TAX COURT OPINION

Case: Kirby Mac Kernan
Docket Number: 17606-17S
Judge: Nega
Opinion Type: bench
Filed: 12/19/2018
Pages: 10

SEC UNITED STATES TAX COURT WASHINGTON, DC 20217 KIRBY MAC KERNAN, Petitioner, v. ) ) ) ) Docket No. 17606-17S. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ORDER Pursuant to Rule 152(b) of the Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit to petitioner and to respondent a copy of the pages of the transcript of the proceedings in the above case before Judge Joseph W. Nega at Richmond, Virginia, on December 4, 2018, containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, decision will be entered under Rule 155. (Signed) Joseph W. Nega Judge Dated: Washington, D.C. December 19, 2018 SERVED Dec 19 2018 Bench Opinion by Judge Joseph W. Nega December 4, 2018 3 Kirby Mac Kernan v. Commissioner of Internal Revenue Docket No. 17606-17S THE COURT: The Court has decided to render oral findings of fact and opinion in this case. The following represents the Court's oral findings of fact and opinion. This bench opinion is made pursuant to section 7459(b) and Rule 152. This case was a small tax case subject to the provisions of section 7463 and Rules 170 through 174. Pursuant to section 7463(b), the decision to be entered is not reviewable by any other court, and this opinion shall not be treated as precedent for any other case. Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the year at issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. By a Notice of Deficiency (notice of deficiency) dated May 8, 2017, respondent determined a deficiency in petitioner's Federal income tax for taxable year 2014. After concessions by the parties the only issue remaining for decision is whether petitioner is entitled to a miscellaneous itemized deduction for unreimbursed employee vehicle expenses for 2014. This case was tried on December 3, 2018, in 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 (973)406-2250loperationsgescribersaetlwwwascribersaat 4 Richmond, Virginia. Petitioner Kirby Mac Kernan appeared pro se. Robert J. Braxton appeared on behalf of respondent. FINDINGS OF FACT Some of the facts are stipulated, and are so found. The stipulation of facts and the accompanying exhibits are incorporated herein by this reference. Petitioner resided in Maidens, Virginia at the time he filed his petition in this case. In 2009 petitioner was hired by CSX Corporation (CSX) as an RCO operator and conductor. Initially, CSX hired petitioner to work out of its Fulton rail yard (Fulton yard), located in Richmond, Virginia. Petitioner completed his new-hire training and orientation in January of 2009, but upon competition of that training CSX informed him that his position at the Fulton yard had been eliminated, and that he would be furloughed until a later date. In spring of 2010, CSX assigned petitioner to a regular position at its rail yard located in Newport News, Virginia (Newport yard). Petitioner accepted this assignment, and continued to report to the Newport yard on a full-time basis through 2014. At the time he was hired, petitioner lived approximately 32 miles from the Fulton yard. His assignment to the Newport yard, ·however, extended his 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 ) 51EEllE (973)406-2250}operations@escribers.net|www.esenbersnet commute to work by an additional 79 miles. 5 Initially, CSX reimbursed petitioner for the additional commuting mileage he incurred as a result of his assignment to the Newport I yard. In December of 2013, however, CSX ended this reimbursement program. In preparing his Federal income tax return for 2014 petitioner consulted with a CPA. The CPA informed petitioner that, as a result of his extended travel to the Newport yard, he was entitled to a deduction for unreimbursed employee vehicle expenses to the extent CSX had previously reimbursed him for the same. Accordingly, petitioner timely filed a Federal income tax return for 2014 claiming a $23,447 deduction for unreimbursed employee vehicle expenses in accordance with the standard mileage rate. Respondent examined petitioner's return for 2014. In doing so, and as relevant here, respondent determined that petitioner's vehicle expenses were a nondeductible personal commuting expense. Accordingly, on May 8, 2017, respondent issued a notice of deficiency to petitioner reflecting that determination. In response, petitioner filed a petition with this Court seeking redetermination. I. The Parties' Positions OPINION 1 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 73)406-2250|opstionspescribersnet]www.esaibennet 6 Respondent disallowed petitioner's deduction for unreimbursed employee vehicle expenses because he determined that petitioner had failed to establish his entitlement to such a deduction. Respondent maintains that petitioner's vehicle expenses are nondeductible personal commuting expenses under 262. Petitioner argues that he is entitled to this deduction. We construe petitioner's argument to suggest that we should consider his regular place of employment to be the Fulton yard. To that end, petitioner states that , we ought to consider his nondeductible commuting cosÝ to(J¼ d be only those that he would have ostensibly incurred in commuting to and from the Fulton yard, æVcost that he did CKJd not claim for 2014. Petitioner argues that the mileage underlying the vehicle expense at issue relates only to the additional 79 miles that he incurred by nature of his assignment to the Newport yard, and that those miles do not represent a personal commuting expense, but rather a deductible unreimbursed employee expense. II. Applicable Law A. Burden of Proof Generally, the Commissioner's determinations as set forth in a notice of deficiency are presumed correct, and the taxpayer bears the burden of proving otherwise. Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 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 (973)406-2250|operations@escribers.net(wwwæscribers.net (1933). Deductions and credits are a matter of 7 legislative grace, and the taxpayer bears the burden of proving entitlement to any deduction credit claimed.( Rule 142(a); Deputy v. du Pont, 308 U.S. 488, 493 (1940); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). B. Section 162, Generally Section 162(a) allows deductions for "all the- (3 ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business". Generally, the performance of services as an employee constitutes a trade or business. Primuth v. Commissioner, 54 T.C. 374, 377 (1970). Taxpayers must satisfy the specific requirements for any deduction claimed, and are required to maintain records sufficient to substantiate those claims. INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); sec. 6001; sec. 1.6001-1(a), (e), Income Tax Regs. Generally, records are adequate substantiation if they establish the amount and purpose of the claimed deductions. Higbee v. Commissioner, 116 T.C. 438, 440 (2001). No deduction, however, will be allowed for personal, living, or family expenses unless the code expressly provides otherwise. Sec. 262(a). C. The Strict Substantiation Requirements Taxpayers who wish to deduct business expenses 1 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 973)406-2250|operations escribersnet|www.escribersaet 8 related to travel, meals, entertainment, gifts, or the use of "listed property" must comply with the strict substantiation requirements of section 274(d). See also Sec. 1.274-5T(a), Temporary Income Tax Regs., 50 Fed. Reg.C 46014 (Nov. 6, 1985). As relevant here, the term "listed property" includes passenger automobiles. Sec. 280F(d)(4) (A)(i) and (ii). Compliance with the strict substantiation requirements of section 274(d) requires a taxpayer to establish "by adequate records": (1) the amount of the claimed business expense, as well as (2) the time and place of the travel, use or purchase, and (3) the business purpose or business relationship giving rise to the expense. Sec. 274(d); sec. 1.274-5T(b)(6), (c)(1), Temporary Income Tax Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985). 'In order to substantiate by "adequate records" a taxpayer must provide, in particular, (1) an account book, log, or similar contemporaneous record, along with (2) other documentary evidence that, in combination, can sufficiently establish each required element. Sec. 1.274- 5T(c)(2), Temporary Income Tax Regs., 50 Fed. Reg. 46017 (Nov. 6, 1985). Documentary evidence includes receipts, paid bills, or similar evidence. Sec. 1.274-5(c) (2) (iii), Income Tax Regs. A taxpayer's uncorroborated testimony is insufficient to satisfy the strict substantiation 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 973)406-2250| operations@escribersnet j wwwesaibersnet requirements of section 274(d). 9 See Rutz v. Commissioner, 66 T.C. 879, 885-886 (1979). Substantiation by other sufficient evidence requires taxpayer to prod c corroborative evidence in support of the taxpayer's statements specifically detailing the information required by section 274. Sec. 74-5T(c)(3), Temporary Income Tax Regs. ^ With respect to vehicle expenses, the strict substantiation requirements of section 274(d) must be met whether the taxpayer chooses to deduct either actual expenses, or claim an amount in accordance with the standard mileage rate. Sec. 1.274-5(j)(2), Income Tax Regs. D. Vehicle Expenses and Commuting In general, a taxpayer's costs of commuting between his or her residence and place of employment are nondeductible personal expenses. See Commissioner v. Flowers, 326 U.S. 465, 473-474 (1946). There are, however, various exceptions to that general rule. See Bogue v. Commissioner, T.C. Memo. 2011-164, aff'd, 522 F.App'x. 169 (3d Cir. 2013). As relevant here, however, these exceptions allow taxpayers to deduct only those commuting expenses incurred in his or her travel to a temporary work site. See Gorokhovsky v. Commissioner, T.C. Memo 2013-65, slip op, at 18-20; see also Rev. Rul. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 (9733406-2250]opentionsperribers.net|www.escribersmet 99-7, 1999-1 C.B. 361. 10 A temporary work site is one that the taxpayer realistically expects to, and does in fact, report to for a period of one year or less. See Rev. Rul. 99-7, 1999-1, C.B. 361 (incorporating the one-year rubric of Rev. Rul. 93-86, 1993-2 C.B. 71). III. Analysis We observe that, at the time he filed his return for 2014, petitioner had regularly commuted to, and worked on a regular basis at, the Newport yard for approximately four years. As such, the Newport yard was not a temporary work location for petitioner, but was instead his regular place of business. Further, at trial, petitioner failed to produce any contemporaneous books, records, receipts, or mileage logs that might establish his entitlement to a vehicle expense deduction. Petitioner, instead, attempted to substantiate his entitlement to that deduction through his own testimony, and an estimated mileage calculation he prepared in advance of trial. Petitioner argues that his estimate calculation corroborates his claimed vehicle expenses, as it reconciles his total mileage against his ostensible Fulton yard commuter mileage and his additional mileage to the Newport yard, and is supported by his rail service time book and a pair of yearly odometer readings. We find this estimate and its supporting records 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 p73340s.22soloperationseescribersnettwwwascribersme insufficient, and lacking in reliability. 11 On the record before us, the vehicle expense at issue here is a nondeductible personal commuting expense. Further, in the light of the applicable strict substantiation requirements, petitioner has failed to carry his burden of proof with respect to his claimed deductions for unreimbursed employee vehicle expenses for 2014. Respondent's determinations are sustained. IV. Conclusion Accordingly, a decision will be entered under Rule 155. This concludes the Court's oral findings of fact and opinion in this case. In reaching our holdings herein, we have considered all arguments made, and, to the extent not mentioned above, we conclude they are moot, irrelevant, or without merit. (Whereupon, at 11:22 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 (973)406-2250|operationspestribersmet|wwwascribersset