The Cohan Rule — How It Still Helps Taxpayers 100 Years Later

What happens if you can’t find every receipt for your expenses? Are you automatically out of luck with the IRS? Not necessarily. Thanks to a 1930 court case—Cohan v. Commissioner—taxpayers still have the right to use reasonable estimates when exact records aren’t available. This principle is known as the Cohan Rule.

The Backstory

Broadway producer George M. Cohan (famous for “Yankee Doodle Dandy”) deducted large travel and entertainment expenses on his tax return. He didn’t have receipts for everything, but the court ruled that because he clearly spent money for business, reasonable estimates were allowed.

How the Cohan Rule Works Today

• If records are missing, taxpayers can use credible evidence to make an estimate.

• The estimate must be reasonable and consistent with the type of expense.

• The burden is still on the taxpayer to show that the expense was real and related to business.

When the Rule Helps

• Lost or destroyed records (e.g., moving, fire, flood).

• Small, recurring business expenses like mileage, tips, or supplies.

• Self-employed taxpayers who know expenses occurred but don’t have every receipt.

When It Doesn’t Apply

Some expenses—like travel, meals, and entertainment—are subject to strict substantiation rules. In those cases, the IRS requires detailed logs or receipts, and estimates won’t hold up.

The Cohan Rule isn’t a free pass to guess at your taxes. But if you truly incurred expenses and can support them with reasonable evidence, the law is on your side—even a century later. If you’re reconstructing returns and missing records, we can help apply the Cohan Rule correctly so your deductions are preserved without crossing the line.