- 9 -
establish their amount. See sec. 6001. Except in the case of
expenses subject to section 274, if the taxpayer's records are
inadequate or there are no records, we may still allow a
deduction based on a reasonable estimate. See Cohan v.
Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930). However, the
taxpayer must present evidence sufficient to provide some
rational basis upon which estimates of deductible expenses may be
made. See Vanicek v. Commissioner, 85 T.C. 731, 742-743 (1985).
In this case, petitioners provided no evidence at trial or
argument on brief that they are entitled to deductions from their
income. Accordingly, we cannot estimate petitioners' deductions
under the Cohan rule.
Issue 2. Self-Employment Tax
On brief, respondent contends that petitioner "is liable for
self-employment tax on all of the income he earned." Section
1401 imposes a tax on the self-employment income of every
individual. An individual's self-employment income depends on
his "net earnings from self-employment". Sec. 1402(b). In
relevant part, the term "net earnings from self-employment" means
the gross income derived by an individual from any trade or
business carried on by such individual less allowable deductions
attributable to such trade or business. See sec. 1402(a).
Under section 1402(a)(5), where the income from a trade or
business is community income, as in this case, all the gross
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011