                  T.C. Summary Opinion 2005-144



                     UNITED STATES TAX COURT



                KATUMBA P. KASHAMA, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 1811-04S.            Filed October 4, 2005.


     Katumba P. Kashama, pro se.

     Angela J. Kennedy, for respondent.




     COUVILLION, Special Trial Judge:     This case was heard

pursuant to section 7463 in effect when the petition was filed.1

The decision to be entered is not reviewable by any other court,

and this opinion should not be cited as authority.




     1
      Unless otherwise indicated, subsequent section references
are to the Internal Revenue Code in effect for the year at issue.
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     Respondent determined a deficiency of $2,320 in petitioner’s

Federal income tax for the year 2001.    The sole issue for

decision is whether petitioner is entitled to certain deductions

claimed on Schedule C, Profit or Loss From Business, for the year

in question in excess of amounts allowed by respondent.

     Some of the facts were stipulated.    Those facts, with the

annexed exhibits, are so found and are made part hereof.

Petitioner’s legal residence at the time the petition was filed

was Indianapolis, Indiana.

     Petitioner is an independent contractor and works on a

commission basis as a courier.    His sole client is a delivery

service called Pillow Express.    Although petitioner was available

to make out-of-State deliveries, his primary work for Pillow

Express was local and in-State deliveries.    Petitioner drove one

of the two cars he owned for the majority of the deliveries;

however, petitioner never made out-of-State deliveries using his

own car.   If he had to deliver anything outside of Indiana,

petitioner would either rent a car or drive a van owned by Pillow

Express.   In addition, when petitioner delivered large items

locally, he would use one of the vans owned by Pillow Express.

Pillow Express did not charge petitioner when he had to use a

company van, but it also did not reimburse petitioner for the

cost of using his own vehicle to make some of the deliveries.
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     On his 2001 Federal income tax return, petitioner reported a

net business loss of $40,668.   On Schedule C of his 2001 Federal

income tax return, petitioner reported gross receipts of $20,398

and deducted the following expenses:


          Expense                          Amount

          Car and truck                   $56,100
          Repairs and maintenance           2,000
          Supplies                            520
          Cell phone                        1,200
          Uniforms                            546
          Furniture                           150
          Computer                            550
            Total                         $61,066


In the notice of deficiency, respondent disallowed all but $8,145

of the claimed deductions.2   Petitioner bears the burden of proof

in showing whether he is entitled to deductions in excess of what

respondent allowed.3

     In general, deductions are a matter of legislative grace.

INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992).   Taxpayers


     2
      Petitioner was allowed car and truck expenses of $5,973,
cellular phone expenses of $708, and “other amounts” deducted
from petitioner’s paycheck by Pillow Express of $1,464.
     3
      Because of the year involved, the examination of
petitioner’s return at issue commenced after July 22, 1998.
Therefore, sec. 7491, which under certain circumstances shifts
the burden of proof to the Commissioner, applies. However, for
the burden to be placed on the Commissioner, the taxpayer must
comply with the substantiation and record-keeping requirements of
the Internal Revenue Code. Sec. 7491(a)(2)(A) and (B). On this
record, petitioner has not wholly satisfied that requirement;
therefore, the burden has not shifted to respondent under sec.
7491. Higbee v. Commissioner, 116 T.C. 438 (2001).
                               - 4 -

are required to maintain records sufficient to enable the

Commissioner to determine their correct tax liability.    Sec.

6001; Higbee v. Commissioner, 116 T.C. 438 (2001); sec. 1.6001-

1(a), Income Tax Regs.   Such records must substantiate both the

amount and purpose of the claimed deductions.   Higbee v.

Commissioner, supra.

     Section 162 allows a deduction for ordinary and necessary

expenses that are paid or incurred during the taxable year in

carrying on a trade or business.   Sec. 162(a); Deputy v. duPont,

308 U.S. 488, 495 (1940).   In the case of travel expenses and

certain other expenses, such as entertainment, gifts, and

expenses relating to the use of listed properties, including

other property used as a means of transportation, computers, and

cellular phones under section 280F(d)(4)(A), section 274(d)

imposes stringent substantiation requirements to document

particularly the nature and amount of such expenses.4    For such

expenses, substantiation of the amounts claimed by adequate


     4
      Although sec. 280F(d)(4)(C) contains an exception to the
definition of “property used as a means of transportation”,
petitioner does not qualify for the exception. Pursuant to the
statute, expenses for any property, of which substantially all
the use is in the business of providing transportation of
property for compensation or hire, need not meet the strict
substantiation standard under sec. 274(d). Petitioner, however,
offered no records establishing how often the property, his two
cars, was used for a business purpose and how often it was
dedicated to personal use. Petitioner admittedly sometimes
rented a car or used a company van to make deliveries. He was
unable to prove how often he used his vehicle or whether the
“substantial” use of these vehicles was for his business.
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records or by other sufficient evidence corroborating the claimed

expenses is required.    Sec. 274(d); sec. 1.274-5T(a)(1),

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

To meet the adequate records requirements of section 274(d), a

taxpayer “shall maintain an account book, diary, log, statement

of expense, trip sheets, or similar record * * * and documentary

evidence * * * which, in combination, are sufficient to establish

each element of an expenditure”.    Sec. 1.274-5T(c)(2)(i),

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

These substantiation requirements are designed to encourage

taxpayers to maintain records, together with documentary evidence

substantiating each element of the expense sought to be deducted.

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

46016 (Nov. 6, 1985).

     Petitioner’s records with respect to his car and truck

expenses do not satisfy the requirements of section 274(d) and

the regulations cited.    Petitioner claimed that he kept adequate

books and records but that they were stolen from his car.

Petitioner also claimed that Pillow Express maintained records of

his mileage, but he provided no substantiation from the company.

     When asked about the seemingly inflated amount of car and

truck expenses claimed on his 2001 Federal income tax return,

petitioner stated:   “I was just going to guess in my head, at the

time I was doing the taxes.    * * *    I was just guessing because,
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like I say, I lost my records.    I was just guessing.”   Petitioner

then acknowledged that the number “did not sound right” and was

excessive.   Petitioner offered into evidence a few invoices from

Pillow Express substantiating that deliveries were made on

certain dates.    Petitioner testified he contemporaneously

recorded the miles traveled making deliveries on those days.     In

addition, petitioner introduced copies of canceled checks

purportedly showing the amounts spent on several occasions

renting a car to make out-of-State deliveries.    Petitioner claims

the invoices and canceled checks substantiated the expenses

petitioner listed on a worksheet he prepared for trial.    The

Court disregards this evidence in its entirety.

     The Court is not bound to accept petitioner’s uncorroborated

or self-serving testimony.    Tokarski v. Commissioner, 87 T.C. 74,

77 (1986).   One of the invoices petitioner introduced into

evidence shows that petitioner made 21 stops on a certain day.

Petitioner wrote on the invoice that he traveled 250 miles in

making the deliveries.    However, the addresses listed on the

invoice are all within one block of each other in Indianapolis.

In fact, several of the businesses petitioner made deliveries to

on that day were located in the same building.    With regard to

the canceled checks, many of the copies admitted into evidence

appear to have been altered to increase the amount paid to rental

agencies.    In light of petitioner’s admission that he “guessed”
                                - 7 -

the amount of car and truck expenses, the Court declines to

consider this evidence due to lack of credibility.

     The Court holds that petitioner’s car and truck expenses

were not properly substantiated under the cited legal authority.

Petitioner, therefore, is not entitled to deductions in excess of

amounts allowed by respondent for car and truck expenses.

     With respect to the amount deducted for cellular phone

expenses, petitioner presented no additional receipts showing he

was entitled to a deduction in excess of what was allowed by

respondent.    In addition, petitioner offered no evidence

substantiating the purchase of a computer for use in his

business.    Because cellular phones and computers are listed

property under section 280F(d)(4)(A), section 274(d) applies.

Petitioner did not meet the strict substantiation requirement of

section 274(d).    These two expenses, therefore, are not allowed.

     Finally, petitioner claimed expenses for supplies, uniforms,

and furniture in excess of the amounts respondent allowed.

Petitioner presented copies of canceled checks as the only

evidence in support of these expenses.    In light of petitioner’s

inadequate record keeping and questionable credibility, the Court

declines to accept this evidence.    Therefore, respondent is

sustained.
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    Reviewed and adopted as the report of the Small Tax Case

Division.

                                         Decision will be entered

                                     for respondent.
