Mila Alemasov and Victor Popov - Page 8




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          Generally, a taxpayer must establish that deductions claimed                
          under sections 162 and 212 are ordinary and necessary expenses,             
          and the taxpayer must maintain records to substantiate the                  
          deductions claimed.  Sec. 6001; Meneguzzo v. Commissioner, 43               
          T.C. 824, 831-832 (1965); sec. 1.6001-1(a), (e), Income Tax Regs.           
               On Schedule C of their 2002 Federal income tax return,                 
          petitioners reported the following gross income and expenses:               

               Income                                       -0-                       
               Expenses:                                                              
               Advertising                   $376                                     
               Car and truck                 4,991                                    
               Depreciation                  8,586                                    
               Other interest                336                                      
               Office                        1,689                                    
               Supplies                      143                                      
               Travel                        9,615                                    
               Meals and entertainment       1,940                                    
               Other                          3,585                                   
               Total                         $31,261                                  
               Loss                                         ($31,261)                 

               With respect to certain business expenses subject to section           
          274(d), more stringent substantiation requirements apply than               
          with respect to other ordinary and necessary expenses.  Section             
          274(d) disallows deductions for traveling expenses, gifts, and              
          meals and entertainment, as well as expenses related to listed              
          property, unless the taxpayer substantiates by adequate records             
          or by sufficient evidence corroborating the taxpayer’s own                  
          statement:  (1) The amount of the expense; (2) the time and place           
          of the travel or entertainment, or the date and description of              







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Last modified: November 10, 2007