Mazotti v. Comm'r of Internal Revenue

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T.C. Memo. 2024-75

ROBERT DEAN MAZOTTI AND DEBRA LEA JONES-MAZOTTI, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent

No. 18576-22

United States Tax Court

July 25, 2024

Robert Dean Mazotti and Debra Lea Jones-Mazotti, pro se.

Michael T. Garrett and Kyu-Jung Kahn, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

JONES Judge.

Debra Lea Jones-Mazotti and Robert Dean Mazotti^[1] seek redetermination of deficiencies in federal income tax determined by the Internal Revenue Service (IRS) for the 2018, 2019, and 2020 taxable years (tax years at issue). The issues for decision are (1) whether Ms. Jones-Mazotti's activities associated with her writing and research were entered into for profit, and, if so, whether she is entitled to deduct purported business expenses associated with those activities; and (2) whether the Mazottis are liable for penalties under section 6662.^[2] For the reasons set forth below, we hold that Ms. Jones-Mazotti did not engage in writing or research activities for profit, and therefore, she is not entitled to deduct the purported business expenses associated with those writing activities for the tax years at issue. Finally, we will sustain the IRS's accuracy-related penalties.

FINDINGS OF FACT

The first part of trial in this case took place during a Denver Colorado, trial session. The second part of trial occurred during a special remote trial session. We incorporate by this reference the stipulations of fact, the stipulated exhibits, and any exhibits admitted at trial.

The Mazottis resided in Colorado when they timely petitioned this Court.

I. Background

A. The Mazottis' Earnings for the Tax Years at Issue

Mr. Mazotti worked for the City and County of Denver for tax year 2018, but he retired and received retirement distributions for tax years 2019 and 2020. Ms. Jones-Mazotti worked for the Jefferson County School District during the tax years at issue. In 2019 and 2020, she also received wages from King Soopers. Further, Ms. Jones-Mazotti received gambling winnings for the tax years at issue, but the Mazottis failed to report those winnings on their returns for the tax years at issue. In tax year 2020, Ms. Jones-Mazotti received nonemployee compensation of $1,000 from Prevagen, Inc. (Prevagen).

B. Ms. Jones-Mazotti's Writer-Researcher Activities

During the tax years at issue, the Mazottis filed Schedules C, Profit or Loss From Business, for "Writer Researcher" activities. According to Ms. Jones-Mazotti, she has been writing her entire life. Her training consists of technical writing, writing workshops, and various community college courses related to writing, journalism, and photography. She also reports on-the-job training as a technical writer for the Federal Bureau of Investigation, Western Gas Resources, and North Jeffco Recreation.

In addition, Ms. Jones-Mazotti engaged in self-study about writing and publishing by reading books. She also claimed to have consulted with famous writers regarding her work, but she could not recall whether she spoke with those authors about minimizing expenses related to her writing.

Ms. Jones-Mazotti has claimed business expense deductions related to her writer-researcher activities since approximately 1996 or 1997, and she identified 2022 as the first year in which she earned a profit related to those activities. Despite her tenure as a professed writer-researcher, she does not have a business plan for her writer-researcher activities.

Ms. Jones-Mazotti claims that she has engaged in several different types of writer-researcher activities, including writing books, articles, and commercials, as well as travel for research and photography. We will discuss each in turn. We will also address Ms. Jones-Mazotti's work with the Jefferson County School District.

1. Books

When she began writing, Ms. Jones-Mazotti retained an agent to assist with her publishing journey. But after concluding that the agent was "less than ethical," she decided to no longer work with the agent. She submitted several books to publishers in the early 1990s, but she received numerous rejection letters.

Ms. Jones-Mazotti's testimony about attempts to publish in the nearly 30 years since-including during the tax years at issue-was inconsistent. For example, she first testified that, during the tax years at issue, her time was mostly limited to writing "articles and storytelling and online," not publishing efforts. She later testified that she submitted "every book" to potential publishers during the tax years at issue. But she could not recall any specific books that she queried to publishers and then stated it was "mostly articles" during the tax years at issue.

Ms. Jones-Mazotti claims to have self-published approximately six books through Shutterfly. Her books include If You Grew Up In, Bountiful Journey, Can You Go Home Again, and Filthy Fingers. She also collaborated on a book with her daughter titled How to be a Bridesmaid.

Filthy Fingers was included as an exhibit, and the document identified as a book appears to be approximately two pages long. Other purported books were also submitted as exhibits, including How Do I Grow? (which appears to be, at most, two pages, double-spaced, taking up less than half of each page) and the Ing Siblings (which is, at most, one page, double-spaced, taking up less than half of the page).

Ms. Jones-Mazotti also represented that some of her work has been made available at a young writers' conference. But her testimony was less than clear when asked whether she offers her books for sale. At first, she stated "Yes. Yes." But when asked to explain those efforts, she stated: "[W]ell, for my own purposes, no, [certain books are] not for sale. They're what I use for education-wise. For other purposes, yes, I do try and see if I can submit that." When pressed further, Ms. Jones-Mazotti stated that she took her books to conferences. When pressed again and asked whether she was offering her books for sale at the conferences, Ms. Jones-Mazotti responded: "Yes, in a way, you are, because you're showing what you've done, and you're hoping to find somebody that's wanting to publish or maybe even use those as those beginner books." On this inconsistent testimony, the Court cannot conclude that Ms. Jones-Mazotti offered her books for sale in the tax years at issue.

2. Articles

In addition to her purported writer-researcher activities related to books, Ms. Jones-Mazotti claims to write articles. For example, she testified that she has been published in numerous newspapers and online sources over the years. She also claims that local television stations have aired her work. But there is no evidence regarding when most of these alleged publications occurred, including whether they were published during the tax years at issue.

However, one newspaper article was apparently published in 2008, long before the tax years at issue. And based on the exhibits in the record, it appears that at least some of these claimed publications are opinion letters or social media posts. For example, one purported publication was a post on Facebook about Ms. Jones-Mazotti's personal experience. Other purported articles appear to be opinion posts on TripAdvisor.

For 2018, Ms. Jones-Mazotti reported $30 of income from her writer-researcher activities. Although she could not recall precisely, she testified that this income may have been from a Reader's Digest article that was published or from another writing submission. Ms. Jones-Mazotti reported $15 in gross receipts for writer-researcher activities for 2019, but she does not know the source of that income.

In addition, Ms. Jones-Mazotti reports that she has written previews and reviews for a company called Theatrical Entertainment Services. She states that some of this work was used by the company during the tax years at issue "until probably COVID." But the record does not contain any evidence of these publications, other than Ms. Jones-Mazotti's testimony.

3. Commercials

Ms. Jones-Mazotti testified that she wrote a national commercial for the over-the-counter medication Prevagen in 2018 or 2019. According to her, she wrote a testimonial about how Prevagen has helped her, and the pharmaceutical company decided to use Ms. Jones-Mazotti's story in its advertising. Ms. Jones-Mazotti also starred in the commercial, which was filmed in 2020.

At trial, Ms. Jones-Mazotti produced a spokesperson contract, indicating that she was paid by Prevagen for being a spokesperson, not for writing a commercial. According to her, she was paid for the writing work in 2020, and she was paid for appearing in the commercial in a later year. But although 2018 and 2019 are included in the tax years at issue, there is no evidence-beyond Ms. Jones-Mazotti's testimony- that she was paid for writing a pharmaceutical commercial in those years.

4. Research Trips

During the tax years at issue, Ms. Jones-Mazotti took numerous trips, expenses for which were included on her Schedules C as deductions claimed for writer-researcher activities. See infra Part I.C. During these trips to various locations-such as California and Florida-she purportedly conducted research for books, articles, and scavenger hunts she was creating. She also traveled to Hawaii in 2020 to allegedly study macadamia nuts for her books. Some members of her family, including her husband and daughter, typically traveled with her on these trips. During these trips, Ms. Jones-Mazotti purportedly took photos of fruits, vegetables, and trees for her writer-researcher activities.

Ms Jones-Mazotti testified that she traveled to California and to Disney World to research a family trivia game she wanted to write. However, Ms. Jones-Mazotti also...