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Unreimbursed Employee Business Expenses
We shall now consider whether petitioners are entitled to
deduct the unreimbursed employee business expenses they claimed
on Schedule A. In general, all ordinary and necessary expenses
paid or incurred in carrying on a trade or business during the
taxable year are deductible, but personal, living, or family
expenses are not deductible. Secs. 162(a), 262. Services
performed by an employee constitute a trade or business.
O’Malley v. Commissioner, 91 T.C. 352, 363-364 (1988); sec.
1.162-17(a), Income Tax Regs.
If a taxpayer establishes that he or she paid or incurred a
deductible business expense but does not establish the amount of
the deduction, we may approximate the amount of the allowable
deduction, bearing heavily against the taxpayer whose
inexactitude is of his or her own making. Cohan v. Commissioner,
39 F.2d 540, 543-544 (2d Cir. 1930). For the Cohan rule to
apply, however, a basis must exist on which this Court can make
an approximation. Vanicek v. Commissioner, 85 T.C. 731, 742-743
(1985). Without such a basis, any allowance would amount to
unguided largesse. Williams v. United States, 245 F.2d 559, 560
(5th Cir. 1957).
Certain business expenses may not be estimated because of
the strict substantiation requirements of section 274(d). See
sec. 280F(d)(4)(A); Sanford v. Commissioner, 50 T.C. 823, 827
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