-7-
also find that petitioners failed to comply with substantiation
requirements of the Code.
Deductions are strictly a matter of legislative grace, and
petitioners must show that their claimed deductions are allowed
by the Code. Rule 142(a); New Colonial Ice Co. v. Helvering, 292
U.S. 435, 440 (1934); Welch v. Helvering, supra at 115.
Petitioners must keep sufficient records to substantiate any
deduction that would otherwise be allowed by the Code. Sec.
6001; New Colonial Ice Co. v. Helvering, supra at 440. In the
case of meals and traveling expenses, section 274(d) disallows
deductions for those expenses, 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 expense; and (3) the business purpose of
the expense. Section 1.274-5T(c)(5), Temporary Income Tax Regs.,
50 Fed. Reg. 46022 (Nov. 6, 1985) states that if an individual
taxpayer can establish that his or her failure to produce
adequate records is due to the loss of such records through
circumstances beyond the taxpayer’s control, such as destruction
by fire, flood, earthquake, or other casualty, the taxpayer may
substantiate a deduction by reasonable reconstruction of his or
her expenditures. Under these regulations, therefore, a taxpayer
may be deemed to meet the requirements of section 274(d) if he or
she establishes the occurrence of a casualty causing the loss of
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