- 13 -
to substantiate it. See Kaye v. Commissioner, T.C. Memo. 1995-
345. Nor can petitioner rely solely on respondent's later
disallowance of the deduction in the statutory notice of
deficiency to prove the deduction lacks a basis in law or fact.
Flynn v. Commissioner, 93 T.C. 355, 364 (1989); Douglas v.
Commissioner, 86 T.C. at 763; Kaye v. Commissioner, supra.
Moreover, the fact that petitioner conceded the correctness of
respondent's disallowance fails to establish that the claimed
deduction has no basis in law or fact. Purcell v. Commissioner,
86 T.C. 228, 239 (1986), affd. 826 F.2d 470 (6th Cir. 1987).
We cannot find that the disallowed Schedule C expenses as
fraudulent, frivolous, phony, or groundless. See Bokum v.
Commissioner, 992 F.2d at 1142. Petitioner's witness Robert J.
Meyer testified the disallowed Schedule C business expenses
comprised part of the development project for the Muttontown
property. Although Mr. Meyer could not precisely recall the
details surrounding the claimed expenses, nothing in his
testimony alerts the Court to the possibility that these expenses
were fraudulent, frivolous, phony or groundless, or that Mr.
Meyer never initiated the development project on which the
expenses were premised. Petitioner herself acknowledged the
existence of her husband's land development project. The
deduction is not grossly erroneous because of the ultimate
failure of the subdivision scheme at the Muttontown property.
Nor is the deduction grossly erroneous merely because Mr. Meyer
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