- 7 -
carrying on a trade or business. Generally, no deduction is
allowed for personal, living, or family expenses. See sec. 262.
The taxpayer must show that any claimed business expenses were
incurred primarily for business rather than personal reasons.
See Rule 142(a). To show that an expense was not personal, the
taxpayer must show that the expense was incurred primarily to
benefit his business, and there must have been a proximate
relationship between the claimed expense and the business.
Walliser v. Commissioner, 72 T.C. 433, 437 (1979).
Where a taxpayer has established that he has incurred a
trade or business expense, failure to prove the exact amount of
the otherwise deductible item may not always be fatal.
Generally, unless prevented by section 274, the Court may
estimate the amount of such an expense and allow the deduction to
that extent. See Finley v. Commissioner, 255 F.2d 128 (10th Cir.
1958), affg. 27 T.C. 413 (1956); Cohan v. Commissioner, 39 F.2d
540, 543-544 (2d Cir. 1930). In order for the Court to estimate
the amount of an expense, however, the Court must have some basis
upon which an estimate may be made. See Vanicek v. Commissioner,
85 T.C. 731, 742-743 (1985). Without such a basis, an allowance
would amount to unguided largesse. See Williams v. United
States, 245 F.2d 559, 560 (5th Cir. 1957).
Certain business deductions described in section 274 are
subject to strict rules of substantiation that supersede the
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011