Remember the Parking Lot Tax? IRS Issues Proposed Regulations on Post-TCJA Qualified Transportation Expenses

The IRS has returned to the issue of qualified transportation fringes, including more detailed guidance on the implementation of the “parking lot tax,” in proposed regulations.[1] The parking lot tax portion of the regulations build on the safe harbor calculation the IRS provided in Notice 2018-99, adding two additional simplified computations for disallowed parking costs.

The regulations cover any qualified transportation fringe which is defined as any of the following:

  • Transportation in a commuter highway vehicle if such transportation is in connection with travel between the employee’s residence and place of employment (as described in sections 132(f)(1)(A) and 132(f)(5)(B));

  • Any transit pass (as described in sections 132(f)(1)(B) and 132(f)(5)(A)); or

  • Qualified parking (as described in sections 132(f)(1)(C) and 132(f)(5)(C))[2]

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Calendar and Log Book Formed Adequate Records to Support 100% Business Use for Two Autos

Under IRC §274(d) taxpayers are denied any deduction for certain expenses if they do not maintain adequate contemporary documentation to support the expense, even if it is obvious that the taxpayers must have incurred the expense and the amount of expense could be reasonably estimated.  This rule was put into the IRC to override the “Cohan” rule, so called due to the case involving George M. Cohan where the Second Circuit ruled that documentation is not needed if it is clear a taxpayer incurred an expense and it can be reasonably estimated [Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930).

The IRS claimed in the case of Ressen v. Commissioner, TC Summary Opinion 2015‑32 that the taxpayer’s records documenting his use of two vehicles, for which he claimed a 100% business use deduction on each, was inadequate.  However the Tax Court did not agree with the IRS on this issue.

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