Ron Niv v. Comm'r
| Decision Date | 21 March 2013 |
| Docket Number | Docket No. 9041-11,T.C. Memo. 2013-82 |
| Parties | RON NIV, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | U.S. Tax Court |
R disallowed certain business expense deductions P claimed on his 2006 and 2007 tax return and determined deficiencies in income tax, additions to tax pursuant to I.R.C. sec. 6651(a)(1) for failing to timely file the 2006 and 2007 tax returns, and accuracy-related penalties under I.R.C. sec. 6662(a) for P's 2006 and 2007 tax years.
Held: P did not substantiate expense deductions for travel, meals, entertainment, and car expenses.
Held, further, P is entitled to a portion of his claimed deductions for promotion and materials costs in connection with his real estate business for 2006 and 2007.
Held, further, P is liable for additions to tax pursuant to I.R.C. sec. 6651(a)(1) for failing to timely file his 2006 and 2007 tax returns.
Held, further, P is liable for accuracy-related penalties pursuant to I.R.C. sec. 6662(a) for 2006 and 2007.
Ron Niv, pro se.
Cory Ellenson and Kathryn A. Meyer, for respondent.
WHERRY, Judge: This case is before the Court on a petition for redetermination of income tax deficiencies, additions to tax pursuant to section 6651(a)(1) for failure to timely file a tax return, and section 6662(a) accuracy-related penalties that respondent determined for petitioner's 2006 and 2007 tax years.1 The issues for determination are: (1) whether petitioner is entitled to deduct expenses on Schedule C, Profit or Loss From Business, of $159,023 for 2006 and $70,270 for 2007, respectively; (2) whether petitioner is liable for additions to tax pursuant to section 6651(a)(1) for failure to timely file his 2006 and 2007 tax returns; and (3) whether petitioner is liable for section 6662(a) accuracy-related penalties for 2006 and 2007.2
The parties' stipulation of facts, with accompanying exhibits, is incorporated herein by this reference. At the time the petition was filed, petitioner resided in California.
Petitioner is a mortgage broker, real estate agent, and real estate investor who was engaged in these business activities during the years in dispute.3
Petitioner requested, and was granted, an extension of time within which to file his 2006 income tax return. The due date for the 2006 tax return was extended to October 15, 2007. Petitioner filed his 2006 tax return on November 6, 2008. On petitioner's 2006 Schedule C, he reported gross receipts of $225,972, total expenses of $212,423, and net income of $13,549.
Petitioner submitted some receipts, invoices, and credit card and bank statements but did not submit any account ledgers, check registries, or travel or entertainment logs or equivalent contemporaneous evidence to the Court. On the basis of evidence petitioner provided at trial, he paid and sought to substantiate the following expenses, for which at least some documentation identified by the Court was provided, associated with his real estate business activity for the 2006 tax year:4
1 Under part V of Schedule C for 2006 petitioner claimed $17,978 for materials under other expenses. Petitioner does not argue that he is entitled to materials expenses in excess of the $17,978 claimed on his 2006 tax return.
+---------------------------------------------------------------------+
¦Office Expenses ¦Price ¦Substantiation ¦Date of invoice/charge ¦
+-------------------+-------+----------------+------------------------¦
¦Computer--Dell ¦$763.62¦Invoice ¦1/29/06 ¦
+-------------------+-------+----------------+------------------------¦
¦Dept. of Build.--LA¦1.90 ¦Credit card ¦1/26/06 ¦
+-------------------+-------+----------------+------------------------¦
¦Staples ¦35.96 ¦Credit card ¦7/11/06 ¦
+-------------------+-------+----------------+------------------------¦
¦Total ¦801.48 ¦ ¦ ¦
+---------------------------------------------------------------------+
Petitioner also requested, and was granted, an extension of time within which to file his 2007 income tax return. The due date for the 2007 tax return was extended to October 15, 2008. Petitioner filed his 2007 tax return on July 7, 2009. On petitioner's 2007 Schedule C he reported gross receipts of $97,075, total expenses of $94,953, and net income of $2,122.
The evidence petitioner introduced, stipulated in Exhibit 6-P, contains no invoices or receipts and minimal credit card statements for transactions entered into and expenses petitioner paid or incurred with regard to his real estate business for the 2007 tax year. A credit card charge of $180 was submitted for Combined LA Westside Advertising dated March 3, 2007. A credit card charge of $2,500 was submitted dated May 23, 2007, for Longview Doors and Windows, Van Nuys. Additionally, two credit card charges of $8.65 and $7.55 were submitted for Anawalt Lumber dated August 19, 2007, and August 15 and 20, 2007, respectively.
On petitioner's Schedules C for 2006 and 2007 he claimed deductions for the following expenses, which respondent disallowed:
+--------------------------------------+
¦Expense ¦2006 ¦2007 ¦
+-----------------------+-------+------¦
¦Car and truck ¦$9,173 ¦$6,111¦
+-----------------------+-------+------¦
¦Office ¦24,690 ¦8,943 ¦
+-----------------------+-------+------¦
¦Meals and entertainment¦14,425 ¦3,163 ¦
+-----------------------+-------+------¦
¦Travel ¦11,823 ¦6,856 ¦
+-----------------------+-------+------¦
¦Other 1 ¦98,912 ¦45,197¦
+-----------------------+-------+------¦
¦Total 2 ¦159,023¦70,270¦
+--------------------------------------+
1 Under part V of Schedule C for 2006, petitioner allocated the other expenses as follows: $6,993 for telephone expenses, $23,766 for outside services, $12,238 for promotion, $2,328 for Internet, $714 for small tools, $1,719 for research, $17,978 for materials, and $33,176 for referrals, commissions, and marketing. Under part V of Schedule C for 2007, petitioner allocated the other expenses as follows: $4,127 for telephone expenses, $9,457 for outside services, $5,334 for promotion, $2,421 for Internet, $644 for small tools, $857 for research, $7,765 for materials, and $14,592 for referrals, commissions, and marketing.
2 Petitioner contends he is entitled to deduct all of his expenses listed on his 2006 and 2007 Schedules C.
Respondent audited petitioner's returns for the 2006 and 2007 years and issued a notice of deficiency on January 19, 2011, disallowing the Schedule C expenses listed above and, after computational adjustments, determining the following:
+-----------------------------------------------------------+
¦ ¦2006 ¦2007 ¦
+-------------------------------------+----------+----------¦
¦Deficiency ¦$46,718.00¦$20,634.00¦
+-------------------------------------+----------+----------¦
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