Filed: Mar. 31, 2014
Latest Update: Mar. 03, 2020
Summary: T.C. Summary Opinion 2014-29 UNITED STATES TAX COURT MICHAEL E. HOUCHIN, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 30985-12S. Filed March 31, 2014. Michael E. Houchin, pro se. Timothy Shawn Sinnott, for respondent. SUMMARY OPINION COHEN, Judge: This case was heard pursuant to the provisions of section 7463 of the Internal Revenue Code in effect at the time that the petition was filed. The decision to be entered is not reviewable by any other Court, and this opinion sh
Summary: T.C. Summary Opinion 2014-29 UNITED STATES TAX COURT MICHAEL E. HOUCHIN, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 30985-12S. Filed March 31, 2014. Michael E. Houchin, pro se. Timothy Shawn Sinnott, for respondent. SUMMARY OPINION COHEN, Judge: This case was heard pursuant to the provisions of section 7463 of the Internal Revenue Code in effect at the time that the petition was filed. The decision to be entered is not reviewable by any other Court, and this opinion sha..
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T.C. Summary Opinion 2014-29
UNITED STATES TAX COURT
MICHAEL E. HOUCHIN, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 30985-12S. Filed March 31, 2014.
Michael E. Houchin, pro se.
Timothy Shawn Sinnott, for respondent.
SUMMARY OPINION
COHEN, Judge: This case was heard pursuant to the provisions of section
7463 of the Internal Revenue Code in effect at the time that the petition was filed.
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, all
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section references 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.
Respondent determined a deficiency of $4,506 in petitioner’s Federal
income tax for 2010. The issues for decision are whether petitioner has
substantiated deductible vehicle expenses as required under section 274(d) and
whether petitioner is liable for self-employment tax.
Background
Some of the facts have been stipulated, and the stipulated facts are
incorporated in our findings by this reference. Petitioner resided in Indiana at the
time that he filed his petition.
At the beginning of 2010, petitioner--who previously had worked as a truck
driver--was unemployed. During this time, petitioner collected unemployment
compensation and also engaged in a business activity of picking up old
newspapers and selling them to a recycling company. Petitioner would drive his
truck to whatever locations he could find that had available newspapers.
Petitioner maintained a mileage log wherein he recorded the date, starting and
ending odometer readings, business mileage, and personal mileage for each trip
with his truck during 2009 and 2010. By the latter part of 2010, petitioner had
secured a job as a truck driver with UPS.
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Petitioner’s 2010 Form 1040, U.S. Individual Income Tax Return, was
prepared by H and R Block. On Schedule C, Profit or Loss From Business,
petitioner reported gross income of $1,274, office expense of $142, and car and
truck expenses of $17,978, for a net loss of $16,846.
The examination division of the Internal Revenue Service (IRS) disallowed
all of petitioner’s truck expenses but allowed the office expense. Because of the
disallowed car and truck expenses, petitioner’s business had a net profit for 2010.
Accordingly, the IRS calculated and included self-employment tax of $160 and a
self-employment tax deduction of $80 based upon this business income.
On or about August 14, 2012, petitioner submitted his 2009-10 mileage log
to the IRS examination division to substantiate his truck expenses. The IRS
examination division was unpersuaded by petitioner’s mileage log because the
entries did not reflect a business purpose or the places where petitioner’s business
activity occurred. The IRS asked that petitioner provide information regarding the
places where he went.
On or about September 18, 2012, petitioner resubmitted his mileage log,
having modified it by writing in the places where he guessed he may have gone.
Again unpersuaded, the IRS sent to petitioner a notice of deficiency, dated
October 30, 2012, reflecting its adjustments to his tax return.
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Discussion
Car and Truck Expenses
Section 162 allows as a deduction “all the ordinary and necessary expenses
paid or incurred during the taxable year in carrying on any trade or business”.
Taxpayers are required to maintain sufficient records to establish the amounts and
purpose of any deductions. Sec. 6001; Higbee v. Commissioner,
116 T.C. 438,
440 (2001); sec. 1.6001-1(a), (e), Income Tax Regs. The taxpayer has the burden
of proving his or her deductions claimed. See New Colonial Ice Co. v. Helvering,
292 U.S. 435, 440 (1934); Rockwell v. Commissioner,
512 F.2d 882, 886 (9th Cir.
1975), aff’g T.C. Memo. 1972-133.
Petitioner claimed truck expenses of $17,978. Because petitioner’s truck is
listed property under section 280F(d)(4)(A)(i) or (ii), a deduction for the truck
expenses requires additional substantiation. See sec. 274(d). A taxpayer must
substantiate by adequate records or by sufficient evidence corroborating the
taxpayer’s own statement the amount of the expense, the time and place of travel,
and the business purpose of the expense. Id.; see also sec. 1.274-5T(b)(6), (c)(1)
and (2), Temporary Income Tax Regs., 50 Fed. Reg. 46016-46017 (Nov. 6, 1985).
While a contemporaneous log is not required, a taxpayer’s subsequent
reconstruction of his or her expenses does require corroborative evidence with a
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high degree of probative value to support such a reconstruction not made at or
near the time of the expenditure, in order to elevate that reconstruction to the same
level of credibility as a contemporaneous record. Sec. 1.274-5T(c)(1), Temporary
Income Tax
Regs., supra.
Although petitioner provided his 2009-10 mileage log, he nevertheless
failed to provide any corroborating receipts or other records that substantiated the
statements made in the log. Petitioner’s mileage log did not address the business
purpose of each trip. Guessing as to where he may have gone in 2010, petitioner
added the places of business travel to his log in 2012. The log was thus not
contemporaneous, and the reconstruction was not reliable. Although we believe
that petitioner had business travel expenses in relation to his recycling business,
section 274(d) precludes estimates. See Sanford v. Commissioner,
50 T.C. 823,
827 (1968), aff’d per curiam,
412 F.2d 201 (2d Cir. 1969); sec. 1.274-5T(a)(4),
Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6, 1985). Because
petitioner failed to substantiate the claimed expenses as required by section
274(d), his deductions must be disallowed.
Self-Employment Tax
Section 1401 generally imposes a self-employment tax on the self-
employment income of every individual. Individuals whose net earnings from
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self-employment equal or exceed $400 during the taxable year are required to
report such income. Sec. 6017.
In his petition, petitioner contends that his recycling of newspapers “was a
‘hobby’ type of business”. However, petitioner and H and R Block treated the
activity as a Schedule C business and used a disproportionate amount of expenses
and the resulting net loss to offset other income. On the basis of the entire record,
we have determined that, for 2010, petitioner had self-employment income in
excess of $400 after the disallowance of the truck expenses. Accordingly,
respondent is sustained on this issue.
We have considered the other arguments of the parties, and they are not
material to our conclusions.
To reflect the foregoing,
Decision will be entered
for respondent.