Tax Court in Brief | Pedersen v. Commissioner | Schedule A Itemized Miscellaneous Business Deductions by Employee

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The Tax Court in Brief – June 27th – July 1st, 2022

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Tax Litigation:  The Week of June 27th, 2022, through July 1st, 2022

Pedersen v. Commissioner, T.C. Summary Opinion 2022-11 | June 28, 2022 | Wells, J.| Dkt. No. 12748-19-S

Short Summary:

Key Issues:

Primary Holdings:

Key Points of Law:

Insights:  This case illustrates a common theme at the Tax Court level: In order to receive the grace permitted for deducting miscellaneous business expenses, travel expenses, and meals and entertainment expenses, the taxpayer must substantiate those expenses according to section 162 and, where applicable, according to the more stringent requirements of section 274(d). Mileage logs, contemporaneously kept and showing beginning and ending address for each trip as well as odometer readings, are advisable. Expenses reflected in credit card statements must be corroborated with receipts and statement of purpose. The taxpayer must be able to explain the specific business purpose for any business trip during which claimed deductible expenses were incurred. Terms of employment, including policies for employer reimbursement, should be established by objective evidence. In short, it is advisable, if not required, to (1) substantiate the reported expenses, (2) prove that there was a requirement to incur the expenses in the course of employment, and (3) prove that any expenses incurred were not reimbursable or reimbursed by the employer.

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