Even the College Business Professors Get it Wrong!!

These are very basic mistakes that under normal circumstances, could lead an IRS auditor to suspect the intent to commit fraud.  He was very lucky CID did not get involved.


 Code Section 162—Business deductions—travel and meals and entertainment expenses—substantiation.
Adjunct business professor/owner of 2 consulting businesses was denied deductions for 1 business's travel and meals and entertainment expenses: taxpayer didn't provide receipts; credit card statements that he offered didn't show name or account number; and he didn't record meals on his calendar or keep receipts for any meals under $75, and instead offered only self-generated spreadsheets or other unsubstantiating documents. Also, his testimony was inconsistent and otherwise unpersuasive when considering he was claiming to have been on different business trips at same time and admitted to claiming meal expense deductions both by specific items and at per diem rates without showing he didn't duplicate expenses. Moreover, he didn't explain how expenses claimed for this business were distinguishable from those already allowed for his other business. (John H. Besaw v. Commissioner, (2015) TC Memo 2015-233, 2015 RIA TC Memo ¶2015-233 )


 Code Section 274—Business deductions—wage expenses—substantiation—business purpose.

Adjunct business professor/owner of 2 consulting businesses was denied deductions for 1 business's alleged wage payments to independent contractors who included his daughter: taxpayer failed to prove he made payments in amounts claimed or that they were ordinary and necessary business expenses. Notably, while he claimed that he established payments via his testimony and corroborating Forms 1099-MISC and bank statements, he didn't even offer any Forms 1099-MISC for 1 of years at issue, didn't explain mismatch of amounts claimed for other year, didn't offer into evidence any Schedules C from his daughter or other alleged contractor showing they reported supposed payments as income, and didn't identify any specific withdrawals in bank records that would reflect payments at issue. Moreover, he admitted he was financially supporting daughter during years at issue. (John H. Besaw v. Commissioner, (2015) TC Memo 2015-233, 2015 RIA TC Memo ¶2015-233 )