- 10 -
section, an expense must be directly connected with, or
proximately result from, a trade or business of the taxpayer.
See Kornhauser v. United States, 276 U.S. 145, 153 (1928);
O’Malley v. Commissioner, 91 T.C. 352, 361 (1988). Personal
expenses 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. 1.6001-1(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 incurred a
deductible expense but is unable to substantiate the exact
amount, we are, in some circumstances, 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 taxpayer provides evidence sufficient to
establish a rational basis upon which the estimate can be made.
See Vanicek v. Commissioner, 85 T.C. 731, 743 (1985).
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Next
Last modified: May 25, 2011