Having resided in Southern California, I know you can put a lot of miles on your car in that area. One engineering teacher learned the hard way from Tax Court that a written mileage log is essential if you want to deduct your business miles.
The petitioner taught at several schools in Southern California. He was not reimbursed by the schools for his mileage. He claimed 85,491 business miles driven–a deduction of $46,593. The IRS allowed only 4,970 miles. That’s a difference of 80,000 miles and a difference that large led to the case going to trial.
Unfortunately, the petitioner did not keep a contemporaneous written mileage log. The Cohan rule (allowing the Court to estimate an expense) does not apply to automobile expenses.
To meet the heightened substantiation requirements, a taxpayer must substantiate the amount, time of use, and business purpose of the expense. Sec. 274(d); see also sec. 1.274-5T(b)(6), Temporary Income Tax Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985). To substantiate by adequate records, the taxpayer must provide both an account book, a log, or a similar record, as well as documentary evidence, which are together sufficient to establish each element of an expenditure…Documentary evidence includes receipts, paid bills, or similar evidence…To substantiate by sufficient evidence corroborating the taxpayer’s own statement, the taxpayer must establish each element by the taxpayer’s statement and by direct evidence, such as documentary evidence.
Unfortunately, the petitioner didn’t maintain a contemporaneous log.
During his testimony petitioner submitted into evidence a mileage log which was created after the 2008 tax year. Petitioner claimed he drove 88,820 miles related to business travel in 2008. Corroborative evidence used to support a taxpayer’s reconstruction of expenditures “‘must have a high degree of probative value to elevate such [a] statement’ to the level of credibility of a contemporaneous record.”
The question for the Court was whether the testimony of the petitioner was enough to prove the 80,000 miles were for business but not commuting (commuting mileage is never deductible).
We find the mileage summary to be insufficient under section 274(d) because the mileage amounts were not entered at the time the vehicle was used. Petitioner testified that the mileage log he presented at trial was prepared “after [he] was approached by the IRS”. Outside of the syllabi petitioner presented, we are unable to determine for what purpose petitioner was traveling to and from the various schools outside of class time. Petitioner provided no evidence to corroborate entries in the mileage log for random trips to the schools other than testimony that he made various trips to prepare for the semester. We are unable to verify whether these trips were for business or were personal.
The petitioner also attempted to argue that even if the mileage were commuting mileage, these were temporary positions. The problem is that commuting to temporary positions outside of the metropolitan area where you reside can be deducted (this would be a travel expense). Unfortunately, all of the positions were within the Los Angeles metropolitan area.
Petitioner worked and lived in the same metropolitan area, and therefore we find that petitioner’s commuting expenses do not qualify for the exception to the general rule of nondeductibility. We hold that petitioner’s commuting expenses were nondeductible.
If you’re going to deduct mileage, keep a contemporaneous written mileage log. It takes just a few seconds to note your starting and ending mileage, the date, where you went, and the business purpose. It could be the difference in deducting 80,000 business miles.
Case: Daniel-Berhe v. Commissioner, T.C. Summary Opinion 2013-33
