                         T.C. Summary Opinion 2014-29



                         UNITED STATES TAX COURT



                  MICHAEL E. HOUCHIN, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 30985-12S.                        Filed March 31, 2014.



      Michael E. Houchin, pro se.

      Timothy Shawn Sinnott, for respondent.



                              SUMMARY OPINION


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

7463 of the Internal Revenue Code in effect at the time that the petition was filed.

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, all
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section references are to the Internal Revenue Code in effect for the year in issue,

and all Rule references are to the Tax Court Rules of Practice and Procedure.

      Respondent determined a deficiency of $4,506 in petitioner’s Federal

income tax for 2010. The issues for decision are whether petitioner has

substantiated deductible vehicle expenses as required under section 274(d) and

whether petitioner is liable for self-employment tax.

                                    Background

      Some of the facts have been stipulated, and the stipulated facts are

incorporated in our findings by this reference. Petitioner resided in Indiana at the

time that he filed his petition.

      At the beginning of 2010, petitioner--who previously had worked as a truck

driver--was unemployed. During this time, petitioner collected unemployment

compensation and also engaged in a business activity of picking up old

newspapers and selling them to a recycling company. Petitioner would drive his

truck to whatever locations he could find that had available newspapers.

Petitioner maintained a mileage log wherein he recorded the date, starting and

ending odometer readings, business mileage, and personal mileage for each trip

with his truck during 2009 and 2010. By the latter part of 2010, petitioner had

secured a job as a truck driver with UPS.
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      Petitioner’s 2010 Form 1040, U.S. Individual Income Tax Return, was

prepared by H and R Block. On Schedule C, Profit or Loss From Business,

petitioner reported gross income of $1,274, office expense of $142, and car and

truck expenses of $17,978, for a net loss of $16,846.

      The examination division of the Internal Revenue Service (IRS) disallowed

all of petitioner’s truck expenses but allowed the office expense. Because of the

disallowed car and truck expenses, petitioner’s business had a net profit for 2010.

Accordingly, the IRS calculated and included self-employment tax of $160 and a

self-employment tax deduction of $80 based upon this business income.

      On or about August 14, 2012, petitioner submitted his 2009-10 mileage log

to the IRS examination division to substantiate his truck expenses. The IRS

examination division was unpersuaded by petitioner’s mileage log because the

entries did not reflect a business purpose or the places where petitioner’s business

activity occurred. The IRS asked that petitioner provide information regarding the

places where he went.

      On or about September 18, 2012, petitioner resubmitted his mileage log,

having modified it by writing in the places where he guessed he may have gone.

Again unpersuaded, the IRS sent to petitioner a notice of deficiency, dated

October 30, 2012, reflecting its adjustments to his tax return.
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                                     Discussion

Car and Truck Expenses

      Section 162 allows as a deduction “all the ordinary and necessary expenses

paid or incurred during the taxable year in carrying on any trade or business”.

Taxpayers are required to maintain sufficient records to establish the amounts and

purpose of any deductions. Sec. 6001; Higbee v. Commissioner, 116 T.C. 438,

440 (2001); sec. 1.6001-1(a), (e), Income Tax Regs. The taxpayer has the burden

of proving his or her deductions claimed. See New Colonial Ice Co. v. Helvering,

292 U.S. 435, 440 (1934); Rockwell v. Commissioner, 512 F.2d 882, 886 (9th Cir.

1975), aff’g T.C. Memo. 1972-133.

      Petitioner claimed truck expenses of $17,978. Because petitioner’s truck is

listed property under section 280F(d)(4)(A)(i) or (ii), a deduction for the truck

expenses requires additional substantiation. See sec. 274(d). A taxpayer must

substantiate by adequate records or by sufficient evidence corroborating the

taxpayer’s own statement the amount of the expense, the time and place of travel,

and the business purpose of the expense. Id.; see also sec. 1.274-5T(b)(6), (c)(1)

and (2), Temporary Income Tax Regs., 50 Fed. Reg. 46016-46017 (Nov. 6, 1985).

While a contemporaneous log is not required, a taxpayer’s subsequent

reconstruction of his or her expenses does require corroborative evidence with a
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high degree of probative value to support such a reconstruction not made at or

near the time of the expenditure, in order to elevate that reconstruction to the same

level of credibility as a contemporaneous record. Sec. 1.274-5T(c)(1), Temporary

Income Tax Regs., supra.

      Although petitioner provided his 2009-10 mileage log, he nevertheless

failed to provide any corroborating receipts or other records that substantiated the

statements made in the log. Petitioner’s mileage log did not address the business

purpose of each trip. Guessing as to where he may have gone in 2010, petitioner

added the places of business travel to his log in 2012. The log was thus not

contemporaneous, and the reconstruction was not reliable. Although we believe

that petitioner had business travel expenses in relation to his recycling business,

section 274(d) precludes estimates. See Sanford v. Commissioner, 50 T.C. 823,

827 (1968), aff’d per curiam, 412 F.2d 201 (2d Cir. 1969); sec. 1.274-5T(a)(4),

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

petitioner failed to substantiate the claimed expenses as required by section

274(d), his deductions must be disallowed.

Self-Employment Tax

      Section 1401 generally imposes a self-employment tax on the self-

employment income of every individual. Individuals whose net earnings from
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self-employment equal or exceed $400 during the taxable year are required to

report such income. Sec. 6017.

      In his petition, petitioner contends that his recycling of newspapers “was a

‘hobby’ type of business”. However, petitioner and H and R Block treated the

activity as a Schedule C business and used a disproportionate amount of expenses

and the resulting net loss to offset other income. On the basis of the entire record,

we have determined that, for 2010, petitioner had self-employment income in

excess of $400 after the disallowance of the truck expenses. Accordingly,

respondent is sustained on this issue.

      We have considered the other arguments of the parties, and they are not

material to our conclusions.

      To reflect the foregoing,


                                                 Decision will be entered

                                           for respondent.
