Attorney-at-Law

HOME IS WHERE THE HEART IS – REDIVIVUS

In Uncategorized on 07/28/2014 at 18:22

Or, Who Says Tax Is Unromantic?

Today is a rare day for this old softy. I’ve got a love story and a tax takeaway, and here’s STJ Daniel A. (“Yuda”) Guy with hearts, flowers and Schedule A, and a bye on the Section 6662(a) accuracy penalty for Lauren Elizabeth Miller, 2014 T.C. Sum. Op. 74, filed 7/28/14.

Lauren E. was the NYC rep for a California start-up called BrandingIron Worldwide, Inc. BrandingIron might have been long on iron but it was short on gold, at least while Lauren E. was repping them in the Apple. They had no office in NYC and weren’t going to get one, so Lauren E. had to work out of her apartment.

So the unreimbursed employee business expense I want to cover today is a fact of NYC life that y’all who live on the bayous, prairies, and Great Plains of our land wot not of, the NYC studio. Lauren E. had a large one, “…a single room with a total living area of 700 square feet. She provided a sketch of the apartment in which the space is divided into three equal sections: (1) an entryway, a bathroom, and a kitchen area; (2) office space, including a desk, two shelving units, a bookcase, and a sofa; and (3) a bedroom area including a platform bed and dressers. Petitioner had to pass through the office space to get to the bedroom area.” 2014 T. C. Sum. Op. 74, at p. 4. And she occasionally used the “office” space for personal purposes.

I lived in something that size for a year-plus, prior to finding the apartment of my dreams (and the Girl of My Dreams), with both of whom I am still happily affiliated.

Now exclusivity of the home office sinks most deductions (see my blogpost “Lock The Door!”, 8/18/11), but STJ Yuda is not oblivious to reality (and realty).

“Although petitioner admitted that she used portions of the office space for nonbusiness purposes, we find that her personal use of the space was de minimis and wholly attributable to the practicalities of living in a studio apartment of such modest dimensions. See Hughes v. Commissioner, T.C. Memo. 1981-140.” 2014 T. C. Sum. Op. 74, at p. 14.

So Lauren E. gets at least some of what she claims. As her annual rent for the palazzo in question was $26K (don’t gasp, you denizens of The Great Wide-Open; that’s what Manhattan costs), she gets about one-third, plus a piece of her cleaning bill.

IRS wants a Section 6662(a) accuracy penalty, but STJ Yuda says no.

“Petitioner provided her tax records to Mr. Letta, a certified public accountant, and she consulted with him regarding deductions for her business expenses. Mr. Letta reviewed petitioner’s tax records, considered them to be complete and accurate, and discussed the return with her before filing it. When he learned that many of petitioner’s original tax records had been lost, Mr. Letta contacted TurboTax in an ultimately unsuccessful attempt to retrieve worksheets that he completed while preparing the return for electronic filing.

“Considering all the circumstances, we conclude that petitioner reasonably relied on Mr. Letta to assist her in preparing a proper tax return for 2009. We likewise conclude that there was reasonable cause for, and petitioner acted in good faith with respect to, the underpayment in this case.” 2014 T. C. Sum. Op. 74, at pp. 21-22.

Now where was the romance I promised you? It comes in a footnote.

“Petitioner provided her tax records, including original receipts and invoices of her business expenses … to Michael Letta.” 2014 T. C. Sum. Op. 74, at p. 9 (Footnote omitted, but here it comes).

“Petitioner married Mr. Letta in August 2013.” 2014 T. C. Sum. Op. 74, at p. 9, footnote 3.

May they file jointly happily ever after.

 

 

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