Attorney-at-Law

“WON’T YA LET ME TAKE YA ON A SEA CRUISE?”

In Uncategorized on 11/04/2019 at 16:08

Senior Judge Joel Gerber is willing to let Roger G. Maki write off travel and meal expenses for looking after his 100 acres of Washington State timberlands. The timber on the lands was worth millions, and some of it had been rustled. Rog’s logs and records for the year at issue had been lost when his cabin was vandalized, but he had made an abstract (he said), which he gave to IRS pretrial.

But Judge Gerber says “No” when Rog poses a paraphrase of the above inquiry from the 1959 Huey “Piano” Smith and Frankie Ford hit.

Rog claimed he made 47 round trips of 300 miles each from his home to the timberlands, and was away 161 days during the year at issue. And Judge Gerber buys Rog’s testimony about his repetitive trips to the timber, and planting new trees to replace old. So Rog is in business and gets Section 162 treatment.

IRS bought Rog’s car and truck, and taxes and licenses expenses. They hit him for unreported Social Security, which he doesn’t contest. But IRS disallows Rog’s 7K of travel expenses and $55K of per diem.

Hence and wherefore, Roger G. Maki and Lilane J. Gervais, 2019 T. C. Sum. Op. 34, filed 11/4/19.

“A self-employed individual can deduct meal expenses computed at the Federal rate established for the locality in which meal expenses were incurred while away from home. See Rev. Proc. 2011-47, sec. 1, 2011-42 I.R.B. 520, 520. The Federal published rate is deemed substantiated for purposes of section 1.274- 5T(b)(2)(i) and (c), Temporary Income Tax Regs., 50 Fed. Reg. 46014-46015, 46016 (Nov. 6, 1985). Self-employed individuals may not use this method to substantiate lodging expenses. See Rev. Proc. 2011-47, sec. 1.” 2019 T. C. Sum. Op. 34, at p. 6.

But Rog has a problem, as indicated by the headline hereof.

“Petitioners used the per diem rates for ‘Luxury Water Travel’ to compute the annual per diem deduction. The rates used ranged from $320 to $374 per day and are intended for away from home expenses incurred on an ocean liner or cruise ship. The rates are based on the highest Federal per diem rates, which include lodging, meals, and incidentals. Using the luxury rates, petitioners computed and deducted $55,925 in away from home per diem expenses for [year at issue]. We note that petitioners did not provide any evidence of the lodging expenses actually incurred in the timber activity during [year at issue].

“Under Rev. Proc. 2011-47, 2011-42 I.R.B. 520, the Federal per diem rate (for meals) that applies to many smaller localities, including the counties in which petitioner’s timber land is situated, is $46. Petitioner through his testimony and the summary taken from his logs has shown that he was away from home on business for 161 days during [year at issue]. Accordingly, he is entitled to deduct $7,406 of per diem expenses ,,,(161 times $46).” 2019 T. C. Sum. Op. 34, at pp. 6-7.

Rog’s travel miles stand up, although Judge Gerber won’t let Rog take him on a sea cruise.

 

 

 

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