In Uncategorized on 08/16/2012 at 16:38

Unless you can prove hardship, the schedules of national and local allowances govern housing expenses for figuring out collectibility. That’s the lesson Judge Goeke has for Wayne Clark, in T. C. Memo. 2012-238, filed 8/16/12.

Even though Wayne had only paid about $5K of the nearly $750K he owed in taxes for three years, he went and bought a house for $950K.  Judge Goeke describes this palazzo as having “at least 4,000 square feet of interior finished living space, is on a lot of approximately two acres in a gated ‘golf course community’, and has four bedrooms and five bathrooms.” T. C. Memo. 2012-238, at p. 4.

Wayne’s explanation is that he was a part-time consultant for Prince George’s County, MD, trying to entice business to locate there, using his wholly-owned LLC, Clarke & Company, LLC.

Wayne claims “that he ‘purchased his primary residence to help promote confidence among businesses that Prince George’s County is still a booming community’ and that he used his home ‘office to meet prospective clients and the location of his office allowed him to produce income. Petitioner further claims that without the home office ‘he would be forced to rent outside space which would not be a viable option considering the unpredictable nature of his income’.” T. C. Memo. 2012-238, at p. 13.

Wayne says that the SO assigned to his CDP abused his discretion by not allowing Wayne’s special circumstances to trump the national and local allowances.

Judge Goeke isn’t going there. “While respondent was generally aware of petitioner’s business, there was no evidence presented that petitioner made the Appeals Office aware of the fact that one of the rooms in his home was used as an office for Clarke & Associates. Indeed, each Form 433-A petitioner submitted listed an address for Clarke & Associates that was different from his personal address listed. There was no evidence presented that petitioner informed respondent’s Appeals Office or the SO that his housing expenses may have helped him (through Clarke & Associates) to produce income. Because petitioner failed to prove this information was provided to the SO, we find that he failed to prove the SO abused his discretion in using the local standard housing and utilities allowances instead of petitioner’s stated housing and utilities expenses.

“Even if petitioner had informed the SO of the facts regarding his business and home office, we would still rule that the SO did not abuse his discretion, as we find that petitioner’s home was not a necessary expense for production of his income and that no special circumstance exists which would allow him to deduct his stated housing and utilities expenses. Apart from vague testimony, petitioner offered no evidence that owning the home helped Clarke & Associates generate business. We also compare the size of the house as a whole (4,000 square feet on two acres of land with four bedrooms and five bathrooms) with the size of the areas used for business. Petitioner testified he used one room as an office but that he also “spread things out in the–off the kitchen. Sometimes we bring folks in, and they sit in the living room and downstairs”. Considering the cost of the house (nearly four times the local standard housing and utilities allowance) and the vague and unproven benefits to his business, we find that petitioner was not entitled to his claimed housing and utilities expenses of . . .and that the SO did not abuse his discretion in not allowing him this claimed monthly expense.” T. C. Memo. 2012-238, at pp. 15-16. (Footnotes omitted.)

A home is a house only if it fits the schedules, or you can show true hardship. Sorry, Wayne.

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