IN THE OREGON TAX COURT MAGISTRATE DIVISION Income Tax
PAULINE EVALYN COLE, ) ) Plaintiff, ) TC-MD 230186R ) v. ) ) DEPARTMENT OF REVENUE, ) State of Oregon, ) ) Defendant. ) DECISION
Plaintiff appeals Defendant’s Notice of Deficiency dated October 19, 2022, for the 2019
tax year, challenging adjustments to her gross income and business vehicle mileage deduction.
Additionally, Plaintiff argues she is entitled to a deduction for charitable miles.
Trial was held at the Oregon Tax Court on September 12, 2023. Plaintiff appeared and
testified on her own behalf. Tania Marcelino, auditor for the Department of Revenue, appeared
and testified on behalf of Defendant. Plaintiff’s Exhibits 1 to 3 and Defendant’s Exhibits A to R
were received into evidence without objection.
I. STATEMENT OF FACTS
Plaintiff transitioned mid-career from being a teacher and school administrator to
obtaining a master’s degree in health services administration. After a few years in the health
industry, she built up her client base and eventually became CEO of her own company, AMS
LLC, where she worked for 15 years. In 2017, Plaintiff ceased work due to a major car accident.
In 2018, she was able work only limited hours as an employee for Keiper Spine. Plaintiff
testified that she received a 2018 bonus of $6,467.67 from Keiper Spine, which she recorded in
her accounting program as “2018 4TH SSC QTR,” but did not deposit the check into her bank
account until January 22, 2019. (Ex 3A.) Marcelino provided Plaintiff with a list of
DECISION TC-MD 230186R 1 “unidentified deposits” for clarification. For the January 2019 deposit of $6,467.67, Plaintiff
indicated it was income from Keiper Spine to AMS. Plaintiff was issued a form W-2 wage
statement from Keiper Spine, showing $15,538 in employee wages for the 2019 tax year. (Ex
D.)
Plaintiff testified that during 2019 she performed services as an independent contractor
for Dr. Keiper and traveled round-trip from her home in Mill City to his office in Eugene (a 181-
mile round trip) 50 times, totaling 9,000 miles. (Ex 2A.) In support of her mileage claim,
Plaintiff provided a letter from Dr. Keiper, stating she was engaged on a “contracted basis” at his
office and that MapQuest reflects a round-trip distance of 181-miles. (Id.) Plaintiff included a
Google Maps printout showing a one-way distance of 77.1 miles or 154.2 miles round trip. (Id.)
During the audit, Plaintiff created a calendar documenting her travel to Keiper Spine. (Id.) She
also presented a handwritten log indicating that she traveled to Keiper Spine, as an employee, 63
times between January and March 2019, with each trip covering 150 miles, totaling of 9,450
miles, plus 48 trips as an independent contractor, covering 150 miles per trip, totaling 7,200
miles. (Ex E at 1.) Plaintiff provided a monthly calendar, prepared during the audit, with some
but not all of the trips listed on her handwritten mileage log. (Id.) During the audit, Plaintiff sent
an email to Defendant in response to Marcelino’s request for more information explaining that
her high mileage deduction was due to travel to Bend, Oregon, for litigation with a client. (Ex
H.)
In 2019, Plaintiff volunteered at Northgate Wesleyan Church as a pianist, an audio-visual
assistant, and as a board member. She provided a letter from the church’s senior pastor and a
printout of worship agendas listing her services. (Ex 2B.) Plaintiff also included a Google
Maps printout showing a 33.5-mile distance from her home to the church and another printout
DECISION TC-MD 230186R 2 showing a 90.8-mile round trip to Lincoln City for a church board retreat in February 2019. She
provided a mileage log documenting 2,516 miles for worship team duties and 862 miles for
monthly board meetings. (Id.)
II. ANALYSIS
To address the questions of this case, the court applies federal tax provisions because
Oregon defines taxable income by reference to the federal tax code, with modifications not
relevant here. See ORS 316.022(6); see also ORS 316.048. 1 Because Plaintiff seeks affirmative
relief, she bears the burden of proof by a preponderance of the evidence, which means “the
greater weight of evidence, the more convincing evidence.” ORS 305.427; Feves v. Dept. of
Rev., 4 OTR 302, 312 (1971). The court will address the business milage deductions and
charitable mileage deduction arguments before turning to the bank deposit analysis issue.
A. Business Mileage Deduction
Plaintiff claimed a deduction of $4,176 for business mileage in 2019. Defendant denied
this deduction for lack of substantiation. Under Internal Revenue Code (IRC) section 162(a),
ordinary and necessary business expenses are generally deductible. Travel expenses, including
expenses for vehicle use, require stricter substantiation under IRC section 274(d), 2 which
mandates adequate records or sufficient corroborative evidence for the amount, time, place, and
business purpose of travel. Although contemporaneous records are not required, records made
near the time of the expenditure are given a high degree of credibility. Treas Reg § 1.274-
5T(c)(2)(i). To meet the “adequate records” standard, a taxpayer is responsible for maintaining
1 References to the Oregon Revised Statutes (ORS) are to the 2017 edition. 2 Generally, the court is permitted to make a reasonable estimation of a deduction for business expense where a taxpayer is unable to substantiate the precise amount. See Cohan v. Comm’r, 39 F2d 540, 543-44 (2d Cir 1930). However, IRC section 274(d) supersedes the Cohan rule. See Treas Reg § 1.274–5T(a)(4).
DECISION TC-MD 230186R 3 “an account book, diary, log, statement of expense, trip sheets, or similar record, * * * and
documentary evidence * * * which, in combination, are sufficient to establish each element of an
expenditure or use * * *.” (Id.) If a taxpayer cannot satisfy the adequate records standard, they
“may substantiate the elements by other ‘sufficient evidence’—generally a combination of the
taxpayer’s detailed statement and other corroborative evidence for each element.” Okon v. Dept.
of Rev., TC-MD 220022G, WL 2495607 at *2 (Or Tax M Div, Mar 14, 2023) (citing Treas Reg
§ 1.274-5T(c)(3)(i)).
Plaintiff did not maintain contemporaneous travel logs and the records she presented
during the audit and at trial were inconsistent. Her mileage claimed did not align with her
handwritten log, Google Maps data, her hand-written calendar, or her email to the Department
indicating significant travel to Bend, Oregon. While the court believes Plaintiff’s testimony that
she traveled a significant number of miles for work, her evidence did not meet the adequate
records standard. The evidentiary standard does not allow the court to estimate miles; therefore,
the court sustains Defendant’s denial of her business travel mileage deduction.
B. Charitable Mileage Deduction
The deduction for charitable mileage requires the same level of substantiation as business
miles. While Plaintiff did not maintain a mileage log for her charitable work at the church, she
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IN THE OREGON TAX COURT MAGISTRATE DIVISION Income Tax
PAULINE EVALYN COLE, ) ) Plaintiff, ) TC-MD 230186R ) v. ) ) DEPARTMENT OF REVENUE, ) State of Oregon, ) ) Defendant. ) DECISION
Plaintiff appeals Defendant’s Notice of Deficiency dated October 19, 2022, for the 2019
tax year, challenging adjustments to her gross income and business vehicle mileage deduction.
Additionally, Plaintiff argues she is entitled to a deduction for charitable miles.
Trial was held at the Oregon Tax Court on September 12, 2023. Plaintiff appeared and
testified on her own behalf. Tania Marcelino, auditor for the Department of Revenue, appeared
and testified on behalf of Defendant. Plaintiff’s Exhibits 1 to 3 and Defendant’s Exhibits A to R
were received into evidence without objection.
I. STATEMENT OF FACTS
Plaintiff transitioned mid-career from being a teacher and school administrator to
obtaining a master’s degree in health services administration. After a few years in the health
industry, she built up her client base and eventually became CEO of her own company, AMS
LLC, where she worked for 15 years. In 2017, Plaintiff ceased work due to a major car accident.
In 2018, she was able work only limited hours as an employee for Keiper Spine. Plaintiff
testified that she received a 2018 bonus of $6,467.67 from Keiper Spine, which she recorded in
her accounting program as “2018 4TH SSC QTR,” but did not deposit the check into her bank
account until January 22, 2019. (Ex 3A.) Marcelino provided Plaintiff with a list of
DECISION TC-MD 230186R 1 “unidentified deposits” for clarification. For the January 2019 deposit of $6,467.67, Plaintiff
indicated it was income from Keiper Spine to AMS. Plaintiff was issued a form W-2 wage
statement from Keiper Spine, showing $15,538 in employee wages for the 2019 tax year. (Ex
D.)
Plaintiff testified that during 2019 she performed services as an independent contractor
for Dr. Keiper and traveled round-trip from her home in Mill City to his office in Eugene (a 181-
mile round trip) 50 times, totaling 9,000 miles. (Ex 2A.) In support of her mileage claim,
Plaintiff provided a letter from Dr. Keiper, stating she was engaged on a “contracted basis” at his
office and that MapQuest reflects a round-trip distance of 181-miles. (Id.) Plaintiff included a
Google Maps printout showing a one-way distance of 77.1 miles or 154.2 miles round trip. (Id.)
During the audit, Plaintiff created a calendar documenting her travel to Keiper Spine. (Id.) She
also presented a handwritten log indicating that she traveled to Keiper Spine, as an employee, 63
times between January and March 2019, with each trip covering 150 miles, totaling of 9,450
miles, plus 48 trips as an independent contractor, covering 150 miles per trip, totaling 7,200
miles. (Ex E at 1.) Plaintiff provided a monthly calendar, prepared during the audit, with some
but not all of the trips listed on her handwritten mileage log. (Id.) During the audit, Plaintiff sent
an email to Defendant in response to Marcelino’s request for more information explaining that
her high mileage deduction was due to travel to Bend, Oregon, for litigation with a client. (Ex
H.)
In 2019, Plaintiff volunteered at Northgate Wesleyan Church as a pianist, an audio-visual
assistant, and as a board member. She provided a letter from the church’s senior pastor and a
printout of worship agendas listing her services. (Ex 2B.) Plaintiff also included a Google
Maps printout showing a 33.5-mile distance from her home to the church and another printout
DECISION TC-MD 230186R 2 showing a 90.8-mile round trip to Lincoln City for a church board retreat in February 2019. She
provided a mileage log documenting 2,516 miles for worship team duties and 862 miles for
monthly board meetings. (Id.)
II. ANALYSIS
To address the questions of this case, the court applies federal tax provisions because
Oregon defines taxable income by reference to the federal tax code, with modifications not
relevant here. See ORS 316.022(6); see also ORS 316.048. 1 Because Plaintiff seeks affirmative
relief, she bears the burden of proof by a preponderance of the evidence, which means “the
greater weight of evidence, the more convincing evidence.” ORS 305.427; Feves v. Dept. of
Rev., 4 OTR 302, 312 (1971). The court will address the business milage deductions and
charitable mileage deduction arguments before turning to the bank deposit analysis issue.
A. Business Mileage Deduction
Plaintiff claimed a deduction of $4,176 for business mileage in 2019. Defendant denied
this deduction for lack of substantiation. Under Internal Revenue Code (IRC) section 162(a),
ordinary and necessary business expenses are generally deductible. Travel expenses, including
expenses for vehicle use, require stricter substantiation under IRC section 274(d), 2 which
mandates adequate records or sufficient corroborative evidence for the amount, time, place, and
business purpose of travel. Although contemporaneous records are not required, records made
near the time of the expenditure are given a high degree of credibility. Treas Reg § 1.274-
5T(c)(2)(i). To meet the “adequate records” standard, a taxpayer is responsible for maintaining
1 References to the Oregon Revised Statutes (ORS) are to the 2017 edition. 2 Generally, the court is permitted to make a reasonable estimation of a deduction for business expense where a taxpayer is unable to substantiate the precise amount. See Cohan v. Comm’r, 39 F2d 540, 543-44 (2d Cir 1930). However, IRC section 274(d) supersedes the Cohan rule. See Treas Reg § 1.274–5T(a)(4).
DECISION TC-MD 230186R 3 “an account book, diary, log, statement of expense, trip sheets, or similar record, * * * and
documentary evidence * * * which, in combination, are sufficient to establish each element of an
expenditure or use * * *.” (Id.) If a taxpayer cannot satisfy the adequate records standard, they
“may substantiate the elements by other ‘sufficient evidence’—generally a combination of the
taxpayer’s detailed statement and other corroborative evidence for each element.” Okon v. Dept.
of Rev., TC-MD 220022G, WL 2495607 at *2 (Or Tax M Div, Mar 14, 2023) (citing Treas Reg
§ 1.274-5T(c)(3)(i)).
Plaintiff did not maintain contemporaneous travel logs and the records she presented
during the audit and at trial were inconsistent. Her mileage claimed did not align with her
handwritten log, Google Maps data, her hand-written calendar, or her email to the Department
indicating significant travel to Bend, Oregon. While the court believes Plaintiff’s testimony that
she traveled a significant number of miles for work, her evidence did not meet the adequate
records standard. The evidentiary standard does not allow the court to estimate miles; therefore,
the court sustains Defendant’s denial of her business travel mileage deduction.
B. Charitable Mileage Deduction
The deduction for charitable mileage requires the same level of substantiation as business
miles. While Plaintiff did not maintain a mileage log for her charitable work at the church, she
presented weekly church programs documenting her services as a pianist or audio-visual
assistant, totaling 2,516 miles. Plaintiff did not provide similar documentation for other church-
related travel.
Defendant did not audit this item, and neither party presented the relevant tax return
pages to confirm whether Plaintiff had already taken the deduction. Defendant submitted
Plaintiff’s tax return attachment showing $21,400 in deductible gifts to charity. The evidence
DECISION TC-MD 230186R 4 was unclear as to whether Plaintiff’s travel miles were already included in that figure. Therefore,
the court must deny the deduction for chartable miles due to insufficient evidence.
C. Bank Deposit Analysis
Defendant may use methods such as a bank deposit analysis to examine potential
unreported income. Danielson v. Dept. of Rev., TC-MD 160282C, WL 5158730 at *3 (Or Tax
M Div Nov 7, 2017) (quoting Brenner v. Dept. of Rev., 9 OTR 299, 306 (1983)) (internal
citations omitted). Defendant conducted such an analysis and gave Plaintiff the opportunity to
explain unidentified deposits. The only disputed deposit was $6,467.67 on January 22, 2019,
which Plaintiff asserts is a bonus from Keiper Spine dated December 31, 2018, that was included
in her 2018 tax return. However, Plaintiff did not provide corroborative evidence, such as a copy
of the check or proof that the amount was included in her 2018 return. Consequently, the court
finds that Plaintiff did not meet her burden of proof.
III. CONCLUSION
After careful consideration, the court finds that Plaintiff has not provided adequate
contemporaneous documentary evidence to substantiate her business mileage deduction. While
she substantiated some of her charitable miles, she did not demonstrate that she had not already
taken a deduction for them. Finally, Plaintiff has not met her burden of proof that the January
2019 deposit was included in her 2018 tax return. Now, therefore,
IT IS THE DECISION OF THIS COURT that Plaintiff’s appeal be denied.
RICHARD DAVIS MAGISTRATE ///
DECISION TC-MD 230186R 5 If you want to appeal this 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 this Decision or this Decision cannot be changed. TCR-MD 19 B.
This document was signed by Magistrate Richard Davis and entered on November 13, 2024.
DECISION TC-MD 230186R 6