A real estate agent claims nearly $90,000 in travel, meal, and vehicle deductions for a single year. He has credit card statements. He has a log listing dates, amounts, and business purposes. He hired a paid preparer to file his return. And the Tax Court still let him keep less than 1% of it.
That's the story of Edmund Ha v. Commissioner, a case decided June 29, 2026, and it's a useful gut-check for any small business owner who thinks "I have a log, so I'm covered." The ruling turns on a distinction that trips up honest taxpayers constantly: the difference between deductions the IRS will estimate for you and deductions it flatly won't.
What Happened
Edmund Ha was a licensed California real estate agent, employed by InSync AI, Inc. and Coldwell Banker, who also worked independently developing and acquiring investment properties. During 2021, he traveled constantly — Miami, Orlando, Las Vegas, Maui domestically, and St. Barth's, Greece, England, Switzerland, Mexico, and Spain internationally — describing the trips as client meetings, property tours, and deal negotiations. He also used his personal car heavily for local business travel and ran his operation out of a 130-square-foot room in his apartment.
On his Schedule C, he originally reported $24,822 in travel and meal expenses and $16,325 in car and truck expenses. By the time the case reached trial, he was arguing for even more: a combined $59,866.14 in travel and meals. The IRS audited, disallowed the deductions, and hit him with a Notice of Deficiency for $10,964 in additional tax plus a $2,192.80 accuracy-related penalty.
Ha wasn't a records nihilist. He kept credit card statements. He created a mileage and expense log — after the fact, but detailed, listing dates, amounts, and stated business purposes. He submitted flight receipts for two trips and biographies of the "clients" he said he'd flown with. At trial, he explained he couldn't provide more because he owed his high-profile clients a fiduciary duty of confidentiality.
None of it was enough. The Court allowed him $711.60 of the $59,866.14 in travel and meal expenses he claimed — the two line items he could actually corroborate with the flight records. His entire $16,325 vehicle deduction was disallowed. And the accuracy-related penalty stood.
Why "I Have a Log" Wasn't the Answer
The outcome hinges on a rule most business owners have never heard of, buried in Internal Revenue Code Section 274(d).
Under the general rule for business expenses, if you prove you spent the money but can't pin down the exact amount, a court can estimate a reasonable deduction for you. That's the Cohan rule, named for a 1930 case involving Broadway showman George M. Cohan, who clearly spent money entertaining and traveling for business but couldn't produce receipts for most of it. Courts have leaned on Cohan for nearly a century to avoid punishing taxpayers who spent money legitimately but kept sloppy records.
Section 274(d) carves out an exception for exactly the categories that come up constantly in small business: travel, meals, vehicle use, and gifts. For these, Congress decided estimation isn't good enough — a court is barred outright from guessing on your behalf. You need "adequate records" (a contemporaneous account book, diary, log, or similar record) or other corroborating evidence covering four specific elements for every expenditure:
- The amount of the expense
- The time (date) it was incurred
- The place (or, for vehicle use, the business destination)
- The business purpose
Ha's problem wasn't that he had zero documentation — it was that his documentation didn't corroborate the business nature of the spending, and it was assembled after the year was already under examination rather than close to the time of each trip. The Tax Court noted plainly that "an actual contemporaneous log is not strictly required, but records made at or near the time of the expenditure have greater probative value than records created subsequently." A log built from memory months or years later, describing expenses only in general terms, doesn't carry the same weight as a diary entry made the day of the trip.
The vehicle deduction failed even harder: Ha kept no odometer readings, provided no evidence tying specific drives to specific business purposes, and admitted the mileage log was prepared during or after the IRS examination — not contemporaneously. Section 280F(d)(4) applies the same strict Section 274(d) standard to car and truck expenses, so "I drove a lot for work" plus a reconstructed log, with nothing else, wasn't going to survive.
The One Deduction That Did Survive — and Why
Interestingly, Ha's $13,328.05 home office deduction was upheld almost in full. Home office expenses fall under Section 280A and general Section 162 "ordinary and necessary" rules, not Section 274(d)'s strict substantiation regime — so when the Court found his testimony about exclusive business use credible and his documentation (a log, credit card statements, a floor plan, and eight rental payment receipts) sufficient to establish that expenses were incurred and had a business purpose, the ordinary Cohan rule kicked in and the Court estimated the deduction in his favor.
That contrast is the whole lesson of the case in miniature: outside the Section 274(d) categories, being generally credible and reasonably documented can be enough. Inside them, it isn't.
The Penalty Held Too — And "I'm Too Busy for Records" Isn't a Defense
Beyond the disallowed deductions, Ha also owed a 20% accuracy-related penalty under Section 6662(a) for a substantial understatement of tax. He argued he acted with reasonable cause because he didn't fully realize how strict the recordkeeping requirements were and had hired a paid preparer.
The Court wasn't persuaded. It pointed out that Ha was "a sophisticated realtor who works with high-profile clients" and, given that experience, "should have known the requirements of keeping track of the expenses to satisfy the strict substantiation requirements of section 274(d) under ordinary business care and prudence." Hiring a preparer doesn't automatically insulate you from a penalty if the Court isn't convinced you gave that preparer complete and accurate information in the first place. And Ha's stated reason for withholding client-related documentation — confidentiality — didn't count as reasonable cause, because it wasn't tied to any actual effort to substantiate the expenses through other means.
What This Means for Your Records
If you claim vehicle, travel, meal, or gift expenses on a Schedule C, here's what Edmund Ha actually requires, not just recommends:
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Log it the same day, not the same year. A log created during an audit — even a detailed, honest one — carries far less weight than a contemporaneous record. The IRS regulations literally say so, and the Tax Court applied that language against Ha directly.
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Track vehicle use with odometer readings, not vibes. "I drove to a lot of showings" isn't a mileage log. Record starting and ending odometer readings (or reliable GPS mileage), the date, the destination, and the specific business purpose for every trip you intend to deduct.
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Name the business purpose specifically. "Client meeting" is weaker than "reviewed 4-unit investment property at [address] with [client name] re: acquisition financing." Vague categories are exactly what sank most of Ha's travel log.
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Confidentiality isn't a substantiation exemption. If you work with clients under an NDA or fiduciary duty, you still need to be able to corroborate the business purpose of an expense — through your own contemporaneous notes if nothing else — even if you can't hand over client-identifying documents to the IRS.
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Don't assume "I hired a preparer" transfers the risk. You're still the one who has to supply accurate, complete information, and you're still the one who eats the penalty if your underlying records don't hold up. Note that the IRS also has to clear its own procedural hurdle here — Section 6751(b)(1) requires written supervisory approval of a penalty before it's assessed, which the IRS documented in this case. Don't assume a penalty is automatically valid; that approval is worth checking for in any dispute.
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The standard mileage rate still requires a log — it just skips the receipts. If you use the IRS's standard mileage rate (72.5 cents per mile for the first half of 2026, rising to 76 cents per mile for July–December 2026 after a mid-year fuel-cost adjustment) instead of tracking actual vehicle expenses, you're exempt from keeping every gas and maintenance receipt — but you are not exempt from Section 274(d)'s date/place/purpose logging requirement. A missing mileage log sinks a standard-rate deduction exactly the way it sank Ha's.
Keep Your Records Where They Can't Quietly Vanish
One detail in the opinion is worth sitting with: Ha testified that some of his supporting documentation "may have been on a Coldwell Banker email server to which he no longer had access." That's a common failure mode — proof of a business expense living only in a system you don't control, that can disappear the moment you change jobs, switch software, or lose an account.
Plain-text accounting sidesteps that risk. When your books are version-controlled, human-readable text files instead of records locked inside someone else's platform, your transaction history — and the notes and business-purpose annotations attached to it — travel with you and stay auditable for as long as you keep the file. That's a meaningfully different starting position than trying to reconstruct a year of travel and mileage from memory after an examiner has already opened the file.
Simplify Your Financial Management
Substantiation fights like Edmund Ha are won or lost months before the audit even starts — in whether you logged an expense the week it happened or tried to remember it a year later. Beancount.io offers plain-text accounting that's transparent, version-controlled, and easy to annotate with the exact business-purpose detail Section 274(d) demands, so your records are still yours no matter what platform or employer you leave behind. Get started for free and keep a ledger you can actually stand behind.