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permanent books of account or records, including inventories, as
are sufficient to establish the amount of gross income,
deductions, credits, or other matters required to be shown by
such person in any return of such tax".
Under certain circumstances, where a taxpayer establishes
entitlement to a deduction but does not establish the amount of
the deduction, the Court is allowed to estimate the amount
allowable. See Cohan v. Commissioner, 39 F.2d 540 (2d Cir.
1930). However, there must be sufficient evidence in the record
to permit the Court to conclude that a deductible expense was
incurred in at least the amount allowed. See Williams v. United
States, 245 F.2d 559, 560 (5th Cir. 1957). In estimating the
amount allowable, the Court bears heavily against the taxpayer
whose inexactitude is of his or her own making. See Cohan v.
Commissioner, supra at 544.
In this case, since there is both unreported gross income
and unsubstantiated expenses, the Court is unable to allow any
deductions to petitioner under Cohan v. Commissioner, supra.
Accordingly, the Court sustains respondent in this case.
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
for respondent.
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Last modified: May 25, 2011