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Petitioners offered at trial, to establish payment of the
above amounts, three checks totaling $4,702. However, all three
checks bear notations that all or portions of the checks are for
taxes. No credible documentary evidence was presented that would
satisfy the Court that petitioners paid any amounts to acquire
the property. The court is satisfied, however, that petitioners
have record title to the property; that the property was held for
residential rental purposes; and that petitioners have been
reporting the income and expenses for this property for Federal
income tax purposes. When certain claimed expenses are not
adequately substantiated, but the Court is satisfied from the
record that expenses were in fact incurred by the taxpayer, and a
basis upon which an estimate of the expenses can be made, this
Court may determine and allow the taxpayer a deduction for the
expense claimed. Cohan v. Commissioner, 39 F.2d 540, 544 (2d
Cir. 1930). The Court, accordingly, estimates that petitioners
paid $8,250 for the house and improvements and, assuming a useful
life of 27.5 years (which respondent does not dispute), allows
petitioners a depreciation deduction of $300 for each of the
years at issue.8
8
For 1992, the rental activity of the Sister Bay property was
reported by JMZ Management, Inc., a corporation owned by
petitioners, an S corporation under section 1361. On their 1992
Federal income tax return, petitioners reported a loss of $3,567
from JMZ Management, Inc., which included a depreciation
deduction of $1,920 claimed by JMZ Management, Inc., on Form
(continued...)
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