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"Necessary" has been construed to mean "appropriate" or "helpful"
in the development of the taxpayer's business. Welch v.
Helvering, supra at 113. Unless expressly provided for, section
262 prohibits deductions for personal, living, or family
expenses.
A. Travel expenses
On his 1992 Schedule C, petitioner claimed a deduction in
the amount of $2,053 for travel expenses allegedly attributable
to petitioner's book marketing activity. Petitioners routinely
traveled together, and this amount apparently includes the
expenses incurred by both of them. Respondent disallowed the
deduction in full on the ground that the expenses were not
ordinary and necessary within the meaning of section 162, and for
lack of substantiation. As indicated above, travel expenses are
subject to the more stringent substantiation requirements imposed
by section 274.
To substantiate a deduction under section 274(d), a taxpayer
must maintain adequate records or present corroborative evidence
to show: (1) The amount of the expense; (2) the time and place
of the travel; (3) the business purpose of the expense or other
item; and (4) the business relationship to the taxpayer or person
entertained. Sec. 1.274-5T(b)(2), (3), (5), (6), (c)(1),
Temporary Income Tax Regs., 50 Fed. Reg. 46014-46017 (Nov. 6,
1985).
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Last modified: May 25, 2011