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carrying on a trade or business. Such expenses must be directly
connected with or pertain to the taxpayer’s trade or business.
Sec. 1.162-1(a), Income Tax Regs. Generally, no deduction is
allowed for personal, living, or family expenses, nor is
deduction proper for expenditures that are properly categorized
as capital expenditures. See secs. 262 and 263. The
determination of whether an expenditure satisfies the
requirements of section 162 is a question of fact. Commissioner
v. Heininger, 320 U.S. 467, 475 (1943).
When a taxpayer establishes that he or she has incurred
deductible expenses but is unable to substantiate the exact
amounts, we can estimate the deductible amount, but only if the
taxpayer presents sufficient evidence to establish a rational
basis for making the estimate. 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 amount allowable, we
bear heavily against the taxpayer where the inexactitude of the
record is of his or her own making. See Cohan v. Commissioner,
supra at 544.
However, deductions relating to travel, meals and
entertainment, gifts, or use of listed property (including
passenger automobiles) are subject to strict rules of
substantiation that supersede the doctrine in Cohan v.
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