Facts

The petitioner, a law firm, filed a petition seeking a redetermination of tax deficiencies and penalties that were determined by respondent for 2008 through 2010. The deficiencies were related, in part, to travel expenses deductions that were disallowed. Walter Lack owned 50 percent of petitioner's shares and also owned a 50 percent interest in the partnership that owned two aircrafts. Petitioner claimed travel expense deductions based on use of the two aircrafts owned by Lack's partnership.

PETITIONER'S CONTENTIONS:
Petitioner argued that the travel expenses at issue should have been allowed as deductions because the expenses paid by petitioner rather than the partnership were legitimate, properly substantiated, business expenses.

RESPONDENT'S CONTENTIONS:
Respondent argued that the petitioner's claimed travel expenses were not related to ordinary and necessary business expenses and were not properly substantiated.

Result

The court held that some of the travel expenses were for the petitioner's business and, therefore, were entitled to deduction. The court allowed deductions for travel expenses that it determined were properly substantiated under Internal Revenue Code Section 274(d) and directly involving petitioner's employees other than Lack and for Lack's travel expenses to law conferences and petitioner-related legal proceedings. The court, however, rejected other travel expense claims for lack of substantiation. The court also allowed accuracy related penalties, finding petitioner's underpayments negligent and without reasonable cause or good faith.