Wing Y. Kwan - Page 4
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depreciation expense/section 179 expenses of $9,986, and rent
expense of $4,400.
Respondent contends that the documents offered by petitioner
provide insufficient evidence to support the claimed deductions.
Section 7491 is inapplicable here because petitioner has not
complied with the requisite substantiation requirements. Sec.
Section 162(a) allows a deduction for ordinary and necessary
expenses paid or incurred during the taxable year in carrying on
a trade or business. Taxpayers, however, must maintain
sufficient records to establish the amount of claimed deductions.
Sec. 6001; sec. 1.6001-1(a), Income Tax Regs.
Section 274(d)(4) imposes stringent substantiation
requirements for the deduction of certain listed property defined
under section 280F(d)(4). Listed property includes, inter alia,
automobiles and computers. Sec. 280F(d)(4)(A). To deduct
expenses for such listed property, including depreciation,
taxpayers must substantiate by adequate records the following
items: The amount of each separate expenditure, the listed
property’s business and total usage, the date of the expenditure
or use, and the business purpose for an expenditure or use. Sec.
274(d); sec. 1.274-5T(b)(6), Temporary Income Tax Regs., 50 Fed.
Reg. 46016 (Nov. 6, 1985). To substantiate a deduction by means
of adequate records, a taxpayer must maintain an account book,
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