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and necessary expenses paid or incurred during the taxable year
in carrying on any trade or business”. Yet as with cost of goods
sold, amounts deducted must be substantiated, and records
sufficient to establish such deductions must be maintained by the
taxpayer. Sec. 6001; Hradesky v. Commissioner, 65 T.C. 87, 89-90
(1975), affd. 540 F.2d 821 (5th Cir. 1976); sec. 1.6001-1(a),
Income Tax Regs.
When a taxpayer adequately establishes that he or she paid
or incurred a deductible expense but does not establish the
precise amount, we may in some circumstances estimate the
allowable deduction, bearing heavily against the taxpayer whose
inexactitude is of his or her own making. Cohan v. Commissioner,
39 F.2d 540, 543-544 (2d Cir. 1930). There must, however, be
sufficient evidence in the record to provide a basis upon which
an estimate may be made and to permit us to conclude that a
deductible expense was incurred in at least the amount allowed.
Williams v. United States, 245 F.2d 559, 560 (5th Cir. 1957);
Vanicek v. Commissioner, 85 T.C. 731, 742-743 (1985).
Furthermore, business expenses described in section 274 are
subject to rules of substantiation which supersede the doctrine
of Cohan v. Commissioner, supra. Sanford v. Commissioner, 50
T.C. 823, 827-828 (1968), affd. 412 F.2d 201 (2d Cir. 1969); sec.
1.274-5T(a), Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov.
6, 1985). Section 274 provides that no deduction shall be
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