Edward E. and Constance M. Thorpe - Page 12

                                       - 12 -                                         
          308 U.S. 488, 495 (1940) (citing Welch v. Helvering, supra at               
          114).  ETCO bears the burden of proving that the claimed expenses           
          are deductible.  Welch v. Helvering, supra at 115.                          
               Mrs. Thorpe was an officer and an employee of ETCO.  Mrs.              
          Thorpe attended various trade shows and conventions at which she            
          occupied the display booth, talked to people about ETCO's                   
          product, met new or prospective clients, learned more about the             
          market, and solicited new business.  ETCO procured most of its              
          business through direct solicitation of housing authorities in              
          various states where trade shows and conventions attracted                  
          prospective clients.  Respondent does not question the expenses             
          incurred by Mr. Thorpe who, like Mrs. Thorpe, was an officer and            
          employee of ETCO.  Under these facts and circumstances, we find             
          that the travel and entertainment expenses incurred by Mrs.                 
          Thorpe were ordinary and necessary business expenses of ETCO.               
          See Duncan v. Bookwalter, 216 F. Supp. 301, 305 (W.D. Mo. 1963).            
               Respondent argues that $1,514, $786, and $1,095 of the total           
          travel and entertainment expenses of $74,395, $81,237, and                  
          $75,749 deducted by ETCO for the fiscal years ending June 30,               
          1990, 1991, and 1992, respectively, are not allowed because they            
          do not meet the substantiation requirements under section 274(d).           
          Under section 274(d)(4), the taxpayer must substantiate:  (1) The           
          amount of the claimed expense; (2) the time and place the expense           
          was incurred; and (3) the business purpose of the expense.  At              
          trial, respondent attempted to elicit testimony that would show a           

Page:  Previous  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  Next

Last modified: May 25, 2011