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the day care activity was $819. Respondent disallowed all of the
claimed expenses for lack of substantiation.
Both petitioner and Mrs. Willits testified that they
maintained records of their expenses and that they turned these
records and receipts over to their accountant. However, the
accounting firm with which the accountant had been associated
split apart, and as a result, records were lost. None of the
records were reconstructed. Mrs. Willits was able to
substantiate only certain expenses by her testimony, but for the
most part Mrs. Willits’ testimony lacked detail, and she had
difficulty with her recollection of the expenses.
Section 162(a) allows the deduction of “ordinary and
necessary” expenses paid or incurred during the taxable year in
carrying on any trade or business. Whether an expenditure is
ordinary and necessary is a question of fact. See Commissioner
v. Heininger, 320 U.S. 467, 475 (1943). An ordinary and
necessary expense is one which is appropriate and helpful to the
taxpayer’s business and which results from an activity which is a
common and accepted practice in the business. See Boser v.
Commissioner, 77 T.C. 1124, 1132 (1981), affd. without published
opinion (9th Cir., Dec. 22, 1983).
Deductions are a matter of legislative grace. See INDOPCO,
Inc. v. Commissioner, 503 U.S. 79, 84 (1992). Taxpayers must
keep sufficient records to establish deduction amounts. See sec.
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