A common law rule whereby taxpayers, when unable to produce records of actual expenditures, may rely on reasonable estimates provided there is some factual basis for it. "Absolute certainty in such matters is usually impossible and is not necessary; the Board should make as close an approximation as it can, bearing heavily if it chooses upon the taxpayer whose inexactitude is of his own making." See Cohan v. Commissioner, 39 F. 2d 540 (2d Cir. 1930).
Definition from Nolo’s Plain-English Law Dictionary
A federal court decision which allows taxpayers in certain situations to approximate expenses for tax deduction purposes when their records are missing. It cannot be used for travel and entertainment business expenses.
Definition provided by Nolo’s Plain-English Law Dictionary.
August 19, 2010, 5:27 pm