- 10 - 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 alsoPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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