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expenses incurred in connection with a business activity. Sec.
6001; sec. 1.6001-1(a), Income Tax Regs. Moreover, in the case
of travel expenses and certain other expenses, such as
entertainment, gifts, and the use of listed properties under
section 280F(d)(4)(A), section 274(d) imposes stringent
substantiation requirements to document more particularly the
nature and amount of such expenses. Petitioners' records that
were submitted into evidence do not suffice to substantiate the
expenses claimed on their returns, including those expenses that
would be subject to section 274(d). The Court recognizes that
petitioners realized gross income of $2,599 and certainly
incurred some expenses in the production of those gross receipts.
Except for expenses that are subject to substantiation under
section 274(d), where the Court is satisfied that expenses were
incurred in the production of income but the taxpayer has not
established the amount of the deduction, the Court is allowed to
estimate an allowable amount. Cohan v. Commissioner, 39 F.2d 540
(2d Cir. 1930). Pursuant to Cohan, the Court allows petitioners
a deduction of $450 for expenses related to their trade or
business activity for 1999. In all other respects, respondent is
sustained on this issue.
With respect to the second issue, the addition to tax under
section 6651(a)(1) for 1998, petitioners agreed that their return
for that year was not filed timely, and they presented no
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