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correct tax liability. See Meneguzzo v. Commissioner, 43 T.C. 824,
831-832 (1965). Section 274(d) provides that no deduction or credit
will be allowed for any traveling expense or for any activity that
is of a type generally considered to constitute entertainment,
amusement, or recreation “unless the taxpayer substantiates by
adequate records or by sufficient evidence corroborating the
taxpayer’s own statement”.
Petitioners failed to establish their entitlement to the travel
and automobile expense deductions. They failed to produce
contemporaneous logs documenting the expenses; they produced only
a few canceled checks and receipts that for the most part documented
purchases of women’s sportswear and travel in Europe.
In sum, petitioners have failed to satisfy the requirements of
sections 162 and 274. Accordingly, we sustain respondent’s
determination on this issue.
Issue 3. Loans vs. Capital Contributions
The next issue is whether petitioners’ advances to HPD are to
be characterized as loans or capital contributions. If we determine
the advances to be loans, further inquiry must be made into whether
the loans were business or nonbusiness debts and whether they became
worthless.5 Respondent contends the advances were capital
5 Petitioners claim they are entitled to a bad debt
deduction in 1990 with respect to funds they advanced to HPD.
Petitioners assert that the bad debt deduction created a net
operating loss, which they seek to carry back to 1989 under sec.
172. We have jurisdiction over those items in years that bear on
a taxpayers’ tax liability for the year at issue. See sec.
(continued...)
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