- 10 -
Evidently realizing that they have serious evidentiary
problems regarding their position on the deductions that they are
claiming with respect to the ten parcels, petitioners assert:
"It is unreasonable to expect to manage and maintain 10 proper-
ties for 12 months * * * without incurring any expenses. Reason-
able expenses should be allowed." In support of that position,
petitioners cite Cohan v. Commissioner, 39 F.2d 540 (2d Cir.
1930). On the record before us, we disagree with petitioners'
position that "Reasonable expenses should be allowed" in the
present case. The so-called Cohan rule permits us to estimate
and allow expenses that have not been adequately substantiated
only if we are convinced from the record that such expenses were
incurred by the taxpayer and that they otherwise satisfy the
requirements of the Code as to their deductibility, and we have a
basis on which to make an estimate of such expenses. The circum-
stances under which the so-called Cohan rule is to be applied are
not present in the instant case.
Based on our examination of the entire record in this case,
we find that petitioners have failed to establish that they are
entitled (1) under either section 162 or section 212 to the
expense deductions4 or (2) under section 167 to the depreciation
deductions that they are claiming for 1994 with respect to the
ten parcels in question.
4 We need not decide whether the claimed expense deductions
are subject to sec. 162 or sec. 212 because petitioners have
failed to show that they have met the requirements of either
section.
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