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contends further that no deduction of the expenses is permissible
absent an accounting by Motomi of her expenses to Toraya.
Deductions are a matter of legislative grace, and
petitioners must prove that Toraya is entitled to the claimed
deductions. Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S.
79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435
(1934). Section 162(a) provides a deduction for "ordinary and
necessary" expenses paid or incurred during the taxable year in
carrying on any trade or business. To sustain their burden of
proof, petitioners must establish that the claimed office
expenses are "normal, usual or customary" in Toraya's trade or
business and reasonable in relation to the purpose of that
business. Deputy v. duPont, 308 U.S. 488, 495 (1940); United
States v. Haskel Engg. & Supply Co., 380 F.2d 786, 788-789 (9th
Cir. 1967). They must establish that the expenses bear "a
proximate and direct relationship to the taxpayer's trade or
business." Carroll v. Commissioner, 51 T.C. 213, 218 (1968),
affd. 418 F.2d 91 (7th Cir. 1969). Furthermore, Toraya must keep
sufficient records to establish deduction amounts. Sec. 6001;
Meneguzzo v. Commissioner, 43 T.C. 824, 831-832 (1965).
Motomi is the daughter of the Takaos, Toraya's sole
shareholders. Therefore, transactions between Motomi and Toraya
should be closely scrutinized to ascertain whether payments to
her by Toraya constitute bona fide business expenses which would
be deductible under section 162. See Harwood v. Commissioner, 82
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