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Section 6001 requires taxpayers to “keep such records,
render such statements, make such returns, and comply with such
rules and regulations as the Secretary may from time to time
prescribe.” Section 1.6001-1(a), Income Tax Regs., requires the
taxpayer to “keep such permanent books of account or records,
including inventories, as are sufficient to establish the amount
of gross income, deductions, credits, or other matters required
to be shown by such person in any return of such tax or
information.”
If a claimed deduction is disallowed by respondent,
petitioner must prove entitlement to that deduction, whether
ordinary and necessary business expenses or depreciation expense.
INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934) (“a
taxpayer seeking a deduction must be able to point to an
applicable statute and show that he comes within its terms”);
Rule 142(a); Cluck v. Commissioner, 105 T.C. 324, 337 (1995).
(While the burden of proof may be shifted in some cases involving
taxpayers, including corporations, unlike petitioner, with a
limited net worth, under section 7491, the burden shift occurs
only where “the taxpayer has maintained all records required”.
Sec. 7491(a)(2)(B).)
The doctrine of Cohan v. Commissioner, supra, permits the
Court to estimate allowable deductions when it is clear that
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Last modified: November 10, 2007