Patricia Chappell v. Comm., TCS 2024-2

Patrica Chappell used MileIQ to track location from March 23 and Dec. 15, 2015. From the app, she entered whether trips were business or personal. MileIQ summarized Ms. Chappell’s tracking information and provided a log that could be used to help substantiate her business miles driven during the year. Ms. Chappell’s driver’s license was suspended for about six months in the middle of 2015. During that time, she used a driver. In a close examination of her records, there were inconsistencies in dates and purchases. There were several days on which gas was purchased multiple times, but no excessive number of miles were recorded by MileIQ. Her records showed one day on which there was a fuel purchase recorded in Ohio when MileIQ and an updated mileage log indicated that Ms. Chappell was in Washington, D.C. attending an IRS conference. The updated mileage log included a “business purpose” column which was inconsistently completed.

Auto expenses are allowable when property substantiated. Substantiation rules, discussed above, are strict when applied to listed property such as cars. While Ms. Chappell may have been able to substantiate mileage and percentage business use through the use of an app, the court was not convinced that her expenses were accurate. With lack of faith in the expense records, the Court fell back on the standard mileage rate and allowed a portion of the automobile expense claimed using the cents per mile calculation on with the modified mileage log that included business purpose of the trip.

Tax practitioner planning.  Tax preparers are held to a higher standard by the IRS and the courts.  Preparers should know the rules and obey them.

Also see.

Suzanne M. Scholz v. Comm., TCS 2022-5 Where a handwritten mileage log prepared after the fact and some repair service receipts were accepted to substantiate vehicle expenses. The Court was very generous – usually, no records equal no deductions.

Cheri L. Rau v. Comm., TCS 2022-4  Where telling the court a mileage log exists does not actually create the mileage log. A spreadsheet created for trial with cryptic notes did not meet substantiation rules. Without appropriate substantiation, auto expenses were not allowed in excess of the amounts IRS had already allowed.

James and Connie Harwood v. Comm., TCM 2022-8 Mr. Harwood had adequate records for his mileage expenses. Unfortunately, his mileage was mostly commuting.

Tax practitioner planning. Although the Harwood case is about a union employee’s business expenses (non-deductible for 2022), it does provide a useful point on commuting. A self-employed contractor cannot claim mileage from his home to the first job site unless he has a home office. If he has a home office, he drives from one business site to another.