Cohan v. Commissioner

Holding

When the existence of business expenses is established but exact amounts cannot be proved due to lack of records, courts may estimate the deductible amount.

Facts

George M. Cohan kept inadequate records of business entertainment expenses but argued substantial amounts were spent.

Reasoning

Learned Hand established the 'Cohan rule': courts may approximate expenses when the existence of an expense is clear but the precise amount is not. Section 274(d) later limited the Cohan rule for travel, entertainment, and listed-property expenses, requiring strict substantiation.