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It is also well established that the taxpayer must keep
records sufficient to establish the amount of the items required
to be shown on his Federal income tax return. See sec. 6001;
sec. 1.6001-1(a), (e), Income Tax Regs. But if the taxpayer
establishes that he has incurred a deductible expense yet is
unable to substantiate the exact amount, the Court may estimate
the deductible amount in some circumstances (the Cohan rule).
See Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930).
A. Claimed Business Expenses
Mr. Schubert testified that he reduced the total $15,900
claimed as businesses expenses to $11,508 because “I omitted a
lot of these extra –- the fluff”; i.e., the job search. Mr.
Schubert did not explain the nature of their business expenses,4
and no receipts or other documents were submitted into evidence
to substantiate the expenditures. Respondent’s determination is
sustained.
B. Vehicle Expenses
Pursuant to section 274(d), the Court cannot estimate a
taxpayer’s expenses with respect to certain items. See Sanford
4 Mr. Schubert briefly referred to the remaining $11,508 in
business expenses as a “home office expense”. Whether the
expenses are home office expenses under sec. 280A(c) is
uncertain. Nevertheless, the expenditures would not be
deductible under sec. 280A(c) since Mr. Schubert has not shown
that a portion of their residence was exclusively used on a
regular basis as their principal place of business and that the
exclusive use was for their employers’ convenience. See sec.
280A(c).
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Last modified: March 27, 2008