T.C. Summary Opinion 2018-8



                         UNITED STATES TAX COURT



   IBRAHIM ABDEL-FATAH AND RAIDA ABDEL-FATAH, Petitioners v.
        COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 27123-16S.                        Filed March 6, 2018.



      Ibrahim Abdel-Fatah and Raida Abdel-Fatah, pro sese.

      Katherine Holmes Ankeny and Daniel J. Daugherty, for respondent.



                              SUMMARY OPINION


      THORNTON, 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



      1
       All section references are to the Internal Revenue Code in effect at all
relevant times, and all Rule references are to the Tax Court Rules of Practice and
Procedure. We round all monetary amounts to the nearest dollar.
                                        -2-

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 $6,116 deficiency and a $1,223 accuracy-related

penalty with respect to petitioners’ 2013 Federal income tax. Respondent now

concedes that petitioners are not liable for the accuracy-related penalty.

      The deficiency resulted from respondent’s disallowance of petitioners’

claimed $3,116 education credit and $3,000 American opportunity credit, based

upon respondent’s determination that petitioners had failed to substantiate any

amount of qualified tuition and related expenses. Respondent now concedes that

petitioners have substantiated $1,690 of qualified tuition and related expenses.

The question is whether they have substantiated any greater amount.

                                    Background

      The parties have stipulated some facts, which we incorporate by this

reference.

      During 2013 Ms. Adbel-Fatah was a student at the Islamic Institute of

Orange County (IIOC). IIOC did not issue a Form 1098-T, Tuition Statement, to

Ms. Abdel-Fatah.

      During 2013 petitioners’ son and daughter were enrolled at Mt. San Antonio

College (Mt. SAC). Mt. SAC issued Forms 1098-T for both petitioners’ son and
                                           -3-

daughter. The Forms 1098-T, in boxes labeled “1 Payments Received” and

“2 Amounts Billed for qualified tuition and related expenses”, were empty. The

Forms 1098-T at the box labeled “8 Check if at least half time student” were

marked with an “X” for both petitioners’ son and daughter.

      Petitioners timely filed their 2013 Form 1040, U.S. Individual Income Tax

Return. On the Form 8863, Education Credits (American Opportunity and

Lifetime Learning Credits), petitioners claimed the nonrefundable education credit

of $3,116 and the refundable American opportunity credit of $3,000. The claimed

education credits resulted from petitioners’ claimed qualified education expenses

of $4,000 each for Ms. Abdel-Fatah, petitioners’ son, and petitioners’ daughter.

      In the notice of deficiency respondent disallowed, for lack of supporting

information, petitioners’ claimed education credits. While residing in California,

petitioners timely petitioned the Court.

                                     Discussion

      The Commissioner’s determinations in a notice of deficiency are generally

presumed correct, and the taxpayer bears the burden of proving those

determinations erroneous. Rule 142(a); see INDOPCO, Inc. v. Commissioner, 

, 84 (1992); Welch v. Helvering, 

, 115 (1933). Credits, like

deductions, are a matter of legislative grace, and the taxpayer bears the burden of
                                         -4-

proving entitlement to any deduction or credit claimed. Deputy v. du Pont, 

, 493 (1940).

      The American opportunity credit is a modified version of the Hope

Scholarship Credit. Sec. 25A(i). The American opportunity credit provides for a

credit against tax equal to “(A) 100 percent of so much of the qualified tuition and

related expenses paid by the taxpayer during the taxable year * * * as does not

exceed $2,000, plus * * * 25 percent of such expenses so paid as exceeds $2,000

but does not exceed $4,000.” Sec. 25A(i)(1). The credit phases out for a taxpayer

whose modified adjusted gross income exceeds $80,000, or $160,000 for married

taxpayers filing joint returns. Sec. 25A(i)(4). In addition, up to 40% of this credit

may be refundable. Sec. 25A(i)(5).

      The term “qualified tuition and related expenses” includes tuition and fees

at an eligible educational institution that the taxpayer, the taxpayer’s spouse, or the

taxpayer’s dependent attends, as well as course materials. Sec. 25A(f)(1), (i)(3).

The credit cannot be applied to expenses for student activity fees, athletic fees,

insurance expenses, and other expenses not related to an academic course of

instruction unless the fees are a required condition of the student’s attendance or

enrollment and are not inherently personal. Sec. 25A(f)(1)(C); sec. 1.25A-2(d)(1),

(3), Income Tax Regs. (stating that personal expenses such as insurance and
                                         -5-

medical costs are not qualified even if the fee must be paid to the education

institution as a requisite of enrollment or attendance).

      A taxpayer ordinarily must maintain adequate records to substantiate

claimed deductions or credits. Sec. 6001; Hradesky v. Commissioner, 

,

89-90 (1975), aff’d per curiam, 

 (5th Cir. 1976); sec. 1.6001-1(a), (e),

Income Tax Regs. If a taxpayer establishes that a deductible expense has been

paid or incurred but is unable to substantiate the precise amount, we generally may

estimate the amount of the deductible expense, bearing heavily against the

taxpayer responsible for the inexactitude. Cohan v. Commissioner, 

,

543-544 (2d Cir. 1930). We cannot estimate deductible expenses, however, unless

the taxpayer presents evidence providing a sufficient basis for making an estimate.

Vanicek v. Commissioner, 

, 742-743 (1985). Without such basis, any

allowance would amount to unguided largesse. Williams v. United States, 

, 560 (5th Cir. 1957).

      To substantiate the claimed education expenses for petitioners’ son and

daughter, petitioners offered copies of the Forms 1098-T, school account

summaries, and credit card statements. Petitioners did not provide any

documentation to substantiate Ms. Abdel-Fatah’s claimed education expenses. On

the basis of the foregoing, respondent conceded that petitioners substantiated
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$1,690 in qualified tuition and related expenses. Petitioners have not produced

records of tuition payments or educational expenses greater than those conceded

by respondent and therefore have not met their burden of proof with respect to any

additional amount. Accordingly, we hold that petitioners are entitled to education

credits only as attributable to $1,690 of qualified tuition and related expenses.

      To reflect the foregoing,


                                                     Decision will be entered under

                                               Rule 155.