When Good Records Aren’t Enough: Lessons from Houchin v. Commissioner

A recent Tax Court case shows that keeping a mileage log is only half the battle—and guessing later won’t save your deduction.

The Setup

Michael Houchin was between truck-driving jobs in 2010. While collecting unemployment, he ran a side business picking up old newspapers and selling them to a recycling company. He drove his truck wherever he could find newspapers and kept a mileage log recording the date, starting and ending odometer readings, business mileage, and personal mileage for each trip.

On his 2010 return, prepared by H&R Block, he reported $1,274 of gross income, $142 of office expense, and **$17,978 in car and truck expenses**—producing a $16,846 net loss that offset other income. The IRS disallowed the entire vehicle expense deduction, which flipped the business to a net profit and triggered $160 of self-employment tax.

Why the Log Failed

This is the part every gig worker and small business owner should read closely.

Because a truck is “listed property” under §280F(d)(4), the strict substantiation rules of §274(d) apply. That means the taxpayer must prove, by adequate records or sufficient corroborating evidence:

  • the amount of the expense,
  • the time and place of travel, and
  • the business purpose of the expense.

Houchin’s log had dates and odometer readings—but it did not reflect a business purpose or the places where the business activity occurred. When the IRS asked for the missing locations, Houchin did something that sealed his fate: in 2012, he re-wrote his 2009–10 log by “writing in the places where he guessed he may have gone.”

The Court was blunt:

“Guessing as to where he may have gone in 2010, petitioner added the places of business travel to his log in 2012. The log was thus not contemporaneous, and the reconstruction was not reliable.”

A later reconstruction is permitted in theory, but only with corroborative evidence of a “high degree of probative value”—receipts, calendars, appointment records, etc. Houchin offered none. And critically:

“Although we believe that petitioner had business travel expenses in relation to his recycling business, section 274(d) precludes estimates.”

That’s the sting. The Court believed he actually incurred business expenses—and still disallowed every dollar, because §274(d) forbids approximations, no matter how credible the taxpayer.

The “Hobby” Argument Backfires

Houchin also argued his newspaper recycling was a “‘hobby’ type of business”—presumably hoping to avoid self-employment tax. The Court wasn’t buying it: he and his preparer had treated the activity as a Schedule C business and used the resulting loss to offset other income. Having claimed the business losses, he couldn’t pivot to “hobby” when the tax bill came due. With the truck expenses disallowed, his net self-employment income still exceeded $400, so the self-employment tax stood.

Practical Takeaways

  1. A log needs more than miles. Record the purpose and destination of every business trip at or near the time of the trip. “Drove 47 miles” proves nothing under §274(d).
  2. Never reconstruct from memory. If you must reconstruct, back it up with independent corroboration—receipts, emails, schedules, GPS data, bank records. Guessed destinations are worse than useless; they undermine your credibility.
  3. Contemporaneous doesn’t mean perfect. You don’t need a formal diary, but the record must be made close in time and must address amount, time, place, and business purpose.
  4. Be consistent about your business. You can’t take Schedule C losses in April and call it a hobby in Tax Court.
  5. §274(d) is unforgiving. Even sympathetic facts won’t rescue an undocumented deduction. The Tax Court can believe you incurred the expense and still be legally required to disallow it.

The Bottom Line

Houchin is a short, unpublished-ish Summary Opinion (not precedential), but it’s a clean illustration of a rule that bites thousands of taxpayers every year: for vehicle expenses, documentation is the deduction. Keep a contemporaneous log with purpose and destination, save corroborating records, and don’t try to fill in the blanks years later.

Case: Houchin v. Commissioner, T.C. Summary Opinion 2014-31 (filed March 31, 2014).