"Stuff." That's the actual name of the LLC at the center of a Tax Court case that just cost a small business owner nearly $17,000 in denied vehicle and interest deductions — and it's also, more or less, what the taxpayer offered as proof when the IRS asked her to substantiate them. Three pages of QuickBooks entries and a couple of lease agreements. No mileage log. No record of why the vehicle was used for business. The court's response, in essence: that's not evidence, that's an assertion.
If you drive for your business — even occasionally, even in a vehicle you also use to pick up groceries — the ruling in Simmons v. Commissioner (T.C. Memo. 2026-34) is worth ten minutes of your attention. It's a clean, almost textbook illustration of a rule that catches more small business owners than any other single substantiation failure: the strict recordkeeping standard under Internal Revenue Code Section 274(d), and the fact that the Tax Court is not allowed to estimate its way around a missing log.
What happened in Simmons
Cathryn Simmons ran a retail business, structured as an LLC called Stuff, LC, with her sister. On the company's 2017 partnership return, Stuff claimed $12,939 in automobile expenses. When the IRS audited the return and asked for substantiation, Simmons produced three pages of QuickBooks ledger entries and two vehicle lease agreements.
The Tax Court didn't quibble over whether the entries looked legitimate or whether the lease payments were real. It didn't need to. The court's finding was blunt: "The record is devoid of any evidence substantiating Stuff's business purpose" for the vehicle. Not underdocumented — devoid. The entire $12,939 deduction was disallowed.
That wasn't the only casualty. In the same case, the court also denied:
- $11,377 in non-reimbursed food expenses, because there was no documentation of what the expenses actually were.
- $16,901 in interest expense, split between personal loans from family members (no documentation that the partnership — as opposed to Simmons personally — legally owed the debt) and credit card interest (the cards were in Simmons's individual name, and she couldn't show the charges were exclusively business-related).
- Roughly $10,000 of rental property repairs, because the receipts didn't distinguish between deductible repairs and non-deductible improvements or routine maintenance.
- $6,764 in rental utilities across two tax years, because the lease agreements required tenants to reimburse the landlord for utilities — meaning Simmons wasn't the one actually bearing the cost, so she couldn't deduct it.
On top of all that, the court upheld a 20% accuracy-related penalty under Section 6662(a), finding that the recordkeeping failures amounted to negligence and that Simmons hadn't shown reasonable cause for the underpayment.
It's a rough outcome across the board, but the vehicle deduction is the one that generalizes to the widest audience — because the rule that killed it applies to nearly every business owner who ever puts a car, truck, or SUV on a Schedule C or partnership return.
Why "close enough" doesn't work for vehicle expenses
Most business deductions get some benefit of the doubt. If you can't produce a receipt for a $40 client lunch but you can credibly reconstruct that it happened, courts have historically been willing to let you estimate a reasonable amount — a principle known as the Cohan rule, from a 1930 case involving entertainer George M. Cohan.
Vehicles don't get that benefit. Congress carved out an exception specifically for cars, along with a short list of other "listed property" (things like computers and property easily used for personal purposes). Under Section 274(d), a taxpayer must substantiate four specific elements for every vehicle-related deduction:
- Amount — how much was spent, or how many miles were driven
- Time — the date of each use
- Place — where the vehicle went, or was used
- Business purpose — why the trip was business-related, not personal
Critically, the Tax Court stated plainly in Simmons that it "may not invoke the Cohan doctrine to estimate" these expenses. That's not a discretionary call by the judge — it's a statutory bar. If you can't produce contemporaneous records covering all four elements, the deduction doesn't get reduced to a "reasonable" amount. It gets disallowed entirely, even if everyone in the room believes the vehicle really was used for business.
That's what happened to Stuff, LC. The QuickBooks entries might have shown amount. The lease agreements might have shown the vehicle existed. Neither showed why the car was on the road on any given day. Without that fourth element, the other three didn't matter.
What "adequate records" actually looks like
The IRS and the courts have been fairly consistent about what satisfies Section 274(d). A defensible mileage log — whether paper, spreadsheet, or app — needs to capture, for each trip or each reporting period:
- Date of the trip
- Destination (a client name, job site, or meeting location — not just "downtown")
- Business purpose, in a short phrase ("deliver order to Jones account," not "business")
- Mileage, either odometer start/end or total miles for the trip
The word that trips people up is contemporaneous. A log has to be built at or near the time of each trip. Reconstructing a year's worth of mileage in April, from memory, while filling out your return, is exactly the pattern the Tax Court has repeatedly rejected — because it isn't a record, it's a recollection dressed up as one. Mileage-tracking apps (several run automatically off your phone's GPS) solve this well because they log a "record" the moment the drive happens, with no year-end reconstruction required. A logbook updated daily or a spreadsheet updated weekly works too; a logbook updated in April doesn't.
One nuance worth knowing: using the standard mileage rate (72.5 cents per mile for 2026, per IRS Notice 2026-10) instead of deducting actual vehicle costs doesn't get you out of this. The standard rate simplifies the cost side of the calculation — you don't need fuel and repair receipts — but you still need the mileage log itself. "I used the standard rate" is not a substitute for "I can show you where I drove and why."
The lesson that goes beyond cars
Read alongside the interest and utility denials in the same case, Simmons points at a pattern that shows up constantly in small-business audits: the paperwork has to match the legal entity, not just the general vibe of the business.
- If your LLC or partnership is the one deducting an expense, the debt or obligation needs to actually belong to the entity — not to you personally, with the entity just paying the bill. Simmons lost the family-loan interest deduction in part because there was no documentation that Stuff, LC — as opposed to Simmons herself — was legally on the hook for the debt.
- If a credit card is in your personal name, charges on it are presumed personal until you can show otherwise. Commingling personal and business credit lines is one of the most common reasons pass-through entities lose interest deductions.
- If your tenants are contractually required to reimburse you for a cost, you can't also deduct that cost yourself — you're not the one actually bearing it.
None of these are exotic rules. They're the kind of thing that separates businesses with clean books from businesses that are guessing at tax time. And they're exactly the kind of gap that shows up only when the IRS asks — which is usually years after the transactions happened, when memories have faded and "I'm pretty sure that was for the business" is all that's left.
Keep Your Finances Organized from Day One
Cases like Simmons are rarely about whether a deduction should exist — they're about whether you can prove it did, years after the fact, in the specific form the tax code demands. Vehicle logs, entity-level loan documentation, and a clear line between business and personal accounts are the difference between a deduction that survives an audit and one that doesn't. Beancount.io gives you plain-text accounting with a full version-controlled history, so every transaction — down to which entity it belongs to and when it happened — is documented as you go, not reconstructed months later. Get started for free and keep records an auditor (or a Tax Court judge) would actually accept.