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are required to maintain records sufficient to enable the
Commissioner to determine their correct tax liability. Sec.
6001; Higbee v. Commissioner, 116 T.C. 438 (2001); sec. 1.6001-
1(a), Income Tax Regs. Such records must substantiate both the
amount and purpose of the claimed deductions. Higbee v.
Commissioner, supra.
Section 162 allows a deduction for ordinary and necessary
expenses that are paid or incurred during the taxable year in
carrying on a trade or business. Sec. 162(a); Deputy v. duPont,
308 U.S. 488, 495 (1940). In the case of travel expenses and
certain other expenses, such as entertainment, gifts, and
expenses relating to the use of listed properties, including
other property used as a means of transportation, computers, and
cellular phones under section 280F(d)(4)(A), section 274(d)
imposes stringent substantiation requirements to document
particularly the nature and amount of such expenses.4 For such
expenses, substantiation of the amounts claimed by adequate
4Although sec. 280F(d)(4)(C) contains an exception to the
definition of “property used as a means of transportation”,
petitioner does not qualify for the exception. Pursuant to the
statute, expenses for any property, of which substantially all
the use is in the business of providing transportation of
property for compensation or hire, need not meet the strict
substantiation standard under sec. 274(d). Petitioner, however,
offered no records establishing how often the property, his two
cars, was used for a business purpose and how often it was
dedicated to personal use. Petitioner admittedly sometimes
rented a car or used a company van to make deliveries. He was
unable to prove how often he used his vehicle or whether the
“substantial” use of these vehicles was for his business.
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Last modified: May 25, 2011