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A taxpayer must establish his cost or adjusted basis for the
purpose of determining gain or loss that he must recognize on a
sale of property. O’Neill v. Commissioner, 271 F.2d 44, 50 (9th
Cir. 1959), affg. T.C. Memo. 1957-193; Brodsky v. Commissioner,
T.C. Memo. 2001-240; Schaeffer v. Commissioner, T.C. Memo. 1994-
206. Proof of the cost or adjusted basis is necessary because
recovery of an amount in excess of cost constitutes income.
Cullins v. Commissioner, 24 T.C. 322, 328 (1955). In certain
circumstances, we may use the Cohan rule to estimate a taxpayer’s
basis in an asset at the time of transfer. Cohan v.
Commissioner, 39 F.2d 540 (2d Cir. 1930); Group Admin. Premium
Servs., Inc. v. Commissioner, T.C. Memo. 1996-451. In order for
the Court to estimate basis, the taxpayer must provide some
“reasonable evidentiary basis” for the estimation. Group Admin.
Premium Servs., Inc., supra (citing Polyak v. Commissioner, 94
T.C. 337, 345 (1990) and Vanicek v. Commissioner, 85 T.C. 731,
743 (1985)); Saykally v. Commissioner, T.C. Memo. 2003-152.
Here, petitioners have not provided any facts or details
that permit a reasonable estimate of their basis in the purchased
tools. Petitioner testified that the tools were his “older
equipment” and that he had owned some of them since he was 10 or
12. Pictures of each tool were submitted at trial with
4(...continued)
arrangement between petitioner and Mr. Kerkinni.
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