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A taxpayer generally must keep records sufficient to
establish the amounts of the items reported on his Federal income
tax return. See sec. 6001; sec. 1.6001-1(a), (e), Income Tax
Regs. However, in the event that a taxpayer establishes that a
deductible expense has been paid but is unable to substantiate
the precise amount, we generally may estimate the amount of the
deductible expense bearing heavily against the taxpayer whose
inexactitude in substantiating the amount of the expense is of
his own making. See Cohan v. Commissioner, 39 F.2d 540, 543-544
(2d Cir. 1930). We cannot estimate a deductible expense,
however, unless the taxpayer presents evidence sufficient to
provide some basis upon which an estimate may be made. See
Vanicek v. Commissioner, 85 T.C. 731, 743 (1985).
Section 274(d) imposes stricter requirements and supersedes
the Cohan doctrine. See Sanford v. Commissioner, 50 T.C. 823,
827 (1968), affd. 412 F.2d 201 (2d Cir. 1969). Section 274(d)
provides that, unless the taxpayer complies with certain strict
substantiation rules, no deduction is allowable (1) for traveling
expenses, (2) for entertainment expenses, (3) for expenses for
gifts, or (4) with respect to listed property. To meet the
strict substantiation requirements, the taxpayer must
substantiate the amount, time, place, and business purpose of the
expenses. See sec. 274(d); sec. 1.274-5T, Temporary Income Tax
Regs., 50 Fed. Reg. 46006 (Nov. 6, 1985).
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Last modified: May 25, 2011