Danvis S. and Sheryl S. Smith - Page 10

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          purpose of the expenses.  Sec. 274(d); sec. 1.274-5T, Temporary             
          Income Tax Regs., 50 Fed. Reg. 46006 (Nov. 6, 1985).                        
               Petitioners have failed to substantiate any of the Schedule            
          C deductions or the employee business expense deductions                    
          disallowed by respondent.4  Petitioners have failed to provide              
          evidence that the expenses were incurred, such as receipts, and             
          they have failed to sufficiently explain the underlying business            
          purposes.  For example, petitioners claim to have traveled to               
          Hawaii in connection with the business of the sole                          
          proprietorship.  However, overlooking whether petitioners in fact           
          traveled to Hawaii primarily to sell table pads, they provided no           
          receipts for the travel, and their daily planner indicates that             
          their primary business-related activity was making phone calls--            
          calls which presumably could have been made from Colorado.                  
          Petitioners assert that a flood destroyed many of the records               
          which would have provided substantiation.  Even if this were the            
          case, however, petitioners have not adequately attempted to                 
          reconstruct any destroyed records, by such means as obtaining               
          copies of bank or credit card records.  Finally, petitioners have           
          not provided the Court with any basis upon which to estimate                
          expenses (with respect to those for which estimates may be made).           

          4Sec. 7491(a) does not shift the burden of proof to                         
          respondent here because petitioners have failed to produce any              
          credible evidence with respect to the disallowed deductions.                

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