Income Tax

Calendar Notes Not Enough to Substantiate Vehicle Expenses

A taxpayer, who was employed as an outside direct sales representative, used his truck to call upon customers. Per company policy, he wasn’t reimbursed for his expenses. To keep track of his truck expenses, he kept records in a calendar planner book by documenting his truck’s odometer readings at the beginning and end of each month, but no other information related to vehicle usage (personal or business) was included. On his Schedule A for the year, the taxpayer claimed a deduction of more than $20,000 in vehicle expenses, based on the standard mileage rate, which the IRS disallowed for lack of substantiation. The Tax Court agreed with the IRS, concluding that although the taxpayer had run reimbursed travel expenses related to his employment, he failed to follow the strict substantiation requirements of IRC Sec 274(d). The taxpayer’s calendar, while contemporaneous, did not sufficiently document the business purpose of each business use of his truck.