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Miscellaneous Deduction--$1,545
Petitioners assert that petitioner made a $1,000 payment on
a $20,000 debt owed to Texas Commerce Bank. Petitioners assert
that the debt was part of the liabilities transferred from Wise
Co. and assumed by AMROC. Respondent argues that the loan is not
deductible on a number of grounds, including that the payment was
not substantiated, the debt was not business related, and
petitioners merely paid their own debt.
As a general rule, taxpayers bear the burden of proving the
Commissioner is incorrect in her determinations. Rule 142(a);
Welch v. Helvering, 290 U.S. 111 (1933). Furthermore, deductions
are strictly a matter of legislative grace, and taxpayers bear
the burden of proving their entitlement to any deduction claimed.
INDOPCO, Inc. v. Commissioner, 503 U.S. 79 (1992); New Colonial
Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). This includes
the burden of substantiation. Hradesky v. Commissioner, 65 T.C.
87, 90 (1975), affd. per curiam 540 F.2d 821 (5th Cir. 1976).
Moreover, an obligor's repayment of loan proceeds generally
cannot be deducted as a bad debt. Dreyfuss v. Commissioner, 140
F.2d 922 (5th Cir. 1944), affg. a Memorandum Opinion of this
Court; Perry v. Commissioner, 92 T.C. 470, 479 (1989), affd. 912
F.2d 1466 (5th Cir. 1990); Estate of Schwehm v. Commissioner, 17
T.C. 1435 (1952).
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