Imhoff v. Commissioner
| Decision Date | 15 February 1979 |
| Docket Number | 4309-76.,Docket No. 6279-73 |
| Citation | 38 TCM (CCH) 230,1979 TC Memo 57 |
| Parties | Joseph J. Imhoff and Edith M. Imhoff v. Commissioner. |
| Court | U.S. Tax Court |
Joseph J. Imhoff, pro se, 380 N. Highland Ave., Merion Station, Pa. Russell K. Stewart, for the respondent.
Memorandum Findings of Fact and Opinion
The Commissioner determined deficiencies in petitioners' Federal income tax for the taxable years 1971 and 1972 in the amounts of $3,083.72 and $16,620, respectively. The cases were consolidated for trial, briefs and opinion. The issue for decision is allowability of expenditures claimed to be ordinary and necessary under section 212, Internal Revenue Code of 1954,1 for the production, or collection of income or for the management, conservation or maintenance of property held for the production of income and allowability of a deduction for "depletion dividend."
Some of the facts have been stipulated. The stipulation of facts and attached exhibits are found as facts and incorporated by this reference.
Petitioners are husband and wife and resided at Merion Station, Pennsylvania, when they filed their petition. They filed joint Federal income tax returns for the taxable years 1971 and 1972 with the District Director of Internal Revenue at Philadelphia, Pennsylvania.
Petitioner Joseph J. Imhoff (herein Col. Imhoff) during 1971 and 1972 was a retired Army Colonel. He served on General Douglas MacArthur's staff prior to 1950. His duties in the Army included those of an inspector general where he investigated government contracts involving billions of dollars to ascertain the adequacy and appropriateness of the expenditure of government funds and to see whether good business management was being applied. At the personal request of the Secretary of War he authored the "Armed Services Procurement Act" and the "General Services Procurement Act" which were enacted by Congress without a single dissenting vote.
During 1971 and 1972 petitioners resided in a 17-room, 3-storied house. They held investments in corporate stocks and bonds and real estate located in the Washington, D.C., metropolitan area. They maintained no office outside their personal residence in which to conduct their business affairs nor did they operate a trade or business from their personal residence. Their income-producing real estate was managed by a real estate firm located in Washington, D.C., which was paid fees for its services. On their income tax returns for the taxable years 1971 and 1972 petitioners claimed that 47.06 percent of their personal residence was utilized by them in connection with their investment activities. In his statutory notices of deficiency the Commissioner determined that petitioners utilized 5.78 percent of their personal residence in connection with their investment activities, based upon a memorandum opinion of this Court covering petitioners' income tax liabilities for the taxable years 1961, 1962 and 1963. Imhoff v. Commissioner Dec. 30,269(M), T.C. Memo. 1970-221. Petitioners' business use of their personal residence in 1971 and 1972 did not exceed the 5.78 percent allowed by the Commissioner in his statutory notices of deficiency.
On their income tax return for the taxable year 1971, petitioners claimed the following deductions:
Sales tax ......................... $2,000
Automobile expense ................ 900
Miscellaneous expenses
for Production and
Conservation of Income .......... 7,375
In his statutory notice of deficiency covering the taxable year 1971, the Commissioner allowed the following portions of the deductions described above:
Sales tax ......................... $346
Automobile expense ................ none
Miscellaneous expenses
for Production and
Conservation of Income .......... none
The Commissioner, in the statutory notice did, however, allow a deduction not claimed by petitioners on their return. It was for $1,217.61 representing 5.78 percent of petitioners' total expenses related to upkeep of property.
On their income tax return for the taxable year 1972, petitioners claimed the following deductions:
Sales tax ......................... $ 2,059
Miscellaneous deductions
consisting of the following
Autos ............................ $ 960
Entertainment .................... 475
Books & publications ............. 875
Production & Conservation
of income........................ 12,945
Investment ....................... 774
Legal ............................ 12,780
Organizations .................... 575
Political
Contributions ................... 100
Miscellaneous .................... 1,587 $31,071
In his statutory notice of deficiency covering the taxable year 1972, the Commissioner disallowed petitioners' claimed deduction for sales tax of $2,059 and miscellaneous deductions to the extent of $29,046.
Petitioners are not entitled to deductions in excess of those allowed by the Commissioner in his statutory notices of deficiency except as conceded by respondent.
OpinionPetitioners, on brief, rely upon a single ground to defeat the deficiencies determined by the Commissioner. That ground is that the statutory notice of deficiency for the taxable year 1971 is invalid because the examining officer did not determine that all of the deductions were disallowed. Despite a ruling against petitioners prior to trial and our admonitions ad nauseam during trial, petitioners, like a broken record, continue to press this argument to the exclusion of arguing the merits of the deductions they claimed on their income tax returns. We explained time and time again that the determination of the Commissioner of Internal Revenue which petitioners must disprove is contained in his statutory notice of deficiency and we will not look behind that notice. We continue to conclude that the rule is applicable here. The deductions were disallowed for lack of substantiation and they are deductions that are commonly disallowed for that reason. "Except in very limited circumstances involving allegations of extraordinary misconduct, we have consistently refused to look behind a deficiency notice to examine respondent's procedures or policies used in making the determinations." Lane-Burslem v. Commissioner Dec. 35,317, 70 T.C. 613, 622 (1978). "Except in very limited circumstances involving allegations of extraordinary misconduct, this Court has consistently refused to look behind a deficiency notice to examine respondent's motives for the administrative policy or procedure involved in making the determination." Estate of Brimm v. Commissioner Dec. 35,089, 70 T.C. 15, 22 (1978); Greenberg's Express, Inc. v. Commissioner Dec. 32,640, 62 T.C. 324, 327-329 (1974); Human Engineering Institute v. Commissioner Dec. 32,181, 61 T.C. 61, 66 (1973).2
We have not included in our findings of fact any fact involving the examination of petitioners' income tax returns prior to the mailing of the statutory notices of deficiency because they are all immaterial. The Court afforded petitioners a separate hearing in Washington, D.C., on petitioners' motion for production of documents at which time Col. Imhoff interrogated the revenue agent who examined petitioners' 1971 income tax return. That testimony convinces us that there are no grounds to override our oftstated rule quoted above and delve into the circumstances leading up to the mailing of the statutory notices of deficiency.
In any event petitioners' argument about the invalid statutory notice of deficiency applies only to the taxable year 1971. They make no such argument with respect to the taxable year 1972.
The only real issue before the Court is substantiation of deductions. Petitioners in their opening brief did not request the Court to find a single fact with respect to the deductions they claimed on their income tax returns. Respondent,...
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