Thai V. Pham and Khuy T. Bui - Page 8

                                        - 8 -                                         
          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.                                   
          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.                          

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011