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If the item is deductible, but the taxpayer is unable to
substantiate it, the Court should make as close an approximation
as it can. Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir.
1930). The estimate, however, must have a reasonable evidentiary
basis. Vanicek v. Commissioner, 85 T.C. 731, 742-743 (1985). In
making an estimate, the Court may bear heavily upon the taxpayer,
whose inexactitude is of his own making. Cohan v. Commissioner,
supra at 543-544.
Accordingly, this Court will make as close an approximation
as we can where a reasonable evidentiary basis exists.
a. Advertising Expenses
Petitioners claimed Schedule C advertising expense
deductions in the amount of $1,859 on their 1994 Federal income
tax return. Petitioners incurred this expense in purchasing an
18-foot neon sign which was apparently attached to the outside of
Villa Cabana.
Under section 263, any amount paid for capital expenditures
may not be currently deducted. Commissioner v. Idaho Power Co.,
418 U.S. 1, 16 (1974). Capital expenditures include fixtures and
similar property having a useful life substantially beyond the
taxable year. Sec. 1.263(a)-2(a), Income Tax Regs. Signs with a
useful life of more than 1 year must be capitalized. See Alabama
Coca-Cola Bottling Co. v. Commissioner, T.C. Memo. 1969-123.
Though petitioners claimed the $1,859 amount as an
advertising expense deduction on Schedule C of their 1994 Federal
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