Not many opinions were released towards the end of the week. Therefore, I am writing about two summary opinions in this post.
In the first case, Mr. Rice lived in one house with his mother, girlfriend, his daughter, and his girlfriend's son. He claimed head-of-household filing status and took dependency exemptions for his daughter and his girlfriend's son. The IRS determined Mr. Rice should file single and denied both dependency exemptions.
Section 152(c) is controlling here. To claim someone has a dependent they must be a qualifying child; there is a four-part test for determining whether someone is a qualifying child; Support, Residence, Age, and Relationship. I tried to think of a catchy acronym like 'some roads are rough', but maybe it is easier to just remember the test as it is written.
After Mr. Rice produced a copy of his son's birth certificate proving he was the father, the IRS conceded head-of-household filing status and the dependency exemptions for his son. Mr. Rice, however, could not prove the relationship test with respect to his girlfriend's son. He also could not show he had adopted his girlfriend's son. Finally, he was not married to his girlfriend (that's called a wife), thus g's son was not Mr. Rice's step-son.
The next opinion involved a construction worker who claimed deductions on his 2003 tax return for his work clothes (denim jeans, denim shirts, and boots), and his transportation expenses between his home and his work site.
Generally, clothing is a non-deductible personal expense. Revenue Ruling 70-474, however, states that clothing expense is deductible if required as a condition of employment and not adaptable for ordinary every day use. The IRS did not challenge Mr. Blackmon on this test, but rather denied his deduction because he could not substantiate the amount of his deduction (although, the Tax Court did mention this test in the footnotes). The Tax Court upheld the IRS's determination because Mr. Blackmon could not provide any records to substantiate the cost of his work clothes or boots.
Likewise, Mr. Blackmon could not substantiate his transportation expenses. But even if he could, his transportation expenses between his home and his job site are considered non-deductible commuting expenses. Revenue Ruling 99-7 provides three exceptions to this general rule: a deduction for transportation expenses is allowed (1) if the work location is temporary and the location is "outside the metropolitan area where the taxpayer lives and normally works," (2) if there are one or more regular work locations away from the residence, then daily transportation expenses are deductible between the taxpayer's residence and a temporary work location in the same trade or business, and (3) if the taxpayer's residence is their place of business. Temporary is generally defined as a realistic expectation that a work location will last less than one year.
Here, Mr. Blackmon worked at a plant in Darlington, NC and lived 71 miles away in Chadbourn, NC. He worked there for 7 years, and 11 1/2 months in 2003. The record is not clear, but it seems he was laid off a few times during that 7 year period, and worked at other jobs in different locations. Mr. Blackmon believed all his work locations were temporary because he might get laid off at a moment's notice. Unfortunately this is not the definition of temporary; if it were we could all deduct our commuting expenses since must of us are at-will employees.
Both Mr. Rice and Mr. Blackmon were completely ignorant of the law. As a taxpayer, I wish there was a way to resolve these types of meritless petitions without the expense of a hearing and a written opinion.