6
On Schedule C of Form 1040 filed with respect to her activity,
Too Close To Home, petitioner reported gross receipts in the
amount of $1,200 less cost of goods sold and/or operations in the
amount of $1,200. In addition, petitioner claimed expenses
totaling $8,000 and deducted a loss from this activity in the
amount of $8,000. Respondent received petitioner's return for
the year in issue on September 1, 1995.
Respondent's determinations are presumed correct, and
petitioner has the burden of proving them erroneous. Rule
142(a); Welch v. Helvering, 290 U.S. 111 (1933). Deductions
against income are allowed as a matter of legislative grace. New
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).
Taxpayers must maintain adequate records to substantiate the
amount of any deductions. Sec. 6001; sec. 1.6001-1(a), Income
Tax Regs.
Generally, when evidence shows that a taxpayer incurred a
deductible expense but the exact amount cannot be determined, the
Court may approximate the amount. Cohan v. Commissioner, 39 F.2d
540 (2d Cir. 1930). An exception to the Cohan rule is section
274(d), which prohibits the estimation of expenses with respect
to certain listed property. Listed property includes automobiles
and computers. Sec. 280F(d)(4).
Section 274(d) requires substantiation of these expenses
either "by adequate records or by sufficient evidence
corroborating the taxpayer's own statement". Petitioner must
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