Robin A. and Susan D. Bettencourt - Page 9

                                        - 8 -                                         
               Petitioners contend, however, that they are entitled to an             
          increase in basis under the doctrine of Cohan v. Commissioner, 39           
          F.2d 540 (2d Cir. 1930).5                                                   
               Under certain circumstances, where a taxpayer establishes              
          entitlement to a deduction but does not establish the amount of             
          the deduction, the Court is allowed to estimate an allowable                
          amount.  Cohan v. Commissioner, supra.  However, there must be              
          sufficient evidence in the record to permit the Court to conclude           
          that a deductible expense was incurred in at least the amount               
          allowed.  Williams v. United States, 245 F.2d 559, 560 (5th Cir.            
          1957).  In estimating the amount allowable, the Court bears                 
          heavily against the taxpayer whose inexactitude is of his or her            
          own making.  Cohan v. Commissioner, supra at 544.                           
               Petitioners testified extensively about the legal troubles             
          they encountered regarding the residence in the years before its            
          sale.  The Court finds this testimony credible and, considering             
          the evidence as a whole, holds that petitioners did incur legal             
          fees and other expenses in connection with the improper use of              
          the residence and termination of the probate homestead that had             
          encumbered the title to the property.  The payment of these legal           
          fees is a capital expenditure and, as such, increased                       

               5 Because the Court holds that petitioners failed to                   
          establish whether the improvements paid for by Mrs. Hatch                   
          constituted capital expenditures that could increase the basis of           
          the residence, the Court considers the Cohan rule only with                 
          regard to expenditures actually paid for by petitioners.                    




Page:  Previous  1  2  3  4  5  6  7  8  9  10  Next

Last modified: May 25, 2011