Opinion
4086-19
11-02-2021
Misbah Idrees, Petitioner(s), v. Commissioner of Internal Revenue, Respondent
ORDER
Joseph Robert Goeke, Judge.
Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is
ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Joseph Robert Goeke containing his oral findings of fact and opinion rendered at the remote Chicago, Illinois trial session at which this case was heard. In accordance with the oral findings of fact and opinion, a decision will be entered for respondent.
Bench Opinion by Judge Joseph Robert Goeke
October 19, 2021
Misbah Idrees v. Commissioner of Internal Revenue Docket No. 4086-19
THE COURT: The Court has decided to render oral findings of fact and opinion in this case and the following represents the Court's oral findings of fact and opinion.The oral findings of fact and opinion shall not be relied upon as precedent in any other case. This opinion is rendered pursuant to the authority in section 7459(b) of the Internal Revenue Code. Hereinafter section references are to the Internal Revenue Code in effect for the year 2016, which is the year before the Court.
The petitioner received a notice of deficiency for the taxable year 2016 asserting an income tax liability of $2,057. Subsequently the petitioner filed a timely petition and brought the present case before this court. We have jurisdiction to review the deficiency pursuant to the timely petition and the issuance of the notice of deficiency to the petitioner. JRG
Factual Summary
In 2016, the petitioner was employed by AutoNation as a car salesperson. Prior to January of 2016 she worked at AutoNation's Des Plaines, Illinois dealership. In 2016, she moved from Illinois to Texas due to personal health reasons. She requested to move to her employer, AutoNation, seeking relocation to the Lewisville, Texas location and she moved there and she JRG maintains that she began working in that location on January 2nd, 2016.
From early January through the end of May 2016 the petitioner worked at the dealership in Lewisville, JRG Texas. During those months she lived in a hotel located in Lewisville near the dealership where she worked. This hotel cost her roughly $12,000 for the length of her stay, which she used as a portion of the moving expense she asserted on her 2016 Federal Income Tax return.
Prospect Heights, Illinois at the end of May 2016.
Subsequently, the petitioner found the cost of living too high in Lewisville and moved back to her old apartment in
In June 2016, she returned to AutoNation's dealership in Des Plaines, Illinois and took her former position as a salesperson at that location. She stayed at that location in Des Plaines, Illinois at least through the end of 2016. She filed a form 1040 U.S. Individual Income Tax return for 2016, as we previously stated. Attached to the return was a Schedule A, where she itemized deductions. She reflected on that Schedule A unreimbursed employee expenses of $16,500. Included in that amount was $8,100 of vehicle expense. This deduction was not allowed in full and is not the subject of an JRG adjustment in respondent's notice of deficiency.
The vehicle expense included the miles petitioner drove to and from Texas as part of her two moves. This vehicle expense was calculated at a much higher rate than the allowable vehicle expense for moving, but no adjustment was made for the difference. She also listed on her 2016 tax return $15,000 of moving expense. She provided documents which consisted mostly of invoices from the hotel and a receipt for the purchase of furniture to support the $15,000 deduction.
With respect to petitioner's move from Illinois to Texas, respondent disallowed the entire $15,000 of moving expense, because the petitioner did not work in Texas for 39 weeks and did not meet the exception to the statutory rule at the time that petitioner left the JRG Lewisville car dealership because she left this dealership by her own admission, by her own choice.
Legal Analysis
Deductions are a matter of legislative grace and taxpayers must satisfy the specific statutory requirements for the item claimed. INDOPCO Inc. v. Commissioner, 503 U.S. 79, 84 (1992).
Petitioners like the petitioner in the present case bear the burden of proving their entitlement to any claimed deductions, credits, and expenses pursuant to Tax Court Rule 142(a). None of the exceptions in the Tax Court Rule or the statutory exceptions regarding burden of proof are applicable to this case, and petitioner does bear the burden of proof. A taxpayer claiming a deduction on a Federal Income Tax return must demonstrate that the deduction is provided by a statute and must further substantiate that the expense to which the deduction relates has been paid or incurred. Section 6001, Hradesky v. Commissioner, 65 T.C. 87 (1975) aff'd per curium, 540 F.2d 821 (5th Circuit 1976). A taxpayer is required to maintain records sufficient to enable the Commissioner of Internal Revenue to determine his correct tax liability. Section 6001 and Tres. Reg. Section 1.46001-1(a). The records required to be maintained must substantiate both the amount and purpose of the claimed deduction. Higbee v. Commissioner, 116 T.C. 438, 440 (2001).
Section 217(a) allows taxpayers to deduct moving expenses paid or incurred in connection with commencement of work as an employee at a new principal place of work. Section 217(b) generally defines the term "moving expenses" as the reasonable expenses of moving household goods and personal effects and travel expenses and section 217(c) imposes conditions that the taxpayer must satisfy to be eligible to claim a deduction for moving expenses. Relevant here is section 217(c)(2)(A) which requires that during the 12-month period immediately following her arrival in her new principal place of work she must be a fulltime employee there during at least 39 weeks. Section 217(d) provides exceptions for taxpayers who are unable to satisfy the 39-week requirement by reason of death, disability, involuntary separation from employment or a transfer for the benefit of the employer. Section JRG 217(d)(1)(B). Petitioner's job in Texas lasted from January to May of 2016, short of the 39-week requirement to qualify for the deduction of her moving expenses from Illinois to Texas. She moved from Illinois to Texas continuing to work for the same employer and returned to Illinois because of the cost of living in Texas was too high. Her decision to leave Texas and return to Illinois was based upon her own choice, not that of her employer.
Although petitioner's decision to return to Illinois was well founded; her reasons for doing so do not qualify for an exception to the 39-week requirement. Accordingly any moving expenses attributable to petitioner's move to Texas cannot be deducted. Petitioner's move to Illinois in connection with the commencement of work at her prior place of business in Des Plaines, Illinois, however, is potentially eligible for deductions, because she stayed at that facility for over 39 weeks. However, petitioner has failed to substantiate any expenses not previously allowed on her Schedule A as automobile expenses for the move from Texas to Illinois.
JRG Even if petitioner had been able to establish an exception to the 39-week requirement for her move to Texas, substantial part of the expenses that she claimed as moving expenses did not qualify as deductions, as that term is defined by the Internal Revenue Code and Treasury Regulations. In addition, certain expenses for her move to Illinois in May 2016 do not qualify as deductible moving expenses. Section 217(b)(1) defines moving expenses as the reasonable expenses of moving household goods and personal effects from the former residence to the new residence and traveling expenses including lodging from the former residence to the new residence. Expense of moving household goods and personal effects are defined as expenses of transporting goods and affects from the taxpayer's former residence to her new residence and packing, crating, in transit storage, and insurance.
Section 1.217-1(b)(3), Income Tax Regs. Expenses that are not deductible include storage charges - other than in transit storage - the cost of acquiring new property, expenses of connecting or disconnecting utilities, penalties for breaking leases, and losses sustained from the disposal of club memberships, tuition fees, and similar items.
Petitioner has not demonstrated any of these items that would qualify as being deductible expense for her move from Texas to Illinois. Traveling expenses are defined as the cost of transportation in route from the taxpayer's former residence to her new residence. Traveling expenses do not include hotel or other living expenses following the date of arrival at the new place of residence. Petitioner in the present case was therefore barred from claiming the hotel expense in Texas even if she had stayed in her position in Texas for more than 39 weeks. Under the definition of moving expenses, the expenses that petitioner deducted for the purchase of furniture in Illinois were clearly not deductible.
At trial petitioner testified she paid cash to an individual she met at her business to move her furniture to and from Texas. We find this testimony to be vague and to lack credibility regarding her move from Texas to Illinois because in other parts of her testimony she indicated she had little, if any, in the nature of furniture or other items that she needed to move from Texas to Illinois. As previously stated she was allowed her car moving expense indirectly through the allowance of the automobile expense she claimed on Schedule A.
As a result of this opinion, a decision will be entered for respondent.
This ends the Court's oral findings of fact and opinion in this case.
(Whereupon, at 12:43 p.m., the above-entitled matter was concluded.)