James M. and Ruth J. Riley - Page 19

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          or the buildings thereon at the time he purchased the farms.                
          Petitioner also submitted real property tax assessments for the             
          farms for 1997 and/or 1998.  The assessments do not separately              
          appraise the land and the improvements on the land.  Therefore,             
          the assessments provide no evidence of the comparative values of            
          the land and the improvements.                                              
               If a claimed deduction is not adequately substantiated, we             
          are permitted to estimate expenses when we are convinced from the           
          record that the taxpayer has incurred such expenses.  Cohan v.              
          Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930).  However, we             
          require a basis upon which an estimate may be made.  Vanicek v.             
          Commissioner, 85 T.C. 731, 743 (1985).  Here we have no such                
          basis.  The taxpayer must present credible evidence that provides           
          a rational basis for our estimate.  Id.  Cohan is inapplicable              
          “where the claimed but unsubstantiated deductions are of a sort             
          for which the taxpayer could have and should have maintained the            
          necessary records.”  Lerch v. Commissioner, 877 F.2d 624, 628               
          (7th Cir. 1989), affg. T.C. Memo. 1987-295.  Under such                     
          circumstances the Tax Court is under no obligation to guess as to           
          the amounts of the expenses.  Lutheran Mut. Life Ins. Co. v.                
          United States, 816 F.2d 376, 379 (8th Cir. 1987) (observing that            
          “given the lack of evidentiary support for taxpayer’s claimed               
          deductions, we cannot say that the trial court erred in declining           
          to uphold at least some deduction under Cohan”).                            

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