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1988 Federal income tax return. Respondent contends that both
amounts represent unreported taxable income. Accordingly,
respondent has adjusted petitioners' taxable income for 1988 to
reflect the unreported amount of $14,000.
OPINION
Issue 1. Schedule C Cost of Labor Deduction
Petitioners contend that, pursuant to section 162(a)(1), they
are entitled to Schedule C deductions in the amounts of $22,957
and $19,685 for taxable years 1988 and 1989, respectively, for
compensation paid to their sons with respect to their involvement
in petitioners' sewing enterprise. Respondent argues that
petitioners' failure to substantiate these deductions precludes
their entitlement to them.
Respondent's determinations are presumed to be correct, and
petitioners bear the burden of proving otherwise. Rule 142(a);
Welch v. Helvering, 290 U.S. 111 (1933). Moreover, the taxpayers
do not have an inherent right to take tax deductions. Deductions
are a matter of legislative grace, requiring the taxpayers to
establish their right to take them. Deputy v. Du Pont, 308 U.S.
488, 493 (1940); New Colonial Ice Co. v. Helvering, 292 U.S. 435,
440 (1934). Additionally, taxpayers are required to keep books
and records so that they can file true and correct returns and to
enable respondent to determine their correct tax liability. Sec.
6001; Menequzzo v. Commissioner, 43 T.C. 824, 831-832 (1965);
secs. 1.446-1(a)(4), 1.6001-1(a), Income Tax Regs.
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