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earnings. See Halpern v. Commissioner, T.C. Memo. 1982-31
(controlling shareholder who diverts income from corporation
receives taxable dividend to the extent of the corporate earnings
and profits). Petitioners argue that Americana had no earnings
or retained earnings in 1986 or 1987, and that therefore the
interest is not income to them.
Petitioners' contention that respondent must show that
Americana had sufficient earnings and profits to reallocate
interest income to petitioners is erroneous. Petitioner husband
acquired ownership of Americana's assets when it liquidated and
went out of business in 1987. The interest earned during 1987,
1988, and 1989 on assets in the bank account that formerly
belonged to Americana is therefore taxable to petitioner husband.
We sustain respondent's determination.
7. Deductions
A taxpayer may deduct ordinary and necessary expenses paid
or incurred during the taxable year in carrying on a trade or
business. Sec. 162(a). Personal living expenses generally are
not deductible. Sec. 262. Deductions are a matter of
legislative grace, and taxpayers bear the burden of proving that
they are entitled to any deductions claimed on their returns.
Rule 142(a); Deputy v. DuPont, 308 U.S. 488, 493 (1940); New
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934); Welch v.
Helvering, 290 U.S. 111, 115 (1933).
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