                     T.C. Summary Opinion 2009-72



                        UNITED STATES TAX COURT



            JONELL S. AND SEDELIA R. DURAND, Petitioners v.
              COMMISSIONER OF INTERNAL REVENUE, Respondent



        Docket No. 21076-07S.               Filed May 11, 2009.



        Jonell S. and Sedelia R. Durand, pro sese.

        Derek P. Richman, for respondent.



     DEAN, 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 filed.     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.     Unless otherwise indicated, subsequent section references

are to the Internal Revenue Code in effect for the year in issue,
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and all Rule references are to the Tax Court Rules of Practice

and Procedure.1

     For 2004 respondent determined a $6,106 deficiency in

petitioners’ Federal income tax.   Respondent disallowed

petitioners’ claimed miscellaneous itemized deductions of $29,701

(before application of the 2-percent floor of section 67(a)) and

deduction for charitable contribution(s) of $500.   Respondent

allowed petitioners the standard deduction instead.   The issue

remaining for decision2 is whether petitioners are entitled to

itemized deductions in an amount in excess of the standard

deduction.

                           Background

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



     1
      Sedelia R. Durand (Mrs. Durand) did not appear at trial or
sign the stipulation of facts. The Court will dismiss Mrs.
Durand for failure properly to prosecute and will enter a
decision against Mrs. Durand consistent with the decision entered
against Jonell Durand (Mr. Durand).
     2
      Mr. Durand concedes that petitioners are not entitled to
the claimed $1,200 deduction for “job supplies” or the claimed
$22,535 deduction for “education”.

     Respondent concedes that petitioners are entitled to a:
(1) $2,000 lifetime learning credit for 2004; and (2) $200
deduction for tax preparation for 2004, subject to sec. 67.

     Finally, Mr. Durand presented neither evidence nor argument
that petitioners are entitled to their claimed deduction for
charitable contribution(s) of $500. Petitioners are therefore
deemed to have conceded the issue. See Nielsen v. Commissioner,
61 T.C. 311, 312 (1973); Mikalonis v. Commissioner, T.C. Memo.
2000-281.
                                 - 3 -

The stipulation of facts and the exhibits received into evidence

are incorporated herein by reference.     When the petition was

filed, Mrs. Durand resided in New York, and Mr. Durand resided in

Florida.

      During 2004 Mr. Durand worked as a salesperson for BenQ

Latin America Corp.    He “was required to visit accounts within

the immediate territory of Miami and Fort Lauderdale.”     Mr.

Durand was also required by his employer to have a cell phone and

Internet service at his home.    He was not reimbursed by his

employer for his expenditures.    Instead, petitioners claimed

$29,501 in unreimbursed employee expenses on their Schedule A,

Itemized Deductions (before application of the 2-percent floor of

section 67(a)).   Petitioners’ unreimbursed employee expenses

consist of:   (1) $3,900 for vehicle expenses (based on the

standard mileage rate of 37.5 cents for 10,400 miles); (2) $390

for parking fees and tolls; (3) $1,476 for unspecified business

expenses; (4) $1,200 for job supplies; and (5) $22,535 for

education.

                             Discussion

I.   Burden of Proof

      The Commissioner’s determinations in a notice of deficiency

are presumed correct, and the taxpayer bears the burden to prove

that the determinations are in error.     See Rule 142(a); Welch v.

Helvering, 290 U.S. 111, 115 (1933).      But the burden of proof on
                                - 4 -

factual issues that affect the taxpayer’s tax liability may be

shifted to the Commissioner where the taxpayer introduces

credible evidence with respect to the issue and the taxpayer has

satisfied certain conditions.   See sec. 7491(a)(1).   Petitioners

have not alleged that section 7491(a) applies, and they have

neither complied with the substantiation requirements nor

maintained all required records.   See sec. 7491(a)(2)(A) and (B).

Accordingly, the burden of proof remains on petitioners.

II.   Unreimbursed Employee Expenses

      Section 162(a) authorizes a deduction for all the ordinary

and necessary expenses paid or incurred during the taxable year

in carrying on any trade or business.   But as a general rule,

deductions are allowed only to the extent that they are

substantiated.   Secs. 274(d) (no deductions are allowed for

gifts, listed property,3 or traveling, entertainment, amusement,

or recreation unless substantiated), 6001 (taxpayers must keep

records sufficient to establish the amount of the items required

to be shown on their Federal income tax returns).   If the

taxpayer establishes that he has incurred a deductible expense

yet is unable to substantiate the exact amount, the Court may

estimate the deductible amount in some circumstances (the Cohan

rule).    Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir.



      3
      The term “listed property” is defined to include passenger
automobiles and cell phones. Sec. 280F(d)(4)(A)(i), (v).
                                 - 5 -

1930).    But the Court cannot estimate a taxpayer’s expenses with

respect to the items enumerated in section 274(d).     Sanford v.

Commissioner, 50 T.C. 823, 827 (1968), affd. per curiam 412 F.2d

201 (2d Cir. 1969); Rodriguez v. Commissioner, T.C. Memo. 2009-22

(the strict substantiation requirements of section 274(d)

preclude the Court and taxpayers from approximating their

expenses).

       Section 274(d) and the regulations thereunder require

taxpayers to substantiate their deductions by adequate records or

sufficient evidence to corroborate the taxpayer’s own testimony:

(1) The amount of the expenditure or use; (2) the time of the

expenditure or use; (3) the place of the expenditure or use; (3)

the business purpose of the expenditure or use; and (4) the

business relationship to the taxpayer of the persons entertained

or receiving the gift.    See sec. 1.274-5T(a) and (b), Temporary

Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6, 1985).

       As to the “Rules of substantiation”, the temporary

regulation provides that taxpayers must maintain and produce such

substantiation as will constitute proof of each expenditure or

use.    Sec. 1.274-5T(c)(1), Temporary Income Tax Regs., 50 Fed.

Reg. 46016 (Nov. 6, 1985).    Written evidence has considerably

more probative value than oral evidence, and the probative value

of written evidence is greater the closer in time it is to the

expenditure or use.    Id.   Although a contemporaneous log is not
                                 - 6 -

required, a record made at or near the time of the expenditure or

use that is supported by sufficient documentary evidence has a

higher degree of credibility than a subsequently prepared

statement.    Id.   The corroborative evidence required to support a

statement not made at or near the time of the expenditure or use

must have a high degree of probative value to elevate the

statement and evidence to the level of credibility reflected by a

record made at or near the time of the expenditure or use

supported by sufficient documentary evidence.     Id.

     To satisfy the “adequate records” requirement of section

274(d), the taxpayer shall maintain an account book, diary, log,

statement of expense, trip sheets, or similar record and

documentary evidence that in combination are sufficient to

establish each element of expenditure or use.     Sec. 1.274-

5T(c)(2)(i), Temporary Income Tax Regs., 50 Fed. Reg. 46017 (Nov.

6, 1985).    The adequate record must be prepared or maintained in

such manner that each recording of an element or use is made at

or near the time of the expenditure or use.    Sec. 1.274-

5T(c)(2)(ii), Temporary Income Tax Regs., 50 Fed. Reg. 46017

(Nov. 6, 1985).     “‘[M]ade at or near the time of the expenditure

or use’ means [that] the elements of an expenditure or use are

recorded at a time when, in relation to the use or making of an

expenditure, the taxpayer has full present knowledge of each
                                 - 7 -

element of the expenditure or use”.      Sec. 1.274-5T(c)(2)(ii)(A),

Temporary Income Tax Regs., supra.

     The level of detail required in an adequate record to

substantiate the taxpayer’s business use may vary depending on

the facts and circumstances.     Sec. 1.274-5T(c)(2)(ii)(C),

Temporary Income Tax Regs., 50 Fed. Reg. 46018 (Nov. 6, 1985).

For example, a taxpayer’s use of a vehicle for both business and

personal purposes and whose only business use of the vehicle is

to make deliveries to customers on an established route may

satisfy the adequate record requirement by:      (1) Recording the

total number of miles driven during the taxable year, the length

of the delivery route once, and the date of each trip at or near

the time of the trips; or (2) establishing the date of each trip

with a receipt, record of delivery, or other documentary

evidence.    Id.

     A.   Vehicle Expenses

            1.   Deduction Based on the Standard Mileage Rate

     To substantiate petitioners’ deduction for vehicle expenses,

Mr. Durand submitted a letter from his employer, which states

that Mr. Durand was not entitled to reimbursement for his “visits

and travel” to his accounts, a customer list, and a “summary”

that includes:     (1) Customers’ names and addresses; (2) the

number of miles traveled one way and round trip and the total

miles traveled per month from his employer’s office to each
                                  - 8 -

account; (3) the cost per toll and the total cost per month; and

(4) the cost of parking per visit and the total cost per month.

In addition, Mr. Durand testified that he created his summary by:

“[Googling] the miles from my office to each” customer’s address

from the customer list his employer provided and providing a

“conservative average” of the number of visits to each customer

during an average month.     He also testified that his summary was

not created in 2004; rather, he made the summary “recently”.

        Mr. Durand’s testimony established that he did not

accurately record his business mileage at or near the time of his

business use and that the numbers of “visits” were mere estimates

or “averages”.     See sec. 1.274-5T(b)(6)(i)(B), (c)(2), Temporary

Income Tax Regs., 50 Fed. Reg. 46016, 46017 (Nov. 6, 1985).       The

Court therefore finds that petitioners are not entitled to their

deduction for mileage.     See Sanford v. Commissioner, supra at

827; Rodriguez v. Commissioner, supra; see also sec. 1.274-

5T(c)(1), Temporary Income Tax Regs., supra (the substantiation

requirements are designed to encourage taxpayers to maintain

records and documentary evidence).        Respondent’s determination is

sustained.

             2.   Deduction for Parking Fees, Tolls, and
                  Transportation Expenses

     Petitioners claimed a $390 deduction for parking fees and

tolls.     These expenses may generally be deducted as a separate

item.     See Rev. Proc. 2003-76, sec. 5.04, 2003-2 C.B. 924, 926.
                                - 9 -

     With respect to Mr. Durand’s summary of his expenses for

tolls and parking, Mr. Durand testified that he “took the

customers that [he] would have to pay the tolls coming from the

office to downtown * * * [by] the toll road”.    He also testified

that he did not have any receipts for his parking expense;

rather, he “put an average” between $4 to $8.    Finally, he

explained that his “estimates were very conservative with regard

to the parking, with the tolls and the miles.”

     Other than Mr. Durand’s summary and testimony, petitioners

have provided no other evidence, e.g., a receipt, to substantiate

their deduction for parking fees and tolls.    The Court therefore

finds that petitioners are not entitled to their deduction for

parking fees and tolls.   See Kodak v. Commissioner, T.C. Memo.

1991-485, affd. without published opinion 14 F.3d 47 (3d Cir.

1993); Jones v. Commissioner, T.C. Memo. 1987-554; see also Urban

Redev. Corp. v. Commissioner, 294 F.2d 328, 332 (4th Cir. 1961)

(the Court may reject a taxpayer’s uncorroborated, self-serving

testimony), affg. 34 T.C. 845 (1960); Tokarski v. Commissioner,

87 T.C. 74, 77 (1986) (same).   Absent credible documentation of

petitioners’ expenditures, the record provides no basis for

making a determination under the Cohan rule.     Respondent’s

determination is sustained.
                                - 10 -

     B.   Unspecified Business Expenses

     Petitioners’ deduction for unspecified business expenses

consists of charges for Internet service and Mr. Durand’s cell

phone use.   To substantiate petitioners’ deduction for

unspecified business expenses Mr. Durand provided the letter from

his employer, which states that cell phone charges and home

Internet service were not reimbursed by BenQ, and a Cingular

Wireless statement for the period “12/24/04 - 01/23/05”.    Mr.

Durand also testified that he had no other records of these

expenses for 2004 because “some of them were thrown away.”4

     Expenses for cell phone use must be substantiated in

accordance with section 274 and the regulations thereunder.    Sec.

274(d); see supra pp. 4-5 and note 3.

     Petitioners have provided no evidence that substantiates

their cell phone expense in accordance with section 274(d) and

the regulations thereunder.   Thus, petitioners are not entitled

to their claimed deduction, and the Court cannot apply the Cohan

rule to estimate a deductible expense.    See Sanford v.

Commissioner, 50 T.C. at 827.


     4
      Petitioners did not attempt to reconstruct the records of
their unspecified business expenses. See Boyd v. Commissioner,
122 T.C. 305, 319-322 (2004); Sanderlin v. Commissioner, T.C.
Memo. 2008-209; sec. 1.274-5T(c)(5), Temporary Income Tax Regs.,
50 Fed. Reg. 46022 (Nov. 6, 1985), (if a taxpayer can establish
that the taxpayer’s failure to produce an adequate record is due
to the loss of the record through circumstances beyond the
taxpayer’s control, the taxpayer may substantiate a deduction by
reasonable reconstruction of the expenditures).
                                  - 11 -

       The Court has characterized Internet expenses as utility

expenses.       Verma v. Commissioner, T.C. Memo. 2001-132.   Strict

substantiation therefore does not apply, and the Court may apply

the Cohan rule to estimate petitioners’ deductible expense,

provided that the Court has a reasonable basis for making an

estimate.       See Vanicek v. Commissioner, 85 T.C. 731, 742-743

(1985) (an estimate must have a reasonable evidentiary basis);

Pistoresi v. Commissioner, T.C. Memo. 1999-39.

       Petitioners have provided no receipts or other documentation

to substantiate their Internet expense.      Therefore, petitioners

are not entitled to the deduction, and the Court cannot estimate

a deductible expense because they have not provided the Court

with any basis for making an estimate.

       In sum, respondent’s determination denying petitioners’

$1,476 deduction for unspecified business expenses is sustained.

III.       Itemized Deductions

       Respondent conceded that petitioners are entitled to a $200

miscellaneous itemized deduction for tax preparation fees.       The

$200 amount, however, does not exceed the 2-percent floor of

section 67(a); thus, petitioners are not entitled to the claimed

deduction.5


       5
      Taking into account respondent’s concession of a $2,000
lifetime learning credit, petitioners’ adjusted gross income for
2004 is $61,977. To exceed the 2-percent floor of sec. 67(a),
petitioners’ miscellaneous itemized deductions must exceed
                                                   (continued...)
                                - 12 -

     Respondent made no adjustments in the notice of deficiency

to petitioners’ itemized deductions for real property taxes of

$2,160 and mortgage interest of $6,718.    But taking into account

petitioners’ concessions and the Court’s determinations, their

remaining itemized deductions total $8,878, which is less than

the $9,700 standard deduction.    See Rev. Proc. 2003-85, sec.

3.10, 2003-2 C.B. 1184, 1188.    The Court assumes that petitioners

would want the larger amount and therefore sustains respondent’s

use of the standard deduction.    See sec. 63; George v.

Commissioner, T.C. Memo. 2006-121 (taxpayers may either elect the

standard deduction or elect to itemize deductions).

     To reflect the foregoing,


                                          An appropriate order will

                                     be issued, and decision will

                                     be entered under Rule 155.




     5
      (...continued)
$1,239.54.
