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(3) Travel, meals, & entertainment:
Travel 2,460
Meals & entertainment (80%) 3,017 5,477
Total disallowed expenses $25,528
The stated reason for disallowance of these expenses is that the
expenses were not substantiated pursuant to section 274(d).
Petitioners challenge that determination.4
With respect to the airplane, since petitioner was not a
licensed pilot during 1992, he was required to engage the
services of a licensed pilot on the trips he made in connection
with his business. Petitioner, however, was also taking flying
lessons during 1992, and, on several of his business trips,
petitioner engaged his flight instructor as the pilot. Each such
flight, however, qualified as a training lesson for petitioner.
The bill submitted by the pilot for each of these trips
identifies the charge as a fee for flight instruction.
Petitioner maintains, however, that such charges were no higher
than the costs of a regular pilot. At the same time, petitioner
argues, each such trip contributed to his training for
4 Insofar as any of the $25,528 of expenses at issue may
be attributable to petitioner's activity as an employee rather
than as a self-employed individual, respondent conceded at trial
that petitioner qualified as an employee under sec. 3121(d)(3)(B)
as a full-time life insurance salesman; therefore, any expenses
allocable to petitioner's income as an employee would not be
subject to the 2-percent limitation of sec. 67(a). Thus, such
expenses would be treated in the same manner as petitioner's
self-employed activity expenses.
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