- 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, contendsPage: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
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