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expenses deduction. Respondent disallowed $8,328 of the claimed
employee benefit programs expense deduction, and instead allowed
$4,996 for self-employed health insurance. Respondent disallowed
the deduction for pension and profit-sharing plans expense in
full. Respondent disallowed the deduction for other expenses of
$5,371 and instead allowed a depreciation deduction of $1,301 for
the computer and software. Respondent recharacterized the health
insurance deducted as “employee benefit programs of $8,328" as an
adjustment to gross income and allowed 60 percent of that amount
or $4,996 as a deduction. Respondent disallowed $5,371 of the
claimed “other expenses”.
Section 162(a) allows a deduction for ordinary and necessary
expenses paid or incurred during the taxable year in carrying on
a trade or business. Taxpayers, however, must maintain
sufficient records to establish the amount of the claimed
deductions. Sec. 6001; sec. 1.6001-1(a), Income Tax Regs.
Section 274(d)(4) imposes stringent substantiation
requirements for the deduction of certain listed property defined
under section 280F(d)(4). Listed property includes, inter alia,
automobiles and computers. Sec. 280F(d)(4)(A). To deduct
expenses for such listed property, including depreciation,
taxpayers must substantiate by adequate records the following
items: The amount of each separate expenditure, the listed
property’s business and total usage, the date of the expenditure
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Last modified: May 25, 2011