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costs of goods, however, must be substantiated, and taxpayers are
required to maintain records sufficient for this purpose. Sec.
6001; Newman v. Commissioner, T.C. Memo. 2000-345; Wright v.
Commissioner, T.C. Memo. 1993-27; sec. 1.6001-1(a), Income Tax
Regs.
Section 162(a) allows a deduction for “all the ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on any trade or business.” As with cost of goods sold,
amounts deducted pursuant to section 162(a) 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); see
also sec. 1.6001-1(a), (e), Income Tax Regs.
When a taxpayer adequately establishes that he or she has paid
or incurred a deductible expense but is unable to fully
substantiate it, the Court is permitted, in some circumstances, to
determine the amount of the allowable deduction based on an
approximation, 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 contained in the record to provide a basis for
the Court to make an estimate and to conclude that a deductible
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