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The Court holds that respondent’s determination of
additional income in the amounts set forth in the notice of
deficiency is sustained.
B. Petitioners' Deductions
1. Schedule C and Schedule A Deductions
Section 162(a) allows a taxpayer deductions for ordinary and
necessary business expenses incurred during the taxable year in
carrying on a trade or business. Deductions, however, are a
matter of legislative grace, and the taxpayer bears the burden of
proving the entitlement to any deductions claimed. See INDOPCO,
Inc. v. Commissioner, 503 U.S. 79, 84 (1992); Rockwell v.
Commissioner, 512 F.2d 882 (9th Cir. 1975), affg. T.C. Memo.
1972-133.
Generally, a taxpayer must establish that deductions taken
pursuant to section 162 are ordinary and necessary business
expenses and must maintain records sufficient to substantiate the
amounts of the deductions claimed. Sec. 1.6001-1(a), Income Tax
Regs. Under section 6001, petitioner bears the sole
responsibility for maintaining his business records.
If a claimed business expense is deductible, but the
taxpayer is unable to substantiate it, the Court is permitted to
make as close an approximation as it can, bearing heavily against
the taxpayer whose inexactitude is of his or her own making.
Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930). The
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