TAX COURT OPINION

Case: Francis Edward Zwinklis
Docket Number: 9563-12S
Judge: Whalen
Opinion Type: bench
Filed: 02/19/2013
Pages: 9

UNITED STATES TAX COURT WASHINGTON, DC 20217 FRANCIS EDWARD ZWINKLIS, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) ) ) ) ) ) ORDER Docket No. 9563-12S Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the proceedings in the above-case before the undersigned at Denver, Colorado, containing the oral findings of fact and opinion rendered on January 31, 2013. In accordance with the oral findings of fact and opinion, decision will be entered under Rule 155. (Signed) Laurence J. Whalen Judge Dated: Washington, D.C. February 19, 2013 SEVED FEB 2 0 2013 Capital Reporting Company 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Bench Opinion by Judge Laurence J. Whalen January 31, 2013 Francis Edward Zwinklis v. Commissioner Docket No. 9563-12S I. THE COURT: The Court has decided to render oral findings of fact and opinion in this case, and the following represents the Court's oral findings of fact and opinion. II. This proceeding was heard as a Small Tax Case pursuant to the provisions of section 7463 of the Internal Revenue Code of 1986, as amended, and Rules 170 through 179 of the Tax Court Rules of 15 Practice and Procedure. Hereinafter all section 16 17 18 references are to the Internal Revenue Code, as amended and in effect for the taxable year in issue, and all rule references are to the Tax Court Rules of 19 Practice and Procedure. Pursuant to section 7463(b), 20 21 22 23 24 25 the decision to be entered in this case cannot be reviewed in any other court, and this bench opinion shall not be treated as precedent for any other case. III. This bench opinion is made pursuant to the authority granted by section 7459 (b) and Rule 152 . 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 IV. Mr. Francis Edward Zwinklis appeared in these proceedings on his own behalf, and Philip E. Blondin, Esquire, appeared on behalf of respondent. V. Respondent determined a deficiency in petitioner's Federal income tax for taxable year 2008 in the amount of $34,031 and a penalty under section 6662(a) of $6,806.20. Before trial, the parties filed a Stipulation of Settled Issues resolving all but two of the substantive issues in the case. At the start of trial, petitioner orally conceded his claim to a deduction for medical and dental expenses, and he further conceded that the accuracy-related penalty under section 6662(a) would apply to the tax deficiency ultimately redetermined in this proceeding. After these, and other, concessions by the parties, the only issue left for decision is 19 whether petitioner is entitled to deduct unreimbursed 20 21 22 23 24 25 employee business expenses in the net amount of $121,667, consisting of petitioner's mileage expense from the business use of his personal automobile. VI. Background: Petitioner is employed by Sysco Corporation as a sales manager. In that 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 4 5 6 7 8 9 10 11 capacity, he is required to travel by automobile throughout his sales region. Petitioner claims to have incurred unreimbursed mileage expenses of $121,667, after subtracting 2% of petitioner's AGI. VII. We begin with several fundamental principles of tax litigation. First, as a general rule, the Commissioner's determinations are presumed correct, and the taxpayer bears the burden of proving that those determinations are erroneous. Rule 142(a). This principle was firmly established by the 12 United States Supreme Court as early as 1933, and it 13 14 15 16 17 18 19 20 21 22 23 has been reaffirmed by the Supreme Court more recently. See INDOPCO Inc. v. Commissioner, 503 U.S. 793 H. C ,,, Although section 7491(a) may serve to shift the burden of proof to the Commissioner under certain circumstances, it does not do so here for at least three independent reasons: Petitioner failed to raise the matter; petitioner failed to comply with recordkeeping and substantiation requirements, see sec. 7491(a).(2) (A) and (B); and petitioner failed to introduce credible evidence, see sec. 7491(a),(1). 24 Accordingly, petitioner bears the burden of proof. 25 Second, deductions are a matter of 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 legislative grace, and the taxpayer bears the burden of proving that he or she is entitled to any deduction claimed. Rule 142(a); Deputy v. DuPont, 308 U.S. 488;'New Colonial 493 094o) Ice Co. v. Helvering, 292 U.S. 435.' is 1ncludes the burden of substantiation. Hradesky v. Commissioner, 65 T.C. 87, 90 (\q15), off d per curiam 5+o F.1d %2.5 (5¼ Ör . 1916). Third, the Court is not bound to accept as true, the unverified and undocumented testimony of a taxpayer. Hradesky v. Commissioner o Tl supra; Tokarski v. Commissioner, 87 T.C. 74 Even when a taxpayer's testimony is uncontroverted, we are not required to accept it, if it is improbable, unreasonable, or questionable. Lovell & Hart, Inc. v. Commissioner, 456 F.2d 145; MacGuire v. Commissioner, 450 F.2d 3143 (6¼ Ch . 1411.'), aff 's T.C. Me-o 19'0 -335 »I144 (SA Ch. 141t'), ofE's T.C.Me-o W10 -29 1239; Niedringhaus v. Commis sioner, 99 T . C. 202 111 (1991 Fourth, a party's failure to introduce documentary evidence which is within his possession or control and which, he implies, would be favorable to him, gives rise to the presumption that, if produced, such evidence would be unfavorable. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Recklitis v. Commissioner, 91 T.C. 874; Pollack v. . Commissioner, 47 T.C. 92; Wichita Terminal Elevator 109 Ú%6'), off'Ê 391 F.2.d 409 (5¼ Cir. 1969 Co. v. Commissioner, 6 T.C. 1158. 31165 Gq%'), aFF'd 162. F.2d We note that section 6001 requires 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company taxpayers to maintain books and records sufficient to substantiate the amounts of the deductions claimed. Sec. 1.6001-1(a), (e), Income Tax Regs. If a taxpayer is unable to fully substantiate the expenses claimed, but there is evidence that deductible expenses were incurred, the Court may under certain circumstances allow a deduction based upon an approximation of expenses. Cohan v. Commissioner, 39 s£44 (2.nd Cir . 1930) F.2d 540. But see Williams v. United States, 245 ,5Go -561 $¼ Gr. 195-i) F.2d 559; Vanicek v. Commiss1oner, 85 T.C. 731. A A 3 741- 743 (RÚ5 In the case of expenses relating to the use of listed property, specifically including any passenger automobile or other property used as a means of transportation, section 274 (d) imposes stringent substantiation requirements to document the nature and amount of such expenses. Sec. 280F(d) (4) (A) (i) and (ii), (5); Sanford v. Commissioner, 50 T.C. 823; Larson v. Commissioner, , 211 G96s'), df 'd Mr cur l =4 t1 E.1d 2.t)( T.C. Memo. 2008-187; sec. 1.274-5T(a), Temporary Nov. 6, 1995) Income Tax Regs., 50 Fed. Reg. 46014 (expressly superseding the so-called Cohan rule and making it I inapplicable). Thus, in order to satisfy these strict substantiation requirements, the taxpayer must | 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 maintain adequate records or sufficient corroborating 25 evidence to establish each element of an expenditure. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company \- 8 1 2 3 4 5 6 7 8 Sec. 274 (d); sec. 1.274-ST(b) (6), (c) (2) (i), Temporary Income Tax Regs., 50 Fed. Reg. 46016. For this purpose, the elements of an expenditure include: (1) The use of each vehicle based on mileage; (2) the time and place of the expense; and (3) the business purpose of the expense. Sec. 274 (d). In order for an account book, diary, statement of expense or similar record to qualify as an adequate record, it 9 must be prepared or maintained in such manner that 10 11 12 13 14 each recording of an element of an expenditure is made at or near the time of the expenditure. Reg. Sec. 1.274-5T(c) (2) (ii). Section 274 (d) requires any record to be supported by documentary evidence and a noncontemporaneous record to be supported by evidence 15 with a "high degree of probative value". Sec. 1.274- 16 17 18 19 20 21 22 ST(c) (1), Temporary Income Tax Regs., Supra. VIII. A Discussion: For the purpose of substantiating the claimed mileage expense in the net amount of $121,667 with respect to the business use of his personal automobile, petitioner proffered a "spreadsheet" that purported to show his monthly 23 mileage for 2008. For each date, the spreadsheet 24 25 purports to show the date, the beginning mileage, ending mileage, total miles, and the name of a 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 1 2 3 4 5 customer. Upon questioning by respondent's counsel and the Court, it became evidence that the "spreadsheet" had not been prepared at or near the time of the travel, and that there was no reason to conclude that the spreadsheet accurately reflected 6 petitioner's travel during 2008. 7 8 Petitioner testified that he had maintained a "day timer" during 2008 in which he recorded his 9 mileage and all of his business activities. He 10 11 12 13 14 15 16 17 18 19 20 21 22 23 further testified that he would periodically transfer the mileage information into a "spreadsheet", like the spreadsheet he offered into evidence. While his testimony was vague, he acknowledged that the day timer that he had used during 2008 had been destroyed. He also acknowledged that the spreadsheet into which those entries were transferred also had been destroyed. The document that petitioner proffered as substantiation for his mileage was a digital "recreation" of the 2008 spreadsheet. It was not clear from petitioner's testimony how the recreation was performed or why the proffered spreadsheet would bear any similarity to the 2008 records. 24 Petitioner's proffered spreadsheet i not a 1 25 contemporaneous record, and, clearly, it was not 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 supported by evidence with a "high degree of probative value". Sec. 1. 274-5T (c) (1), Temporary Income Tax Regs., supra. Respondent objected to petitioner's spreadsheet and the Court sustained respondent's objection. After that, petitioner offered no other evidence to substantiate his business mileage during 2008. IX. Accordingly, with no evidence to substantiate petitioner's claimed mileage, we conclude that petitioner has failed to establish that for 2008 he is entitled to a deduction for unreimbursed employee business expenses in the net amount of $121,667. X. In order to give effect to the foregoing and concessions of the parties, decision will be entered under Rule 155. XI. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 9:17 a.m., the above- entitled matter was concluded.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com