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McAllister had automobile loans, home mortgages, and fully
utilized his credit cards at interest rates up to 22 percent, he
kept a cash hoard of $25,000, lent Mr. McGirl money 101 times at
a rate of 10 percent with no fixed payment schedule, and
consolidated 3 years of loans after receiving one payment of
principal, without adding accrued, yet unpaid interest. Mr.
McGirl would have the Court believe that he borrowed money almost
weekly during a period when he amassed more than $112,000 in
savings, for an alleged business whose existence he was unable to
document by any reliable evidence. The record as a whole
contradicts the testimony of Mr. McGirl and Mr. McAllister;
simply put, we do not believe them.
Petitioners have not proven that any purported transfers
were loans. Therefore, they have not met their burden of proof
in establishing a nontaxable source for the deposits.10
3. Increased Expenses
Petitioners argue that the Yogurt Station is entitled to
offset its unreported gross receipts with additional expenses
that were not claimed on its corporate tax returns. Deductions
are a matter of legislative grace; petitioners have the burden of
showing that they are entitled to any deduction claimed. New
Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). Mr.
10 Even if we accepted Mr. McGirl's testimony that Mr.
McAllister provided him with funds 101 times, which we do not,
petitioners would still have to show that the transfers of funds
truly were loans. Beaver v. Commissioner, 55 T.C. 85, 91 (1970).
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