                          T.C. Summary Opinion 2015-32



                         UNITED STATES TAX COURT



          RICKY RAY RESSEN AND ROSALIND RESSEN, Petitioners v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 17873-13S.                         Filed April 21, 2015.



      Ricky Ray Ressen and Rosalind Ressen, pro sese.

      Christina L. Cook and David L. Zoss, for respondent.



                              SUMMARY OPINION


      MARVEL, Judge: This case was heard pursuant to the provisions of section

7463 of the Internal Revenue Code (Code) in effect when the petition was filed.1



      1
        Unless otherwise indicated, all section references are to the Code in effect
for the year at issue, and all Rule references are to the Tax Court Rules of Practice
and Procedure. Some monetary amounts are rounded.
                                        -2-

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 a deficiency of $4,995 in petitioners’ Federal

income tax for 2010. The issue for decision is whether petitioners are entitled to

deduct unreimbursed employee business expenses of $34,475 for 2010.

                                    Background

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

facts and the facts drawn from stipulated exhibits are incorporated herein by this

reference. Petitioners resided in Minnesota when they petitioned this Court.

      In 2010 Ricky Ray Ressen was employed as a construction manager with

Innovative Construction Solutions, Inc. (ICS). He supervised several construction

projects for ICS during that year. With the exception of a period of approximately

1-1/2 months, Mr. Ressen lived and worked away from home for most of 2010,

returning home for the weekends, because of his responsibilities as an employee of

ICS. When away from home, he stayed in a recreational vehicle that he refers to

as a fifth wheel.

      Mr. Ressen owned two trucks that he used during 2010 for travel between

his home and the various jobsites and while at the various jobsites: (1) a 2007

Chevrolet Silverado 1500 (2007 Chevy) and (2) a 2008 Chevrolet Silverado 2500
                                        -3-

HD (2008 Chevy). He used the 2008 Chevy to transport the fifth wheel, which he

would set up at or near the jobsites. Between January 1 and May 14, 2010, Mr.

Ressen put 11,585 miles on the odometer of the 2008 Chevy. He stopped using

the 2008 Chevy on May 14, 2010. Between May 16 and December 31, 2010, Mr.

Ressen put 45,422 miles on the odometer of the 2007 Chevy.

      ICS reimbursed Mr. Ressen a per diem amount for food and lodging and

would also reimburse him if he purchased an airline ticket in connection with his

employment. ICS did not and would not reimburse him for the use of the 2007

Chevy or the 2008 Chevy.

      From January until around March 25, 2010, Mr. Ressen managed the

construction of a pet supply store in Oak Creek, Wisconsin. From the last week of

March until May 8, 2010, Mr. Ressen managed the construction of a fabric and

craft store near his residence in Brainerd, Minnesota.

      Subsequently, Mr. Ressen managed the construction of a sporting goods

store in Waterloo, Iowa. At the same time he also worked on a project in Iowa

City, Iowa. Because he was alternating between the two jobsites, he parked the

fifth wheel at a campground between the two sites.

      On several occasions Mr. Ressen visited a jobsite in Des Moines, Iowa. The

Des Moines jobsite was still in the planning stages, and he made only occasional
                                       -4-

trips there. Mr. Ressen worked at the Waterloo and Iowa City jobsites through the

end of 2010.

      Mr. Ressen maintained a calendar and a logbook to record his business

activities and the business use of the 2007 and 2008 Chevys. Upon returning

home at the end of each week he recorded the miles he drove during the previous

week in the calendar. Additionally, as required by ICS, he recorded in general

terms his daily business activities and weekly travel in the logbook. He also

recorded the beginning and ending mileage for the 2007 and 2008 Chevys in the

logbook.

      Petitioners filed a joint Form 1040, U.S. Individual Income Tax Return, for

2010 (2010 return). Petitioners attached to their 2010 return a Form 2106,

Employee Business Expenses, claiming 100% of the 45,422 miles driven with

respect to the 2007 Chevy and 100% of the 11,585 miles driven with respect to the

2008 Chevy. After multiplying the total miles driven by the standard mileage rate,

petitioners reported unreimbursed vehicle expenses of $28,504. Petitioners also

reported additional unreimbursed employee business expenses totaling $7,597.

After applying the 2% floor to their total unreimbursed employee business

expenses of $36,101 petitioners claimed a deduction for job expenses and certain
                                          -5-

miscellaneous deductions of $34,475 on a Schedule A, Itemized Deductions,

attached to their 2010 return.

      After communication broke down between petitioners and respondent’s

revenue agent, respondent issued a notice of deficiency to petitioners. The

deficiency notice disallowed petitioners’ claimed $34,475 deduction for job

expenses and certain miscellaneous deductions in full. The deficiency notice

explained that the portion of the disallowed deduction attributable to petitioners’

claimed unreimbursed vehicle expenses was disallowed solely for insufficient

substantiation of the claimed miles.

                                       Discussion

I.    Burden of Proof

      Generally, the taxpayer bears the burden of proving his or her entitlement to

any claimed deduction. See Rule 142(a)(1); INDOPCO, Inc. v. Commissioner,

503 U.S. 79, 84 (1992). This includes the burden of substantiation. See sec. 6001;

Hradesky v. Commissioner, 65 T.C. 87, 89 (1975), aff’d per curiam, 540 F.2d 821

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

produces credible evidence2 with respect to any factual issue relevant to

      2
       “‘Credible evidence is the quality of evidence which, after critical analysis,
the court would find sufficient upon which to base a decision on the issue if no
                                                                       (continued...)
                                        -6-

ascertaining the taxpayer’s liability for any tax imposed by subtitle A or B of the

Code and satisfies the requirements of section 7491(a)(2), the burden of proof on

any such issue shifts to the Commissioner. See sec. 7491(a)(1).

      As explained below, see infra part III, petitioners did not submit any

evidence with respect to their claimed deduction for $7,597 in additional

unreimbursed employee business expenses that respondent disallowed. The

burden of proof therefore remains on them with respect to these expenses. See

sec. 7491(a)(1). However, we need not decide whether petitioners satisfy the

requirements of section 7491(a)(1) and (2) with respect to the remainder of the

issues in this case because we decide them on the preponderance of credible

evidence and not on any failure to carry the burden of proof. See Blodgett v.

Commissioner, 394 F.3d 1030, 1039 (8th Cir. 2005), aff’g T.C. Memo. 2003-212;

Knudsen v. Commissioner, 131 T.C. 185, 188-189 (2008).

II.   Deductions Generally

      Section 162(a) permits a taxpayer to deduct ordinary and necessary

expenses paid or incurred in carrying on a trade or business. See Commissioner v.


      2
       (...continued)
contrary evidence were submitted (without regard to the judicial presumption of
IRS correctness).’” Higbee v. Commissioner, 116 T.C. 438, 442 (2001) (quoting
H.R. Conf. Rept. No. 105-599, at 240-241 (1998), 1998-3 C.B. 747, 994-995).
                                          -7-

Lincoln Sav. & Loan Ass’n, 403 U.S. 345, 352 (1971). A trade or business

expense is ordinary for purposes of section 162 if it is normal or customary within

a particular trade, business, or industry, and it is necessary if it is appropriate and

helpful for the development of the business. Commissioner v. Heininger, 320 U.S.

467, 471 (1943). In general, section 262(a) disallows deductions for personal,

living, or family expenses. See also sec. 1.162-17(a), Income Tax Regs.

      Generally, a taxpayer must maintain adequate records to substantiate the

amounts of his or her income and entitlement to any deductions or credits claimed.

Sec. 6001; sec. 1.6001-1(a), Income Tax Regs. When a taxpayer establishes that

he or she paid or incurred a deductible expense but does not establish the amount

of the expense, we may estimate the amount allowable in some circumstances

(Cohan rule). See Cohan v. Commissioner, 39 F.2d 540, 542-544 (2d Cir. 1930).

There must be sufficient evidence in the record, however, to permit us to conclude

that the taxpayer paid or incurred a deductible expense in at least the amount

allowed. See Williams v. United States, 245 F.2d 559, 560 (5th Cir. 1957);

Vanicek v. Commissioner, 85 T.C. 731, 743 (1985). In estimating the amount

allowable, we bear heavily upon the taxpayer who failed to maintain required

records and to substantiate deductions as the Code requires. See Cohan v.

Commissioner, 39 F.2d at 544.
                                         -8-

      For certain kinds of business expenses, section 274(d) overrides the Cohan

rule. See Sanford v. Commissioner, 50 T.C. 823, 827 (1968), aff’d per curiam,

412 F.2d 201 (2d Cir. 1969). Under section 274(d), a taxpayer must satisfy strict

substantiation requirements before a deduction is allowable. These strict

substantiation requirements apply to any traveling expense, including meals and

lodging away from home, any item with respect to an activity in the nature of

entertainment, or the use of listed property, as defined in section 280F(d)(4),

including passenger automobiles.

      To deduct these expenses, the taxpayer must “substantiate[] by adequate

records or by sufficient evidence corroborating the taxpayer’s own statement”: (1)

the amount of the expense or other item; (2) the time and place of travel,

entertainment, or use of the property; (3) the business purpose of the expense or

other item; and (4) the business relationship of the taxpayer to the persons

entertained or using the property. See sec. 274(d). With respect to the use of

listed property, the taxpayer must establish the amount of business use and the

amount of total use for such property. See sec. 1.274-5T(b)(6)(i)(B), Temporary

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

      Substantiation by adequate records requires the taxpayer to maintain an

account book, a diary, a log, a statement of expense, trip sheets, or a similar record
                                         -9-

prepared contemporaneously with the use or expenditure and documentary

evidence (e.g., receipts or bills) of certain expenditures.3 See sec. 1.274-

5(c)(2)(iii), Income Tax Regs.; sec. 1.274-5T(c)(2), Temporary Income Tax Regs.,

50 Fed. Reg. 46017 (Nov. 6, 1985). A log that is kept on a weekly basis is

considered contemporaneous for this purpose. See sec. 1.274-5T(c)(2)(ii)(A),

Temporary Income Tax Regs., 50 Fed. Reg. 46017-46018 (Nov. 6, 1985). Uses

that are properly considered part of a single use--including, for example, a round

trip or uninterrupted business use--may be accounted for by a single record. See

id. subpara. (6)(i)(C), 50 Fed. Reg. 46023. A written explanation of the business

purpose of a use or expenditure is not required where the business purpose is

evident from the facts and circumstances. See id. subpara. (2)(ii)(B), 50 Fed. Reg.

46018. The level of detail required for substantiating by adequate records the

business use of listed property depends upon the facts and circumstances of such

use. See id. subdiv. (ii)(C), 50 Fed. Reg. 46018-46019.

      Substantiation by other sufficient evidence corroborating the taxpayer’s

statement requires a statement by the taxpayer specifically detailing the required

elements and the production of corroborative evidence in support of the taxpayer’s


      3
     The Secretary has not promulgated regulations with respect to any
documentary evidence required with respect to the use of listed property.
                                        - 10 -

statement. See id. subpara. (3)(i), 50 Fed. Reg. 46020. In general, corroborative

evidence of an element must be direct evidence or documentary evidence. See id.

subdiv. (i)(B), 50 Fed. Reg. 46020-46021. If the element is either the business

relationship to the taxpayer of persons entertained or the business purpose of an

expenditure or use, however, corroborative evidence may include circumstantial

evidence. See id. Except in circumstances not present here a taxpayer may

substantiate the business use of listed property for an entire year with

corroborative evidence with respect to a part of the year if the periods for which

the taxpayer has corroborative evidence are representative of the entire year. See

id. subdiv. (ii)(A), 50 Fed. Reg. 46021.

III.   Analysis

       Petitioners presented evidence with respect to the portion of the disallowed

deduction attributable to their claimed use of the 2007 and 2008 Chevys.

However, petitioners failed to introduce any evidence with respect to the $7,597 in

additional unreimbursed employee business expenses that respondent also

disallowed. We therefore sustain respondent’s disallowance of the $7,597 in

additional unreimbursed employee business deductions. See Rule 142(a)(1);

INDOPCO, Inc. v. Commissioner, 503 U.S. at 84.
                                        - 11 -

      With respect to the portion of the disallowed deduction attributable to their

claimed use of the 2007 and 2008 Chevys, petitioners introduced copies of the

calendar in which Mr. Ressen contemporaneously recorded his weekly mileage as

an employee of ICS as well as some information regarding where he was working

at various times. Petitioners also introduced copies of the pages in the logbook on

which he contemporaneously recorded the beginning and ending miles for the

2007 and 2008 Chevys. Considering the facts and circumstances of Mr. Ressen’s

employment arrangement with ICS and his business use of the 2007 and 2008

Chevys we conclude that the calendar is a credible, adequate record of the amount

of the business use of the property, the dates of such use, and the business purpose

of such use, and the logbook pages are an adequate record of the total use of the

property. See sec. 274(d); sec. 1.274-5T(b)(6)(i)(B), (c)(2), Temporary Income

Tax Regs., supra; see also Lyseng v. Commissioner, T.C. Memo. 2011-226, 102

T.C.M. (CCH) 280, 282-283 (2011).

      Additionally, even if the calendar is for some reason not an adequate record

of the amounts or dates of the business use of the 2007 and 2008 Chevys, Mr.

Ressen credibly and with specificity testified as to the business use of the property

and the dates of such use. Petitioners corroborated this testimony with the pages

from the logbook. See sec. 1.274-5T(c)(3)(i), Temporary Income Tax Regs.,
                                        - 12 -

supra. Although petitioners did not introduce the entire logbook into evidence, we

conclude that the pages of the logbook that they did introduce are representative of

contemporaneous, adequate records that Mr. Ressen maintained for the entire year

and that they sufficiently corroborate his testimony with respect to the amounts

and dates of the business use of the 2007 and 2008 Chevys for the entire year. See

id. subdiv. (ii)(A). We therefore conclude that petitioners satisfied the

substantiation requirements of section 274(d) with respect to their claimed use of

the 2007 and 2008 Chevys.

      To reflect the foregoing,


                                                      Decision will be entered under

                                                 Rule 155.
