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SEC. 262. PERSONAL, LIVING, AND FAMILY EXPENSES.
(a) General Rule.--Except as otherwise expressly
provided in this chapter, no deduction shall be allowed
for personal, living, or family expenses.
(b) Treatment of Certain Phone Expenses.--For
purposes of subsection (a), in the case of an
individual, any charge (including taxes thereon) for
basic local telephone service with respect to the lst
telephone line provided to any residence of the
taxpayer shall be treated as a personal expense.
The tax returns that they filed and the journals that petitioners
presented create a strong inference that petitioners have
improperly deducted many household and living expenses. They
have failed to present evidence that would overcome this
inference.
Section 274(d) requires, with respect to entertainment
expenses, that taxpayers substantiate, among other things, the
business purpose of each expense and the business relationship to
the taxpayer of persons entertained. Although they deducted
thousands of dollars each year for “entertainment”, petitioners
have failed to substantiate any of those expenses as required by
section 274. The amounts claimed apparently included in many
instances three meals a day for petitioners and their dependent
son. Although they claim that they were entertaining potential
customers, this claim is inherently improbable.
Petitioner Rodney J. Huang testified that the total monthly
rent for petitioners’ residence was $1,350 and that he allocated
$700 to business expense (for 1992; in 1993, the amount claimed
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Last modified: May 25, 2011