William M. & Karen M. Loewenhagen, Petitioner

T.C. Summar Opinion 2011-70

UNITED STATES TAX COURT

WILLIAM M. AND KAREN M. LOEWENHAGEN, Petitioners v. COMMIS$iIONER OF INTERNAL REVENUE, Respondent Docket No. 4357-10S.

Filed Túne-15 2011 William M. and Karen M. Loewenhagen, pro sese.

Christ ina L . Cook, for respondent .

ARMEN; Special Trial Jud e:

This case was heard pursuant to the piovisions of seátion 746 of the Internal Revenue Code in effect when the petition was f iled." Pursuant. to section 7463 (b) , the decision to be entered is not reviewable "by any Unless otherwise indicated, all, subsequent section references are to- the Int'ernal Revenue Code in effect for the - year in issue, a d all Rule rèferences are to the Tax Court Rules of Practice and Procedure.

SeRVED JUR 152 other court, and this opinion shall not be treated as precedent for any other case.

Respondent determined a deficiency in petitioners' 2006 Federal income tax of $7,656.

After concessions by petitioners,2 the issue for decision is whether petitioners are entitled to Schedule C, Profit or Loss From Business, deductions for various expenses related to their campground business activities.

Background Some of the facts have been stipulated, and they are so found.

We incorporate by reference the parties' stipulation of facts and accompanying exhibits. All references to petitioner in the singular are to William M. Loewenhagen.

Petitioners resided in the State of Wisconsin when the petition was filed.

In 2001 petitioner entered into a contract with the County of La Crosse, Wisconsin, to manage Goose Island Park (the campground) . Petitioner' s duties as campground manager commenced January 1; 2002, and terminated on December.³¹, 2006.

As the campground manager petitioner was an independent contractor and not an employee of the County of La Crosse .

they are not entitled to:

The campgrodnd has: a stcire from which the campground manager is permitted atossell food and refreshments as well assbait ,and fishirig supplies.

The campground manager is requiredito pay toe the county "a $6002 rental fee [per year] for the * * * store, including electricity" rand to furnish all of the materials and supplies necessary, -to operatetthe store.

The campground manager' s duties include inter alia, r renting boats -and sother recreational equiptñent, operating a holding tank pumpout service "honey wagon') for campers for tfee, taking reservations and collecting fees from cámpers', and providin<j 24- hour security services .

The ampground manager -:LS permitted tO move a mobile ho e onto "the c mpground and ithere reside- ; -The campground manager is re'quire to spay *to the -county $1 rent per year for the sit on which th mobile home ist located and $44 per month "for elect icity provided to his mobile home:" Upon approval the campground manager is permitted to erect structures at his own expense as necessai-y to the operation of the campground.

The campground manager is also required to maintain worker' s comp ns tion and general liability insurance, with the County of La Crosse to - be named as an additional insured on the policy.

Because the campground manager is required to provide 24- hour security se 'vices, getitioner exercised his right to move a mobile home onto the campground.

There was no storage space on the campground for the food and tackle sold in the campground store, so petitioner erected a room on the side of the mobiles home-to house goods to be sold in the store. Petitioner also maintained a home of f ice so that when 'he was .not in the campground store and during the off-season, he would be able .to - take reservations and assist campers' as necessary.

In respect of his duties as campground manager, petitioner operated various fuel-consuming vehicles, including the honey wagon, a 1944 .tractor for pulling the honey wagon, a Ford'service var ("a -21, 000 pound retired ambulance") , and a Dodge diesel truck that, was used only fore the month of January.'

Petitioners timely filed a-2006 Federal income tax return.

On a Schedule C:petitioners claimed the following expenses:

Depreciation and se c . 17 9 expens es Insurance (other than health) Interest- -mortgage Utilities .

$8 , 8 64 3,647 5, 631 3, 226 Petitioners also claimed a deduction for an "auto expense" uñder "Other expenses" of $2,798.

In a notice of deficiency, respondent determined, inter alia, that petitioners were not entitled to:

(1) Depreciation and section 179 expenses of $2, 034 related to the campground vehicles and the mobile home; (2) insurance other than health of $380 related to the campground vehicles and mobile home; (3) mortgage interest of $2,816 related to the mobile home; (4) utilities of $2 258 for the m bile home; and (5) .vehicle expenses of $2, 098 for fuel for the vañious campground vehicles:

I. Burden of Prcof

Discussion y | In general, the Commissi ner'sadeterminationtset forth in a notice of- deficiency is presuàed correct, and the taxpayer bears the bu;cden of shcwing thati the determination-ais in error. Rule 142 (a) ; Meldh v .* Helvering , 290 JJ. S . 11r,all⁵ (1°933-)a. Pursuant to section"7491(a")., the burden of proof as to factual matters shifts, to the Cottmissioner un er certain circumstances. E a Petitioners have neithere alleged that -sections749-ly(a) applies nor established their compliance iths its requirementsa Accordingly, petitioners bear the burden o proof .

See Rule 142 (a) .

Deductions are a matter óf legislative' grace,- and the taxpayer bears the burden of roof to establish' entitlement to any cl'aimed deduc tion .

- Rule i⁴² (a) ; INDOPCO, ±Ina ir .

Commissioner, '503rU.S.;"79, 84 (1992) ; New -Colonial Ice Co. v.

Helvering, 292 . U. S'. 435, 440 1934 ) .

»This aburden requires the taxpayers to substahtiate claieed deductions* by keeping and producing- adequaterrecords thát enabre- the Commissioner to determine the taxpayer's correct tax liability Sea. 6001;± Hradesky v. Commissioner .C. 87, '90 (1975) affd. per curiam 540 F.2d 821 (5tl" Ci . 1976) .

A taxpayer claiming a deduction on aéFederal income tax return: must demonstrate that the- deduction is allowable pursuant to some statutory provision and must a further substantiate that the expense to which the deduction relates has been paid or incurred.

See sec. 6001; Hradesky v Commissioner, supra at 90; sec. 1.6001-1(a), Income Tax Regs.

If the taxpayer e'stablishes that he has incurred a deductible expense yet is zunable sto substantiate the' exact amount, the Court -may estimate ,a deductible amount, but may abear heavily against the taxpayer whose inexactitude is of his own 3 making.

Cohan v. Commissioner, 39 F,.2d 540, 544 -(2d Cir. 1930) The taxpayer must present sufficient evidence for the Court to forme an estimate because without such a basis, any tallowance would amount to unguided largesse. . Williams v. "United States 245 F.2d 559, 560-561 (5th Cir. 1-957); Vanicek v. Commissioner,

« Section 274 (d) generally imposes stringent substantiation requirements in the case of expenses, relating to the use of listed property,r specifically including any passenger automobile or other property used as a means of transportation.

-Sec.

280F (d) (4) (A) (i) cand ("i-i) , -(5) ; Larson v. Commissioner, 3 T. C.

Memo. 2008-187; sec..1.274-5T(a)s, Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov.

6,, 1985) (expressly superseding the so- a called Cohan rule and making -it inapplicable) .

- The flush language, of section 274 (d) , however, specif ically excludes from the strict substantiation requirements -any 'qualified nonpersonal use vehicle" A "qualified nonpersonal use vehicle" is "any vehicle which, by réason of i a nature, is notalikely to becused more than a de ni niniis amount for ;personal purposes . " Sec .

274 (i) .

II.

Expenses Related to the Ñobile Home Respondent etermined that petitioners are not entitled to= Schedule C deduct ions related to thes mobile home as follows:

Deprec ation and seä: 179 expenses Insura ce (other than health) Interest-'-mortgage Utilities $1 277 2, 816- 2, 258 Petitioners contend that hey are entitled to the Schedule C deductions relatdd to the mobile home because petitioner was required to live on the campgi-ound. Pet-itioners rely upon Lindeman v. Comm ssioner, 60 T.C. 609 (1973), in upport of their position.

Petitioners' reliance upon Lindeman is misplaced.

In Lindeman the taxpayer was the general manager of a hotel and lived in housing furnished by his employer.

Id. at 611.

The Court held that the taxpayer in Lindeman was entitled to exclude from gross income the value o the lodging furnished by his employer pursuant to section 19.

.Id_ at 617.

Responde ' s determinåtion allowed a portion of the.

deductions clain d for the no$ile home on the ground that petitioners used part of facilitate the campground manAgek duties and as a storage area for the campground store.

the niobile home as an office to See sec. 280A.

* I Section 119 excludes from an employee' s gross income the va-lue sof lodging furnished to him by his employer if three « conditions are met:

(1). The lodging is.furnished for,the convenience of the employer; (2) the employee is required to accept the lodging as a condition of his employment; and (3) the lodging is on the-business premises of the employer.

eLindeman v.

Commissioner, supra at 613; sec. 1.119-1(b), Income Tax Regs.

"The threshold requirement for section 119 is that the employer furnish the employee with housing in -kind, the value of which is properly inc ludable in inc ome . " Fuhrmann v . Commis s ioner , T . C .

Memo. 1977-416; sec. 1.119-1(c) (2), Income Tax Regs.

Section 119 does not apply in the instant case. First, section 119 is an income exclusion provision that petitioners rely upon to deduct expenses on a Schedule C. Petitioners, however, did not receive income from- the County of La Crosse in the form of lodging furnished in kind, nor did they include the value of lodging in income . Respondent is also not charging petitioners with income from the fair rental value of the land on which the mobile home was located.

Second, even if petitiôners had income from the County of La Crosse in the form of lodging furnished in kind, they do not satisfy the threshold requirements for section 119.. See Fuhrmann v. Commissione'r, supra. Petitioner was not an employee but rather an independent contractor, and the mobile home was not furnished to rpetitioner but r ther petitioner moved the mobile home onto the can pground Therefore,apetitioners a è not entitled to an exclusion under section 119 for the "mobile home.

Furthermore, e under section 262 personal living, aor family a expenses are not déductible .

"Everyorie must have food and shelter.

They are personal, t¹ ings :essential toaall of ua alike regaždl'ess of occupation.

They do not lose their personal a characteristics because they may contribute indirectlysto a taxpayer's business activitied?" Commissioner v.. Moran, 3236'F.2d 595, - 597 (;8th Cir .. 1956) , revg .I -on another matter T . C. Memo .

1955-202. Petit oners'sexpen es relat'ed to:the mobile home are personal expense ".

See- sec. 262.

'a Accordingly, de -hold that - petitioners, are note entitlèd to deduct the expenses arelated t the mobile' homé in any amounts greater than thore. previonely allowed ibyrrespondent III.

Expensest Rexlatéd to the Campground Vehioles Respondent eterminedi that petitioners are not entitled to Schedule C deductions related to the campground vehicles as follows:

Mortgage interest is deductible on Schedule A, Itemized Deductions. Petitiohers, hów verPclaimed the-standard dedùction and'have not presented any evideriae a that their: itemi zed I e deductions would be greater than the standard deducti:on.

Other expenses--auto expense Insurance (other than health) Depreciation and sec. 179 expenses « , $2,-098.

Respondent argues that petitioners are.not -entitled to such deductions because the amounts have not been substantiated and petitioners did not provide a mileage log for the auto expense.

Petitioner explained at.trial that the $2,098 of "other expenses" for ,auto expenses.claimed on the Schedule C was for gasoline for the campground vehiclest Those vehicles include the honey wagon,- -the 1944 etractor, and the Ford service van.⁵ sThese vehicles are "qualified nonpersonal use vehicles" within the, meaning of section 274(i) and therefore are not subject to the strict substantiation requirements of section 274(d), and no mileage log is necessary.

The record demonstrates that pet-itioners are entitled to the deduction of $2,098 for "other expenses"- for.gasoline, for the campground vehicles.

-See Williams v. Commissioner, 245-F.2d at 560-561þ Cohan v. Commissioner,: 39 F.2d at 544; Vanicek v. Commissioner, 85 T.C. at 742-743.

Petitioners have not established that they are entitled to deductions for insurance of $78 or depreciation of $757.

Thus, we hold that petitioners are entitled to a deduction of $2,098 for gasoline for the campground vehicles but are not otherwise entitled to deductions for the.campground vehicles in The Dodge ·truck, used only for othe month of January, was the $2,098 reflects only a diesel, and petitioner explained that the amount paid for gasoline and not-diesel fuel; - - e excess of the amcunts previously allowed or conceded by respondent .

Conclusion We have con idered all o the arguments made by the parties, and, to the exte t that we ha†e not specifically addressed them, we conclude that they do not upport a result contrary to that reached herein.

To reflect the foregoing Dedision will be entered - 155.

2. Petitioners concede that (1). A loss on the sale of business property of $42, 610 for the sale of a campground building; and (2) depreciation of $1, 257 for that same building.
85. T.C. 731, 742-743 (1985) .