The opinion
IN THE OREGON TAX COURT
MAGISTRATE DIVISION
Income Tax
LESLIE D. MARCUM, )
)
Plaintiff, ) TC-MD 150414N
)
v. )
)
DEPARTMENT OF REVENUE, )
State of Oregon, )
)
Defendant. ) FINAL DECISION
This Final Decision incorporates without change the court’s Decision, entered April 4,
2016. The court did not receive a statement of costs and disbursements within 14 days after its
Decision was entered. See TCR-MD 16 C(1).
Plaintiff appeals Defendant’s Notice of Deficiency Assessment dated July 28, 2015, for
the 2011 tax year. A trial was held in the Oregon Tax Courtroom on January 12, 2016, in Salem,
Oregon. Vern Holstad (Holstad), CPA, appeared and testified on behalf of Plaintiff. Plaintiff
testified on his own behalf. Colin Currier (Currier), Tax Auditor, appeared and testified on
behalf of Defendant. Plaintiff’s Exhibits 1 through 8 and Defendant’s Exhibits A through I were
received without objection
I. STATEMENT OF FACTS
Plaintiff worked as a timber faller for Fallon Logging Co., Inc., in 2011. (See Ptf’s Ex 1
at 1; Ex 4; Ex 5 at 1.) Plaintiff testified that he would receive a job assignment from his
employer and continue working at that job site until told otherwise. He testified that he drove his
pickup truck to the job sites. Plaintiff testified that his tools were in his truck and ready to go.
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FINAL DECISION TC-MD 150414N 1
A. Mileage
Plaintiff testified that he prepared a mileage calculation listing his job sites in 2011.
(See Ptf’s Ex 6 at 1-2.) He testified that he kept that record periodically. The mileage
calculation lists four job sites in 2011, the number of days driven to each job site, and the round
trip miles per day. (See id.) Based on Plaintiff’s log, he worked the “Buck MTN” job from
January through April 2011, for which he drove 90 miles per day for 85 days. (Id.) Plaintiff
worked the “Cockran” job from May to July 2011, for which he drove 112 miles per day for 64
days. (Id.) Plaintiff worked the “Hug PT.” job from August through October 2011, for which he
drove 100 miles per day for 65 days. (Id.) Plaintiff worked the “Vermilya” job in November
and December 2011, for which he drove 31 miles per day for 32 days. (Id.) Plaintiff calculated
his 2011 business mileage to be 22,300 miles. (Id.) Holstad testified that Plaintiff’s pickup truck
was used 100 percent for business. Plaintiff testified that his personal vehicle was a Chevrolet.
Holstad testified that Plaintiff’s odometer readings also support Plaintiff’s calculation that he
drove 22,300 business miles in 2011. (See id. at 3.)
Plaintiff testified that he was required to go to his employer’s shop to fill his fuel. He
provided a letter from his employer stating that
“timber fallers get reimbursed daily for driving their personal vehicles to our job
sites. They receive $20.00 per day for driving under 60 miles from the Fallon
Logging shop, to our jobs. If it’s over 60 miles from our shop, they get $30.00
per day. The monies are for the wear and tear of the vehicles, as the fuel is
provided here at our shop.”
(Ptf’s Ex 5 at 1.) Holstad testified Plaintiff rented equipment from his employer and received
reimbursements from his employer that appeared on Plaintiff’s W-2. (See Ptf’s Ex 1at 1; Ex 4.)
Plaintiff’s 2011 W-2 reported total wages of $46,933. (Ptf’s Ex 4.) His December 2011 paystub
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FINAL DECISION TC-MD 150414N 2
indicated that, of that amount, $300 was for “PROTECTIVE EQUIPM,” $3,960 was for
“PICKUP RENT <60,” and $3,893 was for “SAW RENT (SAIF EX).” (Id.)
Plaintiff provided a 2011 Activity Detail Report from his employer that states the date
and quantity of Plaintiff’s fuel fills. (Ptf’s Ex 5 at 2-4.) The Report indicates that Plaintiff filled
fuel at the shop 84 times in 2011. (See id. at 1-4.) Plaintiff tallied his total fuel from 2011 to be
1,518 gallons. (See id. at 4.) Plaintiff testified that he checked the fuel economy of his pickup
truck and it was about 18 miles per gallon. Holstad testified that Plaintiff’s fuel reimbursements
substantiate his claimed mileage for 2011. (See Ptf’s Ex 5.) Holstad testified that, of the 1,518
gallons of fuel, he estimated that Plaintiff used 260 gallons for saws, therefore, Plaintiff used
1,258 gallons of fuel for his truck. Holstad testified that, assuming Plaintiff’s pickup truck got
only 17 miles per gallon, that indicates Plaintiff drove 21,386 miles.
B. Cell Phone
Plaintiff testified that, in 2011, he had a cell phone for work. He testified that he does not
want a cell phone and only bought one because of work. Plaintiff testified that he used to have a
landline until he got a cell phone. He testified that, in 2011, he had two cell phones; the second
was a spare he kept in his glove compartment. Plaintiff testified that he may receive a few calls
per day from other timber fallers to provide a safety check or to report that they are going to get
more equipment. He testified that he receives personal calls periodically. Plaintiff testified that
he did not allocate any of his cell phone expense to personal use; he thought his use was all
business because that is the only reason he had a cell phone. Plaintiff testified his total monthly
cell phone bill was $99.94 in 2013, and he thought his bill was about the same in 2011.
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FINAL DECISION TC-MD 150414N 3
C. Work Clothes
Holstad testified that safety is very important for timber fallers and Plaintiff was required
to “wear ‘protective clothing’ modified in ways to assure [his] safety * * *.” (See Ptf’s Ex 1
at 2.) Plaintiff testified that OSHA requires him to cut the hems off his pants. He testified that,
as a result, he does not wear his work pants outside of work. Plaintiff provided to Defendant a
receipt for Rustler jeans and a receipt for suspenders. (See Def’s Ex G at 3-4.)
D. Plaintiff’s 2011 Income Tax Return
Holstad testified that he did not prepare Plaintiff’s 2011 income tax return, but he
received the materials that Plaintiff provided to his original preparer. On his 2011 Schedule A,
Plaintiff claimed unreimbursed employee expenses totaling $14,081. (Def’s Ex B at 5.) That
amount is comprised of a mileage expense of $11,875, based on 22,300 miles, and other business
expenses totaling $2,206. (Id. at 6-7.)
E. Defendant’s Audit
Defendant audited Plaintiff’s 2011 income tax return and disallowed $13,117 of
Plaintiff’s claimed unreimbursed employee business expenses. (Def’s Ex C at 1.) Defendant
allowed expenses for ropes, chainsaw parts, logging equipment, and boots. (Def’s Ex G at 1.)
Plaintiff requested a conference with Defendant, and the conference officer upheld the prior
adjustments with the exception of an additional expense allowance of $25.95 for chainsaw oil.
(Def’s Ex C at 4; Ex G at 2.)
Currier testified that, under Revenue Ruling 99-7, commuting from home to a job site is
personal commuting mileage, not business mileage. (See Ptf’s Ex H at 25.) Thus, he questions
whether Plaintiff may deduct his mileage.
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FINAL DECISION TC-MD 150414N 4
Currier testified that, even if Plaintiff’s mileage were deductible, Plaintiff failed to
adequately substantiate his mileage. He testified that taxpayers may not estimate mileage under
the substantiation requirements of IRC section 274(d). (See Def’s Ex H at 14-23.) Currier
testified that Plaintiff told him at the audit interview that his mileage log was created at the end
of the year based on memory, whereas Plaintiff testified at trial that he maintained his mileage
log periodically. (See Def’s Ex A at 13, Ex D at 5-6.) He testified that, due to Plaintiff’s
conflicting statements, he is unsure when Plaintiff created his mileage log. Currier testified that
Plaintiff’s log reported an odometer reading of 114,091 on January 1, 2011, whereas Plaintiff left
a message for Defendant on January 6, 2015, stating that his mileage was 112,000 on January 1,
2011. (See Def’s Ex F at 2.) He testified that he has no doubt that Plaintiff drove for work, but it
is unclear where he drove, how far, or for what purpose.
Currier testified that Plaintiff’s cell phone bill from 2013 is not adequate substantiation
for his 2011 cell phone expense. He testified that Plaintiff failed to allocate his cell phone
expense between business and personal usage.
Currier testified that Plaintiff is not entitled to deduct expenses for jeans, suspenders, and
socks because those items are not specialized safety wear and may be used for everyday wear.
II. ANALYSIS
The issue presented is whether Plaintiff is entitled to deduct certain unreimbursed
employee business expenses for the 2011 tax year. Specifically, Plaintiff challenges Defendant’s
disallowance of his claimed deductions for transportation, cell phone, and clothing expenses.
(See Ptf’s Ex 1.)
The Oregon Legislature intended to “[m]ake the Oregon personal income tax law
identical in effect to the provisions of the Internal Revenue Code relating to the measurement of
FINAL DECISION TC-MD 150414N 5
taxable income of individuals, estates and trusts, modified as necessary by the state’s jurisdiction
to tax and the revenue needs of the state[.]” ORS 316.007(1).1 “Any term used in this chapter
has the same meaning as when used in a comparable context in the laws of the United States
relating to federal income taxes, unless a different meaning is clearly required or the term is
specifically defined in this chapter.” ORS 316.012. On the issue presented in this case,
“Oregon law makes no adjustments to the rules under the Internal Revenue Code (IRC) and
therefore, federal law governs the analysis.” See Porter v. Dept. of Rev., 20 OTR 30, 31 (2009).
IRC section 162(a) allows a deduction for “all ordinary and necessary expenses paid or
incurred during the taxable year in carrying on any trade or business.” “To be ‘necessary[,]’ an
expense must be ‘appropriate and helpful’ to the taxpayer’s business. * * * To be ‘ordinary[,]’
the transaction which gives rise to the expense must be of a common or frequent occurrence in
the type of business involved.” Boyd v. Comm’r, 83 TCM (CCH) 1253, WL 236685 at *2
(2002) (internal citations omitted). IRC section 262 generally disallows deductions
for “personal, living, or family expenses” not otherwise expressly allowed under the IRC.
Taxpayers must be prepared to produce “any books, papers, records or memoranda
bearing upon [any] matter required to be included in the return[.]” ORS 314.425(1); see also
Gapikia v. Comm’r, 81 TCM (CCH) 1488, WL 332038 at *2 (2001) (“Taxpayers are required to
maintain records sufficient to substantiate their claimed deductions”). Generally, if a claimed
business expense is deductible, but the taxpayer is unable to substantiate it fully, the court is
permitted to make an approximation of an allowable amount. Cohan v. Comm’r, 39 F2d 540,
543-44 (2nd Cir 1930). The estimate must have a reasonable evidentiary basis. Vanicek v.
Comm’r, 85 TC 731, 743 (1985). IRC section 274(d) supersedes the Cohan rule and imposes
1
The court’s references to the Oregon Revised Statutes (ORS) are to 2009.
FINAL DECISION TC-MD 150414N 6
more stringent substantiation requirements for travel, meals, entertainment, gifts, and listed
property under IRC section 280F(d)(4)(A)(i). Treas Reg § 1.274-5T(a).
Deductions are “a matter of legislative grace” and taxpayers bear the burden of proving
their entitlement to the deductions claimed. INDOPCO, Inc. v. Comm’r, 503 US 79, 84,
112 S Ct 1039, 117 L Ed 2d 226 (1992). “In all proceedings before the judge or a magistrate of
the tax court and upon appeal therefrom, a preponderance of the evidence shall suffice to sustain
the burden of proof. The burden of proof shall fall upon the party seeking affirmative relief
* * *.” ORS 305.427. Plaintiffs must establish their claim “by a preponderance of the
evidence[,]” which “means the greater weight of evidence, the more convincing evidence.”
Feves v. Dept. of Revenue, 4 OTR 302, 312 (1971). “[I]f the evidence is inconclusive or
unpersuasive, the taxpayer will have failed to meet his burden of proof * * *.” Reed v. Dept. of
Rev., 310 Or 260, 265, 798 P2d 235 (1990). “In an appeal to the Oregon Tax Court from an
assessment made under ORS 305.265, the tax court has jurisdiction to determine the correct
amount of deficiency * * *.” ORS 305.575.
A. Mileage
A taxpayer may deduct “traveling expenses * * * while away from home in the pursuit of
a trade or business[.]” IRC § 162(a)(2). However, a “taxpayer’s costs of commuting to his place
of business or employment are personal expenses and do not qualify as deductible expenses.”
Treas Reg 1.262-1(b)(5). “Commuting expenses are considered not to be required by business
because where a taxpayer chooses to live is a personal decision. The distance a taxpayer chooses
to live from his place of business does not change the character of the expense.” Harding v.
Dept. of Rev., 13 OTR 454, 458 (1996). Traveling expenses are subject to the substantiation
requirements of IRC section 274(d). Taxpayers must substantiate such expenses “by adequate
FINAL DECISION TC-MD 150414N 7
records or by sufficient evidence corroborating the taxpayer’s own statement” the amount, time,
place, and business purpose of the travel. IRC § 274(d); Treas Reg 1.274-5T(b)(2).
In this case, Plaintiff deducted mileage associated with his daily transportation to four
different job sites in 2011. As noted above, daily commuting expenses are a personal expense
and may not be deducted pursuant to IRC section 262. However, Rev Rul 99-7, 1991-1 CB 361
(Rev Rul 99-7) describes several circumstances under which a taxpayer may deduct daily
transportation expenses for travel between the taxpayer’s residence and a work location:
“(1) A taxpayer may deduct daily transportation expenses incurred in going
between the taxpayer’s residence and a temporary work location outside the
metropolitan area where the taxpayer lives and normally works. However, unless
paragraph (2) or (3) below applies, daily transportation expenses incurred in going
between the taxpayer’s residence and a temporary work location within that
metropolitan area are nondeductible commuting expenses.
“(2) If a taxpayer has one or more regular work locations away from the
taxpayer’s residence, the taxpayer may deduct daily transportation expenses
incurred in going between the taxpayer’s residence and a temporary work location
in the same trade or business, regardless of the distance. * * *
“(3) If a taxpayer’s residence is the taxpayer’s principal place of business within
the meaning of § 280A(c)(1)(A), the taxpayer may deduct daily transportation
expenses incurred in going between the residence and another work location in
the same trade or business, regardless of whether the other work location
is regular or temporary and regardless of the distance.”
(Emphasis in original.) A work location is temporary if employment at that location “is
realistically expected to last (and does in fact last) for 1 year or less.” Id.
No evidence was presented to suggest that Plaintiff’s residence was his principal place of
business, as required by the third circumstance in Rev Rul 99-7. Thus, the court focuses on the
first and second circumstances.
The first and second circumstances described in Rev Rul 99-7 each require that the
taxpayer’s travel was to a temporary work location. According to his mileage log, Plaintiff
FINAL DECISION TC-MD 150414N 8
worked at four different locations in 2011. No evidence was presented to suggest that any of
those work locations were expected to last for more than one year. The court concludes that
Plaintiff’s four work locations were “temporary” within the meaning if Rev Rul 99-7.
1. Temporary Work Location Outside of Metropolitan Area
Under the first circumstance described in Rev Rul 99-7, a taxpayer may deduct daily
transportation expenses for travel between the taxpayer’s residence and a temporary work
location outside of the metropolitan area where the taxpayer lives and normally works. In
defining the metropolitan area where a taxpayer lives and normally works, the US Tax Court
indicated that it will “evaluate the facts and circumstances” and “decline[d] to adopt any such
rigid definition” of metropolitan area, such as the OMB standard defining metropolitan statistical
area. See Bogue v. Comm’r, 102 TCM (CCH) 41, WL 2709818 at *10-11 (2011), aff’d 522 Fed
Appx 169 (3rd Cir 2013). The taxpayer must “normally” work in a particular metropolitan area.
See Austin v. Dept. of Rev., 20 OTR 20, 23-26 (2009) (concluding that the taxpayer did not
“normally” work in the Salem metropolitan area because, over a seven year period, the taxpayer
“worked in the Salem metropolitan area in significantly varying amounts of time, and in two
years, not at all”). The taxpayer must also live in the metropolitan area where the taxpayer
normally works. See Aldea v. Comm’r, 79 TCM (CCH) 1917, WL 371549 at *4 (2000)
(upholding the disallowance of the taxpayer’s daily transportation expenses because “[t]he
record does not indicate that [taxpayer] ever worked in, had the prospect of work in, or had any
other business tie to [the city where taxpayer lived]”); see also Porter v. Dept. of Rev., 20
OTR 30, 33 (2009) (reaching the same conclusion as in Aldea).
In this case, Plaintiff presented no evidence from which the court may determine the
metropolitan area where he lived and normally worked. Plaintiff did not, for example, present
FINAL DECISION TC-MD 150414N 9
evidence of his past work locations or provide a map showing the location of any of his work
locations in 2011. Other than the round trip mileage reported by Plaintiff, the court received no
evidence of Plaintiff’s work locations in 2011 relative to the location of his residence. On that
question, Holstad wrote that it “would be quite a stretch” to conclude that “the Tillamook Forest”
was a metropolitan area. (Ptf’s Ex 1at 1.) Holstad’s assertion that the Tillamook National Forest
could not be considered a metropolitan area does not help the court determine whether Plaintiff
lived and normally worked in a particular metropolitan area and, if so, whether he traveled
outside of that metropolitan area for work in 2011. The court finds Plaintiff has failed to prove
by a preponderance of the evidence that he is entitled to deduct daily transportation expenses
based on the first circumstance described in Rev Rul 99-7.
2. Regular Work Location
Under the second circumstance described in Rev Rul 99-7, a taxpayer may deduct daily
transportation expenses for travel between the taxpayer’s residence and a temporary work
location if the taxpayer has one or more regular work locations away from the taxpayer’s
residence. With respect to the “regular work location” circumstance, the US Tax Court observed
that the term “regular work location” is not defined in Rev Rul 99-7 and determined that it
should be given the same definition as “regular place of business” under Rev Rul 90-23, 1990-1
CB 28. Bogue, WL 2709818 at *12. Rev Rul 90-23 defines “regular place of business” as “any
location at which the taxpayer works or performs services on a regular basis.”
Plaintiff testified that he was required to fill fuel at his employer’s shop and he provided a
letter from his employer corroborating his testimony. Plaintiff provided a document detailing his
fuel fills in 2011 that indicated Plaintiff filled fuel at his employer shop 84 times in 2011. It is
unclear from the evidence and testimony presented in this case if Plaintiff performed any other
FINAL DECISION TC-MD 150414N 10
services at his employer’s shop. Plaintiff’s employer’s shop may be a regular work location, but
Plaintiff did not present sufficient evidence for the court to determine one way or the other.
Plaintiff has, therefore, failed to meet his burden of proof that he is entitled to deduct daily
transportation expenses under any of the circumstances described in Rev Rul 99-7.
B. Cell Phone
Plaintiff claimed a deduction for expenses associated with his cell phone. Plaintiff
testified that his employer required him to maintain a cell phone, but provided no documentary
evidence to corroborate his testimony. Plaintiff provided a reasonable explanation of how a cell
phone was appropriate and helpful in his line of work; he used the cell phone to check in with
other timber fallers and his employer. However, Plaintiff’s claim that his cell phone was used
100 percent for business is not reasonable. Plaintiff conceded that he received some personal
phone calls on his cell phone and he testified that he gave up his landline when he obtained a cell
phone. Plaintiff did not provide any persuasive evidence from which the court can determine the
total amount of Plaintiff’s cell phone expenses in 2011, or from which the court can determine a
reasonable allocation for business use. Plaintiff’s only evidence of his cell phone expense was a
cell phone bill from 2013, which has no bearing on 2011.
C. Work Clothes
Expenses for work clothes may be deductible under IRC section 162(a). “The generally
accepted rule governing the deductibility of clothing expenses is that the cost of clothing is
deductible as a business expense only if: (1) the clothing is of a type specifically required as a
condition of employment, (2) it is not adaptable to general usage as ordinary clothing, and (3) it
is not so worn.” Pevsner v. Comm’r, 628 F2d 467, 469 (5th Cir 1980), citing Donnelly v.
Comm’r, 262 F2d 411, 412 (2nd Cir 1959); see also Popov v. Comm’r, 246 F3d 1190, 1192 n2
FINAL DECISION TC-MD 150414N 11
(9th Cir 2001). In Donnelly, the Second Circuit upheld a lower court’s determination that the
taxpayer’s work clothes – “aprons and strong work clothes” used by taxpayer in his work “as a
buffer and polisher of rough plastics” – were not deductible expenses because they “were not
required as a condition of employment” and were “of a type adaptable to general usage.” Id.
Plaintiff provided receipts for purchases of two pairs of jeans and of suspenders. He
testified that OSHA required him to cut the hems off of his jeans for safety purposes. Plaintiff
provided no documentary evidence from either his employer or OSHA describing specific
clothing requirements for Plaintiff’s employment. Typically, jeans and suspenders are the types
of clothing adaptable to general usage. The court finds that Plaintiff failed to meet his burden of
proof that he is entitled to any deduction for work clothes.
III. CONCLUSION
After careful consideration, the court concludes that Plaintiff has failed to establish by a
preponderance of the evidence that he is entitled to any additional deduction for unreimbursed
employee business expenses for the 2011 tax year. Now, therefore,
IT IS THE DECISION OF THIS COURT that Plaintiff’s appeal is denied.
Dated this day of April 2016.
ALLISON R. BOOMER
MAGISTRATE
If you want to appeal this Final Decision, file a complaint in the Regular
Division of the Oregon Tax Court, by mailing to: 1163 State Street, Salem, OR
97301-2563; or by hand delivery to: Fourth Floor, 1241 State Street, Salem, OR.
Your complaint must be submitted within 60 days after the date of the Final
Decision or this Final Decision cannot be changed. TCR-MD 19 B.
This document was filed and entered on April 25, 2016.
FINAL DECISION TC-MD 150414N 12