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Discussion
In general, the Commissioner’s determinations set forth in a
notice of deficiency are presumed correct, and the taxpayer bears
the burden of showing that the determinations are in error. Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Deductions
and credits are a matter of legislative grace, and the taxpayer
bears the burden of proving entitlement to any deduction or
credit claimed on his return. See INDOPCO, Inc. v. Commissioner,
503 U.S. 79 (1992).
Pursuant to section 7491(a), the burden of proof as to
factual matters shifts to the Commissioner under certain
circumstances. Petitioner has neither alleged that section
7491(a) applies nor established her compliance with the
requirements of section 7491(a)(2)(A) and (B) to substantiate
items, maintain records, and cooperate fully with respondent’s
reasonable requests. Petitioner therefore bears the burden of
proof.
I. Schedule C Deductions
A taxpayer who carries on a trade or business generally may
deduct ordinary and necessary expenses paid or incurred in
connection with the operation of the business. Sec. 162(a); see
also FMR Corp. & Subs. v. Commissioner, 110 T.C. 402, 414 (1998).
Respondent does not dispute that the cleaning business qualifies
as a trade or business for Federal income tax purposes. Thus, we
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Last modified: November 10, 2007