Return with us now to those thrilling days of yesteryear, when Congress wanted to make life a little easier for taxpayers, who could still claim deductions later disallowed by the aptly-named "Jobs Cut and Tax Increase Act" of 2017.
Specifically, go back to May of 1985 and PL 99-44. The conference report explains:
"Amends the Internal Revenue Code to repeal the requirement that contemporaneous records be kept to substantiate tax deductions for certain business expenses, including automobile expenses, business entertainment expenses, and expenses for gifts. Requires taxpayers to supply adequate records or sufficient evidence corroborating the taxpayer's own statement to substantiate these deductions. Repeals the requirements imposed on tax return preparers with respect to informing taxpayers of certain recordkeeping requirements. Repeals the negligence penalty with respect to underpayment attributable to failure to meet the substantiation requirements. Repeals the regulations issued to carry out such provisions....Requires the Secretary of the Treasury to prescribe regulations by October 1, 1985, to carry out this Act."
So this is sort of like the hobby-loss rule, which was enacted to help taxpayers by letting them win their case with a profit in two years out of five, while not allowing IRS to win even if there were losses ten years in a row. What was repealed by amended Section 274(d) was the requirement for contemporaneous written records. Those are still best practice, but taxpayers don't lose just because they don't have them. The question on tax forms must intimidate a lot of people, though.
But as @IRonMaN suggests, once it's entered on a tax return, it's a written record, right?
