- 4 - the burden of showing that the determinations are in error. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Deductions and credits are a matter of legislative grace, and the taxpayer bears the burden of proving entitlement to any deduction or credit claimed on a return. See INDOPCO, Inc. v. Commissioner, 503 U.S. 79 (1992); Wilson v. Commissioner, T.C. Memo. 2001-139. Pursuant to section 7491(a), the burden of proof as to factual matters shifts to the Commissioner under certain circumstances. Petitioners have neither alleged that section 7491(a) applies nor established their compliance with the requirements of section 7491(a)(2)(A) and (B) to substantiate items, maintain records, and cooperate fully with respondent’s reasonable requests. Petitioners therefore bear the burden of proof. Where a taxpayer establishes that he has incurred deductible expenses but is unable to substantiate the exact amounts, the Court can estimate the deductible amount 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).2 In addition, we may permit a taxpayer to substantiate 2 Sec. 274(d) imposes additional substantiation requirements for certain types of expenses. See sec. 1.274-5T(a), Temporary Income Tax Regs., 50 Fed. Reg. 46014 (Nov. 6, 1985). The Cohan rule does not apply to expenses governed by sec. 274(d). Sanford v. Commissioner, 50 T.C. 823, 827-828 (continued...)Page: Previous 1 2 3 4 5 6 7 8 9 NextLast modified: November 10, 2007