                         T.C. Summary Opinion 2019-34



                         UNITED STATES TAX COURT



          ROGER G. MAKI AND LILANE J. GERVAIS, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 12958-17S.                         Filed November 4, 2019.



      Roger G. Maki and Lilane J. Gervais, pro sese.

      Patsy A. Clark, for respondent.



                              SUMMARY OPINION


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

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


      1
      Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect at all relevant times, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
                                          -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 $17,925 income tax deficiency and a $3,585

section 6662(a) accuracy-related penalty2 with respect to petitioners’ 2013 tax

year. The deficiency is in large part attributable to the disallowance of travel and

away from home expense deductions claimed in connection with petitioner Roger

Maki’s timberland activity. The issues remaining for our consideration are

whether petitioners paid business expenses and, if so, whether they are ordinary

and necessary travel and away from home expenses.

                                      Background

      Petitioners resided in Washington State when their petition was filed.

During 2013 petitioners’ residence was in Des Moines, King County,

Washington. Roger Maki (petitioner) during the early 1980s inherited from his

mother more than 100 acres of Washington State land. The land was in two

counties, and petitioner traveled substantially every week to take care of and

monitor timber on the land. The round trip from petitioners’ residence to and from

the properties was approximately 300 miles for each visit. The inherited land was

valuable because of the timber situated on it.

      2
          At trial respondent conceded the sec. 6662(a) penalty.
                                        -3-

      Petitioner has continuously experienced physical problems and needs to

walk and stay active. One way he has accomplished this and also provided for his

future was to plant trees and care for them so that they could be harvested for

future financial needs. Petitioner began this process during the 1980s after he

inherited the land from his mother. As of the time of trial the trees were

approaching maturity and two of the properties had trees with a harvest value of

over $1 million.

      Before 2013 one of petitioner’s properties was stripped of fir trees during a

time when he was “very, very sick” and not mobile enough to check on the trees

on the property. Commercial timber companies hire people to regularly check and

patrol their timberland to curb or thwart illegal harvesting. Petitioner was unable

to afford the cost of hiring people to check and patrol. That is one of the reasons

he regularly visited the timber properties to make sure that he did not lose value

because of illegal harvesting or other types of damage. On his visits he also

planted trees and monitored his properties for any other activity, including the

posting of signs on trees which might signify improper intended use of his trees.

      Petitioner maintained a log listing the days that he visited and stayed on the

properties. The log, along with other records, was maintained in the building he

uses when visiting the properties. Petitioner used the log to make a summary of
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his visits during 2013 so that he could present it to respondent during the pretrial

phase of his case. After he prepared the summary, the original contemporaneous

logs and other records were stolen when the building in which they were

maintained was vandalized. The summary reflects that petitioner was present at

the timber properties a total of 161 days during 2013. The summary also reflects

that petitioner made 47 round trips from his residence to the timber properties.

Some of the visits were as short as one day, but most were three-day visits.

      Petitioners’ 2013 income tax return reflects that their sources of income

were Social Security benefits, interest, dividends, capital gains, and pensions.

Petitioner’s timber activity was reported on a Schedule C, Profit or Loss From

Business, attached to the 2013 joint income tax return. No income from the timber

activity was reported for the 2013 year, and the following deductions were

claimed: car and truck expense, $450; insurance, $964; taxes and licenses,

$4,483; travel, $7,011; and other expenses (away from home per diem), $55,925.

In the notice of deficiency respondent disallowed only the $7,011 of travel

expenses and the $55,925 of per diem expenses. The only other adjustment in the

notice of deficiency is an increase to gross income for Social Security benefits

received and not reported of $18,856. Petitioners have not contested the Social

Security income adjustment.
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                                    Discussion

      Respondent’s contentions with respect to the disallowed deductions are that

petitioners have not adequately substantiated the expenditures and/or shown that

they were ordinary and necessary business expenses. Petitioners counter that they

must monitor the property to protect the timber and that their testimony and

documentation substantiate and justify the claimed deductions.

      Section 162(a)(2) provides for the deduction of ordinary and necessary

business expenses, including travel expenses while away from home in the pursuit

of a trade or business. Those expenses must be incurred while “away from home”

overnight. Commissioner v. Flowers, 326 U.S. 465, 470-472 (1946). We note

that respondent has not questioned whether petitioner is engaged in a business

activity or whether he was “away from home” when he visited the timber

properties. Accordingly, we proceed to decide the amount, if any, of the travel

and away from home deductions to which petitioners are entitled.

      Respondent’s primary argument with respect to substantiation is that

petitioner did not provide a log and the information he provided was inaccurate.

Petitioner established a normal pattern of travel, usually three days each week, and

that pattern rarely varied. He always traveled to the same locations. His testimony

that he maintained a log is credible, and his summary, received in evidence, was
                                        -6-

extracted from the log he maintained. In any event, the repetitive pattern of travel

would be easily verified because it was essentially the same each week. That fact

along with petitioner’s credible testimony is sufficient to show the occasions on

which he traveled to and visited the lumber properties. Accordingly, we have

found that petitioner made 47 trips and spent 161 days at his timber properties

during 2013. Finally, we are persuaded that petitioner’s travel expenses were

ordinary and necessary because of the need to monitor the timber and to maintain

and plant trees.

       A self-employed individual can deduct meal expenses computed at the

Federal rate established for the locality in which meal expenses were incurred

while away from home. See Rev. Proc. 2011-47, sec. 1, 2011-42 I.R.B. 520, 520.

The Federal published rate is deemed substantiated for purposes of section 1.274-

5T(b)(2)(i) and (c), Temporary Income Tax Regs., 50 Fed. Reg. 46014-46015,

46016 (Nov. 6, 1985). Self-employed individuals may not use this method to

substantiate lodging expenses. See Rev. Proc. 2011-47, sec. 1.

      Petitioners used the per diem rates for “Luxury Water Travel” to compute

the annual per diem deduction. The rates used ranged from $320 to $374 per day

and are intended for away from home expenses incurred on an ocean liner or

cruise ship. The rates are based on the highest Federal per diem rates, which
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include lodging, meals, and incidentals. Using the luxury rates, petitioners

computed and deducted $55,925 in away from home per diem expenses for 2013.

We note that petitioners did not provide any evidence of the lodging expenses

actually incurred in the timber activity during 2013.

      Under Rev. Proc. 2011-47, 2011-42 I.R.B. 520, the Federal per diem rate

(for meals) that applies to many smaller localities, including the counties in which

petitioner’s timber land is situated, is $46. Petitioner through his testimony and

the summary taken from his logs has shown that he was away from home on

business for 161 days during 2013. Accordingly, he is entitled to deduct $7,406 of

per diem expenses for 2013 (161 times $46).

      Petitioner’s $7,011 travel deduction was computed at the permitted per mile

rate times the number of round trips we have found he made during 2013 to his

properties. Although respondent questioned whether petitioner had traveled for

business, he did not question the established mileage rate. Because we have found

both that petitioner’s travel was for business and that the mileage in his logs was

substantiated, he is entitled to the $7,011 deduction.
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To reflect the foregoing and concessions of the parties,


                                             Decision will be entered

                                       under Rule 155.
