- 32 -                                         
          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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