Michael R. and Sheila Olsen - Page 4




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          distinct.  The only evidentiary support provided by petitioners             
          for the disallowed deductions relates to the activities conducted           
          for Olray Corporation.                                                      
               Ordinary and necessary expenses incurred in carrying on a              
          trade or business generally are deductible by the individual                
          engaged in the trade or business.  Sec. 162(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 that he 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).  As relevant here, section 274(d) provides that,                
          unless the taxpayer complies with certain strict substantiation             
          rules, no deduction is allowable for expenses with respect to               






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