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corporation), and that the corporation's 1994 return mistakenly
overstated the corporation's net ordinary income by the amount of
those deductible expenses. Respondent simply points to the
discrepancy between the two returns and argues that Dr. Derby
understated his 1994 ordinary income from the corporation by
$3,665.
2. Discussion
The dispute between the Derbys and respondent raises three
issues: (1) A factual issue as to whether Dr. Derby incurred the
expenses in question in 1994, (2) whether the expenses were
currently deductible business expenses under section 162(a), and
(3) assuming he did incur the expenses and that they were
currently deductible, whether they resulted in a constructive loan
and corporate purchase of the items in question or a capital
contribution of the purchased items by Dr. Derby to the
corporation.
At trial, Dr. Derby admitted that he had no "specific
receipts" that would substantiate the alleged expenditures or
their deductibility and that his oral testimony constituted his
"best recollection of * * * what the discrepancy was." Assuming
arguendo that the Derbys are not required to satisfy the
substantiation requirements of section 274(d) in support of the
alleged expenditures, they were nonetheless required to maintain
records sufficient to substantiate the claimed deductions, in this
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