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Next, petitioners have not shown that they fulfill the
requirements of section 7491(a)(2). RAF has not shown that it
meets the net worth requirement of section 7491(a)(2)(C). In
addition, petitioners have not shown that they complied with the
Code’s substantiation requirements. Petitioners argue that they
did not provide substantiation to the revenue agent in RAF’s
audit because he did not specifically request substantiation of
the disallowed corporate card items. However, under section
7491(a)(2)(A), petitioners must show that they complied with the
Code’s substantiation requirements in general, not simply in
response to an audit. The charges at issue include those made at
restaurants, hotels, airlines, gas stations, clothing stores, and
general retail stores. Petitioners provided credit card
summaries of these charges, showing only the vendor, the type of
services offered by the vendor, e.g., “Gas/Misc” and “Food/Bev”,
and the amount of the charge. These summaries do not provide the
substantiation required by section 274 for entertainment and
travel expenses, such as the date and business purpose of each
expense and the business relationship to the person being
entertained. The statement summaries also do not satisfy the
substantiation requirement under section 162 that a taxpayer who
is related to his employer under section 267(b) keep sufficient
records “to enable the Commissioner to correctly determine income
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Last modified: May 25, 2011