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the extent of $321 ($642 less 50 percent pursuant to section
274(n)), and of travel expense to the extent of $1,516. Thus,
petitioner is entitled to deduct $4,312 for meals and
entertainment and $5,017 for travel in addition to the amounts
allowed by respondent.
In 1994, petitioner did not have enough cashflow to fully
pay off his credit cards, so he made minimum payments. In 1995,
petitioner was able to pay an accumulated balance and the
corresponding interest. Petitioner deducted $26,113 of interest
expense on his Schedule C. Respondent allowed the deduction of
$7,000 but disallowed $19,113 of the alleged interest expense
paid to the credit card company, MBNA. Respondent contends that
petitioner did not substantiate that he paid the $19,113 in
interest or that the expense is deductible under section 162.
In general, there is "allowed as a deduction all interest
paid or accrued within the taxable year on indebtedness." Sec.
163(a). Nevertheless, an individual is not entitled to a
deduction for personal interest. Sec. 163(h). Certain interest,
including "interest paid or accrued on indebtedness properly
allocable to a trade or business (other than the trade or
business of performing services as an employee)" is not personal
interest. Sec. 163(h)(2)(A). Because petitioner is a cash basis
taxpayer, interest allocable to his business debts is deductible
when paid. Sec. 163(a).
Petitioner's bookkeeper testified that petitioner used his
MBNA credit card almost exclusively for business purposes and
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