Robinson v. Comm'r of Internal Revenue

• Decision Date: 31 December 1968
• Docket Number: Docket No. 4172-66.
• Citation: 51 T.C. 520
• Parties: JOHN ROBINSON, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
• Court: U.S. Tax Court

51 T.C. 520

JOHN ROBINSON, PETITIONER

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

Docket No. 4172-66.

Tax Court of the United States.

Filed December 31, 1968.

Willard D. Horwich, for the petitioner.

Allan D. Teplinsky, for the respondent

Petitioner was a theatrical agent who during 1961, 1962, and 1963 visited bars and nightclubs in an effort to obtain contracts to represent entertainers and to sell talent to the clubs. He entertained the performers and buyers of talent. He traveled outside his home area in pursuit of his business. Petitioner used his house to some extent for entertaining and gave certain business gifts. Petitioner kept a regular set of books listing his income and expenses but did not keep supporting detailed records of his travel, entertainment, and gift expenses. Petitioner in 1961 paid over half the cost of room and board for his mother and father in a rest home and in 1962 and 1963 paid the cost of room and board for his father in a home for the aged. Held:

1. Amount of deductions to which petitioner is entitled for travel and entertainment expenses in 1961 and 1962 determined under Cohan v. Commissioner, 39 F.2d 540 (C.A. 2, 1930), and respondent's determination of amount allowable as deduction for use of home for business entertainment sustained because of failure of proof by petitioner.

2. Respondent's disallowance of deduction claimed by petitioner for travel, entertainment, gifts, and use of home for business entertainment sustained except to the limited extent petitioner produced supporting documentation for these expenses as required by sec. 274, I.R.C. 1954, and respondent's regulations issued pursuant thereto. William F. Sanford, 50 T.C. 823 (1968), followed.

3. Petitioner is entitled to compute his tax as head of a household because of paying over half of the cost of room and board for his parents in a rest home in 1961 and the cost of room and board for his father in a boarding home for the aged in 1962 and 1963.

4. Petitioner is not entitled to deduct the amounts paid as expenses of his parents in a rest home in 1961 and his father in a boarding home for the aged in 1962 and 1963 as medical expenses.

5. Petitioner is not liable for the addition to tax for negligence under sec. 6653(a), I.R.C. 1954, because of his failure to keep detailed records of his travel and entertainment expenses during the years 1961, 1962, and 1963.

SCOTT, Judge:

Respondent determined deficiencies in petitioner's income taxes and additions to taxes under section 6653(a), I.R.C. 1954,¹ for the calendar year 1961 in the amounts of $5,486.71 and $274.34, respectively; for the calendar year 1962 in the amounts of $7,190.95 and $359.55, respectively; and for the calendar year 1963 in the amounts of.$5,256.82 and $262.84, respectively

The issues for decision are:

(1) Whether petitioner is entitled to deductions for the years 1961 and 1962 for travel and entertainment expenses of amounts in excess of the amounts allowed by respondent.

(2) Whether respondent properly disallowed for the calendar year 1963 all of the amount claimed by petitioner as a deduction for travel and entertainment expenses because of petitioner's failure to comply with the provisions of section 274(d) and respondent's regulations issued pursuant thereto.

(3) Whether petitioner is entitled to compute his income taxes for the calendar years 1961, 1962, and 1963 as the head of a household.

(4) Whether amounts paid by petitioner to the operators of a rest home and a home for the aged on behalf of his mother and father for the year 1961 and to the operator of a home for the aged on behalf of his father for the years 1962 and 1963 are deductible by petitioner as medical expenses.

(5) Whether respondent properly determined that petitioner is liable for additions to taxes under section 6653(a) for the calendar years 1961, 1962, and 1963 because of negligence or intentional disregard of rules and regulations by petitioner in failing to keep proper records of his income and expenses for each of those years.

FINDINGS OF FACT

Some of the facts have been stipulated and are found accordingly.

Petitioner is an unmarried individual who at the time the petition in this case was filed resided in Los Angeles, Calif. He filed individual Federal income tax returns for the calendar years 1961, 1962, and 1963 with the district director of internal revenue at Los Angeles, Calif., computing his taxes for the years 1961 and 1962 on the basis of being head of a household, and for the year 1963 on the basis of being a single individual not head of a household.

During the years here in issue and for a number of years prior thereto and continuing to the date of the trial of this case petitioner was a theatrical agent. During the years here in issue petitioner maintained an office in Los Angeles, Calif. He had three full-time employees during these years and he worked full time in his business during these years without taking any vacations. Petitioner's business consisted of booking talent for appearances throughout the United States and sometimes in other countries.

During the years here in issue petitioner maintained a booking sheet for each of the various performers with whom he had a contract providing that he would represent such performer as booking agent. These booking sheets would show the name of the performer and the place where the performer had an engagement and the number of weeks of the engagement. These booking sheets also carried a notation of the commissions received by petitioner from the booking.

During the years here in issue and until the present time, petitioner was required by the Talent and Musicians Union to contract with all of his artists, guaranteeing each artist with whom he had a contract employment for 40 weeks a year. The contracts which petitioner had with the various artists during the years here in issue were for a period of from 1 to 5 years and each of these contracts provided that petitioner was to receive 10 percent of the artist's salary as his commission.

During the years here in issue petitioner did not have, and does not now have, any of the nationally known performers who are sometimes referred to as ‘head-liners' under contract. The artists for whom petitioner acts as booking agent are primarily of the type who perform in small cocktail lounges. In order to operate his business successfully, it is necessary for petitioner to be continuously locating artists to place under contract with him and finding places to market the talent which is under contract with him. Petitioner contacts artists and persons who use the services of such artists both by telephone and by personal contacts in and outside the Los Angeles area.

During each of the years here in issue petitioner kept a diary. The diary was not complete and for certain days contained no notation of any type. The only notations contained in petitioner's diary for the days for which notations were made were the names of the cities outside Los Angeles to which he went and the names of the clubs, cocktail lounges, and restaurants within or without the Los Angeles area which he visited, and sometimes the name of an individual.

When petitioner was in Los Angeles, he would usually go to his office around 10 o'clock in the morning, read his mail, dictate letters, do paperwork, and carry on telephone conversations with performers and other persons. When in the Los Angeles area, petitioner would generally go out approximately four evenings a week to cocktail lounges or nightclubs that had floor shows, generally going to several such places in one evening. While at these clubs petitioner would observe the performers. He would attempt to get the performers which he felt would be beneficial to his business under contract with him. He would also attempt to determine what type of talent might be appropriate to the club so as to be in a position to ‘sell’ his ‘talent’ to the club. Petitioner would also visit with the manager or other buyer of talent for the club and would at times buy drinks for the talent or the manager.

Petitioner traveled outside the Los Angeles area, primarily in Nevada and Oregon, to visit cocktail lounges and similar establishments that employ artistic talent in an effort to procure talent and sell the services of his talent to the various clubs. One of petitioner's employees also traveled outside the Los Angeles area in an effort to procure talent for petitioner and to ‘sell’ talent for petitioner. When petitioner was visiting a town which he had not previously visited, he would generally get a taxicab driver to take him to the various cocktail lounges or clubs which featured entertainment or orchestras. Petitioner would go into the club and introduce himself to the owner, manager, or buyer of talent, talk with such person if possible, observe the layout of the club, and attempt to determine the type of talent the club was in the market for. If petitioner felt that he had talent which might be booked at the particular club, he would try to convince the manager or buyer that he had artists under contract who were the type needed in the particular establishment. Likewise, if petitioner saw talent performing in some particular club which he felt was salable to the various buyers with whom he had contacts, he would introduce himself to these artists and if feasible buy a drink or dinner for them and attempt to convince them that he could well serve them as a booking agent.

During the years here in issue and for many years prior thereto petitioner was considered by the various artists of the type he had under contract and the club managers to whom he sold talent as a lavish spender and tipper, and it was the opinion of these artists and club managers that petitioner spent more in the various clubs than many other talent agents. Petitioner would at times tip the headwaiter in one of the establishments he was visiting $10 or more in order to...