BAILEY v. COMMISSIONER OF INTERNAL REVENUE
T.C. Memo. 2012-96
United States Tax Court.
Filed April 2, 2012.
An entity called Entertainment Partners reported that it had paid Mr. Bailey wages of $1,541 in 1999, and Principal Life Insurance Company reported that it had paid him $61 in interest in 1999—neither of which, the IRS determined, was reported on his 1999 return. At trial Mr. Bailey testified, "I don't know offhand what that's about. I guess she [his sister Nancy Bailey] deposited the money in 1999. We're not finding a deposit to cover that. So, my answer is, I don't know what happened to it." We therefore sustain the adjustment.
p. Favorable income adjustments
The IRS made adjustments to income that were favorable to Mr. Bailey: $1,300 for reimbursed income in 1995; $40,394 for income that was included twice in 1995; and three credits (of $2,426 for income transferred from another account, of $19,600 for corrections to income, and $991 for double-counted interest income) totaling $23,017 in 1996. Mr. Bailey does not object, and we sustain the adjustments.
a. Dues and publications
The IRS disallowed deductions of $13,383 for 1993 and $10,200 for 1994 that Mr. Bailey claimed for dues and publications. Of the $13,383 disallowed for 1993, $755 is disallowed for lack of substantiation, and $12,628 was nondeductible dues to a private club. Mr. Bailey contends that these were paid in connection with the storing of the Spellbound when it was being held for sale; but since we find that the yacht activity was not for profit, the payments are nondeductible in any event. Of the $10,200 disallowed for 1994, $200 was disallowed as a political contribution (which Mr. Bailey calls de minimis and does not dispute) and $10,000 was a charitable contribution that the IRS has allowed as a Schedule A deduction. The IRS's adjustments are sustained.
b. Legal and accounting fees