Tax Court in Brief | Luna v. Comm’r | Disallowance of Itemized Business Deductions and Lack of Substantiation

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The Tax Court in Brief – August 29th – September 2nd, 2022

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Tax Litigation:  The Week of August 29th, 2022, through September 2nd, 2022

Luna v. Comm’r, T.C. Summ. Op. 2022-18| September 1, 2022 | Carluzzo, Chief SJT | Dkt. No. 17748-18S

Opinion

Short SummaryGeorge Luna (Luna) served as the executive director of a non-profit organization, the Center for Health Justice, Inc. (CHJ).  In addition, he served as a board member of E.S.S.E. Mundo Digital (EMD), a Brazilian organization. During 2015, he traveled to various cities in connection with his role as executive director of CHJ.  Also during 2015, he traveled to Brazil to meet with other board members of EMD.  Luna claimed miscellaneous itemized deductions on his 2015 return related to his travel for CHJ and EMD.  He also claimed a deduction for $225 of tax preparation fees.  The IRS disallowed all of these miscellaneous itemized deductions in full.  Aggrieved, Luna filed a petition with the Tax Court for review of the IRS’s determinations.

Key IssuesWhether Luna is entitled to claim miscellaneous itemized deductions for unreimbursed employee business expenses and for tax preparation fees.

Primary Holdings

Key Points of Law

InsightsThe decision in Luna demonstrates that taxpayers must be able to adequately explain, in many instances, the purpose of their claimed deductions.  If such purpose has only an attenuated connection with a trade or business, the deduction likely will be disallowed in full.