Crawford v. Commissioner
| Decision Date | 29 April 1993 |
| Docket Number | Docket No. 1380-90. |
| Parties | Lynn Crawford v. Commissioner. |
| Court | U.S. Tax Court |
Robert B. Perry, 14180 Dallas Pkwy., Dallas, Tex., for the petitioner. Amy M. Smith and Audrey M. Morris,* for the respondent.
Memorandum Findings of Fact and Opinion
Respondent determined deficiencies in petitioner's Federal income tax for the calendar years 1983, 1985, and 1986 in the amounts of:
Additions to Tax
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Sec. Sec. Sec. Sec. Sec
Year Deficiency 6653(a)(1) 6653(a)(1)(A) 6653(a)(1)(B) 6653(a)(2) 6661
1983 ...................... $ 6,593 $329.65 1 $1,648.25
1985 ...................... 14,579 728.95 1 3,644.75
1986 ...................... 10,329 $516.45 1 2,582.25
1 50 percent of the interest due on the full deficiency
All section references are to the Internal Revenue Code in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure, unless otherwise indicated.
Some of the issues raised by the pleadings have been disposed of by agreement of the parties, leaving for decision: (1) Whether petitioner is entitled to a deduction for 1985 and 1986 of expenses for maintaining an office in his home; (2) whether petitioner is entitled to deduct in 1985 and 1986 the cost of uniforms and the cost of laundering uniforms and, if so, the amount of the deductions; (3) whether petitioner is entitled to deduct in 1983, 1985, and 1986 expenses claimed to be related to an automobile restoration activity; (4) whether respondent erroneously disallowed itemized deductions claimed by petitioner in 1983; (5) whether petitioner is entitled to deduct as a medical expense in 1985 and 1986, the cost of certain foods he consumed as part of a medical diet; (6) whether petitioner is entitled to a charitable contribution deduction in 1986, and, if so, the amount deductible; (7) whether petitioner is entitled to deduct the cost of books and continuing education in 1985 and 1986; (8) whether petitioner is entitled to deduct in 1985 and 1986 depreciation of a library; (9) whether petitioner is entitled to deduct in 1986 the cost of medical supplies; (10) whether petitioner is entitled to deduct in 1986 expenses related to a telephone; (11) whether petitioner is entitled to deduct in 1985 and 1986 the expense of equipment purchased for use in his medical practice; (12) whether petitioner is entitled to deduct in 1986 travel expenses incurred while looking for a job; (13) whether petitioner is entitled to deduct in 1985 and 1986 car and truck expenses related to his medical practice; (14) whether petitioner is entitled to deduct in 1985 and 1986 depreciation on an automobile used in his medical practice; (15) whether petitioner is liable for the additions to tax for negligence under section 6653(a)(1) and (2) for the years 1983 and 1985, and under section 6653(a)(1)(A) and (B) for 1986; and (16) whether petitioner is liable for the additions to tax for a substantial understatement of income under section 6661 for each of the years 1983, 1985, and 1986.
Some of the facts have been stipulated and are found accordingly.
Petitioner resided in Dallas, Texas, at the time of the filing of his petition in this case. Petitioner prepared and filed Federal income tax returns for the taxable years 1983, 1985, and 1986.
Petitioner received his medical degree in 1978. During the fall of 1979 petitioner began to practice medicine in Dallas, Texas. Petitioner's medical practice was basically a walk-in clinic where he did emergency room type work. Around the end of 1983 petitioner closed his medical practice. During 1985 and 1986 petitioner worked as an independent contractor (the medical practice) providing emergency medical services to three or four hospitals in the Dallas area.
Petitioner contracted to render services to hospitals at Garland, Terrell, Cleburne, Mesquite Community, and Weatherford, Texas. The hospital at Cleburne is about 87 miles from Dallas. The hospital at Weatherford is over 100 miles from Dallas.
During 1985 and 1986, petitioner was not a member of the official staff of any of the hospitals. None of the hospitals provided petitioner an office.
Petitioner's duties at the hospitals involved being present in the emergency room at the hospital to handle any problems that might arise. For example, he might treat patients who had been in an automobile accident or patients who only had a simple sore throat. The work petitioner did for patients at the hospitals would sometimes require follow-up work. Petitioner normally would either refer the patient to another doctor for this work or would do the follow-up work at an office he maintained at his home (petitioner's home office or the home office). The follow-up work was considered part of the services petitioner was to perform under his contracts with the hospitals. Therefore, petitioner was not paid an additional amount for any of the services he performed for patients at his home office. Petitioner, under his agreements with the hospitals, could use the hospital facilities to do the follow-up work or could do it at his home office.
In addition to using his home office to do follow-up work for patients, petitioner used it for correspondence and other activities related to his medical practice. The home office was close to the entrance of petitioner's house and was the largest room in the house. The home office comprised about 20 percent of the total square footage of petitioner's house. The home office contained examination tables with partitions for privacy, storage cabinets for surgical tools and medicines, and a small waiting area with chairs that was separated from the examination tables. At times, other equipment was present in petitioner's home office. Patients' records and business records were stored in the home office. Petitioner estimated that he spent 3 to 4 hours in the home office for every 10 hours spent working at a hospital.
On the 1985 and 1986 returns, petitioner deducted the following items related to the home office:
Description of deduction 1985 1986
Depreciation of house ....... $1,346 $2,176
Utilities ................... 2,171
Mortgage interest ........... 1,422
These deductions comprised for 1985 and 1986 petitioner's home office deduction. Respondent disallowed all these deductions asserting that the deductions represent expenses related to the cost of a home office, which petitioner is not eligible to take.
Sometime in March or April 1988 an Internal Revenue agent (the agent) came to petitioner's house to inspect the home office. Upon arriving at petitioner's house, the agent learned that in February 1988 all of petitioner's equipment in the home office was stolen. Petitioner did not file a police report or an insurance claim on the stolen equipment.
In the early eighties petitioner decided to start a car and truck restoration activity.
His decision to start the restoration activity was influenced by two factors. The first factor was the complexity of the cars being produced in the early eighties and the fact that cars were being made in such a way as to reduce an owner's ability to do repair work. Petitioner believed that this fact would cause people to keep cars longer and, therefore, the older cars would eventually need to be restored. The second factor was petitioner's background. Petitioner's father was a vocational agriculture instructor and a shop teacher. Petitioner grew up learning how to work on cars and do other things such as metal work and welding. While in medical school, petitioner studied audio engineering and applications to integrated circuitry which is helpful in working on electronic ignitions.
Petitioner started the restoration activity in 1982. The restoration activity was located on land owned by petitioner's father in Coushatta, Louisiana, which up until 1986, was about a 5-hour drive from petitioner's home. In 1986 a freeway was built that cut the travel time from Dallas to Coushatta down to about 3½ hours. Petitioner put the building utilized by the restoration activity up as collateral against rent so that if the restoration activity failed the building went to petitioner's father. He paid his father no rent for the land.
In the restoration activity, petitioner not only worked on cars that he owned but he also worked on cars owned by others. The amount of time petitioner spent working in the restoration activity varied from month to month. During a typical month petitioner would spend approximately 3 weekends or possibly a week and a weekend working in the restoration activity. A weekend of working in the restoration activity for petitioner usually included work on Friday, Saturday, and Sunday. On Sunday he would attend church with his parents. In 1983, petitioner purchased an Audi and a Jeep for use in the restoration activity. During certain periods, petitioner employed workers to assist in the restoration activity.
Petitioner reported the income and expenses from the restoration activity on Schedule C (Profit or (Loss) From Business or Profession) of his income tax returns. For the years in issue, petitioner reported losses from the restoration activity and other taxable income as follows:
Loss from Other
restoration taxable
Year activity income
1983 ............... ($26,024.21) $29,435.20
1985 ............... (7,878.04) 26,581.51
1986 ............... (6,278.91) 47,968.68
Only in 1985 did petitioner...
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