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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
passenger vehicles and 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. For such expenses, substantiation of the amounts
claimed by adequate records or by other sufficient evidence
corroborating the claimed expenses is required. Sec. 274(d);
sec. 1.274-5T(a)(1), Temporary Income Tax Regs., 50 Fed. Reg.
46014 (Nov. 6, 1985). To meet the adequate records requirements
of section 274(d), a taxpayer “shall maintain an account book,
diary, log, statement of expense, trip sheets, or similar record
* * * and documentary evidence * * * which, in combination, are
sufficient to establish each element of an expenditure”. Sec.
1.274-5T(c)(2)(i), Temporary Income Tax Regs., 50 Fed. Reg. 46017
(Nov. 6, 1985). These substantiation requirements are designed
to encourage taxpayers to maintain records, together with
documentary evidence substantiating each element of the expense
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Last modified: May 25, 2011