T.C. Memo. 2006-172
UNITED STATES TAX COURT
BRIAN F. NICELY, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 14979-04. Filed August 17, 2006.
Brian F. Nicely, pro se.
Karen Lynne Baker, for respondent.
MEMORANDUM OPINION
CHIECHI, Judge: Respondent determined a deficiency of
$3,321 in petitioner’s Federal income tax (tax) for his taxable
year 2002.
The issues remaining for decision are:
(1) Is petitioner entitled to deduct certain claimed automo-
bile expenses? We hold that he is not.
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(2) Is petitioner entitled to deduct certain claimed meal
expenses? We hold that he is not.
(3) Is petitioner entitled to deduct certain claimed cloth-
ing expenses? We hold that he is not.
Background
Some of the facts have been stipulated and are so found.
At all relevant times, including throughout 2002 and at the
time he filed the petition in this case, petitioner resided in
Ridgeley, West Virginia (Ridgeley).
During 2002, petitioner, a welder, was employed by Mendon
Pipeline, Inc. (Mendon Pipeline), located in Ghent, West Vir-
ginia. At all relevant times, Mendon Pipeline’s policy was
(1) to pay directly to the lodging provider lodging expenses
incurred by an employee because the employee resided so far from
the location of the job site (job site location) as to preclude
such employee from safely making a daily round-trip drive from
such employee’s residence to the job site location and (2) not to
pay any other expenses incurred by an employee, such as expenses
for meals and automobile usage.
Petitioner timely filed electronically a tax return for his
taxable year 2002 (petitioner’s 2002 return). In Schedule A-
Itemized Deductions included as part of that return (2002 Sched-
ule A), petitioner claimed “Job Expenses and Most Other Miscella-
neous Deductions” totaling $13,384 prior to the application of
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the two-percent floor imposed by section 67(a).1 Of that total,
petitioner claimed $12,734 as “Unreimbursed employee expenses”,
$50 as “Tax preparation fees”, and $600 as “Other expenses” for
clothes, boots, and gloves. With respect to the $12,734 of
claimed “Unreimbursed employee expenses”, petitioner, as re-
quired, completed Form 2106-EZ, Unreimbursed Employee Business
Expenses, and included that form as part of petitioner’s 2002
return (2002 Form 2106-EZ). In the 2002 Form 2106-EZ, petitioner
claimed the following “Unreimbursed employee expenses”:
Expense Amount
1
Vehicle $8,782
2
Meals 3,952
1
Petitioner calculated the $8,782 of claimed vehicle ex-
penses by using the standard mileage rate for 2002 of 36.5 cents
per mile and multiplying that rate by 24,060, the number of miles
that petitioner claims he drove his automobile for business
(business miles) during 2002. At trial, petitioner conceded that
the total amount of business miles claimed for 2002 in the 2002
Form 2106-EZ was overstated by approximately 3,000 miles.
2
In calculating the $3,952 of claimed meal expenses, peti-
tioner claimed in the 2002 Form 2106-EZ total meal expenses of
$7,904 and reduced that total by 50 percent, as required by sec.
274(n).
As required by section 67(a), petitioner reduced the $13,384
of total “Job Expenses and Most Other Miscellaneous Deductions”
claimed in the 2002 Schedule A by two percent of his adjusted
gross income (i.e., by $1,091). In determining the taxable
1
All section references are to the Internal Revenue Code in
effect for the year at issue. All Rule references are to the Tax
Court Rules of Practice and Procedure.
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income reported in petitioner’s 2002 return, petitioner deducted
the balance (i.e., $12,293), as well as the other itemized
deductions claimed in the 2002 Schedule A that were not subject
to the two-percent floor imposed by section 67(a).
Respondent issued to petitioner a notice of deficiency
(notice) for his taxable year 2002. In that notice, respondent
disallowed the total $12,293 of “Job Expenses and Most Other
Miscellaneous Deductions” that petitioner claimed in the 2002
Schedule A after the reduction required by section 67(a).
Discussion
Petitioner bears the burden of proving that the determina-
tions in the notice are erroneous.2 Rule 142(a); Welch v.
Helvering, 290 U.S. 111 (1933). Moreover, deductions are a
matter of legislative grace, and the taxpayer bears the burden of
proving entitlement to any deduction claimed. INDOPCO, Inc. v.
Commissioner, 503 U.S. 79, 84 (1992). A taxpayer is required to
maintain records sufficient to establish the amount of any
deduction claimed. Sec. 6001; sec. 1.6001-1(a), Income Tax Regs.
Petitioner claims that, prior to the application of the two-
percent floor imposed by section 67(a), he is entitled to deduc-
tions for $8,782 of automobile expenses, $3,952 of meal
2
Petitioner does not claim that the burden of proof shifts
to respondent under sec. 7491(a). In any event, petitioner has
failed to establish that he satisfies the requirements of sec.
7491(a)(2). On the record before us, we find that the burden of
proof does not shift to respondent under sec. 7491(a).
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expenses,3 a $50 tax preparation fee, and $600 of expenses for
certain unidentified clothes and gloves and Rocky Wolverine
boots.4 Respondent counters that petitioner has failed to carry
his burden of establishing his entitlement to deduct any of those
claimed expenses.5
A taxpayer is entitled to deduct all the ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on a trade or business, “including * * * traveling
expenses (including amounts expended for meals * * * other than
amounts which are lavish or extravagant under the circumstances)
while away from home in the pursuit of a trade or business”.
Sec. 162(a). For certain kinds of expenses otherwise deductible
under section 162(a), a taxpayer must satisfy certain substantia-
tion requirements set forth in section 274(d) before such ex-
penses will be allowed as deductions.
In order for petitioner’s claimed expenses for the use of
his automobile and for meals to be deductible, such expenses must
3
In the 2002 Form 2106-EZ, petitioner claimed total meal
expenses of $7,904, which he reduced by 50 percent, as required
by sec. 274(n).
4
Although the Court ordered petitioner to file a posttrial
brief, he failed to do so.
5
Respondent conceded at trial that petitioner incurred a tax
preparation fee of $50. Respondent’s concession will not affect
the deficiency determined in the notice unless we were to sustain
petitioner’s position with respect to his claimed expenses for
the use of his automobile and/or meals. That is because of the
two-percent floor imposed by sec. 67(a).
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satisfy the requirements of not only section 162(a) but also
section 274(d). To the extent that petitioner carries his burden
of showing that the expenses at issue for the use of his automo-
bile and for meals satisfy the requirements of section 162(a) but
fails to satisfy his burden of showing that such expenses satisfy
the recordkeeping requirements of section 274(d), petitioner will
have failed to carry his burden of establishing that he is
entitled to deduct such expenses, regardless of any equities
involved. See sec. 274(d); sec. 1.274-5T(a), Temporary Income
Tax Regs., 50 Fed. Reg. 46014 (Nov. 6, 1985).
The recordkeeping requirements of section 274(d) will
preclude petitioner from deducting amounts otherwise allowable
under section 162(a) with respect to the use of his automobile or
expenditures for meals while traveling away from home on business
unless he substantiates the requisite elements of each such use
or expenditure. See sec. 274(d); sec. 1.274-5T(b)(1), Temporary
Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6, 1985). A taxpayer
is required to
substantiate each element of an expenditure or use
* * * by adequate records or by sufficient evidence
corroborating his own statement. Section 274(d) con-
templates that a taxpayer will maintain and produce
such substantiation as will constitute proof of each
expenditure or use referred to in section 274. Written
evidence has considerably more probative value than
oral evidence alone. In addition, the probative value
of written evidence is greater the closer in time it
relates to the expenditure or use. A contemporaneous
log is not required, but a record of the elements of an
expenditure or of a business use of listed property
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made at or near the time of the expenditure or use,
supported by sufficient documentary evidence, has a
high degree of credibility not present with respect to
a statement prepared subsequent thereto when generally
there is a lack of accurate recall. Thus, the corrobo-
rative evidence required to support a statement not
made at or near the time of the expenditure or use must
have a high degree of probative value to elevate such
statement and evidence to the level of credibility
reflected by a record made at or near the time of the
expenditure or use supported by sufficient documentary
evidence. The substantiation requirements of section
274(d) are designed to encourage taxpayers to maintain
the records, together with documentary evidence, as
provided in paragraph (c)(2) of this section [1.274-5T,
Temporary Income Tax Regs.].
Sec. 1.274-5T(c)(1), Temporary Income Tax Regs., 50 Fed. Reg.
46016-46017 (Nov. 6, 1985).
The elements that a taxpayer must prove with respect to an
expenditure for traveling away from home on business, including a
meal, are: (1) The amount of each such expenditure for traveling
away from home, except that the daily cost of the traveler’s own
breakfast, lunch, and dinner may be aggregated; (2) the time of
each such expenditure, i.e., the dates of departure and return
for each trip away from home and the number of days away from
home spent on business; (3) the place of each such expenditure,
i.e., the destinations or locality of travel, described by name
of city or town or other similar designation; and (4) the busi-
ness purpose of each such expenditure, i.e., the business reason
for the travel or the nature of the business benefit derived or
expected to be derived as a result of travel. Sec. 1.274-
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5T(b)(2), Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6,
1985).
In lieu of substantiating the actual amount of any expendi-
ture relating to the business use of a passenger automobile, a
taxpayer may use a standard mileage rate established by the
Internal Revenue Service (standard mileage rate). See sec.
1.274-5(j)(2), Income Tax Regs.; Rev. Proc. 2001-54, sec. 5.02,
2001-2 C.B. 530, 532. The standard mileage rate is to be multi-
plied by the number of business miles traveled. Rev. Proc. 2001-
54, sec. 5.02, 2001-2 C.B. at 532. The use of the standard
mileage rate establishes only the amount deemed expended with
respect to the business use of a passenger automobile. Sec.
1.274-5(j)(2), Income Tax Regs. The taxpayer must still estab-
lish the amount (i.e., the business mileage), the time, and the
business purpose of each such use. Id.
In lieu of substantiating the actual amount spent for a meal
while traveling away from home on business, a taxpayer may use an
amount computed at the Federal meal and incidental expense (M&IE)
rate set forth in appendix A of 41 C.F.R. chapter 301 (appendix
A) for the locality of travel for each calendar day that the
taxpayer is traveling away from home on business. See sec.
1.274-5(j)(1), Income Tax Regs.; Rev. Proc. 2001-47, secs.
3.02(1)(a), 4.03, 2001-2 C.B. 332, 333-334 (applicable to, inter
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alia, Jan. 1 through Sept. 30, 2002); Rev. Proc. 2002-63, secs.
3.02(1)(a), 4.03, 2002-2 C.B. 691, 693-694 (applicable to, inter
alia, Oct. 1 through Dec. 31, 2002). The use of the M&IE estab-
lishes only the daily amount deemed spent for meals while travel-
ing away from home on business. Sec. 1.274-5(j)(1), Income Tax
Regs. The taxpayer must still establish the time, the place, and
the business purpose of the daily expenditures for meals. Id.
With respect to the deductions that petitioner claims for
2002 with respect to the use of his automobile and for meals,
petitioner testified that during that year he worked in Rocky
Mount, Virginia, Wiley Ford, West Virginia, Hamilton,
Pennsylvania, Warren, Pennsylvania, and Elk Garden, West
Virginia. In support of that testimony, petitioner relies on a
document (document one) that he prepared sometime shortly before
the trial in this case in January 2006. Document one purports to
show all the job site locations at which petitioner claims he
worked during 2002, the respective time periods during which he
claims he worked at such locations, and the respective round-trip
mileages from his home in Ridgeley to such locations. Petitioner
testified that in preparing document one he relied on his recol-
lection and a telephone call to “the main office” of Mendon
Pipeline, his employer during 2002.
In addition to document one, petitioner relies on two other
documents to support his position with respect to the deductions
that he is claiming for the use of his automobile and for meals.
It is not clear from the record when one (document two) of those
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two other documents was prepared. Moreover, document two does
not list all of the job site locations at which petitioner
testified he worked during 2002 and which are shown on document
one. Instead, document two lists only the following three job
site locations: Warren, Pennsylvania, Morris Run, Pennsylvania,
and Elk Garden, West Virginia. The Morris Run, Pennsylvania, job
site location at which petitioner claims he worked for three
months during 2002 is not even listed on document one, which is
the document that purports to show all of the job site locations
where petitioner worked during that year.
The other document (document three) on which petitioner
relies contains handwritten notations on a letter dated May 6,
2004, from Mendon Pipeline, petitioner’s employer during 2002.6
As was true of document two, it is not clear when those handwrit-
ten notations were made on that letter. Moreover, as was also
true of document two, such handwritten notations do not list all
of the job site locations at which petitioner testified he worked
during 2002 and which are shown on document one. Instead, like
document two, such handwritten notations list only the following
three job site locations: Warren, Pennsylvania, Morris Run,
Pennsylvania, and Elk Garden, West Virginia. As was true of
6
The May 6, 2004 Mendon Pipeline letter describes that
company’s policy regarding the payment of the lodging expenses of
its employees in certain circumstances and the nonpayment of any
other expenses of its employees.
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document two, the Morris Run, Pennsylvania, job site location at
which petitioner claims he worked for three months during 2002 is
not even listed on document one, which is the document that
purports to show all of the job site locations where petitioner
worked during that year.
Petitioner concedes that he did not prepare document one at
or near the time in 2002 of the use of his automobile or the
expenditures for meals that are at issue in this case. Peti-
tioner failed to establish when document two was prepared and
when the handwritten notations on document three were made.
Moreover, we found the three documents on which petitioner relies
to be inconsistent and not credible in certain material respects.
By way of illustration, in addition to the inconsistencies in
such documents discussed above regarding the job site locations
at which petitioner claims he worked during 2002, in document two
and document three petitioner indicated that during 2002 he
worked in Elk Garden, West Virginia, for four months, whereas in
document one petitioner indicated that during 2002 he worked in
Elk Garden, West Virginia, for six weeks. By way of further
illustration, in document two and document three petitioner
indicated that the one-way mileage between his home in Ridgeley
and Warren, Pennsylvania, is 178 miles, whereas in document one
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petitioner indicated that such one-way mileage is 245 miles.7 We
are unwilling to rely on document one, document two, or document
three. Petitioner admitted at trial that he has no other docu-
ments or records establishing (1) that during 2002 he worked at
each of the different job site locations at which he claims he
worked for the period of time during that year that he claims he
spent at each such location and (2) that during 2002 he drove the
respective round-trip mileages that he claims he drove from his
home in Ridgeley to such locations.
On the record before us, we find that petitioner has failed
to carry his burden of showing the amount of each business use of
his automobile based on mileage and the time of each such use
(i.e., the date of each such use).8 On that record, we further
7
We note that in document three petitioner indicated that he
did not stay overnight in Elk Garden, W.Va., at which he claims
he worked during 2002. Nor did petitioner stay overnight in
Wiley Ford, W.Va., a job site location listed on document one at
which petitioner claims he worked during 2002 and which is,
according to document one, only five miles from petitioner’s home
in Ridgeley. At least with respect to his claimed job site
locations in Elk Garden, W.Va., and Wiley Ford, W.Va., we find
that petitioner has failed to show that any travel expenses that
he is claiming as deductions for the use of his automobile and
for meals with respect to his purported working at such locations
were paid or incurred while petitioner was away from home within
the meaning of sec. 162(a)(2).
8
On the record before us, we find that petitioner has failed
to carry his burden of establishing the respective round-trip
mileages between his home in Ridgeley and the job site locations
at which he claims he worked during 2002. In this regard, we
note that petitioner claimed at trial that he calculated the
respective round-trip mileages between his home in Ridgeley and
(continued...)
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find that petitioner has failed to carry his burden of establish-
ing that he is entitled for his taxable year 2002 to the deduc-
tion that he claims for the use of his automobile.9
On the record before us, we also find that petitioner has
failed to carry his burden of establishing that he is entitled
for his taxable year 2002 to the deduction that he claims for
meals. The record is devoid of reliable evidence relating to the
amount, the time, and the place of the meal expenses that peti-
tioner contends he is entitled to deduct. Petitioner acknowl-
edged at trial that he has no receipts for any of the meal
expenses at issue because “I was told that meals * * * that was
the one thing you could claim without receipt.” Moreover, it is
not clear whether petitioner used the M&IE rate set forth in
appendix A of 41 C.F.R. chapter 301 in claiming such meal ex-
penses. If he did use such a rate, he did not use the correct
rate set forth in appendix A. In document two, which is the only
document in the record detailing petitioner’s claimed total meal
expenses of $7,904 shown in his 2002 Form 2106-EZ, petitioner
8
(...continued)
those claimed job site locations by looking at the mileage
readings reflected in his automobile during that year. However,
petitioner admitted at trial that document one which purports to
show all his claimed job site locations during 2002 was not
prepared until shortly before the trial in this case and that he
has no records showing the mileage readings reflected in his
automobile during that year.
9
At trial, petitioner conceded that he “overclaimed 3,000
some odd miles”.
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indicated that he incurred a daily meal expense of $42 for the
period January through May 2002, $38 for the period June through
August 2002, and $34 for the period September through December
2002.10 The applicable M&IE for all of the job site locations to
which petitioner claims he traveled during 2002 is $30 a day.
41 C.F.R. ch. 301, app. A (2002).
With respect to the deduction that petitioner claims for
2002 for certain unidentified clothes and gloves and Rocky
Wolverine boots, petitioner admitted at trial that he does not
have any receipts for those items. Moreover, articles of cloth-
ing, including shoes or boots, are deductible under section
162(a) only if the clothing is required in the taxpayer’s employ-
ment, is not suitable for general or personal wear, and is not
worn for general or personal purposes. Yeomans v. Commissioner,
30 T.C. 757, 767-768 (1958). The record is devoid of evidence
that the unidentified clothes and gloves and the Rocky Wolverine
boots were required in petitioner’s employment, were not suitable
for general or personal wear, and were not worn for general or
10
In calculating the claimed total meal expenses of $7,904,
petitioner used a 52-week period, which resulted in total meal
expenses of $7,952. Petitioner then reduced that total amount by
$48 in order to arrive at the claimed total meal expenses of
$7,904 shown in his 2002 Form 2106-EZ. In document one that he
prepared shortly before the trial in this case, petitioner
indicated that he worked only 48 weeks during 2002. Moreover, as
discussed supra note 7, petitioner acknowledges that he did not
stay overnight on the respective days on which he claims he
traveled from his home in Ridgeley to Elk Garden, W.Va., and to
Wiley Ford, W.Va.
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personal purposes. In fact, petitioner acknowledged at trial
that he was wearing Rocky Wolverine boots.
On the record before us, we find that petitioner has failed
to carry his burden of establishing that he is entitled for his
taxable year 2002 to the deduction that he claims for clothes,
boots, and gloves.
We have considered all of the parties’ contentions and
arguments that are not discussed herein, and we find them to be
without merit, irrelevant, and/or moot.
To reflect the foregoing,
Decision will be entered for
respondent.