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We find that respondent has proven by clear and convincing
evidence that Sam Kong Fashions received and failed to report
gross receipts in 1994 and 1995. On the basis of the customers’
payments for sewing services, we find that Sam Kong Fashions
received total gross receipts of $616,574.25 in 1994 and
$521,214.64 in 1995. On its corporate income tax returns, Sam
Kong Fashions reported gross receipts in the amount of $224,718
and $217,296 in 1994 and 1995, respectively. Therefore, we find,
by clear and convincing evidence, that the unreported gross
receipts of Sam Kong Fashions totaled $391,856.25 in 1994 and
$303,918.64 in 1995.
B. Unreported Business Expenses
Section 162(a) provides a deduction for all ordinary and
necessary expenses paid or incurred in carrying on a trade or
business. Taxpayers bear the burden of proving that they are
entitled to any claimed deductions. Rule 142(a); INDOPOC, Inc.
v. Commissioner, 503 U.S. 79, 84 (1992).
Section 6001 provides that a taxpayer must substantiate any
deductible expenses claimed. Taxpayers are required to maintain
records that sufficiently establish the amount of claimed
deductions. Sec. 6001; sec. 1.6001-1(a), Income Tax Regs. When
taxpayers present convincing evidence that they incurred
deductible expenses, but lack the records to substantiate the
claimed amounts, courts may estimate the allowable deductions.
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