- 5 - at the end of the fiscal years 1995 and 1996. The only records explaining the amounts that were debited to the moving expense account are lists showing a breakdown by vendor or other brief description, but not identifying the nature of the item or the dates that the credited amounts were expended. Respondent has conceded that petitioner’s income should be reduced by $1,800,354 of the misapplied $5 million subsidy. Petitioner contends that it is entitled to deduct an additional $2,007,640. Petitioner concedes that it is not entitled to reduce its income by the balance of $1,192,006. OPINION In its opening brief on this issue, petitioner’s position is concisely stated as follows: Petitioner’s records are insufficient to determine the extent to which these expenses should have resulted in a reduction of otherwise allowable ordinary and necessary business expenses as contrasted with the reduction of otherwise allowable depreciation. However, at a minimum, under the well-established Cohan rule (Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930)), petitioner is entitled to treat the entire $2,007,640 as a capital expenditure depreciable over a five-year time period and to reduce its taxable income accordingly for the resulting additional depreciation deductions. Respondent replies: * * * [Petitioner’s] assertion that * * * [it] is at least entitled to capitalize the remaining amounts in dispute without any documentation, is to simply ignore the well known legal principle that deductions are a matter of legislative grace, and the taxpayer must clearly demonstrate entitlement to any deductionsPage: Previous 1 2 3 4 5 6 7 8 9 10 NextLast modified: November 10, 2007