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particular trade, business, or industry. Deputy v. du Pont, 308
U.S. 488, 495 (1940). An expense is considered necessary if it
is appropriate or helpful for the development of the business.
Commissioner v. Heininger, 320 U.S. 467, 471 (1943). Personal,
living, or family expenses, on the other hand, are generally not
deductible. Sec. 262. 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, but we bear 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).
In the case of expenses paid or incurred with respect to
travel and certain listed property, section 274 overrides the
Cohan rule, and those expenses are deductible only if the
taxpayer meets the stringent substantiation requirements of
section 274(d). See sec. 280F(d)(4)(A); Sanford v. Commissioner,
50 T.C. 823, 827 (1968), affd. per curiam 412 F.2d 201 (2d Cir.
1969). For these expenses, only certain types of documentary
evidence will suffice. Passenger automobiles are listed property
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Last modified: November 10, 2007