David E. Christensen - Page 8

                                        - 8 -                                         
          B.   1998-2001                                                              
               Petitioner argues his business expenses for 1998, 1999,                
          2000, and 2001 were properly substantiated solely by his                    
          testimony.  The Court disagrees.                                            
               Under section 162(a), a taxpayer may deduct ordinary and               
          necessary business expenses incurred or paid during the taxable             
          year.  However, deductions are a matter of legislative grace, and           
          the taxpayer must clearly demonstrate entitlement to the claimed            
          deductions.  INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84                 
          (1992).  The taxpayer must keep records sufficient to establish             
          the amount of his deductions.  Secs. 162(a), 6001; sec.                     
          1.6001-1(a), Income Tax Regs.  The taxpayer bears the burden of             
          substantiation.  Hradesky v. Commissioner, 65 T.C. 87, 90 (1975),           
          affd. per curiam 540 F.2d 821 (5th Cir. 1976).                              
               Petitioner testified all substantiating documents were                 
          either destroyed in “hard disk crashes” or lost while moving.               
          When a taxpayer’s records have been destroyed or lost due to                
          circumstances beyond the taxpayer’s control, such as fire, flood,           
          earthquake, or other casualty, the taxpayer has a right to                  
          substantiate the deductions by a reasonable reconstruction of the           
          expenditures or uses.  Sec. 1.274-5T(c)(5), Temporary Income Tax            
          Regs., 50 Fed. Reg. 46022 (Nov. 6, 1985).  If documentation is              
          unavailable, the Court may, although it is not required to do so,           
          accept the taxpayer’s testimony to substantiate the deduction.              

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  Next

Last modified: May 25, 2011