Karan M. Hintze - Page 10

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               Petitioner does not contend that the deposits of nontaxable            
          income into her checking accounts exceeded the $40,988.94 allowed           
          by respondent.  Accordingly, respondent’s determination that                
          petitioner failed to report $8,133.31 of gross income from her              
          business during 1994 is sustained.                                          
          B.   Business Deductions                                                    
               Ordinarily, a taxpayer is permitted to deduct the ordinary             
          and necessary expenses that she pays or incurs during the                   
          taxpayer year in carrying on a trade or business.  See sec.                 
          162(a).  A taxpayer, however, is required to maintain records               
          sufficient to establish the amounts of her deductions.  See sec.            
          6001; sec. 1.6001-1(a), Income Tax Regs.                                    
               When a taxpayer establishes that she paid or incurred a                
          deductible expense but does not establish the amount of the                 
          deduction, we may estimate the amount allowable in certain                  
          circumstances.  See Cohan v. Commissioner, 39 F.2d 540, 543-544             
          (2d Cir. 1930).  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.  See Williams v.           
          United States, 245 F.2d 559, 560 (5th Cir. 1957).  In estimating            
          the amount allowable, we bear heavily upon the taxpayer whose               
          inexactitude is of her own making.  See Cohan v. Commissioner,              
          supra at 544.                                                               
               In addition to satisfying the criteria for deductibility               
          under section 162, certain categories of expenses must also                 

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