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It is important for church leaders to recognize that the tax code imposes strict limitations on the use of the standard mileage rate.

A taxpayer kept a log of his travel. Each day, he noted the beginning and ending mileage but did not note each place he stopped or the business purpose of the stop. For three years he claimed deductions for 67,910 miles, 62,456 miles, and 58,616 miles for the business use of his cars. The IRS audited his returns for these years, and denied a deduction for any of these miles on the ground that they were not adequately substantiated. The taxpayer appealed to the Tax Court. Royster v. Commissioner, TC Memo. 2010-16 (2010)

The court noted that a deduction is not allowed for the business use of a car unless the taxpayer substantiates: (1) The amount of such expense, (2) the time and place of the travel, and (3) the business purpose.

In the absence of adequate records, a taxpayer "may alternatively establish an element by his own statement, whether written or oral, containing specific information in detail as to such element" and by "other corroborative evidence sufficient to establish such element." However, the tax code specifically precludes the deduction of automobile expenses on the basis of an approximation or a taxpayer's uncorroborated testimony.

The court ruled that the taxpayer was not entitled to any deduction for his business miles, based on the following considerations:

• For one of the years in question, the taxpayer offered a random sampling of invoices to corroborate his mileage. The court noted that the tax code "requires a specific showing of time, place of travel, and business purpose."
• For one of the years in question, the miles reported in the taxpayer's log differed from the miles upon which he based a business expense deduction.
• The taxpayer's logs "contain entries for only the beginning and ending odometer reading of the vehicle for each day. The logs do not contain any entries regarding the business purpose of the trips or the destination of each trip as required by [the tax code]."
• The logs also indicate that the taxpayer drove multiple vehicles, but did not indicate which vehicle was being driven at the time entries were made.
• The taxpayer offered only a sampling of total invoices.
• The taxpayer's testimony regarding his business miles "was vague, unspecific, and unpersuasive as to the business purpose of the respective trips. Moreover [the tax code] specifically precludes the allowance of automobile expenses on the basis of an approximation or a taxpayer's uncorroborated testimony."

The court ruled that the taxpayer was liable for "accuracy-related penalties" pursuant to section 6662 of the tax code. This section imposes a 20-percent penalty for any underpayment of tax attributable to negligence or disregard of rules or regulations.

The IRS insisted that the taxpayer was liable for an accuracy-related penalty on account of negligence or disregard of rules or regulations. The court agreed: "The taxpayer has failed to meet his burden of proving that he was not negligent or that he acted with reasonable cause and in good faith. His mileage logs are not adequate records for his car expenses claimed on Schedules C. Furthermore, he was not able to provide sufficient additional evidence to meet the strict substantiation requirements of section 274(d). Accordingly, we hold that he is liable for the accuracy-related penalties."

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