Ledbetter v. Comm'r of Internal Revenue
| Docket Number | 6069-19S |
| Decision Date | 25 May 2023 |
| Parties | JOSEPH MICHAEL LEDBETTER ANDASHLEY JONES LEDBETTER, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | U.S. Tax Court |
NOT PRECEDENTIAL
Joseph Michael Ledbetter and Ashley Jones Ledbetter, pro sese.
Zachary T. King and Jerrika C. Anderson, for respondent.
SUMMARY OPINION
This case was heard pursuant to the provisions of section 7463[1] of the Internal Revenue 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.
By notice of deficiency dated February 6, 2019, respondent determined deficiencies in federal income tax of $4,008 and $5,638 for petitioners' 2015 and 2016 tax years respectively. The issue for decision is whether petitioners are entitled to deduct unreimbursed mileage expenses of $23,855 and $22,539 reported on Schedule A, Itemized Deductions, of their 2015 and 2016 tax returns, respectively.
Petitioners are husband and wife who filed joint federal income tax returns for their 2015 and 2016 tax years (years at issue). They resided in Alabama when they filed the Petition.
Mr. Ledbetter is a union craft sheet metal worker and has worked in the sheet metal trade since approximately 2000. He has been a member of the local sheet metal workers union since entering the trade and, as a member, receives all of his work assignments through the union.
During the years at issue he was employed as a head foreman[2] by Day & Zimmerman, NPS, a government contractor for the Tennessee Valley Authority (TVA) Browns Ferry Nuclear Plant, near Athens, Alabama. Day & Zimmerman did not hire sheet metal workers on a permanent basis. Rather, the length of employment varied with the size of the project and the availability of funds.
In his line of work, Mr. Ledbetter would experience two types of work stoppages: layoffs and furloughs. A furlough typically involved a short-term work stoppage during a period without funding. The worker would remain employed by the contractor and could claim unemployment benefits but could not seek other sheet metal work. When funding became available again, the worker would resume under the same arrangement as before. During a layoff the worker was no longer employed by the contractor and was permitted to seek other union sheet metal work.
Mr. Ledbetter was first assigned to the Browns Ferry Nuclear Plant in 2005 while employed by a different contractor. He was laid off from the plant later that year, then worked there again for approximately six months during 2007. From 2012 through 2019 Mr. Ledbetter worked at the Browns Ferry Nuclear Plant as an employee of Day & Zimmerman, NPS. During that period Mr. Ledbetter experienced no work stoppage that lasted longer than four months.
During the years at issue Mr. Ledbetter resided in Attalla, Alabama, and drove to and from work at the Browns Ferry Nuclear Plant each day he worked. The round-trip distance between his personal residence and the plant was 184.2 miles. In 2015 he worked a total of 235 days, and in 2016 he worked 252 days. During either year the longest break between workdays was 9 days. Mr. Ledbetter was not reimbursed for the cost of driving from his residence to the plant during the years at issue.
On their timely filed 2015 joint income tax return, petitioners reported adjusted gross income of $102,486 and claimed itemized deductions totaling $39,275 and exemptions totaling $8,000. On Schedule A they reported, among other items, taxes paid totaling $4,454, including real estate taxes of $158, and unreimbursed employee expenses totaling $32,918 (before application of the 2% floor of section 67(a)), including vehicle expenses of $26,344. On Form 2106-EZ, Unreimbursed Employee Business Expenses, petitioners calculated the vehicle expenses using business mileage of 45,816. The reported business miles included Mr. Ledbetter's drive to and from the Browns Ferry Nuclear Plant each day, as well as miles that he drove at the worksite. Petitioners reported taxable income of $55,211 and total tax of $7,361.
On their timely filed 2016 joint income tax return, petitioners reported adjusted gross income of $120,992 and claimed itemized deductions totaling $36,014 and exemptions totaling $8,100. On Schedule A they reported, among other items, unreimbursed employee expenses totaling $31,945 (before application of the 2% floor of section 67(a)), including vehicle expenses of $24,443. On Form 2106-EZ, petitioners calculated the vehicle expenses using business mileage of 45,264. The reported business miles again included Mr. Ledbetter's drive to and from the Browns Ferry Nuclear Plant, as well as miles driven on site. Petitioners reported taxable income of $76,878, claimed a residential energy credit of $200, and reported total tax of $10,561.
Respondent examined petitioners' returns and disallowed $23,902 and $22,539 of the reported mileage expenses for 2015 and 2016, respectively. Respondent allowed the portions of the mileage expenses related to Mr. Ledbetter's onsite miles but disallowed the portion attributable to his transportation to and from the Browns Ferry Nuclear Plant. Respondent issued the Notice of Deficiency, and petitioners timely petitioned this Court for redetermination.[3]
The Commissioner's determination set forth in a notice of deficiency is presumed correct, and taxpayers bear the burden of proving that the determination is in error. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).[4] Deductions are a matter of legislative grace, and taxpayers bear the burden of proving that they are entitled to any deduction claimed. See Rule 142(a); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).
Section 274(d) prescribes more stringent substantiation requirements to be met before a taxpayer may deduct certain categories of expenses, including expenses with respect to listed property as defined by section 280F(d)(4), which includes passenger automobiles. See Sanford v. Commissioner, 50 T.C. 823, 827 (1968), aff'd per curiam, 412 F.2d 201 (2d Cir. 1969). To meet the heightened substantiation requirements, taxpayers must substantiate by adequate records or by sufficient evidence corroborating their own statements (1) the amount of the expense, (2) the time and place of the expense or use of listed property, (3) the business purpose of the expense or use, and (4) the business relationship. § 274(d). Petitioners provided excellent records detailing Mr. Ledbetter's daily travel, including times, locations, and business purpose.
Section 162(a) allows a deduction for "ordinary and necessary expenses paid or incurred . . . in carrying on any trade or business." Performing services as an employee may constitute a "trade or business." See Primuth v. Commissioner, 54 T.C. 374, 377 (1970); Ayria v. Commissioner, T.C. Memo. 2022-123, at *4. Generally, taxpayers may deduct unreimbursed employee expenses as ordinary and necessary business expenses under section 162. Lucas v. Commissioner, 79 T.C. 1, 6 (1982).
The deduction for unreimbursed employee expenses is a miscellaneous itemized deduction. §§ 67(b), 63(d)(1), 62. Miscellaneous itemized deductions are allowed only to the extent that, in the aggregate, they exceed 2% of adjusted gross income.[5] § 67(a).
Taxpayers may deduct vehicle mileage expenses that are substantiated by adequate records or sufficient evidence. §§ 274(d)(4), 280F(d)(4)(A)(i) and (ii). Commuting expenses, however, are generally nondeductible personal expenses, regardless of the distances involved. See Fausner v. Commissioner, 413 U.S. 838, 839 (1973); Commissioner v. Flowers, 326 U.S. 465, 473-74 (1946); Treas. Reg. § 1.162-2(e).
There are three exceptions to the general rule that commuting expenses are nondeductible. See Bogue v. Commissioner, T.C. Memo. 2011-164, aff'd, 522 Fed.Appx. 169 (3d Cir. 2013). The first exception is that expenses incurred traveling between a taxpayer's residence and a place of business are deductible if the residence is the taxpayer's principal place of business. Id. Petitioners do not argue and the evidence does not show that petitioners' residence was Mr. Ledbetter's principal place of business. This exception is inapplicable in the present case.
The remaining two exceptions apply where, as petitioners argue here, the commuting involves a temporary work location. See Bogue, T.C. Memo. 2011-164, slip op. at 14-15. One exception permits a taxpayer to deduct transportation expenses incurred in going between the taxpayer's residence and a temporary work location outside the metropolitan area where the taxpayer normally lives and works. See Gorokhovsky v. Commissioner, T.C. Memo. 2013-65; Bogue, T.C. Memo. 2011-164, slip op. at 15; Rev. Rul. 99-7, 1999-1 C.B. 361. The final exception is that travel expenses between a taxpayer's residence and temporary work locations, regardless of the distance, are deductible if the taxpayer also has one or more regular work locations away from the taxpayer's residence. See Bogue, T.C. Memo. 2011-164, slip op. At 15.
A work location is temporary if it is realistically expected to last (and does in fact last) for one year or less. See § 162(a) (flush language) ("For purposes of [section 162(a)] paragraph (2), the taxpayer shall not be treated as being temporarily away from home during any period of employment if such period exceeds 1 year."); see also Bogue, T.C. Memo. 2011-164, slip op. at 24-25; Rev Rul. 99-7. Work is temporary only if it can be...
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