- 284 -
and entertainment in light of the rules and regulations under
section 274 demonstrates negligence.
Several adjustments were made by respondent with respect to
depreciation, legal expenses, office expenses, consulting fees
and rent expense for the years 1977 through 1980. Such
adjustments were due to petitioner's failure to verify amounts
claimed or to establish that such amounts were ordinary and
necessary business expenses. He did not maintain records to
verify the adjusted bases of automobiles or the business use of
the automobiles for which depreciation was claimed. He claimed
deductions for legal expenses incurred by Diesel Power in excess
of $40,000 for which no substantiation was presented and for
which the business purpose was not shown. Business expenses were
claimed as consulting fees for payments to or on behalf of a
stockbroker who had no relationship to petitioner's trade or
business and who provided services to others. A business expense
in the amount of $50,000 claimed for a fee to petitioner's
brother was not paid. Rent expense was deducted for $6,451 paid
by petitioner for his daughter's apartment; $2,053 was deducted
that could not be identified; and over $13,000 was deducted for
his son-in-law and daughter's condominium. The failure to
maintain adequate records to verify business expenses or to show
that claimed amounts were paid is indicative of negligence.
Page: Previous 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 NextLast modified: May 25, 2011