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Bartel v. Commissioner, 54 T.C. 25, 32 (1970). We find that
Elwood had unreported capital gain of $264,425 ($619,425 amount
realized over $355,000 basis). The effect of this ruling is that
the portion of petitioner's 1987 and 1988 NOL's attributable to
the 1984 loss carryforwards will be eliminated.
B. Additional Depreciation Deductions
Petitioner asserts that she is entitled to increase her
claimed 1987 and 1988 NOL's to reflect certain depreciation and
amortization deductions that were not claimed during the tax
years 1984 to 1988. Respondent contends that petitioner has not
substantiated her entitlement to such deductions.
Deductions are strictly a matter of legislative grace, and
petitioner bears the burden of proving she is entitled to any
deductions claimed. Rule 142(a); New Colonial Ice Co. v.
Helvering, 292 U.S. 435 (1934). A taxpayer is required to
substantiate claimed deductions by maintaining the records needed
to establish her entitlement to such deductions. Sec. 6001; sec.
1.6001-1(a), Income Tax Regs.
Section 167 provides, in part, for a depreciation deduction
with respect to property used in a trade or business.
Depreciation allows the taxpayer to recover the cost of the
property used in a trade or business or for the production of
income. United States v. Ludey, 274 U.S. 295, 300-301 (1927);
Southeastern Bldg. Corp. v. Commissioner, 3 T.C. 381, 384 (1944),
affd. 148 F.2d 879 (5th Cir. 1945). To substantiate entitlement
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