- 13 - Travel and Entertainment Expenses Mrs. Kerrigan claimed a Schedule C deduction for travel and entertainment expenses in the amount of $16,834.12. Respondent allowed a deduction of $177. Mrs. Kerrigan claimed expenses in 1985 for 259 meals for a total cost of $6,931. Petitioners argue that these meals were consumed during meetings Mrs. Kerrigan had with her business clients and associates. Section 274 disallows deductions for entertainment expenses unless the taxpayer is able to establish that the item is related to, or associated with, the active conduct of his or her trade or business. Sec. 274(a)(1)(A). At the same time, section 274(d) imposes substantiation requirements for these deductions which are even more exacting than the requirements under section 162 for ordinary and necessary business expense deductions. A taxpayer generally must substantiate each expenditure by producing adequate records or sufficient evidence to corroborate his or her own statements. Sec. 1.274-5(c)(1), Income Tax Regs. The "adequate records" standard, in turn, requires that a taxpayer maintain an account book, which contains contemporaneous entries which clearly indicates the requisite business purpose. Sec. 1.274-5(c)(2)(i) and (ii), Income Tax Regs. In addition, a taxpayer must generally supply documentary evidence, such as receipts or paid bills. Sec. 1.274-5(c)(2)(iii), Income Tax Regs. Alternatively, taxpayers who are unable to satisfy thePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
Last modified: May 25, 2011