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subject to a concession by respondent,3 sustain respondent’s
determination with respect to the 1995 and 1996 unreported
income.
Business Expense Deductions
With respect to petitioner’s sole proprietorship,
petitioners claimed the following deductions and respondent
disallowed the respective portions thereof:
1995 1996 1997
Claimed Disallowed Claimed Disallowed Claimed Disallowed
Travel $6,591 $959 $26,811 $2,420
Legal fees 5,675 5,765 $21,240 $21,240
Depreciation 16,604 2,420 23,420 2,256
Car and truck 6,116 3,054 17,615 6,627 24,267 4,853
Rent 4,569 2,188
Contract labor/wages 75,662 11,266
While a taxpayer generally may deduct expenses incurred in
conducting a trade or business, a taxpayer may not deduct
personal, family, or living expenses. Secs. 162(a), 262(a).
Moreover, 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.
In the event that a taxpayer establishes that a deductible
expense has been paid but 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.
3Respondent concedes in the parties’ stipulation that the
correct amount of business gross income in 1995 is $152,012. We
accordingly find that petitioner had unreported business income
of $11,453 in that year.
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