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engaged in for profit, but only to the extent of gross income
received from the activity.
In the notice of deficiency, respondent, in part, disallowed
petitioner’s claimed business expense deductions for RBS on the
grounds that he had failed to adequately substantiate the claimed
deductions, despite repeated requests made to petitioner for such
records. Petitioner asks the Court to excuse his inability to
fully produce his records with respect to his basketball school
activity on the grounds that most of these records were stolen in
a burglary of his apartment. Petitioner requested at trial that
the Court allow deductions for his basketball school-related
expenses on the basis of his testimony and the records that he
was able to produce at trial under the rule in Cohan v.
Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930).
Section 274(d) supersedes the rule in Cohan, and requires
strict substantiation of expenses for travel, meals and
entertainment, and with respect to any passenger automobile,
computer, cellular phone, and property generally used for
entertainment. A taxpayer is required, under section 274(d), to
substantiate these types of expenses by adequate records or by
sufficient evidence corroborating the taxpayer’s own statement
establishing the amount, time, place, and business purpose of the
expense.
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Last modified: November 10, 2007