TAX COURT OPINION

Case: Jack A. & Lettie G. Wheeler
Docket Number: 25087-08S
Judge: Cohen
Opinion Type: summary
Filed: 09/28/2009
Pages: 6

FILE S T .C . Summary Opinion 2009-15 1 UNITED'STATES .TAX COUR T JACK A . & LETTIE G . WHEELER, Petitioners v . COMMISSIONER OF INTERNAL REVENUE, Responden t Docket No . 25087-08S . Filed September 28, 2009 . Alan C . Housholder , for petitioners . Lynette Mayfield , for responden t COHEN, Judge : This case'washeard pursuant to the provisions of section 7463 of . the: Internal Revenue' Code in effect when the petition was filed . Pursuant 'to section 7463(b), the' decision to be entered is not .reviewable by any other court,-and this opinion shall not bet treated as precedent for any other . case . Unless otherwise'indicated,-all section references are to the Internal Revenue Code in effect for the year in issue, and SERVED SEP 2 9 '2099 Q - 2 - all Rule references are to the Tax Court Rules of Practice an d Procedure . Respondent determined a deficiency of $5,070 in petitioners' Federal income tax for 2005 . The issue for decision is whether Jack A . Wheeler (petitioner) has substantiated deductible vehicle expenses as required under sections 274(d) and 280F(d) (4) . Background Petitioners resided in Tennessee at the time that they filed their petition . During 2005 petitioner represented a laboratory that provided testing for clinics performing renal services , including dialysis, to patients . Petitioner's employment required him to make sales and service calls on customers . Petitioner used his personal vehicle in calling-on customers . Petitioner did not maintain any logs reflecting his business use of a vehicle or any other contemporaneous records of his vehicle expenses . On Schedule C, Profit or Loss From Business, attached to petitioners' Form 1040, U .S . Individual Income Tax Return, for 2005, petitioners reported no income but deducted $19,420 as car and truck expenses . Petitioner prepared the return for 2005 . Respondent disallowed the claimed deduction and . made corresponding adjustments increasing the taxable portion of 3 - petitioners ' Social S ecurity benefits '- andreducing deductible ' medical expenses . In their petition and at trial,, petitioners reduced the amount claimed for car and truck' expenses to '$4, :841, based° on a- proposed amended Form'10'40 and-ah amended Schedule C prepared b y petitioners'counsel Attached to" the" proposed- amended"Form 1040 were a Schedule' A-, -Itemized Deductions, 'which included' a deduction for employee business - expenses , and a'Form '2106-EZ,' Unreimbursed Employee Business Expenses ,'but neither form- separately identified -any vehicle . expenses The reduced claim' was based ' on reconstructed mileage for weekl-y(cid:127)visits to two'labs and monthly acid ' less 'frequent but' regular .visits to other, customers or potential customers'of petitioner's employer .' ' . Discussion Petitioner and a, representative of one 'of his customers testified at'-trial . -Their testimony was to the effect'that petitioner made business calls'on certain customers at various intervals,-and they estimated'the mileage to the customer' s places of busines's from some unspecified locale . 'Petitioner offered a'reconstructed schedule of examples of(cid:127)business'call s he made on behalf of his employer during 2005,' including estimates that he visited' certain customers 1-1/2 times per week' . Petitioners' 'counsel acknowledged that the reconstructed mileage was employee business expense,, . rather than Schedule C expense, and relied on the proposed amended return a s stating petitioners' position . Respondent objected to(cid:127) .the testimony, to,any,discussion of the amended return, and to .the reconstruction that did not relat e the . .amounts . claimed on the-original-Schedule C . -Responden t asserts that . the ., proposed amended .return was not filed and was "simply a settlement negotiation : offer, [and] inadmissible . " From the time'the petition was filed,, it was,apparent that . petitioners . were not relying on .the Schedule C filed with their original return for 2005 . . If they adequately substantiated deductible vehicle expenses ; that should .have-been. claimed a s employee , business expenses, the expenses might be allowable as, itemized deductions subject to the limitations on that category of expenses. . See secs . .67 .and 68 . . Petitioners elected the smal l tax case procedure under Rule 171 when they filed their petition, . and evidence having(cid:127)probative .value,,is admissible under Rule 174(b) . The testimony of :petitioner .and hiss witness had probative value in explaining petitioner's business use of his vehicle . Respondent's objections, based on the difference between the original Schedule C and the-reduced claim ;are .not well founded, and they are overruled . . On the other hand, we cannot accept petitioners'-counsel's, argument that Rule 174(b) relaxes the standards of evidence of deductible business expenses - subject° to'the section 274(d) requirement of substantiation by adequate records . A passenger vehicle is listed property under section 280F(d)(4) . Thus deductions are disallowed unless the taxpayer adequatel y substantiates the amount of the-expense the time and place of business use of the vehicle and the business purpose of the travel . . These rules were adopted to-pre clude-estimates based solely on a finding that .some deductible business expenses were incurred, as allowed in other contexts . See Sanford V . Commissioner , 50 T .C . 823, 827 (1968) ;° affd' . per curiam 412 F .2d 201 (2d Cir . 1969) . - The statutory standard of ' ' adequacy of evidence is not modifiable by a rule regarding admissibility .of ' evidence, such as Rule 174(b ) Petitioner admitted during trial that he did not keep a 1 g of the',mileage for, business or other use ; of his vehicle, and he did not have any contemporaneous records that would corroborat e his reconstruction . He testified only that some-motel or gas receipts had been misplaced . We are not-persuaded tha t petitioner ever had adequate records to substantiate either the $19,420 claimed on his filed return or the lesser amount of $4,841 claimed at trial . The disparity in these claims casts doubt on the reliability of petitioner's recollections in reconstructing the events of 2005 . 6 - Petitioner has adequately explained and corroborated the business purpose of his calls on,customers during 2005 . He has not, however, adequately substantiated the time or date an d number of trips taken . His reconstruction .is based on estimate s and averages ; obviously he did not make l-1/2 trips in a week . His reconstruction based on weekly trips in each of 52 weeks or monthly trips . in each of 12 months in 2005, without any indication of the day of the week or month on which he made those trips, is unreliable . We give no weight to the proposed amended return prepared by petitioners' counsel, beyond the concession of reduced business mileage . The proposed amended return' contains inconsistencies and obvious errors ; it also sets forth other unexplaine d deductions that are not in issue here . Thus we need not resolve the dispute between the parties about whether the amended return was filed . The other adjustments made in the statutory notice are automatic, and petitioners have given us no reason to believe that they are erroneous . For the foregoing reasons , Decision will be entered for respondent .