Elliot Virgil Wilkerson - Page 11

                                       - 10 -                                         
               B.  Schedule C and Schedule E Deductions                               
                    1.  General Principles                                            
               Deductions are strictly a matter of legislative grace, and a           
          taxpayer bears the burden of proving his or her entitlement to              
          the deductions claimed.  Rule 142(a); INDOPCO, Inc. v.                      
          Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v.               
          Helvering, 292 U.S. 435, 440 (1934).6  This includes the burden             
          of substantiation.  Hradesky v. Commissioner, 65 T.C. 87, 90                
          (1975), affd. per curiam 540 F.2d 821 (5th Cir. 1976).                      
               Section 6001 further requires taxpayers to maintain books              
          and records sufficient to substantiate the amounts of the                   
          deductions claimed.  Sec. 6001; sec. 1.6001-1(a), (e), Income Tax           
          Regs.  If a taxpayer is unable to fully substantiate the expenses           
          incurred, but there is evidence that deductible expenses were               
          incurred, the Court may nevertheless allow a deduction based upon           
          an approximation of expenses.  Cohan v. Commissioner, 39 F.2d               
          540, 544 (2d Cir. 1930); Vanicek v. Commissioner, 85 T.C. 731,              
          742-743 (1985).  The estimate, however, must have a reasonable              
          evidentiary basis, Vanicek v. Commissioner, supra, and there must           

               6  The burden of proof does not shift to respondent under              
          sec. 7491(a) because petitioner failed to establish that he                 
          complied with the requirements of sec. 7491(a)(2)(A) and (B) to             
          substantiate items, maintain records, and fully cooperate with              
          respondent’s reasonable requests.  We note that petitioner stated           
          at trial that he “did not come prepared to address those”                   
          deductions.  We find that statement remarkable considering that             
          the amount of the deductions claimed was a substantial part of              
          his revised Form 1040.                                                      

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011