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Was she a natural ginger or a fake ginger? You can’t always tell
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LSDefine
Simple English definitions for legal terms
Cohan rule
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A quick definition of Cohan rule:
The Cohan rule is a law that says if you don't have records of how much money you spent on something, you can make a good guess and still get a tax deduction. This rule was made because sometimes it's hard to keep track of everything you spend money on. But, it's important to remember that this rule doesn't work for everything and there are some things you can't guess about when it comes to taxes.
A more thorough explanation:
The Cohan rule is a legal principle that allows taxpayers to estimate their tax deductions when they are unable to produce records of actual expenditures. This rule is based on the common law and was established in the United States by the Second Circuit in the case of Cohan v. Commissioner.
Under the Cohan rule, taxpayers can claim certain tax deductions based on reasonable estimates, as long as there is some factual basis for the estimate. For example, if a taxpayer cannot produce receipts for business expenses, they may estimate the amount spent based on their memory or other evidence.
However, the Cohan rule does not apply to all tax deductions. It does not apply to items that are listed in Section 274(d) of the Internal Revenue Code, which includes expenses such as entertainment and travel.
For instance, if a self-employed individual cannot produce receipts for their office supplies, they may estimate the amount spent based on their past purchases or industry standards. This estimation can be used to claim a tax deduction for the expenses.
Another example is if a taxpayer cannot produce receipts for charitable donations, they may estimate the amount donated based on their bank statements or other evidence. This estimation can be used to claim a tax deduction for the donations.