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B. Business Expense Deductions
Respondent disallowed certain deductions petitioners claimed
on Schedule C, specifically: $3,463 for meals and entertainment
expenses; $12,347 for travel expenses; $7,862 for supplies; and
$17,199 for car and truck expenses. Respondent disallowed each
of these deductions in full but allowed the remaining $26,403
petitioners claimed as business expenses.
As a general rule, section 162(a) authorizes a deduction for
“all the ordinary and necessary expenses paid or incurred during
the taxable year in carrying on any trade or business”.
Taxpayers are required to maintain records sufficient to
substantiate each claimed deduction. Sec. 6001; Hradesky v.
Commissioner, 65 T.C. 87, 89-90 (1975), affd. 540 F.2d 821 (5th
Cir. 1976); sec. 1.6001-1(a), Income Tax Regs.
When a taxpayer adequately establishes that he paid or
incurred a deductible expense but does not establish the precise
amount, we may in some circumstances estimate the allowable
deduction, bearing heavily against the taxpayer whose
inexactitude is of his own making. Cohan v. Commissioner, 39
F.2d 540, 544 (2d Cir. 1930). We can estimate the amount of the
deductible expense only when the taxpayer produces evidence
sufficient to establish a rational basis upon which the estimate
can be made. Vanicek v. Commissioner, 85 T.C. 731, 742-743
(1985).
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