                      T.C. Memo. 2010-223



                     UNITED STATES TAX COURT



                  JOEL P. ARNOLD, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 20879-08.               Filed October 13, 2010.



     Herman D. Baker, for petitioner.

     Jennifer K. Martwick, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     GOLDBERG, Special Trial Judge:     Respondent determined a

$3,471 deficiency in petitioner’s 2005 Federal income tax.

Unless otherwise indicated, all section references are to the

Internal Revenue Code in effect for the taxable year in issue,

and all Rule references are to the Tax Court Rules of Practice

and Procedure.
                                   - 2 -

        After concessions,1 the two issues for decision are whether

petitioner is entitled to unreimbursed employee business expense

deductions claimed in 2005 for:       (1) Use of his personal vehicle;

and (2) job search expenses.

                             FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.      Petitioner resided in

Georgia when he filed his petition.

     In 2005 petitioner worked as a senior auditor in the

Healthcare Audits Division of the Georgia Department of Audits

and Accounts (the department), headquartered in Atlanta, Georgia.

He had been with the department for 4 years.

     Petitioner was divorced by 2005.      In 2005 he owned a home

about 40 miles from the department’s Atlanta headquarters.

Petitioner’s son lived full time with petitioner during all of

2005.       According to petitioner, his son turned 9 in 2005 and was

in childcare before and after school.      However, medical records

in evidence state that his son was age 18 in 2005.      Petitioner’s

son suffered from multiple severe chronic illnesses, including

renal failure.



        1
      Petitioner conceded $290 of the $2,164 in student loan
interest that he had deducted. Respondent conceded that
petitioner is entitled to a $42 deduction for tax return
preparation expenses.
                                 - 3 -

     Petitioner’s job required frequent travel throughout

Georgia.   He performed and supervised onsite audits of the

financial records of nursing homes at either the nursing

facilities themselves or at their main offices.    Many of the

locations were quite far from the department’s headquarters, and

the audits often continued for several days.    Depending on

petitioner’s schedule, either petitioner or petitioner’s sister

would pick up petitioner’s son from school and bring him home.

     The department made vehicles available for its employees who

were traveling to audit sites.    However, petitioner neither

requested nor used a department vehicle during 2005.    Instead,

petitioner drove his personal vehicle to all of his assignments.

Petitioner never requested and did not receive reimbursement from

the department for his work-related driving.

     Petitioner recorded mileage on a commonplace commercial

spiral-bound 8-1/2 by 11-inch monthly calendar showing the days

for each month.   For each day petitioner noted the name of a

destination city or town and the mileage from Atlanta to and from

that destination.   The log is not clear as to what petitioner

meant by “Atlanta”:   whether he started and ended each trip from

the department’s headquarters or calculated the mileage from

headquarters or considered his home as part of the Atlanta

metropolitan area and computed the mileage from his house.      Other

elements of the log are also difficult to interpret.    For
                                - 4 -

instance, petitioner crossed out certain dates for which he

recorded mileage.   On other dates he noted a doctor’s visit

and/or 0.7 miles for a trip within the Atlanta city limits, and

then on the same dates in a different handwriting style he noted

mileage for a long journey.   Petitioner also attached an adding

machine tape of mileage that for no apparent reason omitted

certain mileage that he had recorded on the calendar.

     Nonetheless, as best the Court can decipher, it appears that

in aggregate for the year at issue, petitioner reported 21 days

of intra-Atlanta round trips of 1.4 miles and 249 days of driving

to audit sites outside of the Atlanta metropolitan area,

returning home on all but a couple of the nights.    The out-of-

town trips consisted of the following round trip mileage:

         Round Trip             Number        Percentage
          Distance             of Days         of Total
        < 100 Miles               40                16
      100-199 Miles               39                16
      200-299 Miles              112                45
      300-399 Miles               45                18
      400-499 Miles                7                 3
      500 or More Miles            6                2
         Total                   249              100

     Thus, two-thirds of petitioner’s mileage consisted of round

trips of at least 200 miles, including 58 days (45 + 7 + 6) of

driving 300 miles or more.    Often these trips were nearly daily.

For example, from March 21 to May 2, 2005, a span of 32 business
                                - 5 -

days, petitioner reported 22 days of 296.8-mile round trips

between Atlanta and Augusta, Georgia, and 7 days of 369.4-mile

round trips between Atlanta and Albany, Georgia.    Petitioner’s

longest drive during the year was on May 23, 2005, when he

traveled 681.9 miles from Atlanta to Brunswick to Columbus and

back to Atlanta.   His second longest drive was on June 9, 2005,

when he traveled 668.7 miles from Greensboro to Hinesville to

Lafayette to Atlanta.    Because of the ambiguity of petitioner’s

notation that all the drives originated and ended in Atlanta, we

cannot determine whether the 80-mile round trip from petitioner’s

home to the department’s headquarters should be added to these

figures to determine petitioner’s actual driving distances.

     Petitioner filed his 2005 Federal income tax return,

reporting $49,854 of adjusted gross income and $40,100 of

itemized deductions.    Petitioner deducted $25,973 as an

unreimbursed employee business expense for use of his personal

vehicle.   On Form 2106-EZ, Unreimbursed Employee Business

Expenses, attached to his return, he reported that he drove his

vehicle 59,302 miles for his job, 3,763 miles for commuting, and

1 mile for other personal use.2   Using the 249 driving days as a

denominator, petitioner therefore claimed that for every day he


     2
      Rev. Proc. 2004-64, sec. 5.01, 2004-2 C.B. 898, 900,
allowed a 40.5-cents-per-mile standard mileage rate for business
use of a vehicle in 2005. Announcement 2005-71, 2005-2 C.B. 714,
increased the rate to 48.5 cents per mile for business miles
driven after Aug. 31, 2005.
                               - 6 -

drove, he did so for his job, averaging about 238.2 miles

(59,302/249) per day.

     The Internal Revenue Service (IRS) selected petitioner’s

return for examination.   In the notice of deficiency the IRS

disallowed, as pertinent here, all of petitioner’s $25,973

deduction for business use of his personal vehicle and all of his

$185 deduction for job search expenses.   The notice stated that

“since you did not establish that the business expense shown on

your tax return was paid or incurred during the taxable year and

that the expense was ordinary and necessary to your employment,

we have disallowed the amount shown.”

     With respect to the $185 in job search expenses that

petitioner deducted for 2005, petitioner stated that the amount

represented postage to mail “resumes, follow-up letters, and

credentials” to prospective employers.    The Court received into

evidence copies of 10 of petitioner’s canceled checks payable to

the U.S. Postmaster totaling $147.20.

     Petitioner petitioned this Court, contending:

     The employee business expenses claimed on the return
     were ordinary and necessary and they were not
     reimbursed by the employer. Evidence was submitted to
     the IRS that the employer did not approve reimbursement
     for those expenses but IRS did not find the evidence to
     be sufficient. Taxpayer disagrees with that
     determinaton [sic].

     The Court received into evidence a letter dated February 25,

2008, that Meg Ramsay, the department’s human resources manager,
                               - 7 -

prepared in response to a request for information from the IRS

regarding petitioner.   Ms. Ramsay wrote, in pertinent part:

     In 2005, the department of Audits and Accounts
     maintained a fleet of vehicles, and employees were
     expected to use these vehicles when they traveled on
     official state business. Our Department policy only
     allows employees to be reimbursed for mileage in a
     personal vehicle if the use of the vehicle was approved
     in advance. Since we maintained a fleet of vehicles,
     approval to use a personal vehicle, and be reimbursed
     for such use, was not common practice. Generally,
     employees who have personal reasons for traveling by
     personal vehicle were not eligible for mileage
     reimbursement.

     For the year in question [2005], we have reviewed the
     travel expense statements for Joel P. Arnold and found
     there were no instances in which Joel Arnold was
     reimbursed for business miles driven in his personal
     vehicle during the year.

     Ms. Ramsay enclosed, and the Court received into evidence, a

copy of the department’s travel policy that was in effect for

2005.   The policy states in pertinent part (reproduced

literally):

     (A) General Provisions
         Employees of the Department of Audits and Accounts
     will be reimbursed for actual travel expenses incurred
     while performing their official duties. Travel
     expenses are incurred for overnight stays and, in
     certain circumstances, when overnight travel is not
     involved. All travel must be authorized and approved
     by division directors or their designees.

     (B) Lodging Expenses for Overnight Travel Within
         Georgia
         Employees are encouraged to commute to audit sites
     that are within a reasonable driving distance. No
     employee will be reimbursed for overnight lodging at
     audit sites that are within 30 miles of home or
     headquarters, or within the same county of their home
     or headquarters. If the audit site is between 30 and
                               - 8 -

      60 miles from home or headquarters, the employee must
      receive approval from the division director or his
      designee in order to be reimbursed for overnight
      lodging. This approval must be obtained in advance of
      the scheduled trip.

     (E) Travel by State-Owned or Personal Vehicles
         Employees who are on travel status are encouraged
     to use agency-owned vehicles, if available, for travel
     within the State of Georgia, and when appropriate for
     travel outside the State. However, if agency-owned
     vehicles are not available, employees may choose
     between using DOAS[3] or personal vehicles. Employees
     must receive prior approval from the division director,
     or his designee, to use a personal vehicle when an
     agency-owned vehicle is available.

     (F) Mileage Reimbursement for Use of Personal Vehicles
         Employees may be reimbursed for business miles
     traveled in a personal vehicle, provided the use of the
     personal vehicle was approved. * * * Employees may be
     reimbursed for the mileage incurred from the point of
     departure to the travel destination. During the normal
     week, the point of departure will be either the
     employee’s residence or headquarters, whichever is
     nearer to the destination point. During weekends and
     holidays, employees should use the actual point of
     departure to calculate travel mileage. Employees are
     not entitled to mileage reimbursement for - travel
     between their place of residence and their official
     headquarters, or - personal mileage incurred while on
     travel status.

                              OPINION

I.   The Parties’ Positions

      During the IRS examination petitioner stated in a letter to

the examining agent that he used his personal vehicle rather than

the department’s fleet of vehicles because it was the “most

logical choice” for two reasons:   (1) As “the custodial parent of



      3
       Department of Audits and Accounts.
                               - 9 -

a sick dependent”, he wanted to be home every night to care for

his son; and (2) the department had what he believed was an

illegal vehicle insurance policy.   According to petitioner’s

understanding, the policy would not cover instances where

employees used department vehicles for nonbusiness or personal

purposes, such as in his situation if he had to return home on

short notice because of a medical problem related to his son.

Petitioner did not offer evidence to support his personal

conclusion regarding the department’s vehicle insurance coverage.

     At trial petitioner testified that he did not submit

requests for reimbursement because he believed the department

would deny his requests on the grounds that:   (1) The department

considered shorter trips as not being in travel status and,

therefore, would not reimburse a mileage expense that is

equivalent to a nonreimbursable commute; and (2) for longer

distances that would qualify as being in travel status,

petitioner returned home almost every night, and therefore he

believed that he would not qualify for reimbursement because,

according to his understanding, the department required an

overnight stay.   In support of his understanding of the

department’s reimbursement policy, petitioner at trial read from

portions of the department’s travel policy.    The policy, however,

does not validate petitioner’s assumptions about reimbursement

when in travel status.
                               - 10 -

      Respondent, while sympathetic to the medical problems of

petitioner’s son, contends that those problems do not make

petitioner’s mileage deductible because “petitioner voluntarily

chose to drive his personal vehicle rather than an agency-owned

vehicle”.    Respondent further contends that even if petitioner

had valid business reasons for driving his own vehicle,

petitioner’s expenses are not deductible because:    (1) Petitioner

did not seek department approval to drive his own vehicle as

department policy required; and (2) petitioner did not seek

reimbursement from the department for the mileage expenses he

incurred.

II.   Burden of Proof

      Generally, the Commissioner’s determination of a deficiency

is presumed correct, and the taxpayer bears the burden of proving

that the deficiency is incorrect.    Rule 142(a); Welch v.

Helvering, 290 U.S. 111, 115 (1933).    Under section 7491(a) the

burden may shift to the Commissioner regarding factual matters

affecting a taxpayer’s liability for tax if the taxpayer produces

credible evidence and meets other requirements of the section.

Petitioner has neither argued for a burden shift nor established

his compliance with the requirements of section 7491(a).

Petitioner therefore bears the burden of proving that

respondent’s determination in the notice of deficiency is

erroneous.
                               - 11 -

III.   Petitioner’s Personal Vehicle Mileage Expense

       Taxpayers must maintain records relating to their income and

expenses and must prove their entitlement to all claimed

deductions, credits, and expenses in controversy.      See sec. 6001;

Rule 142(a); INDOPCO, Inc. v. Commissioner,    503 U.S. 79, 84

(1992); Welch v. Helvering, supra at 115.

       Section 162(a) allows a deduction for ordinary and necessary

expenses that a taxpayer pays or incurs during the year in

carrying on a trade or business.    Lucas v. Commissioner, 79 T.C.

1, 6 (1982).    Generally, the performance of services as an

employee constitutes a trade or business.     Primuth v.

Commissioner, 54 T.C. 374, 377 (1970).

       To be “ordinary” the transaction that gives rise to the

expense must be of a common or frequent occurrence in the type of

business involved.    Deputy v. du Pont, 308 U.S. 488, 495 (1940).

To be “necessary” an expense must be “appropriate and helpful” to

the taxpayer’s business.    Welch v. Helvering, supra at 113.

       Petitioner claims that he is entitled to a deduction for use

of his personal vehicle as an ordinary and necessary business

expense.    Ordinarily, when an employee has a right to

reimbursement for expenditures related to his status as an

employee but fails to claim such reimbursement, the expenses are

not deductible because they are not “necessary”; in other words,

it is not “necessary” for an employee to remain unreimbursed for
                               - 12 -

expenses to the extent he could have been reimbursed.     Orvis v.

Commissioner, 788 F.2d 1406, 1408 (9th Cir. 1986), affg. T.C.

Memo. 1984-533; Lucas v. Commissioner, supra at 7; Kennelly v.

Commissioner, 56 T.C. 936, 943 (1971), affd. without published

opinion 456 F.2d 1335 (2d Cir. 1972).

     Petitioner was not entitled to reimbursement because he did

not follow the department’s travel policy.    Had he followed the

policy, he first would have requested use of one of the

department’s vehicles.    If one was available, he would have

avoided the expense associated with the use of his personal

vehicle.   If, on the other hand, a department vehicle was not

available, he then could have requested approval to use his

personal vehicle.    Approval by the department would have entitled

him to reimbursement for travel other than that between his

residence and the department’s headquarters.

     The record is clear that petitioner chose to drive his

personal vehicle for reasons unrelated to his employment.

Petitioner stated he wanted to return home almost every night to

be with his son.    We note, however, petitioner’s testimony

regarding his son’s age conflicts with the medical records.     As

we discuss below, we also note inaccuracies in petitioner’s

mileage log.   These discrepancies affect our judgment of

petitioner’s credibility.    Whatever reasons petitioner had for
                               - 13 -

returning home practically every night, they were not job

related.

       In addition, the department encouraged overnight stays when

employees drove to sites 60 miles away or further.    Here again by

making a personal choice to return home nightly instead of

staying overnight near the audit site in a hotel room, the cost

of which would have been reimbursable, petitioner incurred

expenses for many additional miles that were unnecessary for his

job.

       Accordingly, the vehicle expense petitioner incurred was not

a necessary expense.    Petitioner incurred the expense not for a

reason related to his employment, but as the result of his

personal choice; namely, to be home at night with his son.   Under

section 262(a) a taxpayer may not deduct personal, living, or

family expenses.    See Commissioner v. Flowers, 326 U.S. 465, 474

(1946) (“The exigencies of business rather than the personal

conveniences and necessities of the traveler must be the

motivating factors.”); Walliser v. Commissioner, 72 T.C. 433, 437

(1979) (to show that an expense was not personal, the taxpayer

must prove that the expense was incurred primarily to benefit his

business and the continuation of his employment and that there

was a proximate relationship between the claimed expense and his

business); sec. 1.162-1(a), Income Tax Regs. (the expenditure

must be “directly connected with or pertaining to the taxpayer’s
                                - 14 -

trade or business”).     In conclusion, for the foregoing reasons we

sustain respondent’s determination disallowing petitioner’s

vehicle mileage expense deduction for 2005.

IV.   Job Search Costs

      Petitioner deducted $185 in job search costs for 2005.

Deductible job search costs include expenses incurred in

searching for new employment in the employee’s same trade or

business.   Primuth v. Commissioner, supra at 377-378.    It does

not matter whether the search is successful, or even whether the

taxpayer accepts a new position.     Cremona v. Commissioner, 58

T.C. 219, 221-222 (1972).     If, however, the employee is seeking a

job in a new trade or business, then the expenses are not

deductible.   Frank v. Commissioner, 20 T.C. 511, 513-514 (1953).

      We find it credible that petitioner was searching for a new

job in 2005, one requiring less travel.     We also find it credible

that petitioner was searching for work in the same trade or

business since he was a senior auditor with a chronically ill

son, making starting over in a new line of work improbable.

      Petitioner substantiated his expenditure by providing copies

of 10 canceled checks.     The checks were payable to the U.S.

Postmaster.   Postage is a deductible job search expense.    Cheh v.

Commissioner, T.C. Memo. 1992-658; Rev. Rul. 77-16, 1977-1 C.B.

37.   The 10 checks, however, totaled only $147.20.    Accordingly,

petitioner may deduct $147.20 as a job search expense.     This
                              - 15 -

deduction, however, is subject to the section 67(a) limitation

that individuals may deduct miscellaneous itemized deductions

“only to the extent that the aggregate of such deductions exceeds

2 percent of adjusted gross income.”

V.   Conclusion

      We have considered all of the other arguments made by

petitioner, and, to the extent that we have not specifically

addressed them, we conclude that they are without

merit, irrelevant, or moot.


                                           Decision will be entered

                                       under Rule 155.
