- 14 -
amount, time, place, and business purpose of these expenses as
required by section 274(d). Under this circumstance, the Court
is precluded from using the Cohan doctrine to estimate the amount
of the travel expenses incurred in connection with such travel.
Accordingly, the Court holds that petitioners are not entitled to
deduct travel expenses in connection with petitioner's trips to
air races for any of the years at issue. Thus, petitioners are
not entitled to deduct any travel expenses in connection with
petitioner's air racing activity for any of the years at issue.
Respondent is sustained on this issue.
The second issue is whether petitioners are entitled to
deduct labor expenses for each year at issue in connection with
the air racing activity in excess of amounts allowed by
respondent. On Schedules C of their returns, petitioners
deducted labor expenses of $60,722 for 1995, $19,019 for 1996,
and $37,605 for 1997. In the notice of deficiency, respondent
disallowed labor expenses of $12,250, $5,000, and $17,000,
respectively, for 1995, 1996, and 1997, due primarily to lack of
substantiation. Respondent also argues that, if the Court finds
that petitioners substantiated the disallowed amounts, such
amounts represented expenses for construction of the Mach Buster
airplane, and, thus, these amounts are not deductible with
respect to the air racing activity and should be capitalized
subject to depreciation with respect to the Mach Buster.
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011