T.C. Summary Opinion 2017-94



                            UNITED STATES TAX COURT



     ROBERT GOLLNICK, JR. AND PIYANUT USTSASAN-GOLLNICK,
    Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 18269-16S.                            Filed December 26, 2017.



      Robert Gollnick, Jr., pro se.

      Jason T. Scott, Michael A. Skeen, and Trent D. Usitalo, for respondent.



                                 SUMMARY OPINION


      GUY, 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.1 Pursuant to section 7463(b), the decision to be entered is not reviewable by


      1
          Unless otherwise indicated, all section references are to the Internal
                                                                           (continued...)
                                            -2-

any other court, and this opinion shall not be treated as precedent for any other

case.

        Respondent determined a deficiency of $4,336 in petitioners’ Federal

income tax for 2013. Petitioners, husband and wife, filed a timely petition for

redetermination with the Court pursuant to section 6213(a). At the time the

petition was filed, they resided in California.

        The issue for decision is whether petitioners are entitled to a deduction for

various expenses related to Mr. Gollnick’s insurance sales and educator activities.2

                                       Background3

        In 2013 Mr. Gollnick was an independent agent of New York Life

Insurance Co. (NYL). He drove his own vehicle from home to various locations

in California and attempted to sell insurance policies to small businesses, walking

door to door. He also attempted to sell insurance to family and friends in New

York and Florida.



        1
       (...continued)
Revenue Code, as amended and in effect for 2013, and all Rule references are to
the Tax Court Rules of Practice and Procedure. Monetary amounts are rounded to
the nearest dollar.
        2
            Ms. Ustsasan-Gollnick did not appear when this case was called for trial.
        3
            Some of the facts have been stipulated and are so found.
                                         -3-

      NYL notified Mr. Gollnick that he was terminated in December 2013 and

that he owed the company $1,299 at that time. It appears that NYL did not issue a

Form 1099 or similar record to Mr. Gollnick for 2013.

      Petitioners filed a joint Form 1040, U.S. Individual Income Tax Return, for

2013, reporting adjusted gross income of $78,476, including wages paid to

Mr. Gollnick by St. Leo University. On Form 2106-EZ, Unreimbursed Employee

Business Expenses, Mr. Gollnick claimed that, while working as an insurance

agent and educator, he incurred unreimbursed employee business expenses of

$28,014, comprising vehicle expenses, parking fees, tolls and transportation, travel

expenses while away from home, meals and entertainment expenses, and other

expenses. Petitioners carried over to Schedule A, Itemized Deductions, the

amount reported on Form 2106-EZ, along with “Excess Educator Expenses” of

$2,753, claiming a miscellaneous deduction of $30,767 (before the application of

section 67(a)). Petitioners also attached to their return a Schedule C, Profit or

Loss From Business, reporting that Mr. Gollnick earned gross income of $481 as

an insurance agent in 2013.

      The Internal Revenue Service (IRS) examined petitioners’ tax return and

disallowed the miscellaneous deduction claimed on Schedule A for lack of

substantiation of the underlying expenses. Petitioners subsequently submitted to
                                          -4-

the IRS an amended tax return for 2013, eliminating the Schedule A deduction

described above, but including a deduction for similar expenses on Schedule C.4

                                       Discussion

      As a general rule, the Commissioner’s determination of a taxpayer’s liability

in a notice of deficiency is presumed correct, and the taxpayer bears the burden of

proving that the determination is incorrect. Rule 142(a); Welch v. Helvering, 

, 115 (1933).5 Deductions and credits are a matter of legislative grace,

and the taxpayer generally bears the burden of proving entitlement to any

deduction or credit claimed. Rule 142(a); INDOPCO, Inc. v. Commissioner, 

, 84 (1992); New Colonial Ice Co. v. Helvering, 

, 440 (1934).

      Under section 162(a), a deduction is allowed for ordinary and necessary

expenses paid or incurred during the taxable year in carrying on any trade or

business. A deduction is not allowed, however, for personal, living, or family

expenses. Sec. 262(a). Whether an expenditure satisfies the requirements for

deductibility under section 162 is a question of fact. See Commissioner v.

Heininger, 

, 475 (1943).



      4
          The amended tax return is not part of the record.
      5
       Petitioners do not contend, and the record does not suggest, that the burden
of proof should shift to respondent pursuant to sec. 7491(a).
                                       -5-

      When a taxpayer establishes that he paid or incurred a deductible expense

but fails to establish the amount of the deduction, the Court normally may estimate

the amount allowable as a deduction. Cohan v. Commissioner, 

, 543-

544 (2d Cir. 1930); Vanicek v. Commissioner, 

, 742-743 (1985).

There must be sufficient evidence in the record, however, to permit the Court to

conclude that a deductible expense was paid or incurred in at least the amount

allowed. Williams v. United States, 

, 560 (5th Cir. 1957).

      Section 274(d) prescribes strict substantiation requirements for deductions

for expenses related to travel (including meals and lodging), entertainment, and

gifts, and with respect to “listed property”. Sanford v. Commissioner, 

, 826-829 (1968), aff’d per curiam, 

(2d Cir. 1969); sec. 1.274-

5T(a), Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6, 1985). As

relevant here, the term “listed property” includes passenger automobiles. Sec.

280F(d)(4)(A)(i). To satisfy the requirements of section 274(d), a taxpayer

generally must maintain adequate records and documentary evidence which, in

combination, are sufficient to establish the amount, date, and business purpose for

a covered expenditure or business use of listed property. Sec. 1.274-5T(b)(6),

(c)(1), Temporary Income Tax Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985).
                                          -6-

         Section 1.274-5T(c)(2), Temporary Income Tax Regs., 50 Fed. Reg. 46017-

46018 (Nov. 6, 1985), provides in relevant part that “adequate records” generally

consist of an account book, a diary, a log, a statement of expense, trip sheets, or a

similar record made at or near the time of the expenditure or use, along with

supporting documentary evidence. Section 1.274-5(j)(2), Income Tax Regs.,

provides that the strict substantiation requirements of section 274(d) for vehicle

expenses must be met even where the optional standard mileage rate is used.

Moreover, the Court may not use the rule established in Cohan v. 

, to estimate expenses covered by section 274(d). Sanford v.

Commissioner, 

; sec. 1.274-5T(a), Temporary Income Tax 

.

         There is no dispute that Mr. Gollnick’s activities as an insurance agent and

educator during the year in issue constituted trades or businesses within the

meaning of section 162. The sole issue for decision is whether Mr. Gollnick has

properly substantiated the business expenses in dispute.

I. Vehicle, Travel, Meals and Entertainment Expenses

         Mr. Gollnick produced a partial milage log at trial--a document that he had

failed to share with the IRS Office of Appeals or respondent’s counsel before trial.

Because he failed to produce the partial mileage log before trial, and in the light of
                                        -7-

unexplained inconsistencies between the log and claims made on petitioners’ tax

return, the Court gives no weight to the document. In sum, Mr. Gollnick failed to

satisfy the heightened substantiation requirements prescribed for vehicle expenses

under section 274(d), and it follows that petitioners are not entitled to a deduction

for vehicle expenses.

      Mr. Gollnick did not maintain a log or a similar record to substantiate or

demonstrate the business purpose for travel, meals and entertainment expenses.

Many of the expenditures for travel and meals and entertainment appear to be

personal expenses. In any event, Mr. Gollnick failed to satisfy the heightened

substantiation requirements prescribed for these type of expenses in section

274(d). Consequently, we sustain respondent’s disallowance of a deduction for

travel, meals and entertainment expenses.

II. Other Expenses

      Mr. Gollnick produced copies of numerous receipts in an effort to

substantiate expenses for business-related supplies, educational items, parking fees

and tolls, cellular phone service, and postage. On close examination, the receipts

in question include a mix of business and personal expenses. In some cases, the

nature of the expense is not discernable. Nevertheless, applying the rule in Cohan

v. 

, the Court finds that there is sufficient
                                      -8-

evidence in the record showing that Mr. Gollnick paid $1,100 for deductible

business expenses in 2013.

      To reflect the foregoing,


                                            Decision will be entered

                                     under Rule 155.