In Uncategorized on 03/06/2012 at 16:14

And a Heavy Duty Penalty

Two Tax Court cases filed 3/5/12 each illustrate a point.

First is a “not-for-nuttin’” section 7463, Paul Michael Gritz and Janice Lee Gritz, 2012 T.C. Sum. Op. 20.

Paul’s story is the usual unsubstantiated employee business expenses and disallowed commuting costs. Paul was a pilot who flew from various airports, all in the general vicinity of his home. His employer reimbursed him for travel between airports, but Paul had to pick up the tab from home to whichever airport he was flying out of. He tried to deduct those expenses. No, says Judge Ruwe, commuting (homeplace to workplace and back) is personal. “It is well settled that, as a general rule, the expenses of traveling between one’s home and his place of business or employment constitute commuting expenses which are nondeductible personal expenses, while the costs associated with travel between work assignments are deductible. See Fausner v. Commissioner, 413 U.S. 838 (1973); Commissioner v. Flowers, 326 U.S. 465 (1946); Feistman v. Commissioner, 63 T.C. 129 (1974); Heuer v. Commissioner, 32 T.C. 947; see also secs. 1.162-2(e), 1.262-1(b)(5), Income Tax Regs.” 2012 T.C. Sum. Op 20, at p. 8.

Janice Lee’s story is more interesting. Schoolteacher Janet Lee bought a computer, manuals and similar items that she claimed she needed for her job, and expensed them. She could have claimed reimbursement from her school, but chose not to. Here’s her story: “…Mrs. Gritz consciously elected not to be reimbursed for her expenses, because if she were reimbursed, the items purchased would belong to the school district. Petitioners specifically indicated that they found reimbursement to be unappealing because Mrs. Gritz desired to amass a personal library of books and electronic devices. When an employee has a right to reimbursement for expenditures related to her status as an employee but fails to claim reimbursement, the expenses are not deductible because they are not “necessary”; i.e., it is not necessary for an employee to remain unreimbursed for expenses to the extent she could have been reimbursed. Orvis v. Commissioner, 788 F.2d 1406, 1408 (9th Cir. 1986), aff’g T.C. Memo.1984-533; Lucas v. Commissioner, 79 T.C. 1, 7 (1982).” 2012 T.C. Sum. Op. 20, at p. 11.

Part Two is how to get a Section 6673(a) frivolity penalty equal to three-quarters of your gross income. Performing this feat is Dennis C. Jackson, 2012 T.C. Mem. 58. I’ll spare you the particulars. This tale goes back to 1999, but the year at issue here is 2002.

Judge Thornton: “Petitioner’s deemed admissions establish that in 2002 he received income of $21,179. This amount is made up of net gains from the sale of stock, interest, dividends, royalties, partnership gains, and retirement income from a pension fund, as reported to the IRS by third parties. Under the Code, these items are clearly taxable. See sec. 61(a)(3), (4), (6), (7), (11), (13). Petitioner has not expressly disputed receiving any of this income or presented any evidence or made any judicially cognizable argument to properly challenge his 2002 underlying liability. Instead, petitioner has espoused frivolous and groundless arguments, including, notably, the argument that he made in objecting to respondent’s request for admissions, that the amounts and sources of his 2002 income are ‘irrelevant’. This argument appears to emanate from his nonsensical contention, as appears repeatedly in his petition and in other materials filed with this Court, that he is not liable for Federal income taxes because he is not a ‘taxpayer’.” 2012 T. C. Mem. 58, at pp. 14-15.

Well, he mightn’t have been a taxpayer before, but he sure will be now, as Judge Thornton socks ol’ Denny with a $15,000 Section 6673(a) penalty.

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