To meet the strict substantiation requirements for deducting vehicle expenses under
IRC section 274(d), a taxpayer must have adequate records or sufficient corroborating
evidence that establishes:
1) The amount of the expense,
2) The time and place of the expense or use of the listed property,
3) The business purpose of the expense or use, and
4) The business relationship.
To substantiate car and truck expenses through adequate records, the taxpayer must
maintain a contemporaneous log, trip sheet, or similar document, as well as corroborate
documentary evidence, that together establishes each required element of the expense listed
above. In the absence of adequate records, the taxpayer must establish each required
piece by his or her own statement, whether written or oral, containing specific information
in detail as to such element and by other corroborative evidence sufficient to
establish such an element.
In addition to his W-2 job, the taxpayer, in this case, owned and operated an unincorporated
business in which he made sales calls on the maintenance and engineering departments
of industrial technology companies to sell his consulting and industrial maintenance
education and training services. The taxpayer sold two training courses during the
year at issue. The taxpayer used his Ford F-150 truck to travel for his consulting business and commute to and from his W-2 job. Routinely, the taxpayer drove his vehicle to work and then left to conduct a sales call or other consulting activity for his self-employment business.
The court did not find the mileage log credible because it reflects that the
taxpayer was in two states simultaneously. For instance, the mileage log shows a trip
from “home” in South Carolina to Columbus, Georgia, on November 11 – 14, 2018, and a journey from “home” to Fletcher, North Carolina, on November 13, 2018. When asked about this discrepancy at trial, the taxpayer testified that he “may have written the wrong date down.” The mileage log also shows that the taxpayer was on a trip in one state, while the bank
statements show a fuel purchase in another state. The taxpayer failed to articulate a reason
for the discrepancies. The court highlighted six distinct differences between the
locations listed in the mileage log with what the bank statements said.
Despite many mileage log entries showing the taxpayer was in another
state for multiple days, the taxpayer did not provide any additional testimony or
other evidence to corroborate his presence in another state on the dates listed. The taxpayer
testified he would often use cash to make fuel purchases when out of state but
could not remember where he would have stayed on overnight trips other than
staying at a hotel or camping. The court stated it is not bound to accept the taxpayer’s self-serving, unverified, and undocumented
testimony. The court noted the taxpayer’s testimony was not credible and
therefore disallowed the deductions for vehicle expenses.