Category Archives: Tax Planning Strategies

Want to deduct your driving expenses? Tax court says you better keep excellent records.

A Tax Court case this year drives home the point that there are no shortcuts or bypasses for people wanting to take deductions for using a car for business. The taxpayers who went to court reached one dead end after another in their quest for write-offs, but the case provides a roadmap for anyone looking to navigate the path (yes, I could go on with this…but I won’t) of tax-deductible business travel.

James Clement Powell and Lucy H. Powell went to court after the IRS denied $24,253 in vehicle expense deductions taken by their S Corp., WPL, Inc.

While Mr. Powell kept a mileage log, the court noted, among other things, that

–many of the mileage log entries didn’t list a destination,

–mileage totals sometimes differed for two trips to the same destination,

–some entries listed only estimated or rounded mileage totals, and

–in some cases a month’s worth of trips to a location were summarized in one mileage entry.

The court said that only the daily entries that listed the date of a trip, the destination, the purpose of the trip, and the exact mileage driven could meet the substantiation requirements for deducting business mileage. Entries that looked like estimates or that didn’t include either actual destinations or the purpose of the trip wouldn’t qualify.

Bottom line: The court disallowed $17,110 of deductions, leaving the Powells liable for back taxes plus interest and penalties.

For other taxpayers, the message is clear. The best way to prove and defend deductions for legitimate business travel is to keep a daily mileage log of your business trips. Record the date, your beginning odometer reading, where you are going and the business purpose, and your ending odometer reading. The difference between the two odometer numbers is your business mileage for that trip or that day; at the end of the month, quarter or year you can tally up your deductible business mileage.

You can find the whole story of the Powells by searching the internet for T.C. Memo 2016-111.

“The Situation” is in a not-so-good tax situation

Did you know that “Jersey Shore” reality show personality Michael Sorrentino, aka “The Situation”, and his brother Marc, grossed almost $9 million in a variety of ventures over four years? Me neither, until I read the U.S. District Court indictment, reported inThe New York Times,charging the brothers with conspiracy and filing false tax returns. Michael… Continue Reading

How Oregon is helping a billionaire save some bacon on Bacon

There are two current mysteries about Francis Bacon’s Three Studies of Lucien Freud. First, who paid $142.4 million, the most ever paid for a work of art at auction, in November for the triptych? Second, why is it currently being displayed a mere three miles from my home, in the well-regarded-but-let’s-face-it-not-internationally-renowned Portland Art Museum? Can’t… Continue Reading

Apple avoids billions in taxes, and it all looks legal; those guys really are smart

Lawmakers are using words like “gimmicks” and “schemes” to describe how Apple Corporation has used a web of subsidiaries spanning the globe to avoid taxes. There are hearings this week at which Congressmen are expected to say they are shocked, shocked, to hear of tax loopholes being exploited. As The New York Times reported, Congressional… Continue Reading

Sex and the IRS: making “friends” with your IRS auditor, extreme version

Dear IRS: I’ve Read About This In Your Manuals, But I Never Thought It Would Happen To Me… Sometimes I sort through tedious tax court cases looking for some mildly interesting nugget to share, and sometimes a thing of sheer weirdness lands in my lap. An Oregon man has filed a lawsuit claiming that an… Continue Reading

Gay marriage at the Supreme Court: Taxes, as usual, are the key to everything

Edith Windsor saw the federal government claim more than $360,000 in taxes on the assets she inherited from her spouse’s estate when her spouse died in 2009. How could that be, when you are allowed to inherit an unlimited amount from a spouse free of estate tax? Edith’s spouse was a woman. She and Thea… Continue Reading