Tax Court Addresses Cell Phone Expenses

Cell phones are subject to same substantiation requirements as other expenses.

Church Finance Today

Tax Court Addresses Cell Phone Expenses

Cell phones are subject to same substantiation requirements as other expenses.

The tax code imposes strict substantiation requirements on the business use of certain kinds of personal property including cell phones. These requirements are explained fully in chapter 7 of Richard Hammar’s 2003 Church & Clergy Tax Guide as well as in prior issues of this newsletter. These requirements are cumbersome, and many feel that the modest cost of cell phone charges does not warrant compliance with these rules. A recent Tax Court case demonstrates that such a view will not be acceptable to the IRS or the courts. The case involved a taxpayer who claimed a business expense deduction of $1,200 for the use of a cell phone and pager. The Tax Court denied a deduction for any of these expenses since the taxpayer did not comply with the strict substantiation requirements that apply to cell phones. The court concluded, “The deduction for cell phone and pager expenses is subject to the same strict substantiation requirements as the car expenses. The taxpayer’s failure to substantiate the expense by original or reasonably reconstructed records is grounds for disallowing the deduction.” Lemos v. Commissioner, T.C. Summary Opinion 2002-29 (2002).

This article first appeared in Church Treasurer Alert, January 2003.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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