics were for petitioner to receive such a commission without a Form W-2's being issued by the dealership at which the referred sale occurred. Respondent appears to agree that the two Forms W-2 include all of petitioner's commission income from the Crabtree Dealerships and the related companies.
1. Petitioner acknowledges the limitation, and showed it on his tax return.
2. Petitioner acknowledges the limitation, and showed it on his tax return.
1. The parties have stipulated that the distance between petitioner's home and his workplace is about 34 miles; the roundtrip is about 68 miles.↩
2. Although the implication of the commuting items is that petitioner worked 250 days in 1987 (2,500 mi. divided by 10 mi. per day = 250 days) petitioner's diary, discussed supra, shows business meals on 304 days in 1987.↩
5. Sec. 162 provides, in relevant part, as follows: (a) In General.--There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, * * *↩
6. Sec. 274(d) provides, in relevant part, as follows: * * * * (d) Substantiation Required.--No deduction or credit 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 the taxpayer's own statement (A) the amount of such expense or other item, (B) the time and place of the travel, entertainment, amusement, recreation, or use of the facility or property, or the date and description of the gift, (C) the business purpose of the expense or other item, and (D) the business relationship to the taxpayer of persons entertained, * * *↩
7.
8. Our qualms about the credibility of petitioner's testimony may be illustrated by his statements about the number of days he worked. When confronted with his diary, he testified that he worked "well over 300 days." When confronted with his tax return, he testified that "that was a guess when I said 300", and that he probably went to work about 250 days in 1987. When asked how to reconcile his diary and his tax return, he responded-- I don't know, Your Honor, probably between 250 and 300. I can't be certain.↩
9. (a) Negligence.-- (1) In general.--If any part of any underpayment * * * is due to negligence or disregard of rules or regulations, there shall be added to the tax an amount equal to the sum of-- (A) 5 percent of the underpayment, and (B) an amount equal to 50 percent of the interest payable under
The later amendments of this provision by sec. 1015(b)(2)(A) of the Technical and Miscellaneous Revenue Act of 1988 (Pub. L. 100-647, 102 Stat. 3342, 3569), and by sec. 7721(a) of the Omnibus Budget Reconciliation Act of 1989 (OBRA 89--Pub. L. 101-239, 103 Stat. 2106, 2395) do not affect the instant case.
As a result of OBRA 89, the substance of former
10. (a) Addition to Tax.--If there is a substantial understatement of income tax for any taxable year, there shall be added to the tax an amount equal to 25 percent of the amount of any underpayment attributable to such understatement.