                       T.C. Memo. 1996-403



                     UNITED STATES TAX COURT



         BILL R. AND CAROLINA N. THOMAS, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 12096-94.                    Filed August 27, 1996.


     Kenneth Alan Thomas, for petitioners.

     Alvin A. Ohm, for respondent.


                       MEMORANDUM OPINION

     GOLDBERG, Special Trial Judge:   This case was heard pursuant

to section 7443A(b)(3) and Rules 180, 181, and 182.1   Respondent

determined a deficiency in petitioners' Federal income tax for

1991 in the amount of $1,335.   After concessions, the issue for


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

decision is whether petitioners are entitled to a Schedule A

deduction claimed for unreimbursed employee business expenses.

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

The stipulation of facts and exhibits received into evidence are

incorporated herein by this reference.   Petitioners resided in

Dallas, Texas, at the time their petition was filed.

     During the tax year in question, Bill R. Thomas (petitioner)

was a practicing certified public accountant and owner of an

accounting practice, Thomas & Associates, P.C.   Petitioner

managed the office, supervised field audits, and performed

consulting work.   The business was organized as a professional

corporation for which corporate tax returns were filed.

     Petitioner owned a second business, Thomas Business

Brokerage, a sole proprietorship engaged in the sale of

companies.   Both the accounting practice and brokerage business

required petitioner to travel locally and away from home.

Petitioners owned four cars.   Petitioner used one car for

business travel, commuting, and some personal travel.   Petitioner

recorded the odometer readings of this car at the beginning and

end of the taxable year.   Petitioner also maintained a daily

calendar on which he recorded names representing the clients with

whom he met on that day.   He did not write down the nature of the

business conducted or a location of the meeting.

     At trial, petitioner testified as to approximate distances

traveled and the nature of the business involved with respect to
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various names on his calendar.    Petitioners attached an exhibit,

a summary of petitioner's business travel for 1991, including

mileage totals, to their posttrial brief.    This exhibit was not

offered or entered into evidence at trial, and therefore is not

evidence.   See Rule 143(b).

     Petitioner testified that it was the policy of the

accounting firm to reimburse employees for their mileage expense.

Petitioner testified that although he was entitled to

reimbursement from the accounting firm for his mileage expense,

he chose not to request reimbursement because of the financial

condition of the firm.    Petitioner received no wages or

compensation from the accounting firm, although all other

employees were paid.

     During 1991, petitioner traveled to Santa Fe, New Mexico, to

attend a required Government course in order to qualify to

perform certain audits.    Petitioner drove from Dallas and stayed

in a hotel while in Santa Fe.

     On their 1991 Federal income tax return, petitioners claimed

a Schedule A deduction for unreimbursed employee business

expenses of $8,188.    These expenses included $5,913 for vehicle

expense, $150 for parking fees, tolls, and local transportation,

$1,775 for other business expenses, and $350 for union and

professional dues.    Petitioner had been audited for a prior

year's return, which resulted in the allowance of a business

deduction for automobile expense based on 82 percent of his total
                                   4

annual mileage.   For the taxable year at issue, petitioner

multiplied the standard mileage rate of 27.5 cents by 82 percent

of his annual mileage, and claimed this amount as vehicle

expense.    Petitioner filed a Schedule C, reporting income and

deducting expenses incurred in the brokerage business, but did

not deduct any automobile expense.

     In the notice of deficiency, respondent disallowed $6,663 of

petitioners' claimed employee business expenses for lack of

substantiation.   The disallowed expenses include $5,913 for

vehicle expense, $150 for parking fees, tolls, and local

transportation, and $600 for other business expenses.    In her

brief, respondent concedes the $150 deduction for parking fees,

tolls, and local transportation.

     Respondent's determinations are presumed correct, and

petitioners have the burden of proving them erroneous.    Rule

142(a); Welch v. Helvering, 290 U.S. 111 (1933). Deductions

against income are allowed as a matter of legislative grace.       New

Colonial Ice Co. v. Commissioner, 292 U.S. 435, 440 (1934).

Taxpayers must maintain adequate records to substantiate the

amount of any deductions.    Sec. 6001; sec. 1.6001-1(a), Income

Tax Regs.

     Generally, when evidence shows that petitioners incurred a

deductible expense, but the exact amount cannot be determined,

the Court may approximate the amount.    Cohan v. Commissioner, 39

F.2d 540 (2d Cir. 1930).    An exception to the Cohan rule is
                                 5

section 274(d), which prohibits the estimation of expenses for

travel or deductions with respect to certain listed property.

Sec. 274(d).   Listed property includes automobiles.   Sec.

280F(d)(4).

     Section 274(d) requires substantiation of these expenses

either "by adequate records or by sufficient evidence

corroborating the taxpayer's own statement."   Sec. 274(d).   The

records must show the amount, date, and business purpose of each

expense or business use.   Id.; sec. 1.274-5T(b)(6), Temporary

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

regulations provide that other evidence may be offered in the

form of sampling.   Taxpayers may use adequate records maintained

for "a portion of the taxable year" to substantiate business use

for the entire year if they "demonstrate by other evidence that

the periods for which an adequate record is maintained are

representative of the use for the taxable year".   Sec. 1.274-

5T(c)(3)(ii)(A), Temporary Income Tax Regs., 50 Fed. Reg. 46021

(Nov. 6, 1985).

     Petitioner's daily calendar does not meet the requirement of

adequate records to substantiate petitioners' claimed deduction

for vehicle expense.   While it contains dates and client names,

it fails to indicate mileage or business purpose for any of the

entries.   In the alternative, petitioners contend that 82 percent

represents a sampling of mileage from a prior year and is

sufficient evidence, arguing that the regulations do not mandate
                                   6

that each taxable year be treated independently.    The language of

the regulations is clear and does not permit estimation of

current business use by reference to a prior year.    In addition,

there is no indication on the record that the 82 percent was

based on adequate records or any evidence that the prior year was

representative of the year at issue.

     Petitioners offered no further evidence at trial.

Accordingly, petitioners have not met the requirements of

substantiation under section 274(d).    Respondent is sustained on

this issue.

     Because petitioners failed to substantiate the automobile

expense, we need not address their general contention that they

are entitled to a business deduction for petitioner's mileage

expense because he was not reimbursed by the accounting firm.    We

note, however, that a taxpayer ordinarily is not allowed a trade

or business deduction for expenditures to the extent that he has

a right of reimbursement from the corporation.     Leamy v.

Commissioner, 85 T.C. 798, 809-810 (1985).

     It is unclear from the record what the business expenses of

$600 are.     Petitioner testified at trial that he stayed in Santa

Fe for approximately 3 days.    However, he did not testify as to

the amount of the expenses incurred and did not produce any

receipts or documentary evidence for support.    Therefore,

petitioners have failed to substantiate the $600 in business

expenses, and respondent is sustained on this issue.
7


         Decision will be entered

    under Rule 155.
