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preparation of the return and testimony by petitioner’s
accountant bear little relationship to reality.
While the record in this case has made fact finding
difficult, we nevertheless have carefully reviewed this record to
analyze the issues and make findings and conclusions.
B. Schedule C Expenses
Section 162(a) permits a deduction for the ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on a trade or business. An expense must be directly
connected with, or proximately result from, a trade or business
of the taxpayer. See Kornhauser v. United States, 276 U.S. 145,
153 (1928); O’Malley v. Commissioner, 91 T.C. 352, 361 (1988).
Expenses that are personal in nature are generally not allowed as
deductions. See sec. 262(a). Deductions are a matter of
legislative grace, and taxpayers must comply with the specific
requirements for any deduction claimed. See INDOPCO, Inc. v.
Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v.
Helvering, 292 U.S. 435, 440 (1934).
A taxpayer is required to maintain records sufficient to
establish the amount of his income and deductions. See sec.
6001; sec. 1.6001-1(a), (e), Income Tax Regs. A taxpayer must
substantiate his deductions by maintaining sufficient books and
records to be entitled to a deduction under section 162(a).
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