DocketNumber： Docket No. 16724-12
Filed Date： 8/4/2014
Status： Non-Precedential
Modified Date： 4/18/2021
Decision will be entered for respondent with respect to the deficiency and for petitioner with respect to the
MORRISON, (1) Crawford is not entitled to deductions claimed on Schedule C, "Profit or Loss From Business", for car-and-truck expenses; (2) Crawford is not entitled to deductions claimed on Schedule C for travel expenses; (3) Crawford is not entitled to deductions claimed on Schedule C for meals-and-entertainment expenses; but (4) Crawford is not liable for any amount of the
Some of*154 the facts in this case have been stipulated. We hereby incorporate those facts in the Court's findings of fact. Crawford was a resident of North Carolina when he filed his petition.
During 2009 Crawford was paid $52,659 of wage income working as an engineer for AFL Telecommunications at its office in Duncan, South Carolina. He made a daily commute to Duncan from his home in Charlotte, North Carolina, 92 miles away. As part of his job with AFL Telecommunications, Crawford sometimes had to travel, either by car or by plane. His travel costs were reimbursed fully by AFL Telecommunications.
Besides his job with AFL Telecommunications, Crawford sold nutritional supplements for a company called Vemma. He also recruited potential new salespeople for Vemma. Crawford claims that he traveled by car for his work for Vemma and that he often had meetings over meals with potential customers and with potential Vemma salespeople. He had two cars, and he used both of them for various purposes, not just driving for the Vemma business.
Crawford's 2009 tax return, a Form 1040, "U.S. Individual Income Tax Return", was*155 dated June 24, 2010, according to the computer summary of the return, which is in the record. The parties stipulated that the return was timely filed. Crawford's filing status was married filing separately. He reported wage and salary income of $52,659 from AFL Telecommunications on the return. He *159 attached to his return a Schedule C purporting to report the income and losses from his business with Vemma. On this Schedule C he reported gross receipts of $1,183 and $38,123 in business expenses.
In the notice of deficiency, the IRS disallowed $27,759 of the $38,123 of claimed Schedule C expense deductions in the following amounts and categories: • the full $20,149 Crawford claimed for car-and-truck expenses, • $2,981 of the $3,478 Crawford claimed for travel expenses, and • $4,629 of the $4,653 Crawford claimed for meals-and-entertainment expenses.
Crawford timely filed a petition in this Court for redetermination of the deficiency and the addition to tax. In the petition Crawford claimed that he "sent documentation * * * showing that * * * [he] was entitle[d] to these deductions". By "these deductions" we presume Crawford meant the $27,759 of Schedule C expense deductions that the*156 IRS disallowed. As explained above, the disallowed deductions were in three categories: travel, car-and-truck, and meals-and-entertainment. Trial was held in Winston-Salem, North Carolina.
Crawford introduced into the record various receipts, invoices, and travel-reservation-confirmation printouts.
*160 Crawford offered as evidence his daily calendar for 2009. The daily entries on the calendar contain notations related to his activities for the day. Some of the notations are a location, for example, "Hendersonville". Some of the notations are a person's name, for example, "Charles", "Victoria", "Will", or "Charlotte". Some of the notations appear to indicate an activity, for example, "Mail Salle Mae", "Get hair cut", or "Lynn order placed momentum pk". At trial, Crawford did not explain what any specific notation on the calendar meant. Some of the days are also annotated with numbers for "miles". For the days that are annotated with mileage, the text notation for that day is sometimes a location. Sometimes the text notation for that day is not a location. Sometimes it is unclear whether the text notation refers to a location or something else.
Crawford also offered as evidence a spreadsheet*157 of his claimed meals-and-entertainment expenses. The spreadsheet lists the following information for each expense: • the name of the store or restaurant at which the expense was incurred and paid (usually a restaurant); • the date of the expense; • the dollar amount of the expense; and *161 • the business purpose of the expense, which for every entry is "Interview/team training".
The IRS objected to the admission of Crawford's daily calendar and his meals-and-entertainment spreadsheet on the grounds that the documents are inadmissible hearsay. Crawford testified that he gave a copy of the calendar and his meals-and-entertainment spreadsheet to his tax-return-preparation firm, Jackson Hewitt, to prepare his return. Even if we were to admit the daily calendar and the spreadsheet into evidence and give them their due weight as evidence, the two documents in combination with the documentary evidence and testimony do not demonstrate that Crawford is entitled to any of the disputed deductions. Therefore it is unnecessary to decide whether the daily calendar and meals-and-entertainment spreadsheet are admissible.
We ordered briefs to be filed after trial. The IRS filed a brief, but Crawford, who is*158 not represented by counsel, did not. We have ascertained Crawford's arguments as best we can from his petition, his testimony, and the evidence in the record, including the stipulation of facts.
As a preliminary matter, we must determine which party bears the burden of proof as to the disputed deductions. As a general rule, the taxpayer bears the burden of proving that the determinations in the notice of deficiency are incorrect.
A taxpayer may deduct ordinary and necessary expenses paid or incurred*159 during the taxable year in carrying on a trade or business but must maintain sufficient records to substantiate the expenses.
One type of deductible business expense is the cost of transportation related to business, including both local transportation and the cost of traveling away from home on overnight trips.
The requirements of
With respect to car-and-truck expenses,
Crawford claimed a deduction of $20,149 for car-and-truck expenses. These expenses were, he testified, for driving his car to meetings*162 where he discussed either sales of Vemma products, the recruitment of new Vemma sellers, or both. He seeks to corroborate this testimony with his daily calendar, which *166 contains notations appearing to show his travel destination in some instances and in some instances a number for mileage.
We find the locational notations on the calendar unreliable. In several instances, a location is marked on the calendar for a particular day, but a receipt shows that Crawford was somewhere else that day.*163 business (as opposed to AFL Telecommunications business or personal errands). And we cannot simply assume that all entries on the calendar with mileage amounts are related to Vemma trips. Crawford admitted that not all of the entries on the calendar for mileage are related to Vemma trips. Consequently, we cannot reliably find that all of the mileage entries are for travel related to the Vemma business.
*167 Crawford submitted receipts for the purchase of gasoline. This may give rise to the inference that Crawford is seeking to deduct amounts of actual expenses, as an alternative to deductions based on mileage. Crawford admitted that a number of expenses for gasoline were incurred for his commute. These expenses are not deductible. Nothing in the record (and in the disputed daily calendar and meals-and-entertainment spreadsheet) establishes which receipts are related to the Vemma business.
We hold that Crawford is not entitled to any deductions for car-and-truck expenses for 2009.
There is a deduction for expenses for travel away from home, as long as the expenses are reasonable, necessary, and directly attributable to the taxpayer's business.
*168 The expenses of travel away from home are subject to the strict substantiation requirements of
To substantiate his expenses for traveling away from home, Crawford introduced into evidence copies of (1) invoices, and (2) travel-reservation-confirmation printouts, and (3) receipts. In addition, Crawford provided his daily calendar. We find that these sets of documents*165 are insufficient substantiation. We begin with the invoices and the travel-reservation-confirmation printouts. The invoices and printouts do not prove that the amounts invoiced or referred to in the printouts were actually paid by anyone. Even if we were to assume that all the amounts on the invoices and travel-reservation-confirmation printouts were paid, it is unclear from any documents (including the receipts) that the payor was Crawford, as opposed to, say, AFL Telecommunications. Crawford testified that *169 he paid for the travel referred to on the invoices or travel-reservation-confirmation printouts, but we did not find the testimony credible. Therefore he may not deduct any expense documented by the invoices or travel-reservation-confirmation printouts.
As for the receipts, a number of them relate to expenses that were paid by a credit card with a card number ending with 1904. Crawford admitted at trial that AFL Telecommunications reimbursed him for all payments made with that credit card. Therefore he is not entitled to a deduction for any expense appearing on the receipts corresponding to purchases made by the credit card with a card number ending with 1904.
As for the*166 travel corresponding to the remaining receipts, there is an absence of documentation of the business purpose of the travel to which the receipts correspond. The potentially relevant documents are receipts, invoices, and the daily calendar. None of these documents indicate that any of these trips are related to Vemma. Thus, Crawford has failed to provide substantiation for the business purpose of these particular trips. Crawford's uncorroborated testimony is unpersuasive and insufficient. Crawford asserted generally that he traveled away from home for his Vemma business, but he failed to give the reason for any *170 particular trip. Furthermore he was not a credible witness generally. Therefore we hold that he is not entitled to a deduction in any amount for the expenses of traveling away from home.
Fifty percent of expenses for meals that are directly connected to a taxpayer's trade or business, such as lunch or dinner meetings with clients, is deductible.
The items substantiating the meals-and-entertainment expenses Crawford claimed include (1) his testimony (in which he generally asserted that the meals he claimed on the return were deductible business expenses), (2) receipts for meals or *171 entertainment, and (3) a list of meals with restaurant names and the business purpose of each meal (which was "Interview/team training" for every meal).
There are many problems with the substantiation Crawford provided. One overarching problem is that the items do not convince us there was a business purpose for any particular meal or for any particular entertainment expense. The mere fact that Crawford introduced a receipt does not mean that the expense corresponding to the receipt was business-related. He admitted that at least*168 some of the meals for which he supplied receipts were personal meals. As for the meal-and-entertainment spreadsheet, Crawford ate many of the meals reflected on this spreadsheet alone. That no one else was present at the meals belies the spreadsheet's description of the business purpose of the meals as "Interview/team training." We conclude that the records submitted by Crawford are too unreliable to be considered "adequate records or * * * sufficient evidence corroborating the taxpayer's own statement".
The IRS contends that Crawford is liable for a failure-to-timely-file addition to tax of $219.45 for the 2009 tax year.
We have considered all of the arguments the parties have made, and to the extent that we have not discussed them, we find them to be irrelevant, moot, or without merit.
*174 To reflect the foregoing,
1. All section references are to the Internal Revenue Code of 1986 as amended and in effect for the year in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.↩
2. We are not certain from the record whether Crawford intended his deduction for car-and-truck expenses to be based on actual expense amounts, since he submitted receipts for gasoline, or to be based on the standard mileage rate, since he submitted the calendar, which indicates miles he claimed he traveled for business. Either way, Crawford has not demonstrated he is entitled to a deduction for the expenses of operating his vehicles.↩
3. Some of the receipts we refer to are for meals-and-entertainment expenses rather than car-and-truck expenses. Nonetheless we consider them here because they show that Crawford was, on more than one occasion, not in the place he indicated in the calendar.↩
4. The strict substantiation requirements apply to "any item with respect to an activity which is of a type generally considered to constitute entertainment".
5. The amount of the addition to tax is reduced by amounts paid by the filing deadline.