Key Takeaways
- Taxpayer bears burden of proof (IRC §6001).
- Cohan Rule: estimates allowed, BUT NOT for travel, meals, gifts, listed property.
- Strict substantiation (§274(d)): 5 elements—amount, time, place, purpose, relationship.
- Standard mileage rate (Tax Year 2024): 67 cents/mile.
- Electronic records: Rev. Proc. 97-22 (legible, retrievable, original destroyable).
- Retention: 3-7 years general, property records = life of asset + 7.
Last updated: January 2026
Recordkeeping Requirements
Why This Matters for the Exam
Substantiation is heavily tested. Know when Cohan Rule applies and when strict substantiation is required.
Expect at least 3-4 questions on recordkeeping.
Burden of Proof
| Rule | Description |
|---|---|
| General | Taxpayer must prove deductions (§6001) |
| Exception | Burden shifts to IRS if certain conditions met |
Cohan Rule vs. Strict Substantiation
| Category | Cohan Rule (Estimates)? |
|---|---|
| General business expenses | Yes |
| Travel (away from home) | NO |
| Meals | NO |
| Gifts | NO |
| Listed property (autos) | NO |
Strict Substantiation (§274(d)) - 5 Elements
| Element | Requirement |
|---|---|
| 1. Amount | Cost of each expense |
| 2. Time | Date of expense |
| 3. Place | Location/destination |
| 4. Purpose | Business reason |
| 5. Relationship | Who received benefit |
Vehicle Log Requirements
| Element | Required |
|---|---|
| Odometer (start/end of year) | Yes |
| Date of trip | Yes |
| Destination | Yes |
| Business vs. personal miles | Yes |
| Tax Year 2024 SMR | 67 cents/mile |
Electronic Records (Rev. Proc. 97-22)
| Requirement | Description |
|---|---|
| Integrity | Not altered or destroyed |
| Legibility | Readable on screen and print |
| Retrieval | Searchable and indexed |
| Original | Paper can be destroyed if properly scanned |
Record Retention Periods
| Record Type | Retention |
|---|---|
| Income tax returns | Permanent |
| Bank statements | 7 years |
| Travel/meal logs | 7 years |
| Employment records | 4 years |
| Asset purchase records | Life of asset + 7 years |
Real-World Scenario
Scenario: Taxpayer loses receipt for $1,200 airfare but has credit card statement.
- Cohan Rule: Does NOT apply to travel (§274(d)).
- Strict substantiation: Required.
- Credit card alone: Insufficient (no business purpose/relationship).
- Result: Deduction likely disallowed.
On the Exam
Expect 3-4 questions on recordkeeping, typically:
- Cohan Questions: "Can travel expenses be estimated?"
- SMR Questions: "What is Tax Year 2024 mileage rate?"
- Retention Questions: "How long keep employment records?"
The key is to remember: Cohan = estimates OK except travel/meals/gifts/listed property. Strict = 5 elements. SMR = 67 cents (Tax Year 2024). Retention = 3-7 years, property = life + 7.
Test Your Knowledge
$1,200 airfare, $400 meals. Lost receipts, have credit card statement. Cohan Rule?
A
B
C
D
Test Your Knowledge
Electronic recordkeeping requirement per Rev. Proc. 97-22?
A
B
C
D
Test Your Knowledge
Employment tax records (941, 940, W-2) retention?
A
B
C
D