Steven M. and Karen Arhontes - Page 10




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          274(d) imposes stringent substantiation requirements for                    
          deductions related to travel, entertainment, gifts, and "listed             
          property (as defined in section 280F(d)(4))".  Passenger                    
          automobiles are listed property under section 280F(d)(4)(i).                
          Section 274(d) denies these deductions unless:                              

               the taxpayer substantiates by adequate records or by                   
               sufficient evidence corroborating the taxpayer's own                   
               statement (A) the amount of such expense or other item,                
               (B) the time and place of the travel, entertainment,                   
               amusement, recreation, or use of the facility or                       
               property, or the date and description of the gift, (C)                 
               the business purpose of the expense or other item, and                 
               (D) the business relationship to the taxpayer of                       
               persons entertained, using the facility or property, or                
               receiving the gift. * * *                                              

          Thus, under section 274(d), deductions for automobile expenses,             
          travel expenses, and meals and entertainment expenses may not be            
          estimated.  Instead the taxpayer must provide adequate records or           
          corroborate testimony with other evidence.                                  
               The limited amount of evidence submitted by petitioners in             
          support of this item is insufficient to satisfy the strict                  
          substantiation requirements of section 274(d).  Accordingly, on             
          this record, the Court holds that petitioners are not entitled to           
          deduct the $275 in car and truck expenses claimed on their 1997             
          Schedule C for Spanky's.  Respondent is sustained on this issue.            
               The third issue is whether petitioners are entitled to a $22           
          Schedule C depreciation deduction.  Section 167(a) allows                   






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Last modified: May 25, 2011