TAX COURT OPINION

Case: Roddie L. & Patricia L. Evans
Docket Number: 25392-07S
Judge: Thornton
Opinion Type: summary
Filed: 01/21/2010
Pages: 8

BW T .C . Summary Opinion 2010- 7 UNITED .STATES TAX COURT RODDIE L . AND PATRICIA L . EVANS, Petitioners COMMISSIONER OF INTERNAL REVENUE, Responde n V . Docket No . 25392-07S . Filed January P1, 2010 . Roddie L . and Patricia L . Evans, pro se . Dessa J . Baker-Inman and William F . Castor , for jespondent . THORNTON, Judge : This case was heard pursuant tc the provisions of section 7463 of the Internal Revenue Co e in effect when the petition was filed .1 Pursuant . to section 746 (b), the decision to be entered is not reviewable by any other court, and 'Unless otherwise indicated, subsequent section references are to the Internal Revenue Code in effect for the year in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure . SERVED Jan 21 2010 this opinion shall not be treated as precedent for any other 2 - case . Respondent determined a $1,725 deficiency in petitioners' 2004 Federal income tax . After concessions, the issue for decision is whether petitioners are entitled to deduct certain business expenses for 2004 . Background Some of the facts have been stipulated and are so found . The stipulation of facts and the attached exhibits are incorporated herein by this reference . When they petitioned this Court, petitioners were married and resided in Louisiana . During 2004 Mr . Evans was employed as a pipefitter by three companies at three different jobsites . From February 17 to March 11, 2004, Mr . Evans was employed by Stone and Webster Construction, Inc ., at a jobsite in Vicksburg, Mississippi . From March 19 to May 9, 2004, Mr . Evans was employed by Atlantic Union Resources, Inc ., at a jobsite in St . Louis, Missouri . From August 19 to-November 15, 2004, Mr . Evans was employed by Fru-Con (Construction Corp ., at a jobsite in Alexandria, Louisiana . Petitioners owned a trailer, which they towed to the vicinity o f each jobsite and used for their living accommodations whil e there . During 2004'none of Mr . Evans' three employers reimbursed any of his vehicle or travel expenses or had an expense reimbursement policy . - 3 - Petitioners reported a total of $16,770 in vehic~e, travel , and meals and entertainment expenses on Form 2106, Em p loye e Business Expenses , attached to their 2004 Federal incq' me tax return .2 Respondent allowed or conceded all of petitioners ' meals and entertainments .expenses and portions of peti tioners ' vehicle and travel expenses . A total of $12,346 in ve hicle and travel expenses remains in dispute . The records petitioners maintained with respect o the claimed vehicle and travel expenses consisted only of certain trailer park rental receipts . Petitioners did not mai ntainany records or logs to account for the business mileage .of vehicles . Petitioners did not maintain adequate records with res ect to the disputed travel expenses because they believed that us ing the pe r diem method to calculate such expenses was proper fo r tax reporting purposes . Respondent conceded all of the am ounts for which petitioners provided adequate records, as well s a portio n of petitioners' unsubstantiated vehicle expenses . Discussion A taxpayer may deduct ordinary and necessary exp nses paid or incurred during the taxable year in carrying on a 'trade or business if the taxpayer maintains sufficient records to- substantiate the expenses . Secs . 162(a), 6001 ; sec . .6001-1(a) , 2Figures have been rounded to the nearest dollar 4 - Income Tax Regs . The taxpayer bears the burden of substantiation . Hradesky v . Commissioner , 65 T .C . 87 , 90 (1975), affd . 540 F .2d 821 (5th Cir . 1976) . As a general rule, no deductions are allowed for personal, living, o r 'family expenses . Sec . 262(a) . If a taxpayer establishes that deductible expenses were incurred but fails to establish the amount, we generally may estimate the amount allowable (the Cohan doctrine) . Cohan v . Commissioner , 39 F .2d 540, 543-544 (2d Cir . 1930) . There must be evidence in the record, however, that provides a rational basis for our estimate . Vanicek v . Commissioner , 85 T .C . 731, 742-743 (1985) . In the case of travel expenses and expenses paid or incurred with respect to listed property, e .g ., passenger automobiles or other property used as a . means of transportation , section 274 overrides the Cohan doctrine, and these expenses are deductible only if the taxpayer meets stringent substantiation requirements . Secs . 274(d), 280F(d)(4) ; Sanford v . Commissioner , 50 T .C . 823, 827 (1968), affd . 412 F .2d 201 (2d Cir . 1969) ; sec . .11 .274-5T(a), Temporary Income Tax Regs ., 50 Fed . Reg . 46014 (Nov . 6, 1985) . 3 3Sec . .274(d) specifically provides : SEC . 274(d) . Substantiation Required .--No deduction or credit shall be allowed-- (continued . . . ) 5 - To substantiate a deduction under section 274 a axpaye r must generally maintain an account book, a diary, a 1 g, a statement of expenses, trip sheets, or a similar reco d and documentary evidence which, in combination, are suffi ient to establish each element of each expense . Sec . .1 .274-5 (c) (2) (i ) Temporary Income Tax Regs ., 50 Fed . Reg . 46017 (Nov . 1985 ) Thus, no deduction for expenses under section 274(d) ay be allowed on the basis of any approximation or the unsupporte d testimony of the taxpayer . Sec . 1 .274-5T(a), Tempor a y Income '( . . .continued ) (1) under section 162 or 212 for any traveling expense (including meals and lodg while away from home) , (2) for any item with respect to an ac which is of a type generally considered to constitute entertainment, amusement, o r recreation, or with respect to a facility u connection with such an activity , (3) for any expense for gifts, o r (4) with respect to any listed propert defined in section 280F(d) (4)) , unless .the taxpayer substantiates by adequate re sufficient evidence corroborating the taxpayer's statement (A) the amount of such expense or othe item, (B) the time and place of the travel , entertainment, amusement, recreation, or use of facility'or property, or the date and descriptio the gift, (C) the business purpose of the expens other item, and (D) the business relationship to taxpayer of persons entertained, using the facil property, or receiving the gift . ords or by own he of or the ty or a - 6 - Tax Regs ., supra ; see, e .g ., -Murata v . Commissioner , T .C . Memo . 1996-321 ; Golden v . . Commissioner ,, T .C . Memo . 1993-602 . The Commissioner is authorized to prescribe rules under which certain types of expense allowances, including per diem .iallowances for ordinary and necessary expenses for traveling away ,from home, will be regarded as satisfying the substantiatio n requirements of section 274(d) . Sec . 1 .274-5(j), Income Tax Regs . Under this authority, the Commissioner issued Rev . Proc . 2003-80, 2003-2 C .B . 1037,4 and Rev . Proc . 2004-60, 2004-2 C .B . 682,5 which provide rules for using a per diem method t o substantiate the amounts of lodging, meals, and incidental expenses . The per diem method is available to employees only if their employers pay a per diem allowance in lieu of reimbursing the actual expenses an employee pays while traveling away from home . 'Rev . Proc . 2003-80, sec . 1, 2003-2 C .B . at 1037 ; Rev . Proc . 2004- 60, sec . 1, 2004-2 C .B . at 682 . Employees who receive per diem .allowances from an employer and meet certain requirements of the applicable revenue procedures are not required to include the deemed substantiated amounts in their gross income or claim th e i 'The Commissioner issues an updated revenue procedure each ,year enumerating the per diem rules . Rev . Proc . 2003-80, 2003- 2 ;''C .B . 1037, applies to Mr . Evans' disputed expenses incurred before Oct . 1, 2004 . 5Rev . Proc . 2004-60, 2004-2 C .B . 682, applies to Mr . Evans' .disputed expenses incurred after Oct . 1, 2004 . - 7 - expense deductions on their return . See Rev . Proc . 2 03-80, sec . 7, 2003-2 C .B . at 1044 ; Rev . Proc . 2004 - 60, sec . 7, 2 04-2 C .B . at 691 . Employees who are not reimbursed for travel xpenses by their employer cannot use the per diem method and must claim their travel expense deductions by complying with all of the substantiation requirements of section 274(d ) . See Re . Proc . 2003-80, sec . 1 ; Rev . Proc . 2004 - 60, sec . 1 . Petitioners ' use of the per diem method for sub tantiating the amount of Mr . Evans ' travel expenses was in error . Mr . Evans was not paid a per diem allowance by any of his three mployers, and thus petitioners were not eligible to use the per diem method for calculating the amount of his travel expenses . Section 1 . 274-5 ( j)(2), Income Tax Regs ., provide that th e Commissioner may prescribea standard mileage rate tha taxpayer may use to determine a deduction with respect business use of a passenger automobile . Under .this au Commissioner issued Rev . Proc . 2003-76, 2003-2 C .B . 92 provides rules for using a standard mileage rate in li substantiating the actual amount of expenditures rela t business use of a passenger automobile . Petitioners a eligible to use the standard mileage rate provided in 2003-76, supra , because they did not maintain any rec o to account for the business mileage of vehicles . See Oe c 5 (j) (2) , Income Tax Regs . 8 - Petitioners have not maintained or provided any records with respect to the expense amounts in dispute and thus have not met the substantiation requirements of section 274(d) . Accordingly, petitioners are not entitled to deductions for the ;,$12,346 of disputed expenses . To reflect the foregoing, Decision will be entere d under Rule 155 .