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1The notice of deficiency states that petitioners had already consented
to the assessment of a $1,207 deficiency resulting from this $4,200
adjustment. This previously assessed tax was subtracted from the corrected
tax liability in arriving at the amount of the deficiency at issue in this
case. See sec. 6211(a)(1)(B). Petitioners nevertheless dispute this
adjustment. Due to our holding on the issue in this case we need not address
the relevancy of any consent by petitioners to an assessment.
We now turn to the issue for decision. As a general rule,
ordinary and necessary business expenses are deductible, but
personal, family, and living expenses are not. Secs. 162(a),
262(a).
A taxpayer generally must keep records sufficient to
establish the amounts of the items reported on his Federal income
tax return. Sec. 6001; sec. 1.6001-1(a), (e), Income Tax Regs.
However, in the event that a taxpayer establishes that a
deductible expense has been paid but is unable to substantiate
the precise amount, we generally may estimate the amount of the
deductible expense bearing heavily against the taxpayer whose
inexactitude in substantiating the amount of the expense is of
his own making. Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d
Cir. 1930). We cannot estimate a deductible expense, however,
unless the taxpayer presents evidence sufficient to provide some
basis upon which an estimate may be made. Vanicek v.
Commissioner, 85 T.C. 731, 743 (1985).
Section 274(d) supersedes the Cohan doctrine. Sanford v.
Commissioner, 50 T.C. 823, 827 (1968), affd. 412 F.2d 201 (2d
Cir. 1969). Section 274(d) provides that, unless the taxpayer
complies with certain strict substantiation rules, no deduction
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