Patrick E. Catalano - Page 8

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          the disallowance provisions of section 274(a)(1)(B), see, e.g.,             
          section 274(e), none applies here.  The expenses of leasing the             
          boats are not deductible.4                                                  
               Petitioner alternatively contends that, if the corporation             
          is not allowed to deduct the boat lease payments, we should                 
          accord him some relief because, as a result of the disallowance,            
          he is being taxed twice on the same income.  He points out that             
          the disallowance of his corporation’s boat lease deductions                 
          increases the passthrough income he is required to report on his            
          individual returns by the amount of the deductions.  Because the            

               4 Petitioner argued at trial and on brief that his                     
          substantiation of the business use of the boats met the                     
          requirements of sec. 274(d).  We disagree.  Sec. 274(d) requires            
          a taxpayer to demonstrate the amount, the time and place, and the           
          business purposes which give rise to his claimed business                   
          entertainment expenses “by adequate records or by sufficient                
          evidence corroborating * * * [his] own statement”.  At trial                
          petitioner attempted to present summaries gleaned from office               
          records and prepared by someone on his staff.  These summaries              
          failed to meet the requirements for admissibility under Fed. R.             
          Evid. 1006.  Moreover, they failed to include information with              
          respect to the business purpose of the boat utilizations.  See              
          S. Rept. 1881, 87th Cong., 2d Sess. (1962), 1962-3 C.B. 707, 741:           
                    The requirement that the taxpayer's statements be                 
               corroborated will insure that no deduction is allowed                  
               solely on the basis of his own unsupported, self-                      
               serving testimony. * * *                                               
                    Generally, the substantiation requirements of the                 
               bill contemplate more detailed recordkeeping than is                   
               common today in business expense diaries. * * *                        
          Thus, the boat lease deductions run afoul of both the                       
          substantiation requirements of sec. 274(d) and the prohibition of           
          sec. 274(a)(1)(B).                                                          

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