Robert Walter Allison - Page 6

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          establish the amount of his or her income and deductions.  Sec.             
          6001; sec. 1.6001-1(a), (e), Income Tax Regs.                               
               Section 162(a) allows a taxpayer to deduct all ordinary and            
          necessary business expenses paid or incurred during the taxable             
          year in carrying on any trade or business.  To be “necessary” an            
          expense must be “appropriate and helpful” to the taxpayer’s                 
          business.  Welch v. Helvering, 290 U.S. 111, 113 (1933).  To be             
          “ordinary” the transaction which gives rise to the expense must             
          be of a common or frequent occurrence in the type of business               
          involved.  Deputy v. Du Pont, 308 U.S. 488, 495 (1940).  No                 
          deduction is allowed for personal, living, or family expenses.              
          Sec. 262(a).                                                                
               Generally, if a claimed business expense is deductible, but            
          the taxpayer is unable to substantiate it, the Court is permitted           
          to make as close an approximation as it can, bearing heavily                
          against the taxpayer whose inexactitude is of his or her own                
          making.  Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir.               
          1930).  The estimate must have a reasonable evidentiary basis.              
          Vanicek v. Commissioner, 85 T.C. 731, 743 (1985).  However,                 
          section 274 supersedes the doctrine in Cohan v. Commissioner,               
          supra, see sec. 1.274-5T(a), Temporary Income Tax Regs., 50 Fed.            
          Reg. 46014 (Nov. 6, 1985), and requires strict substantiation of            
          expenses for travel, meals and entertainment, and gifts, and with           
          respect to any listed property as defined in section 280F(d)(4).            

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