T.C. Memo. 2009-172
UNITED STATES TAX COURT
JOHN J. MCGOWAN, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 12006-08, 12007-08, Filed July 20, 2009.
12008-08, 12009-08.
John J. McGowan, pro se.
Michael T. Sargent, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
JACOBS, Judge: In these consolidated cases,1 respondent
determined the following deficiencies and additions to tax with
respect to petitioner’s Federal income taxes for years 2002-05:
1
These cases were consolidated by Order dated Jan. 5, 2009.
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Additions to Tax
Year Tax Sec. 6651(a)(1) Sec. 6651(a)(2) Sec. 6654
2002 $2,625.00 $590.63 $656.25 $87.73
2003 9,825.60 1,698.44 1,698.44 190.92
2004 8,007.00 1,801.58 1,321.16 232.38
2005 6,459.00 1,453.28 259.05 678.20
The issues for decision are: (1) Whether respondent
correctly determined petitioner’s income for years 2002-05, (2)
the amounts, if any, of business expenses (automobile mileage
expenses and unreimbursed meal expenses) petitioner may deduct
for years 2002-04, and (3) whether petitioner is liable for
additions to tax under sections 6651(a)(1) and (2) and 6654 for
years 2002-05.
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and attached exhibits are incorporated
herein by this reference.
Petitioner resided in Connecticut at the time the petitions
in these consolidated cases were filed.
Petitioner failed to file tax returns for 2002-05.
Consequently, pursuant to the provisions of section 6020(b),
respondent prepared substitutes for returns for petitioner for
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each of these years that were based on information provided by
third-party payors, as follows:
2002
Payor Form Amount
Servco Oil W-2 $6,340
Servco Oil W-2 16,167
William J. Loosemore, Jr. 1099-MISC 2,097
2003
Payor Form Amount
Servco Oil W-2 $11,699
1
St. of Conn. Dept. 1099-G 15,483
of Labor
Safe-Way Pilot Car Service 1099-MISC 11,203
Servco Oil Sec. 401(k) Plan 1099-R 11,386
2004
Payor Form Amount
Standard Oil of Conn. W-2 $36,848
1
St. of Conn. Dept. 1099-G 3,093
of Labor
Safe-Way Pilot Car Service 1099-MISC 8,764
2005
Payor Form Amount
Standard Oil of Conn. W-2 $47,357
1
These payments were for unemployment compensation.
Petitioner worked for Servco Oil and Standard Oil of
Connecticut as a truck driver. In addition, he worked for
William J. Loosemore, Jr., and Safe-Way Pilot Car Service (Safe-
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Way)2 as a pilot vehicle escort for wide and/or oversize load
trucks. In performing this task he used his own automobile. The
business logs provided by William J. Loosemore, Jr., show the
number of miles petitioner drove his automobile as a pilot
vehicle escort to be as follows:
Year Miles
2002 2,206
2003 11,702
2004 7,937
Petitioner received income of $38,727 in 2001 from Servco
Oil; he failed to file a return for that year. The record does
not indicate whether respondent prepared a substitute for return
for petitioner for 2001.
OPINION
A. Respondent’s Determination of Petitioner’s Income for
Years 2002-05
As a general rule, the Commissioner’s determinations in the
notice of deficiency are presumed correct, and the taxpayer bears
the burden of proving error.3 Rule 142(a); Welch v. Helvering,
290 U.S. 111, 115 (1933). The Commissioner has the burden of
producing evidence appropriate to impose a relevant penalty,
2
William J. Loosemore, Jr., was the owner of Safe-Way Pilot
Car Service.
3
Sec. 7491(a)(1) (which shifts the burden of proof to
respondent) does not apply in the instant case because petitioner
did not introduce credible evidence or comply with the
substantiation and record keeping requirements of sec.
7491(a)(2).
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addition to tax, or additional amount. Sec. 7491(c); Higbee v.
Commissioner, 116 T.C. 438, 446 (2001).
The parties stipulated that during years 2002-05 petitioner
received payments from Servco Oil, the Servco Oil Section 401(k)
plan, Standard Oil of Connecticut, William J. Loosemore, Jr.,
Safe-Way, and the State of Connecticut Department of Labor.
Petitioner, however, denies the accuracy of the amounts set forth
on the Forms W-2, Wage and Tax Statement, 1099-MISC,
Miscelleneous Income, 1099-R, Distributions From Pensions,
Annuities, Retirement, or Profit-Sharing Plans, IRAs, Insurance
Contracts, etc., and 1099-G, Certain Government Payments,
provided to respondent.
Section 6020(b) provides that when preparing a substitute
for return, the Secretary shall make such return from his own
knowledge and from such other information as he can obtain
through testimony or otherwise. Respondent may rely on Forms W-
2, 1099-MISC, 1099-R, and 1099-G from third-party payors when
determining a taxpayer’s tax liability. See, e.g., Cabirac v.
Commissioner, 120 T.C. 163, 167 (2003); Spurlock v. Commissioner,
T.C. Memo. 2003-124. However, if in a court proceeding a
taxpayer asserts a reasonable dispute with respect to any item of
income reported on an information return filed with the
Secretary, and if the taxpayer has fully cooperated with the
Secretary, the Secretary has the burden of producing reasonable
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and probative information concerning the deficiency in addition
to such information return. See sec. 6201(d).
Petitioner admits that he does not know the amount of income
he received from his employers even as he denies the accuracy of
the information returns provided to respondent. We do not find
petitioner’s assertion sufficient to constitute a “reasonable
dispute” as referred to in section 6201(d). See White v.
Commissioner, T.C. Memo. 1997-459. Thus, respondent’s income
determinations for all years in issue enjoy a presumption of
correctness, and consequently we sustain respondent’s income
determinations.
B. Petitioner’s Business Expense Deductions for 2002-04
Petitioner argues that respondent’s deficiency
determinations are incorrect because they do not take into
account mileage deductions and deductions for unreimbursed meal
expenses arising from petitioner’s work as a pilot vehicle escort
for Safe-Way and William J. Loosemore, Jr. At trial petitioner
introduced a document he had prepared in connection with the
trial of these cases which indicated petitioner (1) drove 5,002
miles and worked 20 days in 2002, (2) drove 24,040 miles and
worked 85 days in 2003, and (3) drove 16,472 miles and worked 60
days in 2004.4 Petitioner asserts that he is entitled to a
4
The document states that “all numbers are approximate due
to the inability [of petitioner] to verify accuracy.”
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deduction equal to the standard milage rate allowed by the
Internal Revenue Service (IRS) and a deduction equal to the IRS’
per diem allowance for meals for each day he drove his automobile
as a pilot vehicle escort.
Deductions are a matter of legislative grace and are
allowable only as specifically provided by statute. See INDOPCO,
Inc. v. Commissioner, 503 U.S. 79, 84 (1992); Joseph v.
Commissioner, T.C. Memo. 2005-169. Taxpayers bear the burden of
proving that they are entitled to any deductions claimed. New
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934); Singh v.
Commissioner, T.C. Memo. 2009-36.
Because automobiles are “listed property” as defined in
section 280F(d)(4)(A), automobile expenses otherwise deductible
are not allowed unless the taxpayer meets strict substantiation
requirements. See sec. 274(d); Larson v. Commissioner, T.C.
Memo. 2008-187. Specifically, the taxpayer must substantiate the
claimed automobile expenses by adequate records or other
corroborating evidence showing the amount of the expense, the
time and place of the automobile’s use, and the business purpose
of its use. See sec. 274(d); Sanford v. Commissioner, 50 T.C.
823, 827-828 (1968), affd. per curiam 412 F.2d 201 (2d Cir.
1969).
To satisfy the adequate records requirement of section
274(d), a taxpayer must maintain records and documentary evidence
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that in combination are sufficient to establish each element of
an expenditure or use. Sec. 1.274-5T(c)(2), Temporary Income Tax
Regs., 50 Fed. Reg. 46017 (Nov. 6, 1985). Although a
contemporaneous log is not required, “corroborative evidence to
support a taxpayer’s reconstruction ‘of the elements * * * of the
expenditure or use must have a high degree of probative value to
elevate such statement’ to the level of credibility of a
contemporaneous record.” Larson v. Commissioner, supra (quoting
section 1.274-5T(c)(1), Temporary Income Tax Regs., 50 Fed. Reg.
46016 (Nov. 6, 1985)).
In the absence of adequate records to substantiate each
element of an expense, a taxpayer may alternatively establish an
element by “his own statement, whether written or oral,
containing specific information in detail as to such element”,
and by “other corroborative evidence sufficient to establish such
element.” Sec. 1.274-5T(c)(3), Temporary Income Tax Regs., 50
Fed. Reg. 46014 (Nov. 6, 1985).
The Court may not approximate a taxpayer’s mileage claim.
Section 1.274-5T(a), Temporary Income Tax Regs., 50 Fed. Reg.
46014 (Nov. 6, 1985), states that the substantiation requirements
of section 274(d) supersede the doctrine founded in Cohan v.
Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930), which
otherwise permits the Court to approximate a taxpayer’s claim to
an allowable expense in cases where the evidence indicates a
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taxpayer incurred deductible travel expenses but the exact amount
could not be determined. Moreover, section 1.274-5T(a),
Temporary Income Tax Regs., supra, states that section 274(d)
“contemplates that no deduction or credit shall be allowed a
taxpayer on the basis of such approximations or unsupported
testimony of the taxpayer.”
Before trial petitioner did not provide respondent with any
documents, records, or information to substantiate any itemized
deductions and/or business-related expenses to which he may be
entitled for 2002-05. And at trial petitioner admitted that the
document he introduced contained approximate mileage for 2002-04
and was not a contemporaneous log of his Safe-Way mileage but
rather was generated in preparation for trial. We found this
document lacking in probative value and credibility.
By way of contrast, petitioner’s employer, Safe-Way,
provided contemporaneous records relating to petitioner’s
employment as a pilot vehicle driver during 2002-04. These
records were created and maintained by Safe-Way in its regular
course of business.
We judge Safe-Way’s records to be of sufficient probative
value to satisfy the substantiation requirements of section
274(d). Therefore, using these records, we hold that petitioner
is entitled to a deduction for mileage as follows:
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Year Miles
2002 2,206
2003 11,702
2004 7,937
Section 1.274-5(g)(1), Income Tax Regs., provides that the
Commissioner may prescribe (in pronouncements of general
applicability) a standard mileage rate that a taxpayer may use to
determine a deduction with respect to the business use of a
passenger automobile. Such rate is set forth in a revenue
procedure published by the IRS each year. For 2002 the rate is
36.5 cents per mile;5 for 2003 the rate is 36 cents per mile;6
and for 2004 the rate is 37.5 cents per mile.7
Petitioner also claims entitlement to a deduction for
unreimbursed meal expenses incurred while driving his automobile
as a pilot vehicle escort. Generally, in order to claim a
deduction under section 162(a)(2), a taxpayer must substantiate
the amount of the expense claimed. See sec. 1.162-17, Income Tax
Regs. However, section 1.274-5(g)(1), Income Tax Regs., provides
that the Commissioner may prescribe (in pronouncements of general
applicability) rules under which standard allowances for certain
expenses will, if such expenses are in accord with reasonable
business practice, be regarded as equivalent to substantiation by
5
Rev. Proc. 2001-54, sec. 5.01, 2001-2 C.B. 530, 531.
6
Rev. Proc. 2002-61, sec. 5.01, 2002-2 C.B. 616, 618.
7
Rev. Proc. 2003-76, sec. 5.01, 2003-2 C.B. 924, 925.
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adequate records or other sufficient evidence. Section 1.274-
5(g)(2)(ii), Income Tax Regs., 50 Fed. Reg. 46014, 46016 (Nov. 6,
1985), provides that such an allowance includes per diem expenses
(e.g., meals).
The Commissioner yearly publishes revenue procedures that
provide amounts that individuals may use, in lieu of actual
expenses, to compute the amount allowable as a deduction for
ordinary and necessary business meal and incidental expenses paid
or incurred for travel away from home. These amounts are deemed
substantiated for purposes of section 1.274-5T(b)(2) and (c),
Temporary Income Tax Regs., 50 Fed. Reg. 46014, 46016 (Nov. 6,
1985), provided the individual substantiates the elements of
time, place, and business purpose of the travel expense.8 Thus,
pursuant to relevant revenue procedures, petitioner must still
substantiate the time, place, and business purpose for his
claimed away-from-home expenses. Although petitioner listed the
approximate number of days he worked for Safe-Way on the document
he presented at trial, he did not provide any information
regarding the time, place or business purpose of the meals for
which he claims an allowance. Accordingly, petitioner has not
8
The revenue procedures in effect for the years at issue
are: Rev. Proc. 2001-47, 2001-2 C.B. 332; Rev. Proc. 2002-63,
2002-2 C.B. 691; Rev. Proc. 2003-80, 2003-2 C.B. 1037; Rev. Proc.
2004-60, 2004-2 C.B. 682.
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substantiated his meal expenses, and thus he is not entitled to a
deduction for them.9
In sum, petitioner may deduct his mileage expenses for 2002-
04, as determined supra. In all other respects, respondent’s
income tax determinations for the years at issue are sustained.
C. Additions to Tax Under Sections 6651(a)(1) and (2) and
6654(a)
Respondent determined additions to tax under sections
6651(a)(1) and (2) and 6654(a) for 2002-05. Section 6651(a)(1)
imposes an addition to tax for failure to file an income tax
return by the time prescribed by law unless the taxpayer proves
that such failure is due to reasonable cause and not willful
neglect. See United States v. Boyle, 469 U.S. 241, 245 (1985).
Petitioner did not file returns for 2002-05 by the time
prescribed by law. When asked at trial whether he had reasonable
cause for not filing, petitioner replied: “Not within the
confines of this court, no.” We thus sustain respondent’s
imposition of the addition to tax under section 6651(a)(1).
9
Petitioner stated that “just about all” of his trips for
Safe-Way were 1-day trips. It is well established that in order
to qualify for a meal expense deduction one must be away from
home for a period normally requiring sleep or rest. Day trips do
not qualify for the sec. 162(a)(2) deduction. See United States
v. Correll, 389 U.S. 299 (1967); Bissonnette v. Commissioner, 127
T.C. 124, 132-133 (2006). Thus even had petitioner substantiated
his meal expenses, he would not be entitled to a deduction as
away-from-home expenses.
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Section 6651(a)(2) imposes an addition to tax for failure to
pay the amount of tax shown on any return unless petitioner
proves that the failure is due to reasonable clause and not due
to willful neglect. Section 6651(a)(2) applies only in the case
of an amount of tax shown on a return. Burr v. Commissioner,
T.C. Memo. 2002-69, affd. 56 Fed. Appx. 150 (4th Cir. 2003).
Pursuant to section 6651(g)(2), a substitute for return prepared
under section 6020(b) is treated as a return filed by the
taxpayer for returns due after July 30, 1996 (determined without
regard to extensions).
Respondent prepared substitutes for returns for petitioner
for 2002-05. Petitioner did not pay the calculated liabilities
by the time prescribed by law; and when asked at the trial if he
had reasonable cause for not paying, petitioner replied: “Same
answer, your Honor [as he gave to the question about his failure
to file].” When asked why should he not have to pay the tax and
penalties, petitioner replied: “I’m trying to avoid frivolous
arguments, your Honor. I’d like to take the Fifth Amendment for
something like that.” We thus sustain respondent’s imposition of
the addition to tax under section 6651(a)(2).
Section 6654(a) imposes an addition to tax on individual
taxpayers who underpay their estimated income tax. Respondent
asserts that petitioner is liable for the addition to tax for
2002-05. A taxpayer has an obligation to pay estimated tax for a
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particular year if he has a “required annual payment” for that
year. Sec. 6654(d). A “required annual payment” is generally
equal to the lesser of (1) 90 percent of the tax shown on the
individual’s return for that year (or if no return is filed, 90
percent of his or her tax for the year), or (2) if the individual
filed a return for the immediately preceding taxable year, 100
percent of the tax shown on that return. Sec. 6654(d)(1);
Wheeler v. Commissioner, 127 T.C. 200, 210-212 (2006), affd. 521
F.3d 1289 (10th Cir. 2008); Brennan v. Commissioner, T.C. Memo.
2009-77. To show a required annual payment for 2002, respondent
must show proof of petitioner’s failure to file a return for
2001. See Wheeler v. Commissioner, supra at 210-212; Brennan v.
Commissioner, supra.
To satisfy his burden of production under section 7491(c),
respondent introduced evidence showing that petitioner was
required to file Federal income tax returns for 2002-05, that he
failed to file returns, and that after taking into account income
tax withheld from petitioner’s salary, he did not make any other
tax payments in the years at issue. Respondent also established
that petitioner failed to file a return for 2001. We therefore
hold that respondent has met his burden of production with regard
to the additions to tax under section 6654(a).
Petitioner offered no evidence to refute respondent’s
evidence. Nor has petitioner established a credible defense to
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respondent’s determination that petitioner is liable for the
section 6654 addition to tax. Consequently, respondent’s
imposition of the addition to tax under section 6654(a) for 2002-
05 is sustained.
All of petitioner’s arguments have been considered. To the
extent not discussed herein, we find them to be groundless and/or
without merit.
To reflect the foregoing,
Decisions will be entered
under Rule 155.