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reimbursement. The difference between the reimbursed expenses
and the claimed expenses is the expenses for which respondent
denied a deduction. The category of expenses denied becomes an
important matter as the substantiation requirements vary
depending upon the type of expense claimed as a deduction.
Generally, ordinary and necessary expenses paid or incurred
in carrying on a trade or business are deductible by an
individual engaged in the trade or business. Sec. 162(a); sec.
1.162-1(a), Income Tax Regs. “The determination of whether an
expenditure satisfies the requirements of section 162 is a
question of fact.” Shea v. Commissioner, 112 T.C. 183, 186
(1999) (citing Commissioner v. Heininger, 320 U.S. 467, 475
(1943)).
Deductible expenses are subject to substantiation. Secs.
6001, 274(d). The basic substantiation requirement is set forth
in section 6001 and provides in pertinent part:
SEC. 6001. NOTICE OR REGULATIONS REQUIRING
RECORDS, STATEMENTS, AND SPECIAL RETURNS.
Every person liable for any tax imposed by
this title, or for the collection thereof, shall
keep such records * * * and comply with such rules
and regulations as the Secretary may from time to
time prescribe. * * *
The regulations provide that “any person subject to tax * * *
shall keep such permanent books of account or records * * * as
are sufficient to establish the amount of * * * deductions.”
Sec. 1.6001-1(a), Income Tax Regs. In the event that a taxpayer
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