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Issue II. Whether Petitioner Is Entitled to Offsets and Business
Deductions in Excess of Those Allowed by Respondent for the 1992
Taxable Year
Respondent acknowledges that the determination for 1992 has
not taken into account any offsetting business expenses.
Petitioner contends that he is entitled to offsets or deductions
totaling $23,349 for (1) amounts refunded to patients, (2)
amounts paid to the billing service, (3) State license fee, and
(4) miscellaneous expenses charged to his VISA card.
Petitioner has the burden of establishing that he is
entitled to such offsets or deductions. Rule 142(a); New
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). This
includes the burden of substantiation. Hradesky v. Commissioner,
65 T.C. 87, 90 (1975), affd. per curiam 540 F.2d 821 (5th Cir.
1976). A taxpayer must maintain records sufficient to permit
verification of income and expenses. Sec. 6001; sec. 1.6001-1,
Income Tax Regs. That a taxpayer cannot prove the exact amount
of an otherwise deductible item, however, is not necessarily
fatal. Unless precluded by section 274, we may estimate the
amount of such an expense and allow the deduction for the
estimated amount. Cohan v. Commissioner, 39 F.2d 540 (2d Cir.
1930). The estimate, however, must have some reasonable
evidentiary basis. Vanicek v. Commissioner, 85 T.C. 731, 743
(1985).
With respect to petitioner's claim that his income should be
reduced for amounts he transferred into the refund account, such
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