Wednesday, April 30, 2008
The Tax Court yesterday denied a deduction for various business expenses claimed by an Illinois real estate attorney, including cell phone expenses. Tash v. Commissioner, T.C. Memo. 2008-120 (4/29/08):
The record did not indicate whether petitioner used his cellular telephone for business and/or personal calls. Petitioner has not demonstrated that his checks paid expenses that were "normal, usual, or customary" for a real estate attorney. See Deputy v. du Pont, [308 U.S. 488, 495-96 (1940)].
The record provides no satisfactory basis for estimating petitioner's legal and professional service expenses. Petitioner has failed to adequately substantiate the business purpose behind the 21 miscellaneous checks. Although the checks provide a guide as to the amount of petitioner's expenditures in 2003, the Court cannot guess as to the character of those expenditures when confronted with an inadequate record.[Fn. 6] Vanicek v. Commissioner, [85 T.C. 731, 742-743 (1985)]. Consequently, we will not apply the Cohan rule [Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930)] to estimate the amount of petitioner's legal and professional service expenses.
Fn.6: Expenses of a cellular telephone must be substantiated pursuant to sec. 274(d). The Court cannot estimate those expenses. Secs. 274(d)(4), 280F(d)(4)(v); sec. 1.274-5T(a), Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6, 1985).