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A taxpayer is required to maintain sufficient records to
establish the amounts of income and deductions. Sec. 6001;
Higbee v. Commissioner, 116 T.C. 438, 440 (2001); sec. 1.6001-
1(a), Income Tax Regs. Petitioners have failed to provide any
substantiation to respondent or to this Court in support of the
claimed deductions for the $12,374 in car and truck expenses,
$420 in legal and professional services, $116 in office expenses,
$299 in vehicle or equipment rent, $357 in supplies, $1,655 in
taxes and licenses, $312 in travel, $2,018 in meals and
entertainment, $4,046 in utilities, and $1,625 in other expenses.
In addition to failing to substantiate the above expenses,
petitioners have failed to show that any were incurred in a trade
or business. See Kornhauser v. United States, 276 U.S. 145, 153
(1928); O’Malley v. Commissioner, 91 T.C. 352, 361 (1988), affd.
972 F.2d 150 (7th Cir. 1992). Petitioner was engaged in a trade
or business in some years prior to 1999, but the record does not
show that petitioner was engaged in a trade or business during
1999.
In addition, with respect to the $312 in travel, $12,374 in
car and truck expenses, and $2,018 in meals and entertainment,
petitioners are subject to the requirements of section 274.
Section 274(d)(4) provides that such deductions are not allowed
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,
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Last modified: May 25, 2011