TAX COURT OPINION

Case: Donald Eugene & Solborg Jenfrid Deneselya
Docket Number: 18700-08S
Judge: Dean
Opinion Type: summary
Filed: 10/13/2009
Pages: 6

T .C . Summary Opinion 2009-15 7 UNITED STATES TAX COUR T DONALD EUGENE DENESELYA AND SOLBORG JENFRID DENESELYA, COMMISSIONER OF INTERNAL REVENUE, Responden t Petitioners v . Docket No . 18700-08S . Filed October 13, 2009 . Donald Eugene Deneselya and Solborg Jenfrid Deneselya, .pr o sese . Bradley C . Plovan , for respondent . DEAN, Special Trial Judge : this case was heard 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 be treated as . precedent for any other case . Unless otherwise indicated, subsequent section reference s 3 2009 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 . For 2003 respondent determined a deficiency of $4,564 in petitioners' Federal income tax . The sole issue for decision is whether petitioners are entitled to deduct car and truck expenses claimed on Schedule C, Profit or Loss From Business . Background Some of the facts have been stipulated and are so found . The stipulation of facts and the exhibits received into evidence are incorporated herein by reference . At the time petitioners filed their petition, they resided in Maryland . In April 2007 petitioners jointly filed Form 1040, U .S . Individual Income Tax Return, for 2003 . On Schedule C petitioners reported gross income .of $5,250, expenses of $29,872,1 and a net loss of $24,8722 from Mr . Deneselya's (petitioner) "Real Estate appraisal/Consulting, News consulting " business (appraisal business) . Petitioner's appraisal busines s expenses include : (1) Car and truck expenses of $16,272 ; (2) business property expenses of $9,000 ; (3) utility expenses of $2,300 ; and (4) office expenses of $2,300 . On May 1, 2008 , 'These expenses exclude petitioners' claimed $5,000 home office deduction . See sec . 280A(c)(5) . 2Petitioners incorrectly calculated their losses as :$24,872 . When calculated correctly, their total losses are $24,622 . respondent issued petitioners a notice of deficiency' disallowing $16,272 of car and truck expenses for lack of substantiation . Petitioner began working for}Kevin McHugh (Mr . McHugh) in 2002 as(cid:127)an appraiser,' and he continued through March 27, 2003 . As an appraiser for Mr . McHugh, petitioner would drive from his home in Bowie, Maryland, to Severn, Maryland, to pick up his order sheets from Mr . McHugh . He would then drive to various locations on the Eastern Shore4 where he performed his appraisa l work . In late March 2003 petitioner moved to the District of Columbia (D .C .) because of Mr . McHugh's untimely death . Because he was properly licensed as an appraiser in D .C ., he .worked i n D .C . .ffor the remainder of 2003 . Respondent contends petitioner is'not entitled to a deduction of $16,272 in car and truck expenses because he failed to substantiate the total business miles driven in 2003 . I . Burden of Proo f Discussio n Generally, the Commissioner's determinations in a notice of deficiency are presumed correct, and the taxpayer has the burden of proving-that those determinations are erroneous . See Rul e 3Petitioner's appraiser's license had been suspended by the State of Maryland ; however, his work for Mr . McHugh required him to inspect and appraise homes . 'Petitioner testified that he performed appraisals on the Eastern Shore, citing Rehoboth Beach as .the main job site . - 4 - 142(a) ; Welch v . Helvering, 290 U .S . 111 , 115 (1933 ) . In certain circumstances , however , section 7491 ( a)(1) places .the burden of proof on the Co mm issioner . Petitioner has not alleged that section 7491 is applicable , nor has he established compliance with the requirements of section 7491 ( a)(2)(A) . Therefore, the burden of proof does not shift to respondent . II . Schedule C Expense s Deductions are strictly a matter of legislative grace, and taxpayers must satisfy the specific requirements for any deduction claimed . See INDOPCO, Inc . v . Commissioner , 503 U .S . 79, 84 ( 1992 ) ; New Colonial Ice Co . v . Helvering, 292 U . S . 435, 440 .(1934 ) . Taxpayers bear the burden of substantiating the amount and purpose of any claimed deduction . See Hradesky v . Commissioner , 65 T .C . 87 (1975 ), affd . per curiam 540 F .2d 821 (5th Cir . 1976) . With respect to certain business expenses subject to section 274(d), more stringent substantiation requirements apply than with respect to other ordinary and necessary business expenses . Section 274 ( d) imposes stringent substantiation requirements fo r claimed deductions relating to the use of "listed property" , which is defined'under section 280F(d)(4)(A)- to include passenger automobiles . Under this provision, any deduction claimed with respect to the use of a passenger automobile will be disallowed unless the taxpayer substantiates specified elements of the use by adequate records or by sufficient evidence corroborating the taxpayer's own statement . See sec .. 274(d) ; sec . 1 .274-5T(c)(1), Temporary Income Tax Regs ., 50 Fed . Reg . 46016 (Nov . 6, 1985) . To meet the adequate records requirements . of section 274(d) , a taxpayer must maintain some form of records and documentary evidence that in combination are sufficient to establish each element of an expenditure or use . See sec . 1 .274-5T(c)(2), Temporary Income Tax Regs ., 50 Fed . Reg . 46017 (Nov . 6, 1985) . A contemporaneous log is not required, but corroborative evidence to support a taxpayer's reconstruction of the elements of an expenditure or use must have "a'high degree of probative value t o elevate such statement" to the level of credibility of a contemporaneous record . Sec . 1 .274-5T(c)(1), Temporary Income Tax Regs ., supra . The elements that must be substantiated to deduct expenses for the business use of an automobile are : (1) The amount of the expenditure ; (2) the mileage for each business use of the automobile and the total mileage for all use of the automobile during the taxable period ; (3) the date of the business use ; and (4) the business purpose of the use of the automobile . See sec . 1 .274-5T(b)(6),,T'emporary Income Tax Regs ., 50 Fed . Reg . 46016 (Nov . 6, 1985) . Although petitioner alleged he maintained "plenty of written documents", he did not submit any documents or other evidence, - 6 - except for his testimony, to substantiate his claimed deduction for car and truck expenses, nor did he supplement the record following trial 5 Because petitioner failed to present sufficient evidence to satisfy the strict substantiation requirements pursuant to section 274(d), he is not entitled to deduct car and truck expenses, . and the Court upholds respondent's determination . To reflect the foregoing, Decision will be entere d for respondent . 5At trial petitioner inquired as to whether he could submit additional documents following trial . The Court advised him that upon agreement by respondent and a motion to reopen the record, he could submit additional documents before the release of this opinion . .