Haron M. and Aurora L. Veras - Page 6

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          Disallowed Schedule C Deductions                                            
               1.  General                                                            
               Section 162(a) permits a deduction for the ordinary and                
          necessary expenses paid or incurred during the taxable year in              
          carrying on a trade or business.  Expenses that are personal in             
          nature are generally not allowed as deductions.  Sec. 262(a).  A            
          taxpayer is required to maintain records sufficient to establish            
          the amount of his income and deductions.  Sec. 6001; sec. 1.6001-           
          1(a), (e), Income Tax Regs.  A taxpayer must substantiate his               
          deductions by maintaining sufficient books and records to be                
          entitled to a deduction under section 162(a).  When a taxpayer              
          establishes that he has incurred a deductible expense but is                
          unable to substantiate the exact amount, we are generally                   
          permitted to estimate the deductible amount.  Cohan v.                      
          Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930).  We can                  
          estimate the amount of the deductible expense only when the                 
          taxpayer provides evidence sufficient to establish a rational               
          basis upon which the estimate can be made.  Vanicek v.                      
          Commissioner, 85 T.C. 731, 743 (1985).                                      
               Section 274(d) supersedes the general rule of Cohan v.                 
          Commissioner, supra, and prohibits the Court from estimating the            
          taxpayer’s expenses with respect to certain items.  Sanford v.              
          Commissioner, 50 T.C. 823, 827 (1968), affd. per curiam 412 F.2d            
          201 (2d Cir. 1969).  Section 274(d) imposes strict substantiation           






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