DocketNumber： Docket No. 8854-72
Judges： Hall
Filed Date： 11/4/1975
Status： Precedential
Modified Date： 11/14/2024
*40
Petitioner deducted as business expenses his costs of certain entertainment, travel, business gifts, and club dues. He had maintained adequate records of these expenses, but his records were inadvertently thrown out.
*342 Respondent determined a $ 10,588.53 deficiency in petitioners' 1969 Federal income taxes.
The issues in this case are whether petitioners are entitled to the claimed deductions for business gifts, club dues, and travel, entertainment, and advertising expenses.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
Petitioners Joe F. and Ann Gizzi, husband and wife, filed a joint income tax return for 1969. Petitioners resided in River *343 Forest, Ill., at the time they filed their petition. Ann Gizzi is a party only by virtue of having filed a joint Federal income tax return with her husband. Joe F. Gizzi will be referred to herein as petitioner.
Petitioner followed several lines of work in 1969. He served as a commission agent for Acme Fast Freight Co. (Acme), a company which specialized in transporting freight between the Chicago area and the west coast. Petitioner's duties for Acme involved soliciting additional clients, and he received as compensation a percentage of the fees he generated. Acme*42 did not reimburse petitioner for any expenses involved in soliciting customers. Petitioner also operated an air freight delivery business under the name of B & G Trucking Co. (B & G Trucking), during 1969. And, in October 1969, petitioner began operating a drive-in restaurant named Fiorie's Drive-In.
To encourage business in both of his freight ventures, petitioner felt it necessary frequently to entertain current and potential customers. It was common in his branch of the freight industry to entertain clients and give them gifts. To improve relations with Acme customers, petitioner would host golf parties, which included dinner and drinks, at the Cog Hill Country Club. In 1969, he hosted at least three such events, inviting both current and potential clients. Petitioner frequently gave gifts, such as turkeys, hams, and clock radios, to both his Acme clients and his B & G clients.
In 1969 petitioner also made five or six trips to California to entertain a Mr. Donald Soul, an employee of International Business Machines. Petitioner hoped that Mr. Soul would exert influence to direct freight business to him. Palm Springs was chosen as their meeting place because, according to*43 petitioner, the opportunities "to have a good time, so to speak" were more abundant in Palm Springs than in Los Angeles.
Petitioner's custom was to pay for his business entertainment expenses, gifts, and travel expenses in cash. He recorded these expenses by writing on a voucher the date, place, purpose, and amount spent. In the case of business entertainment expenses, he also recorded the persons entertained. For gifts he included a description of the gift and the name of the recipient. To prepare his tax return, petitioner separated his accumulated vouchers into the categories designated by his tax preparer. Petitioner kept no separate diary of expenses.
*344 Petitioner kept his accumulated vouchers in the storage area of his residence. Sometime after filing his 1969 return, petitioner began to experience marital problems and moved from his home. Subsequent to his moving and prior to respondent's audit, petitioner's records somehow disappeared from the storage area. Petitioner's son indicated that the records had been inadvertently thrown out.
Petitioner in his 1969 income tax return claimed total business-related deductions for all three of his business ventures in*44 the amount of $ 49,086.16. His Acme-related expenses totaled $ 40,262; his B & G Trucking expenses totaled $ 7,427.78; and his restaurant expenses totaled $ 1,396.38.
Respondent disallowed $ 38,293.10 of petitioner's claimed deductions, consisting of $ 34,825.72 of Acme-related deductions and $ 3,467.38 of B & G Trucking deductions. *45 and club dues in issue because they are ordinary and necessary business expenses within the meaning of section 162,
*46 The Treasury regulations, in
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 sufficiently resemble floods or fire to be considered a casualty. See
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.,
For example, petitioner did not provide any information concerning the cost of the country club parties, their dates, or the identities of the persons entertained. Petitioner was equally indefinite as to both his business gifts and his California journeys. Petitioner 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*49 some of the Cog Hill Country Club functions, but gave 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 dates, amounts, or places involved in petitioner's California travel. The witness did not even mention the Traffic Club deduction. Petitioner simply has not met the reconstruction requirement.
1. Respondent disallowed the following items:
(a) Concerning petitioner's Acme-related work:
| Meals, lodging and other travel expenses | $ 3,422.18 |
| Air travel | 2,936.40 |
| Traffic Club dues, dinners, and meetings | 3,600.42 |
| Entertainment | 14,305.55 |
| Advertising and promotions-sales aids | 9,874.17 |
| Prizes and giveaways | 687.00 |
| 34,825.72 |
(b) Concerning B & G Trucking:
| Advertising and promotion | $ 3,467.38 |
The record contains almost no information concerning the advertising and promotion deduction claimed by petitioner for both of his freight ventures.↩
2. All section references are to the Internal Revenue Code of 1954, as in effect during the year in issue.↩
3. The elements in the case of entertainment expenses are the amount, time, place, business purpose, and business relationship of the recipient.