Opinion ID: 350814
Heading Depth: 1
Heading Rank: 3

Heading: Expense Deductions

Text: 12 The Tax Court affirmed the disallowance of a part of taxpayers' claimed expenses for promotion, entertainment and travel because taxpayers had failed to meet the substantiation requirements of § 274(d). However, only certain of the claimed expenses were subject to the requirements of § 274(d). That section became effective on January 1, 1963, but the Commissioner, by Revenue Ruling 63-144, 1963 2 CB 129, 130, ruled that the new rules would not be applied until after July 31, 1963, if a good faith effort was made to comply with the new substantive requirements. And § 274(d) does not cover local travel expense. 1963 1 CB 474, 475. 13 The disallowed expenses cover both local travel and items expended prior to July 31, 1963. Taxpayers' testimony that these expenses were incurred for business purposes was not contradicted. The Tax Court was entitled to disbelieve this testimony, but the record fails to show that it did, or that it was even considered, in the absence of what was apparently thought to be the essential substantiation. On remand, the Tax Court shall reconsider these expense deductions in the light of the limited applicability of § 274(d).