Sandra Holmes, Petitioner
T.C.
Opinion
iwT fu 1 , T .C . Memo . 2007-97 UNITED STATES TAX COURT SANDRA HOLMES, Petitioner v . COMMISSIONER OF INTERNAL REVENUE, Responden t Docket No . 5699-05 . Filed April 24, 2007 .
James H . Callwood , for petitioner .
Matthew J . Avon and Paul Schneiderman , for respondent .
MEMORANDUM FINDINGS OF FACT AND OPINIO N SWIFT, Judge : Respondent determined a deficiency in and additions to petitioner's 2001 Federal income tax as follows :
Additions to Ta x Deficiency 6651 (a) (1) 6651(a)(2) 6654 (a ) Sec . Sec . Sec .
$35, 380 $2 , 037 $1,358 $24 2 SERVED 'APR 2 4 2O Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for 2001, and Rule references are to the Tax Court Rules of Practice and Procedure .
After settlement of some issues by the parties, the issue for decision is whether petitioner for 2001 is entitled to deduct legal fees .
FINDINGS OF FAC T At the time the petition was filed, petitioner resided in New York, New York .
In 1994, using an attorney, petitioner filed in Federal District Court a lawsuit against petitioner's employer alleging sexual harassment and discrimination . In 1996, the District Court dismissed petitioner's lawsuit . In 1997 the United States Court of Appeals for the Second Circuit affirmed the dismissal .
Holmes v . NBC, GE , 946 F . Supp . 2 (S .D .N .Y . 1996), affd . without published opinion Holmes v . NBC/GE , 133 F .3d 907 (2d Cir . 1997) .
The specific terms of the fee agreement between petitioner and her attorney are not established in the record .
In 2001, even though petitioner's Federal sexual harassment and discrimination lawsuit had been dismissed against petitioner several years earlier, petitioner's attorney continued attempts to recover for petitioner damages relating to alleged sexua l harassment and discrimination . The record does not indicate that petitioner ever recovered any amount of damages relating to sexual harassment or discrimination .
On September 13, 2004, because petitioner had not filed her 2001 individual Federal income tax return, respondent prepared for petitioner a substitute tax return using third-party return information and determined against petitioner a tax deficiency of $35,380, plus the additions to tax listed above .
On or about September 5, 2006, 2 weeks prior to trial, petitioner signed and submitted to respondent her 2001 individual Federal income tax return and claimed thereon a $47,600 miscellaneous legal expense deduction under section 212, subject to the 2-percent adjusted-gross-income floor of section 67(a) .
At trial, after settling all other issues and without objection from respondent, petitioner was allowed to raise the issue as to the claimed $47,600 legal expense deduction .
Of the $47,600 in legal expenses petitioner seeks to deduct, petitioner acknowledges that in 2001 she paid her attorney no more than approximately $7,000, representing out-of-pocket legal expenses .
Petitioner has not submitted bills, receipts, canceled checks, or other records that would establish that petitioner paid any of the legal expenses that petitioner seeks to deduct .
Petitioner admits that she is a cash method taxpayer .
OPINION
A taxpayer is required to keep records to enable a determination of the taxpayer ' s correct Federal income tax liability to be made .
Sec . 6001 ; sec . 1 . 6001-1(a), Income Tax Regs .
A taxpayer may deduct from income ordinary and necessary expenses paid or incurred during a year in connection with the production of income . Sec . 212 .
Under section 1 .446-1(c)(1)(i), Income Tax Regs ., a taxpayer who uses the cash method of accounting to compute taxable income may only deduct expenses in the year the expenses are paid . See Estate of Gordon v . Commissioner , 47 T .C . 462, 466 (1967) ; Dehoney v . Commissioner , T .C . Memo . 2006-108 ; Sandoval v .
Commissioner , T .C . Memo . 1979-430 .
Petitioner's argument that the statutory language of section 212 allows her a deduction for legal expenses "incurred" but not paid in 2001 is without merit .
Because petitioner has not substantiated that she paid any legal fees in 2001, petitioner is not entitled to a deduction in 2001 for legal fees in any amount .
To reflect the foregoing, Decision will be entere d under Rule 155 .