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Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).
Taxpayers must substantiate any deductions claimed. Hradesky v.
Commissioner, 65 T.C. 87 (1975), affd. per curiam 540 F.2d 821
(5th Cir. 1976). Section 6001 imposes upon every person liable
for any tax a duty to maintain records that are sufficient to
enable the Commissioner to determine the taxpayer's correct tax
liability. Sec. 1.6001-1(a), Income Tax Regs.
Section 162(a) allows a deduction for the ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on a trade or business. Only ordinary and necessary
business expenditures directly connected with or pertaining to
the taxpayer's trade or business are deductible from gross
income. Sec. 1.162-1(a), Income Tax Reg. Whether an expenditure
is ordinary and necessary is a question of fact. Commissioner v.
Heininger, 320 U.S. 467, 475 (1943).
When a taxpayer fails to keep records, but a court is
convinced that deductible expenditures were incurred, the court
may make as close an approximation as it can, "bearing heavily if
it chooses upon the taxpayer whose inexactitude is of his own
making." Cohan v. Commissioner, 39 F.2d 540, 544 (2d Cir. 1930).
We cannot estimate deductible expenses, however, unless the
taxpayer presents evidence sufficient to provide some rational
basis upon which an estimate may be made. Vanicek v.
Commissioner, 85 T.C. 731 (1985).
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