Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Tuesday, February 3, 2015

Resurfacing The Cohan Rule

Tax receipt

While receipts are critical to good bookkeeping and tax returns, if you cannot find one, you are not out of luck.  The Cohan Rule, arising from the case, Cohan v. Commissioner, is the exception to the stringent IRS record keeping requirements.  It allows taxpayers to prove by “other credible evidence” they actually incurred deductible expenses.

The IRS or a court may be convinced by oral or written statements.  If you can make a reasonable approximation of the expenses, you may be okay despite lack of documentation.  Even charitable contributions have been allowed under the Cohan Rule, though not in cases subject to special strict substantiation requirements. 

When the IRS computer crashes occurred, the hunt for the destroyed lost emails of Lois Lerner prompted Rep. Steve Stockman of Texas to introduce a bill titled, “The Dog Ate My Tax Receipts Act.”  Rep. Stockman said, “Taxpayers should be allowed to offer the same flimsy, obviously made-up excuses the Obama administration uses.”

Regardless, worrying about an IRS audit is not fun.  Neither is trying to prove expenses.  The best advice is to save your receipts so you never have to argue the Cohan rule.

See Robert W. Wood, Tax Receipts Rule IRS Keeps Quiet: They’re Optional, Forbes, Feb. 2, 2015.


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