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petitioner has substantiated certain Schedule C business expense
deductions that he claimed on his 1993, 1994, and 1995 Federal
income tax returns. Deductions are a matter of legislative
grace, and petitioner bears the burden of proving that he is
entitled to the deductions claimed. Rule 142(a); New Colonial
Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).5
Ordinarily, a taxpayer is permitted to deduct the ordinary
and necessary expenses that he pays or incurs during the taxable
year in carrying on a trade or business. Sec. 162(a). A
taxpayer, however, is required to maintain records sufficient to
establish the amounts of his deductions. Sec. 6001; sec. 1.6001-
1(a), Income Tax Regs.
When a taxpayer establishes that he paid or incurred a
deductible expense but does not establish the amount of the
deduction, we may estimate the amount allowable in certain
circumstances. Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d
Cir. 1930); Vanicek v. Commissioner, 85 T.C. 731, 742-743 (1985).
There must be sufficient evidence in the record, however, to
permit us to conclude that a deductible expense was paid or
incurred in at least the amount allowed. Williams v. United
States, 245 F.2d 559, 560 (5th Cir. 1957).
5 The examination in this case began in 1996; therefore,
sec. 7491 is inapplicable. Higbee v. Commissioner, 116 T.C. 438,
440 (2001) (sec. 7491 applies to examinations commenced after
July 22, 1998).
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