- 8 -
way flawed. Likewise, petitioner has not shown that respondent’s
determination of unreported income was in error. Accordingly, we
sustain respondent’s determination and hold that petitioner
failed to report gross income from his real estate activity of
$75,614 and $27,462 for 1992 and 1993, respectively.
Whether Petitioner Is Entitled to Deductions in Connection With
His Real Estate Business Activity
Generally, a taxpayer must show that he is entitled to
deductions with respect to his business activity. Rule 142(a);
Welch v. Helvering, supra. Under section 162(a), ordinary and
necessary expenses incurred in carrying on a trade or business
may be deductible. The fact that a deduction was incurred in an
illegal activity is not sufficient to deny a deduction that is
otherwise allowable. Commissioner v. Tellier, 383 U.S. 687
(1966); Commissioner v. Sullivan, 356 U.S. 27 (1958); Brizell v.
Commissioner, 93 T.C. 151 (1989); cf. sec. 162(c), (f).
Taxpayers are required to maintain books and records in support
of the items reported on a return. Sec. 1.6001-1(a), Income Tax
Regs. More stringent record keeping requirements apply to
certain travel and entertainment expenses. Sec. 274(d).
In this case, petitioner has attempted to meet his burden by
reconstructing his expenditures through secondary and incomplete
documentation. In particular, petitioner offered credit card
statements and some invoices. Respondent reviewed petitioner’s
documents and after performing a perfunctory analysis, contends
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
Last modified: May 25, 2011