Khalil and Lana K. Hamdan - Page 15




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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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