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Petitioner claimed $16,000 of deductions for prototype
manufacturing expense on New Tech's Schedule C. The money was
for the production of country and western CDs which petitioner
planned to give away. Petitioner thought that if he gave away
the CDs, people would invest in that endeavor. Respondent
contends that this $16,000 prototype expense was an expense of
the Nashville North, LLC, partnership, because the partnership
was the entity promoting Greg Shires, the singer on the CDs.
Petitioner agreed with this characterization at trial.
Accordingly, the expense belonged to the partnership. We sustain
respondent's determination as to this issue.
Respondent disallowed $3,276 of vehicle expense deducted on
petitioners' New Tech Schedule C. Deductions are strictly a
matter of legislative grace. INDOPCO, Inc. v. Commissioner, 503
U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S.
435, 440 (1934). Taxpayers must substantiate claimed deductions.
Hradesky v. Commissioner, 65 T.C. 87, 89 (1975), affd. per curiam
540 F.2d 821 (5th Cir. 1976). Moreover, taxpayers must keep
sufficient records to establish the amounts of the deductions.
Meneguzzo v. Commissioner, 43 T.C. 824, 831 (1965); sec. 1.6001-
1(a), Income Tax Regs.
Section 274(d) imposes stringent substantiation requirements
for the deduction of travel expenses and automobile expenses.
Taxpayers must substantiate by adequate records certain items in
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