Section 162 permits taxpayers to deduct all the “ordinary and necessary expenses” they incur in carrying on their trade or business.  Generally, we know that taxpayers who claim §162 deductions must substantiate them.  Generally, we know that means taxpayer must provide receipts. Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930) Of course, taxpayers must do more than just substantiate an expense; they must be sure to tie that expenses to their business, as we learned in Lesson From The Tax Court: Receipts Are Not Enough, TaxProf Blog (Sept. 21, 2020). 

Today we learn of an interesting exception to the receipt requirement.  In H. DeForest Boegart v. Commissioner, T.C. Summ. Op. 2024-4 (Mar. 4, 2024) (Judge Panuthos), the taxpayer took the stand and, through his dramatic testimony, explained how a clogged sewer line had backed up into his basement and soaked all of his paper receipts with … well … sewage.  While he offered to provide the soggy mess to the Court, Judge Panuthos permitted the taxpayer to substantiate the expenses solely through oral testimony, writing “we don’t need no stinking receipts.”

The messy details are below the fold.

Nah.  It’s not a real case.  April Fools!  Today’s real Lesson will appear this afternoon.