-11-
curiam T.C. Memo. 1969-159; Tokarski v. Commissioner, 87 T.C. 74,
77 (1986).
If taxpayers establish that they have incurred deductible
expenses but are unable to substantiate the exact amounts, we can
in some circumstances estimate the deductible amounts, but only
if the taxpayer presents sufficient evidence to establish a
rational basis for making the estimates. See Cohan v.
Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930); Vanicek v.
Commissioner, 85 T.C. 731, 742-743 (1985). In estimating the
amounts allowable, we bear heavily upon the taxpayer whose
inexactitude is of his own making. See Cohan v. Commissioner,
supra at 544. We shall not rely on the Cohan rule as petitioners
have not presented sufficient evidence to establish a rational
basis for making an estimate. Furthermore, the evidence does not
establish that petitioners incurred any interest expense or had
any cost of goods sold.
Accordingly, we sustain respondent’s disallowance of the
interest expense, the labor expenses, the Western Timber Farms,
Inc. losses, and the cost of goods sold.
At trial, petitioners contended that they suffered a $20,000
capital loss related to Orion. The parties tried this issue by
consent. See Rule 41(b).4
4 When issues not raised by the pleadings are tried by
express or implied consent of the parties, the issues shall be
(continued...)
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