Debra D. McNair - Page 11

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          2.  Schedule C Expenses                                                     
               Section 162(a) allows a taxpayer to deduct ordinary and                
          necessary business expenses paid or incurred during the taxable             
          year in carrying on any trade or business.  Generally, deductions           
          are a matter of legislative grace, and the taxpayer bears the               
          burden of proving that he or she is entitled to any claimed                 
          deduction.  Rule 142(a); INDOPCO, Inc. v Commissioner, 503 U.S.             
          79, 84 (1992).  A taxpayer is required to maintain records                  
          sufficient to substantiate deductions that he or she claims on              
          his or her tax return.  Sec. 6001; sec. 1.6001-1(a), Income Tax             
               If a taxpayer cannot fully substantiate a business                     
          deduction, the Court generally may estimate the amount of certain           
          expenses if the taxpayer provides sufficient evidence that he or            
          she has incurred a deductible expense.  Cohan v. Commissioner, 39           
          F.2d 540, 543-544 (2d Cir. 1930).  However, section 274(d)                  
          overrides the so-called Cohan rule for expenses incurred for                
          travel or with respect to certain types of property such as a               
          passenger automobile, a computer or peripheral equipment, or a              
          cellular telephone or similar telecommunication equipment.  Under           
          section 274(d), a deduction is not allowed unless the taxpayer is           
          able to substantiate the expense by adequate records or by                  
          sufficient evidence corroborating the taxpayer’s own statement              

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