- 12 -
amount and purpose of the item claimed. Sec. 6001; Hradesky v.
Commissioner, 65 T.C. 87, 90 (1975), affd. per curiam 540 F.2d 821
(5th Cir. 1976); sec. 1.6001-1(a), Income Tax Regs. If claimed
deductions are not adequately substantiated, we are permitted to
estimate them, provided we are convinced from the record that the
taxpayer has incurred such expenses and we have a basis upon which
to make an estimate. Cohan v. Commissioner, 39 F.2d 540 (2d Cir.
1930); Vanicek v. Commissioner, 85 T.C. 731, 743 (1985).
Pursuant to section 162(a), a taxpayer may deduct all ordinary
and necessary expenses paid or incurred during the taxable year in
carrying on a trade or business. In general, an expense is
ordinary if it is considered “normal, usual, or customary” in the
context of the particular business out of which it arose. Deputy
v. duPont, 308 U.S. 488, 495-496 (1940). An expense is necessary
if it is appropriate and helpful to the operation of the taxpayer’s
trade or business. Carbine v. Commissioner, 83 T.C. 356, 363
(1984), affd. 777 F.2d 662 (11th Cir. 1985); Heineman v.
Commissioner, 82 T.C. 538, 543 (1984). Only the portion of an
expense that is reasonable in amount is deductible under section
162. United States v. Haskel Engg. & Supply Co., 380 F.2d 786,
788-789 (9th Cir. 1967). Pursuant to section 262(a), no portion of
any expenditure attributable to personal, living, or family
expenses may be deducted, except as otherwise expressly provided in
the Code.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011