Jan and Corinne Mejnartowicz - Page 5

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          1. Deductions and Cost of Goods Sold                                        
               Deductions are a matter of legislative grace.  INDOPCO, Inc.           
          v. Commissioner, 503 U.S. 79, 84 (1992).  A taxpayer “shall keep            
          such permanent books of account or records, including                       
          inventories, as are sufficient to establish the amount of gross             
          income, deductions, credits, or other matters required to be                
          shown” on a tax return.  Sec. 1.6001-1(a), Income Tax Regs.; see            
          also Meneguzzo v. Commissioner, 43 T.C. 824, 831 (1965).  Except            
          as otherwise provided in section 274,3 when the evidence shows              
          that a taxpayer incurred a deductible expense, but the exact                
          amount cannot be determined, the Court may “make as close an                
          approximation as it can, bearing heavily if it chooses upon the             
          taxpayer whose inexactitude is of his own making.”  Cohan v.                
          Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930).  There must,             
          however, be some basis upon which such an approximation can be              
          made.  Vanicek v. Commissioner, 85 T.C. 731, 742-743 (1985).                
               Petitioner has the burden of substantiating his deductions.            
          Rule 142.  Petitioner has no records whatsoever.  His argument,             
          as he expresses it, is:                                                     
               Normally * * * my expenses would be two-thirds of my gross             
               [receipts].  Here, my expenses were only half of what my               
               gross was, and that would be the same with any plumbing and            
               heating business.                                                      

          3    None of the disallowed deductions are subject to sec. 274.             

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