                  T.C. Summary Opinion 2003-109



                      UNITED STATES TAX COURT



        ANTONIO G. AND BONNIE L. MONTOYA, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 3023-02S.              Filed August 5, 2003.


     Antonio G. Montoya, pro se.

     Christian A. Speck, for respondent.



     PAJAK, Special Trial Judge:   This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed.   Unless otherwise

indicated, section references are to the Internal Revenue Code in

effect for the year in issue.   The decision to be entered is not

reviewable by any other court, and this opinion should not be

cited as authority.

     Respondent determined a deficiency of $1,158 in petitioners’
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1998 Federal income tax.   This Court must decide whether

petitioners are entitled to deduct mortgage loan interest with

respect to certain real property and whether petitioners are

entitled to deduct car expenses in an amount greater than that

allowed by respondent.

     Some of the facts in this case have been stipulated and are

so found.   Petitioners resided in Lafayette, California, at the

time they filed their petition.

     During taxable year 1998, petitioner Antonio G. Montoya

(petitioner) was a high school sports coach.   For his purported

brokerage business, petitioner also filed a Schedule C, Profit or

Loss From Business, with petitioners’ 1998 Form 1040, U.S.

Individual Income Tax Return.   On the Schedule C, petitioner

reported $2,500 in gross income and $11,671 (rounded) in total

expenses for a net loss of $9,171 (rounded).

     Respondent disallowed the claimed $4,841 interest expense

deduction and $231 of the claimed $2,845 auto expense deduction.

     Section 7491 is inapplicable here because petitioners have

not complied with the requisite substantiation requirements.

Sec. 7491(a)(2)(A).

     Section 163(a) allows a deduction for interest paid or

accrued within the taxable year on indebtedness.   It is well

settled that the indebtedness upon which such interest is paid or

accrued must be that of the taxpayer taking the deduction.      Smith
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v. Commissioner, 84 T.C. 889, 897 (1985), affd. without published

opinion 805 F.2d 1073 (D.C. Cir. 1986); Brown v. Commissioner, 1

T.C. 225, 227 (1942).   Thus, interest paid by a taxpayer on the

indebtedness of the taxpayer’s mother is not deductible by that

taxpayer.   Schrayter v. Commissioner, T.C. Memo. 1979-388; Emmons

v. Commissioner, T.C. Memo. 1961-290.

     The regulations also provide that a taxpayer who is a legal

or equitable owner of mortgaged real property may deduct interest

paid as interest on indebtedness, even though the taxpayer is not

directly liable on the bond or note secured by such mortgage.

Sec. 1.163-1(b), Income Tax Regs.   In Golder v. Commissioner, 604

F.2d 34, 36 (9th Cir. 1979), affg. T.C. Memo. 1976-150, the Court

of Appeals for the Ninth Circuit, to which an appeal in this case

would lie if the case were appealable, construed the foregoing

regulation.   The Court of Appeals explained in pertinent part

that that regulation “does nothing more than permit the deduction

of interest in situations where the taxpayer-borrower is not

personally liable on a mortgage of property which is used as

security for a loan made to the taxpayer.”   Id.

     Petitioner alleges that the claimed interest deduction was

interest paid by him on a mortgage loan taken out by his mother

on her house, and that the money was borrowed so petitioner could

run a business.   Petitioner claimed he promised to pay the

mortgage loan and that his failure to repay would result, upon
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his mother’s death, in a corresponding reduction in his

testamentary share of his mother’s estate.

     Petitioners’ $4,841 interest expense deduction is the amount

listed on a 1998 Mortgage Interest Statement issued by Washington

Mutual.    That statement shows that the payer/borrower is

petitioner’s mother’s trust, for which petitioner’s mother is the

designated trustee.    The address on the statement is petitioners’

address.

     Petitioner offered an American Savings Bank Federal Truth-

in-Lending Disclosure Statement dated August 23, 1994.    The

underlying loan appears to be the loan for which the Washington

Mutual Interest Statement was issued.    The American Savings Bank

Statement shows petitioner’s mother as the sole borrower of a

secured mortgage loan against property owned by her.

     Petitioner is neither directly liable on the note securing

the mortgage on his mother’s property, nor is he a legal or

equitable owner of the property.

     Assuming, arguendo, that petitioner made the monthly

payments of interest on his mother’s mortgage, under the cases

cited above he is not entitled to deduct those interest payments.

We sustain respondent’s determination on this issue.

     Section 162(a) allows a deduction for ordinary and necessary

expenses paid or incurred during the taxable year in carrying on

a trade or business.    Taxpayers must maintain sufficient records
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to establish the amount of claimed deductions.    Sec. 6001; sec.

1.6001-1(a), Income Tax Regs.    Section 274(d)(4) imposes

stringent substantiation requirements for the deduction of

certain listed property defined under section 280F(d)(4), which

includes automobiles.

     Petitioner provided a photocopy of a calendar in which the

months and days were written, but no year appears on the

calendar.    Petitioner testified that he recorded his daily

mileage for 1998 in that calendar and that he kept no record of

mileage other than the calendar.    We disregard the calendar

because the Court finds that it was prepared for audit and/or

trial.   In any event, the total number of miles cannot be

ascertained from the calendar entries.    Based on petitioner’s so-

called record, respondent’s determination was generous and is

sustained.

     Reviewed and adopted as the report of the Small Tax Case

Division.



                                          Decision will be entered

                                     for respondent.
