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Under section 162(a), a taxpayer generally may deduct the
ordinary and necessary expenses paid or incurred during the
taxable year in carrying on his trade or business. A taxpayer is
engaged in a trade or business if the taxpayer is involved in the
activity with continuity and regularity and with the primary
purpose of making a profit. Commissioner v. Groetzinger, 480
U.S. 23, 35 (1987).
A taxpayer must keep records sufficient to establish the
amounts of the items required to be shown 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.
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).
In his opening statement at trial, petitioner argued that
the following is the nature of his Schedule C business:
My antique shop association in Redwood City was with
Antiques on Broadway. My association here was with the
Trolley Shop Antiques in Lemon Grove in the mid 90s and at
the present time on the Internet. My future plans of the
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Last modified: May 25, 2011