1999 Tax Ct. Memo LEXIS 262">*262 Decision will be entered under Rule 155.
MEMORANDUM OPINION
1999 Tax Ct. Memo LEXIS 262">*263 DINAN, SPECIAL TRIAL JUDGE: This case was heard pursuant to the provisions of section 7443A(b)(3) and Rules 180, 181, and 182. 1
1999 Tax Ct. Memo LEXIS 262">*264 Respondent determined deficiencies in petitioners' Federal income taxes for 1990, 1991, and 1992 in the amounts of $ 6,959, $ 7,039, and $ 8,013, respectively, and accuracy-related penalties pursuant to
The issues for decision are: (1) The amount of rents received by petitioners during the taxable years in issue; (2) whether petitioners are entitled to any deductions with respect to the rented property; (3) whether petitioners are entitled to any deductions1999 Tax Ct. Memo LEXIS 262">*265 for unreimbursed employee business expenses; (4) whether petitioners are entitled to charitable contribution deductions in excess of the amounts allowed by respondent; and (5) whether petitioners are liable for the
1999 Tax Ct. Memo LEXIS 262">*267 Some of the facts have been stipulated and are so found. The stipulations of fact and attached exhibits are incorporated herein by this reference. Petitioners resided in Chesapeake, Virginia, on the date the petition was filed in this case.
Petitioner husband worked as an auditor for the Army Corps of Engineers during the taxable years in issue. Petitioner wife worked as a schoolteacher during the taxable years in issue. Petitioners reside at 2105 Hollins Court in Chesapeake, Virginia.
1999 Tax Ct. Memo LEXIS 262">*268 Petitioners purchased the residence of petitioner wife's parents, Mr. and Mrs. Charity, and her maternal grandmother (the Charitys) in 1987. This residence is located at 2117 Hollins Court. The Charitys continued to use 2117 Hollins Court as their residence after the sale and paid petitioners rent for such use.
The first issue for decision is the amount of rents received by petitioners during the taxable years in issue.
On Schedules E attached to1999 Tax Ct. Memo LEXIS 262">*269 their 1990, 1991, and 1992 returns, petitioners reported "rents received" from 2117 Hollins Court in the amount of $ 7,200 per year. This amount is equal to the fair rental value appraisal of 2117 Hollins Court obtained by petitioner in 1988 from Eagle Realty, a local real estate agency. In the statutory notice of deficiency, respondent determined that petitioners received rents from 2117 Hollins Court during 1990, 1991, and 1992 in the amounts of $ 8,400, $ 8,400, and $ 11,700, respectively.
Petitioner husband testified that the Charitys paid $ 500 per month as rent during the taxable years in issue. He further testified that petitioners reported their "rents received" on their tax returns as $ 7,200 per year ($ 600 per month), on the advice of one of respondent's revenue agents, in order to satisfy the "fair rental requirement" of
Based on petitioner husband's testimony and the lack of any evidence which supports respondent's determinations of the "rents received", we find that the Charitys paid $ 500 per month during the taxable years in issue for their use of 2117 Hollins Court. We hold that petitioners received rents in the amount of $ 6,000 during 1990, 1991, and 1992.
The second issue for decision is whether petitioners are entitled to any deductions with respect to 2117 Hollins Court.
Petitioners claimed rental expenses for 1990, 1991, and 1992 in the amounts of $ 25,453, $ 23,586, and $ 23,859, respectively. In the statutory notice of deficiency, respondent limited the deductible amounts of petitioners' substantiated expenses to the rents which he determined they had received on the ground that "the rental arrangement with [their] relatives was not at fair market value." Respondent also determined that petitioners only substantiated $ 11,735, $ 14,717, and $ 12,247, respectively, of the expenses claimed on their 1990, 1991, and 1992 returns.
Since the Charitys paid only $ 500 per month for their use of 2117 Hollins Court as their principal residence and its fair rental value was at least $ 600 per month (based on Eagle Realty's 1988 estimate), their personal use of 2117 Hollins Court is treated as petitioners' personal use for every day of the taxable years in issue. Thus, under
Pursuant to
Based on the record, we find that petitioners paid the following amounts 3 with respect to 2117 Hollins Court:
1999 Tax Ct. Memo LEXIS 262">*275 Year Interest Taxes
____ ________ ______
1990 $ 4,522 $ 1,140
1991 6,881 1,180
1992 4,659 1,195
We hold that petitioners are entitled to additional Schedule A itemized deductions for the foregoing amounts of interest and taxes paid on 2117 Hollins Court under section 163(h)(3) and section 164(a), respectively. See infra note 5.
The third issue for decision is whether petitioners are entitled to deductions for unreimbursed employee business expenses.
On Schedules A and Forms 2106 attached to their 1990, 1991, and 1992 returns, petitioners claimed unreimbursed employee business expenses, before the section 67(a) limitations, as follows:
1990 1991 1992
______ ______ ______
Vashon C. Jackson $ 4,222 $ 4,889 $ 5,182
Beverly C. Jackson 1,950 2,795 4,680
______ ______ ______
6,172 7,684 9,862
====== ====== ======
In the statutory notice of deficiency, 1999 Tax Ct. Memo LEXIS 262">*276 respondent disallowed any deductions for the claimed expenses.
Petitioners admit that some of their employee business expenses were reimbursed by their respective employers. They contend, however, that some of their employee business expenses were not reimbursed and therefore are deductible.
Petitioners argue that petitioner husband was reimbursed for the use of his automobile at mileage rates which were less than the "standard mileage rates" established by respondent for the taxable years in issue. 4 They contend that the differences in the rates are deductible as unreimbursed employee business expenses. Petitioner husband's travel vouchers show that he was generally reimbursed at the rate of 24 cents per mile in 1990 and early 1991 and at the rate of 25 cents per mile in late 1991 and 1992 and, on limited occasions, at 9-
1999 Tax Ct. Memo LEXIS 262">*278 Based on the travel vouchers and petitioner husband's testimony, we find that petitioners have substantiated the number of miles which they claimed petitioner husband used his automobile in connection with his employment as an auditor. See sec. 1.274- 5T(b)(6), Temporary Income Tax Regs.,
Petitioners also argue that petitioner wife was not reimbursed for certain expenses which she paid in connection with her employment as a schoolteacher. Petitioner wife did not testify at trial. Petitioners submitted some records of her claimed vehicle and travel expenses for 1991 which are not helpful because they do not indicate whether or not the listed expenses were reimbursed. They submitted no records of her expenses for 1990 or 1992. After reviewing the record, we find that1999 Tax Ct. Memo LEXIS 262">*279 petitioner husband's testimony with respect to petitioner wife's claimed expenses and the little written evidence in the record does not satisfy the substantiation requirements of
We hold that petitioner husband's unreimbursed expenses for the use of his automobile in the course of his employment as an auditor are deductible as miscellaneous itemized deductions to the extent the total of such expenses and petitioners' other allowed miscellaneous itemized deductions for the taxable years in issue exceed the section 67(a) limitation for such years.
The fourth issue for decision is whether petitioners are entitled to charitable contribution deductions in excess of the amounts allowed by respondent. Petitioners claimed and respondent disallowed in the statutory notice of deficiency deductions for charitable contributions as follows:
1990 1991 1992
______ ______ ______
Claimed $ 6,892 $ 5,300 $ 5,300
Disallowed 5,419 4,270 4,168
______ ______ ______
Allowed 1,473 1,030 1,132
====== ====== ======
Respondent allowed petitioners charitable contribution deductions in excess of $ 1,000 for each of the taxable years in issue. We find that petitioners have failed to substantiate charitable contributions in excess of the allowed amounts. Accordingly, we hold that petitioners are not entitled to charitable contribution deductions in excess of the amounts allowed by respondent.
The fifth issue for decision is whether petitioners are liable for the
Respondent determined that petitioners are liable for the accuracy-related penalty 1999 Tax Ct. Memo LEXIS 262">*281 imposed by
Based on the record, we find that petitioners have not proved that their underpayments attributable to the disallowed charitable contribution deductions were due to reasonable cause or that they acted in good faith. We hold that petitioners are liable for the
To reflect the foregoing,
Decision will be entered under Rule 155. 5
1999 Tax Ct. Memo LEXIS 262">*283
1. Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the taxable years in issue. All Rule references are to the Tax Court Rules of Practice and Procedure.↩
2. It appears that respondent erroneously determined that all of the substantiated expenses were deductible under
3. These amounts consist of the interest and taxes determined by respondent in the statutory notice of deficiency to have been substantiated. We find that petitioners have failed to substantiate the "other interest" claimed by them and disallowed by respondent which they claim was paid on a promissory note secured by a second deed of trust on 2117 Hollins Court.↩
4. The standard mileage rates for an employee's use of his own passenger vehicle for business purposes during 1990, 1991, and 1992 were 26 cents, 27-1/2 cents, and 28 cents, respectively. See
5. We lack jurisdiction over any increased deficiencies which may result from our holdings on the issues in this case because respondent has not asserted any claim for increased deficiencies. See sec. 6214(a).↩