- 4 -
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).
Capital Loss Carryovers
In each of the years in issue, petitioners did not include
in income any capital gains or report any capital losses.2 In
the notice of deficiency, respondent determined that petitioners
must include in income capital gains of $4,122 in 1995, $5,219 in
1996, and $3,853 in 1997. Petitioners concede that they realized
capital gains in these amounts. Petitioners, however, argue that
they are entitled to offset these gains with capital loss
carryovers.
A capital loss is a loss from the sale or exchange of a
capital asset. Sec. 1222. A capital asset is property held by a
taxpayer of a type other than the eight categories of property
2There were no capital gains or capital losses reflected on
the faces of the returns filed by petitioners in each of the
years in issue. For the 1997 return, there was a Schedule D,
Capital Gains and Losses, attached to the return which showed a
capital gain for the year. Respondent suggests that this
schedule may have been submitted at the request of the IRS after
the rest of the return had been filed. In any event, the amount
of the gain--which is substantially less than that determined in
the notice of deficiency and which does not reflect any capital
loss carryover--was not included in the computation of
petitioners’ 1997 gross income.
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