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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 or her income and deductions. See
sec. 6001; sec. 1.6001-1(a), (e), Income Tax Regs.
Section 162(a) allows a taxpayer to deduct all ordinary and
necessary business expenses paid or incurred during the taxable
year in carrying on any trade or business. To be “necessary” an
expense must be “appropriate and helpful” to the taxpayer’s
business. Welch v. Helvering, 290 U.S. 111, 113 (1933). To be
“ordinary” the transaction which gives rise to the expense must
be of a common or frequent occurrence in the type of business
involved. Deputy v. Du Pont, 308 U.S. 488, 495 (1940). No
deduction is allowed for personal, living, or family expenses.
See sec. 262(a).
Generally, if a claimed business expense is deductible, but
the taxpayer is unable to substantiate it, the Court is permitted
to make as close an approximation as it can, bearing heavily
against the taxpayer whose inexactitude is of his or her own
making. See Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir.
1930). The estimate must have a reasonable evidentiary basis.
See Vanicek v. Commissioner, 85 T.C. 731, 743 (1985).
1. Rent or Lease
Mr. Ngo claimed a deduction for rent or lease payments of
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