- 9 -
of the taxpayer. See Kornhauser v. United States, 276 U.S. 145,
153 (1928); O’Malley v. Commissioner, 91 T.C. 352, 361 (1988),
affd. 972 F.2d 150 (7th Cir. 1992). Expenses that are personal
in nature are generally not allowed as deductions. See sec.
262(a). Deductions are a matter of legislative grace, and
taxpayers must comply with the specific requirements for any
deduction claimed. See INDOPCO, Inc. v. Commissioner, 503 U.S.
79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435,
440 (1934).
A taxpayer is required to maintain records sufficient to
establish the amount of his income and deductions. See sec.
6001; sec. 1.6001-1(a), (e), Income Tax Regs. A taxpayer must
substantiate his deductions by maintaining sufficient books and
records to be entitled to a deduction under section 162(a).
When a taxpayer establishes that he has incurred a
deductible expense, but is unable to substantiate the exact
amount, we are, in some circumstances, permitted to estimate the
deductible amount. See Cohan v. Commissioner, 39 F.2d 540, 543-
544 (2d Cir. 1930). We can estimate the amount of the deductible
expense only when the taxpayer provides evidence sufficient to
establish a rational basis upon which the estimate can be made.
See Vanicek v. Commissioner, 85 T.C. 731, 743 (1985).
Section 274(d) supersedes the general rule of Cohan v.
Commissioner, supra, and we cannot estimate the taxpayer’s
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011