April 1, 2014

Truck Expenses Not Deductible Due to Inadequate Mileage Log

Houston Tax Attorney Blog

Houston Tax Attorney

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In Houchin v. Commissioner, T.C. Summary Opinion 2014-29, the U.S. Tax Court concluded that truck expenses were not deductible as the mileage log did not note the locations the taxpayer traveled to.

The facts and procedural history are as follows:

  • Mr. Houchin worked as a truck driver, but was unemployed in 2010.
  • He collected unemployment compensation.
  • Mr. Houchin also engaged in a business activity of picking up old newspapers and selling them to a recycling company. He drove his truck to whatever locations he could find that had available newspapers. He maintained a mileage log wherein he recorded the date, starting and ending odometer readings, business mileage, and personal mileage for each trip with his truck during 2009 and 2010.
  • By the latter part of 2010, Mr. Houchin had secured a job as a truck driver with UPS.
  • The IRS audited Mr. Houchin’s 2010 Form 1040 and disallowed his truck expenses of $17,978.
  • Mr. Houchin petitioned the tax court to redetermine his tax liability.

Business expenses are deductible. Expenses associated with listed property require additional substantiation to be deductible. This additional substantiation requires the taxpayer to establish the amount of the expense, the time and place of travel, and the business purpose of the expense.

Vehicles used by truck drivers are normally not listed property, as they qualify for the exception that excludes “property substantially all of the use of which is in a trade or business of providing to unrelated persons services consisting of the transportation of persons or property for compensation or hire.” Personal vehicles are listed property.

Given the facts here, the court concluded that the expenses were subject to the additional substantiation requirements. Unfortunately, Mr. Houchin’s mileage log did not meet these requirements as it did not indicate the places where he traveled to. Mr. Houchin attempted to amend his mileage log to include this information, but, as noted by the court, this would not be sufficiently reliable. Accordingly, the court did not allow Mr. Houchin to deduct his vehicle expenses.

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