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purported organizational consulting business. He claims that
these expenses should have been reported on the 1996 Schedule C
for his law practice.
Generally, ordinary and necessary expenses paid or incurred
in the carrying on of a trade or business are deductible. Sec.
162(a); sec. 1.162-1(a), Income Tax Regs. “The determination of
whether an expenditure satisfies the requirements of section 162
is a question of fact.” Shea v. Commissioner, 112 T.C. 183, 186
(1999).
All deductible expenses are subject to substantiation.
Secs. 6001, 274(d). The general substantiation requirement is
set forth in section 6001 and states in pertinent part: “Every
person liable for any tax imposed by this title, or for the
collection thereof, shall keep such records * * * and comply with
such rules and regulations as the Secretary may from time to time
prescribe.” The regulations provide that “any person subject to
tax * * * shall keep such permanent books of account or records *
* * as are sufficient to establish the amount of * * *
deductions”. Sec. 1.6001-1(a), Income Tax Regs. In the event
that a taxpayer establishes that a deductible expense has been
paid, but he is unable to substantiate the precise amount, the
Court may estimate the amount of the deduction bearing heavily
against the taxpayer. Cohan v. Commissioner, 39 F.2d 540, 543-
544 (2d Cir. 1930). However, the Court cannot make such an
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