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OPINION
I. Claimed Expenses
Deductions are a matter of legislative grace, and a taxpayer
bears the burden of proving that he has complied with the
specific requirements for any deduction he claims.1 See INDOPCO,
Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice
Co. v. Helvering, 292 U.S. 435, 440 (1934).
Under section 162, a taxpayer may deduct all ordinary and
necessary expenses paid or incurred during the taxable year in
carrying on any trade or business if the taxpayer maintains
records or other proof sufficient to substantiate the expenses.
Sec. 162(a); sec. 6001; Deputy v. duPont, 308 U.S. 488, 495-496
(1940); sec. 1.6001-1(a), Income Tax Regs.
If a claimed business expense is deductible, but the
taxpayer is unable to substantiate it, we are generally permitted
to approximate the amount of the expense, bearing heavily against
the taxpayer whose inexactitude is of his own making. Cohan v.
Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930). The estimate,
however, must have a reasonable evidentiary basis. Vanicek v.
Commissioner, 85 T.C. 731, 743 (1985).
1 Petitioners do not argue that the burden of proof shifts
to respondent pursuant to sec. 7491(a) and that the threshold
requirements of sec. 7491(a) have been met. In any event, we
decide the issue on the basis of the preponderance of evidence on
the record.
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Last modified: May 25, 2011