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Guinn v. Dep't of Revenue4/19/2005
penses claimed are allowable business deductions. As is the case for all business deductions, the taxpayer is required to document the business purpose. The court was not provided with any documentation, except Defendant's exhibits that failed to identify the party called and the business purpose. The court concludes that Defendant was generous in allowing 50 percent of all the long distance charges as business expenses when, even though asked by the auditor, Plaintiffs failed to provide detailed substantiation. The court accepts Defendant's adjustment for tax year 1999.
For tax year 2000, the conference officer allowed telephone expense identified as long distance for business use in the amount of $597.00. (Def's Ex A-5.) The conference officer disallowed an internet expense in the amount of $200.00, concluding "there is a highly personal component." (Id.) In response, Guinn states the disallowed deduction relates to utilities, "where the office was maintained, rooms were rented out, and books, and promotional materials were stored." (Guinn's letter at 4-5, Jan 16, 2005.) Guinn's response does not provide relevant information to support the telephone or internet expenses claimed. Without adequate substantiation and documentation, the court must accept Defendant's adjustment.
H. Advertising
For tax year 2000, Plaintiffs claimed advertising costs in the amount of $123.95 for the room in their home they rented to a third party. (Def's Ex C-8.) Plaintiffs concluded that Defendant disallowed the deduction. (Guinn's letter at 4, Jan 16, 2005.) Plaintiffs are incorrect. Defendant allowed the deduction; however, it was limited by IRC § 280A(c)(5). (Def's Ex A-6.) At trial, Guinn acknowledged during the discussion of Form 8829, Expenses for Business Use of Your Home, that he understood the auditor's adjustment. The court accepts Defendant's adjustment in the amount of $123.95.
I. Charitable Deduction
For tax year 2000, Plaintiffs claimed a non-cash charitable deduction in the amount of $549.50. (Def's Ex C-11.) The amount of the contribution was computed as follows: "50 books at 10.99 each." (Id.) Defendant alleges that Plaintiffs improperly computed the amount of the allowable contribution deduction. Citing IRC § 170 and Treas Reg 1.170A-4A-(c), Defendant concludes that the amount of the allowable contribution deduction should be $187.50 (50 books at $3.75, the amount determined as Plaintiffs' cost.) (Def's Brief at 22-23.)
At trial, Guinn argued that Defendant should not be allowed to request the court to reduce Plaintiffs' charitable deduction. As previously discussed, the court must "determine the correct amount of deficiency." ORS 305.575 (emphasis added). The court agrees with Defendant that the amount of the allowable contribution deduction for tax year 2000 is $187.50.
J. Rental Income
In its Brief, Defendant concluded that Plaintiffs may have failed to report rental income received from property they owned in Michigan for tax year 1999. (Def's Brief at 17.) During the trial, Defendant did not present any evidence to support its claim and there was no testimony. Without evidence to support the claim and an opportunity for Plaintiffs to refute it, no adjustment to Plaintiffs'1999 taxable income can be allowed.
K. Costs and Disbursements
Plaintiffs allege that they are entitled to recover "expenses related to appeal." (Ptfs' Complaint.) In its opening remarks of this section, the court quoted a "well settled principle" that "deductions are strictly a matter of legislative grace, and a taxpayer must meet the specific statutory requirements for any deduction claimed." Gapikia v. Commissi
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