TAX COURT OPINION

Case: Kenneth R. Jurek
Docket Number: 21821-16S
Judge: Thornton
Opinion Type: bench
Filed: 01/03/2018
Pages: 8

UNITED STATES TAX COU.RT WASHINGTON, DC 20217 KENNETÉI R. JUREK, Petitioner v. COMMISSIONER OF INTÉRNAL REVENUE, Respondent ) ) ) ) ) Docket No. 21821-16S. ) ) ) ) ORDER 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 ofthe transcript of the trial in the above case before Judge Michael B. Thornton at Cleyeland, Ohio containing his oral findings of fact and opinion rendered at the trial session at.which the case was heard. hi accordance with the oral findings of fact and opinion, decision will be entered under Rule 155. (Signed) Michael B. Thornton Judge Dated: Washington, D:C. January 3, 2018 gggvED JAN - 4 2018 3 1 2 3 4 5 6 7 8 9 Bench Opinion by Judge Michael B. Thornton December 5, 2017 Kenneth R. Jurek v. Commissioner.of Internal Revenue Docket No. 21821-16S 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. Except as otherwise provided by Rule 152(c) of the Tax Court Rules of Practice and Procedure, the oral 10 findings of fact and opinion shall not be relied upon as 11 precedent in any other case. 12 This proceeding for the redetermination of a 13 deficiency is a Small Tax Case conducted pursuant to the 14 provisions of section 7463 of the Internal Revenue Code 15 of 1986, as amended, and Rules 170 through 175 of the 16 Tax Court Rules of Practice and Procedure. Pursuant to 17 18 19 section 7463(b), the decision entered in this case is not reviewable by any other court. This bench opinion is made pursuant to the 20 authority granted by section 7459(b) and Rule 152. 21 Hereinafter in this bench opinion, section references are 22 to the Internal Revenue Code in effect for the taxable 23 year at issue. All rule references are to the Tax Court 24 Rules of Practice and Procedure. All monetary amounts 25 are rounded to the nearest dollar. shun (#73)40 2250|6pestb(cid:0)540ëélIÉibegMé)jmpénís t This case was tried on December 5, 2017, in 4 Cleveland, Ohio. Ms. Arlene B. Steuer appeared on behalf of petitioner. Mr. John D. Davis appeared on behalf of respondent. By notice of deficiency, respondent determined a deficiency in petitioner's 2013 Federal income tax of $10,738. Respondent further determined an accuracy- related penalty pursuant to section 6662(a) of $2,147.60. The deficiency resulted from respondent's adjustments to 1 2 3 4 5 6 7 8 9 10 petitioner's Schedule A, Itemized Deductions. 11 Specif-ically, respondent disallowed deductions claimed on 12 petitioner's Schedule A as follows: (1) medical 13 expenses of $38,365; (2) charitable contributions of 14 15 16 17 18 19 $2,636; and (3) miscellaneous itemized deductions of $23, 920, including vehicle expenses of $8, 852. While living in Ohio, petitioner timely filed a petition contesting respondent's determination. After concessions, the issue for decision is whether petitioner is entitled to a miscellaneous itemized deduction for 20 vehicle expenses in an increased amount of $42, 201. 21 Findings of Fact 22 23 During the year in issue petitioner was a sales representative for Time Warner, a position which he held 24 for about 19 years. As a sales representative petitioner 25 would travel to a customer's place of business to sell 5 1 2 3 4 5 6 7 8 9 10 11 advertising for Time Warner. He was required to provide his own car and was responsible for a large geographic area of Ohio. Petitioner owned 3 cars which he used partly for business purposes. Petitioner timely filed his 2013 Form 1040, U.S. Individual Income Tax Return. Petitioner attached to his 2013 Form 1040 a Form 2106, Unreimbursed Employee Business Expenses, on which he claimed a deduction for vehicle éxpenses of $8,852. The Form 2106 reported vehicle expenses for two cars and reported 7.0 percent business use for one of the cars and 69.640% business use for the 12 other car. In preparation for trial petitioner submitted 13 for 2013 a Förm 1040X, Amended U.S. Individual Incoie 14 15 16 Tax Return. On the 2013 Form 1040X petitioner claimed a deduction for vehicle expenses in an increased amount of $42,201. 17 Opinion 18 The Commissioner's determinations in a notice of 19 deficiency are generally presumed correct, and the 20 taxpayer bears the burden of proving those 21 determinations erroneous by a preponderance of the 22 23 24 evidence. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Deductions are a matter of legislative grace, 25 and the taxpayer bears the burden of proving entitlement 6 1 2 3 4 5 6 7 8 9 to any claimed deduction. . Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S.. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). This burden requires the taxpayer to substantiate claimed deductions by.keeping and producing records sufficient to enable the Commissioner to determine the taxpayer's correct tax liability. Sec. 6001; Hradesky v. Commissioner, 65 T.C. 87, 89-90 (1975), aff'd per curiam, 540 F.2d 821 (5th Cir. 1976); sec. 1.6001-1(a), (e), Income Tax Regs. 10 Section 162(a) generally allows a deduction for 11 ordinary and necessary expenses paid nor incurred during 12 the taxable year in carrying on any trade or business. 13 Uñreimbursed employee business expenses are deductible 14 under section 162(a). See, e.g., Solomon v. 15 Commissioner, T.C. Memo. 2011-91. 16 17 18 Section 274(d) imposes more rigorous substantiation requirements för ce.rtain expenses, including those pertaining to travel and vehicle.s. See 19 also sec. 280F(d) (4). Expenses subject to section, 274(d) 20 must be substantiated; they cannot be estimated. See 21 . Sanford v. Commissioner, 50 T.C. 823, 828 (1968), aff'd, 22 412 F.2d 201 (2d dir. 1969). 23 To obtain a deduction for vehicle expenses, 24 i.e., expenses related to the use of a passenger 25 automobile, a taxpayer must substantiate with adequate records or by sufficient evidence corroborating his own statement: (1) the "amount of each separate expenditure" with respect to the passenger automobile; (2) the "amount of each business/investment use *** based on the 7 appropriate measure (i.e., mileage for automobiles .***), and the total use of the [passenger automobile] for the taxable period";. (3) the "[d]ate of the expenditure or use" with respect to the passenger automobile; and (4) the "business purpose for an expenditure or use" with 1 2 3 4 5 6 7 8 9 10 respect to.the passenger automobile. Sec. 274(d) and 11 12 13 28.0F(d)(4); sec. 1.274-5T(b)(6) and (c),(1), Temporary Income Tax Regs. Alternatively, a taxpayer may calculate his 14 deductible passenger automobile expenses by mult.iplying 15 his business miles by the standard mileage rate for the 16 year and then adding allowable tolls and parking .fees; 17 18 19 under this alternate method, however, the taxpayer is not relieved of the requirement to substantiate the amount of each business use (i.e., the business mileage), or the 20 time and business purpose of each use. Sec. 1.274- 21 5(j)(2), Income Tax Regs. Consequently, substantiation 22 of miles and business purpose is a prerequisite to 23 claihing a deduction whether petitioner meant to claim 24 actual automobile expenses for 2013 or meant to use the 25 alternative standard-mileage-rate method. Petitioner computed vehicle expenses using the 8 standard mil'eage rate method. As substantiation, petitioner offered a cömputer-generated mileage log that petitioner claimed represented a compilation of contemporaneous handwritten records which were not offered into evidence. The proffered mileage log consisted of summary sheets, one for each month of the year, that petitioner stated he submitted tö his employer in order to receive a $200 per month reimbursement. The summary sheet for.each month consisted of three columns: client/appoldtment; miles; and total. The 1 2 3 4 5 6 7 8 9 10 11 12 client/appointment column listed names grouped together 13 such as the following: GL/Kasper/Just A Buck and 14 BGSU/KSU/Ashland. The cmiles column listed numbers such as 15 16 17 18 327 and 761. The total column is blank but for a sum of the miles listed in the "miles" column. The mileage log is vague and generic in na.ture; it did not include the amount of each separate expenditure, the date of the 19 expenditure, or the business purpose for the expenditure. 20 In addition, petitioner did not produce any third-party 21 records to corroborate any of the vehicles' odometer 22 readings, such as service records, or any other evidence 23 which might support the claimed mileage. 24 Undoubtedly, petitioner used at least one 25 vehicle for business purposes during the year in issue. 9 1 2 3 4 5 6 7 8 9 However, we are unable to find that petitioner's mileage log is sufficiently credible to accept it at face value. Petitioner was unable to explain the inconsistency between his testimony that he used 3 cars 100% for business use and the Form 2106 which stated that two of the cars were used 70% and 69.640% for business use, respectively. In addition, petitioner testified that he had serious health issues in 2013, which calls into question his claim that he drove 74,691 business miles, 10 which equates to approximately 204 miles per day each of 11 the 365 days of the year. Thus, we conclude that 12 petitioner has failed to meet the strict substantiation 13 14 requirements of section 274(d) and the regulations thereunder. Accordingly, we sustain respondent's 15 determination disallowing the vehicle expenses claimed by 16 petitioner on his 2013 return. 17 18 Decision will be entered under Rule 155. This concludes the Court's findings of fact and 19 opinion in this case. (Whereupon, at 2:12 p.m., the above-entitled matter was concluded.) 20 21 22 23 24 25