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and remanding 11 B.T.A. 743 (1928); see Bayou Verret Land Co.
Inc. v. Commissioner, 450 F.2d 850, 858 (5th Cir. 1971), affg. 52
T.C. 971 (1969). For the Cohan rule to apply, the Court must
have some basis for estimating the amount of the expense.
Vanicek v. Commissioner, 85 T.C. 731, 742-743 (1985).
Mr. King testified that petitioners paid $79,000 to $86,000
to remodel the first floor, finish the interior of the second
story addition, and complete the parking lot. Petitioners
provided no records to substantiate those amounts, but Mr. King’s
testimony on this point was sufficiently credible to provide a
basis for our estimate. We conclude, bearing heavily against
petitioners because of their of lack of substantiation, that
petitioners’ adjusted basis in the South Oates building includes
$30,000 more than respondent allowed.
2. Petitioners’ Adjusted Basis in the Ross Clark Building
Petitioners reported on Form 1120S for 1996 that King’s
Appliances, Inc., owned the Ross Clark building and that it had
an adjusted basis of $940,000. Respondent determined that King’s
Appliances, Inc., had a basis in the Ross Clark building of
$800,000 ($760,000 for the building and $40,000 for paving).
Construction of the Ross Clark building began in 1988.
Petitioners said they hired a contractor to build the shell of a
new building and they built the rest. Mr. King testified that
they spent about $500,000, but a windstorm partially destroyed
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