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According to petitioner, to prepare their 1992 and 1993 Federal
income tax returns, petitioners enlisted the assistance of a
certified public accountant and reconstructed income and expenses
to the best of their ability.
Petitioners produced no evidence to substantiate their
claimed expenses other than petitioner's testimony concerning
office rent and advertising expenses. Petitioner testified that
their business records for the taxable years in issue were
deliberately discarded by Mrs. Braun and not lost due to
circumstances beyond petitioners' control. Accordingly,
petitioners cannot satisfy the substantiation requirements of
section 274(d) by reconstruction of their expenditures and are
therefore not entitled to deductions for travel, automobile
expenses, meals, or entertainment. See sec. 274.
In the absence of either substantiating documentation or
testimony, petitioners are likewise not entitled to deductions
for the remaining categories of business expenses (except office
rent and advertising) claimed on their 1992 and 1993 Schedules C.
Because petitioner offered testimony regarding the office rent
and advertising expenses petitioners claimed on their returns, we
consider these items in turn.
Petitioner testified that he and another individual operated
4(...continued)
record-keeping obligations under the Internal Revenue Code. See
sec. 6001; sec. 1.6001-1(a), Income Tax Regs.
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