The Tax Court upheld IRS-assessed deficiencies caused by the disallowance of a number of travel expenses an oral surgeon deducted on his Schedules C, Profit or Loss From Business, for 2008 and 2009, and its imposition of a negligence penalty under Sec. 6662(a) (Bigdeli, T.C. Memo. 2013-148).
Javad Bigdeli lived in Gladwyne, Pa., a suburb of Philadelphia, but his dental office was in Elmsford, N.Y., which is north of New York City. He did not work anywhere else during this period, and the evidence established that the job in Elmsford was not temporary. The Bigdelis filed joint returns and claimed almost $56,000 in car and truck expenses for 2008 and 2009.
Despite the long distance between his home and his work, and the fact that he occasionally stayed in hotels in Elmsford to avoid the long trip home, the IRS treated the taxpayer’s travel between Gladwyne and Elmsford, which are approximately 130 miles apart, as a commute (travel from the taxpayer’s home to a nontemporary place of business). As such, the costs of traveling between Gladwyne and Elmsford were not deductible because Sec. 162(a)(2), which allows a deduction for traveling expenses while away from home, has been interpreted to not apply to commuting expenses. The court also disallowed his deductions for the costs of the hotel rooms he stayed in and meals he ate at the office as personal expenses.
In upholding the IRS’s imposition of a penalty of about $5,000 total for 2008 and 2009, the court pointed out that the Bigdelis did not make any arguments about the penalties at trial and failed to file a brief. They relied on their daughter, who had no tax or accounting experience and used personal tax software, to prepare their tax returns and made no effort to determine whether the deductions were proper. The court held this was negligent. The court further found that the taxpayers did not have reasonable cause for or act in good faith with respect to the underpayments.