Many taxpayers use the standard business mileage rate to compute a deduction for the business use of their car because of its simplicity. However, it is important to recognize that the tax code imposes strict limitations on the use of the standard mileage rate. A recent case illustrates some of these limitations.
Royster v. Commissioner, TC Memo. 2010-16 (2010)
A taxpayer kept a log of his travel. Each day, he noted in his log 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.
The Court's opinion. 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. IRC 274. The court explained: