                         T.C. Summary Opinion 2013-67



                        UNITED STATES TAX COURT



        REFUGIO BOGARIN AND TANYA BOGARIN, Petitioners v.
         COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 4904-12S.                      Filed August 15, 2013.



      Refugio Bogarin and Tanya Bogarin, pro sese.

      Michael S. Hensley, 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
                                        -2-

filed.1 Pursuant to section 7463(b), 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.

        Respondent determined deficiencies of $2,708 and $2,355 in petitioners’

Federal income tax for 2009 and 2010, respectively (years in issue). 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, petitioners resided

in California.




        1
        Unless otherwise indicated, section references are to the Internal Revenue
Code (Code), as amended and in effect for the years in issue, and Rule references
are to the Tax Court Rules of Practice and Procedure. All monetary amounts are
rounded to the nearest dollar.
                                        -3-

      After concessions,2 the issues remaining for decision are whether petitioners

are entitled to deductions for unreimbursed employee business expenses in excess

of the amounts respondent allowed.

                                     Background

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

facts and the accompanying exhibits are incorporated herein by this reference.

      During 2009 and 2010 Mr. Bogarin was employed as a journeyman meat

cutter at Safeway grocery stores operated by Vons Companies, Inc., and

Mrs. Bogarin was employed as an instructional support specialist by the Desert

Community College District.




      2
       Respondent concedes that petitioners are entitled to the deductions for
charitable contributions reported on Schedules A, Itemized Deductions, for the
years in issue and they may include $1,096 and $1,110 for union dues in
computing deductions for unreimbursed employee business expenses for 2009 and
2010, respectively. Petitioners concede that they are not entitled to include the
following items in computing deductions for unreimbursed employee business
expenses:

                      Meals and
            Year     entertainment     Uniforms/shoes    Cell phone

            2009        $3,083                $379           $840
            2010         2,375                 389          1,764
                                         -4-

I. Mr. Bogarin’s Employment

      A. Work Schedule and Locations

      During 2009 and 2010 Safeway assigned Mr. Bogarin to work at several

Safeway stores in Southern California. Mr. Bogarin’s store assignments generally

depended on Safeway’s staffing needs at any given time. The table below lists the

Safeway store locations where Mr. Bogarin was assigned to work and the

distances from petitioners’ residence:

                         Location              Miles

                   La Quinta                     8
                   Rancho Mirage
                     (36101 Bob Hope Dr.)       15
                   Palm Desert                  19
                   Rancho Mirage
                     (42424 Bob Hope Dr.)       20
                   Palm Springs
                     (E. Palm Canyon)           20
                   Palm Springs
                     (Tahquitz Canyon)          23
                   Desert Hot Springs           25
                   Yucca Valley                 57
                   Brawley                      73
                   El Centro                    87
                   Fontana                      89

      Mr. Bogarin used his personal vehicle for work-related transportation. He

normally worked an eight-hour shift in a single store, and he returned home at the

end of each shift. Mr. Bogarin considered the Safeway store in Rancho Mirage,
                                          -5-

California, 15 miles from his residence, to be his “home store”--the Safeway store

where he was first hired. Mr. Bogarin worked at his “home store” nine days

during 2009.

      B. Safeway’s Employee Reimbursement Policy

      Safeway reimbursed its employees for certain business-related

transportation expenses. Safeway did not reimburse its meat cutters for tools such

as knives and gloves. Safeway’s reimbursement policy for transportation expenses

stated in relevant part:

      V. TRAVEL PAY.

      *           *        *          *         *          *          *

             2. When an employee is assigned to work in more than one (1)
      market in one (1) day, all work and travel time shall be paid for,
      except in instances where an employee is hired to work in more than
      one (1) market. * * * if the employee uses his own car, he shall be
      paid for such use at the prevailing Internal Revenue Service mileage
      rate for the total mileage from the market of origin to the market of
      reassignment and return.

            3. Any employee, who is temporarily assigned for a full day or
      more but less than two (2) weeks to a market over forty (40) miles
      from said employee’s home, shall receive travel pay at the prevailing
      Internal Revenue Service mileage rate once each way to the
      assignment and return, and said employee shall be reimbursed for his
      room and meals on each day so assigned.
                                        -6-

Employees seeking reimbursement under this policy were required to submit

biweekly expense reimbursement forms to the appropriate Safeway store manager,

detailing the expenses incurred during that period.

      Mr. Bogarin testified that he routinely submitted expense reimbursement

requests to Safeway during the years in issue. Safeway reimbursed Mr. Bogarin

for transportation expenses of $51 on September 2, 2009, and $69, $368, $598,

$137, and $109 on March 9, March 15, March 22, April 12, and May 3, 2010,

respectively. The record does not specify the dates the reimbursements covered,

the number of miles that Mr. Bogarin drove, or the locations of the stores to which

he was assigned.

      Mr. Bogarin testified that he was assigned to the Safeway store in Yucca

Valley 21 days during 2009 and 3 days during 2010; and although he submitted

expense reimbursement requests to the Yucca Valley store manager, Safeway did

not provide any transportation reimbursements for these trips. Mr. Bogarin further

testified that the Yucca Valley store manager harassed him to the point that he

eventually stopped submitting expense reimbursement requests to him and filed an

employee grievance. Mr. Bogarin testified that, as a result of his grievance, he is

no longer assigned to the Yucca Valley store. He also testified that, after his

grievance was resolved, he submitted expense reimbursement requests for his trips
                                         -7-

to Yucca Valley, but the requests were denied as untimely. The record does not

include any documents related to Mr. Bogarin’s employee grievance or its

disposition.

      C. Vehicle Expenses

      Mr. Bogarin did not maintain a mileage log during 2009, and he recreated

one before trial. He did maintain a mileage log in 2010. Mr. Bogarin believed he

was entitled to a deduction for vehicle expenses to the extent that any daily round

trip from his residence to an assigned Safeway store exceeded 30 miles--the

distance to and from his “home store”.

      The mileage log that Mr. Bogarin recreated for 2009 includes the names of

the Safeway stores to which he was assigned, the number of days he was assigned

to each store, the number of miles driven (round trip) from his home, and the

number of miles he thought he could report in computing unreimbursed employee

business expenses. The log indicates that Mr. Bogarin drove 11,035 miles in

connection with his work for Safeway during 2009.

      Mr. Bogarin’s mileage log for 2010 is more detailed and includes, in

addition to the information in the 2009 mileage log, dates of travel, addresses of

assigned Safeway stores, and some odometer readings. The log indicates that Mr.

Bogarin drove 8,706 miles in connection with his work for Safeway during 2010.
                                        -8-

      D. Mr. Bogarin’s Tools

      Mr. Bogarin testified that during 2010 he paid $355 in cash to a coworker

for a lightly used knife set which included four knives, a diamond steel sharpening

tool, a scabbard, and mesh gloves. He further testified that he purchased a knife

from a commercial online retailer and that he charged the $65 purchase price to his

credit card.

      Although petitioners did not provide invoices, receipts, or bank records to

substantiate the tool purchases, they provided a photograph of a seven-piece knife

set (including scabbard and mesh gloves) and an additional knife. The photograph

was taken shortly before trial. The knives and other tools in the photograph

appear to be well used, and Mr. Bogarin testified that he continues to use the

knives daily in his work for Safeway.

II. Petitioners’ Tax Returns for 2009 and 2010

      Petitioners timely filed joint Federal income tax returns for 2009 and 2010.

They attached Schedules A to both returns and claimed deductions of $21,041 and

$17,490 for unreimbursed employee business expenses for 2009 and 2010,

respectively, comprising vehicle expenses, meals and entertainment expenses,

uniforms and shoes, union dues, cell phone expenses, and tools.
                                       -9-

      On Form 2106-EZ, Unreimbursed Employee Business Expenses, petitioners

reported that Mr. Bogarin drove 28,125 miles for business purposes during 2009,

and 22,410 such miles during 2010. Using the optional standard mileage rates,

petitioners reported total vehicle expenses of $15,469 and $11,205 for 2009 and

2010, respectively.3

III. Notice of Deficiency

      Respondent issued a notice of deficiency to petitioners disallowing small

portions of the deductions for charitable contributions reported on Schedules A

and all but $3,096 and $2,222 of the deductions for unreimbursed employee

business expenses petitioners reported for 2009 and 2010, respectively.4




      3
       The Commissioner generally updates the optional standard mileage rates
annually. See sec. 1.274-5(j)(2), Income Tax Regs. The standard mileage rate
was 55 cents per mile for 2009 and 50 cents per mile for 2010. Rev. Proc. 2008-
72, sec. 2.01, 2008-2 C.B. (Vol. 2) 1286; Rev. Proc. 2009-54, sec. 2.01, 2009-51
I.R.B. 930.
      4
        Although the record is not entirely clear on the point, by process of
elimination we are able to deduce that the portion of the deductions for
unreimbursed employee business expenses that respondent allowed for each year
in issue consists of vehicle expenses.
                                       - 10 -

                                    Discussion

      The Commissioner’s determination of a taxpayer’s liability in a notice of

deficiency normally is presumed correct, and the taxpayer bears the burden of

proving that the determination is incorrect. Rule 142(a); Welch v. Helvering, 290

U.S. 111, 115 (1933). As discussed in detail below, petitioners did not comply

with the Code’s substantiation requirements and have not maintained all required

records. Therefore, the burden of proof as to any relevant factual issue does not

shift to respondent under section 7491(a). See sec. 7491(a)(1) and (2); Higbee v.

Commissioner, 116 T.C. 438, 442-443 (2001).

      Deductions are a matter of legislative grace, and the taxpayer generally

bears the burden of proving entitlement 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 must substantiate deductions

claimed by keeping and producing adequate records that enable the Commissioner

to determine the taxpayer’s correct tax liability. Sec. 6001; Hradesky v.

Commissioner, 65 T.C. 87, 89-90 (1975), aff’d per curiam, 540 F.2d 821 (5th Cir.

1976); Meneguzzo v. Commissioner, 43 T.C. 824, 831-832 (1965). A taxpayer

claiming a deduction on a Federal income tax return must demonstrate that the

deduction is allowable pursuant to a statutory provision and must further
                                       - 11 -

substantiate that the expense to which the deduction relates has been paid or

incurred. Sec. 6001; Hradesky v. Commissioner, 65 T.C. at 89-90.

      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 normally is not available, 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, 320 U.S. 467, 475 (1943).

      The term “trade or business” includes performing services as an employee.

Primuth v. Commissioner, 54 T.C. 374, 377-378 (1970). However, an employee

business expense is not ordinary and necessary if the employee is entitled to

reimbursement from his or her employer. See Podems v. Commissioner, 24 T.C.

21, 22-23 (1955); Noz v. Commissioner, T.C. Memo. 2012-272.

      Section 274(d) prescribes more stringent substantiation requirements to be

met before a taxpayer may deduct certain categories of expenses, including

expenses related to the use of listed property as defined in section 280F(d)(4). See

Sanford v. Commissioner, 50 T.C. 823, 827 (1968), aff’d per curiam, 412 F.2d 201

(2d Cir. 1969). As relevant here, the term “listed property” includes passenger

automobiles. Sec. 280F(d)(4)(A)(i). To satisfy the requirements of section
                                        - 12 -

274(d), a taxpayer generally must maintain adequate records or produce sufficient

evidence corroborating his own statement, establishing the amount, date, and

business purpose for an expenditure or business use of listed property. Sec. 1.274-

5T(b)(6), (c)(1), Temporary Income Tax Regs., 50 Fed. Reg. 46016-46017

(Nov. 6, 1985). Section 1.274-5T(c)(2), Temporary Income Tax Regs., supra,

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. Commissioner, 39 F.2d 540, 543-544 (2d

Cir. 1930), to estimate expenses covered by section 274(d). Sanford v.

Commissioner, 50 T.C. at 827; sec. 1.274-5T(a), Temporary Income Tax Regs., 50

Fed. Reg. 46014 (Nov. 6, 1985).

I. Vehicle Expenses

      Petitioners claimed deductions for vehicle expenses (using the optional

standard mileage rates) for Mr. Bogarin’s daily round trips to work at various

Safeway stores. Respondent disallowed most of the claimed deductions on the
                                       - 13 -

ground they constitute nondeductible personal expenses. See sec. 262(a). We

agree with respondent.

      As a general rule, a taxpayer’s costs of commuting between his residence

and his place of business or employment are nondeductible personal expenses.

See Fausner v. Commissioner, 413 U.S. 838, 839 (1973); Commissioner v.

Flowers, 326 U.S. 465, 473-474 (1946); sec. 1.262-1(b)(5), Income Tax Regs.

The record reflects that Mr. Bogarin regularly drove from his home to an assigned

Safeway store, worked an eight-hour shift, and then drove home at the end of the

day. The fact that Mr. Bogarin was often assigned to different Safeway stores

daily or weekly does not alter the conclusion that his transportation expenses were

nondeductible commuting expenses. See, e.g., Heuer v. Commissioner, 32 T.C.

947 (1959), aff’d, 283 F.2d 865 (5th Cir. 1960).

      Mr. Bogarin’s belief that he is entitled to deductions for vehicle expenses

for round trips in excess of 30 miles--the round trip distance to his “home store”--

suggests that petitioners may be relying on the so-called regular work location

exception to the general rule of nondeductibility. See Bogue v. Commissioner,

T.C. Memo. 2011-164 (discussing the home office, temporary distant work site,

and regular work location exceptions to the general rule of nondeductibility),

aff’d, ___ Fed. Appx. ___, 2013 WL 2382310 (3d Cir. June 3, 2013).
                                         - 14 -

Transportation expenses between a taxpayer’s residence and temporary work

locations may be deductible if the taxpayer also has one or more regular work

locations away from the taxpayer’s residence. See id.; Rev. Rul. 99-7, 1999-1

C.B. 361.

      The record does not establish that Mr. Bogarin had any regular work

location during the years in issue. To the contrary, Mr. Bogarin was assigned to

no fewer than 11 Safeway store locations daily or weekly, depending on

Safeway’s staffing needs at any particular time. Considering all the facts and

circumstances, we conclude that Mr. Bogarin’s vehicle expenses are

nondeductible personal expenses.

      Assuming for the sake of argument that some portions of Mr. Bogarin’s

vehicle expenses might otherwise qualify for deduction under section 162(a),

petitioners failed to satisfy the strict substantiation requirements for deductibility

of vehicle expenses prescribed in section 274(d). As previously noted, section

274(d) would be applicable even though petitioners used the optional standard

mileage rates in computing the deductions they claimed for vehicle expenses. See

sec. 1.274-5(j)(2), Income Tax Regs.
                                         - 15 -

      Mr. Bogarin did not maintain a contemporaneous mileage log during 2009,5

and the log that he re-created before trial is insufficient to satisfy the heightened

substantiation requirements of section 274(d). In short, it lacks individual dates of

travel and petitioners failed to offer additional documentation to corroborate that

Mr. Bogarin made each of the trips listed in the log. Sec. 1.274-5T(b)(6), (c)(1),

Temporary Income Tax Regs., supra.

      Although Mr. Bogarin maintained a mileage log during 2010, the 8,706

total miles reported in the log are substantially fewer than the 22,410 miles

petitioners reported on Form 2106-EZ for 2010. Petitioners did not explain this

discrepancy. In any event, we are unable to reconcile large portions of the miles

listed in the 2010 log with the multiple reimbursements that Mr. Bogarin received

from Safeway during the spring of 2010. We note that Safeway reimbursed Mr.

Bogarin a total of $1,281 between March 9 and May 3, 2010, equal to 2,562 miles

at the standard rate of 50 cents per mile. In addition, respondent allowed

petitioners a deduction of $2,222 for vehicle expenses, accounting for another

4,444 miles. In sum, the record reflects that petitioners were reimbursed or


      5
       Although petitioners reported on Form 2106-EZ for 2009 that Mr. Bogarin
drove 28,125 miles for business purposes that year, the 2009 log reports a
substantially lower total of only 11,035 miles. Petitioners did not offer any
explanation for this discrepancy.
                                       - 16 -

allowed a deduction for most of the vehicle expenses listed in the 2010 log. All

things considered, we do not view the 2010 mileage log as reliable evidence of

Mr. Bogarin’s travel expenses for that year.

      In accordance with the preceding discussion, we conclude that petitioners

failed to show that they are entitled to deductions for vehicle expenses in excess of

the amounts respondent allowed. Consequently, respondent’s determinations on

this issue are sustained.

II. Mr. Bogarin’s Tools

      Petitioners claimed a deduction of $420 for tools that Mr. Bogarin

purchased during 2010.6 Although petitioners failed to provide invoices, receipts,

or bank records to substantiate these expenditures, we found Mr. Bogarin’s

testimony that he purchased a knife set from a coworker for $355 and an

additional knife from an online retailer for $65 to be honest and credible. We

conclude that Mr. Bogarin’s testimony and the photograph of the knives and other




      6
       Safeway did not reimburse its meat cutters for tools such as knives and
gloves. Respondent does not dispute that expenditures for tools of this sort
constitute ordinary and necessary employee business expenses.
                                        - 17 -

tools are sufficient to substantiate the deduction of $420 that petitioners claimed

as an unreimbursed employee business expense for 2010.

      To reflect the foregoing,


                                                 Decision will be entered

                                       under Rule 155.
