Judges: "Dean, John F."
Attorneys: Isabel Atizol, Pro se. Anna Kozoulina , for respondent.
Filed: Mar. 30, 2009
Latest Update: Dec. 05, 2020
Summary: T.C. Summary Opinion 2009-46 UNITED STATES TAX COURT ISABEL ATIZOL, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 13227-07S. Filed March 30, 2009. Isabel Atizol, pro se. Anna Kozoulina, for respondent. DEAN, Special Trial Judge: This case was heard pursuant to the provisions of section 7463 of the Internal Revenue Code (Code) in effect when the petition was filed. Pursuant to section 7463(b), the decision to be entered is not reviewable by any other court, and this opinio
Summary: T.C. Summary Opinion 2009-46 UNITED STATES TAX COURT ISABEL ATIZOL, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 13227-07S. Filed March 30, 2009. Isabel Atizol, pro se. Anna Kozoulina, for respondent. DEAN, Special Trial Judge: This case was heard pursuant to the provisions of section 7463 of the Internal Revenue Code (Code) in effect when the petition was filed. Pursuant to section 7463(b), the decision to be entered is not reviewable by any other court, and this opinion..
More
T.C. Summary Opinion 2009-46
UNITED STATES TAX COURT
ISABEL ATIZOL, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13227-07S. Filed March 30, 2009.
Isabel Atizol, pro se.
Anna Kozoulina, for respondent.
DEAN, Special Trial Judge: This case was heard pursuant to
the provisions of section 7463 of the Internal Revenue Code
(Code) in effect when the petition was filed. 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. Unless otherwise indicated,
subsequent section references are to the Code in effect for the
- 2 -
year in issue, and all Rule references are to the Tax Court Rules
of Practice and Procedure.
For 2004 respondent determined a $2,640 deficiency in
petitioner’s Federal income tax. The issue for decision is
whether petitioner is entitled to her claimed deduction for
unreimbursed employee expenses.1
Background
Some of the facts have been stipulated and are so found.
The stipulation of facts and the exhibits received into evidence
are incorporated herein by reference. When the petition was
filed, petitioner resided in New York.
During 2004 petitioner was employed with a New York City
public high school as a math teacher. The New York City
Department of Education required petitioner to obtain a master’s
degree in order to be certified in her subject area. She
attended classes at Lima College in New York and the University
of Santo Domingo during the years 1998 through 2003. Petitioner
traveled to the Dominican Republic and to various U.S. locations,
such as Florida, in order to attend class and to meet with her
professors. She completed the requirements for her master’s
1
Petitioner filed a “Motion To Restrain Assessment and
Collection & Motion to Entry Decision”. The motion to restrain
assessment and collection will be denied because it is precluded
by law. See sec. 7421. The motion for entry of decision will be
denied as moot on account of the Court’s decision.
- 3 -
degree on November 28, 2003. The degree was “Given in Santo
Domingo * * * on December 08, 2003.”
Petitioner was not reimbursed by the high school or the New
York State Department of Education for her expenses incurred in
pursuit of her master’s degree or her expenses related to her
profession as a teacher.2 Instead, petitioner claimed $20,800 in
miscellaneous itemized deductions for unreimbursed employee
expenses on her Schedule A, Itemized Deductions (before the 2-
percent floor). She also claimed the following itemized
deductions for 2004: (1) $2,300 in medical or dental expenses;
(2) $5,081 in State and local income tax; (3) $33,539 in home
interest expense; and (4) $1,076 in charitable contributions. In
sum, petitioner claimed total itemized deductions of $59,223, yet
she reported an adjusted gross income of just $63,665 on her 2004
Form 1040, U.S. Individual Income Tax Return.
Respondent issued a notice of deficiency to petitioner on
May 14, 2007. Respondent did not make any adjustments to
petitioner’s claimed itemized deductions except to disallow her
claimed deduction for unreimbursed employee expenses because she
had not verified it. At trial respondent asserted that
petitioner’s deduction for unreimbursed employee expenses was
denied because: (1) The items were deductible in 2003, the year
2
Petitioner did not claim deductions under sec. 62(a)(2)(D)
for any of her expenditures with respect to materials used in her
classroom.
- 4 -
in which petitioner completed her master’s degree; (2) the
expenses were personal expenses of petitioner, her daughter, or
someone else because the credit card statements were in the name
of petitioner’s daughter and “rarely” were any receipts in
petitioner’s name; and (3) the amounts were not properly
substantiated.
Discussion
I. Burden of Proof
The Commissioner’s determinations in a notice of deficiency
are presumed correct, and the taxpayer bears the burden to prove
that the determinations are in error. See Rule 142(a); Welch v.
Helvering, 290 U.S. 111, 115 (1933). But the burden of proof on
factual issues that affect the taxpayer’s tax liability may be
shifted to the Commissioner where the taxpayer introduces
credible evidence with respect to the issue and the taxpayer has
satisfied certain conditions. See sec. 7491(a)(1). Petitioner
has not alleged that section 7491(a) applies, and she has neither
complied with the substantiation requirements nor maintained all
required records. See sec. 7491(a)(2)(A) and (B). Accordingly,
the burden of proof remains on her.
II. Unreimbursed Employee Expenses for Education
As a general rule, section 162(a) authorizes a deduction for
all the ordinary and necessary expenses paid or incurred during
the taxable year in carrying on any trade or business. An
- 5 -
individual’s education expenditures are deductible as ordinary
and necessary business expenses if the education: (1) Maintains
or improves skills required by the individual in her trade or
business; or (2) meets the express requirements of the
individual’s employer or applicable law or regulation, which is
imposed as a condition to the retention by the individual of an
established employment relationship, status, or rate of
compensation. Sec. 1.162-5(a), Income Tax Regs.
A. Expenditures Before 2004
Petitioner provided a record she entitled “Educational
Expenses 2003-2004” and certain receipts described as follows:3
Date Description Amount
3/03 Lehman College $1,227.50
6/03 Hotel Green House 181.30
6/03 Hotel 960 128.00
6/03 Car rentals 377.00
9/03 Title fees UNPHU 43.33
9/03 Fees UNPHU 8.33
10/03 UASD 1,036.53
11/03 UASD 1,036.53
11/03 SEESCYI 30.00
12/03 State Education Department 300.00
12/03 Tuition USAD professor 2,000.00
12/03 USAD 1,500.00
12/03 Authentication fees 90.00
Not dated Authentication 90.00
Illegible Document with seal Illegible
Illegible UASD 5.00
10/15/03 Universidad Autonomade
Santo Domingo Illegible
Illegible Universidad Autonomade
Santo Domingo Illegible
3
Copies of several receipts are illegible because of poor
quality.
- 6 -
9/06/03 Universidad Nacional Pedro
Henriquez Urena 1,800.00
6/11/03 Secretaria De Estado De
Educacion Superior 900.00
9/05/03 Air waybill/Shipping invoice 32.00
Petitioner testified that she had made the expenditures
during the years 1998 through 2004. But she did not claim
deductions for the expenditures on her Federal income tax returns
until 2004 on account of the “accrual [method of accounting].”
Petitioner’s daughter testified that the academic year
started in June 2003 and extended to June 2004. Therefore,
petitioner did not claim the expenses in March when she filed her
return because she had not received information about her
expenses from the university. Thus, according to petitioner’s
daughter, the expenses are deductible in 2004.
Section 446(a) provides that taxable income shall be
computed under the method of accounting used by the taxpayer in
regularly computing the taxpayer’s income. Methods of accounting
include the cash method, the accrual method, or any combination
of those methods. See sec. 446(c); sec. 1.446-1(a), Income Tax
Regs.
Section 461(a) provides that deductions are to be taken in
the taxable year that is the proper taxable year under the method
of accounting used in computing the taxpayer’s taxable income.
Cash method taxpayers are generally entitled to a deduction in
the taxable year when the amounts are paid. Sec. 1.461-1(a)(1),
- 7 -
Income Tax Regs. Accrual method taxpayers generally become
entitled to a deduction when all events have occurred that
establish the fact of liability and the amount of the liability
can be determined with reasonable accuracy. Sec. 461(h)(4); sec.
1.461-1(a)(2), Income Tax Regs.4 But the “all events” test is
not treated as met until economic performance with respect to the
item occurs. Sec. 461(h); Restore, Inc. v. Commissioner, T.C.
Memo. 1997-571 n.5, affd. without published opinion 174 F.3d 203
(11th Cir. 1999). If a person provides services to the taxpayer,
then economic performance occurs as the person provides the
services. Sec. 461(h)(2)(A)(i).
The Court need not decide whether petitioner computed her
taxable income on the cash method, the accrual method, or some
combination of those methods. Petitioner’s entitlement to her
deductions for educational expenses arose in 1998 through 2003
either when the amounts were paid (under the cash method) or when
the university provided classes or lectures to petitioner and she
could no longer request a refund of her tuition from the
university (under the accrual method). See Mitchell v.
Commissioner, 131 T.C. __, __ (2008) (slip op. at 41) (Holmes,
4
To be properly accruable under the “all events test”:
(1) The liability must be binding and enforceable, (2) the
liability must not be contingent on a future event, (3) the
liability must be certain as to amount, and (4) the debtor must
have a reasonable belief that the liability will be paid. United
Control Corp. v. Commissioner, 38 T.C. 957, 967 (1962).
- 8 -
J., concurring) (for most people our tax system requires an
annual reporting of income and deductions for each calendar year
separately). But to the extent that petitioner might have used
the accrual method for her educational expenses, she has not
proven that economic performance did not occur until 2004.5 See
INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992) (stating
that deductions are strictly a matter of legislative grace and
taxpayers bear the burden of proving that they are entitled to
claim the deduction). The fact that petitioner might not have
physically received her diploma until 2004 is irrelevant--she had
completed the prerequisites for and was awarded her degree in
2003. Therefore, the Court holds that petitioner is not entitled
to a deduction in 2004 for educational expenses paid or incurred
during 1998 through 2003. Respondent’s determination is
sustained.
B. Expenditures During 2004
1. Petitioner’s Evidence of Her Expenditures
Petitioner has submitted a record of her purported
unreimbursed expenses, credit card statements, and certain
receipts to substantiate her expenditures for January through
5
The Court notes that petitioner’s income would not be
clearly reflected if petitioner were allowed to report her
teacher’s salary under the cash method of accounting in each of
1998 through 2003 and to accrue her education expenses and claim
deductions for unreimbursed employee expenses in 2004 under the
accrual method of accounting. See sec. 446(b).
- 9 -
December 2004.6 Petitioner’s purported expenditures are
summarized as follows:
Month Description Amount
Jan. Metro PCS (conference calls) $50.00
Jan., Nov. Photocopies 266.35
Jan., June, Sept. Travel (airline tickets/fees) 4,199.65
through Dec.
Jan, Sept. Travel (hotels) 221.47
Jan. Luggage (“wheelbag”) 89.36
Jan., Feb. Meals and entertainment 270.15
Jan., July, Aug., Office products/supplies 1,328.62
Sept., Nov., Dec.
Feb. Travel (car rental) 5.00
Feb. Locks 5.57
Feb., May, Sept., Postage 98.14
Nov.
Feb., Mar., Sept., Office furniture 1,531.86
Dec.
Feb. Gold Coast Real Estate
School (classes & materials) 488.60
Feb., Sept., Dec. Books 485.91
Mar., May, June TJ Max (educational software) 1,138.36
Apr. Office equipment (printer) 367.10
May through Oct. Storage 1,089.40
May, Dec. T-Mobile (cellphone) 514.99
July, Aug. Books (Word of Life) 139.10
Oct. Money order (tuition) 701.25
Nov. Office moving supplies & rental 690.50
6
Petitioner’s daughter testified that she did not create the
record until 2006. Therefore, the Court accords little weight to
the record. See also sec. 1.274-5T(c)(1) (for some of the
expenses the corroborative evidence required to support a
statement made at or near the time of the expenditure or use must
have a high degree of probative value to elevate the statement
and evidence to the level of credibility reflected by a record
made at or near the time of the expenditure or use supported by
sufficient documentary evidence) and (2)(ii) (records of certain
expenditures must be prepared or maintained in such manner that
each recording of an element or use is made at or near the time
of the expenditure or use), Temporary Income Tax Regs., 50 Fed.
Reg. 46016-46017 (Nov. 6, 1985).
- 10 -
Petitioner testified that: (1) Her January 2004 travel and
Red Lobster expense were incurred on account of meetings with
professors to discuss her thesis; (2) her May and December 2004
cell phone expenses also related to discussions with professors
about her thesis; (3) her storage expenses for May through
October 2004 were incurred for the purposes of storing her
“things” in Florida while she was studying for her master’s
degree; (4) she purchased educational software for her students
in Florida during March, May, and June 2004; and (5) her
“business is education” and she used the computer printer
purchased in April 2004 in her business and for her master’s
degree.7
Petitioner’s daughter testified that: (1) Neither the
University of Santo Domingo nor Lima College had a campus in New
York or Florida; consequently, places such as Golden Coast were
rented so professors could talk with and assess their students
and the expense had to be paid out of petitioner’s pocket; (2)
notwithstanding that petitioner’s diploma shows that she had
satisfied the requirements for a master’s degree in November
7
The Court notes that the credit card statements and
receipts submitted to substantiate petitioner’s deductions are in
the name of petitioner’s daughter. The Court also notes that the
dates of purchase for certain items in Florida, i.e., the
software and the printer, occurred during the New York school
year (and for months for which petitioner did not claim travel
expenses); i.e., March, April, and May. Petitioner appears to
have been in two places simultaneously.
- 11 -
2003, she continued to work on her thesis through January,
“modifying it until they [approved it]”; and (3) petitioner’s
expenses were incurred in part for her thesis and in her work in
education: she left her “equipment in storage in Florida so she
could work here when she came here” because she has certain
requirements that must be done before she starts the next school
year.8
2. The Court’s Analysis
As stated supra, ordinary and necessary expenses paid or
incurred during the taxable year in carrying on any trade or
business are generally deductible. Sec. 162(a). A trade or
business expense is “ordinary” if it is normal or customary
within a particular trade, business, or industry and is
“necessary” if it is appropriate and helpful for the business.
Commissioner v. Heininger,
320 U.S. 467, 471 (1943); Deputy v. du
Pont,
308 U.S. 488, 495 (1940). In contrast, personal, living,
or family expenses are generally not deductible. Sec. 262(a).
Petitioner has not proven that it is an ordinary and
necessary expense of a math teacher to acquire office furniture
and supplies for an out-of-State office, to maintain a storage
8
The Court notes, however, that petitioner’s motion, which
was prepared by petitioner’s daughter, states that the storage
fees and expenditures for office supplies, furniture, and
equipment were incurred so that petitioner could “modify and
complete the thesis work while in Florida.” The Court,
therefore, accords little weight to the inconsistent testimony of
petitioner’s daughter.
- 12 -
shed in which to store the items of a second office, or to pay
the moving expenses9 of a second office while the teacher is
visiting10 or otherwise traveling between two States. Similarly,
the Court is hard pressed to find that it is an ordinary and
necessary expense of a math teacher to acquire books with
religious subject matter, e.g., Word of Life, for use in math
classes.
Although petitioner claims that she expended $1,138.36 at TJ
Max for educational software, the credit card statements do not
prove that the amounts were expended for that purpose. Without
other corroborative evidence, such as a receipt, the Court does
not accept her self-serving testimony that she purchased software
for use in class. See Urban Redev. Corp. v. Commissioner, 294
F.2d 328, 332 (4th Cir. 1961), affg.
34 T.C. 845 (1960); Tokarski
v. Commissioner,
87 T.C. 74, 77 (1986).
Petitioner also failed to prove that the following
expenditures were incurred in either her teaching profession or
in her master’s program: $485.91 for “Books”, $98.14 for
postage, $266.35 for photocopies, $5.57 for locks, $701.25 for
9
Although petitioner claimed a $690.50 deduction for costs
incurred in moving her Florida office, she testified that she
moved “nothing” to her New York home and that she had to purchase
the items twice.
10
Petitioner testified that she travels to Florida
frequently: “If I have time to go. Sometimes in May, and June,
and December.”
- 13 -
tuition, $488.60 for classes and materials for Gold Coast Real
Estate School, $89.36 for luggage, and $50 for “Metro PCS”
conference calls.
To the extent that petitioner claims that her 2004
expenditures were incurred in the pursuit of her master’s degree,
the Court finds that she has not shown that they were in fact
incurred for that purpose in view of the fact that she completed
the requirements of her master’s degree in November 2003 and it
was awarded in December 2003. In addition, when questioned by
respondent’s counsel about certain expenditures incurred in
February 2004, petitioner replied several times: “I don’t
remember”, “I can’t say”, or “I don’t know”. Therefore, the
Court accords little weight to petitioner’s testimony.
Moreover, petitioner has not substantiated her 2004
expenditures for travel, entertainment and meals, or “listed
property”11 as required by section 274 and the regulations
thereunder. In pertinent part, section 274(d) provides that no
deductions or credits are allowed for: (1) Any traveling
expense, including meals and lodging away from home;
(2) entertainment, amusement, or recreation; or (3) the use of
listed property, unless such expenditures are substantiated. The
taxpayer must substantiate by adequate records or sufficient
11
Listed property is defined to include passenger
automobiles, computers and peripheral equipment, and cell phones.
Sec. 280F(d)(4).
- 14 -
evidence to corroborate the taxpayer’s own testimony: (1) The
amount of the expenditure or use; (2) the time of the expenditure
or use; (3) the place of the expenditure or use; (3) the business
purpose of the expenditure or use; and (4) the business
relationship to the taxpayer of the expenditure or use in the
case of entertainment. Sec. 274(d); see also sec. 1.274-5T(a)
and (b), Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6,
1985); supra note 6.
Simply put, the Court holds that petitioner is not entitled
to her claimed deductions for 2004, and respondent’s
determinations are sustained.
Other arguments made by the parties and not discussed herein
were considered and rejected as irrelevant, without merit, and/or
moot.
To reflect the foregoing,
An appropriate order will
be issued, and decision will
be entered for respondent.
