T .C. Su m m ary Op i n io n 2 01 8 -1 1

UNITED STATES TAX COURT

RON W ILLIAM THOM PSON, Pet i t i o n er v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 1 9 3 72 -1 6 S. Fi l edM arch 1 2 , 2 01 8
. Ro n W i l l i am

Th o m p s o n , p ro s e. J eri L. Acro m i t e an dM i l es B. Fu l l er, fo r res p o n d en t .

SUM M ARY OPINION LAUBER, J u d g e: Th i s cas e was h eardp u rs u an t t o th e p ro v is i on s o f s ect i o n 7 4 6 3 o f t h e In t ern al Rev en u e Co d e i n effect wh en th e p et i t i o n was fi l ed
. 1 Pu rs u 1 Al l s t atut o ry

referen ces are t o th e In t ern al Rev en u e Co de (Co d e) i n effect fo r t h e t ax y ear i n i s s u e, an dal l Ru l e referen ces are t o th e Tax Co u rtRu l es o f Pract i ce an d Pro cedu re. W e ro u n dal l m o n et ary am o u nt s t o th e n eares td o ll ar.- 2
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an tt o s ect i o n 7 4 6 3 (b ), the d eci s i o n t o b e en tered i s n o trev i ewab l e b y an y o th er co u rt , an dth i s o pi n i o n s h al l n o tb e treat edas p reced en tfo r an y o th er cas e. W i th res p ect t o p et i t i o n er’ s Fed eral i n co m e t ax fo r 2 01 3 , th e In t ern al Rev en u e Serv ice (IRS o r res p o n den t ) d et erm i n eda d efi ci en cy o f $ 2 , 9 62 . Th i s d efi ci en cy i s at tri b u t ab l e t o th e d is al l o w an ce o f m i s cel lan eo u s d edu ct i on s th atp et i ti o n er cl ai m edo n Sch edul e A, It em i zedDedu ct i o ns . Fi n d i n g th ath e h as s ub s t an t i at ed th e u n derl y i n g ex p en s es i n p art , we wi l l s u s tai n th e d efi ci en cy i n p art . Back gro u n d Th e p art i es fi l eda s t ip ul at i o n o f fact s th ati s i n co rp o rat edb y th i s referen ce. Pet i t io n er res i dedi n Ari zo n a wh en h e t i m el y p et i t i o n edth i s Co u rt . Pet i t i o ner i s a b i o l o g is t wh o was s em i -ret i reddu ri n g 2 01 3
. He s p eci al i zes i n the eco l og y

an dp red at o ry

h ab i t s o f m o u n t ai n l i o ns (an dt o a l es s er ex t en t , jag
u ars an d p u m as ) i n d es ertareas o f M ex i co , New M ex i co , an dTex as . On e i s s u e o f i n t eres tt o h i m i s th e ex t en t t o wh i ch th es e p red at o rs p rey o n l i v es t o ckas o p p o s ed t o wi l dan i m al s s u ch as d eer, el k , an d rab b i ts . Need l es s t o s ay , th i s i ss ue i s al s o o f
co n cern to ran ch ers wh o o wnl i v es t ocki n th es e areas . Pet i t i o ner en g ag es i n fi el dres earch co ncern i n g b i rt h rat es , s u rv iv al , p o p u l at i on d en s i ty , m i grat ory

p at t ern s, an dp red at o ry

h ab i t s o f m o u nt ai n l i o n s an djag
u ars n ear t h e U.S.-M ex ico b o rd er. He an dh i s fel l o w res earch ers s eekt o d o th i s i n- 3
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v ari o u s way s . On e t ech n i qu e i n v o l v es i n s tal l at i o n o f s t at i o n ary cam eras th attrack th e an i m al s ’ act i v it y

atk ey l o cat i o n s . An ot h er t ech n i qu e i nv o l v es cat ch i n g an d
s ed at i n g th e an i m al s , th enp u t t in g rad i o -co l l ars aro u n d t h ei r n eck s b y wh i ch th ei r act i vi t i es can b e t rack ed u s i n g GPS m o n i t o ri n g. Pet i t i o n er h as p ub l i s h eda n u m b er o f s ch o l arl y

art i cl es d o cu m en t i n g th e res u lt s o f h is res earch
. Pet i t i o ner en g ag edi n h i s res earch u n d er t h e au s p i ces o f t wo u n iv ers it i es : Su l Ro s s St at e Un i vers i ty (Su l Ro s s ) i n Al p i n e, Tex as , an d t h e Un i v ers i ty o f Ari
zo n a i n Tu cs o n, Ari zo n a. Pet i t i o n er m ad e num ero u s tri p s t o M ex i co , Tex as , an d New M ex i co i n co n du ct i n g h i s res earch . He m ad e t h es e t ri p s t o as s i s ti n s et t i n g up cam eras an d co l lari ng m o un t ai n l i o ns an d jag u ars , m eet i ng wi th ran ch ers wh o h ad l o stl i v es t o ck , v i s i t i n g ran ch es t o o b s erv e k i l l edp rey , m eet i n g wi th res earch
ers i n M ex ico , an dtrai n in g g radu at e s tu d en ts fro m M ex i co Ci ty . Pet i t i o ner t i m el y

fi l ed , jo i n t l y wi th h i s wi fe, Fo rm 1 0 4 0 , U.S. In di v i du al In
co m e Tax Retu rn , fo r t h e 2 0 13 t ax y ear. 2 As rel ev an th ere, h e rep o rt edwag e i n co m e o f $ 7,5 0 0 fro m

Su l Ro s s an di n cl ud eda Sch edu le C, Pro fi to r Lo s s fro m Bu s i nes s, fo r an act i v i ty

d es cri b edas “ b ord er s tu dy .” He rep o rt edo n Sch edu l e C g ro s s recei p ts o f $ 1 7 ,1 67 , ap p aren t l y refl ect i n g a co n tract fee o r g ran tfro m o n e o f

2 Pet i t i on er’ s wi fe, Bren d a L. Th o m p s o n , d i dn otjo i n th e p et i t i o n s eek i n g red et erm i n at i o n o f t h e d efi ci en cy an di s n ota p et i t i o n er i n th i s Co u rt .- 4
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th e u n iv ers i t i es th ats up erv i s edh i s res earch . Th e o n l y ex p en s es rep o rt edo n h i s Sch edu l e C were car an d tru ckex p en s es o f $ 11 ,8 6 5 , refl ect i n g a m i l eag e al l o wan ce o f $ 0 .5 65 p er m i l e fo r 2 1 ,0 0 0 b u s i n es s m i l es dri v en o n a v eh i cl e p l aced i n s erv i ce o n J an u ary

1 , 2 0 0 2. Res p o n d en th as n o tqu es t io n ed the d edu ct i on fo r p et i
t i on er’ s Sch edu le C v eh i cl e ex p en s e. Sep arat el y , p et i t i o n er rep o rt edo n Sch edu l e A m i s cel l an eo u s ex p en s es o f $ 2 1 ,6 4 3 . Th es e co n s i s t edo f $ 17 ,9 1 8 o f u n rei m b urs edem

p l o y ee b us i n es s ex p en s es (i ncl u d i n g $ 12 ,8 82 o f car an d tru ck ex pen s es ); $ 15 0 o f t ax p rep arat i on fees ; an d $ 3 ,5 7 5 o f “ ot h er ex pen s es .” Th e “ o th er ex p en ses ” i ncl u d edu n i on an dp ro fes
s i on al du es o f $ 8 9 , equ i pm en tex p en s es o f $ 2 ,4 6 5 , an dex p en s es o f $ 1 ,0 21 s o m eh o w rel at edt o m ou nt ai n l i o n s . Aft er ap pl y i n g th e 2 % fl o o r p res cri bedb y s ect i o n 6 7 (a), p et i t i o ner cl ai m eda m i s cel l an eo u s i t em i zed d edu ct i o n o f $ 1 9 ,7 3 3
. 3 Ina t i m el y no t i ce o f d efi ci en cy th e IRS d is al l o wed th i s d educt i o n i n fu l l fo r l acko f
s ub s t an t i at i o n . Pet i t io ner t i m el y p et i t i o n edfo r red et erm i n at i o n .

3 Pet i t i on er i n cl u dedwi th h i s 2 0 1 3 ret u rn a Sch edu le E, Sup p l em en t al In
co m e an dLo s s , rep o rt i n g a n o np as s i v e l o s s o f $ 2 , 0 4 9 at tri b u tab l e t o h i s d i s tri b u t i ve s h are o f a l o s s i n cu rredb y Pri m ero Co n s erv at i o n Ou t fi tt ers LLC. Al th o u g h th aten t i ty

al s o h adact i vi ti es i n M ex i co , p et i t i o n er cred i b ly t es t i fi edth atal l o f i t s i n co m e an d ex pen s es were rep o rt edo n i t s Fo rm 1 06 5 , U.S. Retu rn o f Part n ers h i p In co m e, an d thatn o n e o f t h e ex p en s es ati s s ue h ere were co n n ect edwi th i t s act i v i
t i es .- 5
- Di s cu ss i o n A. Go v ern in g St atut ory Fram ewo rk Th e IRS’ d et erm i n at i o ns i n a n o t i ce o f d efi ci en cy are g en eral l y

p res u m ed
co rrect , an dth e t ax p ay er b ears th e b u rd en o f p ro v i n g t h o se d et erm i nat i on s erro n eo us . Ru l e 1 4 2 (a); W el ch v . Hel v eri n g , 2 9 0 U.S. 1 1 1 , 1 1 5 (1 9 3 3 ). Pet i ti o n er d o es no tco n t en d t h atth e b u rd en o f p ro o f s h ift s t o res p o n d en tu n der s ect io n 7 4 9 1 (a) as t o an y

i s s u e o f fact
. Sect i o n 1 6 2 (a) al l ows th e d edu ct i o n o f “ al l th e o rd i n ary an dn eces s ary

ex p en ses p ai do r i n cu rredduri n g th e t ax ab l e y ear i n carry i n g o n an y trad e o r b u s i
n es s .” Dedu ct i o n s are a m at ter o f l eg i s l at iv e g race; the t ax p ay er b ears th e b u rd en o f p ro v i n g h i s en t i t l em en tt o d edu ct i o n s al lo wed b y th e Co d e an do f s ub s t an t i at i n g th e am o un t s o f ex p en s es u n d erl y i n g cl ai m ed d edu ct i o n s . Sec. 6 0 0 1 ; INDOPCO, In c. v . Co m

m is s io n er, 5 0 3 U.S. 7 9 , 8 4 (1 99 2 ); s ec. 1 .6 0 0 1 -1 (a), In co m e Tax Reg s . Th e fai l u re t o k eep an dp res en taccu rat e reco rd s co u n t s h eav i l y ag ai ns ta t ax p ay er’ s at t em p t edp ro o f. Ro g ers v . Co m m i s s io n er, T.C. M em o . 2 01 4 -1 4 1 , 1 0 8 T.C.M . (CCH) 3 9 , 4 3
. Sect io n 2 7 4 (d ) i m

p o s es rel at i v el y s tri cts ubs t an t i at i o n req u i rem en t s fo r d edu ct i o n s cl ai m edfo r (am o n g o th er t h i n g s ) “ l i s t edp ro p ert y .” Li s tedp ro p erty i n cl u d es an y

“pas sen g er au t o m o bi l e.” Sec. 2 8 0 F(d )(4 ). No d edu ct i o n i s al lo wed- 6
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u n d er s ect i o n 2 7 4 (d ) u n les s t h e t ax p ay er s ub s t an t i at es , b y ad equ at e reco rd s o r b y s u ffi ci en tev i d en ce co rro b o rat i n g h i s o wns t at em en ts , th e am ou n t , t i m e an dp l ace, an d b u s i n es s p u rp o se fo r each ex p en d i tu re. Sec. 1 .2 7 4 -5 T(a), (b ), an d(c), Tem p o raryIn co m e Tax Reg s ., 5 0 Fed . Reg . 4 6 01 4 (No v . 6 , 1 9 8 5 ). B. An al y s i s Res p o n d en tco n ced edattri al th atp et it i o n er h ads ub s t an ti at ed p aym en to f $ 1 5 0 fo r t ax p rep arat i o n fees
. W e fi n dth at th e b al an ce o f t he ex p en s es ati s s u e, o r $ 2 1 ,4 9 3 , al tho u g h rep o rt edo n Sch edu l e A as m i s cel l an eo u s d edu ct i o n s , actu al l y rel at ed t o p et i t i o n er’ s Sch edu l e C b u s i n es s o f res earch i n g p red at o r act i v i ty al o n g th e U.S.-M ex i co b o rd er. 4 W e fi n dth ath e h as s ub st an t i at edthes e ex p en s es i n p art . 1
. Car an dTru ckEx pen s es Becau s e p as sen ger au t o m o b i l es co n s t i tu t e “ li s t edp ro p erty ,” p et i t i o n er’ s rep o rt edcar an dtru ckex p en s es are s ub jectt o t h e h ei g h t en eds ub st an t i at io n req u i rem en t s d es cri b edab o v e. See Fern an d ez v . Co m m i s s io n er, T.C. M em o . 2 0 1 1 -2 1 6 , 1 0 2 T.C.M . (CCH) 2 4 2 , 2 4 4
. To s at i s fy th es e requ i rem en t s , the t ax p ay er g en eral l y m u stk eep a co n tem

p o ran eo u s m i l eag e l og o r a s i m i l ar reco rd , s u ch as a d iaryo r

4 Th e m i s ch aract eri zat i o n o f t h es e ex pen s es m ay b e at tri bu t ab l e t o th e fact th atp et i t i o n er’ s l o n g s tan d i n g retu rn p rep arer d i edwh i l e t h e 2 0 1 3 retu rn was b ei n g p rep ared . Pet i t i o n er ex p l ai n edth at“ a l o to f t h es e fi g u res were m o v edaro u n d ” as a res u l tan dth ath e was “ n o ten t i rel y co m fo rt ab l e wi th wh i ch s ch edu l e th ey s up p o s ed l y wen to n .”- 7
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tri p s h eet s , th ats ub s t an t i at es th e ex t en t t o wh i ch th e v eh i cl e was actu al l y u s edfo r b u s i n es s rat h er t han p ers o n al p u rp o ses . See M i ch ael s v . Co m m is si o n er, 5 3 T.C. 2 6 9 , 2 7 5 (1 9 6 9); Fl ak e v . Co m m i s si o ner, T.C. M em o . 2 0 1 4-7 6 , 1 0 7 T.C.M
. (CCH) 1 3 9 9 , 1 4 0 1 -1 4 02 ; s ec. 1 .2 7 4 -5 T(c), Tem po raryIn co m e Tax Reg s ., s up ra. Lack i n g co n tem

po ran eo u s reco rd s , th e t ax p ay er m u s tp ro du ce o th er cred i b l e ev i
d en ce s u ffi ci en t t o co rro b o rat e h i s o wns t at em en t s co n cern in g b us i n es s u s e. Ib i d
. Pet i t i o ner rep o rt ed$ 1 2 ,8 8 2 o f v eh i cl e co s t s as an u n rei m b u rs edem

p l o y ee b u s i n es s ex p en s e. W e fi n dth atn o p o rt i on o f t h i s am o u nt i s d edu ct ib l e, fo r two reas on s . Fi rs t , p et i t i on er m ai n tai n edn o co nt em p o ran eo u s m il eag e l o g o r s i m i l ar reco rd s o f h i s trav el . Rat h er, h e es t i m at edth e m i l eag e t o three d es t i nat i o n s --M o ct ezu m a, M ex i co ; Las Cru ces , New M ex i co ; an d Al p in e, Tex as --an d m u l t i p l i ed t h at
m i l eag e b y

the n u m b er o f t ri p s h e t h o u g h th e h adt ak en t o each d es t i n at i o n . Seco n d , an dm o re i m

p o rt an t l y , we fi n d th atth e m il eag e d edu ct i o n p et i t i o ner cl ai m edo n Sch edul e A dup l i cat es th e m i l eag e d educt i o n th ath e cl ai m ed(an dth e IRS al l o wed ) o n Sch edu l e C. OnSch edu l e A h e rep o rt edv eh i cl e ex p en s es o f $ 1 2 ,8 8 2 , refl ect i n g 2 2 , 8 0 0 b u s i n es s m i l es dri ven i n a v eh i cl e p l aced i n s erv i ce o n J an u ary 1 , 2 0 0 2
. On Sch edu le C h e rep o rt edv eh icl e ex pen s e o f $ 1 1,8 65 , refl ect i n g 2 1 , 0 0 0 b u s i n es s m il es dri v en i n a v eh i cl e p laced i n s erv i ce o n J an uary1 , 2 0 0 2
. Th e t ri p s fo r wh i ch h e cl ai m eda m i l eag e al l o wan ce d edu ct i o n o n Sch edu l e A,- 8
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m o reo ver, were t o th e s am e d es t i n at i o n s i n M ex i co , New M ex i co , an dTex as th at were l o g ical d es t i n at i o ns fo r h i s Sch edu l e C “ b o rd er s tu dy ” act i v i ty . Fo r t h es e reas on s , we co n cl u d e t h atp et i t i o n er h as n o t s ub s tan t i at edan y car an dtru ckex p en ses b ey o n dth os e t h e IRS h as al read y al l o wedo n Sch edu l e C. 2
. Trav el Ex p en s es Th e $ 5 ,0 3 6 b al an ce o f t h e ex p en s es p et i t i o n er cat eg o ri zed as u n rei m b u rs ed
em pl o y ee b u s i n es s ex p en s es ch i efl y refl ect ed co s t s i n cu rreddu ri n g h is res earch
rel at ed tri p s t o M ex i co , o n wh i ch h i s wi fe o ccas i o n al l y acco m pan i ed h i m . Th es e ex p en s es i n cl u dedth e co s t o f h o t el s , res t au ran tm eal s, cam p i ng equi p m en t , fo o d
co n su m edwh i l e “ cam

p i n g o u t ,” an djag u ar-t h em edh at s fo r M ex i can res earch p art i ci p an t s . Aft er a carefu l rev i ew o f th e reco rdev i d en ce, we fi ndth at p et i t io n er h as s ub s t an t i at ed$ 2 ,6 5 0 o f d edu ct i b l e Sch edu l e C ex p en s es i n th es e cat eg ori es . 3
. Oth er Ex p en s es Th e $ 3 ,5 7 5 b al an ce o f t h e cl ai m edm i s cel lan eo u s ex p en s es ch i efl y refl ect ed
o th er co s t s p et i t io n er i n cu rred du ri n g h i s p red at o r m o n i to ri ng act i v i ty . Attri al h e d o cu m en t ed$ 4 ,0 1 9 o f s uch ex p en s es fo r 2 0 1 3 : $ 1 , 7 49 fo r t h e p u rch as e o f wi l d
l i fe cam eras an d$ 2 ,2 7 0 fo r s at el l i t e p h on e ren t al an ds erv i ce (wh i ch we fi n dt o- 9
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h av e b een an o rd i n ary an dn eces s ary ex p en s e i n rem o t e d es ertareas o f M ex i co ). 5 W e fi n dth atp et i t i o n er i s en ti t ledt o Sch edu le C d edu ct io n s fo r th es e am o un t s . In s u m , we fi n d th at pet i t i o n er h as s ubs t an t i at ed $ 1 5 0 o f m i s cel lan eo u s ex p en ses (fo r t ax retu rn p rep arat i o n ) an d , i n ad d i t i o n t o th e $ 11 ,8 6 5 o f v eh i cl e co s t s h e o ri g i n al l y

rep o rt ed , $ 6 , 6 6 9 o f ex pen s es co n nect edwi th h i s Sch edu l e C b u s i
n es s , n am el y $ 2 ,6 5 0 fo r t rav el ex p en s es i n M ex ico an d$ 4 ,0 1 9 fo r s at el l i t e p h o n e ren t al an ds erv i ce an d t he p u rch as e o f res earch -rel at edwi l d l i fe cam eras . W e s u s t ai n res p o n d en t’ s d i s al l o wan ce o f t h e rem ai n i n g m i scel l an eo u s i t em i zed d edu ct i on s . To refl ectthe fo reg o i n g , Deci s i o n wi ll b e en t eredu n d er Ru l e 1 5 5
.

5 Attri al p et i ti o n er p ro du cedfi v e i n vo i ces fo r s at el li te p ho n e ex p en ses th at t o g et h er t o t al ed$ 2 ,8 26 . Ho wev er, o n e i n v oi ce, i n th e am ou n t o f $ 5 5 6 , was n o t i s su edu n t i l J an uary1 3 , 2 0 14 . Pet i t i o n er p ro vi d ed n o ev id en ce t h ath e p ai dth i s i n v o i ce i n 2 0 13 . Acco rd in gl y , th e ex p en ses refl ect edo n th at i nv o i ce wo u l db e d educt i b l e (i f atal l ) i n a s ub s equ en tt ax y ear.