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Respondent issued a notice of deficiency to petitioners for
1998 on August 13, 2003, determining an income tax deficiency of
$3,075 and an addition to tax under section 6651 of $769.25 for
failure to file a tax return or to pay a tax penalty.
Discussion
A. Schedule C Expenses
Section 162 allows a deduction for all ordinary and
necessary expenses incurred in carrying on a trade or business if
the taxpayer maintains records or other proof sufficient to
substantiate the expenses.2 Secs. 162(a), 6001; sec. 1.6001-
1(a), Income Tax Regs. Section 274(d), however, provides more
stringent substantiation requirements for certain expenses and
requires that the taxpayer “substantiates by adequate records or
by sufficient evidence corroborating the taxpayer’s own
statement” the time and place of the travel and the business
purpose of the expense. The deductions that fall within section
274(d) include expenses “with respect to any listed property (as
defined in section 280F(d)(4))”. Sec. 274(d)(4). “Listed
property” includes passenger automobiles, any computer or
peripheral equipment, and any cellular telephone (or other
similar telecommunications equipment). Sec. 280F(d)(4).
2 Sec. 7491(a), concerning burden of proof, is not
applicable here because petitioners have not satisfied the
substantiation requirements. Sec. 7491(a)(2)(A).
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Last modified: May 25, 2011