Car and Truck Expenses Allowed Based on Mileage Not Actual Costs, Absent Records

Published Categorized as Federal Income Tax, Recordkeeping, Tax Deductions, Tax Procedure
Example Of How The Irs Evaluates Offer In Compromise For Doubt As To Collectibility, Houston Tax Attorney

In Aivatzidis v. Commissioner, T.C. Summary Opinion 2013-105, the U.S. Tax Court concluded that a professional driver could deduct expenses based on mileage, but not for actual expenses. This case provides an example of why drivers should compute car and truck expenses based on mileage if they do not have sufficient records.

Facts & Procedural History

Mr. Aivatzidis was a limousine driver. Mr. Aivatzidis timely filed a joint federal income tax return for 2009.

He deducted $16,992 of business car and truck expenses and $5,567 as repair and maintenance expenses for his limousine driver business on his on Schedule C. He also deducted $20,099 of unreimbursed employee business expenses on Schedule A.

The IRS conducted an audit to Mr. Aivatzdis’ 2009 federal income tax return.

The IRS accepted all of the business car and truck expenses ($16,992) and a portion of the reimbursed employee business expenses ($3,257), but none of the $5,567 repair and maintenance expenses.

The IRS accepted the business car and truck expenses as determined by Mr. Aivatzidis. These expenses were for the SUV that Mr. Aivatzidis used in his limo business. The IRS accepted the amount of this deduction as Mr. Aivatzidis computed the deduction based on mileage rather than actual expenses. The law allows taxpayers to use a standard mileage rate as established by the IRS in lieu of substantiating actual expenses for the business use of a passenger automobile.

The $5,567 vehicle repair expenses were for a town car in Mr. Aivatzidis’ limo business. The costs were to repair the town car after it was involved in two accidents. Mr. Aivatizidis did not compute the deduction for the town car based on mileage, as he did with the SUV. The court concluded that Mr. Aivatizidis did not provide any substantiation for any automobile repair or maintenance expense paid in 2009 or that he even owned the town car. As such, the court disallowed the vehicle repair expenses.

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