                          T.C. Memo. 2005-97



                      UNITED STATES TAX COURT



          JAMES M. AND KAREN K. BARTON, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8861-03.                Filed May 3, 2005.



     E. Rhett Buck, Jr., for petitioners.

     W. Lance Stodghill, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     KROUPA, Judge:   Respondent determined a $6,713 deficiency in

petitioners’ Federal income tax for 2000.      After concessions, we

are asked to decide whether petitioners substantiated the amounts

of automobile expenses and entertainment expenses they claimed as

unreimbursed business expenses of James Barton (petitioner).     We

hold that they did not.
                                - 2 -

     Unless otherwise indicated all section references are to the

Internal Revenue Code in effect for the year at issue, and all

Rule references are to the Tax Court Rules of Practice and

Procedure.

                          FINDINGS OF FACT

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

The stipulation of facts, accompanying exhibits, and stipulation

of settled issues are incorporated by this reference.

Petitioners resided in Houston, Texas, at the time they filed the

petition.

     Petitioner was employed by Armko Industries, Inc. (Armko), a

roof system consulting firm, as a sales representative during

2000.   Petitioner was responsible for consulting with clients,

predominantly school districts, regarding their roofing needs and

assisting them in overseeing the planning and implementation of

roofing projects.   This included identifying the condition of the

current roof, developing specifications for the project, meeting

with local construction contractors who bid on the project, and

attending preconstruction meetings with the school district and

the contractors.    Once construction began, petitioner documented

the progress and authorized payments to the contractors.   When

the project was completed, petitioner prepared a list of items

that had to be remedied before the contractor would be paid and a
                               - 3 -

warranty would be issued.   A typical job lasted 3 months and

required petitioner to travel to the jobsite five times or more.

     During 2000, petitioner’s clients were located in Texas and

Louisiana.   Armko did not reimburse petitioner for expenses

related to his sales activities.

     Petitioner claimed $l5,7411 of automobile expenses2 as

unreimbursed employee business expenses for 2000.     He testified

that he daily maintained a mileage log by recording the odometer

reading for each sales call on the day that he made the sales

call, then transferred this information into a spreadsheet on his

personal computer because, as he testified, he wanted to have a

“more efficient paperless office.”     Petitioner maintained no

other paper records for the business use of his automobile.       The

mileage log contained entries that were inconsistent with and in

fact contradicted other evidence before the Court.3    For example,

there were numerous entries on the same day on both the flight

log and the mileage log that showed times and distances traveled

that could not have taken place on the same day.     Petitioner

     1
      All dollar amounts are rounded to the nearest dollar.
     2
      Petitioner claimed 48,434 miles, at the standard mileage
rate of 32.5 cents per mile, as business purpose miles on Form
2106, Employee Business Expenses, for 2000. The standard mileage
rate for 2000 is set forth in Rev. Proc. 99-38, 1999-2 C.B. 525.
     3
      Petitioner submitted a flight log to substantiate expenses
he claimed involving his 1960 Cessna 182-C airplane. The parties
settled the Cessna airplane expense issue in the stipulation of
settled issues. Accordingly, we consider the flight log only as
it relates to petitioner’s automobile expenses.
                               - 4 -

testified that he reconstructed significant portions of the

mileage log 2 years after the fact in preparing for trial.

     Petitioner also claimed $2,4224 of meals and entertainment

expenses as unreimbursed employee business expenses for 2000.

Petitioner derived this number from the yearend summary statement

he received from a credit card company that grouped restaurant

and entertainment expenses together (master credit card summary).

Petitioner admitted that he did not use this account exclusively

for business purposes.   The master credit card summary showed

$2,168 under the category “Restaurants” and $232 under the

category “Entertainment”.5   The master credit card summary listed

only the date, the name of the restaurant or other payee, and the

amount of the item.   The master credit card summary did not list

the name of the business contact being entertained nor the

business purpose for the expense.   Petitioner created another

document 6 months before trial, which was approximately 3-1/2

years after the fact, on which he listed the name of the person

with whom he dined, his business relationship with the person,

the name of the restaurant, the business purpose, and the amount

for each meal (reconstructed entertainment list).   The total


     4
      This total amount of meals and entertainment expenses was
reduced by 50 percent. Sec. 274(n)(1)(A). Petitioner therefore
claimed $1,211 for meals and entertainment expenses for 2000.
     5
      There is a $22 difference between the sum of these two
amounts and the total meals and entertainment expenses petitioner
claimed. We assume this difference was a computational mistake.
                                - 5 -

amount shown on petitioner’s reconstructed entertainment list was

$763.    Petitioner failed to explain the discrepancy between the

$763 shown on the reconstructed entertainment list and the $2,422

he had claimed.    Nor could petitioner explain multiple

discrepancies between the master credit card summary and his

reconstructed entertainment list.

     Respondent disallowed the claimed expenses in a notice of

deficiency dated May 22, 2003, stating that petitioner had failed

to provide supporting information required to substantiate the

claimed expenses.    Petitioners timely filed a petition for a

redetermination with this Court.

                               OPINION

     This is a substantiation case in which we are asked to

decide whether petitioner may deduct automobile expenses and

certain entertainment expenses he incurred in 2000 as a sales

representative.    We explain the deductibility rules and then

apply these rules to the facts.    We begin with who has the burden

of proof.

Burden of Proof

     Generally, the determinations of the Commissioner in a

deficiency notice are presumed correct, and the taxpayer has the

burden of proving the Commissioner’s determinations to be in

error.    Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111, 115

(1933).    The burden of proof may shift to the Commissioner in
                               - 6 -

certain circumstances, however, if the taxpayer introduces

credible evidence and establishes that he or she substantiated

items, maintained required records, and fully cooperated with the

Commissioner’s reasonable requests.    Sec. 7491(a)(2)(A) and (B).6

The burden does not shift to respondent under section 7491,

however, because we find that petitioner failed to provide

credible evidence, failed to substantiate the claimed expenses,

and failed to maintain adequate records.    The burden therefore

remains with petitioner.

     Moreover, deductions are a matter of legislative grace, and

the taxpayer bears the burden of proving that he or she is

entitled to any deduction claimed.     Rule 142(a); INDOPCO, Inc. v.

Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v.

Helvering, 292 U.S. 435, 440 (1934).     A taxpayer is generally

permitted to deduct all ordinary and necessary expenses paid or

incurred in carrying on a trade or business.    See sec. 162(a).

In contrast, no deduction is allowed for personal, living, or

family expenses.   See sec. 262.

Substantiation Requirement

     A taxpayer must substantiate amounts claimed as deductions

by maintaining the records necessary to establish that he or she


     6
      Sec. 7491 is effective with respect to court proceedings
arising in connection with examinations by the Commissioner
commencing after July 22, 1998, the date of enactment of the
Internal Revenue Service Restructuring and Reform Act of 1998,
Pub. L. 105-206, sec. 3001(a), 112 Stat. 726.
                                 - 7 -

is entitled to the deductions.     Sec. 6001; Hradesky v.

Commissioner, 65 T.C. 87 (1975), affd. per curiam 540 F.2d 821

(5th Cir. 1976); sec. 1.6001-1(a), (e), Income Tax Regs.     If a

taxpayer establishes that he or she paid or incurred a deductible

business expense but does not establish the amount of the

deduction, this Court may approximate the amount of allowable

business deductions, bearing heavily against the taxpayer whose

inexactitude is of his or her own making.     Cohan v. Commissioner,

39 F.2d 540, 543-544 (2d Cir. 1930).     For the Cohan rule to

apply, however, a basis must exist on which this Court can make

an approximation.     Vanicek v. Commissioner, 85 T.C. 731, 742-743

(1985).     Without such a basis, any allowance would amount to

unguided largesse.     Williams v. United States, 245 F.2d 559, 560

(5th Cir. 1957).

Strict Substantiation

     With respect to certain business expenses specified in

section 274(d), more stringent substantiation requirements apply.

No deduction may be allowed for expenses incurred for travel

expenses, specifically including meals and entertainment, and

“listed property”,7 unless the taxpayer substantiates certain

elements.    Passenger automobiles are “listed property” under

section 280F(d)(4)(A)(i).




     7
      Listed property is defined in sec. 280F(d)(4).
                                - 8 -

     Under the strict substantiation requirements of section 274,

the taxpayer must substantiate the amount, time, and business

purpose of the expenditures and must provide adequate records or

sufficient evidence to corroborate his or her own statement.8

Adequate records are defined as a diary, a log, or a similar

record, and documentary evidence that, in combination, are

sufficient to establish each element of each expenditure or use.

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

46017 (Nov. 6, 1985).    To be adequate, a record must generally be

written and must be prepared at or near the time of the use or

expenditure.    Sec. 1.274-5T(c)(2)(ii)(A), Temporary Income Tax

Regs., supra.

     Moreover, the expenses subject to the strict substantiation

rules, such as entertainment expenses and passenger automobile

expenses, may not be estimated; i.e., section 274(d) overrides

the so-called Cohan doctrine.    Sanford v. Commissioner, 50 T.C.

823, 827 (1968), affd. per curiam 412 F.2d 201 (2d Cir. 1969);

sec. 1.274-5T(a), Temporary Income Tax Regs., 50 Fed. Reg. 46014

(Nov. 6, 1985); sec. 1.280F-6T(b)(2), Temporary Income Tax Regs.,

49 Fed. Reg. 42713 (Oct. 24, 1984).     For these expenses, only

strict substantiation will suffice.


     8
      The taxpayer must substantiate by adequate records or by
sufficient evidence corroborating the taxpayer’s own statement:
(1) The amount of the expense; (2) the time and place of the
expense; (3) the business purpose of the expense; and (4) the
business relationship to the taxpayer of the persons involved in
the expense. Secs. 274(a), (d)(4); 280(F)(d)(4)(A)(i) and (ii).
                                - 9 -

     Against this background, we now analyze whether petitioner

satisfied the strict substantiation requirements of section 274

to allow him to deduct automobile expenses and meals and

entertainment expenses.   Petitioner claims that he kept adequate

records and receipts to substantiate his automobile expenses and

his meals and entertainment expenses.      Respondent argues that

petitioner failed to satisfy the strict substantiation

requirements because, among other reasons, petitioner failed to

maintain written records of each business trip and petitioner

failed to record the information contemporaneously with the

expenditures.   We agree with respondent.

Automobile Expenses

     Petitioner claimed $l5,741 of automobile expenses or 48,434

miles as business-related miles.   To substantiate the claimed

automobile expenses, petitioner testified that he read the car’s

odometer each day and recorded the business mileage.      Petitioner

then entered this information onto the mileage spreadsheet that

was introduced into evidence.   The mileage spreadsheet listed the

trips petitioner took, the number of miles for each, and the

clients he visited on those dates.      Petitioner introduced no

written documentation to corroborate these entries.      Instead,

petitioner testified that he discarded all notes, records, or

other documentation in his quest to have a paperless office.
                                - 10 -

     We do not accept this mileage spreadsheet as reliable

evidence for several reasons.    First, we are skeptical of the

number of miles, almost 50,000 in 1 year, that petitioner asserts

were solely business related.    This car mileage, we note, is in

addition to miles petitioner flew on his private airplane.    We

also find numerous inconsistencies between the spreadsheet and

other evidence before the Court.    For example, petitioner

apparently drove to a location on the same day he claimed to have

flown there, and he claimed extensive mileage on days that he was

involved in flight training for his private airplane.    Moreover,

petitioner testified that he substantially reconstructed the

mileage spreadsheet during respondent’s examination, which

occurred over 2 years after the year in issue.    When petitioner

could not explain certain discrepancies respondent raised,

petitioner responded that he could not remember because the trips

had occurred so long ago.    Also, petitioner’s testimony

supporting these expenses is vague and unclear.    In petitioner’s

quest to have a paperless office, petitioner produced no

corroborating evidence other than his own self-serving testimony,

which we are not required to accept, and which we do not, in

fact, find to be credible.    See Niedringhaus v. Commissioner, 99

T.C. 202, 219 (1992).   Accordingly, we do not give any weight to

this mileage spreadsheet.
                               - 11 -

       In lieu of using the standard mileage rate, we can look to

the actual automobile expenses petitioner incurred in 2000.      We

have similar concerns about the reliability of evidence in the

record to prove petitioner’s “actual” automobile expenses.

First, the master credit card summary showed $2,603 for “Auto

Services.”    We note that petitioner testified that this account

was used for both business and personal expenses.    We further

note that petitioner submitted no evidence to show which of these

automobile fuel expenses were for business rather than personal

use.    The master credit card summary included a charge for car

fuel on February 26, 2000, when petitioner admitted that he and

his family were on vacation in San Francisco, California.    In

addition, the Court learned that the “Auto Services” amount on

the master credit card summary included airplane fuel that

petitioner claimed and was allowed as an airplane expense.

       In respondent’s opening brief, respondent conceded that

petitioner would be entitled to $1,884 of automobile expenses

rather than the $15,741 claimed.    Although we did not find at

trial that petitioner satisfied the strict substantiation

requirements regarding the automobile expenses, we shall not

disturb respondent’s concession.    Accordingly, petitioner is

entitled to an automobile expense deduction of $1,884 for 2000.
                              - 12 -

Meals and Entertainment Expenses

     We turn now to petitioner’s claim for meals and

entertainment expenses.   Petitioner claimed $2,422 of meals and

entertainment expenses on the basis of the master credit card

summary, which reflected $2,168 under the category “Restaurants”

and $232 under the category “Entertainment.”

     While the master credit card summary shows the name of the

restaurant (or payee), and the date and the amount spent, the

master credit card summary does not show the business purpose of

the activity or the name of the person entertained.    In

attempting to substantiate the business purpose and the name of

the person entertained, petitioner prepared the reconstructed

entertainment list 3-1/2 years after the fact. Petitioner was

unable to testify as to whom he entertained in some instances.

     We have the same concerns regarding the meals and

entertainment expenses that we had with the automobile expenses.

The account was used for both personal and business purposes.

There was no breakdown on the master credit card statement

between business and personal charges.   The credit card company

simply lumped all charges to restaurants under the “Restaurants”

category.   In addition, petitioner failed to explain which of the

expenses claimed were for business, not personal, purposes, and

petitioner failed to heed the Court’s advice to concede the

personal charges.   Several charges appeared for various ski
                               - 13 -

resorts and what appear to be uniquely personal charges.    In

addition, petitioner could not explain the discrepancy between

the $763 shown on the reconstructed entertainment list and the

$2,422 he had claimed.    Nor could petitioner explain multiple

discrepancies between the master credit card summary and his

reconstructed entertainment list.    Moreover, petitioner failed to

produce receipts or any other corroborating evidence to comply

with the strict substantiation requirements of section 274(d).

Accordingly, we sustain respondent’s disallowing the meals and

entertainment expenses.

     To reflect the foregoing and the concessions of the parties,


                                          Decision will be entered

                                     under Rule 155.
