Emerson v. Dept. of Rev.

DECISION TC-MD 240056R / TC-MD 240520R 1
IN THE OREGON TAX COURT
MAGISTRATE DIVISION
Income Tax
JEREMY J. EMERSON, )
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Plaintiff, TC-MD 240056R
v.
DEPARTMENT OF REVENUE,
State of Oregon,
Defendant.
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JEREMY J. EMERSON, )
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Plaintiff, TC-MD 240520R
v.
DEPARTMENT OF REVENUE,
State of Oregon,
DECISION	Defendant.
Plaintiff appealed Defendant’s Conference Decision Letter and Notice of Assessment,
dated December 19, 2023, for the 2019 tax year. While the appeal was pending, Plaintiff
appealed Defendant’s Notice of Assessment, dated May 21, 2024, for the 2020 tax year; and
Defendant’s Notice of Assessment, dated May 30, 2024, for the 2021 tax year. The cases were
consolidated for trial,1 held on November 18, 2024, in the courtroom of the Oregon Tax Court.
Plaintiff appeared and testified on his own behalf. Jasmine Yuen, auditor, appeared and testified
on behalf of Defendant. Plaintiff’s exhibits PE 1 to PE 1852 and Defendant’s exhibits A to X
were received into evidence.2
1 The scheduling order of August 27, 2024, administratively consolidated case TC-MD 240056R for the
purpose of trial.
2 The exhibits use different naming conventions because Plaintiff submitted exhibits that were unnumbered

DECISION TC-MD 240056R / TC-MD 240520R 2
I. STATEMENT OF FACTS
Plaintiff began working as a rideshare driver in January 2018 for companies including
Uber, Lyft, DoorDash, and Uber Eats. Uber and Lyft provided Plaintiff with periodic reports
reflecting income and “booked mileage” which are those logged while actively transporting a
passenger. These reports excluded mileage incurred driving to pickups, between fares, or while
waiting for ride requests. DoorDash and Uber Eats supplied income data only.
Plaintiff reported the following vehicle-related expenses on his tax returns:
Tax Year Amount Claimed Exhibit
2019 $23,544 Def’s Ex A 13, A 15
2020 $21,158 Def’s Ex B 16, B 18
2021 $9,930 Def’s Ex C 20, C 23
Defendant’s audit disallowed a portion of those expenses, limiting deductible mileage to
the “booked mileage” figures reported by the rideshare companies. (Def’s Ex D 3, E 2, and F 2.)
In its Conference Decision Letter, Defendant concluded that Plaintiff failed to substantiate
mileage beyond the “booked mileage.” (Def’s Ex G 1.)
Plaintiff submitted as trial exhibits a large number of documents with thousands of data
points in the form of GPS coordinates, showing what he contends prove his travel miles.3 Lyft
provided the raw data in the form of GPS coordinates. Plaintiff put those coordinates on a
spreadsheet and used the “Haversine method” to convert these to mileage. This method uses
and unbound. The court used the Case Center program to organize and automatically number them so they would
be useful at trial.
3 Plaintiff waited to present mileage records to Defendant, beyond his rideshare statements, until the exhibit
exchange deadline. This occurred despite the court’s order that Plaintiff was required to send Defendant his
documents related to their discovery request by October 18, 2024. (See Scheduling Order, dated August 27, 2024.)

DECISION TC-MD 240056R / TC-MD 240520R 3
distances between two points on a sphere (the earth) to calculate a straight-line distance. As of
the trial date, Plaintiff was not finished with his work attempting to recreate his travel miles for
all of the tax years in issue. For the 2019 tax year, Plaintiff offered data from Lyft to prove his
mileage for that program. (Ptf’s Ex PE 497 to 551.)
The court tested Plaintiff’s GPS date by using two samples: Plaintiff provided a Lyft
weekly summary for the period January 7, 2019, to January 13, 2019, documenting 208.47 miles.
(Def’s Ex M 117.) He also provided a spreadsheet to show variances between the miles he
claimed, and the monthly reports were not significant at only -0.3 miles. (Def’s Ex M 2.)
Lastly, Plaintiff offered a document titled Lyft Driver Data with GPS coordinates. (See Ptf’s Ex
PE 497 to PE 503.) For the period January 7, 2019, to January 13, 2019, this portion of the
report documents 335 miles. (Ptf’s Ex PE 498.)
The second sample, Plaintiff’s Lyft weekly summary for the period December 9, 2019, to
December 15, 2019, documents 352.23 miles. (Def’s Ex M 167) His spreadsheet shows
variances between the miles he claimed, and the monthly reports were -0.3 miles. (Def’s Ex M
2). Plaintiff’s Lyft Driver Data for the period December 9, 2019, to December 15, 2019,
documents 228.1 miles. (Ptf’s Ex PE 552 to PE 553.)
Yuen, a tax auditor with Defendant for approximately three years, examined Plaintiff’s
GPS data. She stated that Plaintiff did not provide most of the documents in this case until after
hours on the last day to exchange exhibits, despite the court’s discovery order. However, she
testified that she did the best she could to work through the documents and make any appropriate
adjustments. She stated that the “online miles” reported by the rideshare companies represent all
miles while the programs are running, and not just when there is a paid fare in the car. She stated
that, after some sampling of the GPS coordinates provided by Plaintiff, Defendant agreed with

DECISION TC-MD 240056R / TC-MD 240520R 4
the total figures on Plaintiff’s exhibit PE 1843 of 28,951 miles for 2019, which is more than the
miles that were allowed during the audit. That number, with the standard mileage rate for 2019
of $0.58 per mile, yields a deduction of $16,792. For 2020, Defendant agreed to 9,860 miles
which equates to $5,566 in travel expense. For 2021, Defendant agreed to 16,742 miles which
equates to $9,227 in travel expense.4
Defendant performed a bank deposit analysis where it took all of Plaintiff’s deposits,
removed transfers and known deposits, then sent the document to Plaintiff to provide
explanations for unidentified deposits. (Def’s Ex Q.) Plaintiff presented a check in the amount
of $149 deposited on December 23, 2019, which he testified was a rebate. (Ptf’s Ex PE 8.) At
trial, Defendant conceded to reduce the unidentified deposits in 2019 by removing nominal
deposits of $10, $40, $0.91, by reducing $600 in transfers from a Key Bank account to $200, and
by accepting Plaintiff’s $149 check. (Def’s Ex Q at 3.) Those adjustments were re-classified as
non-income. The total adjustment from the conference decision reduces unreported income by
$399.91 in 2019, and by $27,600.77 in 2020. No concessions were made with respect to the
2021 tax year.
II. ANALYSIS
The main issue is this case is whether Plaintiff’s recreated mileage data satisfies the
heightened substantiation requirements of Internal Revenue Code (IRC) section 274(d). A
secondary issue is whether Plaintiff provided sufficient substantiation to overcome Defendant’s
bank deposit analysis that identified several deposits that, if unrebutted, constitute additional
income.
4 Defendant’s explanation for the concessions was unclear, however, since they are in Plaintiff’s favor, the
court will accept them.

DECISION TC-MD 240056R / TC-MD 240520R 5
IRC provisions apply to this state tax matter because Oregon defines taxable income by
reference to the federal tax code, subject to certain modifications not pertinent here. See ORS
316.022(6); 316.048.5 Because Plaintiff seeks affirmative relief, he bears the burden of proof by
a preponderance of the evidence. See ORS 305.427.
A. Substantiation Requirement For Rideshare Drivers
Under IRC section 162(a), ordinary and necessary business expenses are deductible from
gross receipts. However, IRC section 274(d) imposes additional substantiation requirements for
“listed property,” which includes automobiles, unless the vehicle is used “substantially all” for
transporting passengers or property for compensation. IRC § 280F(d)(4)(B). Congress
specifically imposed these rules to prevent courts from approximating expenses where taxpayers
kept insufficient records. Compare, Cohan v. Comm’r, 39 F2d 540, 543–44 (2d Cir. 1930)
(holding that where evidence shows some expenses were incurred, but not how much, the court
should approximate because “allow[ing] nothing at all appears to us inconsistent with saying that
something was spent”) with Treas Reg § 1.274-5T(a)(4) (stating section 274(d) limitation on
deduction “supersedes the doctrine found in Cohan v. Commissioner”).
The regulations require that taxpayers document the mileage, date, and business purpose
for each vehicle use. This can be done either through contemporaneous logs or through
sufficient evidence including corroborating testimony. See, e.g. Treas Reg § 1.274-5T(c)(2)(i))
and 5T(c)(3)(i). Courts have consistently held that rideshare drivers must meet these
requirements unless they can prove nearly exclusive business use. Nurumbi v. Comm’r, 121
T.C.M. (CCH) 1582 (2021) (holding Uber driver had not shown substantially all of his vehicles’
use was for business); Okon v. Dept. of Rev., TC-MD 220022G, 2023 WL 2495607 (Or Tax M
5 References to the Oregon Revised Statutes (ORS) are to 2019.

DECISION TC-MD 240056R / TC-MD 240520R 6
Div, Mar 14, 2023)(finding that taxpayer’s vehicle was used for both personal and rideshare
driving, making IRC section 274(d) applicable). Thus, Plaintiff must do more than show that
business expenses were incurred; he must substantiate the date and mileage for each business use
of the car(s). See Treas Reg § 1.274-5T(b)(6).
Plaintiff contends that he is entitled to deduct the full mileage he drove in connection
with his rideshare business. This includes not only the miles logged while transporting paying
passengers, which some rideshare companies track and report, but also the mileage accrued
while driving between rides, waiting for ride requests, and traveling to pick up riders. He argues
that these additional miles are a necessary part of this business and should therefore qualify as
deductible business expenses.
In response to Plaintiff’s position, Yuen testified that Defendant based its audit and
conference determinations on the information reported by the rideshare companies, which only
documented miles driven during actual paid rides. Because Plaintiff did not keep or maintain
contemporaneous records, such as a mileage log, to substantiate the additional mileage claimed,
Defendant disallowed a portion of the travel deduction. However, Defendant did consider
Plaintiff’s GPS data using their sampling methodology and made some concessions during trial
as described in the fact section above.
Plaintiff attempted to recreate his mileage by submitting extensive GPS data adjusted by
his calculation method. While commendable in scope, the data is incomplete and unreliable.
The court examined, as samples, the periods of January 7, 2019, through January 13, 2019, and
December 9, 2019, through December 15, 2019. The numbers on three different sources for
Plaintiff’s Lyft miles are rife with inconsistencies.
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DECISION TC-MD 240056R / TC-MD 240520R 7
Accordingly, the court finds the data does not meet the “adequate records” requirement because
they are unreliable. See Treas Reg § 1.274-5T(c)(2)(i).
B. Public Policy Arguments
Plaintiff alternatively argues that requiring drivers to maintain contemporaneous mileage
logs is unsafe and burdensome for rideshare drivers, who may be forced to document data in
potentially hazardous conditions (e.g. roadsides). Plaintiff argues that Defendant’s interpretation
of IRS regulations represents an oversimplification of what is going on in the new rideshare
world. Plaintiff has tried to use third-party applications to track his mileage, but claims the data
was too much or was inaccurate. While these concerns raise important issues about the modern
gig economy, Congress continues to expressly require substantiation of mileage in instances
where vehicles are used for mixed purposes. This court is bound to apply existing law, and
changes to policy or statutory exemptions for rideshare drivers must come from legislative
action, not judicial interpretation.
Plaintiff further argues that rideshare drivers are unfairly treated compared to taxicab
operators. However, the tax code deliberately distinguishes vehicles which are used
“substantially all” for business. Unlike cabs, rideshare vehicles are often used for both personal
and business purposes. Cab operators still have to provide substantiation supporting their
deductions; however, the law permits a different standard for each, and this distinction is neither
arbitrary nor unlawful. See IRC §280F(d)(4)(B).
C. Bank Deposit Analysis
Turning to the second issue of this case, the court takes up Plaintiff’s challenge to
Defendant’s assertion of additional, unreported income found through its bank deposit analysis.
As an initial matter, “gross income” includes “all income from whatever source derived * * *.”

DECISION TC-MD 240056R / TC-MD 240520R 8
IRC § 61(a). Taxing agencies may, in certain circumstances, use a bank deposit analysis to
identify unreported income. This method is accepted as correct unless rebutted by the taxpayer
with specific evidence showing that deposits stem from nontaxable sources. DenHerder v. Dept.
of Rev., TC-MD 210393R, 2023 WL 6303205 at *2 (Or Tax M Div, Sept 27, 2023); Ottuso v.
Comm’r, TCM (RIA) 2024-091, 2024 WL 4298072 (2024) (finding that a reasonable
reconstruction of income, such as a bank deposit analysis, while not conclusive as to the amount
of income, is accepted as correct unless proven otherwise.)
Defendant removed known transfers and minimal deposits and accepted Plaintiff’s
explanation of a $149 rebate check. Plaintiff failed to offer timely, additional evidence to rebut
the remaining bank deposit analysis findings. The court accepts Defendant’s revised analysis,
which reduces unreported income by $399.91 for the 2019 tax year, and $27,600.77 for the 2020
tax year. No adjustment was warranted for 2021.
III. CONCLUSION
Plaintiff failed to meet the substantiation requirements under IRC section 274(d) for
vehicle mileage deductions. While the court acknowledges Plaintiff’s sincere effort and
thoughtful policy arguments, the legal standard requires more than the reconstructed records he
provided. Although the court finds Plaintiff’s efforts earnest and his concerns about policy
implications are substantive, he did not present the type of credible, contemporaneous, or
corroborated evidence required to support the claimed expenses. Defendant’s concessions as to
mileage and unreported income are accepted. The court sustains the remainder of Defendant’s
assessments. Now, therefore,
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DECISION TC-MD 240056R / TC-MD 240520R 9
IT IS THE DECISION OF THIS COURT that Defendant’s assessments for the 2019,
2020, and 2021 tax years are hereby modified, in part, consistent with the findings and
concessions set forth above.
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 Decision was signed by Magistrate Richard D. Davis and entered on June 2,
2025.