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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