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management services. Again, we do not know whether such
payments, if made, are properly deductible under section 162(a).
If a claimed deduction is not adequately substantiated, we
are permitted to estimate expenses when we are convinced from the
record that the taxpayer has incurred such expenses. Cohan v.
Commissioner, 39 F.2d 540 (2d Cir. 1930). However, we require a
basis upon which an estimate may be made. Vanicek v.
Commissioner, 85 T.C. 731, 743 (1985). Here, for the most part,
we have no such basis. Moreover, since any expense we would
estimate would constitute a nondeductible preopening expense, no
estimate is necessary.
2. Preopening Expenses
The parties have stipulated, and we have found, that Good
Shepherd did not operate a nursing home or other health care
facility in any of the years in issue. On brief, petitioners
state that, beginning in 1985:
The corporate business of Good Shepherd was to buy and
sell distressed properties, fix them, and resell or
operate them. In the case of the Property, "fixing" at
first meant getting approval for a nursing home license
since at or near the time of purchase the nursing home
had 90% of improvements needed to operate a nursing
home. It was the most logical way to turn this
distressed Property around. Unfortunately, the nursing
home approval was never obtained. Every time it seemed
near at hand, another problem would crop up. Even
though a licensed health facility manager was in place,
unexpected environmental and construction problems had
to be dealt with. Efforts to obtain a nursing home
license began in 1985 and continued through 1988, the
years in question in this case. * * *
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