                               T.C. Memo. 2016-213



                         UNITED STATES TAX COURT



                   ROGER L. LINGREN, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 17459-15.                          Filed November 22, 2016.


      Roger L. Lingren, pro se.

      Tyson R. Smith, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


      THORNTON, Judge: Respondent determined a $2,605 deficiency in

petitioner’s 2012 Federal income tax. The issue for decision is whether petitioner

is entitled to certain claimed business expense deductions.1


      1
      Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect for 2012, and all Rule references are to the Tax Court
                                                                       (continued...)
                                         -2-

[*2]                            FINDINGS OF FACT

       In 2012 petitioner, a retired probation officer living in the San Francisco

Bay area, produced acrylic paintings, selling some at local studios.

       Petitioner and his then wife, who is also an artist, had taken one or two art

classes taught at a local college by Diane Olivier. At some point Ms. Olivier

organized an art class in the South of France; students were to stay in a chalet and

travel to various locations to paint with pastels. In 2012 petitioner and his then-

wife traveled to France, via Barcelona, for Ms. Olivier’s class, accompanied by the

wife’s adult daughter. Their trip lasted three weeks, with 10 days devoted to the

art class.

       Petitioner timely filed his 2012 Federal income tax return, attaching a

Schedule C, Profit or Loss From Business, for a business described as “ART

DEALERS”. This Schedule C reported gross receipts of $1,329 and total

expenses of $18,498, resulting in a net loss of $17,169. The Schedule C indicated

that petitioner used the cash method of accounting.

       In the notice of deficiency respondent disallowed certain of petitioner’s

claimed Schedule C expense deductions, specifically $3,141 for “Travel” and

       1
        (...continued)
Rules of Practice and Procedure. All monetary amounts are rounded to the nearest
dollar.
                                           -3-

[*3] $5,356 for “Car and Truck Expenses”.2 Petitioner, while residing in

California, timely petitioned the Court.

                                     OPINION

       The Commissioner’s determinations in a notice of deficiency are generally

presumed correct, and the taxpayer bears the burden of proving those

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

(1933). Petitioner does not contend, and the evidence does not establish, that the

burden of proof shifts to respondent under section 7491(a) as to any issue of fact.

       Section 162(a) allows the deduction of “all the ordinary and necessary

expenses paid or incurred during the taxable year in carrying on any trade or

business”. An expense is ordinary if it is customary or usual within a particular

trade, business, or industry or relates to a transaction “of common or frequent

occurrence in the type of business involved.” Deputy v. du Pont, 308 U.S. 488,

495 (1940). An expense is necessary if it is appropriate and helpful for the

development of the business. Commissioner v. Heininger, 320 U.S. 467, 471

(1943). Personal, living, or family expenses are generally not deductible. Sec.

262.


       2
       Certain computational adjustments that follow from these determinations
are not in controversy, and we do not address them.
                                         -4-

[*4] Deductions are a matter of legislative grace; the taxpayer bears the burden

of substantiating expenses underlying his claimed deductions by keeping and

producing records sufficient to enable the Commissioner to determine the correct

tax liability. Sec. 6001; INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84

(1992); sec. 1.6001-1(a), (e), Income Tax Regs. Section 274(d) imposes more

rigorous substantiation requirements for certain expenses, including those

pertaining to travel and passenger automobiles. Expenses subject to section

274(d) must be substantiated; they cannot be estimated. See Sanford v.

Commissioner, 50 T.C. 823, 828 (1968), aff’d, 412 F.2d 201 (2d Cir. 1969).

I.    Travel Expenses

      To deduct travel expenses, a taxpayer must substantiate with adequate

records or by sufficient evidence corroborating his own statement: (1) the

“[a]mount of each separate expenditure for traveling away from home * * * except

that the daily cost of the traveler’s own breakfast, lunch, and dinner and of

expenditures incidental to such travel may be aggregated, if set forth in reasonable

categories, such as for meals, for gasoline and oil, and for taxi fares”; (2) “[d]ates

of departure and return for each trip away from home, and number of days away

from home spent on business”; (3) “[d]estinations or locality of travel, described

by name of city or town or other similar designation”; and (4) the “[b]usiness
                                         -5-

[*5] reason for travel or nature of the business benefit derived or expected to be

derived as a result of travel.” Sec. 274(d); sec. 1.274-5T(b)(2), (c)(1), Temporary

Income Tax Regs., 50 Fed. Reg. 46014, 46016 (Nov. 6, 1985).

      Although petitioner claimed a travel expense deduction of $3,141 in his

Schedule C, at trial he claimed a greater travel expense deduction as indicated on

this list he provided:

                          Item                             Amount

             Lodging, meals, class                          $2,634
             Air travel                                      1,100
             Car rental                                        597
             Car insurance                                     103
             Fuel                                               90
             Art supplies used during trip                     375
              Total                                          4,899

      Petitioner provided no supporting evidence, apart from his vague and

general testimony, of the claimed expenditures for air travel, car rental, car

insurance, fuel, or art supplies purportedly used during the trip.3 To substantiate

the expenditures claimed for “lodging, meals, class”, petitioner offered an email,

dated November 17, 2015, from Ms. Olivier stating that the cost of the class had

been $7,903 for three people sharing one suite ($7,903 divided by three equals the


      3
      On his Schedule C petitioner separately claimed a $2,559 deduction for
“Supplies”. Respondent allowed that deduction in full.
                                         -6-

[*6] $2,634 included in petitioner’s list of travel expenses). Petitioner also

provided a bank statement showing that a payment of $7,903 was made to Ms.

Olivier on December 20, 2011. This bank statement is unhelpful to petitioner.

For a cash method taxpayer, expenditures are to be deducted for the taxable year in

which actually made. Sec. 1.446-1(c)(1)(i), Income Tax Regs. Because the

evidence shows that petitioner made this expenditure in 2011, this is reason

enough to disallow its deduction for 2012.

       In short, petitioner’s claimed deduction for travel expenses fails for want of

substantiation as to the amount and timing of the expenditures. Consequently, we

need not consider respondent’s arguments that the claimed deduction also fails

because petitioner has not shown that the expenses were reasonable and necessary

in the pursuit of his business and because of the restrictions of section 274(c)(1)

and (h) relating to foreign travel.

II.   Passenger Automobile Expenses

      To obtain a deduction for expenses related to the use of a passenger

automobile, a taxpayer must substantiate with adequate records or by sufficient

evidence corroborating his own statement: (1) the “amount of each separate

expenditure” with respect to the passenger automobile; (2) the “amount of each

business/investment use * * * based on the appropriate measure (i.e., mileage for
                                        -7-

[*7] automobiles * * * ), and the total use of the * * * [passenger automobile] for

the taxable period”; (3) the “[d]ate of the expenditure or use” with respect to the

passenger automobile; and (4) the “business purpose for an expenditure or use”

with respect to the passenger automobile. Secs. 274(d), 280F(d)(4); sec. 1.274-

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

1985).

      Alternatively, a taxpayer may calculate his deductible passenger automobile

expenses by multiplying his business miles by the standard mileage rate for the

year and then adding allowable tolls and parking fees. Under this alternative

method, however, the taxpayer is not relieved of the requirement to substantiate

the amount of each business use (i.e., the business mileage) or the time and

business purpose of each use. Sec. 1.274-5(j)(2), Income Tax Regs. The standard

mileage rate for 2012 was 55.5 cents per mile. Notice 2012-1, sec. 2, 2012-2

I.R.B. 260, 260. Consequently, substantiation of miles and business purpose is a

prerequisite to claiming a deduction. This prerequisite applies regardless of

whether petitioner meant to claim his actual automobile expenses for 2012 or use

the alternative standard mileage rate method.
                                         -8-

[*8] Although petitioner claimed a passenger automobile expense deduction of

$5,356 on his Schedule C, at trial he claimed a greater passenger automobile

expense deduction, as indicated on this list he provided:

                 Item                                       Amount

             Car purchase                                   $4,800
             DMV fee                                           423
             Repairs                                         3,248
             Insurance                                         698
             Gas                                             1,500
             Cleaning                                          350
             Parking                                           450
              Total                                         11,469

      Petitioner failed to adequately substantiate the amounts of most of these

expenditures.4 And for all the expenditures, he failed to substantiate the other

required elements of business purpose. In particular, having failed to produce a

logbook or other records to corroborate his statements, he failed to substantiate the

business use of his automobile based on miles driven, total miles driven in 2012,

dates of travel, or business purpose of trips. Consequently, he is not entitled to the

claimed deduction for the automobile and related expenses.




      4
        Petitioner submitted inadequate supporting documentation for the amounts
for the car purchase, insurance, gas, cleaning, or parking. Petitioner provided a
series of invoices for car repairs in 2012 totaling $3,526, but he provided payment
receipts for only $1,695 of these expenses.
                                  -9-

[*9] To reflect the foregoing,


                                        Decision will be entered for

                                 respondent.
