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respect to petitioners’ unreported gross receipts for the years
at issue is sustained.
Business Expense Deductions
The second issue for our decision is whether petitioners
overstated the amount of their business expense deductions for
the taxable years at issue. Deductions are a matter of
legislative grace, and petitioners bear the burden of proving
their entitlement to any deduction claimed on their returns.
INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). A
taxpayer is required to maintain records sufficient to establish
the amount of his or her income and deductions. Sec. 6001.
Under certain circumstances, in which a taxpayer establishes his
or her entitlement to a deduction, but does not establish the
amount of the deduction, we are permitted to estimate the amount
allowable. Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930).
There must be, however, sufficient evidence in the record to
permit us to conclude that a deductible expense was incurred in
at least the amount allowed. Williams v. United States, 245 F.2d
559, 560 (5th Cir. 1957). In estimating the amount allowable, we
may bear heavily against the taxpayer whose inexactitude is of
his or her own making. Cohan v. Commissioner, supra at 544.
Based upon the record before us in the instant case, we find
that petitioners have failed to meet their burden of proving
entitlement to business expense deductions for the years at issue
in excess of the amounts allowed by respondent. Petitioners have
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