The Tax Court in Cartwright, TC Memo 2015-212 ,
held that a taxpayer was not entitled to depreciation and Section 179 expense
deductions greater than the IRS allowed for the business use of a vehicle he
used as a mobile office.
The taxpayer, an orthopedic surgeon, operated a
medical practice and was also an on-call physician and staff surgeon at a
hospital. As an on-call physician, the taxpayer was required to work a 24-hour
period three days a month from Friday through Sunday. If he was notified to
report to the hospital in emergency situations, he was required to arrive
within one hour. In certain instances, he was instructed to respond to pages
within 20 minutes and “stat” pages within five minutes. The taxpayer's home was
25 miles from the hospital.
In 2008, the taxpayer purchased a Navigator. He
drove it from his home to the hospital when he reported for on-call duty. He
parked in the hospital parking lot near its emergency room so that he could
rest and sleep in the Navigator when he was not needed at the hospital. Because
the taxpayer suffers from very serious and chronic medical conditions, he
thought that the Navigator would help him better service his patients. In the
Navigator, he reviewed charts on his computer and referred to medical books. He
did not treat patients in the Navigator. The taxpayer and his wife maintained
mileage logs for their business and personal use of the vehicle in 2008 and
2009.
The taxpayer and his wife jointly filed timely
returns. They reported business expense deductions for depreciation and Section
179 expenses for the business use of the Navigator for 2008 and 2009 in the
respective amounts of 85% and 100%. They did not explain how they determined
these percentages.
The IRS issued a deficiency notice in which it
determined the taxpayer's business use percentages to be 19.42% or 948 miles
for 2008 and 22.23% or 663.68 miles for 2009. The IRS found that according to
the taxpayer's logs, the Navigator was used mostly for personal reasons. The
IRS contended that the allowable depreciation deductions and Section 179
expenses for the Navigator should have been allocated between business and
personal use.
The taxpayer argued that the Navigator was used
as a mobile office for 85% of the time he was performing on-call duties in 2008
and 100% of the time for such periods in 2009. He testified that because of his
health problems, he was better able to serve his patients by using the
Navigator, and it saved the cost of renting an office near the hospital.
However, the court was not convinced that he was entitled to allocate 85% and
100% of the vehicle's use for his business. The evidence showed that his
business use of the Navigator was 27 days for 2008 and 36 days in 2009 and that
both he and his wife used it for personal purposes for the remainder of the
time. The court found that the IRS's determinations were fair, reasonable, and
correct. Therefore, it sustained the IRS's business use percentages for the
Navigator.
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Amare
Berhie, Senior Tax Accountant
(651)
621-5777
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