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The first issue for decision is whether petitioner is
entitled to a general business credit carryforward for the
taxable year 1989. Section 38 provides for a credit against tax
for the purchase of qualified investment property. Secs. 38(a)
and (b)(1), 46(a). "Qualified investment property" is defined to
include only property with respect to which depreciation is
allowable and which has a useful life of 3 years or more. Secs.
46(c)(1) and (2), 48(a)(1). To the extent that a credit
permitted by section 38 is not used in the current taxable year,
it may be carried back 3 years and then forward 15 years. Sec.
39(a). Moreover, if the qualified investment property is
disposed of, or otherwise ceases to be section 38 property,
before the end of the useful life which was taken into account in
computing the credit under section 38, the taxpayer must
recapture the amount of the unearned credit. This amount is the
difference between the credit actually claimed and the credit
that would have been claimed if the useful life had been
estimated correctly. Sec. 47(a)(1); sec. 1.47-1(a)(1), Income
Tax Regs.
Credits are a matter of legislative grace, and taxpayers
bear the burden of proving that they are entitled to the credit.
Interstate Transit Lines v. Commissioner, 319 U.S. 590, 593
(1943); Segel v. Commissioner, 89 T.C. 816, 842 (1987).
Taxpayers cannot rely on a mere notation of a carryover credit on
their tax returns to sustain their burden of proving entitlement
to such credit. Sherwood v. Commissioner, T.C. Memo. 1988-544.
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Last modified: May 25, 2011