For and example of IRS stand regarding the recordkeeping see: (if you have Acrobat reader, you can look at an example prepared by the IRS - Daily car Log  Weekly Travel Expense )

Introduction

Your Shields

l the cost of the listed property and other items such as repairs and maintenance;

l the dates of use;

l the name of the user;

l for a vehicle, the number of miles driven, or amount of time the property, other than property constituting a means of transportation, was used; and

l the business purpose of the use of the listed property.¹³

13 Temp Reg §1.274-5T(b)(6).

Manner of Defense

The method for defending the business use of car or other business property is generally the same as that for substantiating travel and entertainment expenses, although alternative methods are also available in certain circumstances. In general, a taxpayer must substantiate each element of an expenditure for the use of listed property by adequate records or by sufficient evidence corroborating his own statement.¹⁴ An adequate record substantiating the business/investment use of listed property must contain sufficient information as to each element of every business/investment use. However, the level of detail required may vary, depending on the facts and circumstances. For example, a taxpayer who uses a truck for both business and personal purposes and whose only business use of a truck is to make deliveries to customers on an established route may satisfy the adequate records requirement by recording the total number of miles driven during the tax year, the length of the delivery route, and the date of each trip. The date of each trip must be recorded at or near the time of the trip. Alternatively, the taxpayer may establish the date of each trip with a receipt, record of delivery, or other documentary evidence.¹⁵

15 Temp Reg §1.274-5T(c)(2)(ii)(C)(1).

Generally, an adequate record must be written. However, a record of the business use of listed property, such as a computer or automobile, prepared in a computer memory device with the aid or a logging program constitutes an adequate record.¹⁶ For further discussion of what constitutes adequate records and sufficient corroborating evidence.

16 Temp Reg §1.274-5T(c)(2)(ii)(C)(2).

Proof necessary to substantiate listed property deductions normally consists of a combination of account books, diaries, logs, or similar records, and documentary evidence such as receipts and paid bills. For example, substantiation of the amount of the expenditure for listed property generally consists of receipts or paid bills showing the date and the amount of the purchase. The proof relating to the actual use of that listed property (that is, date, name of use, time, and business purpose) normally consists of an account book, diary, or similar log.¹⁷ A sampling method may be available for a taxpayer who maintains representative adequate records for a portion of the year. See §G:8.69.

17 See Temp Reg §1.274-5T(c).

Travel and entertainment expenses for listed property must be proved without resort to the Cohan approximation rule.¹⁸

18 Temp Reg §1.274-5T(a)(4); see Cohan v Commr, 39 F2d 540 (2d Cir 1930), 2 USTC ¶489.

(1) that based on evidence that satisfies the substantiation requirements or statements submitted by employees that summarize such evidence, all or a portion of the use of the listed property is by employees in the employer's trade or business, and the employer included an appropriate amount in the income of any employee who used the property for personal purposes; or

(2) for a vehicle, the employer treats all use by employees as personal use and includes an appropriate amount in the employee's income.¹⁹

19 Temp Reg §1.274-5T(e)(2).

For purposes of substantiating the business/investment use of listed property provided to an employee, the employer may rely on adequate records maintained by the employee or on the employee's own statement, if corroborated by other sufficient evidence, unless the employer knows or has reason to know that the statement, records, or other evidence are not accurate. The employer must retain a copy of the adequate records maintained by the employee or the other sufficient evidence, if available. Alternatively, the employer may rely on a statement submitted by the employee that provides sufficient information to allow the employer to determine the business/investment use of the property, unless the employer knows or has reason to know that the statement is not based on adequate records or on the employee's own statement corroborated by other sufficient evidence. The employer must retain a copy of the employee's statement only. The employee must retain a copy of the adequate records or other evidence.²⁰

20 Temp Reg §1.274-5T(e)(2)(ii).

{Last date letter read} 04/17/97 Last Read By: Last Date Saved: 04/08/97 10:08 PM Last Saved By: Bob Parrish