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B. Substantiation
Taxpayers must maintain records sufficient to enable the
Commissioner to determine their correct tax liability. Sec.
6001; Higbee v. Commissioner, 116 T.C. 438, 440 (2001); sec.
1.6001-1(a), Income Tax Regs. Taxpayers must “keep such
permanent books of account or records * * * as are sufficient to
establish the amount of gross income, deductions, credits, or
other matters required to be shown by such person in any return
of such tax or information.” Sec. 1.6001-1(a), Income Tax Regs.
The notice of deficiency in this matter, combined with
information on the attached Form 4549A and Form 886-A, adequately
reveals that respondent disallowed petitioner’s Schedule C
deductions because of petitioner’s failure to substantiate those
deductions. As discussed supra, the Form 886-A states that
respondent disallowed the Schedule C expense amounts shown on
petitioner’s 2001 and 2002 returns because petitioner failed to
provide respondent with “supporting information”. The Form 886-A
also states that petitioner “must establish that [his claimed
deductions have] met all requirements of the law.” This
substantially corresponds both with the language of section 6001
and the regulations issued thereunder, and the principles
underlying section 6001. Petitioner therefore bears the burden
of proof with respect to substantiating his claimed business
deductions. Rule 142(a).
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Last modified: November 10, 2007