- 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