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B. Failure To Substantiate Other Schedule C Deductions
Petitioners contend that in 1986 and 1989, they owned
certain vending machines from which their corporations collected
the revenue. In connection with those vending machines,
petitioners claimed the operating and related expenses.
Respondent determined that petitioners are not entitled to
deductions.
Section 162(a) allows a deduction for “all ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on any trade or business”. See also sec. 1.162-1(a),
Income Tax Regs.
Taxpayers are required to maintain records that are
sufficient to enable the Commissioner to determine their correct
tax liability. See Meneguzzo v. Commissioner, 43 T.C. 824, 831-
832 (1965); sec. 6001; sec. 1.6011-1(a), Income Tax Regs. Also,
the taxpayer bears the burden of substantiating the amount and
purpose of the item claimed. Hradesky v. Commissioner, 65 T.C.
at 90; sec. 1.6001-1(a), Income Tax Regs. Under certain
circumstances, if a taxpayer establishes the entitlement to a
deduction but does not establish the amount of the deduction, we
may estimate the amount allowable. Cohan v. Commissioner, 39
F.2d 540 (2d Cir. 1930).
Finally, “the trade or business of the corporation must be
considered separately from the trade or business of the
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