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repair, because this deduction was disallowed as a result of
petitioner's inability to prove the repair was caused by
charitable use of the automobile, not a disregard of the rules or
regulations. We further conclude that the penalties should apply
to the disallowed portion of the expenditures made for "gifts" on
the second trip to Athens, Greece, and Istanbul, Turkey, because
the disallowance of this deduction related to petitioner's
failure to keep records and the attempt to deduct the cost of
tequila as a gift to the Greek Orthodox Church. Finally, we note
that we have not applied the penalties to the meal expenses that
were deducted twice, as these can be fairly characterized as
isolated transcriptional errors.
We sustain the penalties with respect to petitioner's
disallowed employee business expense deductions. Several grounds
existed to justify the disallowance of these deductions. In
addition, petitioner's substantiation left something to be
desired. The large majority of these deductions involved
traveling expenses. Petitioner made no attempt to establish the
business purpose for any of the deductions as required by section
274(d). Petitioner failed to specify the corporation to which
these expenses were attributable. Furthermore, a colloquy at
trial between respondent and petitioner revealed that
petitioner's travel log was patently erroneous and most likely
prepared in preparation for litigation. The log contained
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