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4. Schedule C Expenses/Deductions
Although petitioner is not entitled to report deductions on
Schedule C, we look at the claimed amounts to consider whether
they may otherwise be deductible as miscellaneous itemized
deductions on Schedule A. Section 162(a) permits a deduction for
the ordinary and necessary expenses paid or incurred during the
taxable year in carrying on a trade or business. Petitioner’s
trade or business is that of an employee for IBC. Expenses that
are personal in nature are generally not allowed as deductions.
See sec. 262(a). Deductions are a matter of legislative grace,
and taxpayers must comply with the specific requirements for any
deduction 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 income and deductions. See sec.
6001; sec. 1.6000-1(a), (e), Income Tax Regs. A taxpayer must
substantiate his deductions by maintaining sufficient books and
records to be entitled to a deduction under section 162(a).
When a taxpayer establishes that he has paid a deductible
expense but is unable to substantiate the exact amount, we are
permitted to estimate the deductible amount. See Cohan v.
Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930). We can
estimate the amount of the deductible expense only when the
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