Lead Opinion
Pеtitioner contends he is entitled to deduct the various entertainment expenses, costs of businеss gifts, air travel, and club dues in issue because they are ordinary and necessary business expenses within the meaning of section 162,
Section 274(d) provides that entertainment еxpenses, gifts, club dues, and travel costs are not allowable as deductions “unless the taxpayer substantiates by adequate records or by sufficient
The Treasury regulations, in section 1.274-5(c)(2), provide that “adequate rеcords” shall consist of a diary or account book or similar record in which the elements оf the expenditures are recorded at or near the time of the expenditure. Petitionеr maintained a voucher system adequately delineating the elements of the various entertainment, travel, and gift expenditures.
Under section 1.274-5(c)(5), Incomе Tax Regs., if the taxpayer can establish that (1) he at one time possessed adequate records and (2) that his present lack of records is due to fire, flood, or other casualty beyond his control, then he is free of the normal substantiation requirements. The taxpayer in such a situation must instead reasonably reconstruct his expenditures. These regulations closely follow the сongressional reports which accompanied the 1962 congressional revisions to section 274. H. Rept. No. 1447, 87th Cong., 2d Sess. (1962), 1962-
The facts before us do not support the claim that the records were lost due to a casualty beyond petitioner’s control. Marital difficulties and their consequences, no matter how seemingly independent of petitioner’s will, do not suffiсiently resemble floods or fire to be considered a casualty. See William C. Silver, Jr.,
Even if the Court were to view the loss of petitioner’s records as a casualty, petitioner has failed to fulfill the additional requirement of reasonably reconstructing his records. See, e.g., Lewis M. Bryan, 43 P-H Memo. T.C. par. 74,266 (1974) (records lost while moving; no effort at reconstruction); Marie Seckel,
For example, petitioner did not provide any informatiоn concerning the cost of the country club parties, their dates, or the identities of the pеrsons entertained. Petitioner was equally indefinite as to both his business gifts and his California journeys. Petitionеr also failed to submit any evidence regarding his Traffic Club dues and expenses.
Petitioner’s witness, Mr. Joseph F, Candela, sales manager at Acme, was present at some of the Cog Hill Country Club functions, but gаve no testimony regarding the dates or cost of each function. He indicated the identities of only 3 of the alleged 75 customers attending these parties. He also failed to document the dates, places, recipients, and costs of gifts. The witness provided no details about the dаtes, amounts, or places involved in petitioner’s California travel. The witness did not even mentiоn the Traffic Club deduction. Petitioner simply has not met the reconstruction requirement.
Decision will be entered for the respondent.
Notes
All section rеferences are to the Internal Revenue Code of 1954, as in effect during the year in issue.
’The еlements in the case of entertainment expenses are the amount, time, place, business purpose, and business relationship of the recipient. Sec. 1.274-5(b)(3), Income Tax Regs. For a gift, in addition to the five elements immediately above, the taixpayer must include a description оf the gift. Sec. 1.274-5(b)(5), Income Tax Regs. Concerning travel expenditures, including lodging and meals incidental to such travel, the taxpayer must prove the four elements of amount, time, place, and business purpose. Sec. 1.274-5(b)(2), Income Tax Regs.