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transactions shall be allowed only to the extent of the gains
from such transactions.” See also sec. 1.165-10, Income Tax
Regs. Petitioners do not dispute that section 165(d) applies
here.
Respondent claims that petitioners’ records are insufficient
to establish that they incurred any losses. To be sure,
petitioners’ records leave something to be desired. Section 6001
and the regulations thereunder require that taxpayers keep
adequate records to substantiate their income and deductions.
When a taxpayer fails to keep adequate records, but a court is
convinced that deductible expenses were made, the Court “should
make as close an approximation as it can, bearing heavily if it
chooses upon the taxpayer whose inexactitude is of his own
making.” Cohan v. Commissioner, 39 F.2d 540, 544 (2d Cir. 1930).
In cases involving gambling losses, this Court has invoked the
Cohan rule when it is satisfied that a taxpayer has incurred some
gambling losses. See Drews v. Commissioner, 25 T.C. 1354 (1956).
The total amount petitioners attribute to their gambling
activity is $46,542--$18,080 (Chase credit card), $19,800 (MBNA
credit card), and $8,662 (bank account debit card). While this
amount may have cycled through the casinos and the financial
institution, we are not convinced that this amount represents
petitioners’ gambling losses. According to their testimony,
their losses were computed by the amount of cash they had at the
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Last modified: May 25, 2011