Even if taxpayers fail to qualify as real estate professionals under section 469(c)(7) and must therefore treat losses from their rental activities as passive activity losses, they may still be eligible to deduct a portion of their losses under section 469(i)(1). Section 469(i) provides a limited exception to the general rule that passive activity losses are disallowed. A taxpayer who actively participates in a rental real estate activity may deduct a loss of up to $25,000 per year related to the activity. The deduction is phased out as adjusted gross income, modified by section 469(i)(3)(F), exceeds $100,000, with a full phaseout occurring when modified 2013 Tax Ct. Summary LEXIS 71">*78 adjusted gross income equals $150,000. Sec. 469(i)(3)(A).

Petitioners contend that Mr. Daco satisfies the real estate professional requirements under section 469. Petitioners offered summaries and the testimony of Mr. Daco to show that Mr. Daco spent over 750 hours performing services in the rental real estate activity for the years at issue. The summaries were not prepared contemporaneously but rather were prepared in preparation for trial. Additionally, a substantial amount of the hours included in the summaries and used to show that Mr. Daco spent more than 750 hours in the rental real estate activity is not corroborated by supporting documentation. Given these circumstances, we find the summaries untrustworthy and do not accept them. As for Mr. Daco's testimony, we find much of it to be questionable, uncorroborated, and self-serving. We are not required to accept such testimony, and we do not rely on that testimony to support his position herein. See Tokarski v. Commissioner, 87 T.C. 74">87 T.C. 74, 87 T.C. 74">76-77 (1986); see also Chapman Glen Ltd. v. Commissioner, 140 T.C.    ,     (slip op. at 45 n.24) (May 28, 2013). Petitioners failed to otherwise establish through reasonable means that Mr. Daco 2013 Tax Ct. Summary LEXIS 71">*79 spent at least 750 hours for each year at issue performing services in the rental real estate activity. ⁵

As for the active participation exception to the passive loss rules, it is irrelevant because the $25,000 amount begins to phase out when the taxpayer's adjusted gross income, determined without regard to any passive activity loss, exceeds $100,000 and is phased out entirely when the taxpayer's adjusted gross income reaches $150,000. Sec. 469(i)(3)(A), (F)(iv). Without the passive activity losses they deducted, petitioners' adjusted gross income for each year at issue exceeded $150,000. See Moss v. Commissioner, 135 T.C. 365">135 T.C. 371-372. Therefore, they are not entitled to deduct any passive activity losses under section 469(i)(3).

We now turn to whether respondent properly disallowed certain automobile expense deductions petitioners claimed with respect to the rental real estate activity for 2008. It bears repeating that deductions are a matter of legislative grace, and the taxpayer 2013 Tax Ct. Summary LEXIS 71">*80 must prove he is entitled to the deductions claimed. Rule 142(a); New Colonial Ice Co. v. Helvering, 292 U.S. 435">292 U.S. at 440. Section 162(a) allows a taxpayer to deduct all ordinary and necessary expenses paid or incurred in carrying on a trade or business. Pursuant to section 274(d), however, automobile expenses otherwise deductible as a business expense will be disallowed in full unless the taxpayer satisfies strict substantiation requirements. ^{62013 Tax Ct. Summary LEXIS 71">*81} The taxpayer must substantiate the automobile expenses by adequate records or other corroborating evidence of items such as the amount of the expense, the time and place of the automobile's use, and the business purpose of its use. See Sanford v. Commissioner, 50 T.C. 823">50 T.C. 823, 50 T.C. 823">827-828 (1968), aff'd per curiam, 412 F.2d 201">412 F.2d 201 (2d Cir. 1969); Rasmussen v. Commissioner, T.C. Memo. 2012-353.

To satisfy the adequate records requirement of section 274(d), a taxpayer must maintain records and documentary evidence that in combination are sufficient to establish each element of an expenditure or use. Sec. 1.274-5T(c)(2), Temporary Income Tax Regs., 50 Fed. Reg. 46017 (Nov. 6, 1985). Although a contemporaneous log is not required, corroborative evidence to support a taxpayer's reconstruction "of the elements * * * of the expenditure or use must have a high degree of probative value to elevate such statement" to the level of credibility of a contemporaneous record. Sec. 1.274-5T(c)(1), Temporary Income Tax Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985).

In the absence of adequate records to substantiate each element of an expense, a taxpayer may alternatively establish an element by "his own statement, whether written or oral, containing specific information in detail as to such element" and by "other corroborative evidence sufficient to establish such element." Sec. 1.274-5T(c)(3), Temporary Income Tax Regs., 2013 Tax Ct. Summary LEXIS 71">*82 50 Fed. Reg. 46020 (Nov. 6, 1985).

In lieu of substantiating the actual amount of any expenditure relating to the business use of a passenger automobile, a taxpayer may use a standard mileage rate as established by the Internal Revenue Service. Seesec. 1.274-5(j)(2), Income Tax Regs. The use of the standard mileage rate establishes only the amount deemed expended with respect to the business use of a passenger automobile. Id. The taxpayer must still establish the amount (i.e., business mileage), the time, and the business purpose of each use. Id.

Petitioners did not maintain a contemporaneous mileage log for the rental real estate activity. And petitioners did not offer any other credible evidence to establish the number of miles traveled or the date, place, and business purpose of the travel. To be sure, petitioners did offer summaries, prepared in preparation for trial, of the mileage Mr. Daco purportedly drove to perform services in the rental real estate activity. Section 274(d) requires any record to be supported by documentary evidence and a noncontemporaneous record to be supported by evidence with a "high degree of probative value". Sec. 1.274-5T(c)(1), Temporary Income Tax Regs., 2013 Tax Ct. Summary LEXIS 71">*83 supra. A substantial amount of the mileage petitioners claimed is not supported by documentary evidence, nor is it corroborated by highly probative evidence. We find the summaries untrustworthy and do not accept them. Petitioners failed to otherwise substantiate with adequate records the car and truck expense deductions claimed with respect to the rental real estate activity. Consequently, we sustain respondent's determination disallowing part of the deduction for those claimed expenses.

Finally, we address respondent's determination that petitioners failed to include $39 of taxable interest in income. As previously mentioned, generally, a taxpayer bears the burden of proving the Commissioner's determinations incorrect. Rule 142(a); Welch v. Helvering, 290 U.S. 111">290 U.S. at 115. The U.S. Court of Appeals for the Ninth Circuit has held that the Commissioner must establish "some evidentiary foundation" connecting the taxpayer with the income-producing activity or otherwise demonstrate that the taxpayer received unreported income, for the presumption of correctness to attach to the deficiency determination in unreported income cases. Weimerskirch v. Commissioner, 596 F.2d 358">596 F.2d 358, 596 F.2d 358">361-362 (9th Cir. 1979), 2013 Tax Ct. Summary LEXIS 71">*84 rev'g67 T.C. 672">67 T.C. 672 (1977). If the Commissioner introduces evidence demonstrating that the taxpayer received unreported income, the burden shifts to the taxpayer to show by a preponderance of the evidence that the deficiency determination was arbitrary or erroneous. See Hardy v. Commissioner, 181 F.3d 1002">181 F.3d 1002, 181 F.3d 1002">1004 (9th Cir. 1999), aff'gT.C. Memo. 1997-97.

Respondent introduced into evidence a computer-generated "Wage and Income Transcript" showing data from all the information returns that the IRS received for 2009 with respect to petitioners. ⁷ The Wage and Income Transcript reflects that respondent received from third-party payors Forms 1099-INT reporting that petitioners were paid interest totaling $77 for 2009. Petitioners reported only $38 of interest income for 2009. The Court asked Mr. Daco whether he received the $39 of unreported interest income reflected on the Wage and Income Transcript, and Mr. Daco did not dispute that he received it. We find that respondent sufficiently established an evidentiary foundation with respect to the $39 in unreported interest income for 2009. Consequently, petitioners bear the burden of proving that respondent's determinations were arbitrary or 2013 Tax Ct. Summary LEXIS 71">*85 erroneous. See Weimerskirch v. Commissioner, 596 F.2d 358">596 F.2d at 361-362.

Petitioners did not forward any arguments or present any evidence at trial to show that respondent's determination regarding the unreported interest income for 2009 was arbitrary or erroneous. And as previously mentioned, Mr. Daco did not dispute, when asked by the Court, that he received the unreported interest income. Accordingly, we sustain respondent's determination.

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.

To reflect the foregoing,

Decision will be entered for respondent.