-15-
sheets. Mr. Sager testified: "Typically material costs in most
construction jobs range from 30 to 60 percent of your bid. Most
labor costs range from 15 to 35 percent of your bid, and that's
pretty--well, that's real broad obviously, but I mean, that is
consistent within the market." As this testimony makes clear,
Mr. Sager admitted that material and labor costs combined can
vary substantially in the construction business--from 45 percent
to 95 percent of the amount bid.
E. Law and Conclusions
Respondent has determined deficiencies in petitioner's tax
for each of the years 1989-92. Respondent's determinations are
presumed correct; petitioner bears the burden of proving that he
is entitled to the claimed deductions. See Rule 142(a).
If a taxpayer has established that deductible expenses were
incurred but has not established the amount of such expenses, we
may estimate the amount allowable, bearing heavily if we so
choose upon the taxpayer whose inexactitude is of his own making.
See Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930).
However, there must be evidence in the record that provides a
rational basis for our estimate. See Williams v. United States,
245 F.2d 559, 560 (5th Cir. 1957); Vanicek v. Commissioner, 85
T.C. 731, 742-743 (1985).
Expert witness testimony may be appropriate where
specialized knowledge can help us understand the evidence or
determine a fact in issue. See Fed. R. Evid. 702. However,
we weigh an expert's testimony in light of his or her
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