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gross income derived from the activity for the taxable year.
Sec. 183(a) and (b)(2).
As with other deductions discussed herein, petitioner bears
the burden of proving he is entitled to claimed business
deductions. See Rule 142(a); New Colonial Ice Co. v. Helvering,
292 U.S. 435, 440 (1934). A taxpayer is required to maintain
records sufficient to substantiate deductions that he or she
claims on his or her tax return. Sec. 6001; sec. 1.6001-1(a),
Income Tax Regs. Section 274(d) provides a strict substantiation
requirement for certain expenses related to travel (including
meals and lodging while away from home), entertainment, gifts,
and certain types of property such as a passenger automobile, a
computer or peripheral equipment, or a cellular telephone or
similar telecommunication equipment.6 Under section 274(d), a
deduction is not allowed unless the taxpayer is able to
substantiate the expense by adequate records or by sufficient
evidence corroborating the taxpayer’s own statement establishing
the amount, time, place, and business purpose of the expense.
Irrespective of whether petitioner’s insurance activity
qualifies as a “trade or business” under section 162 or whether
petitioner’s expenses are deductible under section 183,
petitioner has failed to properly substantiate his claimed
6 Sec. 274(d) overrides the principle established in Cohan
v. Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930), that the
Court may estimate expenses in some circumstances.
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Last modified: May 25, 2011