- 3 -
substantiating the amount of the item claimed. Hradesky v.
Commissioner, 65 T.C. 87, 90 (1975), affd. per curiam 540 F.2d
821 (5th Cir. 1976); sec. 1.6001-1(a), Income Tax Regs.
At trial, petitioners failed to provide any evidence to
substantiate the amount of the claimed bad debt deduction.
Petitioners did not provide any invoices or other documentation
showing the reduction in invoice payments. No evidence on the
value of the "stolen" garments was presented. While it is within
the purview of this Court to estimate the amount of allowable
deductions where there is evidence that deductible expenses were
incurred, Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930), we
must have some basis on which an estimate may be made. Williams
v. United States, 245 F.2d 559 (5th Cir. 1957). The record
before us contains no evidence upon which we can base such an
estimate. Moreover, the record does not establish the manner in
which petitioners' gross receipts were determined and whether the
reported amounts included or excluded the reductions in issue.
Section 1.166-1(e) provides:
(e) Prior inclusion in income required. Worthless debts
arising from * * * items of taxable income shall not be allowed
as a deduction under section 166 unless the income such items
represent has been included in the return of income for the year
for which the deduction as a bad debt is claimed or for a prior
taxable year.
Petitioners' return was prepared on the cash method, and
presumably they reported only amounts actually received. Thus, we
have no assurance that the reductions taken on the invoices to
Page: Previous 1 2 3 4 5 6 Next
Last modified: May 25, 2011