Eugene C. Joseph, Sr. - Page 8

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                  When a taxpayer's records have been destroyed or lost due to                        
            circumstances beyond his control, he is generally allowed to                              
            substantiate his deductions through secondary evidence.  A                                
            taxpayer in this type of situation may reconstruct his expenses                           
            through other credible evidence.  Watson v. Commissioner, T.C.                            
            Memo. 1988-29; sec. 1.274-5(c)(5), Income Tax Regs.  If no other                          
            documentation is available, we may, although not required to do                           
            so, accept credible testimony of a taxpayer to substantiate a                             
            deduction.  Watson v. Commissioner, supra.                                                
                  Petitioner's testimony regarding his business expenses was                          
            candid and credible.  Petitioner testified that he kept books and                         
            receipts.  Further, he was able to itemize certain expenditures                           
            in detail at trial.  In contrast, respondent did not controvert                           
            petitioner's testimony in any respect.  Respondent neither                                
            questioned whether petitioner was in fact involved in a                                   
            "business", nor claimed that any of petitioner's deductions were                          
            fabricated or overstated.  Further, respondent did not challenge                          
            petitioner's claim that his records were destroyed in a fire.                             
                  The amounts claimed as business deductions by petitioner in                         
            1986 are allowable provided the expenditures were ordinary and                            
            necessary in petitioner's trade or business.  Sec. 162(a).  As                            
            stated above, we believe that petitioner has met his burden of                            
            substantiating that he actually incurred the expenses.                                    

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