Michael E. and Nancy Hentges - Page 8

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          of the persons entertained.  Under the regulations, to meet the             
          "adequate records" requirement of section 274(d), a taxpayer                
          "shall maintain an account book, diary, statement of expense or             
          similar record * * * and documentary evidence * * * which, in               
          combination, are sufficient to establish each element of an                 
          expenditure".  Sec. 1.274-5(c)(2)(i), Income Tax Regs.; emphasis            
          added.  The elements to be proven with respect to each travel               
          expense are the amount, time, place, and business purpose of the            
          travel.  Sec. 1.274-5(b)(2), Income Tax Regs.  Similarly, the               
          elements to be proven with respect to entertainment expenses are            
          the amount, time, place, business purpose, and the business                 
          relationship of the person or persons entertained.  Sec. 1.274-             
          5(b)(3), Income Tax Regs.  The record-keeping requirements of               
          section 274(d) contemplate that a record "made at or near the               
          time of the expenditure, supported by sufficient documentary                
          evidence, has a high degree of credibility not present with                 
          respect to a statement prepared subsequent thereto when generally           
          there is a lack of accurate recall."  Sec. 1.274-5(c)(1), Income            
          Tax Regs.  The substantiation requirements of section 274(d) are            
          designed to encourage taxpayers to maintain records, together               
          with documentary evidence substantiating each element of the                
          expense sought to be deducted.  Sec. 1.274-5(c)(1), Income Tax              
          Regs.  Similarly, with respect to local transportation expenses,            
          section 274(d) was amended, effective for taxable years beginning           





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