Michael and Penny Rhodes - Page 11

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          claimed by adequate records or by other sufficient evidence                 
          corroborating the 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             
          sought to be deducted.  Sec. 1.274-5T(c)(1), Temporary Income Tax           
          Regs., 50 Fed. Reg. 46016 (Nov. 6, 1985).                                   
               Ms. Rhodes’s records with respect to her car and truck                 
          expenses for Keepsake do not satisfy the requirements of section            
          274(d) and the regulations cited.  Ms. Rhodes testified she often           
          drove to numerous stores searching for the best prices for                  
          supplies, and, in addition, she drove to a variety of locations             
          to meet with clients and then later drove to wedding or funeral             
          locations to deliver flowers and other decorative arrangements.             
          She kept track of her mileage by writing locations and/or miles             
          driven on a daily calendar.  The total miles recorded on her                
          calendars for both years, however, do not match the mileage she             

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Last modified: May 25, 2011